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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996
Commission File Number 0-6955
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WALBRO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 38-1358966
(State of Incorporation) (I.R.S. Employer ID No.)
6242 Garfield Street, Cass City, Michigan 48726
(Address of principal executive offices) (Zip Code)
(517) 872-2131
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.50 par value
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No ____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
The aggregate market value of the registrant's voting stock held by
non-affiliates of the registrant, based upon the last reported sale price of
the registrant's Common Stock on March 20, 1997.
$145,167,210
The number of shares outstanding of the registrant's Common Stock,
par value $.50, as of March 20, 1997.
8,652,737
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DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the registrant's Annual Report to Stockholders for
the fiscal year ended December 31, 1996 and of the registrant's Notice of
Annual Meeting of Stockholders and Proxy Statement for its Annual Meeting of
Stockholders to be held on April 30, 1997 are incorporated by reference into
Parts II and III of this report.
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PART I
ITEM 1. 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 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 1996, the Company increased net sales at the compound rate of approximately
23% per year. This growth was primarily due to acquisitions, 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 $585.4
million in 1996.
Approximately 75% of the Company's net sales for 1996 were attributable to
the global automotive industry. 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 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 1996 were attributable to
the global small engine industry. 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. Unless the context indicates otherwise, all references to
"the Company" include Walbro Corporation and
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its consolidated subsidiaries. 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.
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.
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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.
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 1996 were 52% of the Company's net sales (excluding
joint ventures) compared to 38% in 1995. 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, 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.
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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 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 34% of cars and light trucks sold by General Motors,
Ford and Chrysler in North America in 1996 used fuel modules. In 1996, 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 1996 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 produced three-layer plastic fuel
tanks during the fourth quarter of 1994, and during 1995 and 1996 for the 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.
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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.
North America. Net sales to Chrysler and Ford for 1996 accounted for 20%
and 10% 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 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
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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 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 and additional export markets established by Korean OEMs. In
November 1995, the Company established Mutual Walbro P. 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, and Ford, Echlin Inc. and Siemens A.G. The Company
has competition in the fuel module market from Delphi, Robert Bosch GmbH, Denso
Corp., VDO 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
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OEMs in Europe with full-service product management. Because the Company has
the capability to provide comprehensive engineering resources with respect to
its product line and assume increasing responsibility for the development of
FSDS products, the Company has been successful in responding to the decisions
by OEMs to consolidate suppliers and reduce internal engineering resources.
AUTOMOTIVE WARRANTY AND OTHER PRODUCT EXPOSURE
The design and manufacture of fuel systems entails an inherent risk that a
governmental authority or a customer may require the recall of one of the
Company's products or a product in which one of the Company's products has been
installed. The Company has taken and intends to continue to take all reasonable
precautions to avoid the risk of exposure to an expensive recall campaign which
could have a material adverse effect on the business and financial condition of
the Company.
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, 7.8 million in 1995 and management
estimates 1996 production to have been approximately 9.3 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.
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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.
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 48%, 24% and 10%,
respectively, of the Company's 1996 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.
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
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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 approximately 90% of
its outboard engine carburetors from the Company.
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 $25.1 million in 1996 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
9
<PAGE> 11
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.
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. The Company
has an aggressive program in place to achieve the required certifications.
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
10
<PAGE> 12
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 1996, 1995 and 1994, the Company spent approximately $18.4 million,
$16.7 million and $12.2 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 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 February 28, 1997, the Company had approximately 4,670 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.
11
<PAGE> 13
ITEM 2. PROPERTIES
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.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any litigation, and is not aware of any
pending or threatened litigation, that would have a material adverse effect on
the Company or its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1996.
12
<PAGE> 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Incorporated by reference to "Common Stock Price and Dividend Information"
on page 12 of the Company's Annual Report to Stockholders for the fiscal year
ended December 31, 1996 (the "1996 Annual Report").
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
Incorporated by reference to "Selected Financial Data" on page 12 of the
1996 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Incorporated by reference to "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 13 through 17 of the
1996 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference herein from the following sections of the 1996
Annual Report. The consolidated statements of income, cash flows and
stockholders' equity are for each of the years ended December 31, 1996, 1995
and 1994 and the consolidated balance sheets are as of December 31, 1996 and
1995:
Report of Independent Public Accountants, page 39.
Consolidated Balance Sheets, page 18.
Consolidated Statements of Income, page 19.
Consolidated Statements of Stockholders' Equity, page 20.
Consolidated Statements of Cash Flows, page 21.
Notes to Consolidated Financial Statements, pages 22 through 38.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
13
<PAGE> 15
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference to "Election of Directors" on pages 2 through 4,
"Identification of Other Executive Officers" on page 10 and "Section 16(a)
Beneficial Ownership Reporting Compliance" on page 11 of the Company's Notice
of Annual Meeting of Stockholders and Proxy Statement for its Annual Meeting of
Stockholders to be held on April 30, 1997 (the "1997 Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to "Executive Compensation" on pages 12 through
16 and "Compensation of the Board of Directors" on page 6 of the 1997 Proxy
Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to "Security Ownership of Management" on pages 8
and 9 of the 1997 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to "Indebtedness of Management" on page 11 of the
1997 Proxy Statement.
14
<PAGE> 16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Form 10-K:
1. The following consolidated financial statements of the Company
and its subsidiaries, together with the applicable report of
independent public accountants, included in the 1996 Annual Report,
are incorporated by reference in Item 8:
Report of Independent Public Accountants.
Consolidated Balance Sheets at December 31, 1996 and 1995.
Consolidated Statements of Income for the years ended December
31, 1996, 1995 and 1994.
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements.
2. The following consolidated financial information of the Company
and its subsidiaries for the three years ended December 31, 1996,
1995 and 1994 is filed as part of this Form 10-K on pages 22 to
33.
Report of Independent Public Accountants.
Supplemental Notes to Consolidated Financial Statements.
(1) Valuation and Qualifying Accounts.
(2) Supplemental Guarantor Condensed Consolidating Financial
Statements.
The information required to be submitted in Schedule II is
included in the Supplemental Notes to Consolidated Financial
Statements.
3. The following exhibits are filed with this report or
incorporated by reference as set forth below.
Exhibit No.
3.1 Restated Certificate of Incorporation of the Company,
filed as Exhibit 3.1 to the Company's Registration
Statement on Form S-3, File No. 333-18317,
incorporated herein by reference.
15
<PAGE> 17
3.2 By-laws of the Company, as amended, filed as Exhibit
3.2 to the Company's 1989 Annual Report on 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 10-K,
incorporated herein by reference.
16
<PAGE> 18
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, dated
December 17, 1996, filed as Exhibit 4.10 to the
Company's Registration Statement on Form S-3, File No.
333-18317, incorporated herein by reference.
4.11 Amended and Restated Declaration of Trust of Walbro
Capital Trust, dated as of February 3, 1997, 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 Indenture between Walbro Corporation and Bankers Trust
Company, as Indenture Trustee, dated as of February
3, 1997.
4.13 Form of Preferred Security issued by Walbro Capital
Trust (included as Exhibit A-1 to Exhibit 4.11
hereof).
4.14 Convertible Debenture issued by Walbro Corporation to
Walbro Capital Trust. (included as Exhibit A to
Exhibit 4.12 hereof).
4.15 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, dated as
of February 3, 1997.
10.1 The Company's 1983 Incentive Stock Option Plan, filed
as the Exhibit to the Company's Registration Statement
on Form S-8, filed November 15, 1989, incorporated
herein by reference.**
10.2 Joint Venture Agreement between the Company and
Mitsuba Electric Manufacturing Company, Ltd., dated
December 12, 1986, filed as Exhibit 10.4 to the
Company's 1986 Annual Report on Form 10-K,
incorporated herein by reference.
10.3 The Company's Equity Based Long-Term Incentive Plan,
filed as Exhibit 4.5 to the Company's Registration
Statement on Form S-8, filed June 15, 1992,
incorporated herein by reference.**
10.4 Executive Disability Plan adopted July 8, 1988, filed
as Exhibit 10.10 to the Company's 1988 Annual Report
on Form 10- K, incorporated herein by reference.**
10.5 Retirement Income Plan for Directors, dated February
9, 1988, filed as Exhibit 10.11 to the Company's 1988
Annual Report on Form 10-K, incorporated herein by
reference.**
10.6 Equipment Leasing Agreement between the Company and
NEMLC Leasing Associates No. 3, without supplements,
dated July 1, 1988, filed as Exhibit 10.13 to the
Company's 1988 Annual Report on Form 10-K,
incorporated herein by reference.
17
<PAGE> 19
10.7 The Company's Employee Stock Ownership Plan, dated
August 15, 1989, filed as Exhibit 10.14 to the
Company's 1989 Annual Report on Form 10-K,
incorporated herein by reference.
10.8 Walbro Engine Management Incentive Compensation Plan,
filed as Exhibit 10.21 to the Company's 1990 Annual
Report on Form 10-K, incorporated herein by
reference.**
10.9 Joint Venture Agreement, dated June 17, 1991, between
the Company and Jaeger S.A, an indirect,
majority-controlled subsidiary of Magneti Marelli
S.p.A., relating to the Marwal Systems S.A. joint
venture, filed as Exhibit 10.23 to the Company's
Registration Statement on Form S-2, File No. 33-41425,
incorporated herein by reference.
10.10 Joint Venture Agreement between the Company and Jaeger
S.A., dated as of January 1, 1993, relating to the
Marwal do Brasil joint venture, filed as Exhibit 10.10
to the Company's 1992 Annual Report on Form 10-K,
incorporated herein by reference.
10.11 Agreement among AB Svenska Elektromagneter, Opcon AB,
Cartona Fastighetsforvaltning K.B., Erling Edmundson,
Four Seasons Venture Capital AB, SEM-Walbro
Corporation and the Company, effective as of January
2, 1991, filed as Exhibit 10.20 to the Company's 1991
Annual Report on Form 10-K, incorporated herein by
reference.
10.12 The Company's Advantage Plan, filed as the Exhibit to
the Company's Registration Statement on Form S-8,
filed October 28, 1991, incorporated herein by
reference.**
10.13 Aircraft Lease Agreement between the Company and
C.I.T. Leasing Corporation, dated as of October 27,
1992, filed as Exhibit 10.13 to the Company's 1992
Annual Report on Form 10-K, incorporated herein by
reference.
10.14 Joint Venture Contract among Walbro Engine Management
Corporation, Fujian Fuding Carburetor Factory and Twin
Winner Trading Co., Ltd., dated December 30, 1993,
relating to the Fujian Hualong Carburetor Co. Ltd.
joint venture, filed as Exhibit 10.14 to the Company's
1994 Annual Report on Form 10-K, incorporated herein
by reference.
10.15 Agreement among the Company, Walbro Automotive
Corporation and Magneti Marelli France S.A., dated
February 7, 1995, filed as Exhibit 10.24 to the
Company's 1994 Annual Report on Form 10-K,
incorporated herein by reference.
10.16 Joint Venture Agreement between the Company and Daewoo
Precision Industries, Ltd., dated November 30, 1994,
filed as Exhibit 10.25 to the Company's 1994 Annual
Report on Form 10-K, incorporated herein by
reference.
18
<PAGE> 20
10.17 Purchase and Sale Agreement dated as of April 7, 1995
by and between the Company and Dyno, filed as Exhibit
2.1 to the Company's Quarterly Report on Form 10-Q,
for the quarter ended March 31, 1995, incorporated
herein by reference.
10.18 Addendum to Purchase and Sale Agreement by and between
the Company and Dyno dated as of July 27, 1995, filed
as Exhibit 2.2 to the Form 8-K, incorporated herein by
reference.
10.19 Joint Venture Agreement between Walbro Automotive
Corporation and Mutual Industries Ltd., dated November
28, 1995, relating to the Mutual Walbro P. Ltd. joint
venture, filed as Exhibit 10.30 to the Company's 1995
Annual Report on Form 10-K, incorporated herein by
reference.
10.20 General Partnership Agreement dated August 18, 1995
between Iwaki Diecast U.S.A., Inc. and Walbro Tucson
Corp., filed as Exhibit 10.31 to the Company's 1995
Annual Report on Form 10-K, incorporated herein by
reference.
10.21 Employment Agreement between the Company and L. E.
Althaver, dated August 16, 1996. **
10.22 Termination and Change of Control Agreement between
the the Company and L. E. Althaver, dated
August 16, 1996. **
10.23 Employment Agreement between the Company and Daniel L.
Hittler, dated August 16, 1996. **
10.24 Termination and Change of Control Agreement between
the Company and Daniel L. Hittler, dated August 16,
1996. **
10.25 Employment Agreement between the Company and Michael
A. Shope, dated August 16, 1996. **
10.26 Termination and Change of Control Agreement between
the Company and Michael A. Shope, dated August 16,
1996. **
10.27 Employment Agreement between the Company and Robert H.
Walpole, dated August 16, 1996. **
10.28 Termination and Change of Control Agreement between
the Company and Robert H. Walpole, dated August 16,
1996. **
10.29 Employment Agreement between the Company and R. H.
Whitehead III, dated August 16, 1996. **
10.30 Termination and Change of Control Agreement between
the Company and R. H. Whitehead III, dated August
16, 1996. **
10.31 Employment Agreement between the Company and Frank E.
Bauchiero, dated October 3, 1996. **
19
<PAGE> 21
10.32 Termination and Change of Control Agreement between
the Company and Frank E. Bauchiero, dated October 3,
1996. **
13.1 1996 Annual Report to Stockholders. With the
exception of the information incorporated by reference
into Items 5, 6, 7, 8 and 14(a)(1) of this Form 10-K,
the 1996 Annual Report to Stockholders is not deemed
filed as part of this report.
21.1 Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP, independent public
accountants.
27.1 Financial Data Schedule.
- --------------
** Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K.
(b) Reports on Form 8-K:
During the last quarter of the period covered by this Form 10-K, the
Company filed a Current Report on Form 8-K dated December 16, 1996 reporting
Items 5 and 7.
20
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 26th day of
March, 1997.
WALBRO CORPORATION
By: /s/ MICHAEL A. SHOPE
-----------------------------------------
Michael A. Shope, Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Chairman of the Board, President and
/s/ LAMBERT E. ALTHAVER March 26, 1997
Chief Executive Officer (Principal
Lambert E. Althaver Executive Officer)
/s/ MICHAEL A. SHOPE March 26, 1997
Chief Financial Officer (Principal Financial
Michael A. Shope and Accounting Officer)
/s/ WILLIAM T. BACON, JR. Director March 26, 1997
William T. Bacon, Jr.
/s/ FRANK E. BAUCHIERO Director March 26, 1997
Frank E. Bauchiero
/s/ VERNON E. OECHSLE Director March 26, 1997
Vernon E. Oechsle
/s/ ROBERT D. TUTTLE
Director March 26, 1997
Robert D. Tuttle
/s/ JOHN E. UTLEY Director March 26, 1997
John E. Utley
/s/ ROBERT H. WALPOLE Director March 26, 1997
Robert H. Walpole
</TABLE>
21
<PAGE> 23
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of Walbro Corporation:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Walbro Corporation and
Subsidiaries' annual report to shareholders incorporated by reference in this
Form 10-K, and have issued our report thereon dated February 11, 1997. Our
audits were made for the purpose of forming an opinion on those statements
taken as a whole. The supplemental notes to the consolidated financial
statements on pages 23 to 33 are the responsibility of the Company's management
and are presented for purposes of complying with the Securities and Exchange
Commission's rules and are not a required part of the basic consolidated
financial statements. The information contained in these supplemental notes
has been subjected to the auditing procedures applied in our audits of the
basic consolidated financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
Arthur Andersen LLP
Detroit, Michigan,
February 11, 1997
22
<PAGE> 24
WALBRO CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) VALUATION AND QUALIFYING ACCOUNTS
Following is a summary of changes in the valuation and qualifying
accounts for the three years ended December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Balance Beginning of Year $ 978 $ 368 $ 413
Additions charged to operations 283 352 115
Additions due to acquisition -- 309 --
Deductions for uncollectible accounts
written off, net of recoveries (508) (51) (160)
-------- -------- --------
Balance End of Year $ 753 $ 978 $ 368
======== ======== ========
RESERVE FOR INVENTORY VALUATION:
Balance Beginning of Year $ 808 $ 238 $ 482
Additions charged to operations 730 194 159
Additions due to acquisition -- 376 --
Deductions for inventory disposal (870) (--) (403)
-------- -------- --------
Balance End of Year $ 668 $ 808 $ 238
======== ======== ========
ALLOWANCE FOR NOTES RECEIVABLE:
Balance Beginning of Year $ -- $ 454 $ 214
Additions charged to operations -- -- 240
Deductions -- (454) --
-------- -------- --------
Balance End of Year $ -- $ -- $ 454
======== ======== ========
</TABLE>
23
<PAGE> 25
WALBRO CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ --------------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash..................................... $ 299 $ 17,779 $ 135 $ -- $ 18,213
Accounts receivable, net................. 67,944 57,823 742 -- 126,509
Accounts receivable, intercompany........ (81,610) 115 101,752 (20,257) --
Inventories.............................. 25,219 22,884 2,485 -- 50,588
Prepaid expenses and other............... 4,464 5,851 920 -- 11,235
Deferred and refundable income taxes..... 509 1,016 3,446 -- 4,971
-------- -------- -------- --------- --------
Total current assets................... 16,825 105,468 109,480 (20,257) 211,516
-------- -------- -------- --------- --------
PLANT AND EQUIPMENT, NET 121,084 150,699 7,995 109 279,887
-------- -------- -------- --------- --------
OTHER ASSETS:
Funds held for construction.............. 1,140 -- -- -- 1,140
Joint ventures........................... 10,629 18,326 -- -- 28,955
Investments.............................. 118,673 24,723 104,084 (241,753) 5,727
Goodwill, net............................ 23,238 12,877 (117) -- 35,998
Notes receivable......................... 1,074 -- 204,884 (204,690) 1,268
Deferred and refundable income taxes..... -- 543 4,871 -- 5,414
Other.................................... 8,890 2,926 7,928 -- 19,744
-------- -------- -------- --------- --------
Total other assets..................... 163,644 59,395 321,650 (446,443) 98,246
-------- -------- -------- --------- --------
Total assets............................... $301,553 $315,562 $439,125 $(466,591) $589,649
======== ======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt........ $ 598 $ 82 $ 409 $ -- $ 1,089
Bank and other borrowings................ -- 22,072 -- -- 22,072
Accounts payable......................... 34,690 61,068 8,981 (26,800) 77,939
Accrued liabilities...................... 17,046 16,498 10,633 (2,901) 41,276
Dividends payable........................ -- -- 865 -- 865
-------- -------- -------- --------- --------
Total current liabilities.............. 52,334 99,720 20,888 (29,701) 143,241
-------- -------- -------- --------- --------
LONG-TERM LIABILITIES:
Long-term debt, less current portion..... 171,675 83,820 269,141 (232,913) 291,723
Pension obligations and other............ -- 2,826 7,892 -- 10,718
Deferred income taxes.................... -- 1,443 3,471 -- 4,914
Minority interest........................ -- 1,320 -- -- 1,320
-------- -------- -------- --------- --------
Total long-term liabilities............ 171,675 89,409 280,504 (232,913) 308,675
-------- -------- -------- --------- --------
STOCKHOLDERS' EQUITY:
Common stock, $.50 par value; authorized
25,000,000; outstanding 8,652,737 in
1996 .................................. -- 19,853 4,326 (19,853) 4,326
Paid-in capital.......................... -- 74,637 65,674 (74,637) 65,674
Retained earnings........................ 77,524 33,569 74,039 (111,093) 74,039
Deferred compensation.................... -- -- (967) -- (967)
Minimum pension liability adjustment..... -- -- -- -- --
Unrealized gain on securities
available for sale..................... -- -- 688 -- 688
Cumulative translation adjustments....... 20 (1,626) (6,027) 1,606 (6,027)
-------- -------- -------- --------- --------
Total stockholders' equity............. 77,544 126,433 137,733 (203,977) 137,733
-------- -------- -------- --------- --------
Total liabilities and stockholders'
equity................................... $301,553 $315,562 $439,125 $(466,591) $589,649
======== ======== ======== ========= ========
</TABLE>
24
<PAGE> 26
WALBRO CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ --------------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash..................................... $ 75 $ 19,219 $ 498 $ -- $ 19,792
Accounts receivable, net................. 59,569 52,837 940 -- 113,346
Accounts receivable, intercompany........ (38,971) (1,382) 48,176 (7,823) --
Inventories.............................. 24,416 25,342 965 -- 50,723
Prepaid expenses and other............... 8,519 2,264 678 (495) 10,966
Deferred and refundable income taxes..... 349 464 4,064 -- 4,877
----------- ---------- ----------- -------------- ----------
Total current assets................... 53,957 98,744 55,321 (8,318) 199,704
----------- ---------- ----------- -------------- ----------
PLANT AND EQUIPMENT, NET................... 85,437 111,190 9,030 108 205,765
----------- ---------- ----------- -------------- ----------
OTHER ASSETS:
Funds held for construction.............. 1,102 -- -- -- 1,102
Joint ventures........................... 10,181 13,285 -- -- 23,466
Investments.............................. 144,588 295 101,386 (237,045) 9,224
Goodwill, net............................ 15,254 18,045 -- -- 33,299
Notes receivable......................... -- -- 189,134 (188,674) 460
Deferred and refundable income taxes..... -- 2,805 -- -- 2,805
Other.................................... 8,352 1,987 7,309 -- 17,648
----------- ---------- ----------- -------------- ----------
Total other assets..................... 179,477 36,417 297,829 (425,719) 88,004
----------- ---------- ----------- -------------- ----------
Total assets............................... $ 318,871 $ 246,351 $ 362,180 $ (433,929) $ 493,473
=========== ========== =========== ============== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt........ $ 555 $ 123 $ 408 $ -- $ 1,086
Bank and other borrowings................ -- 14,921 -- -- 14,921
Accounts payable......................... 27,113 36,988 2,057 (13,384) 52,774
Accrued liabilities...................... 13,278 15,360 6,029 (315) 34,352
Dividends payable........................ -- -- 858 -- 858
----------- ---------- ----------- -------------- ----------
Total current liabilities.............. 40,946 67,392 9,352 (13,699) 103,991
----------- ---------- ----------- -------------- ----------
LONG-TERM LIABILITIES:
Long-term debt, less current portion..... 204,435 45,387 205,448 (221,881) 233,389
Pension obligations and other............ 618 4,455 10,029 -- 15,102
Deferred income taxes.................... -- 2,003 1,924 -- 3,927
Minority interest........................ -- 1,637 -- -- 1,637
----------- ---------- ----------- -------------- ----------
Total long-term liabilities............ 205,053 53,482 217,401 (221,881) 254,055
----------- ---------- ----------- -------------- ----------
STOCKHOLDERS' EQUITY:
Common stock, $.50 par value;
authorized 25,000,000; outstanding
8,579,976 in 1995...................... -- 19,392 4,290 (19,392) 4,290
Paid-in capital.......................... -- 78,633 64,381 (78,633) 64,381
Retained earnings........................ 72,301 23,993 66,256 (96,294) 66,256
Deferred compensation.................... -- -- (817) -- (817)
Minimum pension liability adjustment..... -- -- (63) -- (63)
Unrealized gain on securities
available for sale..................... -- -- 827 -- 827
Cumulative translation adjustments....... 571 3,459 553 (4,030) 553
----------- ---------- ----------- -------------- ----------
Total stockholders' equity............. 72,872 125,477 135,427 (198,349) 135,427
----------- ---------- ----------- -------------- ----------
Total liabilities and stockholders'
equity............................... $ 318,871 $ 246,351 $ 362,180 $ (433,929) $ 493,473
=========== ========== =========== ============== ==========
</TABLE>
25
<PAGE> 27
WALBRO CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ----------- --------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NET SALES.......................... $325,547 $284,812 $ 1,671 $ (26,641) $585,389
COSTS AND EXPENSES:
Cost of sales.................... 264,824 248,589 1,362 (26,641) 488,134
Selling and administrative
expenses...................... 47,557 22,239 73 -- 69,869
-------- -------- --------- ---------- --------
OPERATING INCOME (LOSS)............ 13,166 13,984 236 -- 27,386
OTHER EXPENSE (INCOME):
Interest expense................. 14,824 5,773 21,512 (22,276) 19,833
Interest income.................. (5,416) (1,999) (17,577) 22,276 (2,716)
Foreign currency exchange
loss (gain)................... (309) (131) 370 -- (70)
Other............................ (4) 158 (217) -- (63)
-------- -------- --------- ---------- --------
Income before provision for minority
interest, equity in (income)
loss of joint ventures and
subsidiaries .................... 4,071 10,183 (3,852) -- 10,402
Provision (credit) for income
taxes............................ 1,240 4,155 (2,320) -- 3,075
Minority interest ................. -- 285 -- -- 285
Equity in (income) loss of joint
ventures......................... (552) (3,635) -- -- (4,187)
Equity in (income) of
subsidiaries..................... (9,932) (518) (12,761) 23,211 --
-------- -------- --------- --------- --------
Net income ........................ $ 13,315 $ 9,896 $ 11,229 $ (23,211) $ 11,229
======== ======== ========= ========= ========
</TABLE>
26
<PAGE> 28
WALBRO CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ----------- --------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NET SALES......................... $335,896 $156,280 $ 2,091 $(34,995) $459,272
COSTS AND EXPENSES:
Cost of sales................... 277,196 134,219 1,335 (34,995) 377,755
Selling and administrative
expenses..................... 39,660 13,467 4,368 -- 57,495
-------- -------- --------- -------- --------
OPERATING INCOME (LOSS)........... 19,040 8,594 (3,612) -- 24,022
OTHER EXPENSE (INCOME):
Interest expense................ 10,387 4,300 10,503 (13,119) 12,071
Interest income................. (2,974) (797) (10,308) 13,119 (960)
Foreign currency exchange
loss (gain).................. (324) (68) 1,875 -- 1,483
Other........................... 3 (255) (3) -- (255)
-------- -------- --------- -------- --------
Income before provision (credit)
for income taxes, minority
interest, equity in (income)
loss of joint ventures and
subsidiaries.................... 11,948 5,414 (5,679) -- 11,683
Provision (credit) for income
taxes........................... 1,237 1,958 (1,937) -- 1,258
Minority interest................. -- 472 -- -- 472
Equity in (income) loss of joint
ventures........................ (1,222) (2,655) -- -- (3,877)
Equity in (income) of
subsidiaries.................... (6,417) -- (17,572) 23,989 --
-------- -------- --------- -------- --------
Net income........................ $ 18,350 $ 5,639 $ 13,830 $(23,989) $ 13,830
======== ======== ========= ======== ========
</TABLE>
27
<PAGE> 29
WALBRO CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1994
----------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ --------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NET SALES............................. $296,779 $ 58,903 $ 1,021 $ (31,498) $ 325,205
COSTS AND EXPENSES:
Cost of sales....................... 242,155 49,910 934 (31,498) 261,501
Selling and administrative
expenses......................... 26,765 3,576 8,977 -- 39,318
-------- -------- -------- --------- ---------
OPERATING INCOME (LOSS)............... 27,859 5,417 (8,890) -- 24,386
OTHER EXPENSE (INCOME):
Interest expense.................... 4,911 1,366 2,428 (4,843) 3,862
Interest income..................... -- (4) (4,930) 4,843 (91)
Foreign currency exchange loss
(gain)........................... 260 (42) 2,384 -- 2,602
Other............................... (2) 18 95 -- 111
-------- -------- -------- --------- ---------
Income before provision (credit) for
income taxes, minority interest,
equity in (income) loss of joint
ventures and subsidiaries........... 22,690 4,079 (8,867) -- 17,902
Provision (credit) for income taxes... 7,741 1,213 (3,130) -- 5,824
Minority interest..................... -- 92 -- -- 92
Equity in (income) loss of joint
ventures............................ (1,509) (1,491) 391 -- (2,609)
Equity in (income) of subsidiaries.... (4,265) -- (20,723) 24,988 --
-------- -------- -------- --------- ---------
Net income............................ $ 20,723 $ 4,265 $ 14,595 $ (24,988) $ 14,595
======== ======== ======== ========= =========
</TABLE>
28
<PAGE> 30
WALBRO CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ----------- --------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities............... $ 61,606 $ 50,441 $(75,409) $ -- $ 36,638
-------- -------- -------- ----- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and
equipment..................... (38,884) (60,417) 154 -- (99,147)
Acquisitions, net of cash
acquired...................... -- (1,018) -- -- (1,018)
Purchase of other assets........ (2,041) (1,297) (96) -- (3,434)
Investment in joint ventures and
other......................... (22,509) 10,609 10,449 -- (1,451)
Proceeds/(payments) of
intercompany note
receivable.................... -- -- -- -- --
Proceeds from disposal of
assets........................ 7 328 3,821 -- 4,156
-------- -------- -------- ----- --------
Net cash provided by (used in)
investing activities............... (63,427) (51,795) 14,328 -- (100,894)
-------- -------- -------- ----- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments)
under revolving line-of-credit
agreements.................... -- 1,189 64,061 -- 65,250
Debt repayments................. (555) (141) (408) -- (1,104)
Proceeds from issuance of
long-term debt................ 2,600 172 -- -- 2,772
Proceeds from issuance of common
stock and options............. -- -- 771 -- 771
Financing fees paid ............ -- -- (508) -- (508)
Cash dividends paid ............ -- -- (3,439) -- (3,439)
-------- -------- -------- ----- --------
Net cash provided by (used in)
financing activities............... 2,045 1,220 60,477 -- 63,742
-------- -------- -------- ----- --------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH............................... -- (1,306) 241 -- (1,065)
-------- -------- -------- ----- --------
NET INCREASE (DECREASE) IN CASH...... 224 (1,440) (363) -- (1,579)
CASH AT BEGINNING OF YEAR............ 75 19,219 498 -- 19,792
-------- -------- -------- ----- --------
CASH AT END OF YEAR.................. $ 299 $ 17,779 $ 135 $ -- $ 18,213
======== ======== ======== ===== ========
</TABLE>
29
<PAGE> 31
WALBRO CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------------------------------------
WALBRO CONSOLIDATION
CORPORATION AND
GUARANTOR NONGUARANTOR (PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities............ $ 50,509 $ 11,254 $ (30,875) $ -- $ 30,888
--------- ---------- ----------- ----------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of plant and
equipment.................... (31,237) (14,531) (472) -- (46,240)
Acquisitions, net of cash
acquired..................... (131,952) 15,774 (60) -- (116,238)
Purchase of other assets........ (6,398) (608) (257) -- (7,263)
Investment in joint ventures and
other........................ 118,704 3,901 (124,659) -- (2,054)
Proceeds/(payments) of
intercompany note
receivable................... -- 500 (500) -- --
Proceeds from disposal of
assets....................... 167 7 3,953 -- 4,127
--------- ---------- ----------- ----------- ----------
Net cash provided by (used in)
investing activities............ (50,716) 5,043 (121,995) -- (167,668)
--------- ---------- ----------- ----------- ----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net borrowings (repayments)
under revolving
line-of-credit
agreements................... -- 13,797 50,000 -- 63,797
Debt repayments................. (516) (12,659) (366) -- (13,541)
Proceeds from issuance of long -
term debt.................... 815 120 109,615 -- 110,550
Proceeds from issuance of common
stock and options............ -- -- 168 -- 168
Financing fees paid............. -- -- (4,778) -- (4,778)
Cash dividends paid............. -- -- (3,428) -- (3,428)
--------- ---------- ----------- ----------- ----------
Net cash provided by (used in)
financing activities............ 299 1,258 151,211 -- 152,768
--------- ---------- ----------- ----------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH............................ (92) (861) 217 -- (736)
--------- ---------- ----------- ----------- ----------
NET INCREASE (DECREASE) IN CASH... -- 16,694 (1,442) -- 15,252
CASH AT BEGINNING OF YEAR......... 75 2,525 1,940 -- 4,540
--------- ---------- ----------- ----------- ----------
CASH AT END OF YEAR............... $ 75 $ 19,219 $ 498 $ -- $ 19,792
========= ========== =========== =========== ==========
</TABLE>
30
<PAGE> 32
WALBRO CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1994
---------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ --------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities.............. $ 25,141 $ 2,323 $(16,987) $ -- $ 10,477
-------- -------- -------- ------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of plant and
equipment.................... (12,428) (2,729) (3,687) -- (18,844)
Acquisitions, net of cash
acquired..................... (1,480) -- -- -- (1,480)
Purchase of other assets....... (985) -- (1,630) -- (2,615)
Investment in joint ventures
and other.................... (1,508) -- -- -- (1,508)
Proceeds/(payments) of
intercompany note
receivable................... (8,500) -- 8,500 -- --
Proceeds from disposal of
assets....................... 402 407 654 -- 1,463
-------- -------- -------- ------- --------
Net cash provided by (used in)
investing activities.............. (24,499) (2,322) 3,837 -- (22,984)
-------- -------- -------- ------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net borrowings (repayments)
under revolving
line-of-credit
agreements................... -- 1,011 (28,750) -- (27,739)
Debt repayments................ (416) -- (408) -- (824)
Proceeds from issuance of
long-term debt............... -- -- 45,000 -- 45,000
Proceeds from issuance of
common stock and options..... -- -- 230 -- 230
Cash dividends paid............ -- -- (3,424) -- (3,424)
-------- -------- -------- ------- --------
Net cash provided by (used in)
financing activities.............. (416) 1,011 12,648 -- 13,243
-------- -------- -------- ------- --------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH.............................. (582) (219) -- -- (801)
-------- -------- -------- ------- --------
NET INCREASE (DECREASE) IN CASH..... (356) 793 (502) -- (65)
CASH AT BEGINNING OF YEAR........... 431 1,732 2,442 -- 4,605
-------- -------- -------- ------- --------
CASH AT END OF YEAR................. $ 75 $ 2,525 $ 1,940 $ -- $ 4,540
======== ======== ======== ======= ========
</TABLE>
31
<PAGE> 33
WALBRO CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
Basis of Presentation -- In connection with the acquisition (the Dyno
Acquisition) by the Company of the fuel systems business of Dyno Industrier A.S
(Dyno) and the execution of a $135,000,000 credit facility in July
1995, the Company issued $110,000,000 in aggregate principal amount of Senior
Notes due in 2005 (the Notes). The 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 (the Guarantors). The Guarantors include Walbro Automotive
Corporation, Walbro Engine Management Corporation, Whitehead Engineered
Products, Inc. and Sharon Manufacturing Co. The condensed consolidating
financial statements of the Guarantors are presented on pages 24 through 31 and
should be read in connection with the consolidated financial statements of the
Company. Separate financial statements of the Guarantors are not presented
because the Guarantors are jointly, severally and unconditionally liable under
the guarantees, and the Company believes the condensed consolidating financial
statements presented are more meaningful in understanding the financial
position of the Guarantors.
Distributions -- There are no significant restrictions on the ability of
the Guarantors to make distributions to Walbro Corporation.
Selling and Administrative Expenses -- During 1996 and 1995, the Parent
Corporation allocated $10,422,000 and $3,637,000, respectively, of corporate
selling and administrative expenses to its operating subsidiaries. No
allocations were made during 1994.
32
<PAGE> 34
WALBRO CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
Long-term debt of the Parent Corporation and the Guarantors consisted of
the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- ------
<S> <C> <C>
Senior notes due 2005, unsecured, stated interest at 9.875%
(9.92% effective interest rate) net of unamortized discount
of $331 and $369 as of December 31, 1996 and 1995,
respectively. $109,669 $109,631
Revolving credit facility, secured, interest at the agent's base
rate plus an additional margin ................................ 114,062 50,000
Term loan from the State of Connecticut, secured, interest at 6%
per annum, payable in monthly amounts from 1997 to 2005 ....... 3,400 800
Senior notes, secured, interest at 7.68%, payable in annual
amounts from 1998 to 2004...................................... 45,000 45,000
Industrial revenue bond, issued by Town of Ossian, Indiana,
interest at a variable municipal bond rate, due in 2023........ 9,000 9,000
Industrial revenue bond, issued by City of Ligonier, Indiana,
interest at a variable municipal bond rate plus 1%, payable in
annual amounts from 2003 to 2007............................... 6,300 6,300
ESOP credit agreement, interest rate which approximates 86% of
prime, payable in annual installments of $408.................. 817 1,225
Capital lease obligations, interest at 7.5%, payable in monthly
installments through February 2002............................. 3,640 4,195
Other............................................................ 67 82
-------- --------
291,955 226,233
Less -- Current portion.......................................... 1,007 963
-------- --------
$290,948 $225,270
======== ========
</TABLE>
For a more detailed description of the above indebtedness, see Note 5 of
Notes to Consolidated Financial Statements.
Aggregate minimum principal payment requirements on long-term debt,
including capital lease obligations, in each of the five years subsequent to
December 31, 1996 are as follows: 1997 - $1,007,000; 1998 - $7,584,000; 1999 -
$7,348,000; 2000 - $121,476,000; 2001 - $7,484,000 and thereafter -
$147,056,000.
33
<PAGE> 35
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequential
Exhibits Description Page No.
-------- ----------- ----------
<S> <C> <C>
4.11 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 Indenture between Walbro Corporation and Bankers Trust
Company, as Indenture Trustee, dated as of February 3,
1997.
4.13 Form of Preferred Security issued by Walbro Capital Trust.
(included as Exhibit A-1 to Exhibit 4.11 hereof).
4.14 Convertible Debenture issued by Walbro Corporation to
Walbro Capital Trust (included as Exhibit A to Exhibit
4.12 hereof).
4.15 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, dated as of February 3, 1997.
10.21 Employment Agreement between the Company and L. E. Althaver,
dated August 16, 1996. **
10.22 Termination and Change of Control Agreement between the
Company and L.E. Althaver, dated August 16, 1996. **
10.23 Employment Agreement between the Company and Daniel L.
Hittler, dated August 16, 1996. **
10.24 Termination and Change of Control Agreement between the
Company and Daniel L. Hittler, dated August 16, 1996. **
10.25 Employment Agreement between the Company and Michael A. Shope,
dated August 16, 1996. **
10.26 Termination and Change of Control Agreement between the
Company and Michael A. Shope, dated August 16, 1996. **
10.27 Employment Agreement between the Company and Robert H.
Walpole, dated August 16, 1996. **
10.28 Termination and Change of Control Agreement between the
Company and Robert H. Walpole, dated August 16, 1996. **
10.29 Employment Agreement between the Company and R. H.
Whitehead III, dated August 16, 1996. **
</TABLE>
<PAGE> 36
10.30 Termination and Change of Control Agreement between the
Company and R. H. Whitehead III, dated August 16, 1996.**
10.31 Employment Agreement between the Company and Frank E.
Bauchiero, dated October 3, 1996. **
10.32 Termination and Change of Control Agreement between the
Company and Frank E. Bauchiero, dated October 3, 1996. **
13.1 1996 Annual Report to Stockholders. With the exception of
the information incorporated by reference into Items 5, 6,
7, 8 and 14(a)(1) of this Form 10-K, the 1996 Annual
Report to Stockholders is not deemed filed as part of this
report.
21.1 Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP, independent public
accountants.
27.1 Financial Data Schedule.
<PAGE> 1
EXHIBIT 4.11
================================
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
WALBRO CAPITAL TRUST
Dated as of February 3, 1997
================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application . . . . . . . 9
SECTION 2.2 Lists of Holders of Securities . . . . . . . . 10
SECTION 2.3 Reports by the Institutional Trustee . . . . . 10
SECTION 2.4 Periodic Reports to the Institutional
Trustee. . . . . . . . . . . . . . . . . . . . 11
SECTION 2.5 Evidence of Compliance with
Conditions Precedent . . . . . . . . . . . . 11
SECTION 2.6 Event of Default; Waiver . . . . . . . . . . . 11
SECTION 2.7 Event of Default; Notice . . . . . . . . . . . 13
ARTICLE III
ORGANIZATION OF TRUST
SECTION 3.1 Name . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.2 Office . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.3 Purpose . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.4 Prohibition of Actions by the Trust
and the Trustees . . . . . . . . . . . . . . 15
SECTION 3.5 General Authority of the Trustees . . . . . . . 16
SECTION 3.6 Title to Property of the Trust . . . . . . . . 16
SECTION 3.7 Not Responsible for Recitals or
Issuance of Securities . . . . . . . . . . . 16
SECTION 3.8 Duration of Trust . . . . . . . . . . . . . . . 17
SECTION 3.9 Mergers . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.10 Termination of Trust . . . . . . . . . . . . . 19
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities . . . . 20
SECTION 4.2 Responsibilities of the Sponsor . . . . . . . . 20
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Page
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ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees . . . . . . . . . . . . . . 21
SECTION 5.2 Delaware Trustee; Eligibility . . . . . . . . . 21
SECTION 5.3 Institutional Trustee; Eligibility . . . . . . 22
SECTION 5.4 Qualifications of Regular Trustees
and Delaware Trustee Generally . . . . . . . 23
SECTION 5.5 Initial Trustees . . . . . . . . . . . . . . . 23
SECTION 5.6 Appointment, Removal and Resignation
of Trustees . . . . . . . . . . . . . . . . 24
SECTION 5.7 Vacancies among Trustees . . . . . . . . . . . 25
SECTION 5.8 Merger, Conversion, Consolidation
or Succession to Business of a
Trustee . . . . . . . . . . . . . . . . . . 26
SECTION 5.9 Authority, Powers and Duties of
the Regular Trustees . . . . . . . . . . . 26
SECTION 5.10 Delegation of Powers and Duties of
the Regular Trustees . . . . . . . . . . . . 30
SECTION 5.11 Powers and Duties of the Institutional
Trustee . . . . . . . . . . . . . . . . . . 30
SECTION 5.12 Certain Duties and Responsibilities
of the Institutional Trustee . . . . . . . . 32
SECTION 5.13 Certain Rights of Institutional
Trustee . . . . . . . . . . . . . . . . . . 34
SECTION 5.14 Delaware Trustee . . . . . . . . . . . . . . . 37
SECTION 5.15 Meetings . . . . . . . . . . . . . . . . . . . 37
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions . . . . . . . . . . . . . . . . . 38
ARTICLE VII
THE SECURITIES
SECTION 7.1 Title and Terms . . . . . . . . . . . . . . . . 38
SECTION 7.2 General Provisions Regarding the
Securities . . . . . . . . . . . . . . . . . 39
SECTION 7.3 General Form of Certificates . . . . . . . . . 39
SECTION 7.4 Form of Preferred Securities
Certificates; Global Certificates . . . . . 40
SECTION 7.5 Execution and Dating of Certificates . . . . . 41
SECTION 7.6 Authentication of Preferred Security
Certificates . . . . . . . . . . . . . . . . 41
SECTION 7.7 Definitive Preferred Security
Certificates . . . . . . . . . . . . . . . . 42
-ii-
<PAGE> 4
Page
----
SECTION 7.8 Temporary Certificates . . . . . . . . . . . . 42
SECTION 7.9 Registrar, Paying Agent and Conversion
Agent . . . . . . . . . . . . . . . . . . . 42
SECTION 7.10 Paying Agent to Hold Money in Trust . . . . . . 43
SECTION 7.11 Outstanding Preferred Securities . . . . . . . 44
SECTION 7.12 Preferred Securities in Treasury . . . . . . . 44
SECTION 7.13 Notices to Clearing Agency . . . . . . . . . . 44
SECTION 7.14 Appointment of Successor Clearing
Agency . . . . . . . . . . . . . . . . . . . 45
SECTION 7.15 Deemed Security Holders . . . . . . . . . . . . 45
ARTICLE VIII
TRANSFERS, EXCHANGES AND CANCELLATIONS
OF SECURITIES
SECTION 8.1 General . . . . . . . . . . . . . . . . . . . . 45
SECTION 8.2 Transfer Procedures and Restrictions
for Global Certificates . . . . . . . . . . 46
SECTION 8.3 Mutilated, Destroyed, Lost or Stolen
Certificates; Replacement
Securities . . . . . . . . . . . . . . . . . 47
SECTION 8.4 Cancellation of Preferred Security
Certificates . . . . . . . . . . . . . . . . 48
ARTICLE IX
LIMITATION OF LIABILITY OF HOLDERS
OF SECURITIES, TRUSTEES AND OTHERS
SECTION 9.1 Liability . . . . . . . . . . . . . . . . . . . 48
SECTION 9.2 Exculpation . . . . . . . . . . . . . . . . . . 49
SECTION 9.3 Fiduciary Duty . . . . . . . . . . . . . . . . 50
SECTION 9.4 Indemnification . . . . . . . . . . . . . . . . 51
SECTION 9.5 Outside Businesses . . . . . . . . . . . . . . . 54
ARTICLE X
ACCOUNTING
SECTION 10.1 Fiscal Year . . . . . . . . . . . . . . . . . . 55
SECTION 10.2 Certain Accounting Matters . . . . . . . . . . 55
SECTION 10.3 Banking . . . . . . . . . . . . . . . . . . . . 56
SECTION 10.4 Withholding . . . . . . . . . . . . . . . . . . 56
-iii-
<PAGE> 5
Page
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ARTICLE XI
AMENDMENTS AND MEETINGS
SECTION 11.1 Amendments . . . . . . . . . . . . . . . . . . 57
SECTION 11.2 Meetings of the Holders of Securities;
Action by Written Consent . . . . . . . . . 59
ARTICLE XII
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE
AND DELAWARE TRUSTEE
SECTION 12.1 Representations and Warranties of
Institutional Trustee . . . . . . . . . . . 61
SECTION 12.2 Representations and Warranties of
Delaware Trustee . . . . . . . . . . . . . . 62
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 Notices . . . . . . . . . . . . . . . . . . . . 63
SECTION 13.2 Governing Law . . . . . . . . . . . . . . . . . 64
SECTION 13.3 Intention of the Parties . . . . . . . . . . . 64
SECTION 13.4 Headings . . . . . . . . . . . . . . . . . . . 64
SECTION 13.5 Successors and Assigns . . . . . . . . . . . . 65
SECTION 13.6 Partial Enforceability . . . . . . . . . . . . 65
SECTION 13.7 Counterparts . . . . . . . . . . . . . . . . . 65
ANNEX AND EXHIBITS
ANNEX I Terms of 8% Convertible Trust
Preferred Securities
and 8% Convertible Common Securities
Exhibit A-1 Form of Preferred Security
Exhibit A-2 Form of Common Security
Exhibit B Form of Debenture
-iv-
<PAGE> 6
CROSS-REFERENCE TABLE*
Section of
Trust Indenture Act Section of
of 1939, as amended Declaration
- ------------------- -----------
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)
_________________________
* This Cross-Reference Table does not constitute part of the Declaration
and shall not affect the interpretation of any of its terms or
provisions.
-v-
<PAGE> 7
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
WALBRO CAPITAL TRUST
FEBRUARY 3, 1997
AMENDED AND RESTATED DECLARATION OF TRUST
("Declaration") dated and effective as of February 3, 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 assets of 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 17, 1996 (the
"Original Declaration"), and a Certificate of Trust filed with the Secretary of
State of the State of Delaware on December 17, 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); 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 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> 8
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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> 9
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"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 February 3, 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> 10
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"Common Securities Guarantee" means the Common Securities
Guarantee Agreement dated as of February 3, 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 Bankers Trust Company, 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> 11
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"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 February 3, 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 Securities voting together as a single
class or, as the context
<PAGE> 12
-6-
may require, Holders of outstanding Preferred Securities or Holders of
outstanding Common Securities voting separately as a class, who are the record
owners of greater 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.
"Preferred Securities" has the meaning specified in Section
7.1.
<PAGE> 13
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"Preferred Security Certificate" means a certificate
representing a Preferred Security substantially in the form of Exhibit A-1.
"Preferred Securities Guarantee" means the Preferred
Securities Guarantee Agreement dated as of February 3, 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 January 29, 1997, among the Trust, 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. 333-18971), including any amendments thereto, and the Rule
462(b) Registration Statement (Reg. No. 333-20609) relating to, the Preferred
Securities, the Debentures, the Preferred Securities Guarantees, and the Common
Securities of the Sponsor issuable upon conversion of the Debentures.
"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> 14
-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 at least 10% 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> 15
-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 this
Declaration 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> 16
-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 January 15 of each year,
commencing January 15, 1998, 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
reports required to be filed with the Commission pursuant to
<PAGE> 17
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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
(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
<PAGE> 18
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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 proportion in liquidation amount of the Common Securities that the
relevant Super Majority represents of the aggregate principal amount
of the Debentures outstanding;
<PAGE> 19
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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 Section Section 316(a)(1)(A) and
316(a)(1)(B) of the Trust Indenture Act and such Section Section 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 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
<PAGE> 20
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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 Section 5.01(1) 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.
SECTION 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:
Lambert E. Althaver. On 10 Business Days written notice to the Holders of
Securities, the Regular Trustees may designate another principal office.
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
<PAGE> 21
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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) on behalf of the Trust 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 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
<PAGE> 22
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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 January 31, 2017.
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) or Section 3 of Annex I.
<PAGE> 23
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(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 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;
<PAGE> 24
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(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); and
(B) following such merger, consolidation,
amalgamation or replacement, neither the Trust nor the
Successor Entity will be required to register as an Investment
Company.
(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.
SECTION 3.10 Termination of Trust.
---------------------
(a) The Trust shall dissolve:
(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
<PAGE> 25
-19-
such certificate of cancellation, or the revocation of the Certificate
of Incorporation of the Sponsor or the Holder of the Common Securities
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 January
31, 2017.
(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 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
<PAGE> 26
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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, and
execute on behalf of the Trust, 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 and to execute such
documents on behalf of the Trust;
(c) to prepare for filing by the Trust, and execute on
behalf of 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, and execute on behalf of the Trust, 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
(e) to negotiate, and execute and deliver on behalf of
the Trust, the terms of the Purchase Agreement and other agreements,
documents and instruments providing for the sale of the Preferred
Securities.
<PAGE> 27
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ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees.
-------------------
The initial number of Trustees shall be five.
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 two Regular Trustees who
are employees or officers of, or 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.
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
<PAGE> 28
-22-
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 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.
<PAGE> 29
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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
Daniel L. Hittler
c/o Walbro Corporation
6242 Garfield Street
Cass City, MI 48726
The initial Delaware Trustee is:
Bankers Trust (Delaware)
1001 Jefferson Street
Wilmington, DE 19801
Attention: Lisa Wilkins
The initial Institutional Trustee is:
Bankers Trust Company
Four Albany Street - Fourth Floor
New York, NY 10006
Attention: Corporate Market Services
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.
(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.
<PAGE> 30
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(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 or its successor shall have been appointed or until his 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.
(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 30 days after delivery pursuant to this Section 5.6
of an instrument of
<PAGE> 31
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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 dissolve, terminate or 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
5.7, 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.
SECTION 5.8 Merger, Conversion, Consolidation or
Succession to Business of a Trustee.
-----------------------------------
Any Person 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 Person 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 Person succeeding to all or
substantially all the corporate trust business of the Institutional Trustee or
the Delaware Trustee, as the case may
<PAGE> 32
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be, shall be the successor of the Institutional Trustee or the Delaware
Trustee, as the case may be, hereunder, provided such Person 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.
(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;
<PAGE> 33
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(ii) in connection with the issue and sale of the
Preferred Securities, at the direction of the Sponsor, to:
(A) 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;
(B) 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;
(C) execute and deliver letters, documents, or
instruments to the Depositary relating to the Preferred
Securities; and
(D) 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;
(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
<PAGE> 34
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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(e), 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;
(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
<PAGE> 35
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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 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.
<PAGE> 36
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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 making any
governmental filing.
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 Successor 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
<PAGE> 37
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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 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.
<PAGE> 38
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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
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.
<PAGE> 39
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(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
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
<PAGE> 40
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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 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
<PAGE> 41
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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;
(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 fully protected in acting in accordance
with such instructions;
<PAGE> 42
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(xi) except as otherwise expressly provided by this
Declaration, the Institutional Trustee shall not 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. Notices shall
contain a brief statement of the time, place and anticipated purposes of
<PAGE> 43
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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 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
<PAGE> 44
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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,
subject to Section 9.1(b), nonassessable undivided beneficial interests in the
assets of the Trust.
(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.
The definitive Certificates shall be printed, lithographed or
engraved or produced by any combination of these
<PAGE> 45
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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 execution
by one or more 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:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED SIGNATORY OF THE
DEPOSITORY TRUST COMPANY ("DTC") TO
<PAGE> 46
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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 order of the Trust signed by one Regular Trustee, the
Institutional
<PAGE> 47
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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 Regular Trustees consider 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.
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
<PAGE> 48
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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 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
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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.
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.
<PAGE> 50
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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.
(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. To the fullest extent permitted by law,
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
<PAGE> 51
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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 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
<PAGE> 52
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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.
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, in the case of a Preferred Security, the Institutional Trustee shall
<PAGE> 53
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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.
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
<PAGE> 54
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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 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.
<PAGE> 55
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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
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
<PAGE> 56
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(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 Sponsor 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.
(ii) The Sponsor 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,
<PAGE> 57
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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 by the Sponsor, 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 Sponsor
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 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 Sponsor 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 Sponsor as authorized in this Section 9.4(a).
Notwithstanding the foregoing, no advance shall be made by the Sponsor 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
<PAGE> 58
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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 Sponsor 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 Sponsor and each
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 Sponsor 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 Sponsor
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, conversion 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.
<PAGE> 59
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(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 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 and the
resignation and removal of such Fiduciary Indemnified Person.
SECTION 9.5 Outside Businesses.
------------------
Any Covered Person, the Sponsor, the Delaware Trustee and the
Institutional Trustee (subject to Section 5.3(c)) 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
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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 January
1-December 31, or such other year as is required by the Code.
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
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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 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.
<PAGE> 62
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ARTICLE XI
AMENDMENTS AND MEETINGS
ARTICLE 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
(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
<PAGE> 63
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(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 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
<PAGE> 64
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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 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
<PAGE> 65
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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 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.
<PAGE> 66
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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 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 by-laws of
the Institutional Trustee.
(d) At the Closing Date, the Institutional Trustee has
not 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.
<PAGE> 67
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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 banking corporation 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 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 this Declaration.
<PAGE> 68
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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: 517-872-2131
Telecopy: 517-872-2301
Attention: Lambert E. Althaver
(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):
Bankers Trust Company
4 Albany Street
New York, NY 10006
Tel: 212-250-6382
Telecopy: 212-250-6392
Attention: Corporate Market Services
(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):
Bankers Trust (Delaware)
1001 Jefferson Street
Wilmington, DE 19801
Attention: Lisa Wilkens
(d) if given to the Holder of the Common Securities, at
the mailing address of the Sponsor set forth below (or
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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: 517-872-2131
Telecopy: 517-872-2301
Attention: Lambert E. Althaver
(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.
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
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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> 71
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IN WITNESS WHEREOF, the undersigned has caused
these presents to be executed as of the date first above written.
/s/ Lambert E. Althaver
----------------------------
Lambert E. Althaver,
as Regular Trustee
/s/ Michael A. Shope
----------------------------
Michael A. Shope,
as Regular Trustee
/s/ Daniel L. Hittler
----------------------------
Daniel L. Hittler,
as Regular Trustee
Bankers Trust (Delaware),
as Delaware Trustee
By: /s/ M. Lisa Wilkins
-------------------------
Name: M. Lisa Wilkins
Title: Assistant Secretary
Bankers Trust Company,
as Institutional Trustee
By: /s/ Terence Rawlins
-------------------------
Name: Terence Rawlins
Title: Assistant Treasurer
WALBRO CORPORATION,
as Sponsor
By: /s/ Lambert E. Althaver
-------------------------
Name: Lambert E. Althaver
Title: Chairman and Chief
Executive Officer
<PAGE> 72
ANNEX I
TERMS OF
8% CONVERTIBLE TRUST PREFERRED SECURITIES
8% CONVERTIBLE COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated
Declaration of Trust, dated as of February 3, 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." 2,400,000 Preferred Securities of the
Trust with an aggregate liquidation amount with respect to the
assets of the Trust of Sixty Million Dollars ($60,000,000),
plus up to an additional 360,000 Preferred Securities of the
Trust with an aggregate liquidation amount with respect to the
assets of the Trust of Nine Million Dollars ($9,000,000)
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 "8% 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." 74,227 Common Securities of the Trust
with an aggregate liquidation amount with respect to the
assets of the Trust of One Million Eight Hundred and
Fifty-Five Thousand Six Hundred and Seventy-Five Dollars
($1,855,675) plus up to an additional 11,134 Common Securities
of the Trust with an aggregate liquidation amount with respect
to the assets of the
<PAGE> 73
Trust of Two Hundred and Seventy-Eight Thousand Three Hundred
and Fifty Dollars ($278,350) 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 "8%
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 8% (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 dates correspond to the interest
payment dates on the Debentures: January 31, April 30, July
31 and October 31 of each year, commencing on April 30, 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
I-2
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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
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.
I-3
<PAGE> 75
(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 January 15, April 15, July 15 and October 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 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
I-4
<PAGE> 76
date with respect to such Preferred Security shall be paid to
the converting Holder by 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 to 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, after satisfaction of liabilities to Creditors, 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.
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
I-5
<PAGE> 77
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 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.
I-6
<PAGE> 78
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 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 January 29, 1997), in either case
after January 29, 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
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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 January 29, 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 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
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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 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
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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, 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
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<PAGE> 82
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.
-----------------
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 1.1737
shares of Common Stock of the Debenture Issuer per $25
principal amount of Debentures (which is equivalent to a
conversion price of $21.30 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
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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
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
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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. 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 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
Bankers Trust Company (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
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<PAGE> 85
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 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
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<PAGE> 86
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 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
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<PAGE> 87
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 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, to the fullest extent permitted by law, 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.
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(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 Holders of a Majority in liquidation amount of the
Common Securities, voting separately as a class, may
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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 Common 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, to the fullest extent permitted by law, 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
Debentures, without first instituting any legal proceeding
against the Institutional Trustee or any other Person.
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(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.
(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
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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.
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.
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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 or
similar 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.
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EXHIBIT A-1
FORM OF PREFERRED SECURITY
<PAGE> 94
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. 931152201
WALBRO CAPITAL TRUST
8% Convertible Preferred Securities
(liquidation amount $25 per Convertible Preferred Security)
Walbro Capital Trust, a statutory business trust created 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 representing undivided beneficial interests in the
assets of the Trust designated the "8% Convertible Preferred Securities
(liquidation amount $25 per Convertible Preferred Security)" (the "Preferred
Securities"). The Preferred Securities are
<PAGE> 95
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 February 3, 1997, as the same may be amended from time to time (the
"Declaration"), 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 or an authenticating
agent'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> 96
IN WITNESS WHEREOF, the Trust has caused this instrument to be duly executed.
Dated: February 3, 1997
WALBRO CAPITAL TRUST
By:________________________
Name:
Title: Regular Trustee
INSTITUTIONAL TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Preferred Securities referred to in the
within-mentioned Declaration.
Dated:
BANKERS TRUST COMPANY,
as Institutional Trustee
By:________________________
Authorized Signatory
A-1-3
<PAGE> 97
[REVERSE OF SECURITY]
Distributions payable on each Preferred Security will be fixed
at a rate per annum of 8% (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:
January 31, April 30, July 31 and October 31 of each year, commencing on April
30, 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
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
A-1-4
<PAGE> 98
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 January 15,
April 15, July 15 and October 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.
Customary abbreviations may be used in the name of a Holder or
an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
A-1-5
<PAGE> 99
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> 100
CONVERSION REQUEST
To: BANKERS TRUST COMPANY, 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> 101
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> 102
EXHIBIT A-2
FORM OF COMMON SECURITY
<PAGE> 103
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
8% Convertible Common Securities
(liquidation amount $25 per Convertible Common Security)
Walbro Capital Trust, a statutory business trust created 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 8% Convertible Common Securities
(liquidation amount $25 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 February 3, 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> 104
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> 105
IN WITNESS WHEREOF, the Trust has caused this instrument to
be duly executed.
Dated: February 3, 1997
WALBRO CAPITAL TRUST
By:
------------------------------------
Name:
Title: Regular Trustee
A-2-3
<PAGE> 106
[REVERSE OF SECURITY]
Distributions payable on each Common Security will be fixed at
a rate per annum of 8% (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:
January 31, April 30, July 31 and October 31 of each year, commencing on April
30, 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 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
A-2-4
<PAGE> 107
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> 108
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> 109
CONVERSION REQUEST
To: BANKERS TRUST COMPANY, 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> 110
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> 111
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> 112
WALBRO CORPORATION
8% 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 January 31, 2017
and to pay interest thereon from April 30, 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 January 31, April 30, July 31 and October 31 (each
an "Interest Payment Date") of each year, commencing April 30, 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 January 15, April 15, July 15 and October 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.
<PAGE> 113
-2-
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed under its corporate seal.
Dated: February 3, 1997
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: February 3, 1997 Bankers Trust Company,
as Trustee
By: ______________________________
Authorized Signatory
<PAGE> 114
-3-
[FORM OF REVERSE OF SECURITY]
This Security is one of a duly authorized issue of securities
of the Company designated as its 8% Convertible Subordinated Debenture Due 2017
(herein called the "Securities"), in aggregate principal amount of $61,855,675
(or up to $71,134,025 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 February 3, 1997 (herein
called the "Indenture"), between the Company and Bankers Trust Company, 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 8% per annum, from February 3, 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 January 31, April 30, July 31 and October 31 (each an "Interest
Payment Date") of each year, commencing April 30, 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 January 15, April 15, July 15 and October 15 next preceding such Interest
Payment Date (the "Regular Record Date"). Interest will
<PAGE> 115
-4-
compound quarterly and will accrue at the rate of 8% 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 of the Person entitled thereto as such
address shall appear in the Security Register.
<PAGE> 116
-5-
(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 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 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.
<PAGE> 117
-6-
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 February 2, 2000 at the
redemption prices (expressed as a percentage of the principal amount of
Securities) specified below for the 12 month period commencing February 2 in
the year indicated:
<PAGE> 118
-7-
<TABLE>
<CAPTION>
Percentage of
Principal
Year Amount
---- -------------
<S> <C>
2000 105.6%
2001 104.8
2002 104.0
2003 103.2
2004 102.4
2005 101.6
2006 100.8
2007 and thereafter 100.0%
</TABLE>
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 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.
<PAGE> 119
-8-
(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 April 4, 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 1.1737 shares of Common Stock for each $25 in
aggregate principal amount of Securities (equal to a conversion price of $21.30
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 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 of the Indenture and a Security is converted after
such mailing but
<PAGE> 120
-9-
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 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
<PAGE> 121
-10-
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 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
<PAGE> 122
-11-
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.
(17) Abbreviations and Defined Terms. Customary
abbreviations may be used in the name of a Holder or an assignee, such as: TEN
COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (=
joint tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
<PAGE> 123
-12-
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.)
<PAGE> 124
-13-
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 BANKERS
TRUST COMPANY, 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
(...continued)
<PAGE> 125
-14-
______________________
*(...continued)
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.)
<PAGE> 1
EXHIBIT 4.12
WALBRO CORPORATION, as Issuer
and
BANKERS TRUST COMPANY, as Trustee
______________
Indenture
Dated as of February 3, 1997
$61,855,675*
8% Convertible Subordinated Debentures Due 2017
______________
_______________________________________________________________
__________________________________
* Subject to increase to up to $71,134,025 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:
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- ----------------- ---------
<S> <C> <C>
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
</TABLE>
______________
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
<TABLE>
<CAPTION>
Page
----
<S> <C>
Recitals of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02. Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . 11
SECTION 1.03. Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . . . 12
SECTION 1.04. Acts of Holders; Record Dates . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 1.05. Notices, Etc., to Trustee and the Company . . . . . . . . . . . . . . . . 14
SECTION 1.06. Notice to Holders; Waiver . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 1.07. Conflict with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . 15
SECTION 1.08. Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . 15
SECTION 1.09. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.10. Separability Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.11. Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.12. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.13. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE TWO
Security Forms
SECTION 2.01. Forms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.02. Initial Issuance to Institutional Trustee . . . . . . . . . . . . . . . . 17
ARTICLE THREE
The Securities
SECTION 3.01. Title and Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.02. Denominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.03. Execution, Authentication, Delivery
and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.04. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.05. Registration, Registration of Transfer
and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.06. Mutilated, Destroyed, Lost and Stolen
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.07. Payment of Interest; Interest Rights
Preserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.08. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.09. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.10. Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.11. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.12. Option to Extend Interest Payment
Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
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SECTION 3.13. Paying Agent, Security Registrar
and Conversion Agent . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.14. Global Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE FOUR
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of Indenture . . . . . . . . . . . . . . . . . 31
SECTION 4.02. Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE FIVE
Remedies
SECTION 5.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.02. Acceleration of Maturity; Rescission
and Annulment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 5.03. Collection of Indebtedness and Suits
for Enforcement by Trustee . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 5.04. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.05. Trustee May Enforce Claims Without
Possession of Securities . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.06. Application of Money Collected . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.07. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.08. Unconditional Right of Holders to
Receive Principal and Interest
and Convert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.09. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . 38
SECTION 5.10. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.11. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.12. Control by Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.13. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.14. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.15. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.16. Enforcement by Holders of Preferred
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE SIX
The Trustee
SECTION 6.01. Certain Duties and Responsibilities . . . . . . . . . . . . . . . . . . . 41
SECTION 6.02. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.03. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.04. Not Responsible for Recitals or
Issuance of Securities . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.05. May Hold Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.06. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.07. Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.08. Disqualification; Conflicting
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.09. Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . . . 45
</TABLE>
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SECTION 6.10. Resignation and Removal; Appointment of
Successor . . . . . . . . . . . . . . . . . . . 45
SECTION 6.11. Acceptance of Appointment by Successor . . . . . . 47
SECTION 6.12. Merger, Conversion, Consolidation or
Succession to Business . . . . . . . . . . . . . 47
SECTION 6.13. Preferential Collection of Claims
Against Company . . . . . . . . . . . . . . . . 48
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 7.01. Company to Furnish Trustee Names and
Addresses of Holders . . . . . . . . . . . . . . 48
SECTION 7.02. Preservation of Information;
Communications to Holders . . . . . . . . . . . 48
SECTION 7.03. Reports by Trustee . . . . . . . . . . . . . . . . 49
SECTION 7.04. Reports by Company . . . . . . . . . . . . . . . . 49
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 8.01. Company May Consolidate, Etc., Only
on Certain Terms . . . . . . . . . . . . . . . . 50
SECTION 8.02. Successor Substituted . . . . . . . . . . . . . . . 51
ARTICLE NINE
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without
Consent of Holders . . . . . . . . . . . . . . . 51
SECTION 9.02. Supplemental Indentures with Consent
of Holders . . . . . . . . . . . . . . . . . . . 52
SECTION 9.03. Execution of Supplemental Indentures . . . . . . . 54
SECTION 9.04. Effect of Supplemental Indentures . . . . . . . . . 54
SECTION 9.05. Conformity with Trust Indenture Act . . . . . . . . 54
SECTION 9.06. Reference in Securities to Supplemental
Indentures . . . . . . . . . . . . . . . . . . . 54
ARTICLE TEN
Covenants; Representations and Warranties
SECTION 10.01. Payment of Principal and Interest . . . . . . . . 55
SECTION 10.02. Maintenance of Office or Agency . . . . . . . . . 55
SECTION 10.03. Money for Security Payments to Be
Held in Trust . . . . . . . . . . . . . . . . 55
SECTION 10.04. Statement by Officers as to Default . . . . . . . 57
SECTION 10.05. Limitation on Dividends; Covenants as
to the Trust . . . . . . . . . . . . . . . . . 57
SECTION 10.06. Payment of Expenses of the Trust . . . . . . . . 58
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ARTICLE ELEVEN
Redemption of Securities
SECTION 11.01. Optional Redemption . . . . . . . . . . . . . 59
SECTION 11.02. Tax Event Optional Redemption . . . . . . . . 60
SECTION 11.03. Applicability of Article . . . . . . . . . . 60
SECTION 11.04. Election to Redeem; Notice to Trustee . . . . 60
SECTION 11.05. Selection by Trustee of Securities to
Be Redeemed . . . . . . . . . . . . . . . 61
SECTION 11.06. Notice of Redemption . . . . . . . . . . . . 61
SECTION 11.07. Deposit and Payment of Redemption
Price . . . . . . . . . . . . . . . . . . 62
SECTION 11.08. Securities Payable on Redemption Date . . . . 62
SECTION 11.09. Securities Redeemed in Part . . . . . . . . . 63
SECTION 11.10. No Sinking Fund . . . . . . . . . . . . . . . 64
ARTICLE TWELVE
Subordination of Securities
SECTION 12.01. Agreement to Subordinate . . . . . . . . . . 64
SECTION 12.02. Default on Senior Indebtedness . . . . . . . 64
SECTION 12.03. Liquidation; Dissolution; Bankruptcy . . . . 65
SECTION 12.04. Subrogation . . . . . . . . . . . . . . . . . 66
SECTION 12.05. Trustee to Effectuate Subordination . . . . . 68
SECTION 12.06. Notice by the Company . . . . . . . . . . . . 68
SECTION 12.07. Rights of the Trustee; Holders of
Senior Indebtedness . . . . . . . . . . . 69
SECTION 12.08. Subordination May Not Be Impaired . . . . . . 70
ARTICLE THIRTEEN
Conversion of Securities
SECTION 13.01. Conversion Rights . . . . . . . . . . . . . . 70
SECTION 13.02. Conversion Procedures . . . . . . . . . . . . 71
SECTION 13.03. Conversion Price Adjustments . . . . . . . . 73
SECTION 13.04. Reclassification, Consolidation,
Merger or Sale of Assets . . . . . . . . . 79
SECTION 13.05. Notice of Adjustments of Conversion
Price . . . . . . . . . . . . . . . . . . 84
SECTION 13.06. Prior Notice of Certain Events . . . . . . . 84
SECTION 13.07. Certain Defined Terms . . . . . . . . . . . . 85
SECTION 13.08. Dividend or Interest Reinvestment Plans . . . 86
SECTION 13.09. Certain Additional Rights . . . . . . . . . . 86
SECTION 13.10. Trustee Not Responsible for Determining
Conversion Price or Adjustments . . . . . 87
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ARTICLE FOURTEEN
Immunity of Incorporators, Stockholders,
Officers and Directors
SECTION 14.01. No Recourse . . . . . . . . . . . . . . . . . . . . . . . . . 88
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<PAGE> 8
EXHIBIT AND ANNEX
EXHIBIT A Form of Security
ANNEX A Amended and Restated Declaration of Trust among the
Company, as trust sponsor, Bankers Trust Company, as
institutional trustee, Bankers Trust (Delaware), as
Delaware trustee and Lambert E. Althaver, Michael A.
Shope and Daniel L. Hittler, as regular trustees,
dated as of February 3, 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 February 3, 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 Bankers Trust Company, 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, Bankers Trust Company, as institutional trustee (the
"Institutional Trustee"), Bankers Trust (Delaware), as Delaware trustee (the
"Delaware Trustee"), and Lambert E. Althaver, Michael A. Shope and Daniel L.
Hittler, as regular trustees (the "Regular Trustees"), dated as of February 3,
1997 (the "Declaration"), pursuant to the Underwriting Agreement (the
"Underwriting Agreement") dated January 29, 1997, among the Company and the
underwriters named therein, will issue and sell up to 2,400,000 (or 2,760,000
if the over- allotment option is exercised in full) of its 8% 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 $60,000,000 (or $69,000,000 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 74,227
Securities (or 85,361 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 8%
Convertible Subordinated Debentures Due 2017 (the "Securities") of the Company
in an aggregate principal amount of $61,855,675 (or $71,134,025 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 February
3, 1997 between the Company and Bankers Trust Company, as guarantee trustee,
for the benefit of the holders of the Preferred Securities from time to time;
<PAGE> 10
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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;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles as in effect on the date of calculation;
<PAGE> 11
-3-
(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; and
(5) a reference to the masculine includes the feminine and vice
versa.
"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 other than a 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 Indenture such Commission is not
existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
<PAGE> 12
-4-
"Common Securities" has the meaning specified in the recitals to
this Indenture.
"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.
"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.
<PAGE> 13
-5-
"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 4
Albany Street, New York, New York 10006, Attention: Corporate Market Services.
"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 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.
<PAGE> 14
-6-
"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 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.
<PAGE> 15
-7-
"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 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
<PAGE> 16
-8-
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.
"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.
<PAGE> 17
-9-
"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 and Agency Group 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" or "Security" 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 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
<PAGE> 18
-10-
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.
"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.
<PAGE> 19
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"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 Indenture 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.
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
<PAGE> 20
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(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 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.
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,
<PAGE> 21
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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 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
<PAGE> 22
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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.
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 Market
Services, 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.
<PAGE> 23
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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 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.
<PAGE> 24
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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.
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.
<PAGE> 25
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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 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 $61,855,675 (or
up to $71,134,025 if the over-allotment option is exercised in full in
accordance with the terms and provisions of
<PAGE> 26
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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 "8% Convertible
Subordinated Debentures Due 2017" of the Company. Their Stated Maturity shall
be January 31, 2017, and they shall bear interest at the rate of 8% per annum,
from February 3, 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 January 31,
April 30, July 31 and October 31 (each an "Interest Payment Date") of each
year, commencing April 30, 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 January 15, April 15,
July 15 and October 15 next preceding such Interest Payment Date (the "Regular
Record Date"). Interest will compound quarterly and will accrue at the rate of
8% 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
<PAGE> 27
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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 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
<PAGE> 28
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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 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.
<PAGE> 29
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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.
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
<PAGE> 30
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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 together
with such security or indemnity as may be required by the Company or the
Trustee to save each of them harmless, then 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.
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 upon its request 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
<PAGE> 31
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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 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 the
address of such Holder as it appears in the Security Register, not less
than 10 days prior to such
<PAGE> 32
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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).
(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 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 (subject to the second paragraph of clause (a) of Section 13.02) 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 who converts prior to such 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
<PAGE> 33
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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 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
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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.
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
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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 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
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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 the 20 quarters permitted in the
maximum Extension Period permitted under paragraph (a) hereof.
SECTION 3.13. Paying 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
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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 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
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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
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> 39
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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 stating that all
conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with.
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Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Sections 6.03 and 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 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;
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(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 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
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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,
(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
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(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 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 receivership, insolvency, liquidation,
bankruptcy, reorganization or other judicial or administrative proceeding
relative to the Company (or any other obligor upon the
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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 or administrative 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 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
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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;
(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
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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 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.
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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.
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
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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 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
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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.
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
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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, security, 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 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, security, other
evidence of indebtedness or other paper or document, but the Trustee,
in its discretion,
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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
(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.
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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 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, its directors, officers,
employees and agents 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 or the performance
of its duties hereunder, 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 or resignation or removal of the Trustee.
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.
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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 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
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(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 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 such Holder 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
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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 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).
ARTICLE SEVEN
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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 information as to names and addresses of Holders made
pursuant to the Trust Indenture Act.
SECTION 7.03. Reports by Trustee.
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(a) Within 60 days after January 15 of each year,
commencing January 15, 1998, 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.
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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.
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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
(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
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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;
(e) 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
(f) 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
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
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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 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.
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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 Officers' Certificate or Opinion of Counsel stating that the execution
of such supplemental indenture is authorized or permitted by this Indenture and
that all conditions precedent herein provided for relating to such action have
been complied with. 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
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.
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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.
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
<PAGE> 64
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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 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.
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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 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).
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(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), 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
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(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
February 2, 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 February 2 in the year indicated:
<TABLE>
<CAPTION>
Optional
Year Redemption
Price
<S> <C>
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.6%
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.8%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.0%
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.2%
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.4%
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.6%
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.8%
2007 and thereafter . . . . . . . . . . . . . . . . . . . . 100.0%
</TABLE>
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.
(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
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(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.
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.
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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.
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,
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(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 written 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 subject
to the receipt of funds by the Trustee or the Paying Agent by 10:00 a.m. (New
York City time).
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) 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
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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 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
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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
Company in the payment of principal, premium, interest or any other payment due
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 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.
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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 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
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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 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
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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 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.
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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 as between the Holders of the
Securities and the holders of Senior Indebtedness 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 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
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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.
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
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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
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 April 4, 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 1.1737 shares
of Common Stock for each $25 in aggregate principal amount of Securities (equal
to a conversion price of $21.30 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
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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 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
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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.
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
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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 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
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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 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,
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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.
(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
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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 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
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(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 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
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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 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
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reduced pursuant to the preceding sentence, the Company shall mail to
holders of record of the Securities and the Preferred 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.
(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
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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 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
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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 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
February 2 in the year indicated:
<TABLE>
<CAPTION>
Year Denominator
---- -----------
<S> <C>
1997 $26.40
1998 26.40
1999 26.40
2000 26.40
2001 26.20
2002 26.00
2003 25.80
2004 25.60
2005 25.40
2006 25.20
2007 and thereafter 25.00
</TABLE>
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
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third party, the conversion price per 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> 91
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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 $11.917
(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 January 28, 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 Fundamental Change,
consideration received by a holder of
<PAGE> 92
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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 party and for which approval of any stockholders of the
Company shall be required, or of the sale or transfer of all or
<PAGE> 93
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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 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
<PAGE> 94
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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 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
<PAGE> 95
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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 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
<PAGE> 96
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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.
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> 97
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: /s/ Michael A. Shope
----------------------------------
Name: Michael A. Shope
Title: Chief Financial Officer
BANKERS TRUST COMPANY,
as Trustee
By: /s/ Terence Rawlins
----------------------------------
Name: Terence Rawlins
Title: Assistant Treasurer
<PAGE> 98
EXHIBIT A
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.
<PAGE> 99
WALBRO CORPORATION
8% Convertible Subordinated Debenture Due 2017
No. 02 $9,278,350
CUSIP No. 931154ADO
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 Bankers Trust Company, as
Institutional Trustee or registered assigns, the principal sum of Nine Million
Two Hundred and Seventy Eight Thousand Three Hundred and Fifty Dollars
($9,278,350) on January 31, 2017 and to pay interest thereon from February 3,
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 January 31, April 30,
July 31 and October 31 (each an "Interest Payment Date") of each year,
commencing April 30, 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 January 15, April 15,
July 15 and October 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.
<PAGE> 100
-2-
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed under its corporate seal.
Dated: February 14, 1997
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: February 14, 1997 BANKERS TRUST COMPANY,
as Trustee
By: ____________________
Authorized Signatory
<PAGE> 101
-3-
[REVERSE OF SECURITY]
This Security is one of a duly authorized issue of securities
of the Company designated as its 8% Convertible Subordinated Debenture Due 2017
(herein called the "Securities"), in aggregate principal amount of $61,855,675
(or up to $71,134,025 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 February 3, 1997 (herein
called the "Indenture"), between the Company and Bankers Trust Company, 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 8% per annum, from February 3, 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 January 31, April 30, July 31 and October 31 (each an "Interest
Payment Date") of each year, commencing April 30, 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 January 15, April 15, July 15 and October 15 next preceding such Interest
Payment Date (the "Regular Record Date"). Interest will
<PAGE> 102
-4-
compound quarterly and will accrue at the rate of 8% 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 of the Person entitled thereto as such
address shall appear in the Security Register.
<PAGE> 103
-5-
(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 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 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.
<PAGE> 104
-6-
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 February 2, 2000 at the
redemption prices (expressed as a percentage of the principal amount of
Securities) specified below for the 12 month period commencing February 2, in
the year indicated:
<PAGE> 105
-7-
<TABLE>
<CAPTION>
Percentage of
Principal
Year Amount
---- -------------
<S> <C>
2000 105.6%
2001 104 .8
2002 104 .0
2003 103 .2
2004 102 .4
2005 101 .6
2006 100.8
2007 and thereafter 100 .0%
</TABLE>
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 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.
<PAGE> 106
-8-
(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 April 4, 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 1.1737 shares of Common Stock for each $25 in
aggregate principal amount of Securities (equal to a conversion price of $21.30
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 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
<PAGE> 107
-9-
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 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
<PAGE> 108
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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 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
<PAGE> 109
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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 signatory of the
Trustee or an authenticating agent.
(17) Abbreviations and Defined Terms. Customary
abbreviations may be used in the name of a holder or an assignee, such as TEN
COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (=
joint tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
<PAGE> 110
-12-
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.)
<PAGE> 111
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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 BANKERS
TRUST COMPANY, 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 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.)
<PAGE> 1
EXHIBIT 4.15
=====================================
PREFERRED SECURITIES GUARANTEE AGREEMENT
Walbro Corporation
Dated as of February 3, 1997
=====================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<Caption
Page
----
<S> <C>
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. Definitions and Interpretation . . . . . . . . . . . . . . 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1. Trust Indenture Act; Application . . . . . . . . . . . . . 5
SECTION 2.2. Lists of Holders of Securities . . . . . . . . . . . . . . 6
SECTION 2.3. Reports by the Preferred Guarantee
Trustee . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.4. Periodic Reports to the Preferred
Guarantee Trustee . . . . . . . . . . . . . . . 6
SECTION 2.5. Evidence of Compliance with
Conditions Precedent . . . . . . . . . . . . . 7
SECTION 2.6. Event of Default; Waiver . . . . . . . . . . . . . . . . . 7
SECTION 2.7. Event of Default; Notice . . . . . . . . . . . . . . . . . 7
SECTION 2.8. Conflicting Interests . . . . . . . . . . . . . . . . . . . 7
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
THE PREFERRED GUARANTEE TRUSTEE
SECTION 3.1. Powers and Duties of the Preferred
Guarantee Trustee . . . . . . . . . . . . . . . 8
SECTION 3.2. Certain Rights of the Preferred
Guarantee Trustee . . . . . . . . . . . . . . . 10
SECTION 3.3. Not Responsible for Recitals
or Issuance of Guarantee . . . . . . . . . . . 12
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1. Preferred Guarantee Trustee; Eligibility . . . . . . . . . . . . . . . . . 12
SECTION 4.2. Appointment, Removal and Resignation of Preferred Guarantee Trustee . . . 13
ARTICLE V
GUARANTEE
SECTION 5.1. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 5.2. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 5.3. Waiver of Notice and Demand . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 5.4. Obligations Not Affected . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 5.5. Rights of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 5.6. Guarantee of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 5.7. Subrogation 16
SECTION 5.8. Independent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 5.9. Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VI
LIMITATION OF TRANSACTIONS; RANKING
SECTION 6.1. Limitation of Transactions . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 6.2. Ranking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VII
TERMINATION
SECTION 7.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1. Exculpation . . . . . . . . . . . . . . . . . . . . . 19
SECTION 8.2. Indemnification . . . . . . . . . . . . . . . . . . . 19
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Successors and Assigns . . . . . . . . . . . . . . . . 20
SECTION 9.2. Amendments . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 9.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 9.4. Benefit . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 9.5. Governing Law . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
<PAGE> 5
PREFERRED SECURITIES GUARANTEE AGREEMENT
This PREFERRED SECURITIES GUARANTEE AGREEMENT (the "Preferred
Securities Guarantee"), dated as of February 3, 1997, is executed and delivered
by Walbro Corporation, a Delaware corporation (the "Guarantor"), and Bankers
Trust Company, 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 February 3, 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 2,400,000 preferred securities (or 2,760,000 if
the over-allotment option is exercised in full), having an aggregate
liquidation amount of $25 per preferred security, designated the 8% 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> 6
-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 supplemented,
modified, amended, or amended and restated, and in
effect from time to time; and
<PAGE> 7
-3-
(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 Four
Albany Street, New York, New York 10006, Attention: Corporate Market Services.
"Covered Person" means any Holder or beneficial owner of
Preferred Securities.
"Debentures" means the 8% Convertible Subordinated Debentures
due January 31, 2017 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 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
<PAGE> 8
-4-
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 February 3, 1997,
between the Guarantor (the "Convertible Debenture Issuer") and Bankers Trust
Company, 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 Bankers Trust Company.
"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 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;
<PAGE> 9
-5-
(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 Bankers Trust Company,
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.
"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.
<PAGE> 10
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(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.
SECTION 2.3 Reports by the Preferred Guarantee Trustee.
Within 60 days after January 15 of each year, commencing
January 15, 1998, 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.
<PAGE> 11
-7-
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 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.
<PAGE> 12
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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 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:
<PAGE> 13
-9-
(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 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
<PAGE> 14
-10-
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.
SECTION 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, 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.
<PAGE> 15
-11-
(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, 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
<PAGE> 16
-12-
instructions from the Holders of a Majority in liquidation amount of
the Preferred Securities, (ii) may refrain from 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 under the Trust Indenture Act, authorized under such laws to
exercise
<PAGE> 17
-13-
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 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
<PAGE> 18
-14-
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.
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.
<PAGE> 19
-15-
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 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.
<PAGE> 20
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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 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
<PAGE> 21
-17-
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.
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,
<PAGE> 22
-18-
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 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.
<PAGE> 23
-19-
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
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.
<PAGE> 24
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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 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):
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Market Services
(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):
<PAGE> 25
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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 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.
<PAGE> 26
-22-
THIS PREFERRED SECURITIES GUARANTEE is executed as of the day and year first
above written.
WALBRO CORPORATION, as Guarantor
By: /s/ Michael A. Shope
------------------------------------------
Name: Michael A. Shope
Title: Chief Financial Officer
BANKERS TRUST COMPANY,
as Preferred Guarantee Trustee
By: /s/ Terence Rawlins
------------------------------------------
Name: Terence Rawlins
Title: Assistant Treasurer
<PAGE> 1
EXHIBIT 10.21
WALBRO CORPORATION
________________________________________________________________________
EMPLOYMENT AGREEMENT FOR LAMBERT E. ALTHAVER
________________________________________________________________________
<TABLE>
<S> <C> <C>
1. Employment ....................................... 1
2. Term ............................................. 1
3. Office and Duties ................................ 1
4. Salary and Annual Incentive Compensation ......... 2
5. Long-Term Compensation, Including Stock
Options, and Benefits, Deferred
Compensation, and Expense
Reimbursement .................................... 2
6. Governing Law; Expense Reimbursement ............. 4
7. Miscellaneous .................................... 5
</TABLE>
<PAGE> 2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is dated as of the 16 day of August, 1996, by
and between WALBRO CORPORATION, a Delaware corporation (the "Company") and
Lambert E. Althaver ("Executive"), and shall become effective as of August 16,
1996 (the "Effective Date").
1. Employment.
The Company hereby agrees to employ Executive as a senior executive and
Executive hereby agrees to accept such employment and serve in such capacity,
during the Term as defined in Section 2 and upon the terms and conditions set
forth in this Employment Agreement.
2. Term.
The term of employment of Executive under this Employment Agreement (the
"Term") shall be the period commencing on the Effective Date and terminating on
August 15, 1997 and any period of extension thereof in accordance with this
Section 2, subject to earlier termination in accordance with the Termination
and Change of Control Agreement between the Company and the Executive
("Termination Agreement"). The Term shall be extended automatically without
further action by either party for a one-year period beginning on August 16,
1997 and each succeeding annual anniversary thereafter, unless either party
shall have served written notice in accordance with the provisions of Section
7(d) upon the other party on or prior to the applicable anniversary date upon
which such extension would become effective, electing not to extend the Term,
in which case the Term shall terminate (subject to earlier termination in
accordance with the Termination Agreement) on the last business day prior to
the applicable anniversary date with respect to which such notice is received.
Notwithstanding the above, if there is a Change of Control (as defined in
the Termination Agreement), the Company hereby agrees to continue the Term of
this Employment Agreement and the Executive in its employ, and the Executive
hereby agrees to remain in the employ of the Company subject to the terms and
conditions of this Employment Agreement, for the period commencing on the
Extension Date (as defined in the Termination Agreement) and ending on the
third anniversary of such date (the "Extended Employment Period").
3. Office and Duties.
The provisions of this Section 3 will apply during the Term:
(a) Generally. Executive shall serve as Chairman & Chief Executive
Officer of the Company, and shall perform such duties and responsibilities as
are substantially consistent with his duties, responsibilities, rank and status
as of the
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Effective Date. Executive shall devote full business time and attention, and
his best efforts, abilities, experience, and talent to the performance of such
duties and responsibilities for the businesses of the Company and its
subsidiaries.
(b) Place of Employment. Executive's principal place of employment shall
be the Executive's present headquarters location or such other headquarters
location as may be assigned by the Company which is less than fifty (50) miles
from the present headquarters location.
4. Salary and Annual Incentive Compensation.
As partial compensation for the services to be rendered hereunder by
Executive, the Company agrees to pay to Executive during the Term the
compensation set forth in this Section 4.
(a) Base Salary. The Company will pay to Executive during the
Term a base salary at the annual rate of $450,000 ("Annual Base Salary") in
effect at the Effective Date, payable in cash in substantially equal monthly
installments during each calendar year, or portion thereof, of the Term and
otherwise in accordance with the Company's usual payroll practices with respect
to senior executives. Executive's Annual Base Salary shall be reviewed by the
Company at least once in each calendar year and may be increased above, but may
not be reduced below, the then-current rate of such base salary.
(b) Annual Incentive Compensation. The Company will pay to Executive
during the Term annual incentive compensation in amounts determined by and in
the sole discretion of the Compensation Committee of the Company's Board of
Directors (the "Committee"), consistent with past practices of the Company.
5. Long-Term Compensation, Including Stock Options, and
Benefits, Deferred Compensation, and Expense Reimbursement
(a) Executive Compensation Plans. Executive shall be entitled during
the Term to participate, without discrimination or duplication, in all
executive compensation plans, practices, policies and programs intended for
general participation by senior executives of the Company, as presently in
effect or as they may be modified or added to by the Company from time to time,
subject to the eligibility and other requirements of such plans and programs,
including without limitation the long-term incentive features of the Company's
Equity Based Long Term Incentive Plan (the "EBP"), any successor to such plan,
and other stock option plans, performance share plans, management incentive
plans, deferred compensation plans, and supplemental retirement plans.
(b) Employee and Executive Benefit Plans. Executive shall be
entitled during the Term to participate, without discrimination or duplication,
in all employee and
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executive benefit plans and programs of the Company, as presently in effect or
as they may be modified or added to by the Company from time to time, to the
extent such plans are available to similarly situated senior executives or
employees of the Company, subject to the eligibility and other requirements of
such plans and programs, including without limitation plans providing pensions,
other retirement benefits, medical insurance, life insurance, disability
insurance, and accidental death or dismemberment insurance, and participation
in savings, profit-sharing, and stock ownership plans.
In furtherance of and not in limitation of the foregoing, during the Term:
(i) Executive will participate in all
executive and employee vacation and time-off programs;
(ii) The Company will provide Executive
with coverage by long-term disability insurance and
benefits substantially no less favorable (including any
required contributions by Executive) than such insurance
and benefits provided to Executive on the Effective
Date;
(iii) Executive will be covered by
Company-paid group term life insurance providing a death
benefit of one and one-half (1 1/2) times Executive's
Annual Base Salary but not to exceed $150,000; and
(iv) The Executive will be covered by a
nonqualified supplemental employee retirement plan
("SERP") which will provide to Executive a lifetime
monthly benefit. Executive acknowledges that his rights
to the deferred compensation provided for in this
Section 5(b) shall be no greater than those of a general
unsecured creditor of the Company, and that such rights
may not be pledged, collateralized, encumbered,
hypothecated, or liable for or subject to any lien,
obligation, or liability of Executive, or be assignable
or transferable by Executive, otherwise than by will or
the laws of descent and distribution, provided that
Executive may designate one or more beneficiaries to
receive any payment of such amounts in the event of his
death.
(c) Deferral of Compensation. The Company shall implement deferral
arrangements permitting Executive to elect to defer receipt, pursuant to
written deferral election terms and forms (the "Deferral Election Forms"), of
all or a specified portion of Executive's annual incentive compensation under
Section 4(b) until such date(s) or event(s) as elected by the Executive and
specified in the Deferral Election Forms; provided, however, that such
deferrals shall not reduce Executive's total cash
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compensation in any calendar year below the sum of (i) the FICA maximum taxable
wage base plus (ii) 1.45% of Executive's wages in excess of such FICA maximum.
In accordance with such duly executed Deferral Election Forms, the Company
shall, in lieu of payment by the Company to Executive, credit to one or more
bookkeeping accounts maintained for Executive, on the respective date or dates
payments would otherwise be due to Executive a number of phantom shares of
Common Stock equal to (1) divided by (2) where (1) is the cash amount deferred
multiplied times the number 1.25 and (2) is the value of a share of Common
Stock on the date such shares are credited. Phantom shares shall not entitle
the Executive to receive any shares of Common Stock nor to vote or receive
dividends.
Upon such date(s) or event(s) set forth in the Deferral Election Forms
(including forms filed after deferral but before settlement in which Executive
may elect to further defer settlement), the Company shall pay to Executive cash
equal to the then value of any phantom shares of Common Stock then credited to
Executive's deferral accounts, less applicable withholding taxes, and such
distribution shall be deemed to fully settle such accounts; provided, however,
that the Company may instead settle such accounts in full or in part by
directing the Trustee to distribute the assets of the "rabbi trust" and the
Company shall be relieved of its obligation under this Employment Agreement and
the Termination Agreement to the extent that assets are so distributed. The
Company and Executive agree that compensation deferred pursuant to this Section
5(c) shall be fully vested and nonforfeitable; provided, however, Executive
acknowledges that his rights to the deferred compensation provided for in this
Section 5(c) shall be no greater than those of a general unsecured creditor of
the Company, and that such rights may not be pledged, collateralized,
encumbered, hypothecated, or liable for or subject to any lien, obligation, or
liability of Executive, or be assignable or transferable by Executive,
otherwise than by will or the laws of descent and distribution, provided that
Executive may designate one or more beneficiaries to receive any payment of
such amounts in the event of his death.
6. Governing Law; Expense Reimbursement.
Governing Law. This Employment Agreement is governed by and is to be
construed, administered, and enforced in accordance with the laws of the State
of Michigan, without regard to Michigan conflicts of law principles, except
insofar as the Delaware General Corporation Law and federal laws and
regulations may be applicable. If under the governing law, any portion of this
Employment Agreement is at any time deemed to be in conflict with any
applicable statute, rule, regulation, ordinance, or other principle of law,
such portion shall be deemed to be modified or altered to the extent necessary
to conform thereto or, if that is not possible, to be omitted from this
Employment Agreement. The invalidity of any such portion shall not affect the
force, effect, and validity of the remaining portion hereof.
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(b) Expense Reimbursement. All reasonable costs and expenses (including
fees and disbursements of counsel) incurred by Executive in seeking to enforce
equitable rights pursuant to this Employment Agreement shall be paid on behalf
of or reimbursed to Executive promptly by the Company, whether or not Executive
is successful in asserting such rights.
7. Miscellaneous.
(a) Integration. This Employment Agreement modifies and supersedes any
and all prior agreements and understandings between the parties hereto with
respect to the employment of Executive by the Company and its subsidiaries,
except for the Termination Agreement and contracts relating to compensation
under executive compensation and employee benefit plans of the Company.
Subject to the rights, benefits and obligations provided for in such executive
compensation contracts and employee benefit plans of the Company, this
Employment Agreement and the Termination Agreement constitute the entire
agreement among the parties with respect to the matters herein provided, and no
modification or waiver of any provision hereof shall be effective unless in
writing and signed by the parties hereto. Executive shall not be entitled to
any payment or benefit under this Employment Agreement which duplicates a
payment or benefit received or receivable by Executive under such prior
agreements and understandings with the Company or under any benefit or
compensation plan of the Company.
(b) Non-Transferability. Neither this Employment Agreement nor the rights
or obligations hereunder of the parties hereto shall be transferable or
assignable by Executive, except in accordance with the laws of descent and
distribution or as specified in Section 7(c). The Company may assign this
Employment Agreement and the Company's rights and obligations hereunder, and
shall assign this Employment Agreement, to any Successor (as hereinafter
defined) which, by operation of law or otherwise, continues to carry on
substantially the business of the Company prior to the event of succession, and
the Company shall, as a condition of the succession, require such Successor to
agree to assume the Company's obligations and be bound by this Employment
Agreement. For purposes of this Employment Agreement, "Successor" shall mean
any person that succeeds to, or has the practical ability to control (either
immediately or with the passage of time), the Company's business directly, by
merger or consolidation, or indirectly, by purchase of the Company's voting
securities or all or substantially all of its assets, or otherwise.
(c) Beneficiaries. Executive shall be entitled to designate (and change,
to the extent permitted under applicable law) a beneficiary or beneficiaries to
receive any compensation or benefits payable hereunder following Executive's
death.
(d) Notices. Whenever under this Employment Agreement it becomes
necessary to give notice, such notice shall be in writing, signed by the party
or parties giving or making the same, and shall be served on the person or
persons for whom it is
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intended or who should be advised or notified, by Federal Express or other
similar overnight service or by certified or registered mail, return receipt
requested, postage prepaid and addressed to such party at the address set forth
below or at such other address as may be designated by such party by like
notice:
If to the Company: Walbro Corporation
6242 Garfield Street
Cass City, Michigan 48726-1397
Attention: Secretary
If to Executive: Lambert E. Althaver
4618 Kennebec Drive
Cass City, Michigan 48726
If the parties by mutual agreement supply each other with telecopier numbers
for the purposes of providing notice by facsimile, such notice shall also be
proper notice under this Employment Agreement. In the case of Federal Express
or other similar overnight service, such notice or advice shall be effective
when sent, and, in the cases of certified or registered mail, shall be
effective 2 days after deposit into the mails by delivery to the U.S. Post
Office.
(e) Reformation. The invalidity of any portion of this Employment
Agreement shall not deemed to render the remainder of this Employment Agreement
invalid.
(f) Headings. The headings of this Employment Agreement are for
convenience of reference only and do not constitute a part hereof.
(g) No General Waivers. The failure of any party at any time to require
performance by any other party of any provision hereof or to resort to any
remedy provided herein or at law or in equity shall in no way affect the right
of such party to require such performance or to resort to such remedy at any
time thereafter, nor shall the waiver by any party of a breach of any of the
provisions hereof be deemed to be a waiver of any subsequent breach of such
provisions. No such waiver shall be effective unless in writing and signed by
the party against whom such waiver is sought to be enforced.
(h) Successors and Assigns. This Employment Agreement shall be binding
upon and shall inure to the benefit of Executive, his heirs, executors,
administrators and beneficiaries, and shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
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IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company
has caused this instrument to be duly executed as of the day and year first
above written.
WALBRO CORPORATION
By: /s/ Daniel L. Hittler
--------------------------------
Name: Daniel L. Hittler
Title: Chief Administrative Officer
Lambert E. Althaver
/s/ Lambert E. Althaver
-----------------------------------
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EXHIBIT 10.22
TERMINATION AND CHANGE OF CONTROL AGREEMENT
THIS TERMINATION AND CHANGE OF CONTROL AGREEMENT ("Termination
Agreement") is dated as of the 16 day of August, 1996, by and between WALBRO
CORPORATION, a Delaware corporation (the "Company") and Lambert E. Althaver
("Executive"), and shall become effective as of August 16 , 1996 (the
"Effective Date").
W I T N E S S E T H
The Board of Directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to assure that
the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control
(as defined below) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control
and to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of
other corporations. Therefore, in order to accomplish these objectives, the
Board has caused the Company to enter into this Termination Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Term and Application. The Term of this Termination Agreement shall
be the same (subject to earlier termination in accordance with Section 5) as
for the Employment Agreement between the Company and the Executive ("Employment
Agreement"); provided, however, notwithstanding the term of the Employment
Agreement, on or after the Extension Date (as defined in Section 9(d) of this
Termination Agreement), the Term of this Termination Agreement shall be the
Extended Employment Period (as defined in the Employment Agreement).
Notwithstanding the Employment Agreement, the terms and provisions of this
Termination Agreement shall also apply on and after the Extension Date; where
specifically in conflict with the Employment Agreement, shall supersede the
Employment Agreement; and in no event shall Executive receive benefits under
both this Termination Agreement and the Employment Agreement with respect to
the same Date of Termination.
2. Office and Duties.
(a) Generally. During the Extended Employment Period, the Executive's
position (including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least commensurate in all
material respects with the most significant of those held, exercised and
assigned at any time during the 120-day period immediately preceding the
Extension Date.
<PAGE> 2
During the Extended Employment Period it shall not be a violation of
the Employment Agreement for the Executive to (i) serve on corporate, civic or
charitable boards or committees, (ii) deliver lectures, fulfill speaking
engagements or teach at educational institutions, and (iii) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the Company
in accordance with this Termination Agreement. It is expressly understood and
agreed that, to the extent that any activities have been conducted by the
Executive prior to the Extension Date, the continued conduct of such activities
(or the conduct of activities similar in nature and scope thereto) subsequent
to the Extension Date shall not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the Company.
(b) Place of Employment. During the Extended Employment Period, the
Executive's services shall be performed at the location where the Executive was
employed immediately preceding the Extension Date or any office or location
less than fifty (50) miles from such location.
3. Salary and Annual Incentive Compensation.
(a) Base Salary. During the Extended Employment Period, the Executive
shall receive an Annual Base Salary, which shall be paid at a monthly rate, at
least equal to twelve (12) times the highest monthly base salary paid or
payable, including any base salary which has been earned but deferred, to the
Executive by the Company and its affiliated companies in respect of the
12-month period immediately preceding the month in which the Extension Date
occurs. During the Extended Employment Period, the Annual Base Salary shall be
reviewed no more than twelve (12) months after the last salary increase awarded
to the Executive prior to the Extension Date and thereafter at least annually.
Any increase in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Termination Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Termination Agreement shall refer to Annual Base
Salary as so increased. As used in this Termination Agreement, the term
"affiliated companies" shall include any company controlled by, controlling or
under common control with the Company.
(b) Annual Incentive Compensation. During the Extended Employment
Period, any annual incentive compensation payable to Executive shall be paid in
accordance with the Company's usual practices with respect to payment of
incentive compensation of senior executives (except to the extent deferred). In
addition to Annual Base Salary, the Executive shall be awarded, for each fiscal
year ending during the Extended Employment Period, an annual bonus (the "Annual
Bonus") in cash at least equal to the Executive's highest annual incentive
compensation for the last three full fiscal years prior to the Extension Date
(annualized in the event that the Executive was not employed by the Company for
the whole of such fiscal year) (the "Recent Annual Bonus"). Each such Annual
Bonus shall be paid no later than the end of the third month of the fiscal year
next following the fiscal year for which the Annual Bonus is awarded, unless
the Executive shall elect to defer the receipt of such Annual Bonus.
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4. Long-Term Compensation, Including Stock Options, and
Benefits, Deferred Compensation, and Expense Reimbursement.
(a) Executive Compensation Plans. During the Extended Employment
Period, the compensation plans, practices, policies and programs, in the
aggregate, including without limitation, the long-term incentive features of
the Company's Equity Based Long Term Incentive Plan (the "EBP"), shall provide
Executive with benefits, options to acquire Common Stock, and compensation and
incentive award opportunities no less favorable than those provided by the
Company under such plans and programs to senior executives in similar
capacities. During the Extended Employment Period, in no event shall such
plans, practices, policies and programs provide the Executive with incentive
opportunities (measured with respect to both regular and special incentive
opportunities, to the extent, if any, that such distinction is applicable), in
each case, be less favorable, in the aggregate, than the most favorable of
those provided by the Company and its affiliated companies for the Executive
under such plans, practices, policies and programs as in effect at any time
during the 120-day period immediately preceding the Extension Date or if more
favorable to the Executive, those provided generally at any time after the
Extension Date to other peer executives of the Company and its affiliated
companies. For purposes of this Termination Agreement, all references to
"performance share plans" and "performance shares" refer to such arrangements
under the EBP and to any performance shares, performance units, stock grants,
or other long-term incentive arrangements adopted as a successor or replacement
to performance shares under such plans or other plans of the Company.
(b) Employee and Executive Benefit Plans. During the Extended
Employment Period, benefit plans and programs, in the aggregate, shall provide
Executive with benefits no less favorable than those provided by the Company to
senior executives in similar capacities. During the Extended Employment
Period, in no event shall such plans, practices, policies and programs provide
the Executive with benefits which are less favorable, in the aggregate, than
the most favorable of such plans, practices, policies and programs in effect
for the Executive at any time during the 120-day period immediately preceding
the Extension Date or, if more favorable to the Executive, those provided
generally at any time after the Extension Date to other peer executives of the
Company and its affiliated companies.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Term of this Termination
Agreement. If the Company determines in good faith that the Disability of the
Executive has occurred during the Term of this Termination Agreement, it may
give to the Executive written notice in accordance with Section 13(d) of this
Termination Agreement of its intention to terminate the Executive's employment.
In such event, the Executive's Date of Termination is effective on the 30th day
after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the thirty (30) days after such receipt, the
Executive shall not have returned to full-time performance of the Executive's
duties.
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(b) Notice of Termination. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 13(d) of
this Termination Agreement. For purposes of this Termination Agreement, a
"Notice of Termination" means a written notice which (i) indicates the specific
termination provision in this Termination Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the Date of
Termination (which date shall be not more than thirty (30) days after the
giving of such notice). The failure by the Executive or the Company to set
forth in the Notice of Termination any fact or circumstance which contributes
to a showing of Good Reason or Cause shall not waive any right of the Executive
or the Company, respectively, hereunder or preclude the Executive or the
Company, respectively, from asserting such fact or circumstance in enforcing
the Executive's or the Company's rights hereunder.
(c) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive that the Executive's employment will terminate, (iii) if the
Executive's employment is terminated by reason of death or Disability, or due
to mutually agreed upon early retirement or Normal Retirement other than for
Good Reason, the Date of Termination shall be the date of death of the
Executive, the Disability Effective Date, or the date the Executive notifies
the Company that the Executive's employment will terminate, as the case may be,
and (iv) if the Executive's employment is terminated by the Company by reason
of not renewing the Term of this Termination Agreement for reasons other than
Cause, the Date of Termination shall be the last day of the Term of this
Termination Agreement. Notwithstanding the foregoing, solely the transfer of
an Executive to employment with an affiliated company shall not constitute a
termination of employment with the Company.
6. Termination Due to Normal Retirement, Approved Early
Retirement, Death, or Disability.
Upon an Executive's Date of Termination due to a voluntary decision by
the Executive to retire on or after the Executive's Normal Retirement Date
(other than for Good Reason) or a mutually agreed upon early retirement date,
death or Disability, the Term of this Termination Agreement will immediately
terminate and all obligations of the Company and Executive under this
Termination Agreement and under the Employment Agreement will immediately
cease; provided, however, that subject to the provisions of Section 13(c), the
Company will pay Executive (or his beneficiaries or
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estate), and Executive (or his beneficiaries or estate) will be entitled to
receive, the following:
(a) The unpaid portion of Annual Base Salary at the rate payable, in
accordance with Section 3(a) hereof, at the Date of Termination, pro rated
through such Date of Termination, will be paid;
(b) All vested, nonforfeitable amounts owing and accrued at the Date of
Termination under any compensation and benefit plans, programs, and
arrangements in which Executive theretofore participated (including any earned
annual incentive compensation and performance shares) will be paid under the
terms and conditions of the plans, programs, and arrangements (and agreements
and documents thereunder) pursuant to which such compensation and benefits were
granted, including a single lump sum amount equal to the actuarial equivalent
(determined in accordance with Section 5 of the Employment Agreement) of the
benefit under the Company's nonqualified supplemental employee retirement plan
("SERP");
(c) In lieu of any annual incentive compensation under Section 3(b) for
the year in which Executive's employment terminated (unless otherwise payable
under (b) above), Executive will be paid an amount equal to the average annual
incentive compensation paid to Executive in the three years immediately
preceding the year of termination (or, if Executive was not eligible to receive
or did not receive such incentive compensation for any year in such three year
period, the Executive's target annual incentive compensation for such year(s)
shall be used to calculate average annual incentive compensation) multiplied by
a fraction the numerator of which is the number of days Executive was employed
in the year of termination and the denominator of which is the total number of
days in the year of termination;
(d) Stock options then held by Executive will be exercisable to the
extent and for such periods, and otherwise governed, by the plans and programs
and the agreements and other documents thereunder pursuant to which such stock
options were granted; provided, however, that the stock options described in
Section 5 of the Employment Agreement shall be exercisable to the extent and
for such periods, and otherwise governed by, the provisions of Section 5 of the
Employment Agreement;
(e) All deferral arrangements under the Employment Agreement will be
settled in accordance with the provisions of Section 5 of the Employment
Agreement and the Executive's duly executed Deferral Election Forms; and
(f) If Executive's Date of Termination is due to Disability, for the
period extending from such Date of Termination until Executive reaches age 65,
Executive shall continue to participate in all employee benefit plans,
programs, and arrangements providing health, medical, and life insurance in
which Executive was participating immediately prior to the Date of Termination,
the terms of which allow Executive's continued participation, as if Executive
had continued in employment with the Company during such period or, if such
plans, programs, or arrangements do not allow Executive's continued
participation, a cash payment equivalent on an after-tax basis to the value of
the additional benefits Executive would have received under such
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employee benefit plans, programs, and arrangements in which Executive was
participating immediately prior to the Date of Termination, as if Executive had
received credit under such plans, programs, and arrangements for service and
age with the Company during such period following Executive's Date of
Termination, with such benefits payable by the Company at the same times and in
the same manner as such benefits would have been received by Executive under
such plans (it being understood that the value of any insurance-provided
benefits will be based on the premium cost to Executive, which shall not exceed
the highest risk premium charged by a carrier having an investment grade or
better credit rating).
Amounts which are immediately payable above will be paid as promptly as
practicable after Executive's Date of Termination; provided, however, to the
extent that or the Company would not be entitled to deduct any such payments
under Internal Revenue Code Section 162(m), such payments shall be made at the
earliest time that the payments would be deductible by the Company without
limitation under Section 162(m) (unless this provision is waived by the
Company).
7. Termination of Employment for Cause and Good Reason.
(a) Termination by the Company for Cause and Termination by Executive
for Reasons Other Than Normal Retirement, Approved Early Retirement, Death or
Disability. Upon an Executive's Date of Termination by the Company for Cause
or voluntarily by Executive for reasons other than Good Reason, but excluding
termination due to Normal Retirement, mutually agreed upon early retirement,
death or Disability, the Term will immediately terminate, and all obligations
of the Company under Sections 1 through 4 of this Termination Agreement and
under the Employment Agreement will immediately cease; provided, however, that
subject to the provisions of Section 13(c), the Company shall pay Executive (or
his or her beneficiaries), and Executive (or his or her beneficiaries) shall be
entitled to receive, the following:
(i) The unpaid portion of Annual Base Salary at the rate
payable, in accordance with Section 4(a) hereof, at
the Date of Termination, pro rated through such Date of
Termination, will be paid;
(ii) All vested, nonforfeitable amounts owing and accrued at
the Date of Termination under any compensation and
benefit plans, programs, and arrangements in which
Executive theretofore participated will be paid
under the terms and conditions of the plans, programs,
and arrangements (and agreements and documents
thereunder) pursuant to which such compensation and
benefits were granted; and
(iii) A cash amount equal to the value at the Date of
Termination of any phantom shares of Common Stock
credited to Executive's deferral accounts under
deferral arrangements authorized under the Employment
Agreement at the Date of Termination, less applicable
withholding taxes under
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Section 14(i) of the Employment Agreement; provided,
however, that the Company may instead settle such
accounts, in full or in part, by directing the Trustee to
distribute the assets of the "rabbi trust" and the
Company shall be relieved of its obligation under this
Termination Agreement and the Employment Agreement to the
extent that assets are so distributed. Such amounts
shall be paid or distributed as promptly as practicable
following such Date of Termination, without regard to any
stated period of deferral otherwise remaining in respect
of such amounts, and the payment of such amounts shall be
deemed to fully settle such accounts.
Amounts which are immediately payable above will be paid as promptly as
practicable after the Executive's Date of Termination; provided, however, to
the extent that the Company would not be entitled to deduct any such payments
under Internal Revenue Code Section 162(m), such payments shall be made at the
earliest time that the payments would be deductible by the Company without
limitation under Section 162(m) (unless this provision is waived by the
Company).
(b) Termination by the Company Without Cause and Termination by
Executive for Good Reason. Upon an Executive's Date of Termination prior to
the Extension Date without Cause (including non-renewal of the Term of this
Termination Agreement without Cause) or voluntarily by the Executive for Good
Reason, the Term will terminate and all obligations of the Company and
Executive under Sections 1 through 4 of this Termination Agreement and under
the Employment Agreement will immediately cease; provided, however, that
subject to the provisions of Section 13(c) the Company shall pay to the
Executive (or his or her beneficiaries) and Executive (or his or her
beneficiaries) shall be entitled to receive the following amounts:
(i) the Company shall pay to Executive within, or commencing
within, thirty (30) days after the Date of Termination,
the following amounts:
(A) the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not
theretofore paid, and (2) the product of (x) the
target Annual Bonus paid or payable, including any
bonus or portion thereof which has been earned but
deferred (and annualized for any fiscal year
consisting of less than twelve (12) full months or
during which the Executive was employed for less
than twelve (12) full months) for the fiscal
year, and (y) a fraction, the numerator of which
is the number of days in the current fiscal year
through the Date of Termination, and the
denominator of which is 365, in each case to the
extent not theretofore paid;
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(B) twenty-four (24) semi-monthly payments during a
twelve (12) consecutive month period equal to the
Executive's Annual Base Salary divided by
twenty-four (24); provided, however,
notwithstanding anything to the contrary in the
Termination Agreement or in the Employment
Agreement, none of such amounts shall qualify
Executive for any incremental benefit under any
plan or program in which he has participated or
continues to participate;
(C) a single lump sum amount equal to the actuarial
equivalent (determined in accordance with Section
5(b)(iv) of the Employment Agreement) of the
benefit under the SERP;
(D) a cash amount will be paid equal to the value at
the Date of Termination of any phantom shares of
Common Stock credited to Executive's deferral
accounts under deferral arrangements authorized
under the Employment Agreement at the Date of
Termination, less applicable withholding taxes
under Section 14(i) of the Employment Agreement;
provided, however, that the Company may instead
settle such accounts by directing the Trustee to
distribute the assets of the "rabbi trust" and the
Company shall be relieved of its obligation under
this Termination Agreement and the Employment
Agreement to the extent that assets are so
distributed. Such amounts shall be paid or
distributed as promptly as practicable following
such Date of Termination, without regard to any
stated period of deferral otherwise remaining in
respect of such amounts, and the payment of such
amounts shall be deemed to fully settle such
accounts; and
(E) to the extent not covered by (A), (B), (C) or (D)
above, all vested, nonforfeitable amounts owing
and accrued at the Date of Termination under any
compensation and benefit plans, programs, and
arrangements in which Executive theretofore
participated will be paid under the terms and
conditions of the plans, programs, and
arrangements (and agreements and documents
thereunder) pursuant to which such compensation
and benefits were granted; and
(ii) stock options then held by Executive will be exercisable
to the extent and for such periods, and otherwise
governed, by
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the plans and programs and the agreements and other
documents thereunder pursuant to which such stock
options were granted; provided, however, that
the stock options described in Section 5 of the
Employment Agreement shall be exercisable to the extent
and for such periods, and otherwise governed by, the
provisions of Section 5 of the Employment Agreement.
Amounts which are immediately payable above will be paid as promptly as
practicable after Executive's Date of Termination; provided, however, to the
extent that the Company would not be entitled to deduct any such payments under
Internal Revenue Code Section 162(m), such payments shall be made at the
earliest time that the payments would be deductible by the Company without
limitation under Section 162(m) (unless this provision is waived by the
Company).
8. Termination by the Company Without Cause and Termination by
Executive for Goof Reason During the Extended Employment Period.
Upon an Executive's Date of Termination during the Extended Employment
Period by the Company without Cause (other than for non-renewal of the Term of
the Employment Agreement) or voluntarily by the Executive for Good Reason, the
Term of this Termination Agreement will immediately terminate and all
obligations of the Company and Executive under Sections 1 through 5 of this
Termination Agreement and under the Employment Agreement will immediately
cease; provided, however, that subject to the provisions of Section 13(c) the
Company shall pay Executive (or his or her beneficiaries), and Executive (or
his or her beneficiaries) shall be entitled to receive, the following:
(a) the Company shall pay to the Executive in a lump sum in cash within
thirty (30) days after the Date of Termination the aggregate of the following
amounts:
(i) the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not
theretofore paid, and (2) the product of (x) the
higher of (I) the Recent Annual Bonus and (II) the
Annual Bonus paid or payable, assuming full satisfaction
of any performance standards or targets applicable to
determining the maximum amount payable, including any
bonus or portion thereof which has been earned but
deferred (and annualized for any fiscal year consisting
of less than twelve (12) full months or during
which the Executive was employed for less than twelve
(12) full months), for the most recently completed
fiscal year during the Extended Employment Period, if
any (such higher amount being referred to as the
"Highest Annual Bonus") and (y) a fraction, the
numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the
denominator of which is 365;
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<PAGE> 10
(ii) the amount equal to the product of (1) three and
(2) the sum of (x) the Executive's Annual Base Salary
and (y) the Highest Annual Bonus;
(iii) an amount equal to the actuarial equivalent (determined
in accordance with Section 5 of the Employment
Agreement) of the benefit under the SERP which the
Executive would receive assuming for this purpose that
the Executive's employment continued for three (3) years
after the Date of Termination and assuming that the
Executive's compensation in each of the three years is
that required by Section 3;
(iv) in lieu of any payment in respect of performance shares,
or other long term incentive awards (including awards of
phantom shares under the EBP) granted prior to the
Extension Date or in accordance with Section 4(a), for
any performance period not completed at the
Executive's Date of Termination, an amount equal to the
cash amount payable plus the value of any shares of
Common Stock or other property (valued at the Date of
Termination) payable upon the achievement of maximum
performance (or in the case of phantom shares, target
performance under the EBP) in respect of each tranche of
such performance shares or awards without proration as
if the Date of Termination were the end of the
performance period;
(v) a cash amount will be paid equal to the value at the
Date of Termination of any phantom shares of
Common Stock credited to Executive's deferral accounts
under deferral arrangements authorized under the
Employment Agreement at the Date of Termination, less
applicable withholding taxes under Section 14(i) of the
Employment Agreement; provided, however, that the
Company may instead settle such accounts by directing
the Trustee to distribute the assets of the "rabbi
trust" and the Company shall be relieved of its
obligation under this Employment Agreement and the
Termination Agreement to the extent that assets are so
distributed. Such amounts shall be paid or distributed
as promptly as practicable following such Date of
Termination, without regard to any stated period of
deferral otherwise remaining in respect of such
amounts, and the payment of such amounts shall be
deemed to fully settle such accounts; and
(vi) to the extent not covered in (i), (ii), (iii), (iv) or
(v), all vested, nonforfeitable amounts owing or accrued
at the Date of
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Termination under any other compensation and benefit
plans, programs, and arrangements in which Executive
theretofore participated will be paid under the terms
and conditions of the plans, programs, and arrangements
(and agreements and documents thereunder) pursuant to
which such compensation and benefits were granted.
(b) Stock options then held by Executive will be exercisable and
restricted stock held by the Executive will be vested to the extent and for
such periods, and otherwise governed, by the plans and programs (and the
agreements and other documents thereunder) pursuant to which such stock options
or restricted stock were granted; provided, however, that the stock options and
restricted stock described in Section 5 of the Employment Agreement shall be
fully vested and shall be exercisable to the extent and for such periods, and
otherwise governed by, the provisions of Section 5 of the Employment Agreement.
(c) For three (3) years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue welfare plan benefits
to the Executive and/or the Executive's family at least equal to those which
would have been provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b) of this Termination Agreement
if the Executive's employment had not been terminated or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies and their
families, provided, however, that if the Executive becomes reemployed with
another employer and is eligible to receive medical or other welfare benefits
under another employer-provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility. If such plans, programs, or
arrangements do not allow Executive's continued participation, a cash payment
equivalent on an after-tax basis to the value of the additional benefits
Executive would have received under such employee benefit plans, programs, and
arrangements in which Executive was participating immediately prior to the Date
of Termination, as if Executive had received credit under such plans, programs,
and arrangements for service and age with the Company during such period
following Executive's Date of Termination, with such benefits payable by the
Company at the same times and in the same manner as such benefits would have
been received by Executive under such plans (it being understood that the value
of any insurance-provided benefits will be based on the premium cost to
Executive, which shall not exceed the highest risk premium charged by a carrier
having an investment grade or better credit rating); and
(d) outplacement services the scope and provider of which shall be
selected by the Executive in his sole discretion, provided by the Company at
its sole expense as incurred.
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9. Definitions Relating to Termination Events.
(a) "Cause." For purposes of this Termination Agreement, "Cause" shall
mean Executive's gross misconduct (as defined herein) or willful and material
breach of Section 11 of this Termination Agreement. For purposes of this
definition, "gross misconduct" shall mean (A) a felony conviction in a court of
law under applicable federal or state laws which results in material damage to
the Company or any of its subsidiaries or materially impairs the value of
Executive's services to the Company, or (B) willfully engaging in one or more
acts, or willfully omitting to act in accordance with duties hereunder, which
is demonstrably and materially damaging to the Company or any of its
subsidiaries, including acts and omissions that constitute gross negligence in
the performance of Executive's duties under this Termination Agreement. For
purposes of this Termination Agreement and the Employment Agreement, an act or
failure to act on Executive's part shall be considered "willful" if it was done
or omitted to be done by him not in good faith, and shall not include any act
or failure to act resulting from any incapacity of Executive. Notwithstanding
the foregoing, Executive may not be terminated for Cause unless and until (1)
the Executive shall have committed acts which constitute Cause as set forth in
this Section 9(a), and (2) there shall have been delivered to him a copy of a
resolution duly adopted by a seventy-five percent (75%) affirmative vote of the
membership of the Board of Directors of the Company (the "Board") (excluding
Executive, if he is then a member) at a meeting of the Board called and held
for such purpose (after giving Executive reasonable notice specifying the
nature of the grounds for such termination and not less than 30 days to correct
the acts or omissions complained of, if correctable, and affording Executive
the opportunity, together with his counsel, to be heard before the Board)
finding that Executive was guilty of conduct which constitutes Cause as set
forth in this Section 9(a).
(b) "Change of Control." For the purpose of this Termination
Agreement, a "Change of Control" shall mean:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of twenty percent (20%) or more of
either (A) the then-outstanding shares of common stock
of the Company (the "Outstanding Company Common Stock")
or (B) the combined voting power of the then-outstanding
voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for
purposes of this subsection (i), the following
acquisitions shall not constitute a Change of Control:
(A) any acquisition directly from the Company, (B) any
acquisition by the Company, (C) any acquisition by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled
by the Company, (D) any acquisition by a lender to the
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<PAGE> 13
Company pursuant to a debt restructuring of the
Company, or (E) any acquisition by any corporation
pursuant to a transaction which complies with clauses
(A), (B) and (C) of subsection (iii) of this Section 9;
(ii) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided,
however, that any individual becoming a director
subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders,
was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be
considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of office
occurs as a result of an actual or threatened election
contest with respect to the election or removal of
directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other
than the Board;
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following
such Business Combination, (A) all or substantially all
of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination
beneficially own, directly or indirectly, more than
fifty percent (50%) of, respectively, the
then-outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors,
as the case may be, of the corporation resulting from
such Business Combination (including, without
limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all
of the Company's assets either directly or through one
or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Company
Common Stock and Outstanding Company Voting Securities,
as the case may be, (B) no Person (excluding any
corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly,
twenty percent (20%) or more of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such Business
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Combination, or the combined voting power of the then
outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the
members of the board of directors of the corporation
resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board,
providing for such Business Combination; or
(iv) Approval by the shareholders of the
Company of a complete liquidation or dissolution of the
Company.
(c) "Disability" means the failure of Executive to render and perform
the services required of him under this Termination Agreement, for a total
of 180 days or more during any consecutive 12 month period, because of any
physical or mental incapacity or disability as determined by a physician or
physicians selected by the Company and reasonably acceptable to Executive,
unless, within 30 days after Executive has received written notice from the
Company of a proposed Date of Termination due to such absence, Executive shall
have returned to the full performance of his duties hereunder and shall have
presented to the Company a written certificate of Executive's good health
prepared by a physician selected by Company and reasonably acceptable to
Executive.
(d) "Extension Date" shall mean the first date during the Term of the
Employment Agreement on which a Change of Control occurs. Anything in this
Termination Agreement or the Employment Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's
employment with the Company is terminated prior to the date on which the Change
of Control occurs, and if it is reasonably demonstrated by the Executive that
such termination of employment (i) was at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of Control, then
for all purposes of this Termination Agreement or the Employment Agreement the
"Extension Date" shall mean the date immediately prior to the date of such
termination of employment.
(e) "Good Reason." For purposes of this Termination Agreement and the
Employment Agreement, "Good Reason" shall mean the occurrence of any of the
following, without Executive's prior written consent:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's
position (including status, offices, titles and
reporting requirements), authority, duties or
responsibilities as contemplated by Section 2(a) of this
Termination Agreement or the Employment Agreement, or
any other action by the Company which results in a
diminution in such position, authority, duties or
responsibilities, excluding for this purpose an
isolated,
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insubstantial and inadvertent action not taken
in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Executive;
(ii) any failure by the Company to comply with any of the
provisions of this Termination Agreement or the
Employment Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in
bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any
office or location other than as provided in Section
2(b) hereof or the Employment Agreement or the Company's
requiring the Executive to travel on Company business to
a substantially greater extent than required of other
senior executives in similar capacities immediately
prior to the Effective Date;
(iv) any failure by the Company to perform any material
obligation under, or breach by the Company of any
material provision of, this Termination Agreement
or the Employment Agreement;
(v) any purported termination by the
Company of the Executive's employment otherwise than as
expressly permitted by this Termination Agreement; or
(vi) any failure by the Company to comply
with and satisfy Section 12(b) of this Termination
Agreement.
For purposes of this Section, any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
(f) "Normal Retirement Date." For purposes of this Termination
Agreement, an Executive's Normal Retirement Date is his or her attainment of
age sixty-five (65).
10. Excise Tax Gross-Up.
If Executive becomes entitled to one or more payments (with a "payment"
including, without limitation, the vesting of an option or other non-cash
benefit or property), whether pursuant to the terms of this Termination
Agreement or any other plan, arrangement, or agreement with the Company or any
affiliated company (the "Total Payments"), which are or become subject to the
tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code") (or any similar tax that may hereafter be imposed) (the "Excise
Tax"), the Company shall pay to Executive at the time specified below an
additional amount (the "Gross-up Payment") (which shall
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<PAGE> 16
include, without limitation, reimbursement for any penalties and interest that
may accrue in respect of such Excise Tax) such that the net amount retained by
Executive, after reduction for any Excise Tax (including any penalties or
interest thereon) on the Total Payments and any federal, state and local income
or employment tax and Excise Tax on the Gross-up Payment provided for by this
Section 10, but before reduction for any federal, state, or local income or
employment tax on the Total Payments, shall be equal to the sum of (a) the
Total Payments, and (b) an amount equal to the product of any deductions
disallowed for federal, state, or local income tax purposes because of the
inclusion of the Gross-up Payment in Executive's adjusted gross income
multiplied by the highest applicable marginal rate of federal, state, or local
income taxation, respectively, for the calendar year in which the Gross-up
Payment is to be made.
For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax:
(a) The Total Payments shall be treated as "parachute payments" within
the meaning of Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) of the Code shall be treated
as subject to the Excise Tax, unless, and except to the extent that, in the
written opinion of independent compensation consultants or auditors of
nationally recognized standing ("Independent Advisors") selected by the Company
and reasonably acceptable to Executive, the Total Payments (in whole or in
part) do not constitute parachute payments, or such excess parachute payments
(in whole or in part) represent reasonable compensation for services actually
rendered before a Change of Control within the meaning of Section 280G(b)(4)(B)
of the Code in excess of the base amount within the meaning of Section
280G(b)(3) of the Code or are otherwise not subject to the Excise Tax;
(b) The amount of the Total Payments which shall be treated as subject
to the Excise Tax shall be equal to the lesser of (i) the total amount of the
Total Payments or (ii) the total amount of excess parachute payments within the
meaning of Section 280G(b)(1) of the Code (after applying clause (a) above);
and
(c) The value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Independent Advisors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-up Payment,
Executive shall be deemed (A) to pay federal income taxes at the highest
marginal rate of federal income taxation for the calendar year in which the
Gross-up Payment is to be made; (B) to pay any applicable state and local
income taxes at the highest marginal rate of taxation for the calendar year in
which the Gross-up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes if paid in such year (determined without regard to limitations on
deductions based upon the amount of Executive's adjusted gross income); and (C)
to have otherwise allowable deductions for federal, state, and local income tax
purposes at least equal to those disallowed because of the inclusion of the
Gross-up Payment in Executive's adjusted gross income. In the event that the
Excise
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Tax is subsequently determined to be less than the amount taken into
account hereunder at the time the Gross-up Payment is made, Executive shall
repay to the Company at the time that the amount of such reduction in Excise
Tax is finally determined (but, if previously paid to the taxing authorities,
not prior to the time the amount of such reduction is refunded to Executive or
otherwise realized as a benefit by Executive) the portion of the Gross-up
Payment that would not have been paid if such Excise Tax had been applied in
initially calculating the Gross-up Payment, plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time the Gross-up Payment is made (including by reason of any
payment the existence or amount of which cannot be determined at the time of
the Gross-up Payment), the Company shall make an additional Gross-up Payment in
respect of such excess (plus any interest and penalties payable with respect to
such excess) at the time that the amount of such excess is finally determined.
The Gross-up Payment provided for above shall be paid on the 30th day
(or such earlier date as the Excise Tax becomes due and payable to the taxing
authorities) after it has been determined that the Total Payments (or any
portion thereof) are subject to the Excise Tax; provided, however, that if the
amount of such Gross-up Payment or portion thereof cannot be finally determined
on or before such day, the Company shall pay to Executive on such day an
estimate, as determined by the Independent Advisors, of the minimum amount of
such payments and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code), as soon as
the amount thereof can be determined. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to Executive, payable on the
fifth day after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code). If more than one Gross-up
Payment is made, the amount of each Gross-up Payment shall be computed so as
not to duplicate any prior Gross-up Payment.
Notwithstanding the foregoing, the Executive may at any time elect to
demand the payment of the amount which the Executive, in accordance with an
Opinion of counsel to the Executive, determines to be the Gross-Up Payment. Any
such demand by the Executive shall be made by delivery to the Company of a
written notice which specifies the Gross-Up Payment determined by the Executive
and an Opinion of counsel to the Executive regarding such Gross-Up Payment
(such written notice and Opinion collectively, the "Executive's
Determination"). Within fourteen (14) days after the Executive's delivery of
the Executive's Determination to the Company, the Company shall
(i) pay to the Executive the Gross-Up Payment set forth in
the Executive's Determination
unless
(ii) the Company shall deliver to the Executive a written
notice specifying the Gross-Up Payment determined by the
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Company together with an Opinion of the Company's
counsel regarding such Gross-Up Payment (such written
notice and Opinion collectively, "the Company's
Determination") and shall pay to the Executive the
Gross-Up Payment specified in the Company's
Determination.
For purposes of this Section 10, "Opinion" shall mean an unqualified legal
opinion that a Gross-Up Payment has been calculated in accordance with this
Section 10 and applicable law, unless such Opinion shall state therein that an
unqualified Opinion cannot be given as to any Gross-Up Payment. In such case,
the Opinion shall state that the Gross-Up Payment set forth therein both (A) is
more likely than not to be in accordance with this Section 10 and applicable
law, and (B) is more likely to be in accordance with this Section 10 and
applicable law than any other Gross-Up Payment.
The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in
writing from time to time, including, without
limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 10, the Company shall control all proceedings taken in
connection with such contest and, at its sole option,
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may pursue or forgo any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the tax claimed and
sue for a refund or to contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment
of taxes for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority. If, after the receipt by the Executive of an amount advanced by the
Company pursuant to this Section 10, the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject to
the Company's complying with the requirements of this Section 10) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to this Section 10, a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of thirty (30) days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.
11. Non-Competition and Non-Disclosure; Executive Cooperation.
(a) Non-Competition. Without the consent in writing of the Board, upon
the Executive's Date of Termination for any reason, Executive will not, for a
period of one year thereafter, acting alone or in conjunction with others,
directly or indirectly (i) engage (either as owner, investor, partner,
stockholder, employer, employee, consultant, advisor or Director) in any
business in the continental United States in which he has been directly
engaged, or has supervised as an executive, during the last two years prior to
such Date of Termination and which is directly in competition with a business
then conducted by the Company or any of its subsidiaries; (ii) induce any
customers of the Company or any of its subsidiaries with whom Executive has had
contacts or relationships, directly or indirectly, during and within the scope
of his employment with the Company or any of its subsidiaries, to curtail or
cancel their business with such companies or any of them; or (iii) induce, or
attempt to influence, any employee of the Company or any of its subsidiaries to
terminate employment. The provisions of subparagraphs (i), (ii), and (iii)
above are separate and distinct commitments independent of each of the other
subparagraphs. It is agreed that
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the ownership of not more than one percent of the equity securities of any
company having securities listed on an exchange or regularly traded in the
over-the-counter market shall not, of itself, be deemed inconsistent with
clause (i) of this paragraph (a).
(b) Non-Disclosure. Executive shall not at any time (including
following Executive's Date of Termination for any reason), disclose, use,
transfer, or sell, except in the course of employment with or other service to
the Company, any confidential or proprietary information of the Company or any
of its subsidiaries so long as such information has not otherwise been
disclosed or is not otherwise in the public domain, except as required by law
or pursuant to legal process.
(c) Cooperation With Regard to Litigation. Executive agrees to
cooperate with the Company (including following Executive's Date of Termination
for any reason), provided that such cooperation would not unreasonably
interfere with the business activities or employment obligations of the
Executive, by making himself available to testify on behalf of the Company or
any subsidiary or affiliate of the Company, in any action, suit, or proceeding,
whether civil, criminal, administrative, or investigative, and to assist the
Company, or any subsidiary or affiliate of the Company, in any such action,
suit, or proceeding, by providing information and meeting and consulting with
the Board and its representatives or counsel, or representatives or counsel of
or to the Company, or any subsidiary or affiliate of the Company, as requested;
provided, however, this subsection (c) shall not apply to any action between
the Executive and the Company to enforce this Termination Agreement or the
Employment Agreement. The Company agrees to reimburse Executive, on an
after-tax basis, for all expenses actually incurred in connection with his
provision of testimony or assistance.
(d) Release of Employment Claims. Executive agrees, as a condition to
receipt of the termination payments and benefits provided hereunder, that he
will execute a release agreement, in a form satisfactory to the Company,
releasing any and all claims arising out of Executive's employment, including
claims arising under the Employment Agreement (other than claims made pursuant
to any indemnities provided under the articles or by-laws of the Company, under
any directors or officers liability insurance policies maintained by the
Company or enforcement of this Termination Agreement).
(e) Survival. Notwithstanding any provision of this Termination
Agreement to the contrary, the provisions of this Section 11 shall survive the
termination or expiration of this Termination Agreement, shall be valid and
enforceable, and shall be a condition precedent to the Executive (or his or her
beneficiaries) receiving any amounts payable hereunder.
12. Governing Law; Expense Reimbursement.
(a) Governing Law. This Termination Agreement is governed by and is to
be construed, administered, and enforced in accordance with the laws of the
State of Michigan, without regard to Michigan conflicts of law principles,
except insofar as the Delaware General Corporation Law and federal laws and
regulations may be
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<PAGE> 21
applicable. If under the governing law, any portion of this Termination
Agreement is at any time deemed to be in conflict with any applicable
statute, rule, regulation, ordinance, or other principle of law, such portion
shall be deemed to be modified or altered to the extent necessary to conform
thereto or, if that is not possible, to be omitted from this Termination
Agreement. The invalidity of any such portion shall not affect the force,
effect, and validity of the remaining portion hereof. If any court determines
that any provision of Section 11 is unenforceable because of the duration or
geographic scope of such provision, it is the parties' intent that such court
shall have the power to modify the duration or geographic scope of such
provision, as the case may be, to the extent necessary to render the provision
enforceable and, in its modified form, such provision shall be enforced.
(b) Expense Reimbursement. On and after the Extension Date, all
reasonable costs and expenses (including fees and disbursements of counsel)
incurred by Executive in seeking to enforce rights pursuant to this Termination
Agreement shall be paid on behalf of or reimbursed to Executive promptly by the
Company, whether or not Executive is successful in asserting such rights;
provided, however, that no reimbursement shall be made of such expenses
relating to any unsuccessful assertion of rights if and to the extent that
Executive's assertion of such rights was in bad faith or frivolous, as
determined by independent counsel mutually acceptable to Executive and the
Company and made without reference to or not related to a Change of Control.
During the Extended Employment Period, the Company agrees to maintain a minimum
amount in a rabbi trust (or to provide to the trustee of such rabbi trust) an
irrevocable letter of credit in an amount equal to such minimum amount (and
callable at will by such trustee) sufficient to fund the aggregate present
value of all liabilities potentially owed to the Executive hereunder or under
the Employment Agreement as if he or she had incurred a termination of
employment by the Company other than for Cause.
13. Miscellaneous.
(a) Integration. This Termination Agreement modifies and supersedes
any and all prior agreements and understandings between the parties hereto with
respect to the employment of Executive by the Company and its subsidiaries,
except for the Employment Agreement and contracts relating to compensation
under executive compensation and employee benefit plans of the Company. Subject
to the rights, benefits and obligations provided for in such executive
compensation contracts and employee benefit plans of the Company, this
Termination Agreement and the Employment Agreement together constitute the
entire agreement among the parties with respect to the matters herein provided,
and no modification or waiver of any provision hereof shall be effective unless
in writing and signed by the parties hereto. Executive shall not be entitled
to any payment or benefit under this Termination Agreement which duplicates a
payment or benefit received or receivable by Executive under such prior
agreements and understandings with the Company or under any benefit or
compensation plan of the Company.
(b) Non-Transferability. Neither this Termination Agreement nor the
rights or obligations hereunder of the parties hereto shall be transferable or
assignable by Executive, except in accordance with the laws of descent and
distribution or as
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<PAGE> 22
specified in Section 13(c). The Company may assign this Termination Agreement
and the Company's rights and obligations hereunder, and shall assign this
Termination Agreement, to any Successor (as hereinafter defined) which, by
operation of law or otherwise, continues to carry on substantially the business
of the Company prior to the event of succession, and the Company shall, as a
condition of the succession, require such Successor to agree to assume the
Company's obligations and be bound by this Termination Agreement. For purposes
of this Termination Agreement, "Successor" shall mean any person that succeeds
to, or has the practical ability to control (either immediately or with the
passage of time), the Company's business directly, by merger or consolidation,
or indirectly, by purchase of the Company's voting securities or all or
substantially all of its assets, or otherwise.
(c) Beneficiaries. Executive shall be entitled to designate (and
change, to the extent permitted under applicable law) a beneficiary or
beneficiaries to receive any compensation or benefits payable hereunder
following Executive's death.
(d) Notices. Whenever under this Termination Agreement it becomes
necessary to give notice, such notice shall be in writing, signed by the party
or parties giving or making the same, and shall be served on the person or
persons for whom it is intended or who should be advised or notified, by
Federal Express or other similar overnight service or by certified or
registered mail, return receipt requested, postage prepaid and addressed to
such party at the address set forth below or at such other address as may be
designated by such party by like notice:
If to the Company: Walbro Corporation
6242 Garfield Street
Cass City, Michigan 48726-1397
Attention: Secretary
If to Executive: Lambert E. Althaver
4618 Kennebec Drive
Cass City, Michigan 48726
If the parties by mutual agreement supply each other with telecopier numbers
for the purposes of providing notice by facsimile, such notice shall also be
proper notice under this Termination Agreement. In the case of Federal
Express or other similar overnight service, such notice or advice shall be
effective when sent, and, in the cases of certified or registered mail, shall
be effective 2 days after deposit into the mails by delivery to the U.S. Post
Office.
(e) Reformation. The invalidity of any portion of this Termination
Agreement shall not deemed to render the remainder of this Termination
Agreement invalid.
(f) Headings. The headings of this Termination Agreement are for
convenience of reference only and do not constitute a part hereof.
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<PAGE> 23
(g) No General Waivers. The failure of any party at any time to
require performance by any other party of any provision hereof or to resort to
any remedy provided herein or at law or in equity shall in no way affect the
right of such party to require such performance or to resort to such remedy at
any time thereafter, nor shall the waiver by any party of a breach of any of
the provisions hereof be deemed to be a waiver of any subsequent breach of such
provisions. No such waiver shall be effective unless in writing and signed by
the party against whom such waiver is sought to be enforced.
(h) No Obligation To Mitigate. Executive shall not be required to seek
other employment or otherwise to mitigate Executive's damages hereunder on or
after Executive's Date of Termination, nor shall the amount of any payment
hereunder be reduced by any compensation earned by the Executive as a result of
employment by another employer; provided, however, that, to the extent
Executive receives from a subsequent employer health or other insurance
benefits that are substantially similar to the benefits referred to in this
Termination Agreement, any such benefits to be provided by the Company to
Executive following the Term shall be correspondingly reduced.
(i) No Offsets. The amounts required to be paid by the Company to
Executive pursuant to this Termination Agreement shall not be subject to
offset, counterclaim, recoupment, defense or other claim, right or action which
the Company may have against Executive or others, other than with respect to
any amounts that are owed to the Company by Executive due to his receipt of
Company funds as a result of his fraudulent activity. The foregoing and other
provisions of this Termination Agreement notwithstanding, all payments to be
made to Executive under this Termination Agreement will be subject to required
withholding taxes and other required deductions.
(j) Successors and Assigns. This Termination Agreement shall be
binding upon and shall inure to the benefit of Executive, his heirs, executors,
administrators and beneficiaries, and shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
14. Indemnification.
All rights to indemnification by the Company now existing in favor of
Executive as provided in the Company's Certificate of Incorporation or By-Laws
or pursuant to other agreements in effect on or immediately prior to the
Extension Date shall continue in full force and effect from the Extension Date
(including all periods after the expiration of the Term), and the Company shall
also advance expenses for which indemnification may be ultimately claimed as
such expenses are incurred to the fullest extent permitted under applicable
law, subject to any requirement that Executive provide an undertaking to repay
such advances if it is ultimately determined that Executive is not entitled to
indemnification; provided, however, that any determination required to be made
with respect to whether Executive's conduct complies with the standards
required to be met as a condition of indemnification or advancement of expenses
under applicable law and the Company's Certificate of Incorporation, By-Laws,
or other agreement shall be made by independent counsel mutually acceptable
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<PAGE> 24
to Executive and the Company (except to the extent otherwise required by law).
After the Extension Date, the Company shall not amend its Certificate of
Incorporation or By-Laws or any agreement in any manner which adversely affects
the rights of Executive to indemnification thereunder. Any provision contained
herein notwithstanding, this Termination Agreement shall not limit or reduce
any rights of Executive to indemnification pursuant to applicable law. In
addition, the Company will maintain directors' and officers' liability
insurance in effect and covering acts and omissions of Executive, during the
Term and for a period of six years thereafter, on terms substantially no less
favorable as those in effect on the Extension Date.
IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company
has caused this instrument to be duly executed as of the day and year first
above written.
WALBRO CORPORATION
By: /s/ Daniel L. Hittler
-----------------------------------
Name: Daniel L. Hittler
Title: Chief Administrative Officer
Lambert E. Althaver
/s/ Lambert E. Althaver
-----------------------------------
24
<PAGE> 1
EXHIBIT 10.23
WALBRO CORPORATION
________________________________________________________________________
EMPLOYMENT AGREEMENT FOR DANIEL L. HITTLER
________________________________________________________________________
<TABLE>
<S> <C> <C>
1. Employment ....................................... 1
2. Term ............................................. 1
3. Office and Duties ................................ 1
4. Salary and Annual Incentive Compensation ......... 2
5. Long-Term Compensation, Including Stock
Options, and Benefits, Deferred
Compensation, and
Expense Reimbursement ............................ 2
6. Governing Law; Expense Reimbursement ............. 4
7. Miscellaneous .................................... 5
</TABLE>
<PAGE> 2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is dated as of the 16 day of August, 1996, by
and between WALBRO CORPORATION, a Delaware corporation (the "Company") and
Daniel L. Hittler ("Executive"), and shall become effective as of August 16,
1996 (the "Effective Date").
1. Employment.
The Company hereby agrees to employ Executive as a senior executive and
Executive hereby agrees to accept such employment and serve in such capacity,
during the Term as defined in Section 2 and upon the terms and conditions set
forth in this Employment Agreement.
2. Term.
The term of employment of Executive under this Employment Agreement
(the "Term") shall be the period commencing on the Effective Date and
terminating on August 15, 1997 and any period of extension thereof in
accordance with this Section 2, subject to earlier termination in accordance
with the Termination and Change of Control Agreement between the Company and
the Executive ("Termination Agreement"). The Term shall be extended
automatically without further action by either party for a one-year period
beginning on August 16, 1997 and each succeeding annual anniversary thereafter,
unless either party shall have served written notice in accordance with the
provisions of Section 7(d) upon the other party on or prior to the applicable
anniversary date upon which such extension would become effective, electing not
to extend the Term, in which case the Term shall terminate (subject to earlier
termination in accordance with the Termination Agreement) on the last business
day prior to the applicable anniversary date with respect to which such notice
is received.
Notwithstanding the above, if there is a Change of Control (as defined
in the Termination Agreement), the Company hereby agrees to continue the Term
of this Employment Agreement and the Executive in its employ, and the Executive
hereby agrees to remain in the employ of the Company subject to the terms and
conditions of this Employment Agreement, for the period commencing on the
Extension Date (as defined in the Termination Agreement) and ending on the
third anniversary of such date (the "Extended Employment Period").
3. Office and Duties.
The provisions of this Section 3 will apply during the Term:
(a) Generally. Executive shall serve as Chief Administrative Officer
of the Company, and shall perform such duties and responsibilities as are
substantially consistent with his duties, responsibilities, rank and status as
of the Effective Date.
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<PAGE> 3
Executive shall devote full business time and attention, and his best efforts,
abilities, experience, and talent to the performance of such duties and
responsibilities for the businesses of the Company and its subsidiaries.
(b) Place of Employment. Executive's principal place of employment
shall be the Executive's present headquarters location or such other
headquarters location as may be assigned by the Company which is less than
fifty (50) miles from the present headquarters location.
4. Salary and Annual Incentive Compensation.
As partial compensation for the services to be rendered hereunder by
Executive, the Company agrees to pya to Executive during the Term the
compensation set forth in this Section 4.
(a) Base Salary. The Company will pay to Executive during the Term a
base salary at the annual rate of 4150,000 ("Annual Base Salary") in effect at
the Effective Date, payable in cash in substantially equal monthly installments
during each calendar year, or portion thereof, of the Term and otherwise in
accordance with the Company's usual payroll practices with respect to senior
executives. Executive's Annual Base Salary shall be reviewed by the Company at
lease once in each calendar year and may be increased above, but may not be
reduced below, the then-current rate of such base salary.
(b) Annual Incentive Compensation. The Company will pay to Executive
during the Term annual incentive compensation in amounts determined by and in
the sole discretion of the Compensation Committee of the Company's Board of
Directors (the "Committee"), consistent with past practices of the Company.
5. Long-Term Compensation, Including Stock Options, and Benefits
Deferred Compensation, and Expense Reimbursement
(a) Executive Compensation Plans. Executive shall be entitled during
the Term to participate, without discrimination or duplication, in all
executive compensation plans, practices, policies and programs intended for
general participation by senior executives of the Company, as presently in
effect or as they may be modified or added to by the Company from time to time,
subject to the eligibility and other requirements of such plans and programs,
including without limitation of the long-term incentive features of the
Company's Equity Based Long Term Incentive Plan (the "EBP"), any successor to
such plan, and other stock option plans, performance share plans, management
incentive plans, deferred compensation plans, and supplemental retirement
plans.
(b) Employee and Executive Benefit Plans. Executive shall be entitled
during the Term to participate, without discrimination or duplication, in all
employee and
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<PAGE> 4
executive benefit plans and programs of the Company, as presently in effect or
as they may be modified or added to by the Company from time to time, to the
extent such plans are available to similarly situated senior executives or
employees of the Company, subject to the eligibility and other requirements of
such plans and programs, including without limitation plans providing pensions,
other retirement benefits, medical insurance, life insurance, disability
insurance, and accidental death or dismemberment insurance, and participation
in savings, profit-sharing, and stock ownership plans.
In furtherance of and not in limitation of the foregoing, during the Term:
(i) Executive will participate in all executive and
employee vacation and time-off programs;
(ii) The Company will provide Executive with coverage by
long-term disability insurance and benefits
substantially no less favorable (including any required
contributions by Executive) than such insurance and
benefits provided to Executive on the Effective Date;
(iii) Executive will be covered by Company-paid group term
life insurance providing a death benefit of one and
one-half (1 1/2) times Executive's Annual Base Salary
but not to exceed $150,000; and
(iv) The Executive will be covered by a nonqualified
supplemental employee retirement plan ("SERP") which will
provide to Executive a lifetime monthly benefit.
Executive acknowledges that his rights to the deferred
compensation provided for in this Section 5(b) shall be
no greater than those of a general unsecured creditor of
the Company, and that such rights may not be pledged,
collateralized, encumbered, hypothecated, or liable for
or subject to any lien, obligation, or liability of
Executive, or be assignable or transferable by Executive,
otherwise than by will or the laws of descent and
distribution, provided that Executive may designate one
or more beneficiaries to receive any payment of such
amounts in the event of his death.
(c) Deferral of Compensation. The Company shall implement deferral
arrangements permitting Executive to elect to defer receipt, pursuant to
written deferral election terms and forms (the "Deferral Election Forms"), of
all or a specified portion of Executive's annual incentive compensation under
Section 4(b) until such date(s) or event(s) as elected by the Executive and
specified in the Deferral Election Forms; provided, however, that such
deferrals shall not reduce Executive's total cash
3
<PAGE> 5
compensation in any calendar year below the sum of (i) the FICA maximum taxable
wage base plus (ii) 1.45% of Executive's wages in excess of such FICA maximum.
In accordance with such duly executed Deferral Election Forms, the
Company shall , in lieu of payment by the Company to Executive, credit to one
or more bookkeeping accounts maintained for Executive, on the respective date
or dates payments would otherwise be due to Executive a number of phantom
shares of Common Stock equal to (1) divided by (2) where (1) is the cash amount
deferred multiplied times the number 1.25 and (2) is the value of a share of
Common Stock on the date such shares are credited. Phantom shares shall not
entitle the Executive to receive any shares of Common Stock nor to vote or
receive dividends.
Upon such date(s) or event(s) set forth in the Deferral Election Forms
(including forms filed after deferral but before settlement in which Executive
may elect to further defer settlement), the Company shall pay to Executive cash
equal to the then value of any phantom shares of Common Stock then credited to
Executive's deferral accounts, less applicable withholding taxes, and such
distribution shall be deemed to fully settle such accounts; provided, however,
that the Company may instead settle such accounts in full or in part by
directing the Trustee to distribute the assets of the "rabbi trust" and the
Company shall be relieved of its obligation under this Employment Agreement and
the Termination Agreement to the extent that assets are so distributed. The
Company and Executive agree that compensation deferred pursuant to this Section
5(c) shall be fully vested and nonforfeitable; provided, however, Executive
acknowledges that his rights to the deferred compensation provided for in this
Section 5(c) shall be no greater than those of a general unsecured creditor of
the Company, and that such rights may not be pledged, collateralized,
encumbered, hypothecated, or liable for or subject to any lien, obligation, or
liability of Executive, or be assignable or transferable by Executive,
otherwise than by will or the laws of descent and distribution, provided that
Executive may designate one or more beneficiaries to receive any payment of
such amounts in the event of his death.
6. Governing Law; Expense Reimbursement.
Governing Law. This Employment Agreement is governed by and is to be
construed, administered, and enforced in accordance with the laws of the State
of Michigan, without regard to Michigan conflicts of law principles, except
insofar as the Delaware General Corporation Law and federal laws and
regulations may be applicable. If under the governing law, any portion of this
Employment Agreement is at any time deemed to be in conflict with any
applicable statute, rule, regulation, ordinance, or other principle of law,
such portion shall be deemed to be modified or altered to the extent necessary
to conform thereto or, if that is not possible, to be omitted from this
Employment Agreement. The invalidity of any such portion shall not affect the
force, effect, and validity of the remaining portion hereof.
4
<PAGE> 6
(b) Expense Reimbursement. All reasonable costs and expenses
(including fees and disbursements of counsel) incurred by Executive in seeking
to enforce equitable rights pursuant to this Employment Agreement shall be paid
on behalf of or reimbursed to Executive promptly by the Company, whether or not
Executive is successful in asserting such rights.
7. Miscellaneous.
(a) Integration. This Employment Agreement modifies and supersedes any
and all prior agreements and understandings between the parties hereto with
respect to the employment of Executive by the Company and its subsidiaries,
except for the Termination Agreement and contracts relating to compensation
under executive compensation and employee benefit plans of the Company. Subject
to the rights, benefits and obligations provided for in such executive
compensation contracts and employee benefit plans of the Company, this
Employment Agreement and the Termination Agreement constitute the entire
agreement among the parties with respect to the matters herein provided, and no
modification or waiver of any provision hereof shall be effective unless in
writing and signed by the parties hereto. Executive shall not be entitled to
any payment or benefit under this Employment Agreement which duplicates a
payment or benefit received or receivable by Executive under such prior
agreements and understandings with the Company or under any benefit or
compensation plan of the Company.
(b) Non-Transferability. Neither this Employment Agreement nor the
rights or obligations hereunder of the parties hereto shall be transferable or
assignable by Executive, except in accordance with the laws of descent and
distribution or as specified in Section 7(c). The Company may assign this
Employment Agreement and the Company's rights and obligations hereunder, and
shall assign this Employment Agreement, to any Successor (as hereinafter
defined) which, by operation of law or otherwise, continues to carry on
substantially the business of the Company prior to the event of succession, and
the Company shall, as a condition of the succession, require such Successor to
agree to assume the Company's obligations and be bound by this Employment
Agreement. For purposes of this Employment Agreement, "Successor" shall mean
any person that succeeds to, or has the practical ability to control (either
immediately or with the passage of time), the Company's business directly, by
merger or consolidation, or indirectly, by purchase of the Company's voting
securities or all or substantially all of its assets, or otherwise.
(c) Beneficiaries. Executive shall be entitled to designate (and
change, to the extent permitted under applicable law) a beneficiary or
beneficiaries to receive any compensation or benefits payable hereunder
following Executive's death.
(d) Notices. Whenever under this Employment Agreement it becomes
necessary to give notice, such notice shall be in writing, signed by the party
or parties giving or making the same, and shall be served on the person or
persons for whom it is
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<PAGE> 7
intended or who should be advised or notified, by Federal Express or other
similar overnight service or by certified or registered mail, return receipt
requested, postage prepaid and addressed to such party at the address set forth
below or at such other address as may be designated by such party by like
notice:
If to the Company: Walbro Corporation
6242 Garfield Street
Cass City, Michigan 48726-1397
Attention: Secretary
If to Executive: Daniel L. Hittler
4861 Spruce Street
Cass City, Michigan 48726
If the parties by mutual agreement supply each other with telecopier numbers
for the purposes of providing notice by facsimile, such notice shall also be
proper notice under this Employment Agreement. In the case of Federal Express
or other similar overnight service, such notice or advice shall be effective
when sent, and, in the cases of certified or registered mail, shall be
effective 2 days after deposit into the mails by delivery to the U.S. Post
Office.
(e) Reformation. The invalidity of any portion of this Employment
Agreement shall not deemed to render the remainder of this Employment Agreement
invalid.
(f) Headings. The headings of this Employment Agreement are for
convenience of reference only and do not constitute a part hereof.
(g) No General Waivers. The failure of any party at any time to require
performance by any other party of any provision hereof or to resort to any
remedy provided herein or at law or in equity shall in no way affect the right
of such party to require such performance or to resort to such remedy at any
time thereafter, nor shall the waiver by any party of a breach of any of the
provisions hereof be deemed to be a waiver of any subsequent breach of such
provisions. No such waiver shall be effective unless in writing and signed by
the party against whom such waiver is sought to be enforced.
(h) Successors and Assigns. This Employment Agreement shall be binding
upon and shall inure to the benefit of Executive, his heirs, executors,
administrators and beneficiaries, and shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
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<PAGE> 8
IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company
has caused this instrument to be duly executed as of the day and year first
above written.
WALBRO CORPORATION
By: /s/ Lambert E. Althaver
---------------------------------------
Name: Lambert E. Althaver
Title: Chairman & Chief Executive Officer
Daniel L. Hittler
/s/ Daniel L. Hittler
------------------------------------------
7
<PAGE> 1
EXHIBIT 10.24
TERMINATION AND CHANGE OF CONTROL AGREEMENT
THIS TERMINATION AND CHANGE OF CONTROL AGREEMENT ("Termination
Agreement") is dated as of the 16 day of August, 1996, by and between WALBRO
CORPORATION, a Delaware corporation (the "Company") and Daniel L. Hittler
("Executive"), and shall become effective as of August 16 , 1996 (the
"Effective Date").
W I T N E S S E T H
The Board of Directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to assure that
the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control
(as defined below) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control
and to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of
other corporations. Therefore, in order to accomplish these objectives, the
Board has caused the Company to enter into this Termination Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Term and Application. The Term of this Termination Agreement shall
be the same (subject to earlier termination in accordance with Section 5) as
for the Employment Agreement between the Company and the Executive ("Employment
Agreement"); provided, however, notwithstanding the term of the Employment
Agreement, on or after the Extension Date (as defined in Section 9(d) of this
Termination Agreement), the Term of this Termination Agreement shall be the
Extended Employment Period (as defined in the Employment Agreement).
Notwithstanding the Employment Agreement, the terms and provisions of this
Termination Agreement shall also apply on and after the Extension Date; where
specifically in conflict with the Employment Agreement, shall supersede the
Employment Agreement; and in no event shall Executive receive benefits under
both this Termination Agreement and the Employment Agreement with respect to
the same Date of Termination.
2. Office and Duties.
(a) Generally. During the Extended Employment Period, the Executive's
position (including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least commensurate in all
material respects with the most significant of those held, exercised and
assigned at any time during the 120-day period immediately preceding the
Extension Date.
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<PAGE> 2
During the Extended Employment Period it shall not be a violation of
the Employment Agreement for the Executive to (i) serve on corporate, civic or
charitable boards or committees, (ii) deliver lectures, fulfill speaking
engagements or teach at educational institutions, and (iii) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the Company
in accordance with this Termination Agreement. It is expressly understood and
agreed that, to the extent that any activities have been conducted by the
Executive prior to the Extension Date, the continued conduct of such activities
(or the conduct of activities similar in nature and scope thereto) subsequent
to the Extension Date shall not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the Company.
(b) Place of Employment. During the Extended Employment Period, the
Executive's services shall be performed at the location where the Executive was
employed immediately preceding the Extension Date or any office or location
less than fifty (50) miles from such location.
3. Salary and Annual Incentive Compensation.
(a) Base Salary. During the Extended Employment Period, the Executive
shall receive an Annual Base Salary, which shall be paid at a monthly rate, at
least equal to twelve (12) times the highest monthly base salary paid or
payable, including any base salary which has been earned but deferred, to the
Executive by the Company and its affiliated companies in respect of the
12-month period immediately preceding the month in which the Extension Date
occurs. During the Extended Employment Period, the Annual Base Salary shall be
reviewed no more than twelve (12) months after the last salary increase awarded
to the Executive prior to the Extension Date and thereafter at least annually.
Any increase in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Termination Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Termination Agreement shall refer to Annual Base
Salary as so increased. As used in this Termination Agreement, the term
"affiliated companies" shall include any company controlled by, controlling or
under common control with the Company.
(b) Annual Incentive Compensation. During the Extended Employment
Period, any annual incentive compensation payable to Executive shall be paid in
accordance with the Company's usual practices with respect to payment of
incentive compensation of senior executives (except to the extent deferred). In
addition to Annual Base Salary, the Executive shall be awarded, for each fiscal
year ending during the Extended Employment Period, an annual bonus (the "Annual
Bonus") in cash at least equal to the Executive's highest annual incentive
compensation for the last three full fiscal years prior to the Extension Date
(annualized in the event that the Executive was not employed by the Company for
the whole of such fiscal year) (the "Recent Annual Bonus"). Each such Annual
Bonus shall be paid no later than the end of the third month of the fiscal year
next following the fiscal year for which the Annual Bonus is awarded, unless
the Executive shall elect to defer the receipt of such Annual Bonus.
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4. Long-Term Compensation, Including Stock Options, and
Benefits, Deferred Compensation, and Expense Reimbursement.
(a) Executive Compensation Plans. During the Extended Employment
Period, the compensation plans, practices, policies and programs, in the
aggregate, including without limitation, the long-term incentive features of
the Company's Equity Based Long Term Incentive Plan (the "EBP"), shall provide
Executive with benefits, options to acquire Common Stock, and compensation and
incentive award opportunities no less favorable than those provided by the
Company under such plans and programs to senior executives in similar
capacities. During the Extended Employment Period, in no event shall such
plans, practices, policies and programs provide the Executive with incentive
opportunities (measured with respect to both regular and special incentive
opportunities, to the extent, if any, that such distinction is applicable), in
each case, be less favorable, in the aggregate, than the most favorable of
those provided by the Company and its affiliated companies for the Executive
under such plans, practices, policies and programs as in effect at any time
during the 120-day period immediately preceding the Extension Date or if more
favorable to the Executive, those provided generally at any time after the
Extension Date to other peer executives of the Company and its affiliated
companies. For purposes of this Termination Agreement, all references to
"performance share plans" and "performance shares" refer to such arrangements
under the EBP and to any performance shares, performance units, stock grants,
or other long-term incentive arrangements adopted as a successor or replacement
to performance shares under such plans or other plans of the Company.
(b) Employee and Executive Benefit Plans. During the Extended
Employment Period, benefit plans and programs, in the aggregate, shall provide
Executive with benefits no less favorable than those provided by the Company to
senior executives in similar capacities. During the Extended Employment
Period, in no event shall such plans, practices, policies and programs provide
the Executive with benefits which are less favorable, in the aggregate, than
the most favorable of such plans, practices, policies and programs in effect
for the Executive at any time during the 120-day period immediately preceding
the Extension Date or, if more favorable to the Executive, those provided
generally at any time after the Extension Date to other peer executives of the
Company and its affiliated companies.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Term of this Termination
Agreement. If the Company determines in good faith that the Disability of the
Executive has occurred during the Term of this Termination Agreement, it may
give to the Executive written notice in accordance with Section 13(d) of this
Termination Agreement of its intention to terminate the Executive's employment.
In such event, the Executive's Date of Termination is effective on the 30th day
after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the thirty (30) days after such receipt, the
Executive shall not have returned to full-time performance of the Executive's
duties.
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(b) Notice of Termination. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 13(d) of
this Termination Agreement. For purposes of this Termination Agreement, a
"Notice of Termination" means a written notice which (i) indicates the specific
termination provision in this Termination Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the Date of
Termination (which date shall be not more than thirty (30) days after the
giving of such notice). The failure by the Executive or the Company to set
forth in the Notice of Termination any fact or circumstance which contributes
to a showing of Good Reason or Cause shall not waive any right of the Executive
or the Company, respectively, hereunder or preclude the Executive or the
Company, respectively, from asserting such fact or circumstance in enforcing
the Executive's or the Company's rights hereunder.
(c) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive that the Executive's employment will terminate, (iii) if the
Executive's employment is terminated by reason of death or Disability, or due
to mutually agreed upon early retirement or Normal Retirement other than for
Good Reason, the Date of Termination shall be the date of death of the
Executive, the Disability Effective Date, or the date the Executive notifies
the Company that the Executive's employment will terminate, as the case may be,
and (iv) if the Executive's employment is terminated by the Company by reason
of not renewing the Term of this Termination Agreement for reasons other than
Cause, the Date of Termination shall be the last day of the Term of this
Termination Agreement. Notwithstanding the foregoing, solely the transfer of
an Executive to employment with an affiliated company shall not constitute a
termination of employment with the Company.
6. Termination Due to Normal Retirement, Approved Early
Retirement, Death, or Disability.
Upon an Executive's Date of Termination due to a voluntary decision by
the Executive to retire on or after the Executive's Normal Retirement Date
(other than for Good Reason) or a mutually agreed upon early retirement date,
death or Disability, the Term of this Termination Agreement will immediately
terminate and all obligations of the Company and Executive under this
Termination Agreement and under the Employment Agreement will immediately
cease; provided, however, that subject to the provisions of Section 13(c), the
Company will pay Executive (or his beneficiaries or estate), and Executive (or
his beneficiaries or
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estate) will be entitled to receive, the following:
(a) The unpaid portion of Annual Base Salary at the rate payable, in
accordance with Section 3(a) hereof, at the Date of Termination, pro rated
through such Date of Termination, will be paid;
(b) All vested, nonforfeitable amounts owing and accrued at the Date of
Termination under any compensation and benefit plans, programs, and
arrangements in which Executive theretofore participated (including any earned
annual incentive compensation and performance shares) will be paid under the
terms and conditions of the plans, programs, and arrangements (and agreements
and documents thereunder) pursuant to which such compensation and benefits were
granted, including a single lump sum amount equal to the actuarial equivalent
(determined in accordance with Section 5 of the Employment Agreement) of the
benefit under the Company's nonqualified supplemental employee retirement plan
("SERP");
(c) In lieu of any annual incentive compensation under Section 3(b) for
the year in which Executive's employment terminated (unless otherwise payable
under (b) above), Executive will be paid an amount equal to the average annual
incentive compensation paid to Executive in the three years immediately
preceding the year of termination (or, if Executive was not eligible to receive
or did not receive such incentive compensation for any year in such three year
period, the Executive's target annual incentive compensation for such year(s)
shall be used to calculate average annual incentive compensation) multiplied by
a fraction the numerator of which is the number of days Executive was employed
in the year of termination and the denominator of which is the total number of
days in the year of termination;
(d) Stock options then held by Executive will be exercisable to the
extent and for such periods, and otherwise governed, by the plans and programs
and the agreements and other documents thereunder pursuant to which such stock
options were granted; provided, however, that the stock options described in
Section 5 of the Employment Agreement shall be exercisable to the extent and
for such periods, and otherwise governed by, the provisions of Section 5 of the
Employment Agreement;
(e) All deferral arrangements under the Employment Agreement will be
settled in accordance with the provisions of Section 5 of the Employment
Agreement and the Executive's duly executed Deferral Election Forms; and
(f) If Executive's Date of Termination is due to Disability, for the
period extending from such Date of Termination until Executive reaches age 65,
Executive shall continue to participate in all employee benefit plans,
programs, and arrangements providing health, medical, and life insurance in
which Executive was participating immediately prior to the Date of Termination,
the terms of which allow Executive's continued participation, as if Executive
had continued in employment with the Company during such period or, if such
plans, programs, or arrangements do not allow Executive's continued
participation, a cash payment equivalent on an after-tax basis to the value of
the additional benefits Executive would have received under such
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employee benefit plans, programs, and arrangements in which Executive
was participating immediately prior to the Date of Termination, as if Executive
had received credit under such plans, programs, and arrangements for service
and age with the Company during such period following Executive's Date of
Termination, with such benefits payable by the Company at the same times and in
the same manner as such benefits would have been received by Executive under
such plans (it being understood that the value of any insurance-provided
benefits will be based on the premium cost to Executive, which shall not exceed
the highest risk premium charged by a carrier having an investment grade or
better credit rating).
Amounts which are immediately payable above will be paid as promptly as
practicable after Executive's Date of Termination; provided, however, to the
extent that or the Company would not be entitled to deduct any such payments
under Internal Revenue Code Section 162(m), such payments shall be made at the
earliest time that the payments would be deductible by the Company without
limitation under Section 162(m) (unless this provision is waived by the
Company).
7. Termination of Employment for Cause and Good Reason.
(a) Termination by the Company for Cause and Termination by Executive
for Reasons Other Than Normal Retirement, Approved Early Retirement, Death or
Disability. Upon an Executive's Date of Termination by the Company for Cause
or voluntarily by Executive for reasons other than Good Reason, but excluding
termination due to Normal Retirement, mutually agreed upon early retirement,
death or Disability, the Term will immediately terminate, and all obligations
of the Company under Sections 1 through 4 of this Termination Agreement and
under the Employment Agreement will immediately cease; provided, however, that
subject to the provisions of Section 13(c), the Company shall pay Executive (or
his or her beneficiaries), and Executive (or his or her beneficiaries) shall be
entitled to receive, the following:
(i) The unpaid portion of Annual Base Salary at the rate
payable, in accordance with Section 4(a) hereof, at
the Date of Termination, pro rated through such Date of
Termination, will be paid;
(ii) All vested, nonforfeitable amounts owing and accrued at
the Date of Termination under any compensation
and benefit plans, programs, and arrangements in which
Executive theretofore participated will be paid under
the terms and conditions of the plans, programs, and
arrangements (and agreements and documents thereunder)
pursuant to which such compensation and benefits were
granted; and
(iii) A cash amount equal to the value at the Date of
Termination of any phantom shares of Common Stock
credited to Executive's deferral accounts under
deferral arrangements authorized under the Employment
Agreement at the Date of Termination, less applicable
withholding taxes under
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Section 14(i) of the Employment Agreement; provided,
however, that the Company may instead settle such
accounts, in full or in part, by directing the Trustee
to distribute the assets of the "rabbi trust" and the
Company shall be relieved of its obligation under this
Termination Agreement and the Employment Agreement to
the extent that assets are so distributed. Such amounts
shall be paid or distributed as promptly as practicable
following such Date of Termination, without regard to
any stated period of deferral otherwise remaining in
respect of such amounts, and the payment of such amounts
shall be deemed to fully settle such accounts.
Amounts which are immediately payable above will be paid as promptly as
practicable after the Executive's Date of Termination; provided, however, to
the extent that the Company would not be entitled to deduct any such payments
under Internal Revenue Code Section 162(m), such payments shall be made at the
earliest time that the payments would be deductible by the Company without
limitation under Section 162(m) (unless this provision is waived by the
Company).
(b) Termination by the Company Without Cause and Termination by
Executive for Good Reason. Upon an Executive's Date of Termination prior to
the Extension Date without Cause (including non-renewal of the Term of this
Termination Agreement without Cause) or voluntarily by the Executive for Good
Reason, the Term will terminate and all obligations of the Company and
Executive under Sections 1 through 4 of this Termination Agreement and under
the Employment Agreement will immediately cease; provided, however, that
subject to the provisions of Section 13(c) the Company shall pay to the
Executive (or his or her beneficiaries) and Executive (or his or her
beneficiaries) shall be entitled to receive the following amounts:
(i) the Company shall pay to Executive
within, or commencing within, thirty (30) days after the
Date of Termination, the following amounts:
(A) the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the
extent not theretofore paid, and (2) the product
of (x) the target Annual Bonus paid or payable,
including any bonus or portion thereof which has
been earned but deferred (and annualized for any
fiscal year consisting of less than twelve (12)
full months or during which the Executive was
employed for less than twelve (12) full months)
for the fiscal year, and (y) a fraction, the
numerator of which is the number of days in the
current fiscal year through the Date of
Termination, and the denominator of which is 365,
in each case to the extent not theretofore paid;
(B) twenty-four (24) semi-monthly payments during a
twelve (12) consecutive month period equal to the
Executive's Annual Base Salary divided by
twenty-four (24); provided, however,
notwithstanding anything to the contrary in the
Termination Agreement or in the Employment
Agreement, none of such amounts shall qualify
Executive for any incremental benefit under any
plan or program in which he has participated or
continues to participate;
(C) a single lump sum amount equal to the actuarial
equivalent (determined in accordance with Section
5(b)(iv) of the Employment Agreement) of the
benefit under the SERP;
(D) a cash amount will be paid equal to the value at
the Date of Termination of any phantom shares
of Common Stock credited to Executive's deferral
accounts under deferral arrangements authorized
under the Employment Agreement at the Date of
Termination, less applicable withholding taxes
under Section 14(i) of the Employment Agreement;
provided, however, that the Company may instead
settle such accounts by directing the Trustee to
distribute the assets of the "rabbi trust" and the
Company shall be relieved of its obligation under
this Termination Agreement and the Employment
Agreement to the extent that assets are so
distributed. Such amounts shall be paid or
distributed as promptly as practicable following
such Date of Termination, without regard to any
stated period of deferral otherwise remaining in
respect of such amounts, and the payment of such
amounts shall be deemed to fully settle such
accounts; and
(E) to the extent not covered by (A), (B), (C) or (D)
above, all vested, nonforfeitable amounts owing
and accrued at the Date of Termination under any
compensation and benefit plans, programs, and
arrangements in which Executive theretofore
participated will be paid under the terms and
conditions of the plans, programs, and
arrangements (and agreements and documents
thereunder) pursuant to which such compensation
and benefits were granted; and
(ii) stock options then held by Executive will be
exercisable to the extent and for such periods, and
otherwise governed, by
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the plans and programs and the agreements and other
documents thereunder pursuant to which such stock
options were granted; provided, however, that the stock
options described in Section 5 of the Employment
Agreement shall be exercisable to the extent and for
such periods, and otherwise governed by, the provisions
of Section 5 of the Employment Agreement.
Amounts which are immediately payable above will be paid as promptly as
practicable after Executive's Date of Termination; provided, however, to the
extent that the Company would not be entitled to deduct any such payments under
Internal Revenue Code Section 162(m), such payments shall be made at the
earliest time that the payments would be deductible by the Company without
limitation under Section 162(m) (unless this provision is waived by the
Company).
8. Termination by the Company Without Cause and Termination by
Executive for Goof Reason During the Extended Employment Period.
Upon an Executive's Date of Termination during the Extended Employment
Period by the Company without Cause (other than for non-renewal of the Term of
the Employment Agreement) or voluntarily by the Executive for Good Reason, the
Term of this Termination Agreement will immediately terminate and all
obligations of the Company and Executive under Sections 1 through 5 of this
Termination Agreement and under the Employment Agreement will immediately
cease; provided, however, that subject to the provisions of Section 13(c) the
Company shall pay Executive (or his or her beneficiaries), and Executive (or
his or her beneficiaries) shall be entitled to receive, the following:
(a) the Company shall pay to the Executive in a lump sum in cash within
thirty (30) days after the Date of Termination the aggregate of the following
amounts:
(i) the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not
theretofore paid, and (2) the product of (x) the higher
of (I) the Recent Annual Bonus and (II) the Annual Bonus
paid or payable, assuming full satisfaction of any
performance standards or targets applicable to
determining the maximum amount payable, including any
bonus or portion thereof which has been earned but
deferred (and annualized for any fiscal year consisting
of less than twelve (12) full months or during
which the Executive was employed for less than twelve
(12) full months), for the most recently completed
fiscal year during the Extended Employment Period, if
any (such higher amount being referred to as the
"Highest Annual Bonus") and (y) a fraction, the
numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the
denominator of which is 365;
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(ii) the amount equal to the product of (1) three and
(2) the sum of (x) the Executive's Annual Base Salary
and (y) the Highest Annual Bonus;
(iii) an amount equal to the actuarial equivalent (determined
in accordance with Section 5 of the Employment
Agreement) of the benefit under the SERP which the
Executive would receive assuming for this purpose that
the Executive's employment continued for three (3) years
after the Date of Termination and assuming that the
Executive's compensation in each of the three years is
that required by Section 3;
(iv) in lieu of any payment in respect of performance
shares, or other long term incentive awards (including
awards of phantom shares under the EBP) granted prior to
the Extension Date or in accordance with Section 4(a),
for any performance period not completed at the
Executive's Date of Termination, an amount equal to the
cash amount payable plus the value of any shares of
Common Stock or other property (valued at the Date of
Termination) payable upon the achievement of maximum
performance (or in the case of phantom shares, target
performance under the EBP) in respect of each tranche of
such performance shares or awards without proration as
if the Date of Termination were the end of the
performance period;
(v) a cash amount will be paid equal to the value at the
Date of Termination of any phantom shares of Common
Stock credited to Executive's deferral accounts under
deferral arrangements authorized under the Employment
Agreement at the Date of Termination, less applicable
withholding taxes under Section 14(i) of the Employment
Agreement; provided, however, that the Company may
instead settle such accounts by directing the Trustee to
distribute the assets of the "rabbi trust" and the
Company shall be relieved of its obligation under this
Employment Agreement and the Termination Agreement to
the extent that assets are so distributed. Such amounts
shall be paid or distributed as promptly as practicable
following such Date of Termination, without regard to
any stated period of deferral otherwise remaining in
respect of such amounts, and the payment of such amounts
shall be deemed to fully settle such accounts; and
(vi) to the extent not covered in (i), (ii), (iii), (iv) or
(v), all vested, nonforfeitable amounts owing or accrued
at the Date of
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Termination under any other compensation and benefit
plans, programs, and arrangements in which Executive
theretofore participated will be paid under the terms
and conditions of the plans, programs, and arrangements
(and agreements and documents thereunder) pursuant to
which such compensation and benefits were granted.
(b) Stock options then held by Executive will be exercisable and
restricted stock held by the Executive will be vested to the extent and for
such periods, and otherwise governed, by the plans and programs (and the
agreements and other documents thereunder) pursuant to which such stock options
or restricted stock were granted; provided, however, that the stock options and
restricted stock described in Section 5 of the Employment Agreement shall be
fully vested and shall be exercisable to the extent and for such periods, and
otherwise governed by, the provisions of Section 5 of the Employment Agreement.
(c) For three (3) years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue welfare plan benefits
to the Executive and/or the Executive's family at least equal to those which
would have been provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b) of this Termination Agreement
if the Executive's employment had not been terminated or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies and their
families, provided, however, that if the Executive becomes reemployed with
another employer and is eligible to receive medical or other welfare benefits
under another employer-provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility. If such plans, programs, or
arrangements do not allow Executive's continued participation, a cash payment
equivalent on an after-tax basis to the value of the additional benefits
Executive would have received under such employee benefit plans, programs, and
arrangements in which Executive was participating immediately prior to the Date
of Termination, as if Executive had received credit under such plans, programs,
and arrangements for service and age with the Company during such period
following Executive's Date of Termination, with such benefits payable by the
Company at the same times and in the same manner as such benefits would have
been received by Executive under such plans (it being understood that the value
of any insurance-provided benefits will be based on the premium cost to
Executive, which shall not exceed the highest risk premium charged by a carrier
having an investment grade or better credit rating); and
(d) outplacement services the scope and provider of which shall be
selected by the Executive in his sole discretion, provided by the Company at
its sole expense as incurred.
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9. Definitions Relating to Termination Events.
(a) "Cause." For purposes of this Termination Agreement, "Cause" shall
mean Executive's gross misconduct (as defined herein) or willful and material
breach of Section 11 of this Termination Agreement. For purposes of this
definition, "gross misconduct" shall mean (A) a felony conviction in a court of
law under applicable federal or state laws which results in material damage to
the Company or any of its subsidiaries or materially impairs the value of
Executive's services to the Company, or (B) willfully engaging in one or more
acts, or willfully omitting to act in accordance with duties hereunder, which
is demonstrably and materially damaging to the Company or any of its
subsidiaries, including acts and omissions that constitute gross negligence in
the performance of Executive's duties under this Termination Agreement. For
purposes of this Termination Agreement and the Employment Agreement, an act or
failure to act on Executive's part shall be considered "willful" if it was done
or omitted to be done by him not in good faith, and shall not include any act
or failure to act resulting from any incapacity of Executive. Notwithstanding
the foregoing, Executive may not be terminated for Cause unless and until (1)
the Executive shall have committed acts which constitute Cause as set forth in
this Section 9(a), and (2) there shall have been delivered to him a copy of a
resolution duly adopted by a seventy-five percent (75%) affirmative vote of the
membership of the Board of Directors of the Company (the "Board") (excluding
Executive, if he is then a member) at a meeting of the Board called and held
for such purpose (after giving Executive reasonable notice specifying the
nature of the grounds for such termination and not less than 30 days to correct
the acts or omissions complained of, if correctable, and affording Executive
the opportunity, together with his counsel, to be heard before the Board)
finding that Executive was guilty of conduct which constitutes Cause as set
forth in this Section 9(a).
(b) "Change of Control." For the purpose of this Termination
Agreement, a "Change of Control" shall mean:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of twenty percent (20%) or more of either
(A) the then-outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (B)
the combined voting power of the then-outstanding voting
securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company
Voting Securities"); provided, however, that for
purposes of this subsection (i), the following
acquisitions shall not constitute a Change of Control:
(A) any acquisition directly from the Company, (B) any
acquisition by the Company, (C) any acquisition by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled
by the Company, (D) any acquisition by a lender to the
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Company pursuant to a debt restructuring of the Company,
or (E) any acquisition by any corporation
pursuant to a transaction which complies with clauses
(A), (B) and (C) of subsection (iii) of this Section 9;
(ii) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided,
however, that any individual becoming a director
subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders,
was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be
considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of office
occurs as a result of an actual or threatened election
contest with respect to the election or removal of
directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other
than the Board;
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following
such Business Combination, (A) all or substantially all
of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination
beneficially own, directly or indirectly, more than
fifty percent (50%) of, respectively, the
then-outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors,
as the case may be, of the corporation resulting from
such Business Combination (including, without
limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all
of the Company's assets either directly or through one
or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Company
Common Stock and Outstanding Company Voting Securities,
as the case may be, (B) no Person (excluding any
corporation resulting from such Business
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Combination or any employee benefit plan (or related
trust) of the Company or such corporation resulting
from such Business Combination) beneficially owns,
directly or indirectly, twenty percent (20%) or more of,
respectively, the then outstanding shares of common
stock of the corporation resulting from such Business
Combination, or the combined voting power of the then
outstanding voting securities of such corporation
except to the extent that such ownership existed prior
to the Business Combination and (C) at least a majority
of the members of the board of directors of the
corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of
the Board, providing for such Business Combination; or
(iv) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
(c) "Disability" means the failure of Executive to render and perform
the services required of him under this Termination Agreement, for a total of
180 days or more during any consecutive 12 month period, because of any
physical or mental incapacity or disability as determined by a physician or
physicians selected by the Company and reasonably acceptable to Executive,
unless, within 30 days after Executive has received written notice from the
Company of a proposed Date of Termination due to such absence, Executive shall
have returned to the full performance of his duties hereunder and shall have
presented to the Company a written certificate of Executive's good health
prepared by a physician selected by Company and reasonably acceptable to
Executive.
(d) "Extension Date" shall mean the first date during the Term of the
Employment Agreement on which a Change of Control occurs. Anything in this
Termination Agreement or the Employment Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's
employment with the Company is terminated prior to the date on which the Change
of Control occurs, and if it is reasonably demonstrated by the Executive that
such termination of employment (i) was at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of Control, then
for all purposes of this Termination Agreement or the Employment Agreement the
"Extension Date" shall mean the date immediately prior to the date of such
termination of employment.
(e) "Good Reason." For purposes of this Termination Agreement and the
Employment Agreement, "Good Reason" shall mean the occurrence of any of the
following, without Executive's prior written consent:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's
position (including status, offices, titles and
reporting requirements), authority, duties or
responsibilities as contemplated by Section 2(a) of this
Termination Agreement or the Employment Agreement, or
any other action by the Company which results in a
diminution in such position, authority, duties or
responsibilities, excluding for this purpose an
isolated,
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insubstantial and inadvertent action not taken in bad
faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Executive;
(ii) any failure by the Company to comply with any of the
provisions of this Termination Agreement or the
Employment Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in
bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any
office or location other than as provided in Section
2(b) hereof or the Employment Agreement or the
Company's requiring the Executive to travel on Company
business to a substantially greater extent than required
of other senior executives in similar capacities
immediately prior to the Effective Date;
(iv) any failure by the Company to perform any material
obligation under, or breach by the Company of any
material provision of, this Termination Agreement or the
Employment Agreement;
(v) any purported termination by the Company of the
Executive's employment otherwise than as expressly
permitted by this Termination Agreement; or
(vi) any failure by the Company to comply with and
satisfy Section 12(b) of this Termination Agreement.
For purposes of this Section, any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
(f) "Normal Retirement Date." For purposes of this Termination
Agreement, an Executive's Normal Retirement Date is his or her attainment of
age sixty-five (65).
10. Excise Tax Gross-Up.
If Executive becomes entitled to one or more payments (with a "payment"
including, without limitation, the vesting of an option or other non-cash
benefit or property), whether pursuant to the terms of this Termination
Agreement or any other plan, arrangement, or agreement with the Company or any
affiliated company (the "Total Payments"), which are or become subject to the
tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code") (or any similar tax that may hereafter be imposed) (the "Excise
Tax"), the Company shall pay to Executive at the time specified below an
additional amount (the "Gross-up Payment") (which shall
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<PAGE> 15
include, without limitation, reimbursement for any penalties and interest that
may accrue in respect of such Excise Tax) such that the net amount retained by
Executive, after reduction for any Excise Tax (including any penalties or
interest thereon) on the Total Payments and any federal, state and local income
or employment tax and Excise Tax on the Gross-up Payment provided for by this
Section 10, but before reduction for any federal, state, or local income or
employment tax on the Total Payments, shall be equal to the sum of (a) the
Total Payments, and (b) an amount equal to the product of any deductions
disallowed for federal, state, or local income tax purposes because of the
inclusion of the Gross-up Payment in Executive's adjusted gross income
multiplied by the highest applicable marginal rate of federal, state, or local
income taxation, respectively, for the calendar year in which the Gross-up
Payment is to be made.
For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax:
(a) The Total Payments shall be treated as "parachute payments" within
the meaning of Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) of the Code shall be treated
as subject to the Excise Tax, unless, and except to the extent that, in the
written opinion of independent compensation consultants or auditors of
nationally recognized standing ("Independent Advisors") selected by the Company
and reasonably acceptable to Executive, the Total Payments (in whole or in
part) do not constitute parachute payments, or such excess parachute payments
(in whole or in part) represent reasonable compensation for services actually
rendered before a Change of Control within the meaning of Section 280G(b)(4)(B)
of the Code in excess of the base amount within the meaning of Section
280G(b)(3) of the Code or are otherwise not subject to the Excise Tax;
(b) The amount of the Total Payments which shall be treated as subject
to the Excise Tax shall be equal to the lesser of (i) the total amount of the
Total Payments or (ii) the total amount of excess parachute payments within the
meaning of Section 280G(b)(1) of the Code (after applying clause (a) above);
and
(c) The value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Independent Advisors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-up Payment,
Executive shall be deemed (A) to pay federal income taxes at the highest
marginal rate of federal income taxation for the calendar year in which the
Gross-up Payment is to be made; (B) to pay any applicable state and local
income taxes at the highest marginal rate of taxation for the calendar year in
which the Gross-up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes if paid in such year (determined without regard to limitations on
deductions based upon the amount of Executive's adjusted gross income); and (C)
to have otherwise allowable deductions for federal, state, and local income tax
purposes at least equal to those disallowed because of the inclusion of the
Gross-up Payment in Executive's adjusted gross income. In the event that the
Excise Tax is subsequently determined to be less than the amount taken into
account hereunder at the time the Gross-up Payment is made, Executive shall
repay to the Company at the time that the amount of such reduction in Excise
Tax is finally determined (but, if previously paid to the taxing authorities,
not prior to the time the amount of such reduction is refunded to Executive or
otherwise realized as a benefit by Executive) the portion of the Gross-up
Payment that would not have been paid if such Excise Tax had been applied in
initially calculating the Gross-up Payment, plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise
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<PAGE> 16
Tax is determined to exceed the amount taken into account hereunder at the time
the Gross-up Payment is made (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-up
Payment), the Company shall make an additional Gross-up Payment in respect of
such excess (plus any interest and penalties payable with respect to such
excess) at the time that the amount of such excess is finally determined.
The Gross-up Payment provided for above shall be paid on the 30th day
(or such earlier date as the Excise Tax becomes due and payable to the taxing
authorities) after it has been determined that the Total Payments (or any
portion thereof) are subject to the Excise Tax; provided, however, that if the
amount of such Gross-up Payment or portion thereof cannot be finally determined
on or before such day, the Company shall pay to Executive on such day an
estimate, as determined by the Independent Advisors, of the minimum amount of
such payments and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code), as soon as
the amount thereof can be determined. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to Executive, payable on the
fifth day after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code). If more than one Gross-up
Payment is made, the amount of each Gross-up Payment shall be computed so as
not to duplicate any prior Gross-up Payment.
Notwithstanding the foregoing, the Executive may at any time elect to
demand the payment of the amount which the Executive, in accordance with an
Opinion of counsel to the Executive, determines to be the Gross-Up Payment. Any
such demand by the Executive shall be made by delivery to the Company of a
written notice which specifies the Gross-Up Payment determined by the Executive
and an Opinion of counsel to the Executive regarding such Gross-Up Payment
(such written notice and Opinion collectively, the "Executive's
Determination"). Within fourteen (14) days after the Executive's delivery of
the Executive's Determination to the Company, the Company shall
(i) pay to the Executive the Gross-Up Payment set
forth in the Executive's Determination
unless
(ii) the Company shall deliver to the Executive a written
notice specifying the Gross-Up Payment determined by the
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<PAGE> 17
Company together with an Opinion of the Company's
counsel regarding such Gross-Up Payment (such written
notice and Opinion collectively, "the Company's
Determination") and shall pay to the Executive the
Gross-Up Payment specified in the Company's
Determination.
For purposes of this Section 10, "Opinion" shall mean an unqualified legal
opinion that a Gross-Up Payment has been calculated in accordance with this
Section 10 and applicable law, unless such Opinion shall state therein that an
unqualified Opinion cannot be given as to any Gross-Up Payment. In such case,
the Opinion shall state that the Gross-Up Payment set forth therein both (A) is
more likely than not to be in accordance with this Section 10 and applicable
law, and (B) is more likely to be in accordance with this Section 10 and
applicable law than any other Gross-Up Payment.
The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information reasonably requested
by the Company relating to such claim,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing
from time to time, including, without limitation,
accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
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<PAGE> 18
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 10, the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or to contest
the claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority. If, after the receipt by the Executive
of an amount advanced by the Company pursuant to this Section 10, the Executive
becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the requirements of
this Section 10) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced by the
Company pursuant to this Section 10, a determination is made that the Executive
shall not be entitled to any refund with respect to such claim and the Company
does not notify the Executive in writing of its intent to contest such denial
of refund prior to the expiration of thirty (30) days after such determination,
then such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
11. Non-Competition and Non-Disclosure; Executive Cooperation.
(a) Non-Competition. Without the consent in writing of the Board, upon
the Executive's Date of Termination for any reason, Executive will not, for a
period of one year thereafter, acting alone or in conjunction with others,
directly or indirectly (i) engage (either as owner, investor, partner,
stockholder, employer, employee, consultant, advisor or Director) in any
business in the continental United States in which he has been directly
engaged, or has supervised as an executive, during the last two
years prior to such Date of Termination and which is directly in competition
with a business then conducted by the Company or any of its subsidiaries; (ii)
induce any customers of the Company or any of its subsidiaries with whom
Executive has had contacts or relationships, directly or indirectly, during and
within the scope of his employment with the Company or any of its subsidiaries,
to curtail or cancel their business with such companies or any of them; or
(iii) induce, or attempt to influence, any employee of the Company or any of
its subsidiaries to terminate employment. The provisions of subparagraphs (i),
(ii), and (iii) above are separate and distinct commitments independent of each
of the other subparagraphs. It is agreed that
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<PAGE> 19
the ownership of not more than one percent of the equity securities of any
company having securities listed on an exchange or regularly traded in the
over-the-counter market shall not, of itself, be deemed inconsistent with
clause (i) of this paragraph (a).
(b) Non-Disclosure. Executive shall not at any time (including
following Executive's Date of Termination for any reason), disclose, use,
transfer, or sell, except in the course of employment with or other service to
the Company, any confidential or proprietary information of the Company or any
of its subsidiaries so long as such information has not otherwise been
disclosed or is not otherwise in the public domain, except as required by law
or pursuant to legal process.
(c) Cooperation With Regard to Litigation. Executive agrees to
cooperate with the Company (including following Executive's Date of Termination
for any reason), provided that such cooperation would not unreasonably
interfere with the business activities or employment obligations of the
Executive, by making himself available to testify on behalf of the Company or
any subsidiary or affiliate of the Company, in any action, suit, or proceeding,
whether civil, criminal, administrative, or investigative, and to assist the
Company, or any subsidiary or affiliate of the Company, in any such action,
suit, or proceeding, by providing information and meeting and consulting with
the Board and its representatives or counsel, or representatives or counsel of
or to the Company, or any subsidiary or affiliate of the Company, as requested;
provided, however, this subsection (c) shall not apply to any action between
the Executive and the Company to enforce this Termination Agreement or the
Employment Agreement. The Company agrees to reimburse Executive, on an
after-tax basis, for all expenses actually incurred in connection with his
provision of testimony or assistance.
(d) Release of Employment Claims. Executive agrees, as a condition to
receipt of the termination payments and benefits provided hereunder, that he
will execute a release agreement, in a form satisfactory to the Company,
releasing any and all claims arising out of Executive's employment, including
claims arising under the Employment Agreement (other than claims made pursuant
to any indemnities provided under the articles or by-laws of the Company, under
any directors or officers liability insurance policies maintained by the
Company or enforcement of this Termination Agreement).
(e) Survival. Notwithstanding any provision of this Termination
Agreement to the contrary, the provisions of this Section 11 shall survive the
termination or expiration of this Termination Agreement, shall be valid and
enforceable, and shall be a condition precedent to the Executive (or his or her
beneficiaries) receiving any amounts payable hereunder.
12. Governing Law; Expense Reimbursement.
(a) Governing Law. This Termination Agreement is governed by and is to
be construed, administered, and enforced in accordance with the laws of the
State of Michigan, without regard to Michigan conflicts of law principles,
except insofar as the Delaware General Corporation Law and federal laws and
regulations may be
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<PAGE> 20
applicable. If under the governing law, any portion of this Termination
Agreement is at any time deemed to be in conflict with any applicable statute,
rule, regulation, ordinance, or other principle of law, such portion shall be
deemed to be modified or altered to the extent necessary to conform thereto or,
if that is not possible, to be omitted from this Termination Agreement. The
invalidity of any such portion shall not affect the force, effect, and validity
of the remaining portion hereof. If any court determines that any provision of
Section 11 is unenforceable because of the duration or geographic scope of such
provision, it is the parties' intent that such court shall have the power to
modify the duration or geographic scope of such provision, as the case may be,
to the extent necessary to render the provision enforceable and, in its
modified form, such provision shall be enforced.
(b) Expense Reimbursement. On and after the Extension Date, all
reasonable costs and expenses (including fees and disbursements of counsel)
incurred by Executive in seeking to enforce rights pursuant to this Termination
Agreement shall be paid on behalf of or reimbursed to Executive promptly by the
Company, whether or not Executive is successful in asserting such rights;
provided, however, that no reimbursement shall be made of such expenses
relating to any unsuccessful assertion of rights if and to the extent that
Executive's assertion of such rights was in bad faith or frivolous, as
determined by independent counsel mutually acceptable to Executive and the
Company and made without reference to or not related to a Change of Control.
During the Extended Employment Period, the Company agrees to maintain a minimum
amount in a rabbi trust (or to provide to the trustee of such rabbi trust) an
irrevocable letter of credit in an amount equal to such minimum amount (and
callable at will by such trustee) sufficient to fund the aggregate present
value of all liabilities potentially owed to the Executive hereunder or under
the Employment Agreement as if he or she had incurred a termination of
employment by the Company other than for Cause.
13. Miscellaneous.
(a) Integration. This Termination Agreement modifies and supersedes
any and all prior agreements and understandings between the parties hereto with
respect to the employment of Executive by the Company and its subsidiaries,
except for the Employment Agreement and contracts relating to compensation
under executive compensation and employee benefit plans of the Company. Subject
to the rights, benefits and obligations provided for in such executive
compensation contracts and employee benefit plans of the Company, this
Termination Agreement and the Employment Agreement together constitute the
entire agreement among the parties with respect to the matters herein provided,
and no modification or waiver of any provision hereof shall be effective unless
in writing and signed by the parties hereto. Executive shall not be entitled
to any payment or benefit under this Termination Agreement which duplicates a
payment or benefit received or receivable by Executive under such prior
agreements and understandings with the Company or under any benefit or
compensation plan of the Company.
(b) Non-Transferability. Neither this Termination Agreement nor the
rights or obligations hereunder of the parties hereto shall be transferable or
assignable by Executive, except in accordance with the laws of descent and
distribution or as
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<PAGE> 21
specified in Section 13(c). The Company may assign this Termination Agreement
and the Company's rights and obligations hereunder, and shall assign this
Termination Agreement, to any Successor (as hereinafter defined) which, by
operation of law or otherwise, continues to carry on substantially the
business of the Company prior to the event of succession, and the Company
shall, as a condition of the succession, require such Successor to agree to
assume the Company's obligations and be bound by this Termination Agreement.
For purposes of this Termination Agreement, "Successor" shall mean any person
that succeeds to, or has the practical ability to control (either immediately
or with the passage of time), the Company's business directly, by merger or
consolidation, or indirectly, by purchase of the Company's voting securities or
all or substantially all of its assets, or otherwise.
(c) Beneficiaries. Executive shall be entitled to designate (and
change, to the extent permitted under applicable law) a beneficiary or
beneficiaries to receive any compensation or benefits payable hereunder
following Executive's death.
(d) Notices. Whenever under this Termination Agreement it becomes
necessary to give notice, such notice shall be in writing, signed by the party
or parties giving or making the same, and shall be served on the person or
persons for whom it is intended or who should be advised or notified, by
Federal Express or other similar overnight service or by certified or
registered mail, return receipt requested, postage prepaid and addressed to
such party at the address set forth below or at such other address as may be
designated by such party by like notice:
If to the Company: Walbro Corporation
6242 Garfield Street
Cass City, Michigan 48726-1397
Attention: Secretary
If to Executive: Daniel L. Hittler
4861 Spruce Street
Cass City, Michigan 48726
If the parties by mutual agreement supply each other with telecopier numbers
for the purposes of providing notice by facsimile, such notice shall also be
proper notice under this Termination Agreement. In the case of Federal
Express or other similar overnight service, such notice or advice shall be
effective when sent, and, in the cases of certified or registered mail, shall
be effective 2 days after deposit into the mails by delivery to the U.S. Post
Office.
(e) Reformation. The invalidity of any portion of this Termination
Agreement shall not deemed to render the remainder of this Termination
Agreement invalid.
(f) Headings. The headings of this Termination Agreement are for
convenience of reference only and do not constitute a part hereof.
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(g) No General Waivers. The failure of any party at any time to
require performance by any other party of any provision hereof or to resort to
any remedy provided herein or at law or in equity shall in no way affect the
right of such party to require such performance or to resort to such remedy at
any time thereafter, nor shall the waiver by any party of a breach of any of
the provisions hereof be deemed to be a waiver of any subsequent breach of such
provisions. No such waiver shall be effective unless in writing and signed by
the party against whom such waiver is sought to be enforced.
(h) No Obligation To Mitigate. Executive shall not be required to seek
other employment or otherwise to mitigate Executive's damages hereunder on or
after Executive's Date of Termination, nor shall the amount of any payment
hereunder be reduced by any compensation earned by the Executive as a result of
employment by another employer; provided, however, that, to the extent
Executive receives from a subsequent employer health or other insurance
benefits that are substantially similar to the benefits referred to in this
Termination Agreement, any such benefits to be provided by the Company to
Executive following the Term shall be correspondingly reduced.
(i) No Offsets. The amounts required to be paid by the Company to
Executive pursuant to this Termination Agreement shall not be subject to
offset, counterclaim, recoupment, defense or other claim, right or action which
the Company may have against Executive or others, other than with respect to
any amounts that are owed to the Company by Executive due to his receipt of
Company funds as a result of his fraudulent activity. The foregoing and other
provisions of this Termination Agreement notwithstanding, all payments to be
made to Executive under this Termination Agreement will be subject to required
withholding taxes and other required deductions.
(j) Successors and Assigns. This Termination Agreement shall be
binding upon and shall inure to the benefit of Executive, his heirs, executors,
administrators and beneficiaries, and shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
14. Indemnification.
All rights to indemnification by the Company now existing in favor of
Executive as provided in the Company's Certificate of Incorporation or By-Laws
or pursuant to other agreements in effect on or immediately prior to the
Extension Date shall continue in full force and effect from the Extension Date
(including all periods after the expiration of the Term), and the Company shall
also advance expenses for which indemnification may be ultimately claimed as
such expenses are incurred to the fullest extent permitted under applicable
law, subject to any requirement that Executive provide an undertaking to repay
such advances if it is ultimately determined that Executive is not entitled to
indemnification; provided, however, that any determination required to be made
with respect to whether Executive's conduct complies with the standards
required to be met as a condition of indemnification or advancement of expenses
under applicable law and the Company's Certificate of Incorporation, By-Laws,
or other agreement shall be made by independent counsel mutually
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acceptable to Executive and the Company (except to the extent otherwise
required by law). After the Extension Date, the Company shall not amend its
Certificate of Incorporation or By-Laws or any agreement in any manner which
adversely affects the rights of Executive to indemnification thereunder.
Any provision contained herein notwithstanding, this Termination Agreement
shall not limit or reduce any rights of Executive to indemnification pursuant
to applicable law. In addition, the Company will maintain directors' and
officers' liability insurance in effect and covering acts and omissions of
Executive, during the Term and for a period of six years thereafter, on terms
substantially no less favorable as those in effect on the Extension Date.
IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company
has caused this instrument to be duly executed as of the day and year first
above written.
WALBRO CORPORATION
By: /s/ Lambert E. Althaver
--------------------------------
Name: Lambert E. Althaver
Title: Chairman & Chief Executive Officer
Daniel L. Hittler
/s/ Daniel L. Hittler
-------------------------------
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<PAGE> 1
EXHIBIT 10.25
WALBRO CORPORATION
________________________________________________________________________
EMPLOYMENT AGREEMENT FOR MICHAEL A. SHOPE
________________________________________________________________________
<TABLE>
<S> <C> <C>
1. Employment 1
2. Term 1
3. Office and Duties 1
4. Salary and Annual Incentive Compensation 2
5. Long-Term Compensation, Including Stock
Options, and Benefits, Deferred
Compensation, and
Expense Reimbursement 2
6. Governing Law; Expense Reimbursement 4
7. Miscellaneous 5
</TABLE>
<PAGE> 2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is dated as of the 16 day of August, 1996, by
and between WALBRO CORPORATION, a Delaware corporation (the "Company") and
Michael A. Shope ("Executive"), and shall become effective as of August 16,
1996 (the "Effective Date").
1. Employment.
The Company hereby agrees to employ Executive as a senior executive and
Executive hereby agrees to accept such employment and serve in such capacity,
during the Term as defined in Section 2 and upon the terms and conditions set
forth in this Employment Agreement.
2. Term.
The term of employment of Executive under this Employment Agreement
(the "Term") shall be the period commencing on the Effective Date and
terminating on August 15, 1997 and any period of extension thereof in
accordance with this Section 2, subject to earlier termination in accordance
with the Termination and Change of Control Agreement between the Company and
the Executive ("Termination Agreement"). The Term shall be extended
automatically without further action by either party for a one-year period
beginning on August 16, 1997 and each succeeding annual anniversary thereafter,
unless either party shall have served written notice in accordance with the
provisions of Section 7(d) upon the other party on or prior to the applicable
anniversary date upon which such extension would become effective, electing not
to extend the Term, in which case the Term shall terminate (subject to earlier
termination in accordance with the Termination Agreement) on the last business
day prior to the applicable anniversary date with respect to which such notice
is received.
Notwithstanding the above, if there is a Change of Control (as defined
in the Termination Agreement), the Company hereby agrees to continue the Term
of this Employment Agreement and the Executive in its employ, and the Executive
hereby agrees to remain in the employ of the Company subject to the terms and
conditions of this Employment Agreement, for the period commencing on the
Extension Date (as defined in the Termination Agreement) and ending on the
third anniversary of such date (the "Extended Employment Period").
3. Office and Duties.
The provisions of this Section 3 will apply during the Term:
(a) Generally. Executive shall serve as Chief Financial Officer of the
Company, and shall perform such duties and responsibilities as are
substantially consistent with his duties, responsibilities, rank and status as
of the Effective Date.
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<PAGE> 3
Executive shall devote full business time and attention, and his best efforts,
abilities, experience, and talent to the performance of such duties and
responsibilities for the businesses of the Company and its subsidiaries.
(b) Place of Employment. Executive's principal place of employment shall
be the Executive's present headquarters location or such other headquarters
location as may be assigned by the Company which is less than fifty (50) miles
from the present headquarters location.
4. Salary and Annual Incentive Compensation.
As partial compensation for the services to be rendered hereunder by
Executive, the Company agrees to pay to Executive during the Term the
compensation set forth in this Section 4.
(a) Base Salary. The Company will pay to Executive during the Term a
base salary at the annual rate of $150,000 ("Annual Base Salary") in effect at
the Effective Date, payable in cash in substantially equal monthly installments
during each calendar year, or portion thereof, of the Term and otherwise in
accordance with the Company's usual payroll practices with respect to senior
executives. Executive's Annual Base Salary shall be reviewed by the Company at
least once in each calendar year and may be increased above, but may not be
reduced below, the then-current rate of such base salary.
(b) Annual Incentive Compensation. The Company will pay to Executive
during the Term annual incentive compensation in amounts determined by and in
the sole discretion of the Compensation Committee of the Company's Board of
Directors (the "Committee"), consistent with past practices of the Company.
5. Long-Term Compensation, Including Stock Options, and
Benefits, Deferred Compensation, and Expense Reimbursement
(a) Executive Compensation Plans. Executive shall be entitled during
the Term to participate, without discrimination or duplication, in all
executive compensation plans, practices, policies and programs intended for
general participation by senior executives of the Company, as presently in
effect or as they may be modified or added to by the Company from time to time,
subject to the eligibility and other requirements of such plans and programs,
including without limitation the long-term incentive features of the Company's
Equity Based Long Term Incentive Plan (the "EBP"), any successor to such plan,
and other stock option plans, performance share plans, management incentive
plans, deferred compensation plans, and supplemental retirement plans.
(b) Employee and Executive Benefit Plans. Executive shall be entitled
during the Term to participate, without discrimination or duplication, in all
employee and
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executive benefit plans and programs of the Company, as presently in effect or
as they may be modified or added to by the Company from time to time, to the
extent such plans are available to similarly situated senior executives or
employees of the Company, subject to the eligibility and other requirements of
such plans and programs, including without limitation plans providing pensions,
other retirement benefits, medical insurance, life insurance, disability
insurance, and accidental death or dismemberment insurance, and participation
in savings, profit-sharing, and stock ownership plans.
In furtherance of and not in limitation of the foregoing, during the Term:
(i) Executive will participate in all
executive and employee vacation and time-off programs;
(ii) The Company will provide Executive
with coverage by long-term disability insurance and
benefits substantially no less favorable (including any
required contributions by Executive) than such insurance
and benefits provided to Executive on the Effective
Date;
(iii) Executive will be covered by
Company-paid group term life insurance providing a death
benefit of one and one-half (1 1/2) times Executive's
Annual Base Salary but not to exceed $150,000; and
(iv) The Executive will be covered by a
nonqualified supplemental employee retirement plan
("SERP") which will provide to Executive a lifetime
monthly benefit. Executive acknowledges that his rights
to the deferred compensation provided for in this
Section 5(b) shall be no greater than those of a general
unsecured creditor of the Company, and that such rights
may not be pledged, collateralized, encumbered,
hypothecated, or liable for or subject to any lien,
obligation, or liability of Executive, or be assignable
or transferable by Executive, otherwise than by will or
the laws of descent and distribution, provided that
Executive may designate one or more beneficiaries to
receive any payment of such amounts in the event of his
death.
(c) Deferral of Compensation. The Company shall implement deferral
arrangements permitting Executive to elect to defer receipt, pursuant to
written deferral election terms and forms (the "Deferral Election Forms"), of
all or a specified portion of Executive's annual incentive compensation under
Section 4(b) until such date(s) or event(s) as elected by the Executive and
specified in the Deferral Election Forms; provided, however, that such
deferrals shall not reduce Executive's total cash
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compensation in any calendar year below the sum of (i) the FICA maximum taxable
wage base plus (ii) 1.45% of Executive's wages in excess of such FICA maximum.
In accordance with such duly executed Deferral Election Forms, the
Company shall , in lieu of payment by the Company to Executive, credit to one
or more bookkeeping accounts maintained for Executive, on the respective date
or dates payments would otherwise be due to Executive a number of phantom
shares of Common Stock equal to (1) divided by (2) where (1) is the cash amount
deferred multiplied times the number 1.25 and (2) is the value of a share of
Common Stock on the date such shares are credited. Phantom shares shall not
entitle the Executive to receive any shares of Common Stock nor to vote or
receive dividends.
Upon such date(s) or event(s) set forth in the Deferral Election Forms
(including forms filed after deferral but before settlement in which Executive
may elect to further defer settlement), the Company shall pay to Executive cash
equal to the then value of any phantom shares of Common Stock then credited to
Executive's deferral accounts, less applicable withholding taxes, and such
distribution shall be deemed to fully settle such accounts; provided, however,
that the Company may instead settle such accounts in full or in part by
directing the Trustee to distribute the assets of the "rabbi trust" and the
Company shall be relieved of its obligation under this Employment Agreement and
the Termination Agreement to the extent that assets are so distributed. The
Company and Executive agree that compensation deferred pursuant to this Section
5(c) shall be fully vested and nonforfeitable; provided, however, Executive
acknowledges that his rights to the deferred compensation provided for in this
Section 5(c) shall be no greater than those of a general unsecured creditor of
the Company, and that such rights may not be pledged, collateralized,
encumbered, hypothecated, or liable for or subject to any lien, obligation, or
liability of Executive, or be assignable or transferable by Executive,
otherwise than by will or the laws of descent and distribution, provided that
Executive may designate one or more beneficiaries to receive any payment of
such amounts in the event of his death.
6. Governing Law; Expense Reimbursement.
Governing Law. This Employment Agreement is governed by and is to be
construed, administered, and enforced in accordance with the laws of the State
of Michigan, without regard to Michigan conflicts of law principles, except
insofar as the Delaware General Corporation Law and federal laws and
regulations may be applicable. If under the governing law, any portion of this
Employment Agreement is at any time deemed to be in conflict with any
applicable statute, rule, regulation, ordinance, or other principle of law,
such portion shall be deemed to be modified or altered to the extent necessary
to conform thereto or, if that is not possible, to be omitted from this
Employment Agreement. The invalidity of any such portion shall not affect the
force, effect, and validity of the remaining portion hereof.
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(b) Expense Reimbursement. All reasonable costs and expenses
(including fees and disbursements of counsel) incurred by Executive in seeking
to enforce equitable rights pursuant to this Employment Agreement shall be paid
on behalf of or reimbursed to Executive promptly by the Company, whether or not
Executive is successful in asserting such rights.
7. Miscellaneous.
(a) Integration. This Employment Agreement modifies and supersedes any
and all prior agreements and understandings between the parties hereto with
respect to the employment of Executive by the Company and its subsidiaries,
except for the Termination Agreement and contracts relating to compensation
under executive compensation and employee benefit plans of the Company. Subject
to the rights, benefits and obligations provided for in such executive
compensation contracts and employee benefit plans of the Company, this
Employment Agreement and the Termination Agreement constitute the entire
agreement among the parties with respect to the matters herein provided, and no
modification or waiver of any provision hereof shall be effective unless in
writing and signed by the parties hereto. Executive shall not be entitled to
any payment or benefit under this Employment Agreement which duplicates a
payment or benefit received or receivable by Executive under such prior
agreements and understandings with the Company or under any benefit or
compensation plan of the Company.
(b) Non-Transferability. Neither this Employment Agreement nor the
rights or obligations hereunder of the parties hereto shall be transferable or
assignable by Executive, except in accordance with the laws of descent and
distribution or as specified in Section 7(c). The Company may assign this
Employment Agreement and the Company's rights and obligations hereunder, and
shall assign this Employment Agreement, to any Successor (as hereinafter
defined) which, by operation of law or otherwise, continues to carry on
substantially the business of the Company prior to the event of succession, and
the Company shall, as a condition of the succession, require such Successor to
agree to assume the Company's obligations and be bound by this Employment
Agreement. For purposes of this Employment Agreement, "Successor" shall mean
any person that succeeds to, or has the practical ability to control (either
immediately or with the passage of time), the Company's business directly, by
merger or consolidation, or indirectly, by purchase of the Company's voting
securities or all or substantially all of its assets, or otherwise.
(c) Beneficiaries. Executive shall be entitled to designate (and
change, to the extent permitted under applicable law) a beneficiary or
beneficiaries to receive any compensation or benefits payable hereunder
following Executive's death.
(d) Notices. Whenever under this Employment Agreement it becomes
necessary to give notice, such notice shall be in writing, signed by the party
or parties giving or making the same, and shall be served on the person or
persons for whom it is
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intended or who should be advised or notified, by Federal Express or other
similar overnight service or by certified or registered mail, return receipt
requested, postage prepaid and addressed to such party at the address set forth
below or at such other address as may be designated by such party by like
notice:
If to the Company: Walbro Corporation
6242 Garfield Street
Cass City, Michigan 48726-1397
Attention: Secretary
If to Executive: Michael A. Shope
1913 North Villa Court
Essexville, Michigan 48732
If the parties by mutual agreement supply each other with telecopier numbers
for the purposes of providing notice by facsimile, such notice shall also be
proper notice under this Employment Agreement. In the case of Federal Express
or other similar overnight service, such notice or advice shall be effective
when sent, and, in the cases of certified or registered mail, shall be
effective 2 days after deposit into the mails by delivery to the U.S. Post
Office.
(e) Reformation. The invalidity of any portion of this Employment
Agreement shall not deemed to render the remainder of this Employment Agreement
invalid.
(f) Headings. The headings of this Employment Agreement are for
convenience of reference only and do not constitute a part hereof.
(g) No General Waivers. The failure of any party at any time to require
performance by any other party of any provision hereof or to resort to any
remedy provided herein or at law or in equity shall in no way affect the right
of such party to require such performance or to resort to such remedy at any
time thereafter, nor shall the waiver by any party of a breach of any of the
provisions hereof be deemed to be a waiver of any subsequent breach of such
provisions. No such waiver shall be effective unless in writing and signed by
the party against whom such waiver is sought to be enforced.
(h) Successors and Assigns. This Employment Agreement shall be binding
upon and shall inure to the benefit of Executive, his heirs, executors,
administrators and beneficiaries, and shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
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IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company
has caused this instrument to be duly executed as of the day and year first
above written.
WALBRO CORPORATION
By: /s/ Lambert E. Althaver
--------------------------------------
Name: Lambert E. Althaver
Title: Chairman & Chief Executive Officer
Michael A. Shope
/s/ Michael A. Shope
-----------------------------------------
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EXHIBIT 10.26
TERMINATION AND CHANGE OF CONTROL AGREEMENT
THIS TERMINATION AND CHANGE OF CONTROL AGREEMENT ("Termination
Agreement") is dated as of the 16 day of August, 1996, by and between WALBRO
CORPORATION, a Delaware corporation (the "Company") and Michael A. Shope
("Executive"), and shall become effective as of August 16 , 1996 (the
"Effective Date").
W I T N E S S E T H
The Board of Directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to assure that
the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control
(as defined below) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control
and to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of
other corporations. Therefore, in order to accomplish these objectives, the
Board has caused the Company to enter into this Termination Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Term and Application. The Term of this Termination Agreement shall
be the same (subject to earlier termination in accordance with Section 5) as
for the Employment Agreement between the Company and the Executive ("Employment
Agreement"); provided, however, notwithstanding the term of the Employment
Agreement, on or after the Extension Date (as defined in Section 9(d) of this
Termination Agreement), the Term of this Termination Agreement shall be the
Extended Employment Period (as defined in the Employment Agreement).
Notwithstanding the Employment Agreement, the terms and provisions of this
Termination Agreement shall also apply on and after the Extension Date; where
specifically in conflict with the Employment Agreement, shall supersede the
Employment Agreement; and in no event shall Executive receive benefits under
both this Termination Agreement and the Employment Agreement with respect to
the same Date of Termination.
2. Office and Duties.
(a) Generally. During the Extended Employment Period, the
Executive's position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned at any time during the 120-day period immediately
preceding the Extension Date.
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During the Extended Employment Period it shall not be a violation of
the Employment Agreement for the Executive to (i) serve on corporate, civic or
charitable boards or committees, (ii) deliver lectures, fulfill speaking
engagements or teach at educational institutions, and (iii) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the Company
in accordance with this Termination Agreement. It is expressly understood and
agreed that, to the extent that any activities have been conducted by the
Executive prior to the Extension Date, the continued conduct of such activities
(or the conduct of activities similar in nature and scope thereto) subsequent
to the Extension Date shall not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the Company.
(b) Place of Employment. During the Extended Employment Period, the
Executive's services shall be performed at the location where the Executive was
employed immediately preceding the Extension Date or any office or location
less than fifty (50) miles from such location.
3. Salary and Annual Incentive Compensation.
(a) Base Salary. During the Extended Employment Period, the Executive
shall receive an Annual Base Salary, which shall be paid at a monthly rate, at
least equal to twelve (12) times the highest monthly base salary paid or
payable, including any base salary which has been earned but deferred, to the
Executive by the Company and its affiliated companies in respect of the
12-month period immediately preceding the month in which the Extension Date
occurs. During the Extended Employment Period, the Annual Base Salary shall be
reviewed no more than twelve (12) months after the last salary increase awarded
to the Executive prior to the Extension Date and thereafter at least annually.
Any increase in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Termination Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Termination Agreement shall refer to Annual Base
Salary as so increased. As used in this Termination Agreement, the term
"affiliated companies" shall include any company controlled by, controlling or
under common control with the Company.
(b) Annual Incentive Compensation. During the Extended Employment
Period, any annual incentive compensation payable to Executive shall be paid in
accordance with the Company's usual practices with respect to payment of
incentive compensation of senior executives (except to the extent deferred). In
addition to Annual Base Salary, the Executive shall be awarded, for each fiscal
year ending during the Extended Employment Period, an annual bonus (the "Annual
Bonus") in cash at least equal to the Executive's highest annual incentive
compensation for the last three full fiscal years prior to the Extension Date
(annualized in the event that the Executive was not employed by the Company for
the whole of such fiscal year) (the "Recent Annual Bonus"). Each such Annual
Bonus shall be paid no later than the end of the third month of the
fiscal year next following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of such Annual
Bonus.
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4. Long-Term Compensation, Including Stock Options, and
Benefits, Deferred Compensation, and Expense Reimbursement.
(a) Executive Compensation Plans. During the Extended Employment
Period, the compensation plans, practices, policies and programs, in the
aggregate, including without limitation, the long-term incentive features of
the Company's Equity Based Long Term Incentive Plan (the "EBP"), shall provide
Executive with benefits, options to acquire Common Stock, and compensation and
incentive award opportunities no less favorable than those provided by the
Company under such plans and programs to senior executives in similar
capacities. During the Extended Employment Period, in no event shall such
plans, practices, policies and programs provide the Executive with incentive
opportunities (measured with respect to both regular and special incentive
opportunities, to the extent, if any, that such distinction is applicable), in
each case, be less favorable, in the aggregate, than the most favorable of
those provided by the Company and its affiliated companies for the Executive
under such plans, practices, policies and programs as in effect at any time
during the 120-day period immediately preceding the Extension Date or if more
favorable to the Executive, those provided generally at any time after the
Extension Date to other peer executives of the Company and its affiliated
companies. For purposes of this Termination Agreement, all references to
"performance share plans" and "performance shares" refer to such arrangements
under the EBP and to any performance shares, performance units, stock grants,
or other long-term incentive arrangements adopted as a successor or replacement
to performance shares under such plans or other plans of the Company.
(b) Employee and Executive Benefit Plans. During the Extended
Employment Period, benefit plans and programs, in the aggregate, shall provide
Executive with benefits no less favorable than those provided by the Company to
senior executives in similar capacities. During the Extended Employment
Period, in no event shall such plans, practices, policies and programs provide
the Executive with benefits which are less favorable, in the aggregate, than
the most favorable of such plans, practices, policies and programs in effect
for the Executive at any time during the 120-day period immediately preceding
the Extension Date or, if more favorable to the Executive, those provided
generally at any time after the Extension Date to other peer executives of the
Company and its affiliated companies.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Term of this Termination
Agreement. If the Company determines in good faith that the Disability of the
Executive has occurred during the Term of this Termination Agreement, it may
give to the Executive written notice in accordance with Section 13(d) of this
Termination Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's Date of Termination is effective on
the 30th day after receipt of such notice by the Executive (the "Disability
Effective Date"), provided that, within the thirty (30) days after such
receipt, the Executive shall not have returned to full-time performance of the
Executive's duties.
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(b) Notice of Termination. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 13(d) of
this Termination Agreement. For purposes of this Termination Agreement, a
"Notice of Termination" means a written notice which (i) indicates the specific
termination provision in this Termination Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the Date of
Termination (which date shall be not more than thirty (30) days after the
giving of such notice). The failure by the Executive or the Company to set
forth in the Notice of Termination any fact or circumstance which contributes
to a showing of Good Reason or Cause shall not waive any right of the Executive
or the Company, respectively, hereunder or preclude the Executive or the
Company, respectively, from asserting such fact or circumstance in enforcing
the Executive's or the Company's rights hereunder.
(c) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive that the Executive's employment will terminate, (iii) if the
Executive's employment is terminated by reason of death or Disability, or due
to mutually agreed upon early retirement or Normal Retirement other than for
Good Reason, the Date of Termination shall be the date of death of the
Executive, the Disability Effective Date, or the date the Executive notifies
the Company that the Executive's employment will terminate, as the case may be,
and (iv) if the Executive's employment is terminated by the Company by reason
of not renewing the Term of this Termination Agreement for reasons other than
Cause, the Date of Termination shall be the last day of the Term of this
Termination Agreement. Notwithstanding the foregoing, solely the transfer of
an Executive to employment with an affiliated company shall not constitute a
termination of employment with the Company.
6. Termination Due to Normal Retirement, Approved Early
Retirement, Death, or Disability.
Upon an Executive's Date of Termination due to a voluntary decision by
the Executive to retire on or after the Executive's Normal Retirement Date
(other than for Good Reason) or a mutually agreed upon early retirement
date, death or Disability, the Term of this Termination Agreement will
immediately terminate and all obligations of the Company and Executive under
this Termination Agreement and under the Employment Agreement will immediately
cease; provided, however, that subject to the provisions of Section 13(c), the
Company will pay Executive (or his beneficiaries or
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estate), and Executive (or his beneficiaries or estate) will be
entitled to receive, the following:
(a) The unpaid portion of Annual Base Salary at the rate payable, in
accordance with Section 3(a) hereof, at the Date of Termination, pro rated
through such Date of Termination, will be paid;
(b) All vested, nonforfeitable amounts owing and accrued at the Date of
Termination under any compensation and benefit plans, programs, and
arrangements in which Executive theretofore participated (including any earned
annual incentive compensation and performance shares) will be paid under the
terms and conditions of the plans, programs, and arrangements (and agreements
and documents thereunder) pursuant to which such compensation and benefits were
granted, including a single lump sum amount equal to the actuarial equivalent
(determined in accordance with Section 5 of the Employment Agreement) of the
benefit under the Company's nonqualified supplemental employee retirement plan
("SERP");
(c) In lieu of any annual incentive compensation under Section 3(b) for
the year in which Executive's employment terminated (unless otherwise payable
under (b) above), Executive will be paid an amount equal to the average annual
incentive compensation paid to Executive in the three years immediately
preceding the year of termination (or, if Executive was not eligible to receive
or did not receive such incentive compensation for any year in such three year
period, the Executive's target annual incentive compensation for such year(s)
shall be used to calculate average annual incentive compensation) multiplied by
a fraction the numerator of which is the number of days Executive was employed
in the year of termination and the denominator of which is the total number of
days in the year of termination;
(d) Stock options then held by Executive will be exercisable to the
extent and for such periods, and otherwise governed, by the plans and programs
and the agreements and other documents thereunder pursuant to which such stock
options were granted; provided, however, that the stock options described in
Section 5 of the Employment Agreement shall be exercisable to the extent and
for such periods, and otherwise governed by, the provisions of Section 5 of the
Employment Agreement;
(e) All deferral arrangements under the Employment Agreement will be
settled in accordance with the provisions of Section 5 of the Employment
Agreement and the Executive's duly executed Deferral Election Forms; and
(f) If Executive's Date of Termination is due to Disability, for the
period extending from such Date of Termination until Executive reaches age 65,
Executive shall continue to participate in all employee benefit plans,
programs, and arrangements providing health, medical, and life
insurance in which Executive was participating immediately prior to the Date of
Termination, the terms of which allow Executive's continued participation, as
if Executive had continued in employment with the Company during such period
or, if such plans, programs, or arrangements do not allow Executive's continued
participation, a cash payment equivalent on an after-tax basis to the value of
the additional benefits Executive would have received under such
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employee benefit plans, programs, and arrangements in which Executive
was participating immediately prior to the Date of Termination, as if Executive
had received credit under such plans, programs, and arrangements for service
and age with the Company during such period following Executive's Date of
Termination, with such benefits payable by the Company at the same times and in
the same manner as such benefits would have been received by Executive under
such plans (it being understood that the value of any insurance-provided
benefits will be based on the premium cost to Executive, which shall not exceed
the highest risk premium charged by a carrier having an investment grade or
better credit rating).
Amounts which are immediately payable above will be paid as promptly as
practicable after Executive's Date of Termination; provided, however, to the
extent that or the Company would not be entitled to deduct any such payments
under Internal Revenue Code Section 162(m), such payments shall be made at the
earliest time that the payments would be deductible by the Company without
limitation under Section 162(m) (unless this provision is waived by the
Company).
7. Termination of Employment for Cause and Good Reason.
(a) Termination by the Company for Cause and Termination by Executive
for Reasons Other Than Normal Retirement, Approved Early Retirement, Death or
Disability. Upon an Executive's Date of Termination by the Company for Cause
or voluntarily by Executive for reasons other than Good Reason, but excluding
termination due to Normal Retirement, mutually agreed upon early retirement,
death or Disability, the Term will immediately terminate, and all obligations
of the Company under Sections 1 through 4 of this Termination Agreement and
under the Employment Agreement will immediately cease; provided, however, that
subject to the provisions of Section 13(c), the Company shall pay Executive (or
his or her beneficiaries), and Executive (or his or her beneficiaries) shall be
entitled to receive, the following:
(i) The unpaid portion of Annual Base
Salary at the rate payable, in accordance with Section
4(a) hereof, at the Date of Termination, pro rated
through such Date of Termination, will be paid;
(ii) All vested, nonforfeitable amounts
owing and accrued at the Date of Termination under any
compensation and benefit plans, programs, and
arrangements in which Executive theretofore participated
will be paid under the terms and conditions of the
plans, programs, and arrangements (and agreements and
documents thereunder) pursuant to which such
compensation and benefits were granted; and
(iii) A cash amount equal to the value at
the Date of Termination of any phantom shares of Common
Stock credited to Executive's deferral accounts under
deferral arrangements authorized under the Employment
Agreement at the Date of Termination, less applicable
withholding taxes under
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Section 14(i) of the Employment Agreement; provided,
however, that the Company may instead settle such
accounts, in full or in part, by directing the Trustee
to distribute the assets of the "rabbi trust" and the
Company shall be relieved of its obligation under this
Termination Agreement and the Employment Agreement to
the extent that assets are so distributed. Such amounts
shall be paid or distributed as promptly as practicable
following such Date of Termination, without regard to
any stated period of deferral otherwise remaining in
respect of such amounts, and the payment of such amounts
shall be deemed to fully settle such accounts.
Amounts which are immediately payable above will be paid as promptly as
practicable after the Executive's Date of Termination; provided, however, to
the extent that the Company would not be entitled to deduct any such payments
under Internal Revenue Code Section 162(m), such payments shall be made at the
earliest time that the payments would be deductible by the Company without
limitation under Section 162(m) (unless this provision is waived by the
Company).
(b) Termination by the Company Without Cause and Termination by
Executive for Good Reason. Upon an Executive's Date of Termination prior to
the Extension Date without Cause (including non-renewal of the Term of this
Termination Agreement without Cause) or voluntarily by the Executive for Good
Reason, the Term will terminate and all obligations of the Company and
Executive under Sections 1 through 4 of this Termination Agreement and under
the Employment Agreement will immediately cease; provided, however, that
subject to the provisions of Section 13(c) the Company shall pay to the
Executive (or his or her beneficiaries) and Executive (or his or her
beneficiaries) shall be entitled to receive the following amounts:
(i) the Company shall pay to Executive within, or
commencing within, thirty (30) days after the Date of
Termination, the following amounts:
(A) the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent
not theretofore paid, and (2) the product of
(x) the target Annual Bonus paid or payable,
including any bonus or portion thereof which has
been earned but deferred (and annualized for any
fiscal year consisting of less than twelve (12)
full months or during which the Executive was
employed for less than twelve (12) full months) for
the fiscal year, and (y) a fraction, the numerator
of which is the number of days in the current
fiscal year through the Date of Termination, and
the denominator of which is 365, in each case to
the extent not theretofore paid;
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(B) twenty-four (24) semi-monthly payments
during a twelve (12) consecutive month period equal
to the Executive's Annual Base Salary divided by
twenty-four (24); provided, however,
notwithstanding anything to the contrary in the
Termination Agreement or in the Employment
Agreement, none of such amounts shall qualify
Executive for any incremental benefit under any
plan or program in which he has participated or
continues to participate;
(C) a single lump sum amount equal to the
actuarial equivalent (determined in accordance with
Section 5(b)(iv) of the Employment Agreement) of
the benefit under the SERP;
(D) a cash amount will be paid equal to the value
at the Date of Termination of any phantom shares
of Common Stock credited to Executive's deferral
accounts under deferral arrangements authorized
under the Employment Agreement at the Date of
Termination, less applicable withholding taxes
under Section 14(i) of the Employment Agreement;
provided, however, that the Company may instead
settle such accounts by directing the Trustee to
distribute the assets of the "rabbi trust" and the
Company shall be relieved of its obligation under
this Termination Agreement and the Employment
Agreement to the extent that assets are so
distributed. Such amounts shall be paid or
distributed as promptly as practicable following
such Date of Termination, without regard to any
stated period of deferral otherwise remaining in
respect of such amounts, and the payment of such
amounts shall be deemed to fully settle such
accounts; and
(E) to the extent not covered by (A), (B), (C)
or (D) above, all vested, nonforfeitable amounts
owing and accrued at the Date of Termination under
any compensation and benefit plans, programs, and
arrangements in which Executive theretofore
participated will be paid under the terms and
conditions of the plans, programs, and
arrangements (and agreements and documents
thereunder) pursuant to which such compensation and
benefits were granted; and
(ii) stock options then held by Executive will be
exercisable to the extent and for such periods,
and otherwise governed, by
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the plans and programs and the agreements and other
documents thereunder pursuant to which such stock
options were granted; provided, however, that the stock
options described in Section 5 of the Employment
Agreement shall be exercisable to the extent and for
such periods, and otherwise governed by, the provisions
of Section 5 of the Employment Agreement.
Amounts which are immediately payable above will be paid as promptly as
practicable after Executive's Date of Termination; provided, however, to the
extent that the Company would not be entitled to deduct any such payments under
Internal Revenue Code Section 162(m), such payments shall be made at the
earliest time that the payments would be deductible by the Company without
limitation under Section 162(m) (unless this provision is waived by the
Company).
8. Termination by the Company Without Cause and Termination by
Executive for Goof Reason During the Extended Employment Period.
Upon an Executive's Date of Termination during the Extended Employment
Period by the Company without Cause (other than for non-renewal of the Term of
the Employment Agreement) or voluntarily by the Executive for Good Reason, the
Term of this Termination Agreement will immediately terminate and all
obligations of the Company and Executive under Sections 1 through 5 of this
Termination Agreement and under the Employment Agreement will immediately
cease; provided, however, that subject to the provisions of Section 13(c) the
Company shall pay Executive (or his or her beneficiaries), and Executive (or
his or her beneficiaries) shall be entitled to receive, the following:
(a) the Company shall pay to the Executive in a lump sum in cash within
thirty (30) days after the Date of Termination the aggregate of the following
amounts:
(i) the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to the
extent not theretofore paid, and (2) the product of (x)
the higher of (I) the Recent Annual Bonus and (II) the
Annual Bonus paid or payable, assuming full satisfaction
of any performance standards or targets applicable to
determining the maximum amount payable, including any
bonus or portion thereof which has been earned but
deferred (and annualized for any fiscal year consisting
of less than twelve (12) full months or during which the
Executive was employed for less than twelve (12) full
months), for the most recently completed fiscal year
during the Extended Employment Period, if any (such
higher amount being referred to as the "Highest Annual
Bonus") and (y) a fraction, the numerator of which is
the number of days in the current fiscal year through
the Date of Termination, and the denominator of which is
365;
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<PAGE> 10
(ii) the amount equal to the product of (1) three and
(2) the sum of (x) the Executive's Annual Base Salary
and (y) the Highest Annual Bonus;
(iii) an amount equal to the actuarial equivalent
(determined in accordance with Section 5 of the
Employment Agreement) of the benefit under the SERP
which the Executive would receive assuming for this
purpose that the Executive's employment continued for
three (3) years after the Date of Termination and
assuming that the Executive's compensation in each of
the three years is that required by Section 3;
(iv) in lieu of any payment in respect of performance
shares, or other long term incentive awards (including
awards of phantom shares under the EBP) granted prior to
the Extension Date or in accordance with Section 4(a),
for any performance period not completed at the
Executive's Date of Termination, an amount equal to the
cash amount payable plus the value of any shares of
Common Stock or other property (valued at the Date of
Termination) payable upon the achievement of maximum
performance (or in the case of phantom shares, target
performance under the EBP) in respect of each tranche of
such performance shares or awards without proration as
if the Date of Termination were the end of the
performance period;
(v) a cash amount will be paid equal to
the value at the Date of Termination of any phantom
shares of Common Stock credited to Executive's deferral
accounts under deferral arrangements authorized under
the Employment Agreement at the Date of Termination,
less applicable withholding taxes under Section 14(i) of
the Employment Agreement; provided, however, that the
Company may instead settle such accounts by directing
the Trustee to distribute the assets of the "rabbi
trust" and the Company shall be relieved of its
obligation under this Employment Agreement and the
Termination Agreement to the extent that assets are so
distributed. Such amounts shall be paid or distributed
as promptly as practicable following such Date of
Termination, without regard to any stated period of
deferral otherwise remaining in respect of such amounts,
and the payment of such amounts shall be deemed to fully
settle such accounts; and
(vi) to the extent not covered in (i),
(ii), (iii), (iv) or (v), all vested, nonforfeitable
amounts owing or accrued at the Date of
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Termination under any other compensation and benefit
plans, programs, and arrangements in which Executive
theretofore participated will be paid under the terms
and conditions of the plans, programs, and arrangements
(and agreements and documents thereunder) pursuant to
which such compensation and benefits were granted.
(b) Stock options then held by Executive will be exercisable and
restricted stock held by the Executive will be vested to the extent and for
such periods, and otherwise governed, by the plans and programs (and the
agreements and other documents thereunder) pursuant to which such stock options
or restricted stock were granted; provided, however, that the stock options and
restricted stock described in Section 5 of the Employment Agreement shall be
fully vested and shall be exercisable to the extent and for such periods, and
otherwise governed by, the provisions of Section 5 of the Employment Agreement.
(c) For three (3) years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue welfare plan benefits
to the Executive and/or the Executive's family at least equal to those which
would have been provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b) of this Termination Agreement
if the Executive's employment had not been terminated or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies and their
families, provided, however, that if the Executive becomes reemployed with
another employer and is eligible to receive medical or other welfare benefits
under another employer-provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility. If such plans, programs, or
arrangements do not allow Executive's continued participation, a cash payment
equivalent on an after-tax basis to the value of the additional benefits
Executive would have received under such employee benefit plans, programs, and
arrangements in which Executive was participating immediately prior to the Date
of Termination, as if Executive had received credit under such plans, programs,
and arrangements for service and age with the Company during such period
following Executive's Date of Termination, with such benefits payable by the
Company at the same times and in the same manner as such benefits would have
been received by Executive under such plans (it being understood that the value
of any insurance-provided benefits will be based on the premium cost to
Executive, which shall not exceed the highest risk premium charged by a carrier
having an investment grade or better credit rating); and
(d) outplacement services the scope and provider of which shall be
selected by the Executive in his sole discretion, provided by the Company at
its sole expense as incurred.
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<PAGE> 12
9. Definitions Relating to Termination Events.
(a) "Cause." For purposes of this Termination Agreement, "Cause" shall
mean Executive's gross misconduct (as defined herein) or willful and material
breach of Section 11 of this Termination Agreement. For purposes of this
definition, "gross misconduct" shall mean (A) a felony conviction in a court of
law under applicable federal or state laws which results in material damage to
the Company or any of its subsidiaries or materially impairs the value of
Executive's services to the Company, or (B) willfully engaging in one or more
acts, or willfully omitting to act in accordance with duties hereunder, which
is demonstrably and materially damaging to the Company or any of its
subsidiaries, including acts and omissions that constitute gross negligence in
the performance of Executive's duties under this Termination Agreement. For
purposes of this Termination Agreement and the Employment Agreement, an act or
failure to act on Executive's part shall be considered "willful" if it was done
or omitted to be done by him not in good faith, and shall not include any act
or failure to act resulting from any incapacity of Executive. Notwithstanding
the foregoing, Executive may not be terminated for Cause unless and until (1)
the Executive shall have committed acts which constitute Cause as set forth in
this Section 9(a), and (2) there shall have been delivered to him a copy of a
resolution duly adopted by a seventy-five percent (75%) affirmative vote of the
membership of the Board of Directors of the Company (the "Board") (excluding
Executive, if he is then a member) at a meeting of the Board called and held
for such purpose (after giving Executive reasonable notice specifying the
nature of the grounds for such termination and not less than 30 days to correct
the acts or omissions complained of, if correctable, and affording Executive
the opportunity, together with his counsel, to be heard before the Board)
finding that Executive was guilty of conduct which constitutes Cause as set
forth in this Section 9(a).
(b) "Change of Control." For the purpose of this Termination
Agreement, a "Change of Control" shall mean:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of twenty percent (20%) or more of either
(A) the then-outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (B)
the combined voting power of the then-outstanding voting
securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company
Voting Securities"); provided, however, that for
purposes of this subsection (i), the following
acquisitions shall not constitute a Change of Control:
(A) any acquisition directly from the Company, (B) any
acquisition by the Company, (C) any acquisition by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled
by the Company, (D) any acquisition by a lender to the
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<PAGE> 13
Company pursuant to a debt restructuring of the Company,
or (E) any acquisition by any corporation pursuant to a
transaction which complies with clauses (A), (B) and (C)
of subsection (iii) of this Section 9;
(ii) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board;
provided, however, that any individual becoming a
director subsequent to the date hereof whose election,
or nomination for election by the Company's
shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were
a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened
election contest with respect to the election or removal
of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other
than the Board;
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following
such Business Combination, (A) all or substantially all
of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination
beneficially own, directly or indirectly, more than
fifty percent (50%) of, respectively, the
then-outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors,
as the case may be, of the corporation resulting from
such Business Combination (including, without
limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all
of the Company's assets either directly or through one
or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Company
Common Stock and Outstanding Company Voting Securities,
as the case may be, (B) no Person (excluding any
corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly,
twenty percent (20%) or more of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such Business
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<PAGE> 14
Combination, or the combined voting power of the then
outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the
members of the board of directors of the corporation
resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board,
providing for such Business Combination; or
(iv) Approval by the shareholders of the
Company of a complete liquidation or dissolution of the
Company.
(c) "Disability" means the failure of Executive to render and perform
the services required of him under this Termination Agreement, for a total of
180 days or more during any consecutive 12 month period, because of any
physical or mental incapacity or disability as determined by a physician or
physicians selected by the Company and reasonably acceptable to Executive,
unless, within 30 days after Executive has received written notice from the
Company of a proposed Date of Termination due to such absence, Executive shall
have returned to the full performance of his duties hereunder and shall have
presented to the Company a written certificate of Executive's good health
prepared by a physician selected by Company and reasonably acceptable to
Executive.
(d) "Extension Date" shall mean the first date during the Term of the
Employment Agreement on which a Change of Control occurs. Anything in this
Termination Agreement or the Employment Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's
employment with the Company is terminated prior to the date on which the Change
of Control occurs, and if it is reasonably demonstrated by the Executive that
such termination of employment (i) was at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of Control, then
for all purposes of this Termination Agreement or the Employment Agreement the
"Extension Date" shall mean the date immediately prior to the date of such
termination of employment.
(e) "Good Reason." For purposes of this Termination Agreement and the
Employment Agreement, "Good Reason" shall mean the occurrence of any of the
following, without Executive's prior written consent:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's
position (including status, offices, titles and
reporting requirements), authority, duties or
responsibilities as contemplated by Section 2(a) of this
Termination Agreement or the Employment Agreement, or
any other action by the Company which results in a
diminution in such position, authority, duties or
responsibilities, excluding for this purpose an
isolated,
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<PAGE> 15
insubstantial and inadvertent action not taken in bad
faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of
the provisions of this Termination Agreement or the
Employment Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in
bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based
at any office or location other than as provided in
Section 2(b) hereof or the Employment Agreement or the
Company's requiring the Executive to travel on Company
business to a substantially greater extent than required
of other senior executives in similar capacities
immediately prior to the Effective Date;
(iv) any failure by the Company to perform any material
obligation under, or breach by the Company of any
material provision of, this Termination Agreement or the
Employment Agreement;
(v) any purported termination by the Company of the
Executive's employment otherwise than as expressly
permitted by this Termination Agreement; or
(vi) any failure by the Company to comply with and
satisfy Section 12(b) of this Termination Agreement.
For purposes of this Section, any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
(f) "Normal Retirement Date." For purposes of this Termination
Agreement, an Executive's Normal Retirement Date is his or her attainment of
age sixty-five (65).
10. Excise Tax Gross-Up.
If Executive becomes entitled to one or more payments (with a "payment"
including, without limitation, the vesting of an option or other
non-cash benefit or property), whether pursuant to the terms of this
Termination Agreement or any other plan, arrangement, or agreement with the
Company or any affiliated company (the "Total Payments"), which are or become
subject to the tax imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code") (or any similar tax that may hereafter be
imposed) (the "Excise Tax"), the Company shall pay to Executive at the time
specified below an additional amount (the "Gross-up Payment") (which shall
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<PAGE> 16
include, without limitation, reimbursement for any penalties and
interest that may accrue in respect of such Excise Tax) such that the net
amount retained by Executive, after reduction for any Excise Tax (including any
penalties or interest thereon) on the Total Payments and any federal, state and
local income or employment tax and Excise Tax on the Gross-up Payment provided
for by this Section 10, but before reduction for any federal, state, or local
income or employment tax on the Total Payments, shall be equal to the sum of
(a) the Total Payments, and (b) an amount equal to the product of any
deductions disallowed for federal, state, or local income tax purposes because
of the inclusion of the Gross-up Payment in Executive's adjusted gross income
multiplied by the highest applicable marginal rate of federal, state, or local
income taxation, respectively, for the calendar year in which the Gross-up
Payment is to be made.
For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax:
(a) The Total Payments shall be treated as "parachute payments" within
the meaning of Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) of the Code shall be treated
as subject to the Excise Tax, unless, and except to the extent that, in the
written opinion of independent compensation consultants or auditors of
nationally recognized standing ("Independent Advisors") selected by the Company
and reasonably acceptable to Executive, the Total Payments (in whole or in
part) do not constitute parachute payments, or such excess parachute payments
(in whole or in part) represent reasonable compensation for services actually
rendered before a Change of Control within the meaning of Section 280G(b)(4)(B)
of the Code in excess of the base amount within the meaning of Section
280G(b)(3) of the Code or are otherwise not subject to the Excise Tax;
(b) The amount of the Total Payments which shall be treated as subject
to the Excise Tax shall be equal to the lesser of (i) the total amount of the
Total Payments or (ii) the total amount of excess parachute payments within the
meaning of Section 280G(b)(1) of the Code (after applying clause (a) above);
and
(c) The value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Independent Advisors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-up Payment,
Executive shall be deemed (A) to pay federal income taxes at the highest
marginal rate of federal income taxation for the calendar year in which the
Gross-up Payment is to be made; (B) to pay any applicable state and local
income taxes at the highest marginal rate of taxation for the calendar year in
which the Gross-up Payment is to be made, net of the maximum reduction
in federal income taxes which could be obtained from deduction of such state
and local taxes if paid in such year (determined without regard to limitations
on deductions based upon the amount of Executive's adjusted gross income); and
(C) to have otherwise allowable deductions for federal, state, and local income
tax purposes at least equal to those disallowed because of the inclusion of the
Gross-up Payment in Executive's adjusted gross income. In the event that the
Excise
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<PAGE> 17
Tax is subsequently determined to be less than the amount taken into
account hereunder at the time the Gross-up Payment is made, Executive shall
repay to the Company at the time that the amount of such reduction in Excise
Tax is finally determined (but, if previously paid to the taxing authorities,
not prior to the time the amount of such reduction is refunded to Executive or
otherwise realized as a benefit by Executive) the portion of the Gross-up
Payment that would not have been paid if such Excise Tax had been applied in
initially calculating the Gross-up Payment, plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time the Gross-up Payment is made (including by reason of any
payment the existence or amount of which cannot be determined at the time of
the Gross-up Payment), the Company shall make an additional Gross-up Payment in
respect of such excess (plus any interest and penalties payable with respect to
such excess) at the time that the amount of such excess is finally determined.
The Gross-up Payment provided for above shall be paid on the 30th day
(or such earlier date as the Excise Tax becomes due and payable to the taxing
authorities) after it has been determined that the Total Payments (or any
portion thereof) are subject to the Excise Tax; provided, however, that if the
amount of such Gross-up Payment or portion thereof cannot be finally determined
on or before such day, the Company shall pay to Executive on such day an
estimate, as determined by the Independent Advisors, of the minimum amount of
such payments and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code), as soon as
the amount thereof can be determined. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to Executive, payable on the
fifth day after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code). If more than one Gross-up
Payment is made, the amount of each Gross-up Payment shall be computed so as
not to duplicate any prior Gross-up Payment.
Notwithstanding the foregoing, the Executive may at any time elect to
demand the payment of the amount which the Executive, in accordance with an
Opinion of counsel to the Executive, determines to be the Gross-Up Payment. Any
such demand by the Executive shall be made by delivery to the Company of a
written notice which specifies the Gross-Up Payment determined by the Executive
and an Opinion of counsel to the Executive regarding such Gross-Up Payment
(such written notice and Opinion collectively, the "Executive's
Determination"). Within fourteen (14) days after the Executive's delivery of
the Executive's Determination to the Company, the Company shall
(i) pay to the Executive the Gross-Up
Payment set forth in the Executive's Determination
unless
(ii) the Company shall deliver to the Executive a
written notice specifying the Gross-Up Payment
determined by the
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<PAGE> 18
Company together with an Opinion of the Company's
counsel regarding such Gross-Up Payment (such written
notice and Opinion collectively, "the Company's
Determination") and shall pay to the Executive the
Gross-Up Payment specified in the Company's
Determination.
For purposes of this Section 10, "Opinion" shall mean an unqualified legal
opinion that a Gross-Up Payment has been calculated in accordance with this
Section 10 and applicable law, unless such Opinion shall state therein that an
unqualified Opinion cannot be given as to any Gross-Up Payment. In such case,
the Opinion shall state that the Gross-Up Payment set forth therein both (A) is
more likely than not to be in accordance with this Section 10 and applicable
law, and (B) is more likely to be in accordance with this Section 10 and
applicable law than any other Gross-Up Payment.
The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in
writing from time to time, including, without
limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 10, the Company shall control all proceedings taken in
connection with such contest and, at its sole option,
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<PAGE> 19
may pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax claimed and
sue for a refund or to contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment
of taxes for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority. If, after the receipt by the Executive of an amount advanced by the
Company pursuant to this Section 10, the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of this Section 10) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to this Section 10, a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of thirty (30) days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.
11. Non-Competition and Non-Disclosure; Executive Cooperation.
(a) Non-Competition. Without the consent in writing of the Board, upon
the Executive's Date of Termination for any reason, Executive will not, for a
period of one year thereafter, acting alone or in conjunction with others,
directly or indirectly (i) engage (either as owner, investor, partner,
stockholder, employer, employee, consultant, advisor or Director) in any
business in the continental United States in which he has been directly
engaged, or has supervised as an executive, during the last two
years prior to such Date of Termination and which is directly in competition
with a business then conducted by the Company or any of its subsidiaries; (ii)
induce any customers of the Company or any of its subsidiaries with whom
Executive has had contacts or relationships, directly or indirectly, during and
within the scope of his employment with the Company or any of its subsidiaries,
to curtail or cancel their business with such companies or any of them; or
(iii) induce, or attempt to influence, any employee of the Company or any of
its subsidiaries to terminate employment. The provisions of subparagraphs (i),
(ii), and (iii) above are separate and distinct commitments independent of each
of the other subparagraphs. It is agreed that
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the ownership of not more than one percent of the equity securities of
any company having securities listed on an exchange or regularly traded in the
over-the-counter market shall not, of itself, be deemed inconsistent with
clause (i) of this paragraph (a).
(b) Non-Disclosure. Executive shall not at any time (including
following Executive's Date of Termination for any reason), disclose, use,
transfer, or sell, except in the course of employment with or other service to
the Company, any confidential or proprietary information of the Company or any
of its subsidiaries so long as such information has not otherwise been
disclosed or is not otherwise in the public domain, except as required by law
or pursuant to legal process.
(c) Cooperation With Regard to Litigation. Executive agrees to
cooperate with the Company (including following Executive's Date of Termination
for any reason), provided that such cooperation would not unreasonably
interfere with the business activities or employment obligations of the
Executive, by making himself available to testify on behalf of the Company or
any subsidiary or affiliate of the Company, in any action, suit, or proceeding,
whether civil, criminal, administrative, or investigative, and to assist the
Company, or any subsidiary or affiliate of the Company, in any such action,
suit, or proceeding, by providing information and meeting and consulting with
the Board and its representatives or counsel, or representatives or counsel of
or to the Company, or any subsidiary or affiliate of the Company, as requested;
provided, however, this subsection (c) shall not apply to any action between
the Executive and the Company to enforce this Termination Agreement or the
Employment Agreement. The Company agrees to reimburse Executive, on an
after-tax basis, for all expenses actually incurred in connection with his
provision of testimony or assistance.
(d) Release of Employment Claims. Executive agrees, as a condition to
receipt of the termination payments and benefits provided hereunder, that he
will execute a release agreement, in a form satisfactory to the Company,
releasing any and all claims arising out of Executive's employment, including
claims arising under the Employment Agreement (other than claims made pursuant
to any indemnities provided under the articles or by-laws of the Company, under
any directors or officers liability insurance policies maintained by the
Company or enforcement of this Termination Agreement).
(e) Survival. Notwithstanding any provision of this Termination
Agreement to the contrary, the provisions of this Section 11 shall survive the
termination or expiration of this Termination Agreement, shall be valid and
enforceable, and shall be a condition precedent to the Executive (or his or her
beneficiaries) receiving any amounts payable hereunder.
12. Governing Law; Expense Reimbursement.
(a) Governing Law. This Termination Agreement is governed by and is to
be construed, administered, and enforced in accordance with the laws of the
State of Michigan, without regard to Michigan conflicts of law principles,
except insofar as the Delaware General Corporation Law and federal laws and
regulations may be
20
<PAGE> 21
applicable. If under the governing law, any portion of this
Termination Agreement is at any time deemed to be in conflict with any
applicable statute, rule, regulation, ordinance, or other principle of law,
such portion shall be deemed to be modified or altered to the extent necessary
to conform thereto or, if that is not possible, to be omitted from this
Termination Agreement. The invalidity of any such portion shall not affect the
force, effect, and validity of the remaining portion hereof. If any court
determines that any provision of Section 11 is unenforceable because of the
duration or geographic scope of such provision, it is the parties' intent that
such court shall have the power to modify the duration or geographic scope of
such provision, as the case may be, to the extent necessary to render the
provision enforceable and, in its modified form, such provision shall be
enforced.
(b) Expense Reimbursement. On and after the Extension Date, all
reasonable costs and expenses (including fees and disbursements of counsel)
incurred by Executive in seeking to enforce rights pursuant to this Termination
Agreement shall be paid on behalf of or reimbursed to Executive promptly by the
Company, whether or not Executive is successful in asserting such rights;
provided, however, that no reimbursement shall be made of such expenses
relating to any unsuccessful assertion of rights if and to the extent that
Executive's assertion of such rights was in bad faith or frivolous, as
determined by independent counsel mutually acceptable to Executive and the
Company and made without reference to or not related to a Change of Control.
During the Extended Employment Period, the Company agrees to maintain a minimum
amount in a rabbi trust (or to provide to the trustee of such rabbi trust) an
irrevocable letter of credit in an amount equal to such minimum amount (and
callable at will by such trustee) sufficient to fund the aggregate present
value of all liabilities potentially owed to the Executive hereunder or under
the Employment Agreement as if he or she had incurred a termination of
employment by the Company other than for Cause.
13. Miscellaneous.
(a) Integration. This Termination Agreement modifies and supersedes
any and all prior agreements and understandings between the parties hereto with
respect to the employment of Executive by the Company and its subsidiaries,
except for the Employment Agreement and contracts relating to compensation
under executive compensation and employee benefit plans of the Company. Subject
to the rights, benefits and obligations provided for in such executive
compensation contracts and employee benefit plans of the Company, this
Termination Agreement and the Employment Agreement together constitute the
entire agreement among the parties with respect to the matters herein provided,
and no modification or waiver of any provision hereof shall be effective unless
in writing and signed by the parties hereto. Executive shall not be entitled
to any payment or benefit under this Termination Agreement which duplicates a
payment or benefit received or receivable by Executive under such prior
agreements and understandings with the Company or under any benefit or
compensation plan of the Company.
(b) Non-Transferability. Neither this Termination Agreement nor the
rights or obligations hereunder of the parties hereto shall be transferable or
assignable by Executive, except in accordance with the laws of descent and
distribution or as
21
<PAGE> 22
specified in Section 13(c). The Company may assign this Termination
Agreement and the Company's rights and obligations hereunder, and shall assign
this Termination Agreement, to any Successor (as hereinafter defined) which, by
operation of law or otherwise, continues to carry on substantially the business
of the Company prior to the event of succession, and the Company shall, as a
condition of the succession, require such Successor to agree to assume the
Company's obligations and be bound by this Termination Agreement. For purposes
of this Termination Agreement, "Successor" shall mean any person that succeeds
to, or has the practical ability to control (either immediately or with the
passage of time), the Company's business directly, by merger or consolidation,
or indirectly, by purchase of the Company's voting securities or all or
substantially all of its assets, or otherwise.
(c) Beneficiaries. Executive shall be entitled to designate (and
change, to the extent permitted under applicable law) a beneficiary or
beneficiaries to receive any compensation or benefits payable hereunder
following Executive's death.
(d) Notices. Whenever under this Termination Agreement it becomes
necessary to give notice, such notice shall be in writing, signed by the party
or parties giving or making the same, and shall be served on the person or
persons for whom it is intended or who should be advised or notified, by
Federal Express or other similar overnight service or by certified or
registered mail, return receipt requested, postage prepaid and addressed to
such party at the address set forth below or at such other address as may be
designated by such party by like notice:
If to the Company: Walbro Corporation
6242 Garfield Street
Cass City, Michigan 48726-1397
Attention: Secretary
If to Executive: Michael A. Shope
1913 North Villa Court
Essexville, Michigan 48732
If the parties by mutual agreement supply each other with telecopier numbers
for the purposes of providing notice by facsimile, such notice shall
also be proper notice under this Termination Agreement. In the case of Federal
Express or other similar overnight service, such notice or advice shall be
effective when sent, and, in the cases of certified or registered mail, shall
be effective 2 days after deposit into the mails by delivery to the U.S. Post
Office.
(e) Reformation. The invalidity of any portion of this Termination
Agreement shall not deemed to render the remainder of this Termination
Agreement invalid.
(f) Headings. The headings of this Termination Agreement are for
convenience of reference only and do not constitute a part hereof.
22
<PAGE> 23
(g) No General Waivers. The failure of any party at any time to
require performance by any other party of any provision hereof or to resort to
any remedy provided herein or at law or in equity shall in no way affect the
right of such party to require such performance or to resort to such remedy at
any time thereafter, nor shall the waiver by any party of a breach of any of
the provisions hereof be deemed to be a waiver of any subsequent breach of such
provisions. No such waiver shall be effective unless in writing and signed by
the party against whom such waiver is sought to be enforced.
(h) No Obligation To Mitigate. Executive shall not be required to seek
other employment or otherwise to mitigate Executive's damages hereunder on or
after Executive's Date of Termination, nor shall the amount of any payment
hereunder be reduced by any compensation earned by the Executive as a result of
employment by another employer; provided, however, that, to the extent
Executive receives from a subsequent employer health or other insurance
benefits that are substantially similar to the benefits referred to in this
Termination Agreement, any such benefits to be provided by the Company to
Executive following the Term shall be correspondingly reduced.
(i) No Offsets. The amounts required to be paid by the Company to
Executive pursuant to this Termination Agreement shall not be subject to
offset, counterclaim, recoupment, defense or other claim, right or action which
the Company may have against Executive or others, other than with respect to
any amounts that are owed to the Company by Executive due to his receipt of
Company funds as a result of his fraudulent activity. The foregoing and other
provisions of this Termination Agreement notwithstanding, all payments to be
made to Executive under this Termination Agreement will be subject to required
withholding taxes and other required deductions.
(j) Successors and Assigns. This Termination Agreement shall be
binding upon and shall inure to the benefit of Executive, his heirs, executors,
administrators and beneficiaries, and shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
14. Indemnification.
All rights to indemnification by the Company now existing in favor of
Executive as provided in the Company's Certificate of Incorporation or By-Laws
or pursuant to other agreements in effect on or immediately prior to the
Extension Date shall continue in full force and effect from the Extension Date
(including all periods after the expiration of the Term), and the Company shall
also advance expenses for which indemnification may be ultimately claimed as
such expenses are incurred to the fullest extent permitted under applicable
law, subject to any requirement that Executive provide an undertaking to repay
such advances if it is ultimately determined that Executive is not entitled to
indemnification; provided, however, that any determination required to be made
with respect to whether Executive's conduct complies with the standards
required to be met as a condition of indemnification or advancement of expenses
under applicable law and the Company's Certificate of Incorporation, By-Laws,
or other agreement shall be made by independent counsel mutually
23
<PAGE> 24
acceptable to Executive and the Company (except to the extent otherwise
required by law). After the Extension Date, the Company shall not amend its
Certificate of Incorporation or By-Laws or any agreement in any manner which
adversely affects the rights of Executive to indemnification thereunder. Any
provision contained herein notwithstanding, this Termination Agreement shall
not limit or reduce any rights of Executive to indemnification pursuant to
applicable law. In addition, the Company will maintain directors' and
officers' liability insurance in effect and covering acts and omissions of
Executive, during the Term and for a period of six years thereafter, on terms
substantially no less favorable as those in effect on the Extension Date.
IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company
has caused this instrument to be duly executed as of the day and year first
above written.
WALBRO CORPORATION
By: /s/ Lambert E. Althaver
------------------------------
Name: Lambert E. Althaver
Title: Chairman & Chief Executive Officer
Michael A. Shope
/s/ Michael A. Shope
----------------------------------
24
<PAGE> 1
EXHIBIT 10.27
WALBRO ENGINE MANAGEMENT CORPORATION
________________________________________________________________________
EMPLOYMENT AGREEMENT FOR ROBERT H. WALPOLE
________________________________________________________________________
<TABLE>
<S> <C> <C>
1. EMPLOYMENT ...................................... 1
2. TERM ............................................ 1
3. OFFICE AND DUTIES ............................... 1
4. SALARY AND ANNUAL INCENTIVE COMPENSATION ........ 2
5. LONG-TERM COMPENSATION, INCLUDING STOCK
OPTIONS, AND BENEFITS, DEFERRED
COMPENSATION, AND
EXPENSE REIMBURSEMENT ........................... 2
6. GOVERNING LAW; EXPENSE REIMBURSEMENT ............ 4
7. MISCELLANEOUS .................................... 5
</TABLE>
<PAGE> 2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is dated as of the 16 day of August, 1996, by
and between WALBRO ENGINE MANAGEMENT CORPORATION, a Delaware corporation (the
"Company") and Robert H. Walpole ("Executive"), and shall become effective as
of August 16, 1996 (the "Effective Date").
1. Employment.
The Company hereby agrees to employ Executive as a senior executive and
Executive hereby agrees to accept such employment and serve in such capacity,
during the Term as defined in Section 2 and upon the terms and conditions set
forth in this Employment Agreement.
2. Term.
The term of employment of Executive under this Employment Agreement (the
"Term") shall be the period commencing on the Effective Date and terminating on
August 15, 1997 and any period of extension thereof in accordance with this
Section 2, subject to earlier termination in accordance with the Termination
and Change of Control Agreement between the Company and the Executive
("Termination Agreement"). The Term shall be extended automatically without
further action by either party for a one-year period beginning on August 16,
1997 and each succeeding annual anniversary thereafter, unless either party
shall have served written notice in accordance with the provisions of Section
7(d) upon the other party on or prior to the applicable anniversary date upon
which such extension would become effective, electing not to extend the Term,
in which case the Term shall terminate (subject to earlier termination in
accordance with the Termination Agreement) on the last business day prior to
the applicable anniversary date with respect to which such notice is received.
Notwithstanding the above, if there is a Change of Control (as defined
in the Termination Agreement), the Company hereby agrees to continue the Term
of this Employment Agreement and the Executive in its employ, and the Executive
hereby agrees to remain in the employ of the Company subject to the terms and
conditions of this Employment Agreement, for the period commencing on the
Extension Date (as defined in the Termination Agreement) and ending on the
third anniversary of such date (the "Extended Employment Period").
3. Office and Duties.
The provisions of this Section 3 will apply during the Term:
(a) Generally. Executive shall serve as President and Chief Operating
Officer of the Company, and shall perform such duties and responsibilities as
are
1
<PAGE> 3
substantially consistent with his duties, responsibilities, rank and status as
of the Effective Date. Executive shall devote full business time and
attention, and his best efforts, abilities, experience, and talent to the
performance of such duties and responsibilities for the businesses of the
Company and its subsidiaries.
(b) Place of Employment. Executive's principal place of employment
shall be the Executive's present headquarters location or such other
headquarters location as may be assigned by the Company which is less than
fifty (50) miles from the present headquarters location.
4. Salary and Annual Incentive Compensation.
As partial compensation for the services to be rendered hereunder by
Executive, the Company agrees to pay to Executive during the Term the
compensation set forth in this Section 4.
(a) Base Salary. The Company will pay to Executive during the Term a
base salary at the annual rate of $265,000 ("Annual Base Salary") in effect at
the Effective Date, payable in cash in substantially equal monthly installments
during each calendar year, or portion thereof, of the Term and otherwise in
accordance with the Company's usual payroll practices with respect to senior
executives. Executive's Annual Base Salary shall be reviewed by the Company at
least once in each calendar year and may be increased above, but may not be
reduced below, the then-current rate of such base salary.
(b) Annual Incentive Compensation. The Company will pay to Executive
during the Term annual incentive compensation in amounts determined by and in
the sole discretion of the Compensation Committee of the Company's Board of
Directors (the "Committee"), consistent with past practices of the Company.
5. Long-Term Compensation, Including Stock Options, and
Benefits, Deferred Compensation, and Expense Reimbursement.
(a) Executive Compensation Plans. Executive shall be entitled during
the Term to participate, without discrimination or duplication, in all
executive compensation plans, practices, policies and programs intended for
general participation by senior executives of the Company, as presently in
effect or as they may be modified or added to by the Company from time to time,
subject to the eligibility and other requirements of such plans and programs,
including without limitation management incentive plans, deferred compensation
plans, and supplemental retirement plans, and effective January 1, 1997, the
long-term incentive features of the Walbro Corporation ("Walbro") Equity Based
Long Term Incentive Plan, any successor to such plan, and other stock option
plans or performance share plans.
2
<PAGE> 4
(b) Employee and Executive Benefit Plans. Executive shall be entitled
during the Term to participate, without discrimination or duplication, in all
employee and executive benefit plans and programs of the Company or Walbro, as
presently in effect or as they may be modified or added to by the Company or
Walbro from time to time, to the extent such plans are available to similarly
situated senior executives or employees of the Company, subject to the
eligibility and other requirements of such plans and programs, including
without limitation plans providing pensions, other retirement benefits, medical
insurance, life insurance, disability insurance, and accidental death or
dismemberment insurance, and participation in savings, profit-sharing, and
stock ownership plans.
In furtherance of and not in limitation of the foregoing, during the Term:
(i) Executive will participate in all
executive and employee vacation and time-off programs;
(ii) The Company will provide Executive
with coverage by long-term disability insurance and
benefits substantially no less favorable (including any
required contributions by Executive) than such insurance
and benefits provided to Executive on the Effective
Date;
(iii) Executive will be covered by
Company-paid group term life insurance providing a death
benefit of one and one-half (1 1/2) times Executive's
Annual Base Salary but not to exceed $150,000; and
(iv) The Executive will be covered by a
nonqualified supplemental employee retirement plan
("SERP") which will provide to Executive a lifetime
monthly benefit. Executive acknowledges that his rights
to the deferred compensation provided for in this
Section 5(b) shall be no greater than those of a general
unsecured creditor of the Company, and that such rights
may not be pledged, collateralized, encumbered,
hypothecated, or liable for or subject to any lien,
obligation, or liability of Executive, or be assignable
or transferable by Executive, otherwise than by will or
the laws of descent and distribution, provided that
Executive may designate one or more beneficiaries to
receive any payment of such amounts in the event of his
death.
(c) Deferral of Compensation. The Company shall implement deferral
arrangements permitting Executive to elect to defer receipt, pursuant to
written deferral election terms and forms (the "Deferral Election Forms"), of
all or a specified portion of Executive's annual incentive compensation under
Section 4(b) until such date(s) or
3
<PAGE> 5
event(s) as elected by the Executive and specified in the Deferral Election
Forms; provided, however, that such deferrals shall not reduce Executive's
total cash compensation in any calendar year below the sum of (i) the FICA
maximum taxable wage base plus (ii) 1.45% of Executive's wages in excess of
such FICA maximum.
In accordance with such duly executed Deferral Election Forms, the
Company shall , in lieu of payment by the Company to Executive, credit to one
or more bookkeeping accounts maintained for Executive, on the respective date
or dates payments would otherwise be due to Executive a number of phantom
shares of common stock of Walbro ("Common Stock") equal to (1) divided by (2)
where (1) is the cash amount deferred multiplied times the number 1.25 and (2)
is the value of a share of Common Stock on the date such shares are credited.
Phantom shares shall not entitle the Executive to receive any shares of Common
Stock nor to vote or receive dividends.
Upon such date(s) or event(s) set forth in the Deferral Election Forms
(including forms filed after deferral but before settlement in which Executive
may elect to further defer settlement), the Company shall pay to Executive cash
equal to the then value of any phantom shares of Common Stock then credited to
Executive's deferral accounts, less applicable withholding taxes, and such
distribution shall be deemed to fully settle such accounts; provided, however,
that the Company may instead settle such accounts in full or in part by
directing the Trustee to distribute the assets of the "rabbi trust" and the
Company and Walbro shall be relieved of its obligation under this Employment
Agreement and the Termination Agreement to the extent that assets are so
distributed. The Company and Executive agree that compensation deferred
pursuant to this Section 5(c) shall be fully vested and nonforfeitable;
provided, however, Executive acknowledges that his rights to the deferred
compensation provided for in this Section 5(c) shall be no greater than those
of a general unsecured creditor of the Company, and that such rights may not be
pledged, collateralized, encumbered, hypothecated, or liable for or subject to
any lien, obligation, or liability of Executive, or be assignable or
transferable by Executive, otherwise than by will or the laws of descent and
distribution, provided that Executive may designate one or more beneficiaries
to receive any payment of such amounts in the event of his death.
6. Governing Law; Expense Reimbursement.
(a) Governing Law. This Employment Agreement is governed by and is to
be construed, administered, and enforced in accordance with the laws of the
State of Michigan, without regard to Michigan conflicts of law principles,
except insofar as the Delaware General Corporation Law and federal laws and
regulations may be applicable. If under the governing law, any portion of this
Employment Agreement is at any time deemed to be in conflict with any
applicable statute, rule, regulation, ordinance, or other principle of law,
such portion shall be deemed to be modified or altered to the extent necessary
to conform thereto or, if that is not possible, to be
4
<PAGE> 6
omitted from this Employment Agreement. The invalidity of any such portion
shall not affect the force, effect, and validity of the remaining portion
hereof.
(b) Expense Reimbursement. All reasonable costs and expenses
(including fees and disbursements of counsel) incurred by Executive in seeking
to enforce equitable rights pursuant to this Employment Agreement shall be paid
on behalf of or reimbursed to Executive promptly by the Company, whether or not
Executive is successful in asserting such rights.
7. Miscellaneous.
(a) Integration. This Employment Agreement modifies and supersedes any
and all prior agreements and understandings between the parties hereto with
respect to the employment of Executive by the Company and its subsidiaries,
except for the Termination Agreement and contracts relating to compensation
under executive compensation and employee benefit plans of the Company or
Walbro. Subject to the rights, benefits and obligations provided for in such
executive compensation contracts and employee benefit plans of the Company or
Walbro, this Employment Agreement and the Termination Agreement constitute the
entire agreement among the parties with respect to the matters herein provided,
and no modification or waiver of any provision hereof shall be effective unless
in writing and signed by the parties hereto. Executive shall not be entitled
to any payment or benefit under this Employment Agreement which duplicates a
payment or benefit received or receivable by Executive under such prior
agreements and understandings with the Company or Walbro or under any benefit
or compensation plan of the Company or Walbro.
(b) Non-Transferability. Neither this Employment Agreement nor the
rights or obligations hereunder of the parties hereto shall be transferable or
assignable by Executive, except in accordance with the laws of descent and
distribution or as specified in Section 7(c). The Company may assign this
Employment Agreement and the Company's rights and obligations hereunder, and
shall assign this Employment Agreement, to any Successor (as hereinafter
defined) which, by operation of law or otherwise, continues to carry on
substantially the business of the Company prior to the event of succession, and
the Company shall, as a condition of the succession, require such Successor to
agree to assume the Company's obligations and be bound by this Employment
Agreement. For purposes of this Employment Agreement, "Successor" shall mean
any person that succeeds to, or has the practical ability to control (either
immediately or with the passage of time), the Company's business directly, by
merger or consolidation, or indirectly, by purchase of the Company's voting
securities or all or substantially all of its assets, or otherwise.
(c) Beneficiaries. Executive shall be entitled to designate (and
change, to the extent permitted under applicable law) a beneficiary or
beneficiaries to receive any compensation or benefits payable hereunder
following Executive's death.
5
<PAGE> 7
(d) Notices. Whenever under this Employment Agreement it becomes
necessary to give notice, such notice shall be in writing, signed by the party
or parties giving or making the same, and shall be served on the person or
persons for whom it is intended or who should be advised or notified, by
Federal Express or other similar overnight service or by certified or
registered mail, return receipt requested, postage prepaid and addressed to
such party at the address set forth below or at such other address as may be
designated by such party by like notice:
If to the Company: Walbro Engine Management Corporation
6242 Garfield Street
Cass City, Michigan 48726-1397
Attention: Secretary
With copies to: Walbro Corporation
6242 Garfield Street
Cass City, Michigan 48726-1397
Attention: General Counsel
If to Executive: Robert H. Walpole
4868 Woodview Circle
Cass City, MI 48726
If the parties by mutual agreement supply each other with telecopier numbers
for the purposes of providing notice by facsimile, such notice shall also be
proper notice under this Employment Agreement. In the case of Federal Express
or other similar overnight service, such notice or advice shall be effective
when sent, and, in the cases of certified or registered mail, shall be
effective 2 days after deposit into the mails by delivery to the U.S. Post
Office.
(e) Reformation. The invalidity of any portion of this Employment
Agreement shall not deemed to render the remainder of this Employment Agreement
invalid.
(f) Headings. The headings of this Employment Agreement are for
convenience of reference only and do not constitute a part hereof.
(g) No General Waivers. The failure of any party at any time to require
performance by any other party of any provision hereof or to resort to any
remedy provided herein or at law or in equity shall in no way affect the right
of such party to require such performance or to resort to such remedy at any
time thereafter, nor shall the waiver by any party of a breach of any of the
provisions hereof be deemed to be a waiver of any subsequent breach of such
provisions. No such waiver shall be
6
<PAGE> 8
effective unless in writing and signed by the party against whom such waiver is
sought to be enforced.
(h) Successors and Assigns. This Employment Agreement shall be binding
upon and shall inure to the benefit of Executive, his heirs, executors,
administrators and beneficiaries, and shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company
has caused this instrument to be duly executed as of the day and year first
above written.
WALBRO ENGINE MANAGEMENT
CORPORATION
By: /s/ Lambert E. Althaver
-------------------------------------------
Name: Lambert E. Althaver
Title: Sole Director & Chief Executive Officer
ROBERT H. WALPOLE
/s/ Robert H. Walpole
-----------------------------------------------
7
<PAGE> 1
EXHIBIT 10.28
WALBRO ENGINE MANAGEMENT CORPORATION
________________________________________________________________________
TERMINATION AND CHANGE OF CONTROL AGREEMENT FOR
ROBERT H. WALPOLE
________________________________________________________________________
<TABLE>
<S> <C> <C>
1. Term and Application ............................. 1
2. Office and Duties ................................ 1
3. Salary and Annual Incentive Compensation ......... 2
4. Long-Term Compensation, Including Stock
Options, and Benefits, Deferred
Compensation, and
Expense Reimbursement ............................ 3
5. Termination of Employment ........................ 3
6. Termination Due to Normal Retirement,
Approved Early Retirement, Death,
or Disability .................................... 4
7. Termination of Employment for Cause and
Good Reason ...................................... 6
8. Termination by the Company Without Cause
and Termination by Executive for Good
Reason During the Extended
Employment Period ................................ 9
9. Definitions Relating to Termination Events ....... 12
10. Excise Tax Gross-Up .............................. 16
11. Non-Competition and Non-Disclosure;
Executive Cooperation ............................ 20
12. Governing Law; Expense Reimbursement ............. 21
13. Miscellaneous .................................... 22
14. Indemnification .................................. 24
</TABLE>
<PAGE> 2
TERMINATION AND CHANGE OF CONTROL AGREEMENT
THIS TERMINATION AND CHANGE OF CONTROL AGREEMENT ("Termination Agreement")
is dated as of the 16 day of August, 1996, by and between WALBRO ENGINE
MANAGEMENT CORPORATION, a Delaware corporation (the "Company") and Robert H.
Walpole ("Executive"), and shall become effective as of August 16, 1996, (the
"Effective Date").
W I T N E S S E T H
The Board of Directors of the Company (the "Board") has determined that it
is in the best interests of the Company and its parent, Walbro Corporation
("Walbro") to assure that the Company will have the continued dedication of the
Executive, notwithstanding the possibility, threat or occurrence of a Change of
Control (as defined below) of Walbro. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control
and to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of
other corporations. Therefore, in order to accomplish these objectives, the
Board has caused the Company to enter into this Termination Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Term and Application. The Term of this Termination Agreement shall be
the same (subject to earlier termination in accordance with Section 5) as for
the Employment Agreement between the Company and the Executive ("Employment
Agreement"); provided, however, notwithstanding the term of the Employment
Agreement, on or after the Extension Date (as defined in Section 9(d) of this
Termination Agreement), the Term of this Termination Agreement shall be the
Extended Employment Period (as defined in the Employment Agreement).
Notwithstanding the Employment Agreement, the terms and provisions of this
Termination Agreement shall also apply on and after the Extension Date; where
specifically in conflict with the Employment Agreement, shall supersede the
Employment Agreement; and in no event shall Executive receive benefits under
both this Termination Agreement and the Employment Agreement with respect to
the same Date of Termination.
2. Office and Duties.
(a) Generally. During the Extended Employment Period, the Executive's
position (including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least commensurate in all
material
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respects with the most significant of those held, exercised and assigned at any
time during the 120-day period immediately preceding the Extension Date.
During the Extended Employment Period it shall not be a violation of the
Employment Agreement for the Executive to (i) serve on corporate, civic or
charitable boards or committees, (ii) deliver lectures, fulfill speaking
engagements or teach at educational institutions, and (iii) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the Company
in accordance with this Termination Agreement. It is expressly understood and
agreed that, to the extent that any activities have been conducted by the
Executive prior to the Extension Date, the continued conduct of such activities
(or the conduct of activities similar in nature and scope thereto) subsequent
to the Extension Date shall not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the Company.
(b) Place of Employment. During the Extended Employment Period, the
Executive's services shall be performed at the location where the Executive was
employed immediately preceding the Extension Date or any office or location
less than fifty (50) miles from such location.
3. Salary and Annual Incentive Compensation.
(a) Base Salary. During the Extended Employment Period, the
Executive shall receive an Annual Base Salary, which shall be paid at a monthly
rate, at least equal to twelve (12) times the highest monthly base salary paid
or payable, including any base salary which has been earned but deferred, to
the Executive by the Company and its affiliated companies in respect of the
12-month period immediately preceding the month in which the Extension Date
occurs. During the Extended Employment Period, the Annual Base Salary shall be
reviewed no more than twelve (12) months after the last salary increase awarded
to the Executive prior to the Extension Date and thereafter at least annually.
Any increase in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Termination Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Termination Agreement shall refer to Annual Base
Salary as so increased. As used in this Termination Agreement, the term
"affiliated companies" shall include any company controlled by, controlling or
under common control with the Company.
(b) Annual Incentive Compensation. During the Extended Employment
Period, any annual incentive compensation payable to Executive shall be paid in
accordance with the Company's usual practices with respect to payment of
incentive compensation of senior executives (except to the extent deferred).
In addition to Annual Base Salary, the Executive shall be awarded, for each
fiscal year ending during the Extended Employment Period, an annual bonus (the
"Annual Bonus") in cash at least equal to the Executive's highest annual
incentive compensation for the last three full fiscal years prior to the
Extension Date (annualized in the event that the Executive was not employed by
the Company for the whole of such fiscal year) (the "Recent
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Annual Bonus"). Each such Annual Bonus shall be paid no later than the end of
the third month of the fiscal year next following the fiscal year for which the
Annual Bonus is awarded, unless the Executive shall elect to defer the receipt
of such Annual Bonus.
4. Long-Term Compensation, Including Stock Options, and Benefits,
Deferred Compensation, and Expense Reimbursement.
(a) Executive Compensation Plans. During the Extended Employment
Period, the compensation plans, practices, policies and programs, in the
aggregate, including, effective January 1, 1997, the long-term incentive
features of Walbro's Equity Based Long Term Incentive Plan (the "EBP"), shall
provide Executive with benefits, options to acquire common stock of Walbro
("Common Stock"), and compensation and incentive award opportunities no less
favorable than those provided by the Company or Walbro under such plans and
programs to senior executives in similar capacities. During the Extended
Employment Period, in no event shall such plans, practices, policies and
programs provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to the extent, if
any, that such distinction is applicable), in each case, be less favorable, in
the aggregate, than the most favorable of those provided by the Company and its
affiliated companies for the Executive under such plans, practices, policies
and programs as in effect at any time during the 120-day period immediately
preceding the Extension Date or if more favorable to the Executive, those
provided generally at any time after the Extension Date to other peer
executives of the Company and its affiliated companies. For purposes of this
Termination Agreement, all references to "performance share plans" and
"performance shares" refer to such arrangements under the EBP and to any
performance shares, performance units, stock grants, or other long-term
incentive arrangements adopted as a successor or replacement to performance
shares under such plans or other plans of the Company or Walbro.
(b) Employee and Executive Benefit Plans. During the Extended
Employment Period, benefit plans and programs, in the aggregate, shall provide
Executive with benefits no less favorable than those provided by the Company to
senior executives in similar capacities. During the Extended Employment
Period, in no event shall such plans, practices, policies and programs provide
the Executive with benefits which are less favorable, in the aggregate, than
the most favorable of such plans, practices, policies and programs in effect
for the Executive at any time during the 120-day period immediately preceding
the Extension Date or, if more favorable to the Executive, those provided
generally at any time after the Extension Date to other peer executives of the
Company and its affiliated companies.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Term of this Termination
Agreement. If the Company determines in good faith that the Disability of the
Executive has occurred during the Term of this Termination Agreement, it may
give to the Executive written notice in accordance with Section 13(d) of this
Termination
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Agreement of its intention to terminate the Executive's employment.
In such event, the Executive's Date of Termination is effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the thirty (30) days after such receipt, the
Executive shall not have returned to full-time performance of the Executive's
duties.
(b) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 13(d) of
this Termination Agreement. For purposes of this Termination Agreement, a
"Notice of Termination" means a written notice which (i) indicates the specific
termination provision in this Termination Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the Date of
Termination (which date shall be not more than thirty (30) days after the
giving of such notice). The failure by the Executive or the Company to set
forth in the Notice of Termination any fact or circumstance which contributes
to a showing of Good Reason or Cause shall not waive any right of the Executive
or the Company, respectively, hereunder or preclude the Executive or the
Company, respectively, from asserting such fact or circumstance in enforcing
the Executive's or the Company's rights hereunder.
(c) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive that the Executive's employment will terminate, (iii) if the
Executive's employment is terminated by reason of death or Disability, or due
to mutually agreed upon early retirement or Normal Retirement other than for
Good Reason, the Date of Termination shall be the date of death of the
Executive, the Disability Effective Date, or the date the Executive notifies
the Company that the Executive's employment will terminate, as the case may be,
and (iv) if the Executive's employment is terminated by the Company by reason
of not renewing the Term of this Termination Agreement for reasons other than
Cause, the Date of Termination shall be the last day of the Term of this
Termination Agreement. Notwithstanding the foregoing, solely the transfer of
an Executive to employment with an affiliated company shall not constitute a
termination of employment with the Company.
6. Termination Due to Normal Retirement, Approved Early Retirement,
Death, or Disability
Upon an Executive's Date of Termination due to a voluntary decision
by the Executive to retire on or after the Executive's Normal Retirement Date
(other than for Good Reason) or a mutually agreed upon early retirement date,
death or Disability,
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the Term of this Termination Agreement will immediately terminate and all
obligations of the Company and Executive under this Termination Agreement and
under the Employment Agreement will immediately cease; provided, however, that
subject to the provisions of Section 13(c), the Company will pay Executive (or
his beneficiaries or estate), and Executive (or his beneficiaries or estate)
will be entitled to receive, the following:
(a) The unpaid portion of Annual Base Salary at the rate payable,
in accordance with Section 3(a) hereof, at the Date of Termination, pro rated
through such Date of Termination, will be paid;
(b) All vested, nonforfeitable amounts owing and accrued at the
Date of Termination under any compensation and benefit plans, programs, and
arrangements in which Executive theretofore participated (including any earned
annual incentive compensation and performance shares) will be paid under the
terms and conditions of the plans, programs, and arrangements (and agreements
and documents thereunder) pursuant to which such compensation and benefits were
granted, including a single lump sum amount equal to the actuarial equivalent
(determined in accordance with Section 5 of the Employment Agreement) of the
benefit under the Company's nonqualified supplemental employee retirement plan
("SERP");
(c) In lieu of any annual incentive compensation under Section
3(b) for the year in which Executive's employment terminated (unless otherwise
payable under (b) above), Executive will be paid an amount equal to the average
annual incentive compensation paid to Executive in the three years immediately
preceding the year of termination (or, if Executive was not eligible to receive
or did not receive such incentive compensation for any year in such three year
period, the Executive's target annual incentive compensation for such year(s)
shall be used to calculate average annual incentive compensation) multiplied by
a fraction the numerator of which is the number of days Executive was employed
in the year of termination and the denominator of which is the total number of
days in the year of termination;
(d) Stock options then held by Executive will be exercisable to
the extent and for such periods, and otherwise governed, by the plans and
programs and the agreements and other documents thereunder pursuant to which
such stock options were granted; provided, however, that the stock options
described in Section 5 of the Employment Agreement shall be exercisable to the
extent and for such periods, and otherwise governed by, the provisions of
Section 5 of the Employment Agreement;
(e) All deferral arrangements under the Employment Agreement will
be settled in accordance with the provisions of Section 5 of the Employment
Agreement and the Executive's duly executed Deferral Election Forms; and
(f) If Executive's Date of Termination is due to Disability, for
the period extending from such Date of Termination until Executive reaches age
65, Executive shall continue to participate in all employee benefit plans,
programs, and arrangements providing health, medical, and life insurance in
which Executive was participating
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immediately prior to the Date of Termination, the terms of which allow
Executive's continued participation, as if Executive had continued in
employment with the Company during such period or, if such plans, programs, or
arrangements do not allow Executive's continued participation, a cash payment
equivalent on an after-tax basis to the value of the additional benefits
Executive would have received under such employee benefit plans, programs, and
arrangements in which Executive was participating immediately prior to the Date
of Termination, as if Executive had received credit under such plans, programs,
and arrangements for service and age with the Company during such period
following Executive's Date of Termination, with such benefits payable by the
Company at the same times and in the same manner as such benefits would have
been received by Executive under such plans (it being understood that the value
of any insurance-provided benefits will be based on the premium cost to
Executive, which shall not exceed the highest risk premium charged by a carrier
having an investment grade or better credit rating).
Amounts which are immediately payable above will be paid as promptly as
practicable after Executive's Date of Termination; provided, however, to the
extent that or the Company would not be entitled to deduct any such payments
under Internal Revenue Code Section 162(m), such payments shall be made at the
earliest time that the payments would be deductible by the Company without
limitation under Section 162(m) (unless this provision is waived by the
Company).
7. Termination of Employment for Cause and Good Reason.
(a) Termination by the Company for Cause and Termination by
Executive for Reasons Other Than Normal Retirement, Approved Early Retirement,
Death or Disability. Upon an Executive's Date of Termination by the Company
for Cause or voluntarily by Executive for reasons other than Good Reason, but
excluding termination due to Normal Retirement, mutually agreed upon early
retirement, death or Disability, the Term will immediately terminate, and
all obligations of the Company under Sections 1 through 4 of this Termination
Agreement and under the Employment Agreement will immediately cease; provided,
however, that subject to the provisions of Section 13(c), the Company shall pay
Executive (or his or her beneficiaries), and Executive (or his or her
beneficiaries) shall be entitled to receive, the following:
(i) The unpaid portion of Annual Base Salary at the rate
payable, in accordance with Section 4(a) hereof, at
the Date of Termination, pro rated through such Date
of Termination, will be paid;
(ii) All vested, nonforfeitable amounts
owing and accrued at the Date of Termination under any
compensation and benefit plans, programs, and
arrangements in which Executive theretofore participated
will be paid under the terms and conditions of the
plans, programs, and arrangements (and agreements and
documents thereunder) pursuant to which such
compensation and benefits were granted; and
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(iii) A cash amount equal to the value at the Date of
Termination of any phantom shares of Common Stock
credited to Executive's deferral accounts under deferral
arrangements authorized under the Employment Agreement
at the Date of Termination, less applicable withholding
taxes under Section 14(i) of the Employment Agreement;
provided, however, that the Company may instead settle
such accounts, in full or in part, by directing the
Trustee to distribute the assets of the "rabbi trust"
and the Company shall be relieved of its obligation
under this Termination Agreement and the Employment
Agreement to the extent that assets are so distributed.
Such amounts shall be paid or distributed as promptly as
practicable following such Date of Termination, without
regard to any stated period of deferral otherwise
remaining in respect of such amounts, and the payment of
such amounts shall be deemed to fully settle such
accounts.
Amounts which are immediately payable above will be paid as promptly as
practicable after the Executive's Date of Termination; provided, however, to
the extent that the Company would not be entitled to deduct any such payments
under Internal Revenue Code Section 162(m), such payments shall be made at the
earliest time that the payments would be deductible by the Company without
limitation under Section 162(m) (unless this provision is waived by the
Company).
(b) Termination by the Company Without Cause and Termination by
Executive for Good Reason. Upon an Executive's Date of Termination prior to the
Extension Date without Cause (including non-renewal of the Term of this
Termination Agreement without Cause) or voluntarily by the Executive for Good
Reason, the Term will terminate and all obligations of the Company and
Executive under Sections 1 through 4 of this Termination Agreement and under
the Employment Agreement will immediately cease; provided, however, that
subject to the provisions of Section 13(c) the Company shall pay to the
Executive (or his or her beneficiaries) and Executive (or his or her
beneficiaries) shall be entitled to receive the following amounts:
(i) the Company shall pay to Executive within, or
commencing within, thirty (30) days after the Date of
Termination, the following amounts:
(A) the sum of (1) the Executive's Annual Base
Salary through the Date of Termination to the
extent not theretofore paid, and (2) the product
of (x) the target Annual Bonus paid or payable,
including any bonus or portion thereof which has
been earned but deferred (and annualized for any
fiscal year consisting of less than twelve (12)
full months or
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during which the Executive was
employed for less than twelve (12) full months)
for the fiscal year, and (y) a fraction, the
numerator of which is the number of days in the
current fiscal year through the Date of
Termination, and the denominator of which is 365,
in each case to the extent not theretofore paid;
(B) twenty-four (24) semi-monthly payments during a
twelve (12) consecutive month period equal to the
Executive's Annual Base Salary divided by
twenty-four (24); provided, however,
notwithstanding anything to the contrary in the
Termination Agreement or in the Employment
Agreement, none of such amounts shall qualify
Executive for any incremental benefit under any
plan or program in which he has participated or
continues to participate;
(C) a single lump sum amount equal to the actuarial
equivalent (determined in accordance with Section
5(b)(iv) of the Employment Agreement) of the
benefit under the SERP;
(D) a cash amount will be paid equal to the value at
the Date of Termination of any phantom shares of
Common Stock credited to Executive's deferral
accounts under deferral arrangements authorized
under the Employment Agreement at the Date of
Termination, less applicable withholding taxes
under Section 14(i) of the Employment Agreement;
provided, however, that the Company may instead
settle such accounts by directing the Trustee to
distribute the assets of the "rabbi trust" and the
Company shall be relieved of its obligation under
this Termination Agreement and the Employment
Agreement to the extent that assets are so
distributed. Such amounts shall be paid or
distributed as promptly as practicable following
such Date of Termination, without regard to any
stated period of deferral otherwise remaining in
respect of such amounts, and the payment of such
amounts shall be deemed to fully settle such
accounts; and
(E) to the extent not covered by (A), (B), (C) or (D)
above, all vested, nonforfeitable amounts owing
and accrued at the Date of Termination under any
compensation and benefit plans, programs, and
arrangements in which Executive theretofore
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participated will be paid under the terms
and conditions of the plans, programs, and
arrangements (and agreements and documents
thereunder) pursuant to which such compensation
and benefits were granted; and
(ii) stock options then held by Executive
will be exercisable to the extent and for such periods,
and otherwise governed, by the plans and programs and
the agreements and other documents thereunder pursuant
to which such stock options were granted; provided,
however, that the stock options described in Section 5
of the Employment Agreement shall be exercisable to the
extent and for such periods, and otherwise governed by,
the provisions of Section 5 of the Employment Agreement.
Amounts which are immediately payable above will be paid as promptly as
practicable after Executive's Date of Termination; provided, however, to the
extent that the Company would not be entitled to deduct any such payments under
Internal Revenue Code Section 162(m), such payments shall be made at the
earliest time that the payments would be deductible by the Company without
limitation under Section 162(m) (unless this provision is waived by the
Company).
8. Termination by the Company Without Cause and Termination by
Executive for Good Reason During the Extended Employment Period.
Upon an Executive's Date of Termination during the Extended
Employment Period by the Company without Cause (other than for
non-renewal of the Term of the Employment Agreement) or voluntarily by the
Executive for Good Reason, the Term of this Termination Agreement will
immediately terminate and all obligations of the Company and Executive under
Sections 1 through 5 of this Termination Agreement and under the Employment
Agreement will immediately cease; provided, however, that subject to the
provisions of Section 13(c) the Company shall pay Executive (or his or her
beneficiaries), and Executive (or his or her beneficiaries) shall be entitled
to receive, the following:
(a) the Company shall pay to the Executive in a lump sum in cash
within thirty (30) days after the Date of Termination the aggregate of
the following amounts:
(i) the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to the
extent not theretofore paid, and (2) the product of (x)
the higher of (I) the Recent Annual Bonus and (II) the
Annual Bonus paid or payable, assuming full satisfaction
of any performance standards or targets applicable to
determining the maximum amount payable, including any
bonus or portion thereof which has been
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earned but deferred (and annualized for any fiscal
year consisting of less than twelve (12) full months or
during which the Executive was employed for less than
twelve (12) full months), for the most recently
completed fiscal year during the Extended Employment
Period, if any (such higher amount being referred to as
the "Highest Annual Bonus") and (y) a fraction, the
numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the
denominator of which is 365;
(ii) the amount equal to the product of (1) three and (2) the
sum of (x) the Executive's Annual Base Salary and (y) the
Highest Annual Bonus;
(iii) an amount equal to the actuarial equivalent (determined
in accordance with Section 5 of the Employment Agreement)
of the benefit under the SERP which the Executive would
receive assuming for this purpose that the Executive's
employment continued for three (3) years after the Date
of Termination and assuming that the Executive's
compensation in each of the three years is that required
by Section 3;
(iv) in lieu of any payment in respect of performance shares,
or other long term incentive awards (including awards of
phantom shares under the EBP) granted prior to the
Extension Date or in accordance with Section 4(a), for
any performance period not completed at the Executive's
Date of Termination, an amount equal to the cash amount
payable plus the value of any shares of Common Stock or
other property (valued at the Date of Termination)
payable upon the achievement of maximum performance (or
in the case of phantom shares, target performance under
the EBP) in respect of each tranche of such performance
shares or awards without proration as if the Date of
Termination were the end of the performance period;
(v) a cash amount will be paid equal to the value at the Date
of Termination of any phantom shares of Common Stock
credited to Executive's deferral accounts under deferral
arrangements authorized under the Employment Agreement at
the Date of Termination, less applicable withholding
taxes under Section 14(i) of the Employment Agreement;
provided, however, that the Company may instead settle
such accounts by directing the Trustee to distribute the
assets of the "rabbi trust" and the Company shall be
relieved of its obligation under this Employment
Agreement and the
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Termination Agreement to the extent that assets are so
distributed. Such amounts shall be paid or distributed
as promptly as practicable following such Date of
Termination, without regard to any stated period of
deferral otherwise remaining in respect of such amounts,
and the payment of such amounts shall be deemed to fully
settle such accounts; and
(vi) to the extent not covered in (i),
(ii), (iii), (iv) or (v), all vested, nonforfeitable
amounts owing or accrued at the Date of Termination
under any other compensation and benefit plans,
programs, and arrangements in which Executive
theretofore participated will be paid under the terms
and conditions of the plans, programs, and arrangements
(and agreements and documents thereunder) pursuant to
which such compensation and benefits were granted.
(b) Stock options then held by Executive will be exercisable and
restricted stock held by the Executive will be vested to the extent and for
such periods, and otherwise governed, by the plans and programs (and the
agreements and other documents thereunder) pursuant to which such stock options
or restricted stock were granted; provided, however, that the stock options and
restricted stock described in Section 5 of the Employment Agreement shall be
fully vested and shall be exercisable to the extent and for such periods, and
otherwise governed by, the provisions of Section 5 of the Employment Agreement.
(c) For three (3) years after the Executive's Date of Termination,
or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall continue
welfare plan benefits to the Executive and/or the Executive's family at least
equal to those which would have been provided to them in accordance with the
plans, programs, practices and policies described in Section 4(b) of this
Termination Agreement if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and
its affiliated companies and their families, provided, however, that if the
Executive becomes reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer-provided plan, the
medical and other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility.
If such plans, programs, or arrangements do not allow Executive's continued
participation, a cash payment equivalent on an after-tax basis to the value of
the additional benefits Executive would have received under such employee
benefit plans, programs, and arrangements in which Executive was participating
immediately prior to the Date of Termination, as if Executive had received
credit under such plans, programs, and arrangements for service and age with
the Company during such period following Executive's Date of Termination, with
such benefits payable by the Company at the same times and in the same manner
as such benefits would have been received by Executive under such plans (it
being understood
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that the value of any insurance-provided benefits will be based on the
premium cost to Executive, which shall not exceed the highest risk premium
charged by a carrier having an investment grade or better credit rating); and
(d) outplacement services the scope and provider of which shall be
selected by the Executive in his sole discretion, provided by the Company at
its sole expense as incurred.
9. Definitions Relating to Termination Events.
(a) "Cause." For purposes of this Termination Agreement, "Cause"
shall mean Executive's gross misconduct (as defined herein) or willful and
material breach of Section 11 of this Termination Agreement. For purposes of
this definition, "gross misconduct" shall mean (A) a felony conviction in a
court of law under applicable federal or state laws which results in material
damage to the Company, Walbro, or any of its subsidiaries or materially impairs
the value of Executive's services to the Company, or (B) willfully engaging in
one or more acts, or willfully omitting to act in accordance with duties
hereunder, which is demonstrably and materially damaging to the Company,
Walbro, or any of its subsidiaries, including acts and omissions that
constitute gross negligence in the performance of Executive's duties under this
Termination Agreement. For purposes of this Termination Agreement and the
Employment Agreement, an act or failure to act on Executive's part shall be
considered "willful" if it was done or omitted to be done by him not in good
faith, and shall not include any act or failure to act resulting from any
incapacity of Executive. Notwithstanding the foregoing, Executive may not be
terminated for Cause unless and until (1) the Executive shall have committed
acts which constitute Cause as set forth in this Section 9(a), and (2) there
shall have been delivered to him a copy of a resolution duly adopted by a
seventy-five percent (75%) affirmative vote of the membership of the Board of
Directors of the Company (the "Board") (excluding Executive, if he is then a
member) at a meeting of the Board called and held for such purpose (after
giving Executive reasonable notice specifying the nature of the grounds for
such termination and not less than 30 days to correct the acts or omissions
complained of, if correctable, and affording Executive the opportunity,
together with his counsel, to be heard before the Board) finding that
Executive was guilty of conduct which constitutes Cause as set forth in this
Section 9(a).
(b) "Change of Control." For the purpose of this Termination
Agreement, a "Change of Control" shall mean:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
twenty percent (20%) or more of either (A) the
then-outstanding shares of common stock of Walbro (the
"Outstanding Walbro Company Common Stock") or (B) the combined
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voting power of the then-outstanding voting securities of
Walbro entitled to vote generally in the election of directors
(the "Outstanding Walbro Company Voting Securities");
provided, however, that for purposes of this subsection (i),
the following acquisitions shall not constitute a Change of
Control: (A) any acquisition directly from Walbro, (B) any
acquisition by Walbro, (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by Walbro, (D) any
acquisition by a lender to Walbro pursuant to a debt
restructuring of Walbro, or (E) any acquisition by any
corporation pursuant to a transaction which complies with
clauses (A), (B) and (C) of subsection (iii) of this Section
9;
(ii) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Walbro;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by Walbro's shareholders, was approved by a vote
of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board of
Walbro;
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of Walbro (a "Business
Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Walbro Common Stock and
Outstanding Walbro Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than fifty percent (50%) of, respectively, the
then-outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a
corporation which as a result of such transaction owns Walbro
or all or substantially all of Walbro's assets either directly
or through one or more subsidiaries) in
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substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Walbro Common Stock and Outstanding Walbro
Voting Securities, as the case may be, (B) no Person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of
Walbro or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, twenty
percent (20%) or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such
Business Combination, or the combined voting power of the then
outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business
Combination and (C) at least a majority of the members of the
board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the
action of the Board of Walbro, providing for such Business
Combination; or
(iv) Approval by the shareholders of Walbro of a
complete liquidation or dissolution of Walbro.
(c) "Disability" means the failure of Executive to render and perform
the services required of him under this Termination Agreement, for a
total of 180 days or more during any consecutive 12 month period, because of
any physical or mental incapacity or disability as determined by a physician or
physicians selected by the Company and reasonably acceptable to Executive,
unless, within 30 days after Executive has received written notice from the
Company of a proposed Date of Termination due to such absence, Executive shall
have returned to the full performance of his duties hereunder and shall have
presented to the Company a written certificate of Executive's good health
prepared by a physician selected by Company and reasonably acceptable to
Executive.
(d) "Extension Date" shall mean the first date during the Term of the
Employment Agreement on which a Change of Control occurs. Anything in this
Termination Agreement or the Employment Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's
employment with the Company is terminated prior to the date on which the Change
of Control occurs, and if it is reasonably demonstrated by the Executive that
such termination of employment (i) was at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of Control, then
for all purposes of this Termination Agreement or the Employment Agreement the
"Extension Date" shall mean the date immediately prior to the date of such
termination of employment.
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<PAGE> 16
(e) "Good Reason." For purposes of this Termination Agreement and the
Employment Agreement, "Good Reason" shall mean the occurrence of any of the
following, without Executive's prior written consent:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section 2(a) of this Termination Agreement or
the Employment Agreement, or any other action by the Company
which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of
the provisions of this Termination Agreement or the Employment
Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(iii) the Company's requiring the Executive to be based
at any office or location other than as provided in Section
2(b) hereof or the Employment Agreement or the Company's
requiring the Executive to travel on Company business to a
substantially greater extent than required of other senior
executives in similar capacities immediately prior to the
Effective Date;
(iv) any failure by the Company to perform any material
obligation under, or breach by the Company of any material
provision of, this Termination Agreement or the
Employment Agreement;
(v) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted
by this Termination Agreement; or
(vi) any failure by the Company to comply with and
satisfy Section 12(b) of this Termination Agreement.
For purposes of this Section, any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
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<PAGE> 17
(f) "Normal Retirement Date." For purposes of this Termination
Agreement, an Executive's Normal Retirement Date is his or her attainment of
age sixty-five (65).
10. Excise Tax Gross-Up
If Executive becomes entitled to one or more payments (with a "payment"
including, without limitation, the vesting of an option or other non-cash
benefit or property), whether pursuant to the terms of this Termination
Agreement or any other plan, arrangement, or agreement with the Company,
Walbro, or any affiliated company (the "Total Payments"), which are or become
subject to the tax imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code") (or any similar tax that may hereafter be
imposed) (the "Excise Tax"), the Company shall pay to Executive at the time
specified below an additional amount (the "Gross-up Payment") (which shall
include, without limitation, reimbursement for any penalties and interest that
may accrue in respect of such Excise Tax) such that the net amount retained by
Executive, after reduction for any Excise Tax (including any penalties or
interest thereon) on the Total Payments and any federal, state and local income
or employment tax and Excise Tax on the Gross-up Payment provided for by this
Section 10, but before reduction for any federal, state, or local income or
employment tax on the Total Payments, shall be equal to the sum of (a) the
Total Payments, and (b) an amount equal to the product of any deductions
disallowed for federal, state, or local income tax purposes because of the
inclusion of the Gross-up Payment in Executive's adjusted gross income
multiplied by the highest applicable marginal rate of federal, state, or local
income taxation, respectively, for the calendar year in which the Gross-up
Payment is to be made.
For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax:
(a) The Total Payments shall be treated as "parachute payments" within
the meaning of Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section 280G(b)(1) of the Code shall
be treated as subject to the Excise Tax, unless, and except to the
extent that, in the written opinion of independent compensation consultants or
auditors of nationally recognized standing ("Independent Advisors") selected by
the Company and reasonably acceptable to Executive, the Total Payments (in
whole or in part) do not constitute parachute payments, or such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered before a Change of Control within the meaning of
Section 280G(b)(4)(B) of the Code in excess of the base amount within the
meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the
Excise Tax;
(b) The amount of the Total Payments which shall be treated as subject
to the Excise Tax shall be equal to the lesser of (i) the total amount of the
Total Payments or (ii) the total amount of excess parachute payments within the
meaning of Section 280G(b)(1) of the Code (after applying clause (a) above);
and
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<PAGE> 18
(c) The value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Independent Advisors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-up Payment,
Executive shall be deemed (A) to pay federal income taxes at the highest
marginal rate of federal income taxation for the calendar year in which the
Gross-up Payment is to be made; (B) to pay any applicable state and local
income taxes at the highest marginal rate of taxation for the calendar year in
which the Gross-up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes if paid in such year (determined without regard to limitations on
deductions based upon the amount of Executive's adjusted gross income); and (C)
to have otherwise allowable deductions for federal, state, and local income tax
purposes at least equal to those disallowed because of the inclusion of the
Gross-up Payment in Executive's adjusted gross income. In the event that the
Excise Tax is subsequently determined to be less than the amount taken into
account hereunder at the time the Gross-up Payment is made, Executive shall
repay to the Company at the time that the amount of such reduction in Excise
Tax is finally determined (but, if previously paid to the taxing authorities,
not prior to the time the amount of such reduction is refunded to Executive or
otherwise realized as a benefit by Executive) the portion of the Gross-up
Payment that would not have been paid if such Excise Tax had been applied in
initially calculating the Gross-up Payment, plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time the Gross-up Payment is made (including by reason of any
payment the existence or amount of which cannot be determined at the time of
the Gross-up Payment), the Company shall make an additional Gross-up Payment in
respect of such excess (plus any interest and penalties payable with respect to
such excess) at the time that the amount of such excess is finally determined.
The Gross-up Payment provided for above shall be paid on the 30th
day (or such earlier date as the Excise Tax becomes due and payable to
the taxing authorities) after it has been determined that the Total Payments
(or any portion thereof) are subject to the Excise Tax; provided, however, that
if the amount of such Gross-up Payment or portion thereof cannot be finally
determined on or before such day, the Company shall pay to Executive on such
day an estimate, as determined by the Independent Advisors, of the minimum
amount of such payments and shall pay the remainder of such payments (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code), as
soon as the amount thereof can be determined. In the event that the amount of
the estimated payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company to Executive, payable
on the fifth day after demand by the Company (together with interest at the
rate provided in Section 1274(b)(2)(B) of the Code). If more than one Gross-up
Payment is made, the amount of each Gross-up Payment shall be computed so as
not to duplicate any prior Gross-up Payment.
17
<PAGE> 19
Notwithstanding the foregoing, the Executive may at any time elect
to emand the payment of the amount which the Executive, in accordance
with an Opinion of counsel to the Executive, determines to be the Gross-Up
Payment. Any such demand by the Executive shall be made by delivery to the
Company of a written notice which specifies the Gross-Up Payment determined by
the Executive and an Opinion of counsel to the Executive regarding such
Gross-Up Payment (such written notice and Opinion collectively, the
"Executive's Determination"). Within fourteen (14) days after the Executive's
delivery of the Executive's Determination to the Company, the Company shall
(i) pay to the Executive the Gross-Up Payment set
forth in the Executive's Determination
unless
(ii) the Company shall deliver to the Executive a
written notice specifying the Gross-Up Payment determined by
the Company together with an Opinion of the Company's counsel
regarding such Gross-Up Payment (such written notice and
Opinion collectively, "the Company's Determination") and shall
pay to the Executive the Gross-Up Payment specified in the
Company's Determination.
For purposes of this Section 10, "Opinion" shall mean an unqualified legal
opinion that a Gross-Up Payment has been calculated in accordance with this
Section 10 and applicable law, unless such Opinion shall state therein that an
unqualified Opinion cannot be given as to any Gross-Up Payment. In such case,
the Opinion shall state that the Gross-Up Payment set forth therein both (A) is
more likely than not to be in accordance with this Section 10 and applicable
law, and (B) is more likely to be in accordance with this Section 10 and
applicable law than any other Gross-Up Payment.
The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten (10) business days after the
Executive is informed in writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which it gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to contest such
claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
18
<PAGE> 20
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing
from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 10, the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or to contest
the claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax
or income tax (including interest or penalties with respect thereto) imposed
with respect to such advance or with respect to any imputed income with respect
to such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority. If, after the receipt by the Executive
of an amount advanced by the Company pursuant to this Section 10, the Executive
becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the requirements of
this Section 10) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced by the
Company pursuant to this Section 10, a determination is made that the Executive
shall not be entitled to any refund with respect to such claim and the Company
does not notify the Executive in writing of its intent to contest such denial
of refund prior to the expiration of thirty (30) days after such determination,
then such advance shall be forgiven and shall
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<PAGE> 21
not be required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up Payment required to be
paid.
11. Non-Competition and Non-disclosure; Executive Cooperation.
(a) Non-Competition. Without the consent in writing of the Board, upon
the Executive's Date of Termination for any reason, Executive will not, for a
period of one year thereafter, acting alone or in conjunction with others,
directly or indirectly (i) engage (either as owner, investor, partner,
stockholder, employer, employee, consultant, advisor or Director) in any
business in the continental United States in which he has been directly
engaged, or has supervised as an executive, during the last two years prior to
such Date of Termination and which is directly in competition with a business
then conducted by Walbro or any of its subsidiaries; (ii) induce any customers
of Walbro or any of its subsidiaries with whom Executive has had contacts or
relationships, directly or indirectly, during and within the scope of his
employment with Walbro or any of its subsidiaries, to curtail or cancel their
business with such companies or any of them; or (iii) induce, or attempt to
influence, any employee of Walbro or any of its subsidiaries to terminate
employment. The provisions of subparagraphs (i), (ii), and (iii) above are
separate and distinct commitments independent of each of the other
subparagraphs. It is agreed that the ownership of not more than one percent of
the equity securities of any company having securities listed on an exchange or
regularly traded in the over-the-counter market shall not, of itself, be deemed
inconsistent with clause (i) of this paragraph (a).
(b) Non-Disclosure. Executive shall not at any time (including
following Executive's Date of Termination for any reason), disclose, use,
transfer, or sell, except in the course of employment with or other service to
the Company, any confidential or proprietary information of Walbro or any of
its subsidiaries so long as such information has not otherwise been disclosed
or is not otherwise in the public domain, except as required by law or pursuant
to legal process.
(c) Cooperation With Regard to Litigation. Executive agrees to
cooperate with the Company (including following Executive's Date of Termination
for any reason), provided that such cooperation would not unreasonably
interfere with the business activities or employment obligations of the
Executive, by making himself available to testify on behalf of Walbro or any
subsidiary or affiliate of Walbro, in any action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, and to assist Walbro, or any
subsidiary or affiliate of Walbro, in any such action, suit, or proceeding, by
providing information and meeting and consulting with the Board and its
representatives or counsel, or representatives or counsel of or to Walbro, or
any subsidiary or affiliate of Walbro, as requested; provided, however, this
subsection (c) shall not apply to any action between the Executive and the
Company to enforce this Termination Agreement or the Employment Agreement. The
Company agrees to reimburse Executive, on an after-tax basis, for all expenses
actually incurred in connection with his provision of testimony or assistance.
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<PAGE> 22
(d) Release of Employment Claims. Executive agrees, as a condition to
receipt of the termination payments and benefits provided hereunder, that he
will execute a release agreement, in a form satisfactory to the Company,
releasing any and all claims arising out of Executive's employment, including
claims arising under the Employment Agreement (other than claims made pursuant
to any indemnities provided under the articles or by-laws of the Company, under
any directors or officers liability insurance policies maintained by the
Company or enforcement of this Termination Agreement).
(e) Survival. Notwithstanding any provision of this Termination
Agreement to the contrary, the provisions of this Section 11 shall survive the
termination or expiration of this Termination Agreement, shall be valid and
enforceable, and shall be a condition precedent to the Executive (or his or her
beneficiaries) receiving any amounts payable hereunder.
12. Governing Law; Expense Reimbursement.
(a) Governing Law. This Termination Agreement is governed by and is to
be construed, administered, and enforced in accordance with the laws of the
State of Michigan, without regard to Michigan conflicts of law principles,
except insofar as the Delaware General Corporation Law and federal laws and
regulations may be applicable. If under the governing law, any portion of this
Termination Agreement is at any time deemed to be in conflict with any
applicable statute, rule, regulation, ordinance, or other principle of law,
such portion shall be deemed to be modified or altered to the extent necessary
to conform thereto or, if that is not possible, to be omitted from this
Termination Agreement. The invalidity of any such portion shall not affect the
force, effect, and validity of the remaining portion hereof. If any court
determines that any provision of Section 11 is unenforceable because of the
duration or geographic scope of such provision, it is the parties' intent that
such court shall have the power to modify the duration or geographic scope of
such provision, as the case may be, to the extent necessary to render the
provision enforceable and, in its modified form, such provision shall be
enforced.
(b) Expense Reimbursement. On and after the Extension Date, all
reasonable costs and expenses (including fees and disbursements of counsel)
incurred by Executive in seeking to enforce rights pursuant to this Termination
Agreement shall be paid on behalf of or reimbursed to Executive promptly by the
Company, whether or not Executive is successful in asserting such rights;
provided, however, that no reimbursement shall be made of such expenses
relating to any unsuccessful assertion of rights if and to the extent that
Executive's assertion of such rights was in bad faith or frivolous, as
determined by independent counsel mutually acceptable to Executive and the
Company and made without reference to or not related to a Change of Control.
During the Extended Employment Period, the Company agrees to maintain a minimum
amount in a rabbi trust (or to provide to the trustee of such rabbi trust) an
irrevocable letter of credit in an amount equal to such minimum amount (and
callable at will by such trustee) sufficient to fund the aggregate present
value of all liabilities potentially owed
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<PAGE> 23
to the Executive hereunder or under the Employment Agreement as if he
or she had incurred a termination of employment by the Company other than for
Cause.
13. Miscellaneous.
(a) Integration. This Termination Agreement modifies and supersedes
any and all prior agreements and understandings between the parties hereto with
respect to the employment of Executive by the Company and its subsidiaries,
except for the Employment Agreement and contracts relating to compensation
under executive compensation and employee benefit plans of Walbro. Subject to
the rights, benefits and obligations provided for in such executive
compensation contracts and employee benefit plans of Walbro, this Termination
Agreement and the Employment Agreement together constitute the entire agreement
among the parties with respect to the matters herein provided, and no
modification or waiver of any provision hereof shall be effective unless in
writing and signed by the parties hereto. Executive shall not be entitled to
any payment or benefit under this Termination Agreement which duplicates a
payment or benefit received or receivable by Executive under such prior
agreements and understandings with Walbro or under any benefit or compensation
plan of Walbro.
(b) Non-Transferability. Neither this Termination Agreement nor the
rights or obligations hereunder of the parties hereto shall be transferable or
assignable by Executive, except in accordance with the laws of descent and
distribution or as specified in Section 13(c). The Company may assign this
Termination Agreement and the Company's rights and obligations hereunder, and
shall assign this Termination Agreement, to any Successor (as hereinafter
defined) which, by operation of law or otherwise, continues to carry on
substantially the business of the Company prior to the event of
succession, and the Company shall, as a condition of the succession, require
such Successor to agree to assume the Company's obligations and be bound by
this Termination Agreement. For purposes of this Termination Agreement,
"Successor" shall mean any person that succeeds to, or has the practical
ability to control (either immediately or with the passage of time), the
Company's business directly, by merger or consolidation, or indirectly, by
purchase of the Company's voting securities or all or substantially all of its
assets, or otherwise.
(c) Beneficiaries. Executive shall be entitled to designate (and change,
to the extent permitted under applicable law) a beneficiary or beneficiaries to
receive any compensation or benefits payable hereunder following Executive's
death.
(d) Notices. Whenever under this Termination Agreement it becomes
necessary to give notice, such notice shall be in writing, signed by the party
or parties giving or making the same, and shall be served on the person or
persons for whom it is intended or who should be advised or notified, by
Federal Express or other similar overnight service or by certified or
registered mail, return receipt requested, postage prepaid and addressed to
such party at the address set forth below or at such other address as may be
designated by such party by like notice:
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<PAGE> 24
If to the Company: Walbro Engine Management Corporation
6242 Garfield Street
Cass City, Michigan 48726-1397
Attention: Secretary
With copies to: Walbro Corporation
6242 Garfield Street
Cass City, Michigan 48726-1397
Attention: General Counsel
If to Executive: Robert H. Walpole
4868 Woodview Circle
Cass City, MI 48726
If the parties by mutual agreement supply each other with telecopier numbers
for the purposes of providing notice by facsimile, such notice shall also be
proper notice under this Termination Agreement. In the case of Federal Express
or other similar overnight service, such notice or advice shall be effective
when sent, and, in the cases of certified or registered mail, shall be
effective 2 days after deposit into the mails by delivery to the U.S. Post
Office.
(e) Reformation. The invalidity of any portion of this Termination
Agreement shall not deemed to render the remainder of this Termination
Agreement invalid.
(f) Headings. The headings of this Termination Agreement are for
convenience of reference only and do not constitute a part hereof.
(g) No General Waivers. The failure of any party at any time to
require performance by any other party of any provision hereof or to resort to
any remedy provided herein or at law or in equity shall in no way affect the
right of such party to require such performance or to resort to such remedy at
any time thereafter, nor shall the waiver by any party of a breach of any of
the provisions hereof be deemed to be a waiver of any subsequent breach of such
provisions. No such waiver shall be effective unless in writing and signed by
the party against whom such waiver is sought to be enforced.
(h) No Obligation To Mitigate. Executive shall not be required to seek
other employment or otherwise to mitigate Executive's damages hereunder on or
after Executive's Date of Termination, nor shall the amount of any payment
hereunder be reduced by any compensation earned by the Executive as a result of
employment by another employer; provided, however, that, to the extent
Executive receives from a subsequent employer health or other insurance
benefits that are substantially similar to
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<PAGE> 25
the benefits referred to in this Termination Agreement, any such
benefits to be provided by the Company to Executive following the Term shall be
correspondingly reduced.
(i) No Offsets. The amounts required to be paid by the Company to
Executive pursuant to this Termination Agreement shall not be subject to
offset, counterclaim, recoupment, defense or other claim, right or action which
the Company, Walbro, or its subsidiaries may have against Executive or others,
other than with respect to any amounts that are owed to the Company by
Executive due to his receipt of Company funds as a result of his fraudulent
activity. The foregoing and other provisions of this Termination Agreement
notwithstanding, all payments to be made to Executive under this Termination
Agreement will be subject to required withholding taxes and other required
deductions.
(j) Successors and Assigns. This Termination Agreement shall be
binding upon and shall inure to the benefit of Executive, his heirs, executors,
administrators and beneficiaries, and shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
14. Indemnification.
All rights to indemnification by the Company now existing in favor of
Executive as provided in the Company's Certificate of Incorporation or By-Laws
or pursuant to other agreements in effect on or immediately prior to the
Extension Date shall continue in full force and effect from the Extension Date
(including all periods after the expiration of the Term), and the Company shall
also advance expenses for which indemnification may be ultimately claimed as
such expenses are incurred to the fullest extent permitted under applicable
law, subject to any requirement that Executive provide an undertaking to repay
such advances if it is ultimately determined that Executive is not entitled to
indemnification; provided, however, that any determination required to be made
with respect to whether Executive's conduct complies with the standards
required to be met as a condition of indemnification or advancement of expenses
under applicable law and the Company's Certificate of Incorporation, By-Laws,
or other agreement shall be made by independent counsel mutually acceptable to
Executive and the Company (except to the extent otherwise required by law).
After the Extension Date, the Company shall not amend its Certificate of
Incorporation or By-Laws or any agreement in any manner which adversely affects
the rights of Executive to indemnification thereunder. Any provision contained
herein notwithstanding, this Termination Agreement shall not limit or reduce
any rights of Executive to indemnification pursuant to applicable law. In
addition, the Company will maintain directors' and officers' liability
insurance in effect and covering acts and omissions of Executive, during the
Term and for a period of six years thereafter, on terms substantially no less
favorable as those in effect on the Extension Date.
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<PAGE> 26
IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company
has caused this instrument to be duly executed as of the day and year first
above written.
WALBRO ENGINE MANAGEMENT
CORPORATION
By: /s/ Lambert E. Althaver
----------------------------------
Name: Lambert E. Althaver
Title: Sole Director & Chief Executive Officer
ROBERT H. WALPOLE
/s/ Robert H. Walpole
--------------------------------------
25
<PAGE> 1
EXHIBIT 10.29
WALBRO CORPORATION
________________________________________________________________________
EMPLOYMENT AGREEMENT FOR RICHARD H. WHITEHEAD III
________________________________________________________________________
<TABLE>
<S> <C> <C>
1. Employment ....................................... 1
2. Term ............................................. 1
3. Office and Duties ................................ 1
4. Salary and Annual Incentive Compensation ......... 2
5. Long-Term Compensation, Including
Stock Options, and Benefits, Deferred
Compensation, and
Expense Reimbursement ............................ 2
6. Governing Law; Expense Reimbursement ............. 4
7. Miscellaneous .................................... 5
</TABLE>
<PAGE> 2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is dated as of the 16 day of August, 1996, by
and between WALBRO CORPORATION, a Delaware corporation (the "Company") and
Lambert E. Althaver ("Executive"), and shall become effective as of August 16,
1996 (the "Effective Date").
1. Employment.
The Company hereby agrees to employ Executive as a senior executive and
Executive hereby agrees to accept such employment and serve in such capacity,
during the Term as defined in Section 2 and upon the terms and conditions set
forth in this Employment Agreement.
2. Term.
The term of employment of Executive under this Employment Agreement
(the "Term") shall be the period commencing on the Effective Date and
terminating on August 15, 1997 and any period of extension thereof in
accordance with this Section 2, subject to earlier termination in accordance
with the Termination and Change of Control Agreement between the Company and
the Executive ("Termination Agreement"). The Term shall be extended
automatically without further action by either party for a one-year period
beginning on August 16, 1997 and each succeeding annual anniversary thereafter,
unless either party shall have served written notice in accordance with the
provisions of Section 7(d) upon the other party on or prior to the applicable
anniversary date upon which such extension would become effective, electing not
to extend the Term, in which case the Term shall terminate (subject to earlier
termination in accordance with the Termination Agreement) on the last business
day prior to the applicable anniversary date with respect to which such notice
is received.
Notwithstanding the above, if there is a Change of Control (as defined
in the Termination Agreement), the Company hereby agrees to continue the Term
of this Employment Agreement and the Executive in its employ, and the Executive
hereby agrees to remain in the employ of the Company subject to the terms and
conditions of this Employment Agreement, for the period commencing on the
Extension Date (as defined in the Termination Agreement) and ending on the
third anniversary of such date (the "Extended Employment Period").
3. Office and Duties.
The provisions of this Section 3 will apply during the Term:
(a) Generally. Executive shall serve as Chairman & Chief Executive
Officer of the Company, and shall perform such duties and responsibilities as
are substantially consistent with his duties, responsibilities, rank and status
as of the Effective Date.
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Executive shall devote full business time and attention, and his best efforts,
abilities, experience, and talent to the performance of such duties and
responsibilities for the businesses of the Company and its subsidiaries.
(b) Place of Employment. Executive's principal place of employment shall
be the Executive's present headquarters location or such other headquarters
location as may be assigned by the Company which is less than fifty (50) miles
from the present headquarters location.
4. Salary and Annual Incentive Compensation.
As partial compensation for the services to be rendered hereunder by
Executive, the Company agrees to pay to Executive during the Term the
compensation set forth in this Section 4.
(a) Base Salary. The Company will pay to Executive during the Term a
base salary at the annual rate of $200,000 ("Annual Base Salary") in effect at
the Effective Date, payable in cash in substantially equal monthly installments
during each calendar year, or portion thereof, of the Term and otherwise in
accordance with the Company's usual payroll practices with respect to senior
executives. Executive's Annual Base Salary shall be reviewed by the Company at
least once in each calendar year and may be increased above, but may not be
reduced below, the then-current rate of such base salary.
(b) Annual Incentive Compensation. The Company will pay to Executive
during the Term annual incentive compensation in amounts determined by and in
the sole discretion of the Compensation Committee of the Company's Board of
Directors (the "Committee"), consistent with past practices of the Company.
5. Long-Term Compensation, Including Stock Options, and
Benefits, Deferred Compensation, and Expense Reimbursement
(a) Executive Compensation Plans. Executive shall be entitled during
the Term to participate, without discrimination or duplication, in all
executive compensation plans, practices, policies and programs intended for
general participation by senior executives of the Company, as presently in
effect or as they may be modified or added to by the Company from time to time,
subject to the eligibility and other requirements of such plans and programs,
including without limitation the long-term incentive features of the Company's
Equity Based Long Term Incentive Plan (the "EBP"), any successor to such plan,
and other stock option plans, performance share plans, management incentive
plans, deferred compensation plans, and supplemental retirement plans.
(b) Employee and Executive Benefit Plans. Executive shall be entitled
during the Term to participate, without discrimination or duplication, in all
employee and
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executive benefit plans and programs of the Company, as presently in effect or
as they may be modified or added to by the Company from time to time, to the
extent such plans are available to similarly situated senior executives or
employees of the Company, subject to the eligibility and other requirements of
such plans and programs, including without limitation plans providing pensions,
other retirement benefits, medical insurance, life insurance, disability
insurance, and accidental death or dismemberment insurance, and participation
in savings, profit-sharing, and stock ownership plans.
In furtherance of and not in limitation of the foregoing, during the Term:
(i) Executive will participate in all
executive and employee vacation and time-off programs;
(ii) The Company will provide Executive
with coverage by long-term disability insurance and
benefits substantially no less favorable (including any
required contributions by Executive) than such insurance
and benefits provided to Executive on the Effective
Date;
(iii) Executive will be covered by
Company-paid group term life insurance providing a death
benefit of one and one-half (1 1/2) times Executive's
Annual Base Salary but not to exceed $150,000; and
(iv) The Executive will be covered by a
nonqualified supplemental employee retirement plan
("SERP") which will provide to Executive a lifetime
monthly benefit. Executive acknowledges that his rights
to the deferred compensation provided for in this
Section 5(b) shall be no greater than those of a general
unsecured creditor of the Company, and that such rights
may not be pledged, collateralized, encumbered,
hypothecated, or liable for or subject to any lien,
obligation, or liability of Executive, or be assignable
or transferable by Executive, otherwise than by will or
the laws of descent and distribution, provided that
Executive may designate one or more beneficiaries to
receive any payment of such amounts in the event of his
death.
(c) Deferral of Compensation. The Company shall implement deferral
arrangements permitting Executive to elect to defer receipt, pursuant to
written deferral election terms and forms (the "Deferral Election Forms"), of
all or a specified portion of Executive's annual incentive compensation under
Section 4(b) until such date(s) or event(s) as elected by the Executive and
specified in the Deferral Election Forms; provided, however, that such
deferrals shall not reduce Executive's total cash
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compensation in any calendar year below the sum of (i) the FICA maximum taxable
wage base plus (ii) 1.45% of Executive's wages in excess of such FICA maximum.
In accordance with such duly executed Deferral Election Forms, the
Company shall , in lieu of payment by the Company to Executive, credit to one
or more bookkeeping accounts maintained for Executive, on the respective date
or dates payments would otherwise be due to Executive a number of phantom
shares of Common Stock equal to (1) divided by (2) where (1) is the cash amount
deferred multiplied times the number 1.25 and (2) is the value of a share of
Common Stock on the date such shares are credited. Phantom shares shall not
entitle the Executive to receive any shares of Common Stock nor to vote or
receive dividends.
Upon such date(s) or event(s) set forth in the Deferral Election Forms
(including forms filed after deferral but before settlement in which Executive
may elect to further defer settlement), the Company shall pay to Executive cash
equal to the then value of any phantom shares of Common Stock then credited to
Executive's deferral accounts, less applicable withholding taxes, and such
distribution shall be deemed to fully settle such accounts; provided, however,
that the Company may instead settle such accounts in full or in part by
directing the Trustee to distribute the assets of the "rabbi trust" and the
Company shall be relieved of its obligation under this Employment Agreement and
the Termination Agreement to the extent that assets are so distributed. The
Company and Executive agree that compensation deferred pursuant to this Section
5(c) shall be fully vested and nonforfeitable; provided, however, Executive
acknowledges that his rights to the deferred compensation provided for in this
Section 5(c) shall be no greater than those of a general unsecured creditor of
the Company, and that such rights may not be pledged, collateralized,
encumbered, hypothecated, or liable for or subject to any lien, obligation, or
liability of Executive, or be assignable or transferable by Executive,
otherwise than by will or the laws of descent and distribution, provided that
Executive may designate one or more beneficiaries to receive any payment of
such amounts in the event of his death.
6. Governing Law; Expense Reimbursement.
Governing Law. This Employment Agreement is governed by and is to be
construed, administered, and enforced in accordance with the laws of the State
of Michigan, without regard to Michigan conflicts of law principles, except
insofar as the Delaware General Corporation Law and federal laws and
regulations may be applicable. If under the governing law, any portion of this
Employment Agreement is at any time deemed to be in conflict with any
applicable statute, rule, regulation, ordinance, or other principle of law,
such portion shall be deemed to be modified or altered to the extent necessary
to conform thereto or, if that is not possible, to be omitted from this
Employment Agreement. The invalidity of any such portion shall not affect the
force, effect, and validity of the remaining portion hereof.
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(b) Expense Reimbursement. All reasonable costs and expenses
(including fees and disbursements of counsel) incurred by Executive in seeking
to enforce equitable rights pursuant to this Employment Agreement shall be paid
on behalf of or reimbursed to Executive promptly by the Company, whether or not
Executive is successful in asserting such rights.
7. Miscellaneous.
(a) Integration. This Employment Agreement modifies and supersedes any
and all prior agreements and understandings between the parties hereto with
respect to the employment of Executive by the Company and its subsidiaries,
except for the Termination Agreement and contracts relating to compensation
under executive compensation and employee benefit plans of the Company. Subject
to the rights, benefits and obligations provided for in such executive
compensation contracts and employee benefit plans of the Company, this
Employment Agreement and the Termination Agreement constitute the entire
agreement among the parties with respect to the matters herein provided, and no
modification or waiver of any provision hereof shall be effective unless in
writing and signed by the parties hereto. Executive shall not be entitled to
any payment or benefit under this Employment Agreement which duplicates a
payment or benefit received or receivable by Executive under such prior
agreements and understandings with the Company or under any benefit or
compensation plan of the Company.
(b) Non-Transferability. Neither this Employment Agreement nor the
rights or obligations hereunder of the parties hereto shall be transferable or
assignable by Executive, except in accordance with the laws of descent and
distribution or as specified in Section 7(c). The Company may assign this
Employment Agreement and the Company's rights and obligations hereunder, and
shall assign this Employment Agreement, to any Successor (as hereinafter
defined) which, by operation of law or otherwise, continues to carry on
substantially the business of the Company prior to the event of succession, and
the Company shall, as a condition of the succession, require such Successor to
agree to assume the Company's obligations and be bound by this Employment
Agreement. For purposes of this Employment Agreement, "Successor" shall mean
any person that succeeds to, or has the practical ability to control (either
immediately or with the passage of time), the Company's business directly, by
merger or consolidation, or indirectly, by purchase of the Company's voting
securities or all or substantially all of its assets, or otherwise.
(c) Beneficiaries. Executive shall be entitled to designate (and
change, to the extent permitted under applicable law) a beneficiary or
beneficiaries to receive any compensation or benefits payable hereunder
following Executive's death.
(d) Notices. Whenever under this Employment Agreement it becomes
necessary to give notice, such notice shall be in writing, signed by the party
or parties giving or making the same, and shall be served on the person or
persons for whom it is
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intended or who should be advised or notified, by Federal Express or other
similar overnight service or by certified or registered mail, return receipt
requested, postage prepaid and addressed to such party at the address set forth
below or at such other address as may be designated by such party by like
notice:
If to the Company: Walbro Corporation
6242 Garfield Street
Cass City, Michigan 48726-1397
Attention: Secretary
If to Executive: Richard H. Whitehead III
P.O. Box 428
Hadlyme, Connecticut 06439
If the parties by mutual agreement supply each other with telecopier numbers
for the purposes of providing notice by facsimile, such notice shall also be
proper notice under this Employment Agreement. In the case of Federal Express
or other similar overnight service, such notice or advice shall be effective
when sent, and, in the cases of certified or registered mail, shall be
effective 2 days after deposit into the mails by delivery to the U.S. Post
Office.
(e) Reformation. The invalidity of any portion of this Employment
Agreement shall not deemed to render the remainder of this Employment Agreement
invalid.
(f) Headings. The headings of this Employment Agreement are for
convenience of reference only and do not constitute a part hereof.
(g) No General Waivers. The failure of any party at any time to
require performance by any other party of any provision hereof or to resort to
any remedy provided herein or at law or in equity shall in no way affect the
right of such party to require such performance or to resort to such remedy at
any time thereafter, nor shall the waiver by any party of a breach of any of
the provisions hereof be deemed to be a waiver of any subsequent breach of such
provisions. No such waiver shall be effective unless in writing and signed by
the party against whom such waiver is sought to be enforced.
(h) Successors and Assigns. This Employment Agreement shall be binding
upon and shall inure to the benefit of Executive, his heirs, executors,
administrators and beneficiaries, and shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
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IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company
has caused this instrument to be duly executed as of the day and year first
above written.
WALBRO CORPORATION
By: /s/ Lambert E. Althaver
--------------------------------------
Name: Lambert E. Althaver
Title: Chairman & Chief Executive Officer
Richard H. Whitehead III
/s/ Richard H. Whitehead III
-----------------------------------------
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EXHIBIT 10.30
TERMINATION AND CHANGE OF CONTROL AGREEMENT
THIS TERMINATION AND CHANGE OF CONTROL AGREEMENT ("Termination Agreement")
is dated as of the 16 day of August, 1996, by and between WALBRO CORPORATION, a
Delaware corporation (the "Company") and Richard H. Whitehead III
("Executive"), and shall become effective as of August 16, 1996 (the
"Effective Date").
W I T N E S S E T H
The Board of Directors of the Company (the "Board") has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined below)
of the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Termination Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Term and Application. The Term of this Termination Agreement shall be
the same (subject to earlier termination in accordance with Section 5) as for
the Employment Agreement between the Company and the Executive ("Employment
Agreement"); provided, however, notwithstanding the term of the Employment
Agreement, on or after the Extension Date (as defined in Section 9(d) of this
Termination Agreement), the Term of this Termination Agreement shall be the
Extended Employment Period (as defined in the Employment Agreement).
Notwithstanding the Employment Agreement, the terms and provisions of this
Termination Agreement shall also apply on and after the Extension Date; where
specifically in conflict with the Employment Agreement, shall supersede the
Employment Agreement; and in no event shall Executive receive benefits under
both this Termination Agreement and the Employment Agreement with respect to
the same Date of Termination.
2. Office and Duties.
(a) Generally. During the Extended Employment Period, the Executive's
position (including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least commensurate in all
material respects with the most significant of those held, exercised and
assigned at any time during the 120-day period immediately preceding the
Extension Date.
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During the Extended Employment Period it shall not be a violation of
the Employment Agreement for the Executive to (i) serve on corporate, civic or
charitable boards or committees, (ii) deliver lectures, fulfill speaking
engagements or teach at educational institutions, and (iii) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the Company
in accordance with this Termination Agreement. It is expressly understood and
agreed that, to the extent that any activities have been conducted by the
Executive prior to the Extension Date, the continued conduct of such activities
(or the conduct of activities similar in nature and scope thereto) subsequent
to the Extension Date shall not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the Company.
(b) Place of Employment. During the Extended Employment Period, the
Executive's services shall be performed at the location where the Executive was
employed immediately preceding the Extension Date or any office or location
less than fifty (50) miles from such location.
3. Salary and Annual Incentive Compensation.
(a) Base Salary. During the Extended Employment Period, the Executive
shall receive an Annual Base Salary, which shall be paid at a monthly rate, at
least equal to twelve (12) times the highest monthly base salary paid or
payable, including any base salary which has been earned but deferred, to the
Executive by the Company and its affiliated companies in respect of the
12-month period immediately preceding the month in which the Extension Date
occurs. During the Extended Employment Period, the Annual Base Salary shall be
reviewed no more than twelve (12) months after the last salary increase awarded
to the Executive prior to the Extension Date and thereafter at least annually.
Any increase in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Termination Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Termination Agreement shall refer to Annual Base
Salary as so increased. As used in this Termination Agreement, the term
"affiliated companies" shall include any company controlled by, controlling or
under common control with the Company.
(b) Annual Incentive Compensation. During the Extended Employment
Period, any annual incentive compensation payable to Executive shall be paid in
accordance with the Company's usual practices with respect to payment of
incentive compensation of senior executives (except to the extent deferred). In
addition to Annual Base Salary, the Executive shall be awarded, for each fiscal
year ending during the Extended Employment Period, an annual bonus (the "Annual
Bonus") in cash at least equal to the Executive's highest annual incentive
compensation for the last three full fiscal years prior to the Extension Date
(annualized in the event that the Executive was not employed by the Company for
the whole of such fiscal year) (the "Recent Annual Bonus"). Each such Annual
Bonus shall be paid no later than the end of the third month of the fiscal year
next following the fiscal year for which the Annual Bonus is awarded, unless
the Executive shall elect to defer the receipt of such Annual Bonus.
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4. Long-Term Compensation, Including Stock Options, and
Benefits, Deferred Compensation, and Expense Reimbursement.
(a) Executive Compensation Plans. During the Extended Employment
Period, the compensation plans, practices, policies and programs, in the
aggregate, including without limitation, the long-term incentive features of
the Company's Equity Based Long Term Incentive Plan (the "EBP"), shall provide
Executive with benefits, options to acquire Common Stock, and compensation and
incentive award opportunities no less favorable than those provided by the
Company under such plans and programs to senior executives in similar
capacities. During the Extended Employment Period, in no event shall such
plans, practices, policies and programs provide the Executive with incentive
opportunities (measured with respect to both regular and special incentive
opportunities, to the extent, if any, that such distinction is applicable), in
each case, be less favorable, in the aggregate, than the most favorable of
those provided by the Company and its affiliated companies for the Executive
under such plans, practices, policies and programs as in effect at any time
during the 120-day period immediately preceding the Extension Date or if more
favorable to the Executive, those provided generally at any time after the
Extension Date to other peer executives of the Company and its affiliated
companies. For purposes of this Termination Agreement, all references to
"performance share plans" and "performance shares" refer to such arrangements
under the EBP and to any performance shares, performance units, stock grants,
or other long-term incentive arrangements adopted as a successor or replacement
to performance shares under such plans or other plans of the Company.
(b) Employee and Executive Benefit Plans. During the Extended
Employment Period, benefit plans and programs, in the aggregate, shall provide
Executive with benefits no less favorable than those provided by the Company to
senior executives in similar capacities. During the Extended Employment
Period, in no event shall such plans, practices, policies and programs provide
the Executive with benefits which are less favorable, in the aggregate, than
the most favorable of such plans, practices, policies and programs in effect
for the Executive at any time during the 120-day period immediately preceding
the Extension Date or, if more favorable to the Executive, those provided
generally at any time after the Extension Date to other peer executives of the
Company and its affiliated companies.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Term of this Termination
Agreement. If the Company determines in good faith that the Disability of the
Executive has occurred during the Term of this Termination Agreement, it may
give to the Executive written notice in accordance with Section 13(d) of this
Termination Agreement of its intention to terminate the Executive's employment.
In such event, the Executive's Date of Termination is effective on the 30th day
after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the thirty (30) days after such receipt, the
Executive shall not have returned to full-time performance of the Executive's
duties.
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(b) Notice of Termination. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 13(d) of
this Termination Agreement. For purposes of this Termination Agreement, a
"Notice of Termination" means a written notice which (i) indicates the specific
termination provision in this Termination Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the Date of
Termination (which date shall be not more than thirty (30) days after the
giving of such notice). The failure by the Executive or the Company to set
forth in the Notice of Termination any fact or circumstance which contributes
to a showing of Good Reason or Cause shall not waive any right of the Executive
or the Company, respectively, hereunder or preclude the Executive or the
Company, respectively, from asserting such fact or circumstance in enforcing
the Executive's or the Company's rights hereunder.
(c) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive that the Executive's employment will terminate, (iii) if the
Executive's employment is terminated by reason of death or Disability, or due
to mutually agreed upon early retirement or Normal Retirement other than for
Good Reason, the Date of Termination shall be the date of death of the
Executive, the Disability Effective Date, or the date the Executive notifies
the Company that the Executive's employment will terminate, as the case may be,
and (iv) if the Executive's employment is terminated by the Company by reason
of not renewing the Term of this Termination Agreement for reasons other than
Cause, the Date of Termination shall be the last day of the Term of this
Termination Agreement. Notwithstanding the foregoing, solely the transfer of
an Executive to employment with an affiliated company shall not constitute a
termination of employment with the Company.
6. Termination Due to Normal Retirement, Approved Early
Retirement, Death, or Disability.
Upon an Executive's Date of Termination due to a voluntary decision by
the Executive to retire on or after the Executive's Normal Retirement Date
(other than for Good Reason) or a mutually agreed upon early retirement date,
death or Disability, the Term of this Termination Agreement will immediately
terminate and all obligations of the Company and Executive under this
Termination Agreement and under the Employment Agreement will immediately
cease; provided, however, that subject to the provisions of Section 13(c), the
Company will pay Executive (or his beneficiaries or estate), and Executive (or
his beneficiaries or
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estate) will be entitled to receive, the following:
(a) The unpaid portion of Annual Base Salary at the rate payable, in
accordance with Section 3(a) hereof, at the Date of Termination, pro rated
through such Date of Termination, will be paid;
(b) All vested, nonforfeitable amounts owing and accrued at the Date of
Termination under any compensation and benefit plans, programs, and
arrangements in which Executive theretofore participated (including any earned
annual incentive compensation and performance shares) will be paid under the
terms and conditions of the plans, programs, and arrangements (and agreements
and documents thereunder) pursuant to which such compensation and benefits were
granted, including a single lump sum amount equal to the actuarial equivalent
(determined in accordance with Section 5 of the Employment Agreement) of the
benefit under the Company's nonqualified supplemental employee retirement plan
("SERP");
(c) In lieu of any annual incentive compensation under Section 3(b) for
the year in which Executive's employment terminated (unless otherwise payable
under (b) above), Executive will be paid an amount equal to the average annual
incentive compensation paid to Executive in the three years immediately
preceding the year of termination (or, if Executive was not eligible to receive
or did not receive such incentive compensation for any year in such three year
period, the Executive's target annual incentive compensation for such year(s)
shall be used to calculate average annual incentive compensation) multiplied by
a fraction the numerator of which is the number of days Executive was employed
in the year of termination and the denominator of which is the total number of
days in the year of termination;
(d) Stock options then held by Executive will be exercisable to the
extent and for such periods, and otherwise governed, by the plans and programs
and the agreements and other documents thereunder pursuant to which such stock
options were granted; provided, however, that the stock options described in
Section 5 of the Employment Agreement shall be exercisable to the extent and
for such periods, and otherwise governed by, the provisions of Section 5 of the
Employment Agreement;
(e) All deferral arrangements under the Employment Agreement will be
settled in accordance with the provisions of Section 5 of the Employment
Agreement and the Executive's duly executed Deferral Election Forms; and
(f) If Executive's Date of Termination is due to Disability, for the
period extending from such Date of Termination until Executive reaches age 65,
Executive shall continue to participate in all employee benefit plans,
programs, and arrangements providing health, medical, and life insurance in
which Executive was participatingimmediately prior to the Date of Termination,
the terms of which allow Executive's continued participation, as if Executive
had continued in employment with the Company during such period or, if such
plans, programs, or arrangements do not allow Executive's continued
participation, a cash payment equivalent on an after-tax basis to the value of
the additional benefits Executive would have received under such
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employee benefit plans, programs, and arrangements in which Executive
was participating immediately prior to the Date of Termination, as if
Executive had received credit under such plans, programs, and arrangements for
service and age with the Company during such period following Executive's Date
of Termination, with such benefits payable by the Company at the same times and
in the same manner as such benefits would have been received by Executive under
such plans (it being understood that the value of any insurance-provided
benefits will be based on the premium cost to Executive, which shall not exceed
the highest risk premium charged by a carrier having an investment grade or
better credit rating).
Amounts which are immediately payable above will be paid as promptly as
practicable after Executive's Date of Termination; provided, however, to the
extent that or the Company would not be entitled to deduct any such payments
under Internal Revenue Code Section 162(m), such payments shall be made at the
earliest time that the payments would be deductible by the Company without
limitation under Section 162(m) (unless this provision is waived by the
Company).
7. Termination of Employment for Cause and Good Reason.
(a) Termination by the Company for Cause and Termination by Executive
for Reasons Other Than Normal Retirement, Approved Early Retirement, Death or
Disability. Upon an Executive's Date of Termination by the Company for Cause
or voluntarily by Executive for reasons other than Good Reason, but excluding
termination due to Normal Retirement, mutually agreed upon early retirement,
death or Disability, the Term will immediately terminate, and all obligations
of the Company under Sections 1 through 4 of this Termination Agreement and
under the Employment Agreement will immediately cease; provided, however, that
subject to the provisions of Section 13(c), the Company shall pay Executive (or
his or her beneficiaries), and Executive (or his or her beneficiaries) shall be
entitled to receive, the following:
(i) The unpaid portion of Annual Base
Salary at the rate payable, in accordance with Section
4(a) hereof, at the Date of Termination, pro rated
through such Date of Termination, will be paid;
(ii) All vested, nonforfeitable amounts
owing and accrued at the Date of Termination under any
compensation and benefit plans, programs, and
arrangements in which Executive theretofore participated
will be paid under the terms and conditions of the
plans, programs, and arrangements (and agreements and
documents thereunder) pursuant to which such
compensation and benefits were granted; and
(iii) A cash amount equal to the value at
the Date of Termination of any phantom shares of Common
Stock credited to Executive's deferral accounts under
deferral arrangements authorized under the Employment
Agreement at the Date of Termination, less applicable
withholding taxes under
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Section 14(i) of the Employment Agreement; provided,
however, that the Company may instead settle such
accounts, in full or in part, by directing the Trustee
to distribute the assets of the "rabbi trust" and the
Company shall be relieved of its obligation under this
Termination Agreement and the Employment Agreement to
the extent that assets are so distributed. Such amounts
shall be paid or distributed as promptly as practicable
following such Date of Termination, without regard to
any stated period of deferral otherwise remaining in
respect of such amounts, and the payment of such amounts
shall be deemed to fully settle such accounts.
Amounts which are immediately payable above will be paid as promptly as
practicable after the Executive's Date of Termination; provided, however, to
the extent that the Company would not be entitled to deduct any such payments
under Internal Revenue Code Section 162(m), such payments shall be made at the
earliest time that the payments would be deductible by the Company without
limitation under Section 162(m) (unless this provision is waived by the
Company).
(b) Termination by the Company Without Cause and Termination by
Executive for Good Reason. Upon an Executive's Date of Termination prior to
the Extension Date without Cause (including non-renewal of the Term of this
Termination Agreement without Cause) or voluntarily by the Executive for Good
Reason, the Term will terminate and all obligations of the Company and
Executive under Sections 1 through 4 of this Termination Agreement and under
the Employment Agreement will immediately cease; provided, however, that
subject to the provisions of Section 13(c) the Company shall pay to the
Executive (or his or her beneficiaries) and Executive (or his or her
beneficiaries) shall be entitled to receive the following amounts:
(i) the Company shall pay to Executive
within, or commencing within, thirty (30) days after the
Date of Termination, the following amounts:
(A) the sum of (1) the
Executive's Annual Base Salary through the Date of
Termination to the extent not theretofore paid,
and (2) the product of (x) the target Annual Bonus
paid or payable, including any bonus or portion
thereof which has been earned but deferred (and
annualized for any fiscal year consisting of less
than twelve (12) full months or during which the
Executive was employed for less than twelve (12)
full months) for the fiscal year, and (y) a
fraction, the numerator of which is the number of
days in the current fiscal year through the Date
of Termination, and the denominator of which is
365, in each case to the extent not theretofore
paid;
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(B) twenty-four (24) semi-monthly payments during a
twelve (12) consecutive month period equal to the
Executive's Annual Base Salary divided by
twenty-four (24); provided, however,
notwithstanding anything to the contrary in the
Termination Agreement or in the Employment
Agreement, none of such amounts shall qualify
Executive for any incremental benefit under any
plan or program in which he has participated or
continues to participate;
(C) a single lump sum amount
equal to the actuarial equivalent (determined in
accordance with Section 5(b)(iv) of the Employment
Agreement) of the benefit under the SERP;
(D) a cash amount will be
paid equal to the value at the Date of Termination
of any phantom shares of Common Stock credited to
Executive's deferral accounts under deferral
arrangements authorized under the Employment
Agreement at the Date of Termination, less
applicable withholding taxes under Section 14(i)
of the Employment Agreement; provided, however,
that the Company may instead settle such accounts
by directing the Trustee to distribute the assets
of the "rabbi trust" and the Company shall be
relieved of its obligation under this Termination
Agreement and the Employment Agreement to the
extent that assets are so distributed. Such
amounts shall be paid or distributed as promptly
as practicable following such Date of Termination,
without regard to any stated period of deferral
otherwise remaining in respect of such amounts,
and the payment of such amounts shall be deemed to
fully settle such accounts; and
(E) to the extent not covered
by (A), (B), (C) or (D) above, all vested,
nonforfeitable amounts owing and accrued at the
Date of Termination under any compensation and
benefit plans, programs, and arrangements in which
Executive theretofore participated will be paid
under the terms and conditions of the plans,
programs, and arrangements (and agreements and
documents thereunder) pursuant to which such
compensation and benefits were granted; and
(ii) stock options then held by Executive will be
exercisable to the extent and for such periods, and
otherwise governed, by
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the plans and programs and the agreements and other
documents thereunder pursuant to which such stock
options were granted; provided, however, that the stock
options described in Section 5 of the Employment
Agreement shall be exercisable to the extent and for
such periods, and otherwise governed by, the provisions
of Section 5 of the Employment Agreement.
Amounts which are immediately payable above will be paid as promptly as
practicable after Executive's Date of Termination; provided, however, to the
extent that the Company would not be entitled to deduct any such payments under
Internal Revenue Code Section 162(m), such payments shall be made at the
earliest time that the payments would be deductible by the Company without
limitation under Section 162(m) (unless this provision is waived by the
Company).
8. Termination by the Company Without Cause and Termination by
Executive for Goof Reason During the Extended Employment Period.
Upon an Executive's Date of Termination during the Extended Employment
Period by the Company without Cause (other than for non-renewal of the Term of
the Employment Agreement) or voluntarily by the Executive for Good Reason, the
Term of this Termination Agreement will immediately terminate and all
obligations of the Company and Executive under Sections 1 through 5 of this
Termination Agreement and under the Employment Agreement will immediately
cease; provided, however, that subject to the provisions of Section 13(c) the
Company shall pay Executive (or his or her beneficiaries), and Executive (or
his or her beneficiaries) shall be entitled to receive, the following:
(a) the Company shall pay to the Executive in a lump sum in cash within
thirty (30) days after the Date of Termination the aggregate of the following
amounts:
(i) the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to the
extent not theretofore paid, and (2) the product of (x)
the higher of (I) the Recent Annual Bonus and (II) the
Annual Bonus paid or payable, assuming full satisfaction
of any performance standards or targets applicable to
determining the maximum amount payable, including any
bonus or portion thereof which has been earned but
deferred (and annualized for any fiscal year consisting
of less than twelve (12) full months or during
which the Executive was employed for less than twelve
(12) full months), for the most recently completed
fiscal year during the Extended Employment Period, if
any (such higher amount being referred to as the
"Highest Annual Bonus") and (y) a fraction, the
numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the
denominator of which is 365;
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<PAGE> 10
(ii) the amount equal to the product of
(1) three and (2) the sum of (x) the Executive's Annual
Base Salary and (y) the Highest Annual Bonus;
(iii) an amount equal to the actuarial
equivalent (determined in accordance with Section 5 of
the Employment Agreement) of the benefit under the SERP
which the Executive would receive assuming for this
purpose that the Executive's employment continued for
three (3) years after the Date of Termination and
assuming that the Executive's compensation in each of
the three years is that required by Section 3;
(iv) in lieu of any payment in respect of
performance shares, or other long term incentive awards
(including awards of phantom shares under the EBP)
granted prior to the Extension Date or in accordance
with Section 4(a), for any performance period not
completed at the Executive's Date of Termination, an
amount equal to the cash amount payable plus the value
of any shares of Common Stock or other property (valued
at the Date of Termination) payable upon the achievement
of maximum performance (or in the case of phantom
shares, target performance under the EBP) in respect of
each tranche of such performance shares or awards
without proration as if the Date of Termination were the
end of the performance period;
(v) a cash amount will be paid equal to
the value at the Date of Termination of any phantom
shares of Common Stock credited to Executive's deferral
accounts under deferral arrangements authorized under
the Employment Agreement at the Date of Termination,
less applicable withholding taxes under Section 14(i) of
the Employment Agreement; provided, however, that the
Company may instead settle such accounts by directing
the Trustee to distribute the assets of the "rabbi
trust" and the Company shall be relieved of its
obligation under this Employment Agreement and the
Termination Agreement to the extent that assets are so
distributed. Such amounts shall be paid or distributed
as promptly as practicable following such Date of
Termination, without regard to any stated period of
deferral otherwise remaining in respect of such
amounts, and the payment of such amounts shall be
deemed to fully settle such accounts; and
(vi) to the extent not covered in (i), (ii), (iii), (iv) or
(v), all vested, nonforfeitable amounts owing or
accrued at the Date of
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Termination under any other compensation and benefit
plans, programs, and arrangements in which Executive
theretofore participated will be paid under the terms
and conditions of the plans, programs, and arrangements
(and agreements and documents thereunder) pursuant to
which such compensation and benefits were granted.
(b) Stock options then held by Executive will be exercisable and
restricted stock held by the Executive will be vested to the extent and for
such periods, and otherwise governed, by the plans and programs (and the
agreements and other documents thereunder) pursuant to which such stock options
or restricted stock were granted; provided, however, that the stock options and
restricted stock described in Section 5 of the Employment Agreement shall be
fully vested and shall be exercisable to the extent and for such periods, and
otherwise governed by, the provisions of Section 5 of the Employment Agreement.
(c) For three (3) years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue welfare plan benefits
to the Executive and/or the Executive's family at least equal to those which
would have been provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b) of this Termination Agreement
if the Executive's employment had not been terminated or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies and their
families, provided, however, that if the Executive becomes reemployed with
another employer and is eligible to receive medical or other welfare benefits
under another employer-provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility. If such plans, programs, or
arrangements do not allow Executive's continued participation, a cash payment
equivalent on an after-tax basis to the value of the additional benefits
Executive would have received under such employee benefit plans, programs, and
arrangements in which Executive was participating immediately prior to the Date
of Termination, as if Executive had received credit under such plans, programs,
and arrangements for service and age with the Company during such period
following Executive's Date of Termination, with such benefits payable by the
Company at the same times and in the same manner as such benefits would have
been received by Executive under such plans (it being understood that the value
of any insurance-provided benefits will be based on the premium cost to
Executive, which shall not exceed the highest risk premium charged by a carrier
having an investment grade or better credit rating); and
(d) outplacement services the scope and provider of which shall be
selected by the Executive in his sole discretion, provided by the Company at
its sole expense as incurred.
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<PAGE> 12
9. Definitions Relating to Termination Events.
(a) "Cause." For purposes of this Termination Agreement, "Cause" shall
mean Executive's gross misconduct (as defined herein) or willful and material
breach of Section 11 of this Termination Agreement. For purposes of this
definition, "gross misconduct" shall mean (A) a felony conviction in a court of
law under applicable federal or state laws which results in material damage to
the Company or any of its subsidiaries or materially impairs the value of
Executive's services to the Company, or (B) willfully engaging in one or more
acts, or willfully omitting to act in accordance with duties hereunder, which
is demonstrably and materially damaging to the Company or any of its
subsidiaries, including acts and omissions that constitute gross negligence in
the performance of Executive's duties under this Termination Agreement. For
purposes of this Termination Agreement and the Employment Agreement, an act or
failure to act on Executive's part shall be considered "willful" if it was done
or omitted to be done by him not in good faith, and shall not include any act
or failure to act resulting from any incapacity of Executive. Notwithstanding
the foregoing, Executive may not be terminated for Cause unless and until (1)
the Executive shall have committed acts which constitute Cause as set forth in
this Section 9(a), and (2) there shall have been delivered to him a copy of a
resolution duly adopted by a seventy-five percent (75%) affirmative vote of the
membership of the Board of Directors of the Company (the "Board") (excluding
Executive, if he is then a member) at a meeting of the Board called and held
for such purpose (after giving Executive reasonable notice specifying the
nature of the grounds for such termination and not less than 30 days to correct
the acts or omissions complained of, if correctable, and affording Executive
the opportunity, together with his counsel, to be heard before the Board)
finding that Executive was guilty of conduct which constitutes Cause as set
forth in this Section 9(a).
(b) "Change of Control." For the purpose of this Termination
Agreement, a "Change of Control" shall mean:
(i) The acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of twenty percent (20%) or more
of either (A) the then-outstanding shares of common
stock of the Company (the "Outstanding Company Common
Stock") or (B) the combined voting power of the
then-outstanding voting securities of the Company
entitled to vote generally in the election of directors
(the "Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (i), the
following acquisitions shall not constitute a Change of
Control: (A) any acquisition directly from the Company,
(B) any acquisition by the Company, (C) any acquisition
by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any
corporation controlled by the Company, (D) any
acquisition by a lender to the
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<PAGE> 13
Company pursuant to a debt restructuring of the
Company, or (E) any acquisition by any corporation
pursuant to a transaction which complies with clauses
(A), (B) and (C) of subsection (iii) of this Section 9;
(ii) Individuals who, as of the date
hereof, constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were
a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened
election contest with respect to the election or removal
of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other
than the Board;
(iii) Consummation of a reorganization,
merger or consolidation or sale or other disposition of
all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following
such Business Combination, (A) all or substantially all
of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination
beneficially own, directly or indirectly, more than
fifty percent (50%) of, respectively, the
then-outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors,
as the case may be, of the corporation resulting from
such Business Combination (including, without
limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all
of the Company's assets either directly or through one
or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Company
Common Stock and Outstanding Company Voting Securities,
as the case may be, (B) no Person (excluding any
corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business
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<PAGE> 14
Combination) beneficially owns, directly or indirectly,
twenty percent (20%) or more of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such Business Combination, or the
combined voting power of the then outstanding voting
securities of such corporation except to the extent that
such ownership existed prior to the Business Combination
and (C) at least a majority of the members of the board
of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board
at the time of the execution of the initial agreement,
or of the action of the Board, providing for such
Business Combination; or
(iv) Approval by the shareholders of the
Company of a complete liquidation or dissolution of the
Company.
(c) "Disability" means the failure of Executive to render and perform
the services required of him under this Termination Agreement, for a total of
180 days or more during any consecutive 12 month period, because of any
physical or mental incapacity or disability as determined by a physician or
physicians selected by the Company and reasonably acceptable to Executive,
unless, within 30 days after Executive has received written notice from the
Company of a proposed Date of Termination due to such absence, Executive shall
have returned to the full performance of his duties hereunder and shall have
presented to the Company a written certificate of Executive's good health
prepared by a physician selected by Company and reasonably acceptable to
Executive.
(d) "Extension Date" shall mean the first date during the Term of the
Employment Agreement on which a Change of Control occurs. Anything in this
Termination Agreement or the Employment Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's
employment with the Company is terminated prior to the date on which the Change
of Control occurs, and if it is reasonably demonstrated by the Executive that
such termination of employment (i) was at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of Control, then
for all purposes of this Termination Agreement or the Employment Agreement the
"Extension Date" shall mean the date immediately prior to the date of such
termination of employment.
(e) "Good Reason." For purposes of this Termination Agreement and the
Employment Agreement, "Good Reason" shall mean the occurrence of any of the
following, without Executive's prior written consent:
(i) the assignment to the Executive of
any duties inconsistent in any respect with the
Executive's position (including status, offices, titles
and reporting requirements), authority, duties or
responsibilities as contemplated by Section 2(a) of this
Termination Agreement or the Employment Agreement, or
any other action by the Company which results in a
diminution in such position, authority, duties or
responsibilities, excluding for this purpose an
isolated,
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insubstantial and inadvertent action not taken in bad
faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply
with any of the provisions of this Termination Agreement
or the Employment Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in
bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at
any office or location other than as provided in Section
2(b) hereof or the Employment Agreement or the Company's
requiring the Executive to travel on Company business to
a substantially greater extent than required of other
senior executives in similar capacities immediately
prior to the Effective Date;
(iv) any failure by the Company to perform
any material obligation under, or breach by the Company
of any material provision of, this Termination Agreement
or the Employment Agreement;
(v) any purported termination by the
Company of the Executive's employment otherwise than as
expressly permitted by this Termination Agreement; or
(vi) any failure by the Company to comply
with and satisfy Section 12(b) of this Termination
Agreement.
For purposes of this Section, any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
(f) "Normal Retirement Date." For purposes of this Termination
Agreement, an Executive's Normal Retirement Date is his or her attainment of
age sixty-five (65).
10. Excise Tax Gross-Up.
If Executive becomes entitled to one or more payments (with a "payment"
including, without limitation, the vesting of an option or other non-cash
benefit or property), whether pursuant to the terms of this Termination
Agreement or any other plan, arrangement, or agreement with the Company or any
affiliated company (the "Total Payments"), which are or become subject to the
tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code") (or any similar tax that may hereafter be imposed) (the "Excise
Tax"), the Company shall pay to Executive at the time specified below an
additional amount (the "Gross-up Payment") (which shall
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<PAGE> 16
include, without limitation, reimbursement for any penalties and
interest that may accrue in respect of such Excise Tax) such that the net
amount retained by Executive, after reduction for any Excise Tax (including any
penalties or interest thereon) on the Total Payments and any federal, state and
local income or employment tax and Excise Tax on the Gross-up Payment provided
for by this Section 10, but before reduction for any federal, state, or local
income or employment tax on the Total Payments, shall be equal to the sum of
(a) the Total Payments, and (b) an amount equal to the product of any
deductions disallowed for federal, state, or local income tax purposes because
of the inclusion of the Gross-up Payment in Executive's adjusted gross income
multiplied by the highest applicable marginal rate of federal, state, or local
income taxation, respectively, for the calendar year in which the Gross-up
Payment is to be made.
For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax:
(a) The Total Payments shall be treated as "parachute payments" within
the meaning of Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) of the Code shall be treated
as subject to the Excise Tax, unless, and except to the extent that, in the
written opinion of independent compensation consultants or auditors of
nationally recognized standing ("Independent Advisors") selected by the Company
and reasonably acceptable to Executive, the Total Payments (in whole or in
part) do not constitute parachute payments, or such excess parachute payments
(in whole or in part) represent reasonable compensation for services actually
rendered before a Change of Control within the meaning of Section 280G(b)(4)(B)
of the Code in excess of the base amount within the meaning of Section
280G(b)(3) of the Code or are otherwise not subject to the Excise Tax;
(b) The amount of the Total Payments which shall be treated as subject
to the Excise Tax shall be equal to the lesser of (i) the total amount of the
Total Payments or (ii) the total amount of excess parachute payments within the
meaning of Section 280G(b)(1) of the Code (after applying clause (a) above);
and
(c) The value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Independent Advisors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-up Payment,
Executive shall be deemed (A) to pay federal income taxes at the highest
marginal rate of federal income taxation for the calendar year in which the
Gross-up Payment is to be made; (B) to pay any applicable state and local
income taxes at the highest marginal rate of taxation for the calendar year in
which the Gross-up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes if paid in such year (determined without regard to limitations on
deductions based upon the amount of Executive's adjusted gross income); and (C)
to have otherwise allowable deductions for federal, state, and local income tax
purposes at least equal to those disallowed because of the inclusion of the
Gross-up Payment in Executive's adjusted gross income. In the event that the
Excise
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<PAGE> 17
Tax is subsequently determined to be less than the amount taken into
account hereunder at the time the Gross-up Payment is made, Executive shall
repay to the Company at the time that the amount of such reduction in Excise
Tax is finally determined (but, if previously paid to the taxing authorities,
not prior to the time the amount of such reduction is refunded to Executive or
otherwise realized as a benefit by Executive) the portion of the Gross-up
Payment that would not have been paid if such Excise Tax had been applied in
initially calculating the Gross-up Payment, plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time the Gross-up Payment is made (including by reason of any
payment the existence or amount of which cannot be determined at the time of
the Gross-up Payment), the Company shall make an additional Gross-up Payment in
respect of such excess (plus any interest and penalties payable with respect to
such excess) at the time that the amount of such excess is finally determined.
The Gross-up Payment provided for above shall be paid on the 30th day
(or such earlier date as the Excise Tax becomes due and payable to the taxing
authorities) after it has been determined that the Total Payments (or any
portion thereof) are subject to the Excise Tax; provided, however, that if the
amount of such Gross-up Payment or portion thereof cannot be finally determined
on or before such day, the Company shall pay to Executive on such day an
estimate, as determined by the Independent Advisors, of the minimum amount of
such payments and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code), as soon as
the amount thereof can be determined. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to Executive, payable on the
fifth day after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code). If more than one Gross-up
Payment is made, the amount of each Gross-up Payment shall be computed so as
not to duplicate any prior Gross-up Payment.
Notwithstanding the foregoing, the Executive may at any time elect to
demand the payment of the amount which the Executive, in accordance with an
Opinion of counsel to the Executive, determines to be the Gross-Up Payment. Any
such demand by the Executive shall be made by delivery to the Company of a
written notice which specifies the Gross-Up Payment determined by the Executive
and an Opinion of counsel to the Executive regarding such Gross-Up Payment
(such written notice and Opinion collectively, the "Executive's
Determination"). Within fourteen (14) days after the Executive's delivery of
the Executive's Determination to the Company, the Company shall
(i) pay to the Executive the Gross-Up
Payment set forth in the Executive's Determination
unless
(ii) the Company shall deliver to the Executive a written
notice specifying the Gross-Up Payment determined by the
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Company together with an Opinion of the Company's
counsel regarding such Gross-Up Payment (such written
notice and Opinion collectively, "the Company's
Determination") and shall pay to the Executive the
Gross-Up Payment specified in the Company's
Determination.
For purposes of this Section 10, "Opinion" shall mean an unqualified legal
opinion that a Gross-Up Payment has been calculated in accordance with this
Section 10 and applicable law, unless such Opinion shall state therein that an
unqualified Opinion cannot be given as to any Gross-Up Payment. In such case,
the Opinion shall state that the Gross-Up Payment set forth therein both (A) is
more likely than not to be in accordance with this Section 10 and applicable
law, and (B) is more likely to be in accordance with this Section 10 and
applicable law than any other Gross-Up Payment.
The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information
reasonably requested by the Company relating to such
claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably
request in writing from time to time, including, without
limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good
faith in order effectively to contest such claim, and
(iv) permit the Company to participate in
any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 10, the Company shall control all proceedings taken in
connection with such contest and, at its sole option,
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<PAGE> 19
may pursue or forgo any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax claimed and
sue for a refund or to contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment
of taxes for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority. If, after the receipt by the Executive of an amount advanced by the
Company pursuant to this Section 10, the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of this Section 10) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to this Section 10, a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of thirty (30) days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.
11. Non-Competition and Non-Disclosure; Executive Cooperation.
(a) Non-Competition. Without the consent in writing of the Board, upon
the Executive's Date of Termination for any reason, Executive will not, for a
period of one year thereafter, acting alone or in conjunction with others,
directly or indirectly (i) engage (either as owner, investor, partner,
stockholder, employer, employee, consultant, advisor or Director) in any
business in the continental United States in which he has been directly
engaged, or has supervised as an executive, during the last two years prior to
such Date of Termination and which is directly in competition with a business
then conducted by the Company or any of its subsidiaries; (ii) induce any
customers of the Company or any of its subsidiaries with whom Executive has had
contacts or relationships, directly or indirectly, during and within the scope
of his employment with the Company or any of its subsidiaries, to curtail or
cancel their business with such companies or any of them; or (iii) induce, or
attempt to influence, any employee of the Company or any of its subsidiaries to
terminate employment. The provisions of subparagraphs (i), (ii), and (iii)
above are separate and distinct commitments independent of each of the other
subparagraphs. It is agreed that
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the ownership of not more than one percent of the equity securities of any
company having securities listed on an exchange or regularly traded in the
over-the-counter market shall not, of itself, be deemed inconsistent with
clause (i) of this paragraph (a).
(b) Non-Disclosure. Executive shall not at any time (including
following Executive's Date of Termination for any reason), disclose, use,
transfer, or sell, except in the course of employment with or other service to
the Company, any confidential or proprietary information of the Company or any
of its subsidiaries so long as such information has not otherwise been
disclosed or is not otherwise in the public domain, except as required by law
or pursuant to legal process.
(c) Cooperation With Regard to Litigation. Executive agrees to
cooperate with the Company (including following Executive's Date of Termination
for any reason), provided that such cooperation would not unreasonably
interfere with the business activities or employment obligations of the
Executive, by making himself available to testify on behalf of the Company or
any subsidiary or affiliate of the Company, in any action, suit, or proceeding,
whether civil, criminal, administrative, or investigative, and to assist the
Company, or any subsidiary or affiliate of the Company, in any such action,
suit, or proceeding, by providing information and meeting and consulting with
the Board and its representatives or counsel, or representatives or counsel of
or to the Company, or any subsidiary or affiliate of the Company, as requested;
provided, however, this subsection (c) shall not apply to any action between
the Executive and the Company to enforce this Termination Agreement or the
Employment Agreement. The Company agrees to reimburse Executive, on an
after-tax basis, for all expenses actually incurred in connection with his
provision of testimony or assistance.
(d) Release of Employment Claims. Executive agrees, as a condition to
receipt of the termination payments and benefits provided hereunder, that he
will execute a release agreement, in a form satisfactory to the Company,
releasing any and all claims arising out of Executive's employment, including
claims arising under the Employment Agreement (other than claims made pursuant
to any indemnities provided under the articles or by-laws of the Company, under
any directors or officers liability insurance policies maintained by the
Company or enforcement of this Termination Agreement).
(e) Survival. Notwithstanding any provision of this Termination
Agreement to the contrary, the provisions of this Section 11 shall survive the
termination or expiration of this Termination Agreement, shall be valid and
enforceable, and shall be a condition precedent to the Executive (or his or her
beneficiaries) receiving any amounts payable hereunder.
12. Governing Law; Expense Reimbursement.
(a) Governing Law. This Termination Agreement is governed by and is to
be construed, administered, and enforced in accordance with the laws of the
State of Michigan, without regard to Michigan conflicts of law principles,
except insofar as the Delaware General Corporation Law and federal laws and
regulations may be
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<PAGE> 21
applicable. If under the governing law, any portion of this Termination
Agreement is at any time deemed to be in conflict with any applicable statute,
rule, regulation, ordinance, or other principle of law, such portion shall be
deemed to be modified or altered to the extent necessary to conform thereto
or, if that is not possible, to be omitted from this Termination Agreement.
The invalidity of any such portion shall not affect the force, effect, and
validity of the remaining portion hereof. If any court determines that any
provision of Section 11 is unenforceable because of the duration or geographic
scope of such provision, it is the parties' intent that such court shall have
the power to modify the duration or geographic scope of such provision, as the
case may be, to the extent necessary to render the provision enforceable and,
in its modified form, such provision shall be enforced.
(b) Expense Reimbursement. On and after the Extension Date, all
reasonable costs and expenses (including fees and disbursements of counsel)
incurred by Executive in seeking to enforce rights pursuant to this Termination
Agreement shall be paid on behalf of or reimbursed to Executive promptly by the
Company, whether or not Executive is successful in asserting such rights;
provided, however, that no reimbursement shall be made of such expenses
relating to any unsuccessful assertion of rights if and to the extent that
Executive's assertion of such rights was in bad faith or frivolous, as
determined by independent counsel mutually acceptable to Executive and the
Company and made without reference to or not related to a Change of Control.
During the Extended Employment Period, the Company agrees to maintain a minimum
amount in a rabbi trust (or to provide to the trustee of such rabbi trust) an
irrevocable letter of credit in an amount equal to such minimum amount (and
callable at will by such trustee) sufficient to fund the aggregate present
value of all liabilities potentially owed to the Executive hereunder or under
the Employment Agreement as if he or she had incurred a termination of
employment by the Company other than for Cause.
13. Miscellaneous.
(a) Integration. This Termination Agreement modifies and supersedes
any and all prior agreements and understandings between the parties hereto with
respect to the employment of Executive by the Company and its subsidiaries,
except for the Employment Agreement and contracts relating to compensation
under executive compensation and employee benefit plans of the Company. Subject
to the rights, benefits and obligations provided for in such executive
compensation contracts and employee benefit plans of the Company, this
Termination Agreement and the Employment Agreement together constitute the
entire agreement among the parties with respect to the matters herein provided,
and no modification or waiver of any provision hereof shall be effective unless
in writing and signed by the parties hereto. Executive shall not be entitled
to any payment or benefit under this Termination Agreement which duplicates a
payment or benefit received or receivable by Executive under such prior
agreements and understandings with the Company or under any benefit or
compensation plan of the Company.
(b) Non-Transferability. Neither this Termination Agreement nor the
rights or obligations hereunder of the parties hereto shall be transferable or
assignable by Executive, except in accordance with the laws of descent and
distribution or as
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<PAGE> 22
specified in Section 13(c). The Company may assign this Termination
Agreement and the Company's rights and obligations hereunder, and shall assign
this Termination Agreement, to any Successor (as hereinafter defined) which, by
operation of law or otherwise, continues to carry on substantially the business
of the Company prior to the event of succession, and the Company shall, as a
condition of the succession, require such Successor to agree to assume the
Company's obligations and be bound by this Termination Agreement. For purposes
of this Termination Agreement, "Successor" shall mean any person that succeeds
to, or has the practical ability to control (either immediately or with the
passage of time), the Company's business directly, by merger or consolidation,
or indirectly, by purchase of the Company's voting securities or all or
substantially all of its assets, or otherwise.
(c) Beneficiaries. Executive shall be entitled to designate (and
change, to the extent permitted under applicable law) a beneficiary or
beneficiaries to receive any compensation or benefits payable hereunder
following Executive's death.
(d) Notices. Whenever under this Termination Agreement it becomes
necessary to give notice, such notice shall be in writing, signed by the party
or parties giving or making the same, and shall be served on the person or
persons for whom it is intended or who should be advised or notified, by
Federal Express or other similar overnight service or by certified or
registered mail, return receipt requested, postage prepaid and addressed to
such party at the address set forth below or at such other address as may be
designated by such party by like notice:
If to the Company: Walbro Corporation
6242 Garfield Street
Cass City, Michigan 48726-1397
Attention: Secretary
If to Executive: Richard H. Whitehead III
P.O. Box 428
Hadlyme, Connecticut 06439
If the parties by mutual agreement supply each other with telecopier numbers
for the purposes of providing notice by facsimile, such notice shall also be
proper notice under this Termination Agreement. In the case of Federal
Express or other similar overnight service, such notice or advice shall be
effective when sent, and, in the cases of certified or registered mail, shall
be effective 2 days after deposit into the mails by delivery to the U.S. Post
Office.
(e) Reformation. The invalidity of any portion of this Termination
Agreement shall not deemed to render the remainder of this Termination
Agreement invalid.
(f) Headings. The headings of this Termination Agreement are for
convenience of reference only and do not constitute a part hereof.
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<PAGE> 23
(g) No General Waivers. The failure of any party at any time to
require performance by any other party of any provision hereof or to resort to
any remedy provided herein or at law or in equity shall in no way affect the
right of such party to require such performance or to resort to such remedy at
any time thereafter, nor shall the waiver by any party of a breach of any of
the provisions hereof be deemed to be a waiver of any subsequent breach of such
provisions. No such waiver shall be effective unless in writing and signed by
the party against whom such waiver is sought to be enforced.
(h) No Obligation To Mitigate. Executive shall not be required to seek
other employment or otherwise to mitigate Executive's damages hereunder on or
after Executive's Date of Termination, nor shall the amount of any payment
hereunder be reduced by any compensation earned by the Executive as a result of
employment by another employer; provided, however, that, to the extent
Executive receives from a subsequent employer health or other insurance
benefits that are substantially similar to the benefits referred to in this
Termination Agreement, any such benefits to be provided by the Company to
Executive following the Term shall be correspondingly reduced.
(i) No Offsets. The amounts required to be paid by the Company to
Executive pursuant to this Termination Agreement shall not be subject to
offset, counterclaim, recoupment, defense or other claim, right or action which
the Company may have against Executive or others, other than with respect to
any amounts that are owed to the Company by Executive due to his receipt of
Company funds as a result of his fraudulent activity. The foregoing and other
provisions of this Termination Agreement notwithstanding, all payments to be
made to Executive under this Termination Agreement will be subject to required
withholding taxes and other required deductions.
(j) Successors and Assigns. This Termination Agreement shall be
binding upon and shall inure to the benefit of Executive, his heirs, executors,
administrators and beneficiaries, and shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
14. Indemnification.
All rights to indemnification by the Company now existing in favor of
Executive as provided in the Company's Certificate of Incorporation or By-Laws
or pursuant to other agreements in effect on or immediately prior to the
Extension Date shall continue in full force and effect from the Extension Date
(including all periods after the expiration of the Term), and the Company shall
also advance expenses for which indemnification may be ultimately claimed as
such expenses are incurred to the fullest extent permitted under applicable
law, subject to any requirement that Executive provide an undertaking to repay
such advances if it is ultimately determined that Executive is not entitled to
indemnification; provided, however, that any determination required to be made
with respect to whether Executive's conduct complies with the standards
required to be met as a condition of indemnification or advancement of expenses
under applicable law and the Company's Certificate of Incorporation, By-Laws,
or other agreement shall be made by independent counsel mutually
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<PAGE> 24
acceptable to Executive and the Company (except to the extent otherwise
required by law). After the Extension Date, the Company shall not amend its
Certificate of Incorporation or By-Laws or any agreement in any manner which
adversely affects the rights of Executive to indemnification thereunder. Any
provision contained herein notwithstanding, this Termination Agreement shall
not limit or reduce any rights of Executive to indemnification pursuant to
applicable law. In addition, the Company will maintain directors' and
officers' liability insurance in effect and covering acts and omissions of
Executive, during the Term and for a period of six years thereafter, on terms
substantially no less favorable as those in effect on the Extension Date.
IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company
has caused this instrument to be duly executed as of the day and year first
above written.
WALBRO CORPORATION
By: /s/ Lambert E. Althaver
--------------------------------------
Name: Lambert E. Althaver
Title: Chairman & Chief Executive Officer
Richard H. Whitehead III
/s/ Richard H. Whitehead III
--------------------------------------
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<PAGE> 1
EXHIBIT 10.31
WALBRO CORPORATION
________________________________________________________________________________
EMPLOYMENT AGREEMENT FOR FRANK E. BAUCHIERO
________________________________________________________________________________
<PAGE> 2
WALBRO CORPORATION
________________________________________________________________________________
EMPLOYMENT AGREEMENT FOR FRANK E. BAUCHIERO
________________________________________________________________________________
<TABLE>
<S> <C>
1. Employment ........................................................... 1
2. Term ................................................................. 1
3. Office and Duties .................................................... 1
4. Salary and Annual Incentive Compensation ............................. 2
5. Long-Term Compensation, Including Stock Options, and
Benefits, Deferred Compensation, and Expense
Reimbursement ........................................................ 3
6. Governing Law; Expense Reimbursement ................................. 8
7. Miscellaneous ........................................................ 8
</TABLE>
<PAGE> 3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is dated as of the 3rd day of
October, 1996, by and between WALBRO CORPORATION, a Delaware
corporation (the "Company") and Frank E. Bauchiero ("Executive"), and shall
become effective as of August 16, 1996 (the "Effective Date").
1. Employment
The Company hereby agrees to employ Executive as a senior
executive and Executive hereby agrees to accept such employment and serve in
such capacity, during the Term as defined in Section 2 and upon the terms and
conditions set forth in this Employment Agreement.
2. Term.
The term of employment of Executive under this Employment
Agreement (the "Term") shall be the period commencing on the Effective Date and
terminating on December 31, 1999 and any period of extension thereof in
accordance with this Section 2, subject to earlier termination in accordance
with the Termination and Change of Control Agreement between the Company and
the Executive ("Termination Agreement"). The Term shall be extended
automatically without further action by either party for a one-year period
beginning on January 1, 2000 and each succeeding annual anniversary thereafter,
unless either party shall have served written notice in accordance with the
provisions of Section 7(d) upon the other party on or prior to the applicable
anniversary date upon which such extension would become effective, electing not
to extend the Term, in which case the Term shall terminate (subject to earlier
termination in accordance with the Termination Agreement) on the last business
day prior to the applicable anniversary date with respect to which such notice
is received.
Notwithstanding the above, if there is a Change of Control (as
defined in the Termination Agreement), the Company hereby agrees to continue
the Term of this Employment Agreement and the Executive in its employ, and the
Executive hereby agrees to remain in the employ of the Company subject to the
terms and conditions of this Employment Agreement, for the period commencing on
the Extension Date (as defined in the Termination Agreement) and ending on the
third anniversary of such date (the "Extended Employment Period").
3. Office and Duties.
The provisions of this Section 3 will apply during the Term:
(a) Generally. Executive shall serve as President, Chief
Operating Officer, and as a member of the board of directors of the Company,
and shall perform
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<PAGE> 4
such duties and responsibilities as are substantially consistent with his
duties, responsibilities, rank and status as of the Effective Date. Executive
shall devote full business time and attention, and his best efforts, abilities,
experience, and talent to the performance of such duties and responsibilities
for the businesses of the Company and its subsidiaries; provided, however, that
nothing in this Employment Agreement shall preclude or prohibit Executive from
engaging in other activities to the extent that such other activities do not
preclude Executive's employment or otherwise inhibit the performance of
Executive's duties and responsibilities under this Employment Agreement or
conflict with the businesses of the Company or its subsidiaries.
(b) Place of Employment. Executive's principal place of
employment shall be the Executive's present headquarters location or such other
headquarters location as may be assigned by the Company which is less than
thirty-five (35) miles from the present headquarters location.
4. Salary and Annual Incentive Compensation.
As partial compensation for the services to be rendered
hereunder by Executive, the Company agrees to pay to Executive during the Term
the compensation set forth in this Section 4.
(a) Base Salary. The Company will pay to Executive
during the Term a base salary at the annual rate of $375,000 ("Annual Base
Salary") in effect at the Effective Date, payable in cash in substantially
equal monthly installments during each calendar year, or portion thereof, of
the Term and otherwise in accordance with the Company's usual payroll practices
with respect to senior executives. Executive's Annual Base Salary shall be
reviewed by the Company at least once in each calendar year and may be
increased above, but may not be reduced below, the then-current rate of such
base salary.
(b) Annual Incentive Compensation. For calendar year
1996, the Company will pay to Executive annual incentive compensation in
amounts determined by and in the sole discretion of the Compensation Committee
of the Company's Board of Directors (the "Committee"), consistent with past
practices of the Company, based upon his Annual Base Salary for the full
calendar year and with a maximum target opportunity of forty percent (40%) of
such Annual Base Salary for the full calendar year. For calendar year 1997 and
for each calendar year thereafter, the Company will pay to Executive for that
calendar year during the Term annual incentive compensation based upon
Executive's satisfaction of performance standards established by the Committee
for the Executive at the beginning of each such calendar year (which shall be
similar to those established for the Company's Chief Executive Officer), and
with payouts, as a percentage of Annual Base Salary, equal to the following
benchmark percentages:
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<PAGE> 5
Threshold Satisfaction - 25%
Target Satisfaction - 50%
Maximum Satisfaction - 75%
5. Long-Term Compensation, Including Stock Options, and Benefits,
Deferred Compensation, and Expense Reimbursement ____
(a) Executive Compensation Plans. Executive shall be
entitled during the Term to participate, without discrimination or duplication,
in all executive compensation plans, practices, policies and programs intended
for general participation by senior executives of the Company, as presently in
effect or as they may be modified or added to by the Company from time to time,
subject to the eligibility and other requirements of such plans and programs,
including without limitation the long-term incentive features of the Company's
Equity Based Long Term Incentive Plan (the "EBP"), any successor to such plan,
and other stock option plans, performance share plans, management incentive
plans, deferred compensation plans, and supplemental retirement plans. For
purposes of the EBP, only for calendar year 1996, if the Executive invests 100%
of his Annual Incentive Compensation into stock options for shares of Common
Stock of the Company ("Common Stock"), he will receive, on or before January 1,
1997, an option (1) for an aggregate number of shares equal to (a) the product
of one-hundred percent (100%) of his Annual Incentive Compensation described in
Section 4(b) and two and one-half (2 1/2), divided by (b) the fair market value
of a share of such Common Stock on the date of grant; and (2) with an option
price per share equal to such fair market value. Such option shall have the
same terms and features as described in clauses (3), (4) and (5) below. Under
the EBP, the Company will make, in addition to the option grant described
above, annual option grants to the Executive as follows:
(1) annual grants will be made in
December of 1997, 1998 and 1999;
(2) the size of each year's option grant
to Executive will be based on the
median marketplace for this form of
compensation for positions
comparable to Executive's, as
determined by the Company's
compensation consultant; provided,
however, that each annual option
grant shall consist of no fewer than
the number of shares determined by
the following formula: number of
shares equals (a) 2.1; multiplied by
(b) Executive's Annual Base Salary;
divided by (c) the fair market value
of a share of Common Stock on the
date of grant;
(3) each annual option grant will be
fully and immediately vested upon
grant and will be exercisable in
whole or in part commencing six (6)
months after the date of grant;
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<PAGE> 6
(4) each annual option grant will have a
ten (10) year term and will be
exercisable in whole or in any part
at any time or times during such
term; and
(5) options will be exercisable for five
(5) years (or, if longer, the
remaining term of the option)
following Executive's termination of
employment for any reason, including
death.
In addition, within thirty (30) days of Executive's employment date, the
Company will grant to Executive 30,000 shares of restricted stock under the
EBP. The vesting schedule of such shares of restricted stock shall be
one-third (i.e., 10,000 shares) on each of January 2, 1997, January 2, 1998,
and January 2, 1999; provided, however, that such shares of restricted stock
shall become fully vested immediately upon (i) Executive's termination of
employment by the Company for any reason other than Cause (as defined in the
Termination Agreement), (ii) termination of Executive's employment by reason of
death or disability, or (iii) termination of employment by the Executive for
Good Reason (as defined in the Termination Agreement).
(b) Employee and Executive Benefit Plans. Executive
shall be entitled during the Term to participate, without discrimination or
duplication, in all employee and executive benefit plans and programs of the
Company, as presently in effect or as they may be modified or added to by the
Company from time to time, to the extent such plans are available to similarly
situated senior executives or employees of the Company, subject to the
eligibility and other requirements of such plans and programs, including
without limitation plans providing pensions, other retirement benefits, medical
insurance, life insurance, disability insurance, and accidental death or
dismemberment insurance, and participation in savings, profit-sharing, and
stock ownership plans.
In furtherance of and not in limitation of the foregoing,
during the Term:
(i) Executive will participate in all executive
and employee vacation and time-off programs
and shall be entitled to not less than four
(4) weeks paid annual vacation;
(ii) The Company will provide Executive with
coverage by long-term disability insurance
and benefits no less favorable (including any
required contributions by Executive) than
such insurance and benefits provided to
Executive on the Effective Date;
(iii) Executive will be covered by Company-paid
group term life insurance providing a death
benefit of one and one-half (1 1/2) times
Executive's Annual Base Salary but not to
exceed $150,000;
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<PAGE> 7
(iv) The Executive will be covered by a
nonqualified supplemental employee retirement
plan ("SERP") which will provide to Executive
a lifetime monthly benefit of one percent
(1%) of average annual earnings of the
Executive for the highest three consecutive
years of employment with the Company (or the
period of Executive's employment with the
Company, if less than three (3) years, and
annualized if the Executive is employed in
the Company for less than one (1) year) under
the terms and conditions of such plan (which
shall include provision for payment of a
single lump sum benefit determined in
accordance with the following actuarial
equivalency factors: interest rate of 7.2%
and mortality assumption based on the 1983
Group Annuity Mortality Table, and for
purposes of calculating such benefits,
Executive shall be credited with service
under such plan for each full or partial year
of service during calendar years 1996, 1997,
1998 and 1999, in an amount equal to three
(3) times the actual service earned during
such period. (For example, at the end of
1999 and assuming a July 1, 1996 start date,
the Executive will have earned 10.5 years of
service credit.) In addition, for purposes
of calculating such benefits, Executive shall
be credited with no less than 10.5 years of
service credit in the event of (i)
Executive's termination of employment by the
Company for any reason other than Cause (as
defined in the Termination Agreement), (ii)
termination of Executive's employment by
reason of death or disability, or (iii)
termination of employment by the Executive
for Good Reason (as defined in the
Termination Agreement). Executive's benefits
under the SERP shall be fully and immediately
vested. The Normal Retirement Date for the
Executive under the SERP will be the latter
of (A) attainment of age sixty-five (65); or
(B) December 31, 1999. Amounts determined by
a committee of at least two similarly
situated executives, to be appointed by the
Compensation Committee of the Board, may be
funded by the Company into an irrevocable
"rabbi trust" and the Company shall be
relieved of its obligation under this
Employment Agreement and the Termination
Agreement to the extent that assets are so
distributed. Executive acknowledges that his
rights to the deferred compensation provided
for in this Section 5(b) shall be no greater
than those of a general unsecured creditor of
the Company, and that such rights may not be
pledged, collateralized, encumbered,
hypothecated, or liable for or subject to any
lien, obligation, or liability of Executive,
or be assignable or transferable by
Executive, otherwise than by will or the
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<PAGE> 8
laws of descent and distribution, provided
that Executive may designate one or more
beneficiaries to receive any payment of such
amounts in the event of his death;
(v) The Executive shall be provided by the
Company with a relocation package for
relocating from Illinois to Michigan which
relocation package shall include the
following features. The Executive shall have
the right to either (i) sell his home through
his own efforts, or (ii) to direct the
Company to purchase the Executive's home at
such time as the Executive shall direct
commencing not earlier than six (6) months
after the execution of this Employment
Agreement and ending not later than the third
anniversary of the date of execution of this
Employment Agreement. The purchase price for
the Executive's home for purposes of the
preceding sentence shall be the fair market
value of the home as established by an
appraisal performed, no more than sixty (60)
days prior to the closing date of the sale,
by an appraiser who is mutually acceptable to
the Executive and the Company. Until such
time as the Executive sells his home, the
Company shall reimburse the Executive for all
travel costs for the Executive and the
Executive's spouse between the Executive's
temporary living quarters and the Executive's
current home, and shall pay to the Executive
the cost of temporary living expenses
including the rental of a furnished apartment
and utilities. Upon the Executive's sale of
his home, the Company shall pay all costs of
moving and relocating his principal residence
from his current home to a new home in
Michigan at which the Executive intends to
reside. Notwithstanding anything above, the
Company shall have no obligation to make any
payments hereunder until 1997;
(vi) The Executive shall be provided by the
Company with an annual physical;
(vii) The Executive shall be provided by the
Company with a current model, top-of-the-line
luxury automobile for the Executive's use in
connection with his services on behalf of the
Company, and the Company shall be responsible
for all costs relating thereto, including
gasoline, repairs, maintenance and insurance;
and
(viii) The Executive shall be provided by the
Company with a country club membership.
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<PAGE> 9
(c) Deferral of Compensation. The Company shall
implement deferral arrangements permitting Executive to elect to defer receipt,
pursuant to written deferral election terms and forms (the "Deferral Election
Forms"), of all or a specified portion of Executive's annual incentive
compensation under Section 4(b) until such date(s) or event(s) as elected by
the Executive and specified in the Deferral Election Forms; provided, however,
that such deferrals shall not reduce Executive's total cash compensation in any
calendar year below the sum of (i) the FICA maximum taxable wage base plus (ii)
1.45% of Executive's wages in excess of such FICA maximum.
In accordance with such duly executed Deferral Election Forms,
the Company shall , in lieu of payment by the Company to Executive, credit to
one or more bookkeeping accounts maintained for Executive, on the respective
date or dates payments would otherwise be due to Executive a number of phantom
shares of Common Stock equal to (1) divided by (2) where (1) is the cash amount
deferred multiplied times the number 1.25 and (2) is the value of a share of
Common Stock on the date such shares are credited. Phantom shares shall not
entitle the Executive to receive any shares of Common Stock nor to vote or
receive dividends.
Upon such date(s) or event(s) set forth in the Deferral
Election Forms (including forms filed after deferral but before settlement in
which Executive may elect to further defer settlement), the Company shall pay
to Executive cash equal to the then value of any phantom shares of Common Stock
then credited to Executive's deferral accounts, less applicable withholding
taxes, and such distribution shall be deemed to fully settle such accounts;
provided, however, that the Company may instead settle such accounts in full or
in part by directing the Trustee to distribute the assets of the "rabbi trust"
and the Company shall be relieved of its obligation under this Employment
Agreement and the Termination Agreement to the extent that assets are so
distributed. The Company and Executive agree that compensation deferred
pursuant to this Section 5(c) shall be fully vested and nonforfeitable;
provided, however, Executive acknowledges that his rights to the deferred
compensation provided for in this Section 5(c) shall be no greater than those
of a general unsecured creditor of the Company, and that such rights may not be
pledged, collateralized, encumbered, hypothecated, or liable for or subject to
any lien, obligation, or liability of Executive, or be assignable or
transferable by Executive, otherwise than by will or the laws of descent and
distribution, provided that Executive may designate one or more beneficiaries
to receive any payment of such amounts in the event of his death.
6. Governing Law; Expense Reimbursement.
(a) Governing Law. This Employment Agreement is governed
by and is to be construed, administered, and enforced in accordance with the
laws of the State of Michigan, without regard to Michigan conflicts of law
principles, except insofar as the Delaware General Corporation Law and federal
laws and regulations may be applicable. If under the governing law, any
portion of this Employment Agreement is at any time deemed to be in conflict
with any applicable statute, rule, regulation, ordinance, or other principle of
law, such portion shall be deemed to be modified or altered to the extent
necessary to conform thereto or, if that is not
7
<PAGE> 10
possible, to be omitted from this Employment Agreement. The invalidity of any
such portion shall not affect the force, effect, and validity of the remaining
portion hereof.
(b) Expense Reimbursement. All reasonable costs and
expenses (including fees and disbursements of counsel) incurred by Executive in
negotiating the terms and conditions of this Employment Agreement shall be paid
on behalf of or reimbursed to Executive promptly by the Company. All
reasonable costs and expenses (including fees and disbursements of counsel)
incurred by Executive in seeking to enforce rights pursuant to this Employment
Agreement shall be paid on behalf of or reimbursed to Executive promptly by the
Company, whether or not Executive is successful in asserting such rights.
7. Miscellaneous.
(a) Integration. This Employment Agreement modifies and
supersedes any and all prior agreements and understandings between the parties
hereto with respect to the employment of Executive by the Company and its
subsidiaries, except for the Termination Agreement and contracts relating to
compensation under executive compensation and employee benefit plans of the
Company. Subject to the rights, benefits and obligations provided for in such
executive compensation contracts and employee benefit plans of the Company,
this Employment Agreement and the Termination Agreement constitute the entire
agreement among the parties with respect to the matters herein provided, and no
modification or waiver of any provision hereof shall be effective unless in
writing and signed by the parties hereto. Executive shall not be entitled to
any payment or benefit under this Employment Agreement which duplicates a
payment or benefit received or receivable by Executive under such prior
agreements and understandings with the Company or under any benefit or
compensation plan of the Company.
(b) Non-Transferability. Neither this Employment
Agreement nor the rights or obligations hereunder of the parties hereto shall
be transferable or assignable by Executive, except in accordance with the laws
of descent and distribution or as specified in Section 7(c). The Company may
assign this Employment Agreement and the Company's rights and obligations
hereunder, and shall assign this Employment Agreement, to any Successor (as
hereinafter defined) which, by operation of law or otherwise, continues to
carry on substantially the business of the Company prior to the event of
succession, and the Company shall, as a condition of the succession, require
such Successor to agree to assume the Company's obligations and be bound by
this Employment Agreement. For purposes of this Employment Agreement,
"Successor" shall mean any person that succeeds to, or has the practical
ability to control (either immediately or with the passage of time), the
Company's business directly, by merger or consolidation, or indirectly, by
purchase of the Company's voting securities or all or substantially all of its
assets, or otherwise.
(c) Beneficiaries. Executive shall be entitled to
designate (and change, to the extent permitted under applicable law) a
beneficiary or beneficiaries to receive any compensation or benefits payable
hereunder following Executive's death.
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<PAGE> 11
(d) Notices. Whenever under this Employment Agreement it
becomes necessary to give notice, such notice shall be in writing, signed by
the party or parties giving or making the same, and shall be served on the
person or persons for whom it is intended or who should be advised or notified,
by Federal Express or other similar overnight service or by certified or
registered mail, return receipt requested, postage prepaid and addressed to
such party at the address set forth below or at such other address as may be
designated by such party by like notice:
If to the Company: Walbro Corporation
6242 Garfield Street
Cass City, Michigan 48726-1397
Attention: Secretary
If to Executive: Frank E. Bauchiero
_________________________________
_________________________________
With copies to: Roger C. Siske, Esquire
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
If the parties by mutual agreement supply each other with telecopier numbers
for the purposes of providing notice by facsimile, such notice shall also be
proper notice under this Employment Agreement. In the case of Federal Express
or other similar overnight service, such notice or advice shall be effective
when sent, and, in the cases of certified or registered mail, shall be
effective 2 days after deposit into the mails by delivery to the U.S. Post
Office.
(e) Reformation. The invalidity of any portion of this
Employment Agreement shall not deemed to render the remainder of this
Employment Agreement invalid.
(f) Headings. The headings of this Employment Agreement
are for convenience of reference only and do not constitute a part hereof.
(g) No General Waivers. The failure of any party at any
time to require performance by any other party of any provision hereof or to
resort to any remedy provided herein or at law or in equity shall in no way
affect the right of such party to require such performance or to resort to such
remedy at any time thereafter, nor shall the waiver by any party of a breach of
any of the provisions hereof be deemed to be a waiver of any subsequent breach
of such provisions. No such waiver shall be effective unless in writing and
signed by the party against whom such waiver is sought to be enforced.
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<PAGE> 12
(h) Successors and Assigns. This Employment Agreement shall
be binding upon and shall inure to the benefit of Executive, his heirs,
executors, administrators and beneficiaries, and shall be binding upon and
inure to the benefit of the Company and its successors and assigns.
IN WITNESS WHEREOF, Executive has hereunto set his hand and
the Company has caused this instrument to be duly executed as of the day and
year first above written.
WALBRO CORPORATION
By: /s/ Lambert E. Althaver
-----------------------------------
Name: Lambert E. Althaver
--------------------------------
Title: Chief Executive Officer
--------------------------------
FRANK E. BAUCHIERO
/s/ Frank E. Bauchiero
--------------------------------------
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<PAGE> 1
EXHIBIT 10.32
WALBRO CORPORATION
________________________________________________________________________________
TERMINATION AND CHANGE OF CONTROL AGREEMENT FOR FRANK E. BAUCHIERO
________________________________________________________________________________
<PAGE> 2
WALBRO CORPORATION
________________________________________________________________________________
TERMINATION AND CHANGE OF CONTROL AGREEMENT FOR
FRANK E. BAUCHIERO
________________________________________________________________________________
<TABLE>
<S> <C>
1. Term and Application ................................................. 1
2. Office and Duties .................................................... 1
3. Salary and Annual Incentive Compensation ............................. 2
4. Long-Term Compensation, Including Stock Options, and Benefits,
Deferred Compensation, and Expense Reimbursement ..................... 3
5. Termination of Employment ............................................ 3
6. Termination Due to Normal Retirement, Approved Early Retirement,
Death, or Disability .............................................. 4
7. Termination of Employment ............................................ 6
8. Termination by the Company Without Cause and Termination
by Executive for Good Reason During the Extended
Employment Period .................................................... 9
9. Definitions Relating to Termination Events ........................... 12
10. Excise Tax Gross-Up .................................................. 16
11. Non-Competition and Non-Disclosure; Executive Cooperation ............ 20
12. Governing Law; Expense Reimbursement ................................. 21
13. Miscellaneous ........................................................ 22
14. Indemnification ...................................................... 24
</TABLE>
<PAGE> 3
TERMINATION AND CHANGE OF CONTROL AGREEMENT
THIS TERMINATION AND CHANGE OF CONTROL AGREEMENT ("Termination
Agreement") is dated as of the 3rd day of October, 1996, by and between
WALBRO CORPORATION, a Delaware corporation (the "Company") and Frank E.
Bauchiero ("Executive"), and shall become effective as of August 16, 1996 (the
"Effective Date").
W I T N E S S E T H
The Board of Directors of the Company (the "Board") has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control
(as defined below) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control
and to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of
other corporations. Therefore, in order to accomplish these objectives, the
Board has caused the Company to enter into this Termination Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Term and Application. The Term of this Termination Agreement
shall be the same (subject to earlier termination in accordance with Section 5)
as for the Employment Agreement between the Company and the Executive
("Employment Agreement"); provided, however, notwithstanding the term of the
Employment Agreement, on or after the Extension Date (as defined in Section
9(d) of this Termination Agreement), the Term of this Termination Agreement
shall be the Extended Employment Period (as defined in the Employment
Agreement). Notwithstanding the Employment Agreement, the terms and provisions
of this Termination Agreement shall also apply on and after the Extension Date;
where specifically in conflict with the Employment Agreement, shall supersede
the Employment Agreement; and in no event shall Executive receive benefits
under both this Termination Agreement and the Employment Agreement with respect
to the same Date of Termination.
2. Office and Duties.
(a) Generally. During the Extended Employment Period, the
Executive's position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned at any time during the 120-day period immediately
preceding the Extension Date.
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<PAGE> 4
During the Extended Employment Period it shall not be a violation of
the Employment Agreement for the Executive to (i) serve on corporate, civic or
charitable boards or committees, (ii) deliver lectures, fulfill speaking
engagements or teach at educational institutions, and (iii) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the Company
in accordance with this Termination Agreement. It is expressly understood and
agreed that, to the extent that any activities have been conducted by the
Executive prior to the Extension Date, the continued conduct of such activities
(or the conduct of activities similar in nature and scope thereto) subsequent
to the Extension Date shall not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the Company.
(b) Place of Employment. During the Extended Employment Period,
the Executive's services shall be performed at the location where the Executive
was employed immediately preceding the Extension Date or any office or location
less than thirty-five (35) miles from such location.
3. Salary and Annual Incentive Compensation.
(a) Base Salary. During the Extended Employment Period, the
Executive shall receive an Annual Base Salary, which shall be paid at a monthly
rate, at least equal to twelve (12) times the highest monthly base salary paid
or payable, including any base salary which has been earned but deferred, to
the Executive by the Company and its affiliated companies in respect of the
12-month period immediately preceding the month in which the Extension Date
occurs. During the Extended Employment Period, the Annual Base Salary shall be
reviewed no more than twelve (12) months after the last salary increase awarded
to the Executive prior to the Extension Date and thereafter at least annually.
Any increase in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Termination Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Termination Agreement shall refer to Annual Base
Salary as so increased. As used in this Termination Agreement, the term
"affiliated companies" shall include any company controlled by, controlling or
under common control with the Company.
(b) Annual Incentive Compensation. During the Extended Employment
Period, any annual incentive compensation payable to Executive shall be paid in
accordance with the Company's usual practices with respect to payment of
incentive compensation of senior executives (except to the extent deferred).
In addition to Annual Base Salary, the Executive shall be awarded, for each
fiscal year ending during the Extended Employment Period, an annual bonus (the
"Annual Bonus") in cash at least equal to the Executive's highest annual
incentive compensation for the last three full fiscal years prior to the
Extension Date (annualized in the event that the Executive was not employed by
the Company for the whole of such fiscal year) (the "Recent Annual Bonus").
Each such Annual Bonus shall be paid no later than the end of the third month
of the fiscal year next following the fiscal year for which the Annual
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<PAGE> 5
Bonus is awarded, unless the Executive shall elect to defer the receipt of such
Annual Bonus.
4. Long-Term Compensation, Including Stock Options, and Benefits,
Deferred Compensation, and Expense Reimbursement
(a) Executive Compensation Plans. During the Extended Employment
Period, the compensation plans, practices, policies and programs, in the
aggregate, including without limitation, the long-term incentive features of
the Company's Equity Based Long Term Incentive Plan (the "EBP"), shall provide
Executive with benefits, options to acquire Common Stock, and compensation and
incentive award opportunities no less favorable than those provided by the
Company under such plans and programs to senior executives in similar
capacities. During the Extended Employment Period, in no event shall such
plans, practices, policies and programs provide the Executive with incentive
opportunities (measured with respect to both regular and special incentive
opportunities, to the extent, if any, that such distinction is applicable), in
each case, be less favorable, in the aggregate, than the most favorable of
those provided by the Company and its affiliated companies for the Executive
under such plans, practices, policies and programs as in effect at any time
during the 120-day period immediately preceding the Extension Date or if more
favorable to the Executive, those provided generally at any time after the
Extension Date to other peer executives of the Company and its affiliated
companies. For purposes of this Termination Agreement, all references to
"performance share plans" and "performance shares" refer to such arrangements
under the EBP and to any performance shares, performance units, stock grants,
or other long- term incentive arrangements adopted as a successor or
replacement to performance shares under such plans or other plans of the
Company.
(b) Employee and Executive Benefit Plans. During the Extended
Employment Period, benefit plans and programs, in the aggregate, shall provide
Executive with benefits no less favorable than those provided by the Company to
senior executives in similar capacities. During the Extended Employment
Period, in no event shall such plans, practices, policies and programs provide
the Executive with benefits which are less favorable, in the aggregate, than
the most favorable of such plans, practices, policies and programs in effect
for the Executive at any time during the 120-day period immediately preceding
the Extension Date or, if more favorable to the Executive, those provided
generally at any time after the Extension Date to other peer executives of the
Company and its affiliated companies.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Term of this
Termination Agreement. If the Company determines in good faith that the
Disability of the Executive has occurred during the Term of this Termination
Agreement, it may give to the Executive written notice in accordance with
Section 13(d) of this Termination Agreement of its intention to terminate the
Executive's employment. In such event,
3
<PAGE> 6
the Executive's Date of Termination is effective on the 30th day after receipt
of such notice by the Executive (the "Disability Effective Date"), provided
that, within the thirty (30) days after such receipt, the Executive shall not
have returned to full-time performance of the Executive's duties.
(b) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 13(d) of
this Termination Agreement. For purposes of this Termination Agreement, a
"Notice of Termination" means a written notice which (i) indicates the specific
termination provision in this Termination Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the Date of
Termination (which date shall be not more than thirty (30) days after the
giving of such notice). The failure by the Executive or the Company to set
forth in the Notice of Termination any fact or circumstance which contributes
to a showing of Good Reason or Cause shall not waive any right of the Executive
or the Company, respectively, hereunder or preclude the Executive or the
Company, respectively, from asserting such fact or circumstance in enforcing
the Executive's or the Company's rights hereunder.
(c) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive that the Executive's employment will terminate, (iii) if the
Executive's employment is terminated by reason of death or Disability, or due
to mutually agreed upon early retirement or Normal Retirement other than for
Good Reason, the Date of Termination shall be the date of death of the
Executive, the Disability Effective Date, or the date the Executive notifies
the Company that the Executive's employment will terminate, as the case may be,
and (iv) if the Executive's employment is terminated by the Company by reason
of not renewing the Term of this Termination Agreement for reasons other than
Cause, the Date of Termination shall be the last day of the Term of this
Termination Agreement. Notwithstanding the foregoing, solely the transfer of
an Executive to employment with an affiliated company shall not constitute a
termination of employment with the Company.
6. Termination Due to Normal Retirement, Approved Early
Retirement, Death, or Disability
Upon an Executive's Date of Termination due to a voluntary decision by
the Executive to retire on or after the Executive's Normal Retirement Date
(other than for Good Reason) or a mutually agreed upon early retirement date,
death or Disability, the Term of this Termination Agreement will immediately
terminate and all obligations
4
<PAGE> 7
of the Company and Executive under this Termination Agreement and under the
Employment Agreement will immediately cease; provided, however, that subject to
the provisions of Section 13(c), the Company will pay Executive (or his
beneficiaries or estate), and Executive (or his beneficiaries or estate) will
be entitled to receive, the following:
(a) The unpaid portion of Annual Base Salary at the rate payable,
in accordance with Section 3(a) hereof, at the Date of Termination, pro rated
through such Date of Termination, will be paid;
(b) All vested, nonforfeitable amounts owing and accrued at the
Date of Termination under any compensation and benefit plans, programs, and
arrangements in which Executive theretofore participated (including any earned
annual incentive compensation and performance shares) will be paid under the
terms and conditions of the plans, programs, and arrangements (and agreements
and documents thereunder) pursuant to which such compensation and benefits were
granted, including a single lump sum amount equal to the actuarial equivalent
(determined in accordance with Section 5 of the Employment Agreement) of the
benefit under the Company's nonqualified supplemental employee retirement plan
("SERP");
(c) In lieu of any annual incentive compensation under Section
3(b) for the year in which Executive's employment terminated (unless otherwise
payable under (b) above), Executive will be paid an amount equal to the average
annual incentive compensation paid to Executive in the three years immediately
preceding the year of termination (or, if Executive was not eligible to receive
or did not receive such incentive compensation for any year in such three year
period, the Executive's target annual incentive compensation for such year(s)
shall be used to calculate average annual incentive compensation) multiplied by
a fraction the numerator of which is the number of days Executive was employed
in the year of termination and the denominator of which is the total number of
days in the year of termination;
(d) Stock options then held by Executive will be exercisable to
the extent and for such periods, and otherwise governed, by the plans and
programs and the agreements and other documents thereunder pursuant to which
such stock options were granted; provided, however, that the stock options
described in Section 5 of the Employment Agreement shall be exercisable to the
extent and for such periods, and otherwise governed by, the provisions of
Section 5 of the Employment Agreement;
(e) All deferral arrangements under the Employment Agreement will
be settled in accordance with the provisions of Section 5 of the Employment
Agreement and the Executive's duly executed Deferral Election Forms; and
(f) If Executive's Date of Termination is due to Disability, for
the period extending from such Date of Termination until Executive reaches age
65, Executive shall continue to participate in all employee benefit plans,
programs, and arrangements providing health, medical, and life insurance in
which Executive was
5
<PAGE> 8
participating immediately prior to the Date of Termination, the terms of which
allow Executive's continued participation, as if Executive had continued in
employment with the Company during such period or, if such plans, programs, or
arrangements do not allow Executive's continued participation, a cash payment
equivalent on an after-tax basis to the value of the additional benefits
Executive would have received under such employee benefit plans, programs, and
arrangements in which Executive was participating immediately prior to the Date
of Termination, as if Executive had received credit under such plans, programs,
and arrangements for service and age with the Company during such period
following Executive's Date of Termination, with such benefits payable by the
Company at the same times and in the same manner as such benefits would have
been received by Executive under such plans (it being understood that the value
of any insurance-provided benefits will be based on the premium cost to
Executive, which shall not exceed the highest risk premium charged by a carrier
having an investment grade or better credit rating).
Amounts which are immediately payable above will be paid as promptly as
practicable after Executive's Date of Termination; provided, however, to the
extent that the Company would not be entitled to deduct any such payments under
Internal Revenue Code Section 162(m), such payments shall be made at the
earliest time that the payments would be deductible by the Company without
limitation under Section 162(m) (unless this provision is waived by the
Company).
7. Termination of Employment
(a) Termination by the Company for Cause and Termination by
Executive for Reasons Other Than Normal Retirement, Approved Early Retirement,
Death or Disability. Upon an Executive's Date of Termination by the Company
for Cause or voluntarily by Executive for reasons other than Good Reason, but
excluding termination due to Normal Retirement, mutually agreed upon early
retirement, death or Disability, the Term will immediately terminate, and all
obligations of the Company under Sections 1 through 4 of this Termination
Agreement and under the Employment Agreement will immediately cease; provided,
however, that subject to the provisions of Section 13(c), the Company shall pay
Executive (or his or her beneficiaries), and Executive (or his or her
beneficiaries) shall be entitled to receive, the following:
(i) The unpaid portion of Annual Base Salary at the
rate payable, in accordance with Section 4(a) hereof, at
the Date of Termination, pro rated through such Date of
Termination, will be paid;
(ii) All vested, nonforfeitable amounts owing and
accrued at the Date of Termination under any
compensation and benefit plans, programs, and
arrangements in which Executive theretofore participated
will be paid under the terms and conditions of the
plans, programs, and arrangements (and agreements and
documents thereunder)
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<PAGE> 9
pursuant to which such compensation and benefits were
granted; and
(iii) A cash amount equal to the value at the Date of
Termination of any phantom shares of Common Stock
credited to Executive's deferral accounts under deferral
arrangements authorized under the Employment Agreement
at the Date of Termination, less applicable withholding
taxes under Section 14(i) of the Employment Agreement;
provided, however, that the Company may instead settle
such accounts, in full or in part, by directing the
Trustee to distribute the assets of the "rabbi trust"
and the Company shall be relieved of its obligation
under this Termination Agreement and the Employment
Agreement to the extent that assets are so distributed.
Such amounts shall be paid or distributed as promptly as
practicable following such Date of Termination, without
regard to any stated period of deferral otherwise
remaining in respect of such amounts, and the payment of
such amounts shall be deemed to fully settle such
accounts.
Amounts which are immediately payable above will be paid as promptly as
practicable after the Executive's Date of Termination; provided, however, to
the extent that the Company would not be entitled to deduct any such payments
under Internal Revenue Code Section 162(m), such payments shall be made at the
earliest time that the payments would be deductible by the Company without
limitation under Section 162(m) (unless this provision is waived by the
Company).
(b) Termination by the Company Without Cause and Termination by
Executive for Good Reason. Upon an Executive's Date of Termination prior to
the Extension Date without Cause (including non-renewal of the Term of this
Termination Agreement without Cause) or voluntarily by the Executive for Good
Reason, the Term will terminate and all obligations of the Company and
Executive under Sections 1 through 4 of this Termination Agreement and under
the Employment Agreement will immediately cease; provided, however, that
subject to the provisions of Section 13(c) the Company shall pay to the
Executive (or his or her beneficiaries) and Executive (or his or her
beneficiaries) shall be entitled to receive the following:
(i) the Company shall pay to Executive within, or
commencing within, thirty (30) days after the
Date of Termination, the following amounts:
(A) the sum of (1) the Executive's
Annual Base Salary through the Date
of Termination to the extent not
theretofore paid, and (2) the
product of (x) the target Annual
Bonus paid or payable, including any
bonus
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<PAGE> 10
or portion thereof which has been earned but
deferred (and annualized for any fiscal year
consisting of less than twelve (12) full months or
during which the Executive was employed for
less than twelve (12) full months) for the fiscal
year, and (y) a fraction, the numerator of which
is the number of days in the current fiscal year
through the Date of Termination plus 365, and the
denominator of which is 365, in each case to the
extent not theretofore paid;
(B) the lesser of (1) forty-eight (48) semi-monthly
payments; or (2) the number of semi-monthly
payments remaining in the Term of the Employment
Agreement after the Executive's termination of
employment (but in no event less than twenty-four
(24) semi-monthly payments), equal to the
Executive's Annual Base Salary divided by
twenty-four (24); provided, however,
notwithstanding anything to the contrary in the
Termination Agreement or in the Employment
Agreement, none of such amounts shall qualify
Executive for any incremental benefit under any
plan or program in which he has participated or
continues to participate;
(C) a single lump sum amount equal to the
actuarial equivalent (determined in accordance
with Section 5 of the Employment Agreement) of the
benefit under the SERP;
(D) a cash amount will be paid equal to the value at
the Date of Termination of any phantom shares
of Common Stock credited to Executive's deferral
accounts under deferral arrangements authorized
under the Employment Agreement at the Date of
Termination, less applicable withholding taxes
under Section 14(i) of the Employment Agreement;
provided, however, that the Company may instead
settle such accounts by directing the Trustee to
distribute the assets of the "rabbi trust" and the
Company shall be relieved of its obligation under
this Termination Agreement and the Employment
Agreement to the extent that assets are so
distributed. Such amounts shall be paid or
distributed as promptly as practicable following
such Date of Termination, without regard to any
stated period of deferral otherwise remaining in
respect of such
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<PAGE> 11
amounts, and the payment of such amounts shall
be deemed to fully settle such accounts; and
(E) to the extent not covered by (A), (B), (C) or (D)
above, all vested, nonforfeitable amounts owing
and accrued at the Date of Termination under any
compensation and benefit plans, programs, and
arrangements in which Executive theretofore
participated will be paid under the terms and
conditions of the plans, programs, and
arrangements (and agreements and documents
thereunder) pursuant to which such compensation
and benefits were granted; and
(ii) stock options then held by Executive will be
exercisable to the extent and for such periods, and
otherwise governed, by the plans and programs and the
agreements and other documents thereunder pursuant to
which such stock options were granted; provided,
however, that the stock options described in Section 5
of the Employment Agreement shall be exercisable to the
extent and for such periods, and otherwise governed by,
the provisions of Section 5 of the Employment Agreement.
Amounts which are immediately payable above will be paid as promptly as
practicable after Executive's Date of Termination; provided, however, to the
extent that the Company would not be entitled to deduct any such payments under
Internal Revenue Code Section 162(m), such payments shall be made at the
earliest time that the payments would be deductible by the Company without
limitation under Section 162(m) (unless this provision is waived by the
Company).
8. Termination by the Company Without Cause and Termination by
Executive for Good Reason During the Extended Employment
Period
Upon an Executive's Date of Termination during the Extended Employment
Period by the Company without Cause (other than for non-renewal of the Term of
the Employment Agreement) or voluntarily by the Executive for Good Reason, the
Term of this Termination Agreement will immediately terminate and all
obligations of the Company and Executive under Sections 1 through 4 of this
Termination Agreement and under the Employment Agreement will immediately
cease; provided, however, that subject to the provisions of Section 13(c) the
Company shall pay Executive (or his or her beneficiaries), and Executive (or
his or her beneficiaries) shall be entitled to receive, the following:
(a) the Company shall pay to the Executive in a lump sum in cash
within thirty (30) days after the Date of Termination the aggregate of the
following amounts:
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(i) the sum of (1) the Executive's Annual Base
Salary through the Date of Termination to the
extent not theretofore paid, and (2) the
product of (x) the higher of (I) the Recent
Annual Bonus and (II) the Annual Bonus paid
or payable, assuming full satisfaction of any
performance standards or targets applicable
to determining the maximum amount payable,
including any bonus or portion thereof which
has been earned but deferred (and annualized
for any fiscal year consisting of less than
twelve (12) full months or during which the
Executive was employed for less than twelve
(12) full months), for the most recently
completed fiscal year during the Extended
Employment Period, if any (such higher amount
being referred to as the "Highest Annual
Bonus") and (y) a fraction, the numerator of
which is the number of days in the current
fiscal year through the Date of Termination,
and the denominator of which is 365;
(ii) the amount equal to the product of (1) three
and (2) the sum of (x) the Executive's Annual
Base Salary and (y) the Highest Annual Bonus;
(iii) an amount equal to the actuarial equivalent
(determined in accordance with Section 5 of
the Employment Agreement) of the benefit
under the SERP, plus, if the Date of
Termination is after 1999, the benefit under
the SERP which the Executive would receive
assuming for this purpose that the
Executive's employment continued for three
years after the Date of Termination, and
assuming that the Executive's compensation in
each of the three years is that required by
Section 3;
(iv) in lieu of any payment in respect of
performance shares, or other long term
incentive awards (including awards of phantom
shares under the EBP) granted prior to the
Extension Date or in accordance with Section
4(a), for any performance period not
completed at the Executive's Date of
Termination, an amount equal to the cash
amount payable plus the value of any shares
of Common Stock or other property (valued at
the Date of Termination) payable upon the
achievement of maximum performance (or in the
case of phantom shares, target performance
under the EBP) in respect of each tranche of
such performance shares or awards without
proration as if the Date of Termination were
the end of the performance period;
(v) a cash amount will be paid equal to the value
at the Date of Termination of any phantom
shares of Common Stock
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credited to Executive's deferral accounts
under deferral arrangements authorized under
the Employment Agreement at the Date of
Termination, less applicable withholding
taxes under Section 14(i) of the Employment
Agreement; provided, however, that the
Company may instead settle such accounts by
directing the Trustee to distribute the
assets of the "rabbi trust" and the Company
shall be relieved of its obligation under
this Employment Agreement and the Termination
Agreement to the extent that assets are so
distributed. Such amounts shall be paid or
distributed as promptly as practicable
following such Date of Termination, without
regard to any stated period of deferral
otherwise remaining in respect of such
amounts, and the payment of such amounts
shall be deemed to fully settle such
accounts; and
(vi) to the extent not covered in (i), (ii),
(iii), (iv) or (v), all vested,
nonforfeitable amounts owing or accrued at
the Date of Termination under any other
compensation and benefit plans, programs, and
arrangements in which Executive theretofore
participated will be paid under the terms and
conditions of the plans, programs, and
arrangements (and agreements and documents
thereunder) pursuant to which such
compensation and benefits were granted.
(b) Stock options then held by Executive will be exercisable and
restricted stock held by the Executive will be vested to the extent and for
such periods, and otherwise governed, by the plans and programs (and the
agreements and other documents thereunder) pursuant to which such stock options
or restricted stock were granted; provided, however, that the stock options and
restricted stock described in Section 5 of the Employment Agreement shall be
fully vested and shall be exercisable to the extent and for such periods, and
otherwise governed by, the provisions of Section 5 of the Employment Agreement.
(c) For three years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue welfare plan benefits
to the Executive and/or the Executive's family at least equal to those which
would have been provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b) of this Termination Agreement
if the Executive's employment had not been terminated or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies and their
families, provided, however, that if the Executive becomes reemployed with
another employer and is eligible to receive medical or other welfare benefits
under another employer-provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during
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<PAGE> 14
such applicable period of eligibility. If such plans, programs, or
arrangements do not allow Executive's continued participation, a cash payment
equivalent on an after-tax basis to the value of the additional benefits
Executive would have received under such employee benefit plans, programs, and
arrangements in which Executive was participating immediately prior to the Date
of Termination, as if Executive had received credit under such plans, programs,
and arrangements for service and age with the Company during such period
following Executive's Date of Termination, with such benefits payable by the
Company at the same times and in the same manner as such benefits would have
been received by Executive under such plans (it being understood that the value
of any insurance-provided benefits will be based on the premium cost to
Executive, which shall not exceed the highest risk premium charged by a carrier
having an investment grade or better credit rating); and
(d) outplacement services the scope and provider of which shall be
selected by the Executive in his sole discretion, provided by the Company at
its sole expense as incurred.
9. Definitions Relating to Termination Events.
(a) "Cause." For purposes of this Termination Agreement, "Cause"
shall mean Executive's gross misconduct (as defined herein) or willful and
material breach of Section 11 of this Termination Agreement. For purposes of
this definition, "gross misconduct" shall mean (A) a felony conviction in a
court of law under applicable federal or state laws which results in material
damage to the Company or any of its subsidiaries or materially impairs the
value of Executive's services to the Company, or (B) willfully engaging in one
or more acts, or willfully omitting to act in accordance with duties hereunder,
which is demonstrably and materially damaging to the Company or any of its
subsidiaries, including acts and omissions that constitute gross negligence in
the performance of Executive's duties under this Termination Agreement. For
purposes of this Termination Agreement and the Employment Agreement, an act or
failure to act on Executive's part shall be considered "willful" if it was done
or omitted to be done by him not in good faith, and shall not include any act
or failure to act resulting from any incapacity of Executive. Notwithstanding
the foregoing, Executive may not be terminated for Cause unless and until (1)
the Executive shall have committed acts which constitute Cause as set forth in
this Section 9(a), and (2) there shall have been delivered to him a copy of a
resolution duly adopted by a seventy-five percent (75%) affirmative vote of the
membership of the Board of Directors of the Company (the "Board") (excluding
Executive, if he is then a member) at a meeting of the Board called and held
for such purpose (after giving Executive reasonable notice specifying the
nature of the grounds for such termination and not less than 30 days to correct
the acts or omissions complained of, if correctable, and affording Executive
the opportunity, together with his counsel, to be heard before the Board)
finding that Executive was guilty of conduct which constitutes Cause as set
forth in this Section 9(a).
(b) "Change of Control." For the purpose of this Termination
Agreement, a "Change of Control" shall mean:
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(i) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the
Exchange Act) of twenty percent (20%) or more
of either (A) the then-outstanding shares of
common stock of the Company (the "Outstanding
Company Common Stock") or (B) the combined
voting power of the then-outstanding voting
securities of the Company entitled to vote
generally in the election of directors (the
"Outstanding Company Voting Securities");
provided, however, that for purposes of this
subsection (i), the following acquisitions
shall not constitute a Change of Control:
(A) any acquisition directly from the
Company, (B) any acquisition by the Company,
(C) any acquisition by any employee benefit
plan (or related trust) sponsored or
maintained by the Company or any corporation
controlled by the Company, (D) any
acquisition by a lender to the Company
pursuant to a debt restructuring of the
Company, or (E) any acquisition by any
corporation pursuant to a transaction which
complies with clauses (A), (B) and (C) of
subsection (iii) of this Section 9;
(ii) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least a
majority of the Board; provided, however,
that any individual becoming a director
subsequent to the date hereof whose election,
or nomination for election by the Company's
shareholders, was approved by a vote of at
least a majority of the directors then
comprising the Incumbent Board shall be
considered as though such individual were a
member of the Incumbent Board, but excluding,
for this purpose, any such individual whose
initial assumption of office occurs as a
result of an actual or threatened election
contest with respect to the election or
removal of directors or other actual or
threatened solicitation of proxies or
consents by or on behalf of a Person other
than the Board;
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of
all or substantially all of the assets of the
Company (a "Business Combination"), in each
case, unless, following such Business
Combination, (A) all or substantially all of
the individuals and entities who were the
beneficial owners, respectively, of the
Outstanding Company Common Stock and
Outstanding Company Voting Securities
immediately prior to such Business
Combination
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beneficially own, directly or indirectly, more than
fifty percent (50%) of, respectively, the then-
outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors,
as the case may be, of the corporation resulting from
such Business Combination (including, without
limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all
of the Company's assets either directly or through one
or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Company
Common Stock and Outstanding Company Voting Securities,
as the case may be, (B) no Person (excluding any
corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly,
twenty percent (20%) or more of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such Business Combination, or the
combined voting power of the then outstanding voting
securities of such corporation except to the extent that
such ownership existed prior to the Business Combination
and (C) at least a majority of the members of the board
of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board
at the time of the execution of the initial agreement,
or of the action of the Board, providing for such
Business Combination; or
(iv) Approval by the shareholders of the Company of
a complete liquidation or dissolution of the Company.
(c) "Disability" means the failure of Executive to render and
perform the services required of him under this Termination Agreement, for a
total of 180 days or more during any consecutive 12 month period, because of
any physical or mental incapacity or disability as determined by a physician or
physicians selected by the Company and reasonably acceptable to Executive,
unless, within 30 days after Executive has received written notice from the
Company of a proposed Date of Termination due to such absence, Executive shall
have returned to the full performance of his duties hereunder and shall have
presented to the Company a written certificate of Executive's good health
prepared by a physician selected by Company and reasonably acceptable to
Executive.
(d) "Extension Date" shall mean the first date during the Term of
the Employment Agreement on which a Change of Control occurs. Anything in this
Termination Agreement or the Employment Agreement to the contrary
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<PAGE> 17
notwithstanding, if a Change of Control occurs and if the Executive's
employment with the Company is terminated prior to the date on which the Change
of Control occurs, and if it is reasonably demonstrated by the Executive that
such termination of employment (i) was at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of Control, then
for all purposes of this Termination Agreement or the Employment Agreement the
"Extension Date" shall mean the date immediately prior to the date of such
termination of employment.
(e) "Good Reason." For purposes of this Termination Agreement and
the Employment Agreement, "Good Reason" shall mean the occurrence of any of the
following, without Executive's prior written consent:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the
Executive's position (including status,
offices, titles and reporting requirements),
authority, duties or responsibilities as
contemplated by Section 2(a) of this
Termination Agreement or the Employment
Agreement, or any other action by the Company
which results in a diminution in such
position, authority, duties or
responsibilities, excluding for this purpose
an isolated, insubstantial and inadvertent
action not taken in bad faith and which is
remedied by the Company promptly after
receipt of notice thereof given by the
Executive;
(ii) any failure by the Company to comply with any
of the provisions of this Termination
Agreement or the Employment Agreement, other
than an isolated, insubstantial and
inadvertent failure not occurring in bad
faith and which is remedied by the Company
promptly after receipt of notice thereof
given by the Executive;
(iii) the Company's requiring the Executive to be
based at any office or location other than as
provided in Section 2(b) hereof or the
Employment Agreement or the Company's
requiring the Executive to travel on Company
business to a substantially greater extent
than required of other senior executives in
similar capacities immediately prior to the
Effective Date;
(iv) any failure by the Company to perform any
material obligation under, or breach by the
Company of any material provision of, this
Termination Agreement or the Employment
Agreement;
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(v) any purported termination by the Company of the
Executive's employment otherwise than as expressly
permitted by this Termination Agreement; or
(vi) any failure by the Company to comply with and
satisfy Section 12(b) of this Termination Agreement.
For purposes of this Section, any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
(f) "Normal Retirement Date." For purposes of this Termination
Agreement, an Executive's Normal Retirement Date is his or her attainment of
age sixty-five (65).
10. Excise Tax Gross-Up.
If Executive becomes entitled to one or more payments (with a "payment"
including, without limitation, the vesting of an option or other non-cash
benefit or property), whether pursuant to the terms of this Termination
Agreement or any other plan, arrangement, or agreement with the Company or any
affiliated company (the "Total Payments"), which are or become subject to the
tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code") (or any similar tax that may hereafter be imposed) (the "Excise
Tax"), the Company shall pay to Executive at the time specified below an
additional amount (the "Gross-up Payment") (which shall include, without
limitation, reimbursement for any penalties and interest that may accrue in
respect of such Excise Tax) such that the net amount retained by Executive,
after reduction for any Excise Tax (including any penalties or interest
thereon) on the Total Payments and any federal, state and local income or
employment tax and Excise Tax on the Gross-up Payment provided for by this
Section 10, but before reduction for any federal, state, or local income or
employment tax on the Total Payments, shall be equal to the sum of (a) the
Total Payments, and (b) an amount equal to the product of any deductions
disallowed for federal, state, or local income tax purposes because of the
inclusion of the Gross-up Payment in Executive's adjusted gross income
multiplied by the highest applicable marginal rate of federal, state, or local
income taxation, respectively, for the calendar year in which the Gross-up
Payment is to be made.
For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax:
(a) The Total Payments shall be treated as "parachute payments"
within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) of the Code shall be treated
as subject to the Excise Tax, unless, and except to the extent that, in the
written opinion of independent compensation consultants or auditors of
nationally recognized standing ("Independent Advisors") selected by the Company
and reasonably acceptable to Executive, the Total Payments (in whole or in
part) do not constitute parachute
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payments, or such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered before a Change of
Control within the meaning of Section 280G(b)(4)(B) of the Code in excess of
the base amount within the meaning of Section 280G(b)(3) of the Code or are
otherwise not subject to the Excise Tax;
(b) The amount of the Total Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of (i) the total amount
of the Total Payments or (ii) the total amount of excess parachute payments
within the meaning of Section 280G(b)(1) of the Code (after applying clause (a)
above); and
(c) The value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Independent Advisors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-up Payment,
Executive shall be deemed (A) to pay federal income taxes at the highest
marginal rate of federal income taxation for the calendar year in which the
Gross-up Payment is to be made; (B) to pay any applicable state and local
income taxes at the highest marginal rate of taxation for the calendar year in
which the Gross-up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes if paid in such year (determined without regard to limitations on
deductions based upon the amount of Executive's adjusted gross income); and (C)
to have otherwise allowable deductions for federal, state, and local income tax
purposes at least equal to those disallowed because of the inclusion of the
Gross-up Payment in Executive's adjusted gross income. In the event that the
Excise Tax is subsequently determined to be less than the amount taken into
account hereunder at the time the Gross-up Payment is made, Executive shall
repay to the Company at the time that the amount of such reduction in Excise
Tax is finally determined (but, if previously paid to the taxing authorities,
not prior to the time the amount of such reduction is refunded to Executive or
otherwise realized as a benefit by Executive) the portion of the Gross-up
Payment that would not have been paid if such Excise Tax had been applied in
initially calculating the Gross-up Payment, plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time the Gross-up Payment is made (including by reason of any
payment the existence or amount of which cannot be determined at the time of
the Gross-up Payment), the Company shall make an additional Gross-up Payment in
respect of such excess (plus any interest and penalties payable with respect to
such excess) at the time that the amount of such excess is finally determined.
The Gross-up Payment provided for above shall be paid on the 30th day
(or such earlier date as the Excise Tax becomes due and payable to the taxing
authorities) after it has been determined that the Total Payments (or any
portion thereof) are subject to the Excise Tax; provided, however, that if the
amount of such Gross-up Payment or portion thereof cannot be finally determined
on or before such
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day, the Company shall pay to Executive on such day an estimate, as determined
by the Independent Advisors, of the minimum amount of such payments and shall
pay the remainder of such payments (together with interest at the rate provided
in Section 1274(b)(2)(B) of the Code), as soon as the amount thereof can be
determined. In the event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess shall constitute a
loan by the Company to Executive, payable on the fifth day after demand by the
Company (together with interest at the rate provided in Section 1274(b)(2)(B)
of the Code). If more than one Gross-up Payment is made, the amount of each
Gross-up Payment shall be computed so as not to duplicate any prior Gross-up
Payment.
Notwithstanding the foregoing, the Executive may at any time elect to
demand the payment of the amount which the Executive, in accordance with an
Opinion of counsel to the Executive, determines to be the Gross-Up Payment.
Any such demand by the Executive shall be made by delivery to the Company of a
written notice which specifies the Gross-Up Payment determined by the Executive
and an Opinion of counsel to the Executive regarding such Gross-Up Payment
(such written notice and Opinion collectively, the "Executive's
Determination"). Within fourteen (14) days after the Executive's delivery of
the Executive's Determination to the Company, the Company shall
(i) pay to the Executive the Gross-Up Payment set
forth in the Executive's Determination
unless
(ii) the Company shall deliver to the Executive a
written notice specifying the Gross-Up Payment
determined by the Company together with an Opinion of
the Company's counsel regarding such Gross-Up Payment
(such written notice and Opinion collectively, "the
Company's Determination") and shall pay to the Executive
the Gross-Up Payment specified in the Company's
Determination.
For purposes of this Section 10, "Opinion" shall mean an unqualified legal
opinion that a Gross-Up Payment has been calculated in accordance with this
Section 10 and applicable law, unless such Opinion shall state therein that an
unqualified Opinion cannot be given as to any Gross-Up Payment. In such case,
the Opinion shall state that the Gross-Up Payment set forth therein both (A) is
more likely than not to be in accordance with this Section 10 and applicable
law, and (B) is more likely to be in accordance with this Section 10 and
applicable law than any other Gross-Up Payment.
The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature
of such claim and
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the date on which such claim is requested to be paid. The Executive shall not
pay such claim prior to the expiration of the 30-day period following the date
on which it gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in
writing from time to time, including, without
limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 10, the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or to contest
the claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service
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or any other taxing authority. If, after the receipt by the Executive of an
amount advanced by the Company pursuant to this Section 10, the Executive
becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the requirements of
this Section 10) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced by the
Company pursuant to this Section 10, a determination is made that the Executive
shall not be entitled to any refund with respect to such claim and the Company
does not notify the Executive in writing of its intent to contest such denial
of refund prior to the expiration of thirty (30) days after such determination,
then such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
11. Non-Competition and Non-Disclosure; Executive Cooperation.
(a) Non-Competition. Without the consent in writing of the Board,
upon the Executive's Date of Termination for any reason, Executive will not,
for a period of one year thereafter, acting alone or in conjunction with
others, directly or indirectly (i) engage (either as owner, investor, partner,
stockholder, employer, employee, consultant, advisor or Director) in any
business in the continental United States in which he has been directly
engaged, or has supervised as an executive, during the last two years prior to
such Date of Termination and which is directly in competition with a business
then conducted by the Company or any of its subsidiaries; (ii) induce any
customers of the Company or any of its subsidiaries with whom Executive has had
contacts or relationships, directly or indirectly, during and within the scope
of his employment with the Company or any of its subsidiaries, to curtail or
cancel their business with such companies or any of them; or (iii) induce, or
attempt to influence, any employee of the Company or any of its subsidiaries to
terminate employment. The provisions of subparagraphs (i), (ii), and (iii)
above are separate and distinct commitments independent of each of the other
subparagraphs. It is agreed that the ownership of not more than one percent of
the equity securities of any company having securities listed on an exchange or
regularly traded in the over-the-counter market shall not, of itself, be deemed
inconsistent with clause (i) of this paragraph (a).
(b) Non-Disclosure. Executive shall not at any time (including
following Executive's Date of Termination for any reason), disclose, use,
transfer, or sell, except in the course of employment with or other service to
the Company, any confidential or proprietary information of the Company or any
of its subsidiaries so long as such information has not otherwise been
disclosed or is not otherwise in the public domain, except as required by law
or pursuant to legal process.
(c) Cooperation With Regard to Litigation. Executive agrees to
cooperate with the Company (including following Executive's Date of Termination
for any reason), provided that such cooperation would not unreasonably
interfere with the business activities or employment obligations of the
Executive, by making himself
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available to testify on behalf of the Company or any subsidiary or affiliate of
the Company, in any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, and to assist the Company, or any subsidiary
or affiliate of the Company, in any such action, suit, or proceeding, by
providing information and meeting and consulting with the Board and its
representatives or counsel, or representatives or counsel of or to the Company,
or any subsidiary or affiliate of the Company, as requested; provided, however,
this subsection (c) shall not apply to any action between the Executive and the
Company to enforce this Termination Agreement or the Employment Agreement. The
Company agrees to reimburse Executive, on an after-tax basis, for all expenses
actually incurred in connection with his provision of testimony or assistance.
(d) Release of Employment Claims. Executive agrees, as a
condition to receipt of the termination payments and benefits provided
hereunder, that he will execute a release agreement, in a form satisfactory to
the Company, releasing any and all claims arising out of Executive's
employment, including claims arising under the Employment Agreement (other than
claims made pursuant to any indemnities provided under the articles or by-laws
of the Company, under any directors or officers liability insurance policies
maintained by the Company or enforcement of this Termination Agreement).
(e) Survival. Notwithstanding any provision of this Termination
Agreement to the contrary, the provisions of this Section 11 shall survive the
termination or expiration of this Termination Agreement, shall be valid and
enforceable, and shall be a condition precedent to the Executive (or his or her
beneficiaries) receiving any amounts payable hereunder.
12. Governing Law; Expense Reimbursement.
(a) Governing Law. This Termination Agreement is governed by and
is to be construed, administered, and enforced in accordance with the laws of
the State of Michigan, without regard to Michigan conflicts of law principles,
except insofar as the Delaware General Corporation Law and federal laws and
regulations may be applicable. If under the governing law, any portion of this
Termination Agreement is at any time deemed to be in conflict with any
applicable statute, rule, regulation, ordinance, or other principle of law,
such portion shall be deemed to be modified or altered to the extent necessary
to conform thereto or, if that is not possible, to be omitted from this
Termination Agreement. The invalidity of any such portion shall not affect the
force, effect, and validity of the remaining portion hereof. If any court
determines that any provision of Section 11 is unenforceable because of the
duration or geographic scope of such provision, it is the parties' intent that
such court shall have the power to modify the duration or geographic scope of
such provision, as the case may be, to the extent necessary to render the
provision enforceable and, in its modified form, such provision shall be
enforced.
(b) Expense Reimbursement. All reasonable costs and expenses
(including fees and disbursements of counsel) incurred by Executive in
negotiating the
21
<PAGE> 24
terms and conditions of this Termination Agreement shall be paid on behalf of
or reimbursed to Executive promptly by the Company. All reasonable costs and
expenses (including fees and disbursements of counsel) incurred by Executive in
seeking to enforce rights pursuant to this Termination Agreement shall be paid
on behalf of or reimbursed to Executive promptly by the Company, whether or not
Executive is successful in asserting such rights; provided, however, that no
reimbursement shall be made of such expenses relating to any unsuccessful
assertion of rights if and to the extent that Executive's assertion of such
rights was in bad faith or frivolous, as determined by independent counsel
mutually acceptable to Executive and the Company and made without reference to
or not related to a Change of Control. During the Extended Employment Period,
the Company agrees to maintain a minimum amount in a rabbi trust (or to provide
to the trustee of such rabbi trust an irrevocable letter of credit in an amount
equal to such minimum amount and callable at will by such trustee) sufficient
to fund the aggregate present value of all liabilities potentially owed to the
Executive hereunder or under the Employment Agreement as if he had incurred a
termination of employment by the Company other than for Cause.
13. Miscellaneous.
(a) Integration. This Termination Agreement modifies and
supersedes any and all prior agreements and understandings between the parties
hereto with respect to the employment of Executive by the Company and its
subsidiaries, except for the Employment Agreement and contracts relating to
compensation under executive compensation and employee benefit plans of the
Company. Subject to the rights, benefits and obligations provided for in such
executive compensation contracts and employee benefit plans of the Company,
this Termination Agreement and the Employment Agreement together constitute the
entire agreement among the parties with respect to the matters herein provided,
and no modification or waiver of any provision hereof shall be effective unless
in writing and signed by the parties hereto. Executive shall not be entitled
to any payment or benefit under this Termination Agreement which duplicates a
payment or benefit received or receivable by Executive under such prior
agreements and understandings with the Company or under any benefit or
compensation plan of the Company.
(b) Non-Transferability. Neither this Termination Agreement nor
the rights or obligations hereunder of the parties hereto shall be transferable
or assignable by Executive, except in accordance with the laws of descent and
distribution or as specified in Section 13(c). The Company may assign this
Termination Agreement and the Company's rights and obligations hereunder, and
shall assign this Termination Agreement, to any Successor (as hereinafter
defined) which, by operation of law or otherwise, continues to carry on
substantially the business of the Company prior to the event of succession, and
the Company shall, as a condition of the succession, require such Successor to
agree to assume the Company's obligations and be bound by this Termination
Agreement. For purposes of this Termination Agreement, "Successor" shall mean
any person that succeeds to, or has the practical ability to control (either
immediately or with the passage of time), the Company's business
22
<PAGE> 25
directly, by merger or consolidation, or indirectly, by purchase of the
Company's voting securities or all or substantially all of its assets, or
otherwise.
(c) Beneficiaries. Executive shall be entitled to designate (and
change, to the extent permitted under applicable law) a beneficiary or
beneficiaries to receive any compensation or benefits payable hereunder
following Executive's death.
(d) Notices. Whenever under this Termination Agreement it becomes
necessary to give notice, such notice shall be in writing, signed by the party
or parties giving or making the same, and shall be served on the person or
persons for whom it is intended or who should be advised or notified, by
Federal Express or other similar overnight service or by certified or
registered mail, return receipt requested, postage prepaid and addressed to
such party at the address set forth below or at such other address as may be
designated by such party by like notice:
If to the Company: Walbro Corporation
6242 Garfield Street
Cass City, Michigan 48726-1397
Attention: Secretary
If to Executive: Frank E. Bauchiero
P.O. Box 790, 12232 Ledges Dr.
Roscoe, ILL 61073
With copies to: Roger C. Siske, Esquire
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
If the parties by mutual agreement supply each other with telecopier numbers
for the purposes of providing notice by facsimile, such notice shall also be
proper notice under this Termination Agreement. In the case of Federal Express
or other similar overnight service, such notice or advice shall be effective
when sent, and, in the cases of certified or registered mail, shall be
effective 2 days after deposit into the mails by delivery to the U.S. Post
Office.
(e) Reformation. The invalidity of any portion of this
Termination Agreement shall not deemed to render the remainder of this
Termination Agreement invalid.
(f) Headings. The headings of this Termination Agreement are for
convenience of reference only and do not constitute a part hereof.
(g) No General Waivers. The failure of any party at any time to
require performance by any other party of any provision hereof or to resort to
any remedy provided herein or at law or in equity shall in no way affect the
right of such party to
23
<PAGE> 26
require such performance or to resort to such remedy at any time thereafter,
nor shall the waiver by any party of a breach of any of the provisions hereof
be deemed to be a waiver of any subsequent breach of such provisions. No such
waiver shall be effective unless in writing and signed by the party against
whom such waiver is sought to be enforced.
(h) No Obligation To Mitigate. Executive shall not be required to
seek other employment or otherwise to mitigate Executive's damages hereunder on
or after Executive's Date of Termination, nor shall the amount of any payment
hereunder be reduced by any compensation earned by the Executive as a result of
employment by another employer; provided, however, that, to the extent
Executive receives from a subsequent employer health or other insurance
benefits that are substantially similar to the benefits referred to in this
Termination Agreement, any such benefits to be provided by the Company to
Executive following the Term shall be correspondingly reduced.
(i) No Offsets. The amounts required to be paid by the Company to
Executive pursuant to this Termination Agreement shall not be subject to
offset, counterclaim, recoupment, defense or other claim, right or action which
the Company may have against Executive or others, other than with respect to
any amounts that are owed to the Company by Executive due to his receipt of
Company funds as a result of his fraudulent activity. The foregoing and other
provisions of this Termination Agreement notwithstanding, all payments to be
made to Executive under this Termination Agreement will be subject to required
withholding taxes and other required deductions.
(j) Successors and Assigns. This Termination Agreement shall be
binding upon and shall inure to the benefit of Executive, his heirs, executors,
administrators and beneficiaries, and shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
14. Indemnification.
All rights to indemnification by the Company now existing in favor of
Executive as provided in the Company's Certificate of Incorporation or By-Laws
or pursuant to other agreements in effect on or immediately prior to the
Extension Date shall continue in full force and effect from the Extension Date
(including all periods after the expiration of the Term), and the Company shall
also advance expenses for which indemnification may be ultimately claimed as
such expenses are incurred to the fullest extent permitted under applicable
law, subject to any requirement that Executive provide an undertaking to repay
such advances if it is ultimately determined that Executive is not entitled to
indemnification; provided, however, that any determination required to be made
with respect to whether Executive's conduct complies with the standards
required to be met as a condition of indemnification or advancement of expenses
under applicable law and the Company's Certificate of Incorporation, By-Laws,
or other agreement shall be made by independent counsel mutually acceptable to
Executive and the Company (except to the extent otherwise
24
<PAGE> 27
required by law). After the Extension Date, the Company shall not amend its
Certificate of Incorporation or By-Laws or any agreement in any manner which
adversely affects the rights of Executive to indemnification thereunder. Any
provision contained herein notwithstanding, this Termination Agreement shall
not limit or reduce any rights of Executive to indemnification pursuant to
applicable law. In addition, the Company will maintain directors' and
officers' liability insurance in effect and covering acts and omissions of
Executive, during the Term and for a period of six years thereafter, on terms
substantially no less favorable as those in effect on the Extension Date.
IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company
has caused this instrument to be duly executed as of the day and year first
above written.
WALBRO CORPORATION
By: /s/ L.E. Althaver
------------------------------
Name: L.E. Althaver
------------------------------
Title: Chairman & CEO
------------------------------
FRANK E. BAUCHIERO
/s/ Frank E. Bauchiero
------------------------------
25
<PAGE> 1
EXHIBIT 13.1
COMMON STOCK PRICE
AND DIVIDEND
INFORMATION
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarters Ended Market Price Dividends
High Low Per Share
-------- -------- ---------
<S> <C> <C> <C>
December 31, 1996.......................... 21 1/4 18 1/4 $.10
September 30, 1996......................... 21 18 1/4 .10
June 30, 1996.............................. 22 1/2 19 5/8 .10
March 31, 1996............................. 20 3/4 17 3/4 .10
----
$.40
====
December 31, 1995.......................... 21 17 1/4 $.10
September 30, 1995......................... 23 1/2 17 3/4 .10
June 30, 1995.............................. 20 3/4 17 1/2 .10
March 31, 1995............................. 20 17 1/4 .10
----
$.40
====
</TABLE>
On February 18, 1997, the closing per share price was $18.875. The above prices
do not include retail markup, markdown, or commission. As of February 18, 1997,
the approximate number of shareholders was 1,106. Walbro is traded on the
NASDAQ National Market ("NNM") and reported by NNM under the symbol "WALB".
- --------------------------------------------------------------------------------
SELECTED
FINANCIAL DATA
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(In Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C>
From Continuing Operations:
Net Sales...................... $585,389 $459,272 $325,205 $273,463 $241,416
Cost of Sales.................. 488,134 377,755 261,501 216,804 185,712
Income Before Cumulative Effect
of Accounting Change........ 11,229 13,830 14,595 12,567 12,526
Income Per Share Before
Cumulative Effect of
Accounting Change (fully
diluted).................... 1.30 1.61 1.70 1.47 1.58
Cash Dividends Per Share......... 0.40 0.40 0.40 0.40 0.40
Working Capital.................. 68,275 95,713 58,378 50,187 43,742
Total Assets..................... 589,649 493,473 257,366 215,295 193,020
Long-Term Debt................... 291,723 233,389 66,136 52,392 49,638
Stockholders' Equity............. 137,733 135,427 127,915 114,146 99,910
</TABLE>
12
<PAGE> 2
MANAGEMENT'S
DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS
OF OPERATIONS
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
The following is a discussion of the financial condition and results of
operations of the Company for the years ended December 31, 1994, 1995 and 1996.
The information contained in the following discussion reflects the results of
the Fuel Systems Business of Dyno Industrier A.S (Dyno) subsequent to its
acquisition on July 27, 1995.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO 1995, 1995 COMPARED TO 1994
SALES - The Company reported record sales in 1996 of $585.4 million, an increase
of 27.5%. Most of the 1996 sales increase was due to the inclusion of a full
year of Dyno sales ($214.4 million) in 1996 compared to the inclusion of only
five months of Dyno sales ($88.5 million) in 1995. Sales in 1995 were $459.3
million compared to sales of $325.2 million in 1994, an increase of 41.2% (14.0%
increase without Dyno sales). On a percentage basis, sales to the automotive
market increased 37.9% in 1996 (2.4% decrease without Dyno sales) compared to a
60.4% increase in 1995 (15.8% increase without Dyno sales). Sales to the small
engine market increased 4.1% in 1996 compared to a 10.6% increase in 1995.
Aftermarket sales were flat in both 1996 and 1995.
Sales of the Company's original equipment automotive products were a record
$438.6 million in 1996 compared to $318.1 million in 1995 and $198.3 million in
1994. In 1996, all of the automotive product sales increase was contributed by
Dyno sales as U.S. based automotive product sales declined by 2.4%. The Dyno
increase was primarily the result of including a full year of sales in 1996
versus including only five months of Dyno sales in 1995. U.S. based automotive
product sales were lower in 1996 because of increased in-house production of
fuel pumps and fuel modules by one of the Company's largest customers. Overall,
sales of fuel pumps declined 16.5% and sales of fuel modules declined 2.9%. The
decline in sales of fuel modules due to in-house production by a customer was
mostly offset by increased sales of fuel modules to the company's largest
customer. Sales of fuel rails increased by 7.8% due to sales of the Company's
new plastic fuel rails.
In 1995, the Company was able to increase U.S. based automotive product sales
(representing all automotive sales other than those of Dyno) by $31.4 million or
15.8% in spite of the U.S. light vehicle market decline of 2.1%. The Company was
able to record a sales increase of its U.S. based automotive products due to
increased sales of fuel modules (up 23.7%) because of increased use of fuel
modules in the light truck market and increased sales of fuel modules with
higher dollar content. The increase in fuel module 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. Sales of fuel pumps decreased by 3.3%
and sales of fuel rails declined by 14.9% in 1995 compared to 1994 because of
the decline in U.S. passenger car sales during 1995. Sales of component parts in
1996 were $26.1 million compared to $20.5 million in 1995 and $3.8 million in
1994.
Sales of the Company's small engine products also hit a record level of $117.1
million in 1996, up from $112.6 million in 1995 and $101.8 million in 1994.
Overall sales growth of small engine products was 4.1% in 1996 compared to 10.6%
during 1995. Much of the 1996 increase in small engine product sales came from
increased sales of ignition systems and to a lessor extent float feed
carburetors in the U.S. and float feed carburetors in China. Sales of ignition
systems were $14.3 million in 1996, an increase of 81.0% compared to $7.9
million in 1995 as customer demand has grown for this expanding family of
products. Sales of float feed carburetors in the U.S. increased 5.8% to $29.0
million compared to $27.4 million in 1995, while sales of float feed carburetors
in China increased 23.9% to $5.7 million compared to $4.6 million in 1995. These
increases were partially offset by a decline in sales of diaphragm carburetors.
Sales of diaphragm carburetors decreased 6.3% to $68.1 million compared to $72.7
million in 1995, with declines 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 parts of the U.S. and declines in Japan because
of lower demand and because of the lower yen-dollar exchange rate.
In 1995, sales of diaphragm carburetors increased 16.1% to $72.7 million
compared to $62.6 million in 1994. 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
13
<PAGE> 3
MANAGEMENT'S
DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS
OF OPERATIONS
(continued)
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
by the California Air Resources Board for customers' engines during that period.
Sales of float feed carburetors decreased 8.7% in 1995 with $27.4 million of
sales in 1995 versus $30.0 million in 1994. 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. Sales of small engine ignition systems were
$7.9 million in 1995 compared to $7.1 million in 1994. In addition, carburetor
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.
Management believes that ignition systems will play a more significant role in
the future as small engines become subject to more stringent emissions
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 effective during the 2002 to 2005 period. The
Company has successfully refined existing carburetors to meet the first set of
standards and company engineers are developing new technology to meet the
subsequent requirements.
In response to the more stringent regulations, the Company is integrating its
carburetor and ignition technology to develop engine management systems which
will electronically control both fuel delivery and ignition functions to limit
exhaust emissions. These new products are expected to command higher unit
prices. The more stringent regulations could significantly reduce the number of
units the Company sells of its current carburetor models, especially diaphragm
carburetors, as these regulations could force manufacturers to replace
gasoline-powered lawn and garden equipment with electric-powered equipment.
The Company's Aftermarket business includes both automotive and small engine
products. Aftermarket sales were $25.1 million in 1996 compared to $25.2 million
in 1995 and $25.1 million in 1994. Aftermarket sales were flat in 1996 because
of increased in-house production by one of the Company's Aftermarket customers.
Aftermarket sales in 1995 were flat 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 began to manufacture more of its requirements in-house.
COST OF SALES - Cost of sales was $488.1 million in 1996 compared to $377.8
million in 1995 and $261.5 million in 1994. Cost of sales as a percent of sales
was 83.4% in 1996 compared to 82.3% in 1995 and 80.4% in 1994. Gross margin
declined in 1996 compared to 1995 because of lower margins in both automotive
and small engine products. Higher margins from North American automotive
products were more than offset by new plant start-up costs in Brazil and from
the increased share of sales represented by Dyno plastic tank volume. Dyno
products carry lower margins than the Company's other automotive products
because of the large amount of purchased components included in the Dyno sales.
During 1996, Dyno gross margin was 11.7% compared to 13.1% in 1995 and was lower
primarily because of the new plant start-up costs in Belgium and lower volume at
the United Kingdom plant and the Norway plant. Lower margins in small engine
products resulted primarily from lower volumes of diaphragm carburetors, the new
plant start-up costs in Tianjin, China and the weaker yen-dollar exchange rate.
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. Also contributing
to the lower margins were continuing startup costs at the Company's Ossian,
Indiana plastic fuel tank plant.
Margins declined for small engine products in 1995 because of lower volume of
float feed carburetors in the U.S. and lower gross margin at the Company's
Singapore manufacturing facility due to lower production volumes and the
stronger Singapore Dollar
14
<PAGE> 4
MANAGEMENT'S
DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS
OF OPERATIONS
(continued)
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
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.
SELLING AND ADMINISTRATIVE EXPENSES - Selling and administrative (S & A)
expenses were $51.5 million in 1996, an increase of 26.2% compared to $40.8
million in 1995. The full year of Dyno S & A expenses in 1996 caused a large
portion of the increase as the increase excluding Dyno was 10.1%. The remainder
of the 1996 S & A increase came primarily from new plants in Brazil, China and
the new Tucson Precision Products plant. which produces aluminum diecastings for
carburetors. In 1995, S & A expenses increased by 50.6% (30.7% without Dyno)
compared to $27.1 million in 1994 and they increased because of increased
spending for expansion of the Company's automotive systems center in Auburn
Hills, Michigan and automotive test center in Caro, Michigan and for general
expenses related to adding manufacturing capacity in Meriden, Connecticut. As a
percent of sales, S & A expenses were 8.8% in 1996, 8.9% in 1995 and 8.3% in
1994.
RESEARCH AND DEVELOPMENT EXPENSES - Research and development (R & D) expenses
were $18.4 million in 1996, an increase of 10.2% compared to $16.7 million in
1995. Dyno R & D expenses accounted for all of the increase as R & D expenses
excluding Dyno decreased by 1.0%. In 1995, R & D expenses increased by 36.9%
(14.4% without Dyno) compared to $12.2 million in 1994 to support the new
product development efforts required by emission regulations for both automotive
and small engine products.
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. 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 was
amortized as foreign currency exchange loss. In 1994 the Company 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
1994. The foreign currency exchange gain in 1996 was negligible compared to a
loss of $1.5 million in 1995 and $2.6 million in 1994. See Note 11 of the Notes
to the Consolidated Financial Statements.
NET INTEREST EXPENSE - Net interest expense was $17.1 million in 1996 compared
to $11.1 million in 1995 and $3.8 million in 1994. To finance the Dyno
acquisition in July 1995, the Company issued $110 million in aggregate principal
amount of its 9.875% Senior Notes and obtained a new $135 million secured credit
facility. Borrowing levels were higher in 1996 to support the higher level of
capital expenditures for new facilities. 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 1995 increased interest
expense compared to 1994 resulted from higher interest rates and increased
borrowings for part of the year. The average cost of borrowing was 8.1% in 1996,
7.4% in 1995 and 5.9% in 1994. See Note 5 of the Notes to Consolidated Financial
Statements for details of the borrowings.
INCOME TAXES - The provision for income taxes was $3.1 million in 1996 compared
to $1.3 million in 1995 and $5.8 million in 1994. The provision was higher in
1996 because of a lower research and development (R&D) tax credit of $1.1
million in 1996 compared to $3.0 million in 1995. These tax credits 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 in 1995 and lower
taxable income caused the lower provision for income taxes in 1995 compared to
1994. The R & D tax credits resulted in an effective tax rate of 29.6% for 1996
and 10.8% for 1995 compared to 32.5% for 1994.
JOINT VENTURE INCOME - The Company's equity in income of joint ventures was $4.2
million in 1996 compared to $3.9 million in 1995 and $2.6 million in 1994. The
increase in 1996 resulted from increased income at Marwal Systems (France)
partially offset by losses at Korea Automotive Fuel Systems. The increase in
1995 resulted primarily from increased income at Marwal Systems.
NET INCOME AND INCOME PER SHARE - Net income for 1996 was $11.2 million, a
15
<PAGE> 5
MANAGEMENT'S
DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS
OF OPERATIONS
(continued)
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
decrease of 18.8% compared to $13.8 million in 1995 and $14.6 million in 1994.
Net income per share was $1.30 for 1996 compared with $1.61 for 1995 and $1.70
for 1994. Net income as a percent of sales was 1.9% in 1996, 3.0% in 1995, and
4.5% in 1994. The decline in net income as a percent of sales in both 1996 and
1995 was related to the Dyno acquisition which generated lower profit margins in
all of 1996 and part of 1995 and increased interest expense.
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 52% of the Company's sales during
1996 were derived from international manufacturing operations in Europe, Asia
and South America. The financial position and the results of operations of the
Company's subsidiaries in Europe (36.6% of sales), Asia (8.2% of sales) and
South America (0.3% of sales) are measured in local currency of the countries in
which they operate and translated into U.S. dollars. The effects of foreign
currency fluctuations in Europe, South America and Asia, except Singapore, are
somewhat mitigated by the fact that expenses are generally incurred in the same
currencies in which sales are generated and the reported income of these
subsidiaries will be higher or lower depending on a weakening or strengthening
of the U.S. dollar. For the Company's subsidiaries in Singapore and Mexico (9.2%
of sales) the expenses are generally incurred in the local currency, but sales
are generated in U.S. dollars; therefore, results of operations are more
directly influenced by a weakening or strengthening of the local currency.
Approximately 52% of the Company's net assets at December 31, 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 shareholders' equity will fluctuate depending upon the
weakening or strengthening of the U.S. dollar. In addition, the Company has
equity investments in unconsolidated joint ventures in France, Brazil, Japan,
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
its transaction commitments in foreign currencies and to hedge its equity
investment in certain foreign joint ventures.
LIQUIDITY AND CAPITAL RESOURCES - As of December 31, 1996, the Company had $23.2
million outstanding in short-term debt, including current portion of long-term
debt, and $291.7 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, 1996 are $1.1 million in 1997, $7.7 million in
1998, $7.4 million in 1999, $121.6 million in 2000, $7.6 million in 2001 and
$147.5 million thereafter.
The net purchase price of the Dyno acquisition was approximately $113 million
(approximately $129 million less approximately $16 million in cash acquired by
the Company). The Company financed the acquisition through the combination of a
private placement of $110 million in aggregate principal amount of its 9.875%
Senior Notes due 2005 and a new $135 million secured Credit Facility with a
group of commercial banks. At December 31, 1996, the Company had available to it
approximately $14 million under the Credit Facility. In February 1997, the
Company issued 2,760,000 shares or $69 million of Convertible Trust Preferred
Securities. The proceeds were used to pay down borrowings on the Credit
Facility.
As of December 31, 1996, accounts receivable amounted to $127.0 million, an
increase of $13.7 million, compared to $113.3 million at December 31, 1995. The
average collection period at December 31, 1996 was 78.9 days compared to 71.2
days at December 31, 1995.
The Company's plans for 1997 capital expenditures for facilities, equipment
and tooling total approximately $60 million. The 1997 expansion plan includes
new processing equipment, tooling and a Technical Center in Europe. The Company
intends to
16
<PAGE> 6
MANAGEMENT'S
DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS
OF OPERATIONS
(continued)
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
finance the capital expenditures with cash from operations, supplemented by
borrowings under the Credit Facility and potential lease financing.
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
and by access to the capital markets. Management expects to replace these credit
facilities as they expire with comparable facilities.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 - The statements contained in this discussion that are not historical facts
are forward-looking statements subject to the safe harbor created by the
Securities Litigation Reform Act of 1995. Walbro Corporation cautions readers of
this discussion that a number of important factors could cause Walbro's actual
consolidated results for 1997 and beyond to differ materially from those
expressed in any forward-looking statements made by, or on behalf of, Walbro.
These important factors include, 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
integration of the Dyno acquisition into Walbro's overall business, impact of
environmental regulations, continued availability of adequate funding sources,
currency and other risks inherent in international sales, and general economic
and business conditions. These important factors and other factors which could
affect Walbro's results are more fully discussed in Walbro's filings with the
Securities and Exchange Commission. Readers of this discussion are referred to
such filings.
17
<PAGE> 7
CONSOLIDATED
BALANCE SHEETS
December 31,
1996 and 1995
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
ASSETS -------- --------
(In Thousands,
Except Share Data)
<S> <C> <C>
Current Assets:
Cash...................................................... $ 18,213 $ 19,792
Accounts receivable, net.................................. 126,509 113,346
Inventories............................................... 50,588 50,723
Prepaid expenses and other................................ 11,235 10,966
Deferred and refundable income taxes...................... 4,971 4,877
-------- --------
Total Current Assets................................... 211,516 199,704
-------- --------
Plant and Equipment, at cost:
Land...................................................... 5,190 3,870
Buildings and improvements................................ 69,741 54,116
Machinery and equipment................................... 285,376 211,707
-------- --------
360,307 269,693
Less--Accumulated depreciation............................ 80,420 63,928
-------- --------
Net Plant and Equipment................................ 279,887 205,765
-------- --------
Other Assets:
Funds held for construction............................... 1,140 1,102
Joint ventures............................................ 28,955 23,466
Investments............................................... 5,727 9,224
Goodwill, net............................................. 35,998 33,299
Notes receivable.......................................... 1,268 460
Deferred and refundable income taxes...................... 5,414 2,805
Other..................................................... 19,744 17,648
-------- --------
Total Other Assets..................................... 98,246 88,004
-------- --------
Total Assets........................................... $589,649 $493,473
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt......................... $ 1,089 $ 1,086
Bank and other borrowings................................. 22,072 14,921
Accounts payable.......................................... 77,939 52,774
Accrued liabilities....................................... 41,276 34,352
Dividends payable......................................... 865 858
-------- --------
Total Current Liabilities.............................. 143,241 103,991
-------- --------
Long-Term Liabilities:
Long-term debt, less current portion...................... 291,723 233,389
Pension obligations and other............................. 10,718 15,102
Deferred income taxes..................................... 4,914 3,927
Minority interest......................................... 1,320 1,637
-------- --------
Total Long-Term Liabilities............................ 308,675 254,055
-------- --------
Stockholders' Equity:
Common stock, $.50 par value; authorized 25,000,000;
outstanding 8,652,737 in 1996 and 8,579,976 in 1995.... 4,326 4,290
Paid-in capital........................................... 65,674 64,381
Retained earnings......................................... 74,039 66,256
Deferred compensation..................................... (967) (817)
Minimum pension liability adjustment...................... -- (63)
Unrealized gain on securities available for sale.......... 688 827
Cumulative translation adjustments........................ (6,027) 553
-------- --------
Total Stockholders' Equity............................. 137,733 135,427
-------- --------
Total Liabilities and Stockholders' Equity............. $589,649 $493,473
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
18
<PAGE> 8
CONSOLIDATED STATEMENTS
OF INCOME
For the years ended
December 31,
1996, 1995 and 1994
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(In Thousands, Except Per Share Data)
<S> <C> <C> <C>
Net Sales.................................... $585,389 $459,272 $325,205
Costs and Expenses:
Cost of sales.............................. 488,134 377,755 261,501
Selling and administrative expenses........ 51,469 40,753 27,119
Research and development expenses.......... 18,400 16,742 12,199
-------- -------- --------
Operating Income............................. 27,386 24,022 24,386
Other Expense (Income):
Interest expense, net of capitalized
interest of $3,683,000 in 1996 and
$518,000 in 1995........................ 19,833 12,071 3,862
Interest income............................ (2,716) (960) (91)
Foreign currency exchange (gain) loss...... (70) 1,483 2,602
Other...................................... (63) (255) 111
-------- -------- --------
Income Before Provision for Income Taxes,
Minority Interest and Equity in Income of
Joint Ventures............................. 10,402 11,683 17,902
Provision for Income Taxes................... 3,075 1,258 5,824
Minority Interest............................ 285 472 92
Equity in Income of Joint Ventures........... (4,187) (3,877) (2,609)
-------- -------- --------
Net Income................................... $ 11,229 $ 13,830 $ 14,595
======== ======== ========
Net Income Per Share......................... $ 1.30 $ 1.61 $ 1.70
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
19
<PAGE> 9
CONSOLIDATED STATEMENTS
OF STOCKHOLDERS' EQUITY
For the years ended
December 31,
1996, 1995 and 1994
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
<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, 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
Exercise of stock
options................ 21 750 -- -- -- -- --
ESOP debt payments....... -- -- -- 408 -- -- --
Restricted stock
issued................. 15 543 -- (558) -- -- --
Net income............... -- -- 11,229 -- -- -- --
Adjust minimum pension
liability.............. -- -- -- -- 63 -- --
Cash dividends ($.40 per
share)................. -- -- (3,446) -- -- -- --
Change in market value of
securities available
for sale............... -- -- -- -- -- (139) --
Translation
adjustments............ -- -- -- -- -- -- (6,580)
------ ------- ------- ------- ----- ------ -------
Balance--
December 31, 1996........ $4,326 $65,674 $74,039 $ (967) $ -- $ 688 $(6,027)
====== ======= ======= ======= ===== ====== =======
</TABLE>
The accompanying notes are an integral part of these statements.
20
<PAGE> 10
CONSOLIDATED STATEMENTS
OF CASH FLOWS
For the years ended
December 31,
1996, 1995 and 1994
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- --------
(In Thousands)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income................................ $ 11,229 $ 13,830 $ 14,595
Adjustments to reconcile net income to net
cash provided by operating activities--
Depreciation and amortization........ 29,736 22,451 14,672
(Gain) loss on disposition of
assets............................ 774 (29) 449
Minority interest.................... (238) 472 92
Equity in income of joint ventures... (4,187) (3,877) (2,609)
Change in assets and liabilities, net
of effects of acquisitions--
Deferred and refundable income
taxes........................ (762) 1,721 (681)
Pension obligations and other... (2,049) 3,327 519
Accounts payable and accrued
liabilities.................. 25,507 4,870 704
Accounts receivable, net........ (16,956) (3,236) (18,463)
Inventories..................... (473) (2,034) (3,752)
Prepaid expenses and other...... (5,943) (6,607) 4,951
--------- --------- --------
Total adjustments................. 25,409 17,058 (4,118)
--------- --------- --------
Net cash provided by operating
activities...................... 36,638 30,888 10,477
--------- --------- --------
Cash Flows From Investing Activities:
Purchase of plant and equipment........... (99,147) (46,240) (18,844)
Acquisitions, net of cash acquired........ (1,018) (116,238) (1,480)
Purchase of other assets.................. (3,434) (7,263) (2,615)
Investment in joint ventures and other.... (1,451) (2,054) (1,508)
Proceeds from disposal of assets.......... 4,156 4,127 1,463
--------- --------- --------
Net cash used in investing
activities...................... (100,894) (167,668) (22,984)
--------- --------- --------
Cash Flows From Financing Activities:
Net borrowings (repayments) under
revolving line-of-credit agreements.... 65,250 63,797 (27,739)
Debt repayments........................... (1,104) (13,541) (824)
Proceeds from issuance of long-term
debt................................... 2,772 110,550 45,000
Proceeds from issuance of common stock and
options................................ 771 168 230
Financing fees paid....................... (508) (4,778) --
Cash dividends paid....................... (3,439) (3,428) (3,424)
--------- --------- --------
Net cash provided by financing
activities...................... 63,742 152,768 13,243
--------- --------- --------
Effect of Exchange Rate Changes on Cash..... (1,065) (736) (801)
--------- --------- --------
Net Increase (Decrease) in Cash............. (1,579) 15,252 (65)
Cash at Beginning of Year................... 19,792 4,540 4,605
--------- --------- --------
Cash at End of Year......................... $ 18,213 $ 19,792 $ 4,540
========= ========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
21
<PAGE> 11
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
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 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 $753,000 and
$978,000 as of December 31, 1996 and 1995, 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>
1996 1995
------- -------
(In Thousands)
<S> <C> <C>
Raw materials and
components.......... $23,964 $29,769
Work-in-process....... 10,620 7,666
Finished products..... 16,004 13,288
------- -------
$50,588 $50,723
======= =======
</TABLE>
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 40 years,
machinery and equipment - 5 to 15 years.
Investments:
- -------------
Effective January 1, 1994, the Company changed its method of accounting for
investments in debt and equity securities. 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. The carrying value of
marketable equity securities is market value. The Company classifies investments
in marketable equity securities into three separate categories: "held-to-
maturity", "available-for-sale", and "trading", each with different accounting
treatment.
The Company classifies certain investments in common stock securities as
"available-for-sale", recording these investments at fair market value with the
gross unrealized holding gains and losses, after-tax, included as a separate
component of stockholders' equity. In 1996, the Company sold a portion of its
investments classified as "available-for-sale" for approximately $3,244,000. The
gross realized loss on the sale was approximately $12,000 utilizing a specific
identification methodology. As of December 31, 1996 and 1995, the fair market
value of the Company's investments classified as "available-for-sale" was
approximately $2,071,000 and $5,456,000, respectively, including gross
unrealized holding gains of approximately $1,059,000 ($688,000 after tax) and
$1,272,000 ($827,000 after-tax), respectively.
At December 31, 1996 and 1995, the fair market value of the Company's
investments classified as "trading" was $2,594,000 and $2,641,000, respectively.
The change in net unrealized holding gain included in earnings was not
significant.
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
22
<PAGE> 12
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(continued)
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (continued)
evaluations compare the undiscounted expected future cash flows of the
operations to which goodwill relates to the carrying value of the goodwill. 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>
1996 1995
------- -------
(In Thousands)
<S> <C> <C>
Goodwill.............. $40,234 $36,365
Less: Accumulated
amortization........ (4,236) (3,066)
------- -------
$35,998 $33,299
======= =======
</TABLE>
Income Taxes:
- ---------------
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.
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 8,649,380 in
1996, 8,609,431 in 1995 and 8,602,077 in 1994.
Reclassifications:
- ------------------
Certain amounts in prior years' consolidated financial statements have been
reclassified to conform with the presentation used in 1996.
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
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Marwal Systems, S.N.C.
(France)............ 49% 49% 49%
Mitsuba-Walbro, Inc.
(Japan)............. 50% 50% 50%
Marwal do Brasil,
Ltda................ 49% 49% 49%
Korea Automotive Fuel
Systems, Ltd........ 49% 49% 49%
Marwal de Mexico S.A.
de C.V.............. 52% -- --
</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, 1996 and 1995, the cumulative
effect of these adjustments was to increase the Company's equity in its joint
ventures by approximately $2,631,000 and $2,102,000, respectively. At December
31, 1996, the amount included in retained earnings as undistributed earnings of
foreign joint ventures was approximately $8,567,000.
In 1996, the Company entered into a joint venture (Marwal de Mexico S.A. de
C.V.)
23
<PAGE> 13
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(continued)
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
NOTE 2. JOINT VENTURES. (continued)
with its 49% owned joint venture, Marwal Systems, S.N.C. The Company owns 5% of
the venture directly and Marwal Systems S.N.C. owns the remaining 95%. Marwal de
Mexico S.A. de C.V. manufactures fuel pumps and fuel modules for the Central
American and Mexican automotive markets.
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.
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,
1996 1995
------- -------
<S> <C> <C>
Balance sheet data:
Current assets............................................ $54,030 $60,504
Non-current assets........................................ 65,088 36,629
Current liabilities....................................... 52,038 49,081
Non-current liabilities................................... 9,493 1,657
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Income statement data:
Net sales.................................... $200,276 $170,902 $137,873
Gross margin................................. 39,141 20,500 29,283
Income before provision for income taxes..... 15,946 11,641 8,136
Net income................................... 11,770 7,366 5,164
</TABLE>
Dividends from joint ventures of approximately $415,000 and $38,000 were
received by the Company during 1995 and 1994, respectively. No dividends were
received from joint ventures in 1996. The Company had sales to joint ventures of
approximately $42,413,000, $29,280,000 and $20,407,000 for 1996, 1995 and 1994,
respectively. Included in accounts receivable are trade receivables from joint
ventures of approximately $11,967,000 and $9,583,000 for 1996 and 1995,
respectively. The Company had purchases from joint ventures of approximately
$33,149,000, $22,977,000 and $15,329,000 for 1996, 1995 and 1994, respectively.
Included in accounts payable are trade payables to joint ventures of
approximately $5,580,000 and $3,995,000 for 1996 and 1995, respectively.
- --------------------------------------------------------------------------------
NOTE 3. DYNO ACQUISITION.
On July 27, 1995, the Company acquired the plastic fuel tank business of Dyno
Industrier A.S (Dyno), Oslo, Norway for $128,774,000 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
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 sheets as of December 31, 1996 and 1995
and the operations since the date of acquisition are included in the
accompanying consolidated statements of income and cash flows for the years
ended December 31, 1996 and 1995. Goodwill resulting from this transaction is
being amortized over 40 years using the straight-line method. The purchase price
was
24
<PAGE> 14
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(continued)
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
NOTE 3. DYNO ACQUISITION. (continued)
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.................. $113,105
Fees and expenses............. 3,212
--------
Cost of acquisition, net of
cash acquired............... $116,317
========
Accounts receivable........... $ 42,237
Inventory..................... 16,330
Plant and equipment........... 90,792
Accounts payable and accrued
liabilities................. (44,095)
Notes payable................. (5,663)
Other assets purchased and
liabilities assumed, net.... (1,432)
Goodwill...................... 18,148
--------
Total cost allocation......... $116,317
========
</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 recorded a
liability of approximately $12,021,000 related to these costs in purchase
accounting and approximately $4,550,000 of costs have been paid and charged
against the liability as of December 31, 1996.
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
---------- ----------
(Unaudited, In Thousands)
<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.
- --------------------------------------------------------------------------------
NOTE 4. 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, 1996 and 1995
and the operations since the acquisition are included in the accompanying
consolidated statement of income and cash flows for the years ended December 31,
1996 and 1995. Goodwill resulting from this transaction is being amortized over
40 years using the straight-line method.
Pro forma results of this acquisition, assuming it had taken place at the
beginning of each year presented, would not be materially different from the
results reported.
25
<PAGE> 15
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(continued)
Walbro Corporation & Subsidiaries
- ---------------------------------------------------
NOTE 5. LONG-TERM DEBT AND LINES OF CREDIT.
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(In Thousands)
<S> <C> <C>
Senior notes due 2005, unsecured, stated interest at 9.875%
(9.92% effective interest rate) net of unamortized
discount of $331,000 and $369,000 at December 31, 1996 and
1995, respectively........................................ $109,669 $109,631
Revolving credit facility, secured, interest at the agent's
base rate plus an additional margin(see below)............ 114,062 57,258
Term loan from the State of Connecticut, secured, interest
at 6% per annum, payable in monthly amounts from 1997 to
2005...................................................... 3,400 800
Senior notes, secured, interest at 7.68%, payable in annual
amounts from 1998 to 2004................................. 45,000 45,000
Industrial revenue bond, issued by Town of Ossian, Indiana,
interest at a variable municipal bond rate, due in 2023... 9,000 9,000
Industrial revenue bond, issued by City of Ligonier,
Indiana, interest at a variable municipal bond rate plus
1%, payable in annual amounts from 2003 to 2007........... 6,300 6,300
ESOP credit agreement, interest rate which approximates 86%
of prime, payable in annual installments of $408,000...... 817 1,225
Capital lease obligations, interest at 7.5%, payable in
monthly amounts through February 2002..................... 3,640 4,195
Term loan, unsecured, interest at 6%, payable in monthly
amounts through 2005...................................... 515 563
Note payable to the City of Maumee, Ohio, interest at 4%,
payable in monthly amounts through 2004................... 271 302
Other....................................................... 138 201
-------- --------
292,812 234,475
Less--current portion....................................... 1,089 1,086
-------- --------
$291,723 $233,389
======== ========
</TABLE>
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 multi-currency revolving
credit facility (Credit 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
26
<PAGE> 16
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(continued)
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
NOTE 5. LONG-TERM DEBT AND LINES OF CREDIT. (continued)
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 8.25% to 8.5% as of December 31, 1996 and 7.5% to
8.5% as of December 31, 1995. The Company is also 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 2004 Notes (as
defined below) 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 (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.
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, 1996 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, 1996 and
1995, assets recorded under this capital lease were approximately $4,733,000 and
$5,032,000, respectively, net of accumulated amortization of approximately
$394,000 and $95,000, respectively.
Aggregate minimum principal payment requirements on long-term debt, including
capital lease obligations, in each of the five years subsequent to December 31,
1996 are as follows: 1997 - $1,089,000; 1998 - $7,671,000; 1999 - $7,440,000;
2000 - $121,573,000; 2001 - $7,585,000, and thereafter - $147,454,000.
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 $36,340,000, $17,191,000, and $11,919,000 at December 31, 1996,
1995 and 1994, respectively. The weighted average interest rate on short-term
bank borrowings outstanding under these arrangements was 3.1%, 6.1% and 6.7% as
of December 31, 1996, 1995 and 1994, respectively.
27
<PAGE> 17
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(continued)
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
NOTE 6. 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.
While there can be no assurance that the Company will not incur substantial
warranty or recall expense in the future, management believes that any liability
resulting from these matters will not have a material impact on the financial
position or future results of operations of the Company.
- --------------------------------------------------------------------------------
NOTE 7. INCOME TAXES.
A summary of income before provision for income taxes, minority interest and
equity in income of joint ventures, and components of the provision are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Income before provision for income taxes, minority
interest and equity in income of joint ventures:
Domestic........................................ $ 1,774 $ 4,268 $12,873
Foreign......................................... 8,628 7,415 5,029
------- ------- -------
$10,402 $11,683 $17,902
======= ======= =======
Provision for income taxes:
Currently payable--
Domestic........................................ $ 384 $ 843 $ 3,313
Foreign......................................... 2,456 2,977 1,674
Utilization of tax credits...................... (2,517) (3,182) (605)
------- ------- -------
323 638 4,382
------- ------- -------
Deferred--
Domestic........................................ 988 945 1,067
Foreign......................................... 1,544 (325) (14)
Change in beginning of year valuation
allowance.................................... 220 -- 389
------- ------- -------
2,752 620 1,442
------- ------- -------
$ 3,075 $ 1,258 $ 5,824
======= ======= =======
</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>
1996 1995 1994
----- ----- -----
<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.............................................. 9.4 2.1 (1.2)
Utilization of tax credits......................... (15.9) (27.2) (3.4)
Increase in valuation allowance.................... 2.1 -- 2.2
Goodwill amortization.............................. 1.5 1.4 .9
Other, net......................................... (2.5) (.5) (1.0)
----- ----- -----
Effective income tax rates........................... 29.6% 10.8% 32.5%
===== ===== =====
</TABLE>
28
<PAGE> 18
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(continued)
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
NOTE 7. INCOME TAXES. (continued)
The components of the net deferred income tax (asset) liability at December 31
are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
------- --------
(In Thousands)
<S> <C> <C>
Deferred income tax liabilities:
Depreciation and basis difference......................... $13,311 $ 9,534
Employee benefits......................................... -- 57
Basis difference on foreign currency contracts............ -- 193
Unrealized gain on securities available for sale.......... 371 416
Other..................................................... 181 80
------- --------
13,863 10,280
------- --------
Deferred income tax assets:
Estimated net operating loss carryforwards................ (2,966) (4,231)
Employee benefits......................................... (3,380) (3,609)
Foreign tax credit carryforward........................... (440) --
Accruals.................................................. (217) (208)
Minimum pension liability adjustment...................... -- (32)
Inventory................................................. (600) (585)
Accounts and notes receivable reserve..................... (22) (36)
Write-down of investment.................................. (368) (368)
Loss on joint ventures.................................... (1,052) (1,032)
Other..................................................... (649) (803)
------- --------
(9,694) (10,904)
Valuation allowance....................................... 964 744
------- --------
(8,730) (10,160)
------- --------
Net deferred income tax (asset) liability................... $ 5,133 $ 120
======= ========
</TABLE>
At December 31, 1996, the cumulative amount of undistributed earnings of foreign
subsidiaries was approximately $28,909,000. 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 additional U.S. income
taxes or foreign withholding taxes would not be significant.
As of December 31, 1996, the Company has net operating loss carryforwards of
approximately $10,244,000, which expire in varying amounts between 2003 and
2011, available from certain of its subsidiaries. The Company has recorded a
deferred tax asset of $2,966,000 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 $197,000 in 1996, $1,369,000 in 1995 and $1,203,000 in
1994.
- --------------------------------------------------------------------------------
NOTE 8. STOCK OPTION PLANS AND LONG-TERM INCENTIVE PLANS.
The Company has 18,200 stock options outstanding under the Walbro Corporation
1983 Incentive Stock Option Plan (1983 Plan) which were granted at market value
on the date of grant. There are no options available for grant remaining under
this plan.
Under the Walbro Corporation Equity Based Long Term Incentive Plan (Incentive
Plan), 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
29
<PAGE> 19
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(continued)
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
NOTE 8. STOCK OPTION PLANS AND LONG-TERM INCENTIVE PLANS. (continued)
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 6,754 and 33,294
as of December 31, 1996 and 1995, respectively.
Effective January 1, 1996, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation (SFAS No. 123)." The Company continues to apply
Accounting Principles Board Opinion No. 25 for expense recognition. All stock
options issued by the Company are exercisable at a price equal to the market
price at the date of the grant. Accordingly, no compensation cost has been
recognized for any of the options granted under the Plans.
A summary of the stock option transactions of the 1983 Plan and the Incentive
Plan for the years ended December 31, 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
Number of Shares
Exercisable Outstanding Option price (per share)
----------- ----------- ------------------------
<S> <C> <C> <C>
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
Granted............................ 117,385 18.19-21.75
Exercised.......................... (12,279) 9.25-18.00
Canceled........................... (5,458) 26.00-33.25
-------
December 31, 1996.................... 418,936 531,740 $ 9.25-33.25
=======
</TABLE>
The weighted-average fair value of options granted during the year is $7.63 and
$4.93 for the years ended December 31, 1996 and 1995, respectively.
The following table summarizes information about options outstanding at
December 31, 1996:
<TABLE>
<S> <C> <C> <C> <C>
Options Outstanding:
Range of Exercise Prices............. $ 9.25 $15.25-19.75 $20.63-27.13 $ 33.25
Number Outstanding at 12/31/96....... 20,825 353,009 139,706 18,200
Weighted-Average:
Remaining Contractual Life
(years)......................... 5 8.8 7.9 1.1
Exercise Price.................... $ 9.25 $ 18.02 $ 26.17 $ 33.25
Options Exercisable:
Number Exercisable at 12/31/96....... 20,825 240,282 139,629 18,200
Weighted Average Exercise Price...... $ 9.25 $ 17.33 $ 26.18 $ 33.25
</TABLE>
30
<PAGE> 20
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(continued)
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
NOTE 8. STOCK OPTION PLANS AND LONG-TERM INCENTIVE PLANS. (continued)
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions by year:
<TABLE>
<CAPTION>
Assumptions 1996 1995
- ------------------------- ------- -------
<S> <C> <C>
Risk-free interest
rate................... 6.4% 5.5%
Expected life............ 10 yrs. 10 yrs.
Expected volatility...... 35.2% 36.3%
Expected dividends....... 2.0% 2.0%
</TABLE>
Had compensation cost for the Plans been determined based on the fair value at
the grant dates for awards under those plans consistent with the method
described in SFAS No. 123, the Company's net income and earnings per share would
have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C> <C>
Net income........... As reported $11,229 $13,830
Pro forma 10,601 13,273
Net income per
share.............. As reported 1.30 1.61
Pro forma 1.23 1.55
</TABLE>
The Company cautions that the pro forma net income and per share result in the
initial years of adoption are overstated due to the recognition of pro forma
compensation cost over the vesting period.
During 1996, the Walbro Engine Management Corporation Incentive Compensation
Plan reached the end of its five-year measurement term, and the first of three
annual payments was made. The Company has accrued approximately $4,472,000 and
$5,044,000 as of December 31, 1996 and 1995, respectively, under this plan.
Participants can elect to receive their payments in either cash or common stock
of the Company.
- --------------------------------------------------------------------------------
NOTE 9. 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.
The following table reconciles the status of the accrued postretirement
benefit obligation at December 31:
<TABLE>
<CAPTION>
1996 1995
------ ------
(In Thousands)
<S> <C> <C>
Accumulated
postretirement benefit
obligation (APBO)..... $4,068 $4,587
Plan assets at fair
value................. -- --
------ ------
APBO in excess of plan
assets................ 4,068 4,587
Unrecognized net gain
(loss)................ 331 (81)
------ ------
Accrued postretirement
benefit obligation.... $4,399 $4,506
====== ======
</TABLE>
The discount rate used in 1996 and 1995 was 7.25%.
Net periodic postretirement benefit cost consisted of the following for the
years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Interest cost........ $319 $350 $378
Amortization of
unrecognized net
loss............... -- -- 35
---- ---- ----
$319 $350 $413
==== ==== ====
</TABLE>
For measurement purposes, a 7.63% annual rate of increase was assumed in per
capita cost of covered health and dental care benefits for 1996. 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, 1996 by $364,000 and the interest cost component of net periodic
postretirement benefit cost for the year ended December 31, 1996 by $30,000.
31
<PAGE> 21
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(continued)
Walbro Corporation & Subsidiaries
- ---------------------------------------------------
NOTE 10. 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.
Total pension expense amounted to $325,000 in 1996, $251,000 in 1995 and
$239,000 in 1994. 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>
1996 1995 1994
----- ----- -----
(In Thousands)
<S> <C> <C> <C>
Service cost............................................ $ 285 $ 136 $ 165
Interest on projected benefit obligation................ 345 263 219
Actual return on assets................................. (324) (240) (182)
Net amortization and deferral........................... 19 12 16
----- ----- -----
$ 325 $ 171 $ 218
===== ===== =====
</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>
1996
-----------------
PBO< PBO>
Assets Assets 1995
------- ------ -------
(In Thousands)
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligation--
Vested.............................................. $(5,237) $(511) $(4,022)
Nonvested........................................... (50) -- (767)
------- ----- -------
Accumulated benefit obligation...................... (5,287) (511) (4,789)
Effects of salary progression....................... -- (116) --
------- ----- -------
Projected benefit obligation (PBO).................. (5,287) (627) (4,789)
------- ----- -------
Plan assets--
Cash equivalents.................................... 1,247 -- 270
Equity securities................................... 4,365 -- 3,435
------- ----- -------
5,612 -- 3,705
------- ----- -------
Projected benefit obligation under (over) plan
assets.............................................. 325 (627) (1,084)
Unamortized net asset at transition................... (31) -- (53)
Unamortized net (gain) loss........................... (77) -- 227
Adjustment to recognize minimum liability............. -- -- (1,038)
Unrecognized prior service cost....................... 823 -- 864
------- ----- -------
Pension asset (liability) recorded in the consolidated
balance sheets...................................... $ 1,040 $(627) $(1,084)
======= ===== =======
</TABLE>
32
<PAGE> 22
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(continued)
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
NOTE 10. PENSION PLANS. (continued)
The assumptions used in determining the funded status information shown above
were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Discount rate..................................... 6.0-7.5% 7.25-7.5% 8.5%
Long-term rate of return on assets................ 6.0-7.25% 8.5% 8.5%
</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 1996, 1995 and 1994 was approximately $2,252,000,
$2,255,000 and $1,431,000, 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, 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 $416,000, $515,000 and $365,000 in 1996, 1995 and 1994,
respectively. Contribution expense is net of dividends of $105,000, $105,000 and
$210,000 in 1996, 1995 and 1994, respectively. As of December 31, 1996 and 1995,
the following are held by the ESOP: 218,000 and 194,000 allocated shares,
respectively, and 28,000 and 56,000 suspense (unallocated) shares, respectively,
which are all committed-to-be-released.
- --------------------------------------------------------------------------------
NOTE 11. 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. As of December 31, 1996, the notional amounts of
contracts outstanding were approximately $5,975,000. There were no contracts
outstanding as of December 31, 1995.
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 was recognized based on actual purchases of the related
commitments. The amounts included in the accompanying consolidated statements of
income related to this contract for the years ending December 31, 1996, 1995 and
1994 were approximately $480,000, $720,000 and $600,000, respectively.
33
<PAGE> 23
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(continued)
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
NOTE 11. DISCLOSURES ABOUT DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF
FINANCIAL INSTRUMENTS. (continued)
The Company enters into forward currency exchange contracts to reduce its
exposure against fluctuations in foreign currency exchange rates. During 1996,
the Company had fifteen forward currency exchange contracts which matured during
1996, which exchanged 939,000,000 Japanese yen and 20,200,000 Deutsche marks.
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. The amounts included in foreign currency exchange
(gain) loss in the accompanying consolidated statements of income related to
these contracts were a gain of approximately $339,000 for the year ending
December 31, 1996 and a gain of approximately $929,000 for the year ending
December 31, 1995.
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:
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>
1996 1995
------------------------- -------------------------
Carrying Fair Carrying Fair
Value Value Value Value
-------- -------- -------- --------
(In Thousands)
<S> <C> <C> <C> <C>
Notes receivable................ $ 1,268 $ 1,268 $ 460 $ 460
Long-term debt.................. 292,812 293,212 234,475 232,865
Forward currency exchange
contracts..................... -- (258) (1,200) (1,200)
</TABLE>
- --------------------------------------------------------------------------------
NOTE 12. 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 $7,702,000, $4,761,000 and $3,324,000 in 1996, 1995
and 1994, respectively.
34
<PAGE> 24
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(continued)
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
NOTE 12. LEASES. (continued)
Aggregate minimum future rentals under noncancellable leases are as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ---------
(In Thousands)
<S> <C> <C>
1997.................. $ 850 $ 6,395
1998.................. 850 5,499
1999.................. 850 5,125
2000.................. 850 3,040
2001.................. 850 1,446
Thereafter............ 142 7,739
------ -------
Total minimum lease
payments......... 4,392 $29,244
=======
Amount representing
interest............ 752
------
Present value of net
future minimum
lease payments... $3,640
======
</TABLE>
- --------------------------------------------------------------------------------
NOTE 13. ACCRUED LIABILITIES.
Accrued liabilities consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
------- -------
(In Thousands)
<S> <C> <C>
Compensation
related............. $10,336 $ 4,680
Income Taxes.......... 2,704 6,690
Facilities and
employee
relocation.......... 7,471 7,664
Interest.............. 7,449 5,352
Other................. 13,316 9,966
------- -------
$41,276 $34,352
======= =======
</TABLE>
- --------------------------------------------------------------------------------
NOTE 14. 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.
35
<PAGE> 25
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(continued)
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
NOTE 15. BUSINESS SEGMENT INFORMATION.
The Company operates through its subsidiaries in the following industry
segments:
1. Automotive, which designs, develops and manufactures fuel storage and
delivery products for a broad range of U.S. and foreign manufacturers of
passenger automobiles and light trucks (including minivans), and
2. Small Engine, which designs, develops and manufactures diaphragm
carburetors for portable engines, float feed carburetors for ground supported
engines and ignition systems and other components for a variety of small engine
products. The Company includes aftermarket operations for both the automotive
and small engine markets within its small engine business segment.
Selected financial information about the Company's business and geographic
segments are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Financial Information by Business Segment
Net sales to customers:
Automotive.......................................... $444,239 $324,963 $204,563
Small Engine........................................ 145,299 144,273 134,483
Corporate........................................... 5,004 4,430 1,022
-------- -------- --------
594,542 473,666 340,068
Eliminations.......................................... (9,153) (14,394) (14,863)
-------- -------- --------
Total net sales....................................... $585,389 $459,272 $325,205
======== ======== ========
Operating profit (loss):
Automotive.......................................... $ 30,473 $ 30,076 $ 24,883
Small Engine........................................ 13,727 16,607 18,522
Corporate........................................... (29,896) (31,595) (22,986)
-------- -------- --------
Income before provision for income taxes.............. $ 14,304 $ 15,088 $ 20,419
======== ======== ========
Identifiable assets:
Automotive.......................................... $463,144 $377,975 $155,006
Small Engine........................................ 82,670 65,485 64,494
Corporate........................................... 43,835 50,013 37,866
-------- -------- --------
Total identifiable assets............................. $589,649 $493,473 $257,366
======== ======== ========
Depreciation and amortization:
Automotive.......................................... $ 20,779 $ 12,967 $ 6,320
Small Engine........................................ 6,334 6,090 5,841
Corporate........................................... 2,623 3,394 2,511
-------- -------- --------
Total depreciation and amortization................... $ 29,736 $ 22,451 $ 14,672
======== ======== ========
Capital expenditures:
Automotive.......................................... $ 84,293 $ 35,609 $ 10,101
Small Engine........................................ 11,769 9,692 5,113
Corporate........................................... 3,085 939 3,630
-------- -------- --------
Total capital expenditures............................ $ 99,147 $ 46,240 $ 18,844
======== ======== ========
</TABLE>
36
<PAGE> 26
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(continued)
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
NOTE 15. BUSINESS SEGMENT INFORMATION.(continued)
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Financial Information by Geographic Segment
Net sales to customers:
United States....................................... $342,883 $314,697 $260,710
Europe.............................................. 214,400 88,736 --
Far East and Other Foreign.......................... 28,106 55,839 64,495
-------- -------- --------
585,389 459,272 325,205
Net sales between geographic areas.................. 30,034 27,663 31,094
-------- -------- --------
615,423 486,935 356,299
Eliminations.......................................... (30,034) (27,663) (31,094)
-------- -------- --------
Total net sales....................................... $585,389 $459,272 $325,205
======== ======== ========
Operating profit:
United States....................................... $ 37,105 $ 35,225 $ 37,040
Europe.............................................. 5,383 5,352 --
Far East and Other Foreign.......................... 1,712 6,106 6,365
-------- -------- --------
44,200 46,683 43,405
Corporate, net........................................ (29,896) (31,595) (22,986)
-------- -------- --------
Income before provision for income taxes.............. $ 14,304 $ 15,088 $ 20,419
======== ======== ========
Identifiable assets:
United States....................................... $324,988 $262,020 $224,369
Europe.............................................. 194,017 193,876 --
Far East and Other Foreign.......................... 70,644 37,577 32,997
-------- -------- --------
Total identifiable assets............................. $589,649 $493,473 $257,366
======== ======== ========
</TABLE>
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, Brazil, 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
$127,248,000, $78,985,000 and $36,881,000 for 1996, 1995 and 1994, 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 20%, 19% and 23% of consolidated
sales in 1996, 1995 and 1994, respectively. Sales to another such customer
amounted to 10%, 21% and 30% of consolidated sales in 1996, 1995 and 1994,
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 adequate funding sources,
currency and other risks inherent in international sales, and general economic
and business conditions.
37
<PAGE> 27
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(continued)
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
NOTE 16. SUPPLEMENTAL CASH FLOW INFORMATION.
In 1996, 1995 and 1994, the Company paid $5,048,000, $3,290,000 and $6,749,000
for income taxes and $21,674,000, $7,191,000 and $4,122,000 for interest,
respectively.
- --------------------------------------------------------------------------------
NOTE 17. QUARTERLY FINANCIAL INFORMATION (UNAUDITED).
Selected quarterly financial information for the years ended December 31, 1996
and 1995 is as follows:
<TABLE>
<CAPTION>
Quarter
First Second Third Fourth Total
-------- -------- -------- -------- --------
(In Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C>
1996--
Net sales...................... $152,966 $155,086 $132,545 $144,792 $585,389
Cost of sales.................. 124,178 126,752 111,116 126,088 488,134
-------- -------- -------- -------- --------
Gross profit................ $ 28,788 $ 28,334 $ 21,429 $ 18,704 $ 97,255
======== ======== ======== ======== ========
Net income..................... $ 4,534 $ 4,824 $ 2,346 $ (475) $ 11,229
======== ======== ======== ======== ========
Net income per share........... $ .53 $ .56 $ .27 $ (.05) $ 1.30
======== ======== ======== ======== ========
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
======== ======== ======== ======== ========
</TABLE>
Net income per share and weighted average shares are computed independently for
each of the quarters presented. Therefore, the sum of the quarterly net income
per share may not equal the per share total for the year.
- --------------------------------------------------------------------------------
NOTE 18. SUBSEQUENT EVENT.
In February 1997, the Company sold 2,760,000 Convertible Trust Preferred
Securities of Walbro Capital Trust, a wholly-owned subsidiary of the Company, at
a face value of $25 per share and an interest rate of 8% per annum. The
preferred securities are convertible into common stock of the Company at the
option of the security-holder anytime after April 4, 1997. Net proceeds of the
offering were approximately $66,000,000 and were used to repay a portion of the
Company's revolving credit facility.
38
<PAGE> 28
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(continued)
Walbro Corporation & Subsidiaries
- --------------------------------------------------------------------------------
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, 1996
and 1995 and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1996. 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, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, effective
January 1, 1994, the Company changed its method of accounting for investments in
debt and equity securities.
ARTHUR ANDERSEN LLP
Detroit, Michigan,
February 11, 1997
39
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF WALBRO CORPORATION
<TABLE>
<CAPTION>
Name of Subsidiary Jurisdiction of Incorporation
------------------ -----------------------------
<S> <C>
Auburn Diecast Corporation Michigan
U.S. Coexcell, Inc. Ohio
Walbro Capital Pte. Ltd. Republic of Singapore
Walbro Automotive Corporation Delaware
Walbro Automotive A.S Norway
Walbro Automotive do Brasil Ltda. Brazil
Walbro Automotive Europe S.A. France
Walbro Automotive FSC, Inc. U.S. Virgin Islands
Walbro Automotive GmbH Germany
Walbro Automotive Japan, Inc. Japan
Walbro Automotive Limited Great Britain
Walbro Automotive N.V. Belgium
Walbro Automotive S.A. France
Walbro Automotive S.A. Spain
Walbro Korea, Ltd. Republic of Korea
Walbro Netherlands B.V. Netherlands
Sharon Manufacturing Company Michigan
Whitehead Engineered Products, Inc. Delaware
Walbro Engine Management Corporation Delaware
Walbro de Mexico, S.A. de C.V. Mexico
Walbro GmbH Germany
Walbro Japan, Inc. Japan
Walbro Singapore Pte. Ltd. Republic of Singapore
Walbro Tucson Corporation Delaware
Tucson Precision Products Delaware
Fujian Hualong Carburetor Co., Ltd. People's Republic of China
Tianjin Walbro Industries, Ltd. People's Republic of China
Mutual Walbro P. Ltd. India
Walbro Capital Trust Delaware
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports dated February 11, 1997 included (or incoporated by reference) in
this Form 10-K, into the Company's previously filed Registration Statement File
Nos. 33-20841, 33-32068 and 33-48562.
Arthur Andersen LLP
Detroit, Michigan,
March 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 18,213
<SECURITIES> 0
<RECEIVABLES> 126,509
<ALLOWANCES> 0
<INVENTORY> 50,588
<CURRENT-ASSETS> 211,516
<PP&E> 360,307
<DEPRECIATION> 80,420
<TOTAL-ASSETS> 589,649
<CURRENT-LIABILITIES> 143,241
<BONDS> 291,723
0
0
<COMMON> 4,326
<OTHER-SE> 133,407
<TOTAL-LIABILITY-AND-EQUITY> 589,649
<SALES> 585,389
<TOTAL-REVENUES> 585,389
<CGS> 488,134
<TOTAL-COSTS> 488,134
<OTHER-EXPENSES> 69,736
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,117
<INCOME-PRETAX> 10,402
<INCOME-TAX> 3,075
<INCOME-CONTINUING> 11,229
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,229
<EPS-PRIMARY> 1.30
<EPS-DILUTED> 1.30
</TABLE>
