<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 3, 1998
REGISTRATION NO. 333-45693
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WALBRO CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
3714
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
38-1358966
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
6242 GARFIELD STREET, CASS CITY, MICHIGAN 48726, (517) 872-2131
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
FRANK E. BAUCHIERO
CHIEF EXECUTIVE OFFICER AND PRESIDENT
WALBRO CORPORATION
6242 GARFIELD STREET
CASS CITY, MICHIGAN 48726, (517) 872-2131
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
HOWARD S. LANZNAR, ESQ.
KATTEN MUCHIN & ZAVIS
525 WEST MONROE STREET, SUITE 1600
CHICAGO, ILLINOIS 60661
(312) 902-5200
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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PROSPECTUS
WALBRO CORPORATION
OFFER TO EXCHANGE
10 1/8% SENIOR NOTES DUE 2007, SERIES B
FOR ALL OUTSTANDING 10 1/8% SENIOR NOTES DUE 2007, SERIES A
WALBRO LOGO
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON JUNE 30, 1998, UNLESS EXTENDED.
Walbro Corporation (the "Company") hereby offers, upon the terms and
subject to conditions set forth in this Prospectus (the "Prospectus") and the
accompanying Letter of Transmittal (the "Letter of Transmittal"; together with
the Prospectus, the "Exchange Offer"), to exchange up to an aggregate principal
amount of $100,000,000 of its 10 1/8% Senior Notes Due 2007, Series B (the
"Exchange Notes") for up to an aggregate principal amount of $100,000,000 of its
outstanding 10 1/8% Senior Notes Due 2007, Series A (the "Old Notes"). The terms
of the Exchange Notes are identical in all material respects to those of the Old
Notes, except for certain transfer restrictions and registration rights relating
to the Old Notes. The Exchange Notes will be issued pursuant to, and entitled to
the benefits of, the Indenture (as defined herein) governing the Old Notes. The
Exchange Notes and the Old Notes are sometimes referred to collectively as the
"Notes".
The Company will accept for exchange any and all Old Notes which are
properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time,
on June 30, 1998, unless extended by the Company in its sole discretion (the
"Expiration Date"). The Expiration Date will not in any event be extended to a
date later than December 27, 1998 (180 days after the initial Expiration Date).
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the Expiration Date. In the event the Company terminates the
Exchange Offer and does not accept for exchange any Old Notes with respect to
the Exchange Offer, the Company will promptly return the Old Notes to the
holders thereof. The Exchange Offer is not conditioned upon any minimum
principal amount of Old Notes being tendered for exchange, but is otherwise
subject to certain customary conditions. The Old Notes may be tendered only in
integral multiples of $1,000.
The Old Notes were sold by the Company on December 16, 1997 to Salomon
Brothers Inc (the "Initial Purchaser") in a transaction not registered under the
Securities Act of 1933, as amended (the "Securities Act"), in reliance upon an
exemption under the Securities Act (the "Initial Offering"). The Initial
Purchaser subsequently placed the Old Notes with qualified institutional buyers
in reliance upon Rule 144A under the Securities Act. Accordingly, the Old Notes
may not be reoffered, resold or otherwise transferred in the United States
unless registered under the Securities Act or unless an applicable exemption
from the registration requirements of the Securities Act is available. The
Exchange Notes are being offered hereunder in order to satisfy the obligations
of the Company and the Guarantors (as defined below) under the Registration
Rights Agreement dated December 11, 1997 by and among the Company, the
Guarantors and the Initial Purchaser in connection with the Initial Offering
(the "Registration Rights Agreement"). See "The Exchange Offer."
The Exchange Notes will be senior unsecured obligations of the Company
ranking pari passu in right of payment with all existing and future senior
unsecured obligations of the Company. The Exchange Notes will be guaranteed (the
"Guarantees") on a senior unsecured basis, jointly and severally, by each of the
Company's principal wholly-owned domestic operating subsidiaries (the
"Guarantors").
The Exchange Notes and Guarantees will be effectively subordinated in right
of payment to all existing and future secured indebtedness of the Company and
its subsidiaries. The Exchange Notes will rank pari passu in right of payment
with the Old Notes. As of March 31, 1998, the Company and its subsidiaries had
approximately $80.4 million of secured indebtedness outstanding. Giving effect
to the Refinancing (as defined herein), as of March 31, 1998, the Company and
its subsidiaries would have had approximately $88.4 million of secured
indebtedness outstanding. In addition, the Exchange Notes will be effectively
subordinated in right of payment to all existing and future liabilities,
including trade payables, of the Company's subsidiaries which are not
Guarantors, which, as of March 31, 1998, totalled approximately $186.7 million
(excluding intercompany liabilities).
(Cover continued on next page)
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JUNE 3, 1998.
<PAGE> 3
(Continued from Cover)
Interest on the Old Notes accrued, and interest on the Exchange Notes will
accrue, from the date of issuance and will be payable semi-annually on June 15
and December 15 of each year, commencing June 15, 1998. Holders of the Exchange
Notes will receive interest on December 15, 1998 from the date of initial
issuance of the Exchange Notes, plus an amount equal to the accrued interest on
the Old Notes from the most recent date to which interest has been paid to the
date of exchange. Interest on the Old Notes accepted for exchange will cease to
accrue upon issuance of the Exchange Notes.
The Exchange Notes are subject to redemption on or after December 15, 2002
at the option of the Company, in whole or in part, at the redemption prices set
forth herein, plus accrued interest to the date of redemption. In addition,
prior to December 15, 2000, the Company may, at its option, redeem up to an
aggregate of 30% of the principal amount of the Exchange Notes issued with the
net proceeds from one or more Public Equity Offerings (as defined herein) at the
redemption price set forth herein plus accrued interest to the date of
redemption. In the event of a Change of Control (as defined herein), the Company
will be obligated to make an offer to purchase all of the outstanding Exchange
Notes at a redemption price equal to 101% of the principal amount thereof plus
accrued interest to the date of repurchase. In addition, the Company will be
obligated to make an offer to repurchase the Exchange Notes in the event of
certain asset sales. See "Description of the Exchange Notes."
Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission"), the Exchange Notes issued pursuant to the
Exchange Offer in exchange for the Old Notes may be offered for resale, resold
and otherwise transferred by respective holders thereof (other than any such
holder which is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that the Exchange
Notes are acquired in the ordinary course of such holder's business and such
holder has no arrangement with any person to participate in the distribution of
the Exchange Notes and is not engaged in and does not intend to engage in a
distribution of the Exchange Notes. Notwithstanding the foregoing, each
broker-dealer that receives the Exchange Notes in exchange for the Old Notes
acquired for its own account as a result of market-making activities or other
trading activities must acknowledge that it will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of the
Exchange Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer to satisfy the prospectus delivery requirements in connection with
resales of the Exchange Notes. The Company has agreed that, for a period of 180
days after the Registration Statement (as defined herein) is declared effective
by the Commission, it will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution."
Prior to the Exchange Offer, there has been no public market for the
Exchange Notes. Although the Company has agreed pursuant to the Registration
Rights Agreement to use its best efforts to cause the Exchange Notes to be
listed on the New York Stock Exchange, there can be no assurance as to the
liquidity of any markets that may develop for the Exchange Notes, the ability of
holders to sell the Exchange Notes, or the price at which holders would be able
to sell the Exchange Notes. Future trading prices of the Exchange Notes will
depend on many factors, including, among other things, prevailing interest
rates, the Company's operating results and the market for similar securities.
Historically, the market for securities similar to the Exchange Notes, including
non-investment grade debt, has been subject to disruptions that have caused
substantial volatility in the prices of such securities. There can be no
assurance that any market for the Exchange Notes, if such market develops, will
not be subject to similar disruptions. The Initial Purchaser has advised the
Company that it currently intends to make a market in the Exchange Notes
offered. However, the Initial Purchaser is not obligated to do so and any market
making may be discontinued at any time without notice.
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to pay the expenses incident to the Exchange Offer. No
underwriter is being used in connection with the Exchange Offer.
Holders of the Old Notes not tendered and accepted in the Exchange Offer
will continue to hold the Old Notes and will be entitled to all the rights and
benefits and will be subject to the limitations applicable thereto under the
Indenture and with respect to transfer under the Securities Act. See "The
Exchange Offer -- Consequences of Failure to Exchange."
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THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF THE OLD NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR ITS ACCEPTANCE WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF THAT JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE GUARANTORS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE
ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER, SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
THE EXCHANGE NOTES WILL BE AVAILABLE INITIALLY ONLY IN BOOK-ENTRY FORM.
EXCEPT AS DESCRIBED UNDER "BOOK-ENTRY; DELIVERY AND FORM," THE COMPANY EXPECTS
THAT THE EXCHANGE NOTES ISSUED PURSUANT TO THE EXCHANGE OFFER WILL BE
REPRESENTED BY A GLOBAL NOTE (AS DEFINED HEREIN), WHICH WILL BE DEPOSITED WITH,
OR ON BEHALF OF, THE DEPOSITORY TRUST COMPANY ("DTC") AND REGISTERED IN ITS NAME
OR IN THE NAME OF CEDE & CO., ITS NOMINEE. BENEFICIAL INTEREST IN THE GLOBAL
NOTE REPRESENTING THE EXCHANGE NOTES WILL BE SHOWN ON, AND TRANSFER THEREOF WILL
BE EFFECTED THROUGH, RECORDS MAINTAINED BY DTC AND ITS PARTICIPANTS. AFTER THE
INITIAL ISSUANCE OF THE GLOBAL NOTE, NOTES IN CERTIFICATED FORM WILL BE ISSUED
IN EXCHANGE FOR THE GLOBAL NOTE ONLY UNDER LIMITED CIRCUMSTANCES AS SET FORTH IN
THE INDENTURE. SEE "BOOK-ENTRY; DELIVERY AND FORM."
PROSPECTIVE INVESTORS IN THE EXCHANGE NOTES ARE NOT TO CONSTRUE THE
CONTENTS OF THIS PROSPECTUS AS INVESTMENT, LEGAL OR TAX ADVICE. EACH INVESTOR
SHOULD CONSULT ITS OWN COUNSEL, ACCOUNTANT AND OTHER ADVISORS AS TO LEGAL, TAX,
BUSINESS, FINANCIAL AND RELATED ASPECTS OF THE EXCHANGE NOTES. NEITHER THE
COMPANY NOR ANY OF THE GUARANTORS IS MAKING ANY REPRESENTATION TO ANY
PROSPECTIVE INVESTOR IN THE EXCHANGE NOTES REGARDING THE LEGALITY OF AN
INVESTMENT THEREIN BY SUCH PERSON UNDER APPROPRIATE LEGAL INVESTMENT OR SIMILAR
LAWS.
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AVAILABLE INFORMATION
The Company and the Guarantors have filed with the Commission a
Registration Statement on Form S-4 (together with all amendments, exhibits,
annexes and schedules thereto, the "Registration Statement") pursuant to the
Securities Act, and the rules and regulations promulgated thereunder, covering
the Exchange Notes being offered. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to in the Registration Statement are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement, reference is made to the exhibit
for a more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference. The Company is
currently subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports and other information with the Commission. Reports and other information
filed by the Company with the Commission can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, as well as the regional offices of the
Commission at the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material may also be obtained from the Public Reference Section
of the Commission in its Washington, D.C office at prescribed rates. The
Commission maintains a World Wide Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The internet address of the site is
http://www.sec.gov.
The Company has agreed to file with the Commission, to the extent
permitted, and distribute to holders of the Notes reports, information and
documents specified in Sections 13 and 15(d) of the Exchange Act so long as the
Notes are outstanding, whether or not the Company is subject to such
informational requirements of the Exchange Act. While any Notes remain
outstanding, the Company will make available, upon request, to any holder of the
Notes, the information required pursuant to Rule 144A(d)(4) under the Securities
Act during any period in which the Company is not subject to Section 13 or 15(d)
of the Exchange Act. Any such request should be directed to the Secretary of the
Company at 6242 Garfield Street, Cass City, Michigan 48726 (telephone number
(517) 872-2131).
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by reference and made a
part of this Prospectus.
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997; and
(2) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
Expiration Date shall be deemed to be incorporated in this Prospectus by
reference and to be a part hereof from the date of filing of each such document.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is, or is deemed to be, incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide, without charge, to each person to whom a copy of
this Prospectus has been delivered, on the written or oral request of such
person, a copy of any or all of the documents incorporated herein by reference
(other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates). Requests for such copies should be directed to the Secretary of
the Company at 6242 Garfield Street, Cass City, Michigan 48726 (telephone (517)
872-2131).
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FORWARD-LOOKING STATEMENTS
The statements contained in this Prospectus that are not historical facts
are forward-looking statements subject to the safe harbor created by the
Securities Litigation Reform Act of 1995. Whenever possible, the Company has
identified these forward-looking statements by words such as "anticipating,"
"believes," "estimates," "expects," and similar expressions. The Company
cautions readers of this discussion that a number of important factors could
cause the Company's actual consolidated results for 1998 and beyond to differ
materially from those expressed in any forward-looking statements made by, or on
behalf of, the Company. 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 including the restructuring program announced
during the fourth quarter of 1997, impact of environmental regulations, the year
2000 issue, continued availability of adequate funding sources, currency and
other risks inherent in international sales, and general economic and business
conditions. See "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." Investors are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date hereof. The Company undertakes no obligation to release publicly any
revisions to these forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and consolidated financial
statements of the Company and notes thereto appearing elsewhere in this
Prospectus. Unless the context otherwise requires, all references in this
Prospectus to the Company or Walbro refer to Walbro Corporation and its
consolidated subsidiaries.
THE COMPANY
Walbro 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, plastic 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 1992 to 1997, the
Company increased net sales at the compound rate of approximately 21% per year.
This growth was primarily due to the introduction of new automotive products,
penetration of additional automotive platforms, the Dyno (as defined below)
acquisition and a recovery in the small engine industry from depressed levels in
the late 1980s. The Company had net sales of $619.9 million and $585.4 million
in 1997 and 1996, respectively; and net sales of $169.3 million for the three
months ended March 31, 1998.
WALBRO AUTOMOTIVE
Approximately 74% of the Company's net sales for 1997 were generated by
Walbro Automotive. Through Walbro Automotive, the Company designs, develops and
manufactures fuel storage and delivery systems and components for a broad range
of U.S. and foreign manufacturers of passenger automobiles and light trucks
(including minivans). The Company and its joint ventures hold a strong market
position in North America, Europe and South America and a growing market
presence in Asia. In July 1995, the Company substantially expanded its European
automotive business by acquiring the fuel systems business of Dyno Industrier
A.S ("Dyno") of Oslo, Norway (the "Dyno Acquisition"). In 1997, management
estimates that the Company supplied Chrysler with approximately 79% of its fuel
pump and fuel module requirements, including all requirements for Chrysler's
passenger cars and minivans and approximately 48% of the requirements for
Chrysler's 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, Ford, General Motors, Hyundai, Kia, Nedcar, Peugeot and
Rover.
The Company's growth strategy is to position itself as a global supplier to
the automotive industry through the design, development and manufacture of
technologically advanced fuel systems and components which are delivered
worldwide. Due to the increasing demand by OEMs for the supply of integrated
automotive systems, Walbro is supplying OEMs with an increasing number of fuel
storage and delivery components with the ultimate goal of being responsible for
the complete fuel storage and delivery systems ("FSDS") which would integrate
all of the components necessary for fuel delivery. By assuming responsibility
for the development of complete systems, the Company allows its OEM customers to
reduce their internal engineering costs, use fewer suppliers and assemble
systems rather than components. Once an OEM designates the Company to supply
FSDS components for a new vehicle program, the OEM usually will continue to
purchase those components from the Company for the life of the program.
The Company and its joint ventures in Europe, South America and Asia
design, develop, manufacture and distribute fuel delivery components and systems
worldwide to support OEMs as they produce vehicles for the global automotive
market. The Company's product development efforts focus on the regulatory and
competitive challenges facing its customers worldwide. For example, the Company
has used its technical skills to develop multi-layer plastic fuel tanks and
onboard running and vapor recovery ("ORVR") devices, which are designed, in
part, to assist OEMs in complying with increasingly strict emission regulations.
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WALBRO ENGINE MANAGEMENT
Approximately 20% of the Company's net sales for 1997 were generated by
Walbro Engine Management. Through Walbro Engine Management, the Company designs,
develops and manufactures diaphragm carburetors for portable engines (such as
those used in chain saws and weed trimmers), float feed carburetors for ground
supported engines (such as those used in lawn mowers and marine engines) and
ignition systems and other components for a variety of small engine products.
The Company believes that it is the world's largest independent manufacturer of
small engine carburetors, with an approximate 72% share of the global diaphragm
carburetor market including sales to such leading chain saw and weed trimmer
manufacturers as Poulan/Weedeater, Deere and Company (Homelite), Stihl
Incorporated, McCulloch Corporation, Ryobi Ltd. and Kioritz (Echo) Corporation.
The Company believes it has an approximate 10% share of the global float feed
carburetor market, including sales to Briggs & Stratton Corporation, the world's
largest small engine manufacturer, Kohler Company, Tecumseh Products Co., and
Mercury Marine, a major manufacturer of outboard marine engines. The Company
also produces substantial volumes of float feed carburetors for the Chinese
two-wheeled vehicle market.
The Company's strategy in the small engine sector is to enhance its
presence as a leading supplier of small engine carburetors, ignition systems and
other small engine products through the development of system technologies which
assist customers in complying with new emission standards. The Company's
strategy also includes increasing its global presence, particularly in
developing countries such as the People's Republic of China and India, to profit
from the growing market for carburetors for two-wheeled vehicles,
gasoline-powered portable tools used for infrastructure development and other
small engine applications.
AFTERMARKET
The remaining 6% of the Company's net sales for 1997 were primarily related
to replacement products for both the automotive and small engine aftermarkets.
The Company has recently begun pursuing initiatives to expand its aftermarket
customer base and product lines in an effort to grow this segment of its
business.
RECENT EVENTS
On May 29, 1998, the Company entered into a $150 million line of credit
from NationsBank, N.A. consisting of a $125 million revolving line of credit
(the "Revolving Credit Facility") and a $25 million capital expenditure facility
(the "Capital Expenditure Facility")(the Revolving Credit Facility and the
Capital Expenditure Facility are collectively referred to as the "New Credit
Facility"). On May 29, 1998, proceeds of the Revolving Credit Facility were used
to repay the indebtedness outstanding under the Company's Comerica Bank credit
facility (the "Credit Facility") (including the repayment of a $6.3 million
industrial revenue bond issued by the City of Ligonier, Indiana for construction
of the facility at Sharon Manufacturing Company) and the purchase money facility
issued by the same bank group that issued the Credit Facility (the "Purchase
Money Facility"), as well as to repay the $45 million aggregate principal amount
of the Company's 7.68% Senior Notes due 2004 (the "2004 Notes") including an
early retirement premium of $2.0 million. These actions taken by the Company on
May 29, 1998 are collectively referred to as the "Refinancing." The proceeds of
the New Credit Facility will also be used for capital expenditures and for
general working capital purposes.
As a part of the restructuring program announced during the fourth quarter
of 1997, on June 1, 1998, the Company sold substantially all of the assets of
Sharon Manufacturing Company, one of the Guarantors, for a purchase price of
$4.6 million. The sale of these assets was permitted by, and the Company intends
to apply the proceeds of the sale in compliance with, the Indenture, as
applicable.
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THE EXCHANGE OFFER
THE EXCHANGE NOTES............ The forms and terms of the Exchange Notes are
identical in all material respects to the terms
of the Old Notes for which they may be
exchanged pursuant to the Exchange Offer,
except for certain transfer restrictions and
registration rights relating to the Old Notes
and except for certain interest provisions
relating to the Old Notes described below under
"-- Terms of the Exchange Notes."
THE EXCHANGE OFFER............ The Company is offering to exchange up to
$100,000,000 aggregate principal amount of
10 1/8% Senior Notes due 2007, Series B (the
"Exchange Notes") for up to $100,000,000
aggregate principal amount of its outstanding
10 1/8% Senior Notes due 2007, Series A (the
"Old Notes"). Old Notes may be exchanged only
in integral multiples of $1,000.
EXPIRATION DATE; WITHDRAWAL OF
TENDER........................ The Exchange Offer will expire at 5:00 p.m.,
New York City time, on June 30, 1998, or such
later date and time to which it is extended by
the Company. The tender of Old Notes pursuant
to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date. Any Old
Notes not accepted for exchange for any reason
will be returned without expense to the
tendering holder thereof as promptly as
practicable after the expiration or termination
of the Exchange Offer.
CERTAIN CONDITIONS TO THE
EXCHANGE OFFER................ The Exchange Offer is subject to certain
customary conditions, which may be waived by
the Company. See "The Exchange Offer -- Certain
Conditions to the Exchange Offer."
PROCEDURES FOR TENDERING OLD
NOTES......................... Each holder of the Old Notes wishing to accept
the Exchange Offer must complete, sign and date
the Letter of Transmittal (or facsimile
thereof) in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver the Letter of Transmittal (or
the facsimile), or (in the case of a book-entry
transfer) an Agent's Message (as defined
herein) in lieu of the Letter of Transmittal,
and any other required documentation to the
Exchange Agent (as defined herein) at one of
the addresses set forth herein prior to the
Expiration Date. In addition, prior to the
Expiration Date, either (a) certificates for
tendered Old Notes must be received by the
Exchange Agent at such address, or (b) the Old
Notes must be transferred pursuant to the
procedures for book-entry transfer described
below (and a confirmation of the tender
received by the Exchange Agent, including an
Agent's Message if the tendering holder has not
delivered a Letter of Transmittal). By
executing the Letter of Transmittal (or
transmitting an Agent's Message), each holder
will represent to the Company that, among other
things, (i) any Exchange Notes to be received
by it will be acquired in the ordinary course
of its business, (ii) it has no arrangement
with any person to participate in the
distribution of the Exchange Notes, and (iii)
it is not an "affiliate," as defined in Rule
405 of the Securities Act, of the Company or,
if it is an affiliate, it will comply with the
registration and prospectus delivery
requirements of the Securities Act to the
extent
8
<PAGE> 10
applicable. See "The Exchange Offer --
Procedures for Tendering; -- Resale of the
Exchange Notes."
INTEREST ON THE EXCHANGE
NOTES......................... The Notes bear interest at the rate of 10 1/8%
per annum, payable semi-annually on June 15 and
December 15, commencing June 15, 1998. Holders
of the Exchange Notes will receive interest on
December 15, 1998 from the date of initial
issuance of the Exchange Notes, plus an amount
equal to the accrued interest on the Old Notes
from the most recent date to which interest has
been paid to the date of exchange. Interest on
the Old Notes accepted for exchange will cease
to accrue upon issuance of the Exchange Notes.
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS............. Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender the Old Notes in the
Exchange Offer should contact the registered
holder promptly and instruct the registered
holder to tender on the beneficial owner's
behalf. If the beneficial owner wishes to
tender on the owner's own behalf, such owner
must, prior to completing and executing the
Letter of Transmittal and delivering the Old
Notes, either make appropriate arrangements to
register ownership of the Old Notes in the
owner's name or obtain a properly completed
bond power from the registered holder. The
transfer of registered ownership may take
considerable time and may not be able to be
completed prior to the Expiration Date.
GUARANTEED DELIVERY
PROCEDURES.................... Holders of the Old Notes who wish to tender
their Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes, the Letter of Transmittal or
any other documents required by the Letter of
Transmittal to the Exchange Agent, or who
cannot complete the procedure for book-entry
transfer on a timely basis and deliver an
Agent's Message in lieu of the Letter of
Transmittal, prior to the Expiration Date, must
tender their Old Notes according to the
guaranteed delivery procedures set forth in
"The Exchange Offer -- Guaranteed Delivery
Procedures."
REGISTRATION REQUIREMENTS..... The Company has agreed to use its best efforts
to consummate by July 1, 1998 the registered
Exchange Offer pursuant to which holders of the
Old Notes will be offered an opportunity to
exchange their Old Notes for the Exchange Notes
which will be issued without legends
restricting transfer. In the event that
applicable interpretations of the staff of the
Commission do not permit the Company to effect
the Exchange Offer or in certain other
circumstances, the Company has agreed to file a
shelf registration statement covering resales
of the Old Notes (the "Shelf Registration
Statement") and to use its best efforts to
cause the Shelf Registration Statement to be
declared effective under the Securities Act
and, subject to certain exceptions, keep the
Shelf Registration Statement effective until
two years after its effective date.
9
<PAGE> 11
CERTAIN U.S. FEDERAL INCOME
TAX CONSIDERATIONS............ For a discussion of certain federal income tax
considerations relating to the exchange of the
Exchange Notes for the Old Notes, see "Certain
U.S. Federal Income Tax Consequences."
USE OF PROCEEDS............... There will be no proceeds to the Company from
the exchange of the Old Notes pursuant to the
Exchange Offer.
EXCHANGE AGENT................ Bankers Trust Company is the Exchange Agent.
The address and telephone number of the
Exchange Agent are set forth in "The Exchange
Offer -- Exchange Agent."
10
<PAGE> 12
TERMS OF THE EXCHANGE NOTES
The form and terms of the Exchange Notes are the same as the form and terms
of the Old Notes except that the Exchange Notes are registered under the
Securities Act and, therefore, will not bear legends restricting transfer. See
"Description of the Exchange Notes."
EXCHANGE NOTES................ $100 million aggregate principal amount of
10 1/8% Senior Notes due 2007, Series B of the
Company.
MATURITY DATE................. December 15, 2007.
INTEREST PAYMENT DATES........ June 15 and December 15, commencing December
15, 1998.
RANKING....................... The Exchange Notes will be senior unsecured
obligations of the Company ranking pari passu
in right of payment with all existing and
future senior unsecured obligations of the
Company, including the Company's $110 million
aggregate principle amount of 9.875% Senior
Notes due 2005 (the "2005 Notes"), and will be
effectively subordinated in right of payment to
all existing and future secured indebtedness of
the Company and its subsidiaries. As of March
31, 1998, the Company and its subsidiaries had
approximately $80.4 million of secured
indebtedness outstanding, including $23.0
million of aggregate indebtedness under the
Credit Facility, which amount included $2.9
million outstanding under the Purchase Money
Facility, and the $45 million aggregate
principal amount of the 2004 Notes. After
giving effect to the Refinancing, as of March
31, 1998, the Company and its subsidiaries
would have had approximately $88.4 million of
secured indebtedness outstanding, including
$78.0 million of aggregate indebtedness under
the Revolving Credit Facility and no
indebtedness outstanding under the Capital
Expenditure Facility. All of such indebtedness
was and is secured by the inventory, accounts
receivable and certain intangibles of the
Company and its domestic subsidiaries and by a
pledge of 100% of the capital stock of the
Company's wholly-owned domestic subsidiaries
and of up to 65% of the capital stock of
certain of the Company's wholly-owned foreign
subsidiaries. In addition, the Purchase Money
Facility was and the Capital Expenditure
Facility is secured by certain equipment
purchased with borrowings thereunder. The
Credit Facility and the Purchase Money Facility
are referred to as the "Credit Facilities." In
addition, the Exchange Notes will be
effectively subordinated in right of payment to
all existing and future liabilities, including
trade payables, of the Company's subsidiaries
which are not Guarantors, which, as of March
31, 1998, totalled approximately $186.7 million
(excluding intercompany liabilities).
GUARANTEES.................... The Exchange Notes will be guaranteed on a
senior unsecured basis, jointly and severally,
by the Company's principal wholly-owned
domestic operating subsidiaries, including
Walbro Automotive Corporation and Walbro Engine
Management Corporation. See "Description of the
Exchange Notes -- The Guarantees" and Note 2 of
the Supplemental Notes to the Company's
Consolidated Financial Statements for the year
ended December 31, 1997 and Note 4 of the Notes
to the Company's (unaudited) Consolidated
11
<PAGE> 13
Financial Statements for the three months ended
March 31, 1998, both as contained elsewhere
herein.
OPTIONAL REDEMPTION........... Except as provided below, the Exchange Notes
are not redeemable at the Company's option
prior to December 15, 2002. Thereafter, the
Exchange Notes will be redeemable, in whole or
in part, at the option of the Company, at the
redemption prices set forth herein plus accrued
interest to the date of redemption. In
addition, prior to December 15, 2000, the
Company may, at its option, redeem up to an
aggregate of 30% of the principal amount of the
Exchange Notes originally issued with the net
proceeds from one or more Public Equity
Offerings at the redemption price set forth
herein plus accrued interest to the date of
redemption. See "Description of the Exchange
Notes -- Redemption -- Optional Redemption."
CHANGE OF CONTROL............. In the event of a Change of Control, the
Company will be obligated to make an offer to
purchase all of the outstanding Exchange Notes
at a redemption price of 101% of the principal
amount thereof plus accrued interest to the
date of repurchase. See "Description of the
Exchange Notes -- Certain Covenants -- Change
of Control."
OFFER TO REPURCHASE........... The Company will be required in certain
circumstances to make an offer to repurchase
the Exchange Notes at a price equal to 100% of
the principal amount thereof, plus accrued
interest to the date of repurchase, with the
net cash proceeds of certain asset sales. See
"Description of the Exchange Notes -- Certain
Covenants -- Disposition of Proceeds of Asset
Sales."
CERTAIN COVENANTS............. The indenture under which the Old Notes were
issued and the Exchange Notes will be issued
(the "Indenture") contains covenants including,
but not limited to, covenants with respect to
limitations on the following matters: (i) the
incurrence of additional indebtedness, (ii) the
issuance of preferred stock by subsidiaries,
(iii) the creation of liens, (iv) sale and
leaseback transactions, (v) restricted
payments, (vi) the sales of assets and
subsidiary stock, (vii) mergers and
consolidations, (viii) payment restrictions
affecting subsidiaries, and (ix) transactions
with affiliates. See "Description of the
Exchange Notes -- Certain Covenants."
For additional information regarding the Exchange Notes, see "Description
of the Exchange Notes."
RISK FACTORS
See "Risk Factors" for a discussion of certain considerations that should
be considered before tendering the Old Notes in exchange for the Exchange Notes.
12
<PAGE> 14
SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
The following table sets forth summary historical financial data of the
Company. The summary historical financial data of the Company for each of the
five years ended December 31 was derived from the audited consolidated financial
statements of the Company. The summary historical financial data of the Company
for both of the three-month periods ended March 31 was derived from the
unaudited consolidated financial statements of the Company which, in the opinion
of the Company's management, reflect all adjustments necessary for a fair
presentation of the financial position and results of operations for the
periods. The information contained in this table reflects the results of Dyno
subsequent to its acquisition in July 1995 and should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements of the Company including
the notes thereto, contained elsewhere herein.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales....................... $ 169,292 $ 154,019 $ 619,905 $ 585,389 $ 459,272 $ 325,205 $ 273,463
Cost of sales................... 144,058 129,821 538,751 488,134 377,755 261,501 216,804
Gross profit.................... 25,234 24,198 81,154 97,255 81,517 63,704 56,659
Selling, administrative and
other expenses................ 16,958 15,718 78,075 69,869 57,495 39,318 33,043
Reorganization and restructuring
charges....................... -- -- 27,000 -- -- -- 1,760
Operating income................ 8,276 8,480 (23,921) 27,386 24,022 24,386 21,856
Interest expense, net........... 7,503 5,892 24,736 17,117 11,111 3,771 2,559
Equity in (income) loss of joint
ventures...................... (474) (801) (3,113) (4,187) (3,877) (2,609) 89
Net income(1)................... 572 2,362 (36,627) 11,229 13,830 14,595 9,667
Net income per share(2)......... 0.07 0.27 (4.23) 1.30 1.61 1.70 1.13
Weighted average shares
outstanding................... 8,682,602 8,652,737 8,668,096 8,649,380 8,609,431 8,602,077 8,537,375
OTHER DATA:
Depreciation and amortization... $ 9,718 $ 8,180 $ 31,417 $ 29,736 $ 22,451 $ 14,672 $ 11,339
Capital expenditures............ 11,826 14,232 62,019 99,147 46,240 18,844 20,260
EBITDA(3)....................... 19,462 17,749 7,439 57,255 45,245 36,345 31,128
Ratio of EBITDA to interest
expense, net(3)............... 2.6x 3.0x 0.3x 3.3x 4.1x 9.6x 12.2x
Ratio of earnings to fixed
charges....................... 1.1x 2.5x (0.5x) 1.3x 1.8x 4.5x 6.2x
BALANCE SHEET DATA:
(at end of period)
Total assets.................... $ 629,506 $ 612,101 $ 610,593 $ 589,649 $ 493,473 $ 257,366 $ 215,295
Total long-term debt, less
current portion............... 293,804 261,359 291,393 291,723 233,389 66,136 52,392
Total debt...................... 331,682 284,212 331,557 314,884 249,396 81,548 58,175
Company-Obligated Mandatorily
Redeemable Convertible
Preferred Securities of Walbro
Capital Trust holding solely
Convertible Debentures........ 69,000 69,000 69,000 -- -- -- --
Total stockholders'
equity(4)(5).................. 67,187 130,982 69,866 137,733 135,427 127,915 114,146
</TABLE>
(footnotes on following page)
13
<PAGE> 15
- -------------------------
(1) The Company adopted SFAS 106 as of January 1, 1993. As a result, the Company
recorded a one-time after tax charge of $2,900 for the cumulative effect of
this accounting change in the year ended December 31, 1993.
(2) Basic and diluted income per share were the same in all periods presented.
(3) "EBITDA" represents, for any period, the sum of operating income (minus
foreign currency exchange losses and other expenses, net) and depreciation
and amortization. EBITDA is not intended to be a performance measure that
should be regarded as an alternative either to operating income or net
income as an indicator of operating performance or to cash flow as a measure
of liquidity. The Company has included information concerning EBITDA because
it is a widely accepted financial indicator of a Company's ability to
service and/or incur indebtedness. EBITDA (subject to certain adjustments)
will be used to determine compliance with certain covenants contained in the
Indenture.
(4) Reflects cash dividends declared for Common Stock of $0, $865, $3,474,
$3,446, $3,429, $3,426 and $3,403 in the three months ended March 31, 1998
and 1997 and the years ended December 31, 1997, 1996, 1995, 1994 and 1993,
respectively.
(5) The Company adopted SFAS 115 as of January 1, 1994. As a result, the Company
recorded an increase to stockholders' equity of $2,096 (net of income taxes)
as of January 1, 1994.
14
<PAGE> 16
RISK FACTORS
In addition to other information contained in this Prospectus, investors
should consider carefully the following risk factors before tendering the Old
Notes in exchange for the Exchange Notes.
SUBSTANTIAL LEVERAGE
After the Initial Offering, the Company has consolidated indebtedness that
is substantial in relation to its stockholders' equity. As of March 31, 1998,
the Company had $331.7 million of total debt, $69.0 million of Convertible Trust
Preferred Securities and $67.2 million of stockholders' equity. After giving
effect to the Refinancing, as of March 31, 1998, the Company would have had
$333.4 million of total debt and $67.0 million of stockholders' equity.
Additionally, as of March 31, 1998, the Company and its subsidiaries had
approximately $80.4 million of secured indebtedness outstanding, including
approximately $23.0 million of borrowings under the Credit Facility and $45.0
million aggregate principal amount of the 2004 Notes. After giving effect to the
Refinancing, as of March 31, 1998, the Company and its subsidiaries would have
had approximately $88.4 million of secured indebtedness outstanding, including
approximately $78.0 million of borrowings under the New Credit Facility. Such
secured indebtedness has a lien on specified assets of the Company or its
subsidiaries, as the case may be. As a result, in an insolvency proceeding,
holders of secured indebtedness would have claims against the assets of the
Company or its subsidiaries, as the case may be, securing their indebtedness to
satisfy their claims, and such assets would be applied to the payment of such
claims before claims of holders of unsecured senior indebtedness, such as the
Notes, would be satisfied. Because the domestic inventory, accounts receivable
and certain intangibles and equipment of the Company and its domestic
subsidiaries have been pledged to the banks under the New Credit Facility to
secure the Company's borrowings thereunder, in the event of an insolvency of the
Company, such banks would have a claim to such assets, while the holders of the
Notes would have no claim over specific assets of the Company and its domestic
subsidiaries.
The Company's indebtedness will have several important consequences for the
holders of the Notes, including but not limited to the following: (i) a
substantial portion of the Company's cash flow from operations must be dedicated
to debt service requirements (principal and interest) on its indebtedness and
will not be available for other purposes; (ii) the Company's ability to obtain
additional financing in the future for working capital, capital expenditures,
acquisitions, or to refinance the Notes or for general corporate purposes may be
impaired; (iii) the Company's leverage may increase its vulnerability to
economic downturns and limit its ability to withstand competitive pressures; and
(iv) the Company's ability to capitalize on significant business opportunities
may be limited.
The Company's ability to make payments with respect to the Notes and to
satisfy its other debt obligations will depend on its future operating
performance, which will be affected by prevailing economic conditions and
financial, business and other factors, certain of which are beyond the Company's
control. The Company believes, based on current circumstances, that the
Company's cash flow, together with available borrowings under the New Credit
Facility, will be sufficient to permit the Company to meet its operating
expenses and to service its debt requirements as they become due. Significant
assumptions underlie this belief, including, among other things, that the
Company will succeed in implementing its business strategy and there will be no
material adverse developments in the business, liquidity or capital requirements
of the Company. If the Company is unable to service its indebtedness, it will be
forced to adopt an alternative strategy that may include actions such as
reducing or delaying capital expenditures, selling assets, restructuring or
refinancing its indebtedness or seeking additional equity capital. There can be
no assurance that any of these strategies could be effected on satisfactory
terms, if at all. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources." The
Indenture, among other things, limits the incurrence of additional indebtedness
by the Company and its subsidiaries. However, this limitation is subject to a
number of important qualifications.
15
<PAGE> 17
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The indenture relating to the 2005 Notes (the "2005 Notes Indenture") and
the Indenture restrict the ability of the Company and its subsidiaries to, among
other things, incur additional indebtedness, pay dividends or make certain other
restricted payments or investments, consummate certain asset sales, enter into
certain transactions with affiliates, incur liens, or merge or consolidate with
any other person or sell, assign, transfer, lease, convey or otherwise dispose
of all or substantially all of their assets. The 2005 Notes Indenture and the
Indenture impose limitations on the Company's ability to restrict the ability of
its subsidiaries to pay dividends or make certain payments to the Company or any
of its subsidiaries. In addition, the New Credit Facility contains other and
more restrictive covenants. The New Credit Facility requires the Company to
maintain specified financial ratios and satisfy certain financial tests. The
Company's ability to meet such financial ratios and tests may be affected by
events beyond its control, and there can be no assurance that the Company will
meet such tests. A breach of any of these covenants could result in an event of
default under the New Credit Facility. In an event of default under the New
Credit Facility, the lenders thereunder could elect to declare all amounts
borrowed, together with accrued interest, to be immediately due and payable and
the lenders under the New Credit Facility could terminate all commitments
thereunder. Such event would constitute an event of default under the 2005 Notes
Indenture entitling the holders of the 2005 Notes to declare the principal and
interest on the 2005 Notes due and payable. If any such indebtedness were to be
accelerated, there can be no assurance that the assets of the Company would be
sufficient to repay in full such indebtedness and the other indebtedness of the
Company. See "Description of Other Indebtedness" and "Description of the
Exchange Notes -- Certain Covenants."
FRAUDULENT CONVEYANCE CONSIDERATIONS
Under applicable provisions of the federal bankruptcy law or comparable
provisions of state fraudulent transfer laws, if any Guarantor, at the time it
incurs a Guarantee, (a)(i) was or is insolvent or rendered insolvent by reason
of such incurrence, (ii) was or is engaged in a business or transaction for
which the assets remaining with such Guarantor constituted unreasonably small
capital or (iii) intended or intends to incur, or believed or believes that it
would incur, debt beyond its ability to pay such debts as they mature and (b)
received or receives less than reasonably equivalent value or fair
consideration, the obligations of such Guarantor under its Guarantee could be
avoided, or claims in respect of such Guarantee could be subordinated to all
other debts of such Guarantor. Among other things, a legal challenge of a
Guarantee on fraudulent conveyance grounds may focus on the benefits, if any,
realized by such Guarantor as a result of the issuance by the Company of the
Notes. To the extent that any Guarantee was a fraudulent conveyance or held
unenforceable for any other reason, the holders of the Notes would cease to have
any claim in respect of a Guarantor and would be solely creditors of the Company
and any other Guarantors whose Guarantees were not avoided or held
unenforceable. In such event, the claims of the holders of the Notes would be
subject to the prior payment of all liabilities of the Guarantor whose Guarantee
was avoided. There can be no assurance that, after providing for all prior
claims, there would be sufficient assets to satisfy the claims of the holders of
the Notes relating to any avoided portion of a Guarantee.
Each Guarantor agreed, jointly and severally with the other Guarantors, to
contribute to the obligations of any Guarantor under a Guarantee of the Notes.
Further, the Guarantee of each Guarantor provides that it is limited to an
amount that would not render the Guarantor thereunder insolvent. The Company
believes that the Guarantors received equivalent value at the time the
indebtedness was incurred under the Guarantees. In addition, the Company
believes that none of the Guarantors were, at the time of or as a result of the
issuance of the Guarantees, insolvent, that none of the Guarantors was or is
engaged in a business or transaction for which its remaining assets constitute
unreasonably small capital and that none of the Guarantors intended or intends
to incur debts beyond its ability to pay such debts as they mature. Since each
of the components of the question of whether a Guarantee is a fraudulent
conveyance is inherently fact based and fact specific, there can be no assurance
that a court passing on such questions would agree with the Company. As a
result, in rendering their opinions on the validity of the Notes, Katten Muchin
& Zavis, counsel for the Company and Cahill Gordon & Reindel, counsel for the
Initial Purchaser, will express no opinion as to federal or state laws relating
to fraudulent transfers.
16
<PAGE> 18
HOLDING COMPANY STRUCTURE
The Company derives substantially all of its operating income and cash flow
from its subsidiaries. The Company must rely upon cash distributions from its
subsidiaries to generate the funds necessary to meet its obligations, including
the payment of principal and interest on the Notes.
Any right of the holders of the Notes to participate in the assets of a
non-Guarantor subsidiary of the Company upon any liquidation or reorganization
of such subsidiary will be subject to the prior claims of such subsidiary's
creditors, including the lenders under the New Credit Facility and trade
creditors. Accordingly, the Notes will be structurally subordinated to all
liabilities, including trade payables, of the non-Guarantor subsidiaries of the
Company. As of March 31, 1998, the non-guarantor subsidiaries had outstanding
indebtedness of approximately $186.7 million, which includes trade payables and
accrued expenses of approximately $74.8 million (excluding intercompany
liabilities). In addition, 100% of the capital stock of the Company's
wholly-owned domestic subsidiaries and up to 65% of the capital stock of its
wholly-owned foreign subsidiaries are pledged as collateral to the lenders under
the New Credit Facility. Accordingly, upon any liquidation or reorganization of
the Company, the holders of the Notes will have no claim against such capital
stock until the lenders under the New Credit Facility are paid in full.
DEPENDENCE ON CUSTOMER RELATIONSHIPS
Sales to Chrysler, the Company's largest customer, accounted for 19%, 20%
and, 19% of the Company's consolidated net sales for the years ended 1997, 1996
and 1995, respectively. Although the Company has ongoing supply relationships
with Chrysler and certain of its other OEM customers, there can be no assurance
that sales to these customers will continue at current levels. Further,
continuation of the Company's customer relationships is dependent upon the
customers' satisfaction with the price, quality and delivery of the Company's
products and the Company's ability to execute new product launches successfully,
none of which can be assured. While management believes its relationships with
its customers are mutually satisfactory, if Chrysler or any of the Company's
other significant customers were to reduce substantially or discontinue its
purchases, the Company would be adversely affected. See "Business -- Walbro
Automotive -- Automotive Markets and Customer Base."
COMPETITION
The automotive fuel system and small engine industries in which the Company
operates are highly competitive. There can be no assurance that the Company's
products will continue to compete successfully with the products of other
companies, including the automotive OEMs themselves, many of whom are
significantly larger and have greater financial and other resources available to
them. In addition, the Company is under constant pressure from its major
customers to reduce product costs. Management believes that the Company's
experience in engineering and implementing cost reduction programs and its
ability to develop proprietary new products and to control manufacturing and
development costs should allow the Company's product prices to remain
competitive. However, there can be no assurance that the Company will be able to
improve or maintain its profit margins on sales to vehicle manufacturers and
small engine producers.
CYCLICAL NATURE OF AUTOMOTIVE AND SMALL ENGINE INDUSTRIES
The Company's principal operations are related directly to domestic and
foreign automotive vehicle and small engine consumer product sales. Sales and
production of automobiles and small engine products are cyclical and can be
affected by the strength of a country's general economy, prevailing interest
rates and by other factors which may have an adverse effect on the level of the
Company's sales to automobile and small engine product manufacturers.
IMPACT OF ENVIRONMENTAL REGULATIONS
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 currently expected to become effective in
1999. In addition, the U.S. Environmental Protection Agency ("EPA") has imposed
17
<PAGE> 19
similar regulations which became effective in August 1996, with the more
stringent phase expected to become effective during the 2002 to 2005 period. The
implementation of the 1999 California air quality regulations and proposed EPA
regulations could significantly reduce the number of units the Company sells of
its current carburetor models, especially diaphragm carburetors, and the
Company's resulting sales. Hand-held power equipment is most vulnerable to a
decrease in demand because the cost of compliance with these emission standards
could force manufacturers to replace gasoline-powered lawn and garden equipment
with electrically powered equipment. There can be no assurance that the Company
will develop cost effective products to meet all of these regulations or that
the ultimate customer might not select electric power equipment instead. See
"Business -- Walbro Engine Management -- Small Engine Industry Overview."
WARRANTY EXPOSURE AND RECALLS
The Company warrants to its OEM customers that its products are free from
defect and that they meet certain OEM designated specifications. The OEMs in
turn offer product warranties to their retail customers. In some instances of
common complaint, the automobile manufacturer will institute a voluntary recall
or will be required by a governmental agency to conduct a recall. As a result,
from time to time, the Company has received claims against it and requests for
payment from its OEM customers to remedy complaints made by the ultimate
consumers. The Company took a non-recurring charge in the fourth quarter of 1997
of approximately $5 million (pre-tax) as a warranty reserve related to certain
product claims which became known to the Company in the fourth quarter of 1997.
There can be no assurance that the Company will not incur substantial warranty
or recall expense in the future. Such complaints and the related expenses may
have a material adverse effect on the Company's relationship with its OEM
customers, its financial condition and results of operations. See "Business --
Walbro Automotive -- Automotive Warranty and Other Product Exposure."
RISKS ASSOCIATED WITH FOREIGN OPERATIONS
The Company has significant international operations, specifically in
Europe, South America and Asia and therefore the Company is subject to various
political, economic and other uncertainties. Among others, the Company's
operations are subject to the risks of taxation policies, foreign exchange
restrictions, changing political conditions and governmental regulations.
Accordingly, no assurance can be given that any of the Company's strategies will
prove to be effective or that management's goals will be achieved. In addition,
the Company receives a substantial portion of its net sales in currencies other
than U.S. Dollars. Fluctuations in the exchange rates of these currencies with
respect to the U.S. Dollar could have an adverse effect on the Company's
financial results. From time to time the Company engages in hedging programs
intended to reduce the Company's exposure to currency fluctuations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Foreign Currency Transactions."
CONSEQUENCES OF FAILURE TO EXCHANGE; POSSIBLE ADVERSE EFFECT ON TRADING MARKET
FOR THE OLD NOTES
Holders of the Old Notes who do not exchange their Old Notes for the
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of the Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold unless registered under the Securities Act and applicable state
laws, or pursuant to an exemption therefrom. Subject to the obligation by the
Company to file the Shelf Registration Statement in certain circumstances, the
Company does not intend to register the Old Notes under the Securities Act and,
after consummation of the Exchange Offer, will not be obligated to do so. In
addition, any holder of the Old Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes may be deemed
to have received restricted securities and, if so, will be required to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Additionally, as a result of the
Exchange Offer, it is expected that a substantial decrease in the aggregate
principal amount of the Old Notes outstanding will occur. As a result, it is
unlikely that a liquid trading market will exist for the Old Notes at any time.
This lack of liquidity will make
18
<PAGE> 20
transactions more difficult and may reduce the trading price of the Old Notes.
See "The Exchange Offer" and "Registration Rights of the Old Notes."
ABSENCE OF PUBLIC MARKET
There has not previously been any public market for the Exchange Notes.
Although the Company has agreed pursuant to the Registration Rights Agreement to
use its best efforts to cause the Exchange Notes to be listed on the New York
Stock Exchange, there can be no assurance as to the liquidity of any markets
that may develop for the Exchange Notes, the ability of holders to sell the
Exchange Notes, or the price at which holders would be able to sell the Exchange
Notes. Future trading prices of the Exchange Notes will depend on many factors,
including, among other things, prevailing interest rates, the Company's
operating results and the market for similar securities. Historically, the
market for securities similar to the Exchange Notes, including non-investment
grade debt, has been subject to disruptions that have caused substantial
volatility in the prices of such securities. There can be no assurance that any
market for the Exchange Notes, if such market develops, will not be subject to
similar disruptions. The Initial Purchaser has advised the Company that it
currently intends to make a market in the Exchange Notes offered. However, the
Initial Purchaser is not obligated to do so and any market making may be
discontinued at any time without notice.
19
<PAGE> 21
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain obligations of the
Company under the Registration Rights Agreement. The Company will not receive
any proceeds from the issuance of the Exchange Notes offered. In consideration
for issuing the Exchange Notes as contemplated in this Prospectus, the Company
will receive, in exchange, Old Notes in like principal amount. The form and
terms of the Exchange Notes are identical in all material respects to the form
and terms of the Old Notes, except as otherwise described under "The Exchange
Offer -- Terms of the Exchange Offer." The Old Notes surrendered in exchange for
the Exchange Notes will be retired and cancelled and cannot be reissued.
Accordingly, issuance of the Exchange Notes will not result in any increase in
the outstanding debt of the Company. As such, no effect has been given to the
Exchange Offer in the capitalization table.
The Company applied the net proceeds (net of commissions and estimated
expenses) from the Initial Offering to repay a portion of the borrowings under
the Credit Facility.
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as
of March 31, 1998 and as adjusted to give effect to the Refinancing and $3.7
million in additional borrowings under the Revolving Credit Facility as of May
29, 1998. This table should be read in conjunction with "Selected Financial and
Operating Data" and the consolidated financial statements of the Company and
related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
-----------------------
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS)
<S> <C> <C>
Total short-term debt, including current portion of
long-term debt(1)......................................... $ 37,878 $ 31,428
Long-term debt, less current portion:
New Credit Facility(2).................................... -- 77,952
Credit Facilities(2)...................................... 22,952 --
7.680% Senior Notes Due 2004(3)........................... 38,550 --
9.875% Senior Notes Due 2005.............................. 109,718 109,718
10.125% Senior Notes Due 2007............................. 100,000 100,000
Other long-term debt, net of current portion(1)........... 22,584 16,284
-------- --------
Total long-term debt, net of current portion................ 293,804 303,954
Company-Obligated Mandatorily Redeemable Convertible
Preferred Securities of Walbro Capital Trust holding
solely Convertible Debentures............................. 69,000 69,000
Total stockholders' equity.................................. 67,187 67,187
-------- --------
Total capitalization........................................ $467,869 $471,569
======== ========
</TABLE>
- -------------------------
(1) Of these amounts, approximately $12.3 million are secured by certain assets
of the Company or its subsidiaries.
(2) As of March 31, 1998, the Credit Facility had a maximum availability of $30
million which was, and as of May 29, 1998 the New Credit Facility had a
maximum availability of $125 million which is, secured by the accounts
receivable, inventory and certain intangibles, and by a pledge of 100% of
the capital stock of the Company's wholly-owned domestic subsidiaries and up
to 65% of the capital stock of wholly-owned foreign subsidiaries. In
addition, the Purchase Money Facility was and the Capital Expenditure
Facility is secured by equipment purchased with borrowings thereunder. At
March 31, 1998, the Company had $23.0 million outstanding under the Credit
Facilities, and at May 29, 1998, the Company had $78.0 million outstanding
under the New Credit Facility.
(3) The 2004 Notes were equally and ratably secured with the collateral securing
the Credit Facility.
20
<PAGE> 22
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED FINANCIAL DATA
The following Pro Forma Unaudited Condensed Consolidated Statements of
Operations for the three months ended March 31, 1998 and the year ended December
31, 1997 present pro forma operating results as if the Refinancing had occurred
as of January 1, 1997. The Pro Forma Condensed Consolidated Balance Sheet as of
March 31, 1998 gives effect to the Refinancing as if it has occurred on that
date. The pro forma adjustments are described in the notes thereto. The Pro
Forma Unaudited Condensed Consolidated Financial Data should be read in
conjunction with the Company's historical financial statements and related notes
thereto included elsewhere in the Prospectus. The Pro Forma Unaudited Condensed
Consolidated Financial Data do not purport to represent either future results or
the results that would have occurred if the Refinancing had occurred on the
dates indicated, nor do they give effect to any matters other than those
described in the notes thereto. Non-recurring charges for the early retirement
of debt have not been reflected in the pro forma statements of operations
presented below.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
-------------------------------------------
COMPANY REFINANCING
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C> <C>
Net sales................................................... $ 169,292 $ -- $ 169,292
Cost of sales............................................... 144,058 -- 144,058
---------- ----- ----------
Gross margin................................................ 25,234 -- 25,234
---------- ----- ----------
Selling and administrative expenses......................... 16,958 -- 16,958
---------- ----- ----------
Operating income............................................ 8,276 -- 8,276
---------- ----- ----------
Interest expense, net....................................... 7,503 199(1) 7,702
Other expense (income), net................................. (1,468) -- (1,468)
---------- ----- ----------
Income before taxes and other............................... 2,241 (199) 2,042
---------- ----- ----------
Provision for income taxes.................................. (752) 70(2) (682)
Minority interest........................................... (1,391) -- (1,391)
Equity in income of joint ventures.......................... 474 -- 474
---------- ----- ----------
Net income (loss) before extraordinary charges.............. $ 572 $(129) $ 443
========== ===== ==========
Net income per share before extraordinary charges........... $ 0.07 $ 0.05
========== ==========
Basic Weighted Average Shares Outstanding................... 8,682,602 8,682,602
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------
COMPANY REFINANCING
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C> <C>
Net sales................................................... $ 619,905 $ -- $ 619,905
Cost of sales............................................... 538,751 -- 538,751
---------- ----- ----------
Gross margin................................................ 81,154 -- 81,154
---------- ----- ----------
Selling and administrative expenses......................... 78,075 -- 78,075
Restructuring & impairment charges.......................... 27,000 -- 27,000
---------- ----- ----------
Operating income............................................ (23,921) -- (23,921)
---------- ----- ----------
Interest expense, net....................................... 25,410 341(1) 25,751
Other expense (income), net................................. (4,495) -- (4,495)
---------- ----- ----------
Income before taxes and other............................... (44,836) (341) (45,177)
---------- ----- ----------
Provision for income taxes.................................. 10,131 119(2) 10,250
Minority interest........................................... (5,035) -- (5,035)
Equity in income of joint ventures.......................... 3,113 -- 3,113
---------- ----- ----------
Net income (loss) before extraordinary charges.............. $ (36,627) $(222)(3) $ (36,849)(3)
========== ===== ==========
Net income (loss) per share................................. $ (4.23) $ (4.25)
========== ==========
Basic Weighted Average Shares Outstanding................... 8,661,432 8,661,432
</TABLE>
21
<PAGE> 23
NOTES TO PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(1) Reflects interest expense changes resulting from the Refinancing as if the
Refinancing had taken place as of January 1, 1997. Amortization of deferred
financing fees was calculated based on a five year amortization period for
fees related to the New Credit Facility. In addition, the actual deferred
financing fees amortized during each period under the Credit Facility and
$45 million Senior Notes have been eliminated assuming the Refinancing had
taken place as of January 1, 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1998 DECEMBER 31, 1997
------------------ -----------------
<S> <C> <C>
Interest expense under New Credit Facility,
assuming an interest rate of 8%.................. $1,499 $ 6,080
Elimination of interest expense under Credit
Facility......................................... (454) (1,840)
Elimination of interest expense under $45 million
Senior Notes due 2004............................ (852) (3,456)
Elimination of interest expense under $6.3 million
industrial revenue bond.......................... (70) (284)
Fee amortization under New Credit Facility......... 84 340
Eliminate fee amortization under Credit Facility
and $45 million Senior Notes..................... (8) (499)
------ -------
$ 199 $ 341
====== =======
</TABLE>
(2) Reflects estimated income tax adjustments resulting from the pro forma
adjustments at 35%.
(3) Excludes extraordinary charge of approximately $2.0 million for the early
extinguishment of debt under the $45 million Senior Notes due 2004. This
charge has been excluded from the pro forma presentation as it will not be a
recurring charge. The Company will record this charge during the second
quarter of 1998 as an extraordinary item, net of tax.
22
<PAGE> 24
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
---------------------------------------------
COMPANY REFINANCING
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(UNAUDITED DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash.................................................. $ 17,090 $ -- $ 17,090
Accounts receivable, net.............................. 160,761 -- 160,761
Inventories........................................... 58,504 -- 58,504
Other current assets.................................. 26,903 -- 26,903
--------- ------- ---------
Total current assets................................ 263,258 -- 263,258
--------- ------- ---------
Property, plant and equipment......................... 394,761 -- 394,761
Accumulated depreciation.............................. (123,962) -- (123,962)
--------- ------- ---------
Net property, plant and equipment..................... 270,799 -- 270,799
--------- ------- ---------
Goodwill, net......................................... 32,668 -- 32,668
Other assets.......................................... 62,781 1,494(1) 64,275
--------- ------- ---------
Total other assets.................................. 95,449 1,494 96,943
--------- ------- ---------
Total assets..................................... $ 629,506 1,494 631,000
========= ======= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt....................................... $ 37,878 (6,450)(2) $ 31,428
Other current liabilities............................. 146,065 (772)(3) 145,293
--------- ------- ---------
Total current liabilities........................... 183,943 (7,222) 176,721
--------- ------- ---------
Total long-term debt, less current portion............ 293,804 10,150(4) 303,954
Other long-term liabilities........................... 15,572 -- 15,572
--------- ------- ---------
Total long-term liabilities......................... 309,376 10,150 319,526
--------- ------- ---------
Convertible Trust Preferred Securities................ 69,000 -- 69,000
Total stockholders' equity............................ 67,187 (1,434)(3) 65,753
--------- ------- ---------
Total liabilities and stockholders' equity.......... $ 629,506 1,494 $ 631,000
========= ======= =========
</TABLE>
23
<PAGE> 25
NOTES TO PRO FORMA UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<S> <C> <C>
(1) Reflects the change in deferred financing fees as a results
of the Refinancing as follows:
$ 1,700
Deferred financing fees under the New Credit Facility.......
(206)
Write-off of remaining deferred financing fees under $45
million Senior Notes due 2004...............................
--------
$ 1,494
========
(2) Reflects repayment of the $6.45 million current portion of
$45 million Senior Notes due 2004 under the Refinancing.
There will be no current portion under the New Credit
Facility until such time as the Company borrows under the
Capital Expenditure Facility.
(3) Reflects the write-off of remaining deferred financing fees
under the $45 million Senior Notes due 2004 of $206, net of
tax effect of $72, and the recording of an early retirement
premium expense of $2.0 million under the $45 million Senior
Notes due 2004, net of tax effect of $700.
(4) Reflects the effects of the Refinancing as follows:
$ 78,000
Borrowings under the New Credit Facility at closing.........
(38,550)
Repayment of long-term portion of $45 million Senior Notes
due 2004....................................................
(23,000)
Repayment of Credit Facility, based on balance outstanding
at 3/31/98..................................................
(6,300)
Repayment of $6.3 million industrial revenue bond...........
--------
$ 10,150
Net increase in long-term debt..............................
========
</TABLE>
24
<PAGE> 26
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on December 16, 1997 to the Initial
Purchaser. The Initial Purchaser placed the Old Notes with a limited number of
qualified institutional buyers in reliance on Rule 144A under the Securities
Act. Pursuant to the Registration Rights Agreement by and among the Company, the
Guarantors and the Initial Purchaser, the Company agreed (i) to file a
registration statement with respect to an offer to exchange the Old Notes for
senior debt securities of the Company with terms substantially identical to the
Old Notes (except that the Exchange Notes do not contain terms with respect to
transfer restrictions) within 60 days after the date of original issuance of the
Old Notes, and (ii) to use its best efforts to cause the registration statement
to become effective under the Securities Act within 180 days after the issue
date. In the event that applicable law or interpretations of the staff of the
Commission do not permit the Company to file the registration statement
containing this Prospectus or to effect the Exchange Offer, or if certain
holders of the Old Notes notify the Company that they are not permitted to
participate in, or would not receive freely tradeable Exchange Notes pursuant
to, the Exchange Offer, the Company will use its best efforts to cause to become
effective the Shelf Registration Statement with respect to the resale of the Old
Notes and to keep the Shelf Registration Statement effective until two years
after the effective date thereof. Upon consummation of the Exchange Offer,
holders of the Old Notes not tendered and accepted in the Exchange Offer who did
not notify the Company that they are not permitted to participate in, or would
not receive freely tradeable Exchange Notes pursuant to, the Exchange Offer may
no longer have any registration rights under the Registration Rights Agreement.
The interest rate on the Old Notes is subject to increase under certain
circumstances if the Company is not in compliance with its obligations under the
Registration Rights Agreement. See "Registration Rights of the Old Notes."
Pursuant to the Registration Rights Agreement, the Company has agreed to use its
best efforts to cause the Exchange Notes to be listed on the New York Stock
Exchange.
Each holder of the Old Notes who wishes to exchange the Old Notes for the
Exchange Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business, (ii) it
has no arrangement with any person to participate in the distribution of the
Exchange Notes, and (iii) it is not an "affiliate," as defined in Rule 405 of
the Securities Act, of the Company, or, if it is an affiliate, it will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable. See "Registration Rights of the Old Notes."
RESALE OF THE EXCHANGE NOTES
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third-parties, the Company believes that, except as
described below, the Exchange Notes issued pursuant to the Exchange Offer in
exchange for the Old Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than a holder which is an "affiliate"
of the Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that the Exchange Notes are acquired in the ordinary
course of the holder's business and the holder does not intend to participate
and has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes. Any holder who tenders in the Exchange Offer
with the intention or for the purpose of participating in a distribution of the
Exchange Notes cannot rely on this interpretation by the staff of the Commission
and must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction, unless an
exemption from registration is otherwise available.
Each broker-dealer that receives the Exchange Notes in exchange for the Old
Notes acquired for its own account as a result of market-making activities or
other trading activities (a "Participating Broker-Dealer") must acknowledge that
it will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of the Exchange Notes. The Letter of Transmittal
states that a broker-dealer will not, by so acknowledging and by delivering a
prospectus, be deemed to admit that it is an "underwriter" within
25
<PAGE> 27
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of the Exchange Notes. The Company has agreed that, for
a period of 180 days after the Registration Statement is declared effective by
the Commission, it will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale. See "Plan of
Distribution."
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the Exchange Notes are to be
acquired by the holder and any beneficial owner(s) of the tendered Old Notes
(the "Beneficial Owner(s)") in the ordinary course of business, (ii) the holder
and any Beneficial Owner(s) (other than a broker-dealer referred to in the next
sentence) are not engaging and do not intend to engage, in the distribution of
the Exchange Notes, (iii) the holder and any Beneficial Owner(s) have no
arrangement or understanding with any person to participate in the distribution
of the Exchange Notes, (iv) neither the holder nor any Beneficial Owner is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act, and (v) the holder and any Beneficial Owner(s) acknowledge that if the
holder or Beneficial Owner(s) participates in the Exchange Offer for the purpose
of distributing the Exchange Notes they must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale of the Exchange Notes and cannot rely on these no-action letters. As
indicated above, each Participating Broker-Dealer must acknowledge that it will
deliver a prospectus in connection with any resale of the Exchange Notes. See
"Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept for exchange any and
all Old Notes properly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on the Expiration Date. The Company will issue $1,000 in principal
amount of the Exchange Notes in exchange for each $1,000 in principal amount of
outstanding Old Notes surrendered pursuant to the Exchange Offer. The Old Notes
may be tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes will be the same as the form and
terms of the Old Notes except the Exchange Notes will be registered under the
Securities Act and hence will not bear legends restricting transfer. The
Exchange Notes will evidence the same debt as the Old Notes. The Exchange Notes
will be issued under and entitled to the benefits of the Indenture, which also
authorized the issuance of the Old Notes, such that both series will be treated
as a single class of debt securities under the Indenture.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of the Old Notes being tendered for exchange.
As of the date of this Prospectus, $100,000,000 in aggregate principal
amount of the Old Notes is outstanding. This Prospectus, together with the
Letter of Transmittal, is being sent to all registered holders of the Old Notes.
There will be no fixed record date for determining registered holders of the Old
Notes entitled to participate in the Exchange Offer.
The Company intends to conduct the Exchange Offer in accordance with the
provisions of the Registration Rights Agreement and the applicable requirements
of the Exchange Act, and the rules and regulations of the Commission thereunder.
The Old Notes which are not tendered for exchange in the Exchange Offer will
remain outstanding and continue to accrue interest and will be entitled to the
rights and benefits such holders have under the Indenture.
The Company shall be deemed to have accepted for exchange properly tendered
Old Notes when, as and if the Company shall have given oral or written notice
thereof to the Exchange Agent and complied with the provisions of Section 2 of
the Registration Rights Agreement. The Exchange Agent will act as agent for the
tendering holders for the purpose of receiving the Exchange Notes from the
Company. The Company expressly reserves the right to amend or terminate the
Exchange Offer, and not to accept for exchange any Old Notes not previously
accepted for exchange, upon the occurrence of any of the conditions specified
below under "-- Certain Conditions to the Exchange Offer."
26
<PAGE> 28
Holders who tender the Old Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of the Old
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on June
30, 1998, unless the Company, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended. The Expiration Date shall not in
any event be extended to a date later than December 27, 1998 (180 days after the
initial Expiration Date).
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will notify the holders of
Old Notes of any extension by press release, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting for exchange any Old Notes, to extend the Exchange Offer or to
terminate the Exchange Offer if any of the conditions set forth below under "--
Certain Conditions to the Exchange Offer" shall not have been satisfied, by
giving oral or written notice of such delay, extension or termination to the
Exchange Agent, or (ii) to amend the terms of the Exchange Offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders of the Old Notes. If the Exchange Offer is amended in a
manner determined by the Company to constitute a material change, the Company
will promptly disclose such amendment by means of a prospectus supplement that
will be distributed to the registered holders, and the Company will extend the
Exchange Offer, depending upon the significance of the amendment and the manner
of disclosure to the registered holders, if the Exchange Offer would otherwise
expire during such period.
INTEREST ON THE EXCHANGE NOTES
The Notes bear interest at a rate of 10 1/8% per annum, payable
semi-annually, on each June 15 and December 15, commencing June 15, 1998.
Holders of the Exchange Notes will receive interest on December 15, 1998 from
the date of initial issuance of the Exchange Notes, plus an amount equal to the
accrued interest on the Old Notes from the most recent date to which interest
has been paid to the date of exchange thereof for the Exchange Notes. Interest
on the Old Notes accepted for exchange will cease to accrue upon issuance of the
Exchange Notes.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange any Exchange Notes for, any Old
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of any Old Notes for exchange, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the Company's sole judgment, might materially impair the ability
of the Company to proceed with the Exchange Offer; or
(b) any law, statute, rule or regulation is proposed, adopted or
enacted, or any existing law, statute, rule or regulation is interpreted by
the staff of the Commission, which, in the Company's sole judgment, might
materially impair the ability of the Company to proceed with the Exchange
Offer; or
(c) any governmental approval has not been obtained, which approval
the Company shall, in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Old Notes and return
all tendered Old Notes to the tendering holders, (ii) extend
27
<PAGE> 29
the Exchange Offer and retain all Old Notes tendered prior to the expiration of
the Exchange Offer, subject, however, to the rights of holders to withdraw such
Old Notes (see "-- Withdrawal of Tenders"), or (iii) waive the unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Old Notes which have not been withdrawn. Any Old Notes not accepted for exchange
for any reason will be returned without expense to the tendering holder thereof
as promptly as practicable after the expiration or termination of the Exchange
Offer.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of the
right and each right shall be deemed an ongoing right which may be asserted at
any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no Exchange Notes will be issued in exchange for the Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939 (the
"TIA").
PROCEDURES FOR TENDERING
Only a holder of the Old Notes may tender the Old Notes in the Exchange
Offer. For a holder to validly tender the Old Notes pursuant to the Exchange
Offer, a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantee, or (in the case of a
book-entry transfer) an Agent's Message (as defined below) in lieu of the Letter
of Transmittal, and any other required documents must be received by the
Exchange Agent at one of the addresses set forth under "-- Exchange Agent" prior
to the Expiration Date. In addition, prior to the Expiration Date, either (a)
certificates for tendered Old Notes must be received by the Exchange Agent at
such address, or (b) the Old Notes must be transferred pursuant to the
procedures for book-entry transfer described below (and a confirmation of the
tender received by the Exchange Agent, including an Agent's Message if the
tendering holder has not delivered a Letter of Transmittal). The term "Agent's
Message" means a message, transmitted by the book-entry transfer facility, The
Depository Trust Company (the "Book-Entry Transfer Facility"), to and received
by the Exchange Agent and forming a part of a book-entry confirmation, which
states that the Book-Entry Transfer Facility has received an express
acknowledgment from the tendering participant that the participant has received
and agrees to be bound by the Letter of Transmittal and that the Company may
enforce the Letter of Transmittal against the participant.
By executing the Letter of Transmittal (or transmitting an Agent's Message
in lieu thereof), each holder will make to the Company the representations set
forth above in the third paragraph under the heading "-- Resale of the Exchange
Notes."
The tender by a holder which is not withdrawn prior to the Expiration Date
will constitute an agreement between the holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF THE OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR THE OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS
MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES
OR OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and
28
<PAGE> 30
instruct the registered holder of the Old Notes to tender on the beneficial
owner's behalf. If the beneficial owner wishes to tender on the owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Old Notes, either make appropriate
arrangements to register ownership of the Old Notes in such owner's name or
obtain a properly completed bond power from the registered holder of the Old
Notes. The transfer of registered ownership may take considerable time and may
not be able to be completed prior to the Expiration Date.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below, as the case be, must be guaranteed by an Eligible Institution (as defined
below) unless the Old Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Delivery
Instructions" on the Letter of Transmittal, or (ii) for the account of an
Eligible Institution. In the event that signatures on a Letter Transmittal or a
notice of withdrawal, as the case may be, are required to be guaranteed, such
guarantor must be a member firm of a registered national securities exchange or
of the National Association of Securities Dealers, Inc., a commercial bank or
trust company having an office or correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act which is a member of one of the recognized signature guarantee
programs identified in the Letter of Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, the Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by the
registered holder as the registered holder's name appears on the Old Notes with
the signature thereon guaranteed by an Eligible Institution. If the Letter of
Transmittal is signed by a participant in the Depository Trust Company ("DTC"),
the signature must correspond with the name as it appears on the security
position listing as the holder of the Old Notes and must be guaranteed by an
Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of the Company or its counsel, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Old Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of the Old Notes must be cured within such time as the Company shall determine.
Although the Company intends to notify holders of defects or irregularities with
respect to tenders of the Old Notes, neither the Company, the Exchange Agent nor
any other person is under a duty to do so or shall incur any liability for
failure to give notification. Tenders of the Old Notes will not be deemed to
have been made until any defects or irregularities are cured or waived. Any Old
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Act to the tendering holders, unless otherwise provided
in the Letter of Transmittal, as soon as practicable following the Expiration
Date.
In all cases, issuance of the Exchange Notes for the Old Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of the Old Notes or a timely book-entry
confirmation of transfer of the Old Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility, a properly completed and duly executed Letter
of Transmittal (or, in the case of book-entry transfers, an Agent's Message in
lieu thereof) and all other required documents. If any tendered Old Notes are
not accepted for exchange for any reason set forth in the terms and conditions
of the Exchange Offer or if the Old Notes are submitted for a greater principal
amount than the holder desires to exchange, the unaccepted or non-exchanged Old
Notes will be returned without expense to the tendering holder (or, in the case
of any Old
29
<PAGE> 31
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described below, such non-exchanged Old Notes will be credited to an account
maintained with the Book-Entry Transfer Facility) as promptly as practicable
after the expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of the Old Notes by causing the
Book-Entry Transfer Facility to transfer the Old Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility in accordance with the Book-Entry
Transfer Facility's procedures for transfer. However, although delivery of the
Old Notes may be effected through book-entry transfer at the Book-Entry Transfer
Facility, the Letter of Transmittal (or facsimile thereof), with any required
signature guarantee, or (in the case of a book-entry transfer) an Agent's
Message in lieu of the Letter of Transmittal, and any other required documents,
must be received by the Exchange Agent at one of the addresses set forth below
under "-- Exchange Agent" on or prior to the Expiration Date or, if the
guaranteed delivery procedures described below are to be complied with, within
the time period provided under such procedures. Delivery of documents to the
Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from the
Eligible Institution (i) an Agent's Message with respect to guaranteed
delivery that is accepted by the Company, or (ii) a properly completed and
duly executed Notice of Guaranteed Delivery (by facsimile transmission,
mail or hand delivery) setting forth the name and address of the holder,
the registered number(s) of the Old Notes and the principal amount of the
Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within three (3) New York Stock Exchange trading days
after the Expiration Date, the Letter of Transmittal (or facsimile thereof)
together with the Old Notes or a book-entry confirmation of transfer of the
Old Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility (a "Book-Entry Confirmation"), as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantee, or (in the case
of a book-entry transfer) an Agent's Message in lieu of the Letter of
Transmittal, as well as all tendered Old Notes in proper form for transfer
or a Book-Entry Confirmation, as the case may be, and all other documents
required by the Letter of Transmittal, are received by the Exchange Agent
within three (3) New York Stock Exchange trading days after the Expiration
Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of the Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under "--
Exchange Agent." Any notice of withdrawal must specify the
30
<PAGE> 32
name of the person having tendered the Old Notes to be withdrawn, identify the
Old Notes to be withdrawn (including the principal amount of the Old Notes), and
(where certificates for the Old Notes have been transmitted) specify the name in
which the Old Notes were registered, if different from that of the withdrawing
holder. If certificates for the Old Notes have been delivered or otherwise
identified to the Exchange Agent, then, prior to the release of the
certificates, the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless the holder is an
Eligible Institution. If the Old Notes have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Old Notes and otherwise comply with the
procedures of the Book- Entry Transfer Facility. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, whose determination shall be final and binding on
all parties. Any Old Notes withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Old Notes which
were tendered for exchange but which are not exchanged for any reason will be
returned to the holder without cost to the holder, or (in the case of the Old
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described above) the Old Notes will be credited to an account maintained with
the Book-Entry Transfer Facility for the Old Notes, as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described under "-- Procedures for Tendering" at any time on or prior to the
Expiration Date.
EXCHANGE AGENT
Bankers Trust Company has been appointed as the Exchange Agent of the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for a
Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed
as follows:
By Mail: By Overnight or Courier:
BT Services Tennessee, Inc. BT Services Tennessee, Inc.
Reorganization Unit Corporate Trust & Agency Group
P.O. Box 292737 Reorganization Unit
Nashville, Tennessee 37229-2737 648 Grassmere Park Road
Nashville, Tennessee 37211
Facsimile Transmission Number:
(615) 835-3701 Confirm by Telephone:
(615) 835-3572
By Hand:
Bankers Trust Company
Corporate Trust & Agency Group
Attn: Reorganization Department
Receipt & Delivery Window
123 Washington Street, 1st Floor
New York, New York 10006
Information:
(800) 735-7777
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to broker-dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$500,000. These expenses include registration fees, fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, and
related fees and expenses.
The Company will pay all transfer taxes, if any, applicable to the exchange
of the Old Notes pursuant to the Exchange Offer. If, however, certificates
representing the Old Notes for principal amounts not tendered or
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<PAGE> 33
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of the Old Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to the tendering holder.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who instruct
the Company to register the Exchange Notes in the name of, or request that the
Old Notes not tendered or not accepted in the Exchange Offer be returned to, a
person other than the registered tendering holder will be responsible for the
payment of any applicable transfer tax.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of the Old Notes who do not exchange their Old Notes for the
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of the Old Notes, as set forth in the legend thereon,
as a consequence of the issuance of the Old Notes pursuant to the exemptions
from, or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the Old Notes
may not be offered or sold, unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. Accordingly, the Old Notes
may only be resold (i) to the Company (upon redemption or otherwise), (ii) to a
"qualified institutional buyer" within the meaning of Rule 144A of the
Securities Act pursuant to Rule 144A, (iii) to an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) of the
Securities Act, (iv) outside the United States to non-U.S. persons in compliance
with Regulation S under the Securities Act, (v) pursuant to an effective
registration statement, or (vi) pursuant to any other available exemption from
the registration requirements of the Securities Act (and based upon an opinion
of counsel reasonably acceptable to the Company), in each case in accordance
with any applicable state securities laws. The Company does not currently
anticipate that it will register the Old Notes under the Securities Act.
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<PAGE> 34
SELECTED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
The following table sets forth selected historical financial and operating
data of the Company. The selected historical financial data as of and for each
of the five years ended December 31 was derived from the audited consolidated
financial statements of the Company. The selected historical financial data as
of and for the three months ended March 31 was derived from the unaudited
consolidated financial statements of the Company which, in the opinion of
management, include all adjustments necessary for a fair presentation of the
financial position and results of operations for such periods. The information
set forth below reflects the results of Dyno subsequent to its acquisition in
July 1995 and should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements of the Company, including the notes thereto, contained
elsewhere herein.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
---------------------- -------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales.................. $ 169,292 $ 154,019 $ 619,905 $ 585,389 $ 459,272 $ 325,205 $ 273,463
Cost of sales.............. 144,058 129,821 538,751 488,134 377,755 261,501 216,804
Gross profit............... 25,234 24,198 81,154 97,255 81,517 63,704 56,659
Selling, administrative and
other expenses........... 16,958 15,718 78,075 69,869 57,495 39,318 33,043
Reorganization and
restructuring charges.... -- -- 27,000 -- -- -- 1,760
Operating income........... 8,276 8,480 (23,921) 27,386 24,022 24,386 21,856
Interest expense, net...... 7,503 5,892 24,736 17,117 11,111 3,771 2,559
Equity in (income) loss of
joint ventures........... (474) (801) (3,113) (4,187) (3,877) (2,609) 89
Net income(1).............. 572 2,362 (36,627) 11,229 13,830 14,595 9,667
Net income per share (2)... 0.07 0.27 (4.23) 1.30 1.61 1.70 1.13
Weighted average shares
outstanding.............. 8,682,602 8,652,737 8,668,096 8,649,380 8,609,431 8,602,077 8,537,375
OTHER DATA:
Depreciation and
amortization............. $ 9,718 $ 8,180 $ 31,417 $ 29,736 $ 22,451 $ 14,672 $ 11,339
Capital expenditures....... 11,826 14,232 62,019 99,147 46,240 18,844 20,260
EBITDA(3).................. 19,462 17,749 7,439 57,255 45,245 36,345 31,128
Ratio of EBITDA to interest
expense, net(3).......... 2.6x 3.0x 0.3x 3.3x 4.1x 9.6x 12.2x
Ratio of earnings to fixed
charges.................. 1.1x 2.5x (0.5x) 1.3x 1.8x 4.5x 6.2x
BALANCE SHEET DATA: (at end
of period)
Total assets............... $ 629,506 $ 612,101 $ 610,593 $ 589,649 $ 493,473 $ 257,366 $ 215,295
Total long-term debt, less
current portion.......... 293,804 261,359 291,393 291,723 233,389 66,136 52,392
Total debt................. 331,682 284,212 331,557 314,884 249,396 81,548 58,175
Company-Obligated
Mandatorily Redeemable
Convertible Preferred
Securities of Walbro
Capital Trust holding
solely Convertible
Debentures............... 69,000 69,000 69,000 -- -- -- --
Total stockholders'
equity(4)(5)............. 67,187 130,982 69,866 137,733 135,427 127,915 114,146
</TABLE>
(footnotes on following page)
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<PAGE> 35
- -------------------------
(1) The Company adopted SFAS 106 as of January 1, 1993. As a result, the Company
recorded a one-time after tax charge of $2,900 for the cumulative effect of
this accounting change in the year ended December 31, 1993.
(2) Basic and diluted income per share were the same in all periods presented.
(3) "EBITDA" represents, for any period, the sum of operating income (minus
foreign currency exchange losses and other expenses, net) plus depreciation
and amortization. EBITDA is not intended to be a performance measure that
should be regarded as an alternative either to operating income or net
income as an indicator of operating performance or to cash flow as a measure
of liquidity. The Company has included information regarding EBITDA because
it is a widely accepted financial indicator of a company's ability to
service and/or incur indebtedness. EBITDA (subject to certain adjustments)
will be used to determine compliance with certain covenants contained in the
Indenture.
(4) Reflects cash dividends declared for common stock of, $0, $865, $3,474,
$3,446, $3,429, $3,426 and $3,403 in the three months ended March 31, 1998
and 1997 and the years ended December 31, 1997, 1996, 1995, 1994 and 1993,
respectively.
(5) The Company adopted SFAS 115 as of January 1, 1994. As a result, the Company
recorded an increase to stockholders' equity of $2,096 (net of income taxes)
as of January 1, 1994.
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<PAGE> 36
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company's products can be classified into three segments: automotive,
small engine and after-market and other. Selected financial information about
the Company's continuing operations by market is set forth below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
----------------------- ----------------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net Sales:
Automotive.......................... $126,249 $331,569 $458,074 $438,597 $318,143
Small Engine........................ 33,323 95,867 125,934 117,100 112,567
Aftermarket and Other............... 9,720 26,948 35,897 29,692 28,562
-------- -------- -------- -------- --------
Total............................ 169,292 $454,384 $619,905 $585,389 $459,272
======== ======== ======== ======== ========
Cost of Sales:
Automotive.......................... $109,671 $286,588 $473,179 $368,142 $264,906
Small Engine........................ 27,320 80,510 123,789 97,665 91,440
Aftermarket and Other............... 7,067 20,071 46,858 22,327 21,409
-------- -------- -------- -------- --------
Total............................ $144,058 $387,169 $643,826 $488,134 $377,755
======== ======== ======== ======== ========
Gross Margin:
Automotive.......................... $ 16,578 $ 44,981 $(15,105) $ 70,455 $ 53,237
Small Engine........................ 6,003 15,357 2,145 19,435 21,127
Aftermarket and Other............... 2,653 6,877 (10,961) 7,365 7,153
-------- -------- -------- -------- --------
Total............................ $ 25,234 $ 67,215 $(23,921) $ 97,255 $ 81,517
======== ======== ======== ======== ========
</TABLE>
RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31,
1997
Net sales in the first quarter of 1998 increased 9.9% to $169.3 million
compared to $154.0 million for the same period of 1997. Sales of automotive
products increased 11.1% to $126.3 million for the first quarter of 1998
compared to $113.7 million for the same period of 1997. Sales of small engine
products increased 5.7% to $33.3 million for the first quarter of 1998 compared
to $31.5 million for the same period of 1997. Sales of aftermarket products
increased 14.7% to $7.8 million for the first quarter of 1998 compared to $6.8
million for the first quarter of 1997.
Sales of automotive products increased in the first quarter of 1998
primarily because of higher plastic fuel tank sales in the U.S., which were up
by $18.3 million. U.S. automotive product sales in the 1998 quarter also
included $5.0 million (compared to $7.0 million in the 1997 quarter) from the
Company's steel fuel rail plant in Ligonier, Indiana which is being divested.
Sales of plastic fuel tanks in Europe for the first quarter of 1998 decreased by
6.3% because of foreign currency exchange rates. Without the stronger dollar
currency effect European sales would have increased by approximately 3%.
Sales of small engine products increased as a result of higher sales of all
products except float feed carburetors in the U.S. The largest increases in
sales came from ignition system sales of 49.3% and increased sales of
carburetors in the People's Republic of China by 25.8%. Sales of small engine
products in Japan increased by 18.5% in spite of the lower yen/dollar exchange
rate. Without the currency effect Japan sales would have increased by
approximately 24%.
Sales to the aftermarket increased 14.7% to $7.8 million for the first
quarter of 1998 compared to $6.8 million for the same period of 1997. Sales of
both automotive products and small engine products increased to aftermarket
customers during the first quarter of 1998.
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<PAGE> 37
Cost of sales for the first quarter of 1998 increased 11.0% to $144.1
million compared to $129.8 million for the same period of 1997. Cost of sales as
a percent of net sales was 85.1% for the first quarter of 1998 compared to 84.3%
for the same 1997 period resulting in a gross margin decline of 0.8 percentage
points from 15.7% in 1997 to 14.9% in 1998. The automotive products gross margin
decline resulted from slightly lower volume of fuel pumps and fuel modules in
the U.S., new plant start-up costs in South Korea and the significant new volume
of plastic fuel tank systems in the U.S. which carry lower margins due to
purchased components. Gross margin in Europe increased by 1.3 percentage points
to 12.2% as the result of cost saving initiatives and improved efficiency. The
small engine products gross margin decline of 0.4 percentage points resulted
from lower volume of float feed carburetors in the U.S.
Selling and administrative ("S & A") expenses increased 6.9% for the first
quarter of 1998 compared to the first quarter of 1997. S & A expenses increased
due to increased staff at corporate headquarters and the Asia Pacific region
including staff at the new plant in South Korea. S & A expenses as a percent of
net sales were 7.7% for the first quarter of 1998 compared to 7.9% for the same
period of 1997.
Research and development ("R & D") expenses increased 19.6%. The increase
was due to the new European systems center that is nearing completion in
Germany.
Interest expense increased 27.3% for the first quarter of 1998 compared to
the same period in 1997 because of higher borrowings for additional working
capital and for capital expenditures and because of the higher interest rate on
the new $100 million of Senior Notes due 2007 that were issued in December 1997
to refinance bank borrowings.
Other income was $1.5 million for the first quarter of 1998 compared to
$1.1 million for the first quarter of 1997. The increase was due to higher
income from the gain on the sale of fixed assets.
Provision for income taxes was lower for the first quarter of 1998 compared
to the same period of 1997 primarily due to lower taxable income.
Minority Interest increased by $0.5 million in the first quarter of 1998
compared to the same period of 1997 because of the preferred dividends due on
the Convertible Preferred Securities of Walbro Capital Trust issued in February
1997 were paid for the full quarter in 1998 and were paid for a partial quarter
in 1997.
The equity in income from joint ventures in the first quarter of 1998 was
$0.5 million versus the comparable period income of $0.8 million in 1997,
because of lower profitability at the joint ventures due to weaker foreign
economies; the stronger U.S. dollar; and start-up costs of the Company's new
VITEC joint venture in Detroit, Michigan.
Net income for the first quarter of 1998 was $0.6 million compared to $2.4
million for the same period last year, as a result of the reasons described
above. Net income per share for the first quarter or 1998 was $.07 compared with
$.27 for the same 1997 period.
Year Ended December 31, 1997 Compared to 1996, 1996 Compared to 1995
Sales -- The Company reported sales in 1997 of $619.9 million, an increase
of 5.9% from $585.4 million. The 1997 sales increase was generated by additional
sales to the automotive market in North and South America and additional sales
to the small engine market partially offset by lower sales to the Europe
automotive market due to lower foreign currency exchange rates. Sales in 1996
were $585.4 million compared to sales of $459.3 million in 1995, an increase of
27.5% mostly because of the Dyno acquisition. On a percentage basis, sales to
the automotive market increased 4.4% in 1997 compared to a 37.9% increase in
1996. Sales to the small engine market increased 7.5% in 1997 compared to a 4.0%
increase in 1996. Aftermarket sales increased 17.5% in 1997 compared to flat
sales in 1996 compared to 1995.
Sales of the Company's original equipment automotive products were $458.0
million in 1997 compared to $438.6 million in 1996 and $318.1 million in 1995.
The 1997 increase in automotive product sales resulted from increased sales of
plastic fuel tank systems to both North American and South American OEM
customers partially offset by lower sales of steel fuel rails in the U.S. and
lower plastic fuel tank sales to European OEM customers. The entire European
sales decline was due to foreign currency exchange rates
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<PAGE> 38
which were off 16% compared to the U.S. dollar causing a $37 million decrease in
sales. The increased sales of plastic fuel tank systems resulted from the launch
of four new programs in the U.S. during 1997 and one new program launched in
late 1996 in Brazil. The sales growth was lower in 1997 due to (i) insourcing of
fuel pumps and fuel modules by one of the Company's largest customers which was
completed during the first half of 1997; (ii) lower shipments to Chrysler in the
second quarter because of a strike at Chrysler's Mound Road Engine Plant; and
(iii) lower production of passenger cars in the U.S. In addition, 1997 sales
were lower due to the delay of one new plastic tank program and the cancellation
of another new plastic tank program by a customer who decided to delay the
conversion from a steel to plastic fuel tank.
In 1996, all of the automotive product sales increase was generated by
sales in Europe, as U.S. based automotive product sales declined by 2.4%. The
increase was primarily the result of including a full year of Walbro Europe
sales in 1996, $214.4 million, versus including only five months of Walbro
Europe sales in 1995 of $88.5 million. U.S. based automotive product sales were
lower in 1996 because of insourcing of fuel pumps and fuel modules by one of the
Company's largest customers. The decline in U.S. based automotive product sales
was substantially offset by increased sales of fuel modules to the Company's
largest customer and sales of the Company's new plastic fuel rails.
Sales of the Company's small engine products were $125.9 million in 1997,
up from $117.1 million in 1996 and $112.6 million in 1995. During 1997, ignition
system sales had the largest increase of 25.9% followed by float feed carburetor
sales in The People's Republic of China ("PRC") with a 6.4% increase. Diaphragm
carburetor sales increased 5.3% and float feed carburetor sales in the U.S.
increased by 4.1%. Most of the diaphragm carburetor sales increase was in Japan
which increased by 15.7% in spite of a 10% decline in the yen-dollar exchange
rate. The 6.4% increase in PRC sales was less than expected because sales
suffered in the second half of 1997 from a significant reduction in orders as
customers were forced to reduce excess motorcycle inventories.
In 1996, much of the increase in small engine product sales came from
increased sales of ignition systems (up $6.4 million or 81.0%) and to a lesser
extent float feed carburetors in the U.S. (up $1.7 million or 5.8%) and float
feed carburetors in the PRC (up $1.1 million or 23.9%). These increases were
partially offset by a decline in diaphragm carburetors of $4.6 million or 6.3%
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. Sales declined in Japan because of lower demand and the lower
yen-dollar exchange rate.
Sales of small engine ignition systems were $18.0 million in 1997 compared
to $14.3 million in 1996 and $7.9 million in 1995 as customer demand has grown
for this expanding family of products. 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 a more stringent phase
expected to become effective during the 2002 to 2005 period. The more stringent
regulations could significantly reduce the number of units currently sold,
especially diaphragm carburetors, as these regulations could force manufacturers
to replace low cost gasoline-powered lawn and garden equipment with
electric-powered equipment.
In response to the more stringent 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 to meet the first set of standards and company engineers are
developing new technology to meet the subsequent requirements.
The Company's aftermarket business includes both automotive and small
engine products. Aftermarket sales were $29.5 million in 1997 compared to $25.1
million in 1996 and $25.2 million in 1995. The increase in 1997 sales was due to
adding new customers during the year and the addition of several new products
offered
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to aftermarket customers. Aftermarket sales declined slightly in 1996 because of
increased in-house production by one of the Company's larger aftermarket
customers.
Cost of Sales -- Cost of sales was $538.8 million in 1997 compared to
$488.1 million in 1996 and $377.8 million in 1995. Cost of sales as a percent of
sales was 86.9% in 1997 compared to 83.4% in 1996 and 82.3% in 1995 and
consequently gross margin was 13.1% in 1997 compared to 16.6% in 1996 and 17.7%
in 1995. Gross margin declined in 1997 because of lower margins in both
automotive and small engine products. The lower automotive gross margin was due
to a change in the mix of products sold in the U.S.; the launch costs of four
new multi-layer plastic fuel tank programs; start-up costs for new plants in
Argentina and South Korea; relocation of two plants in Europe; and increased
warranty costs.
The change in mix of products sold involved lower steel fuel rail volume;
lower volume of fuel pumps and fuel modules from customer insourcing; the
Chrysler Mound Road facility strike; and lower production of U.S. passenger
cars. At the same time, volume increased for new plastic fuel tank systems which
carry lower gross margins because they include a high level of purchased
components.
Increased warranty costs in 1997 included $5.7 million for four product
warranty issues. The warranty issues included a steel fuel rail, two plastic
fuel tanks in Europe and an ignition module for the small engine market.
Management believes that the technical issues have been resolved and does not
expect additional charges related to these warranty claims.
The lower gross margin in 1997 for small engine products was related
primarily to lower volume in the two facilities in the PRC; the warranty cost
for an ignition module previously discussed and one-time costs of moving two
plants. The Mexico carburetor plant and the Mexico ignition system plant were
relocated to a new larger facility in Mexico that supports both operations with
lower overhead costs.
Gross margin declined in 1996 because of lower margins in both automotive
and small engine products. Lower margins in automotive products resulted from
lower volumes at all of the North American facilities, new plant start-up costs
in Brazil and from an increased share of European plastic fuel tank volume which
carry lower margins than the Company's other automotive products. During 1996,
Walbro Europe gross margins were 11.7% compared to 13.1% in 1995 and were lower
primarily because of the new plant start-up costs in Belgium, 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, PRC and the weaker yen-dollar exchange rate.
Selling and Administrative Expenses -- Selling and administrative ("S&A")
expenses were $60.8 million in 1997, an increase of 16.5% compared to $52.2
million in 1996. The 1997 increase in S&A was due to new plants in South Korea
and the PRC and due to higher professional fees. The increased professional fees
included financing fees for modifications to bank loan agreements, legal fees,
settlement of legal claims and other one-time charges. In 1996, S&A expenses
increased by 28.6% (12.7% without Europe) compared to $40.6 million in 1995. The
full year of Walbro Europe S&A expenses in 1996 compared to only five months in
1995 caused a large portion of the increase and the remainder of the 1996 S&A
increase came primarily from new plants in Brazil, the PRC and the new Tucson
Precision Products plant. As a percent of sales, S&A expenses were 9.8% in 1997,
8.9% in 1996 and 8.9% in 1995.
Research and Development Expenses -- Research and development ("R&D")
expenses were $17.3 million in 1997, a decrease of 6.0% compared to $18.4
million in 1996. In 1997, R&D resources to support small engine product
development were increased because of emission regulations but overall expenses
declined because automotive R&D resources were used to support many new
production launches of plastic fuel tank programs and their expenses were
charged to Cost of Sales. In 1996, Walbro Europe R&D expenses accounted for all
of the 10.2% increase as R&D expenses excluding Europe decreased by 1.0%.
Restructuring and Impairment Charges -- During the fourth quarter of 1997,
the Company recorded a $27 million pretax charge for restructuring its
operations and other actions. The charge was comprised of a $17 million charge
for restructuring and a $10 million charge associated with asset impairments.
The restructuring actions include divestiture of the Company's Ligonier, Indiana
steel fuel rail manufacturing facility and disposition of its interest in U.S.
Coexcell Inc., a manufacturer of blow-molded plastic drums in
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Maumee, Ohio. In addition, the Company will consolidate its small engine
operations in the Asia-Pacific region and restructure its European automotive
fuel tank operations. The asset impairment charge included the write off of
obsolete equipment and tooling, write off of its interest in Saginaw Plastics,
an injection molder in Saginaw, Michigan and charges related to its Korean
automotive activities. Lastly, the restructuring charge included a
corporate-wide headcount reduction of approximately 10 percent including
reductions related to the divestitures and restructuring. See Note 5 of the
Notes to the Consolidated Financial Statements.
Loss on Foreign Exchange Transactions -- 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 1995 and 1996. The
foreign currency exchange result was a $1.5 million loss in 1995 compared to a
small gain in 1996 and 1997. See Note 12 of the Notes to the Consolidated
Financial Statements.
Net Interest Expense -- Net interest expense was $25.4 million in 1997
compared to $20.5 million in 1996 and $12.4 million in 1995. To finance the Dyno
acquisition in July 1995, the Company sold $110 million in aggregate principal
amount of its 9.875% senior notes and obtained a new $135 million secured Credit
Facility. In December 1997, the Company sold $100 million of its 10.125% senior
notes and used the proceeds to repay a significant part of the secured credit
facility. Borrowing levels were higher in both 1997 and 1996 to support capital
expenditures for facility expansions and for additional equipment and tooling.
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 average cost of borrowing was 8.8% in 1997, 8.1% in 1996
and 7.4% in 1995. See Note 6 of the Notes to Consolidated Financial Statements
for details of the borrowings.
Income Taxes -- The provision for income taxes was a credit of $10.1
million in 1997 compared to expense of $3.1 million in 1996 and $1.3 million in
1995. The 1997 provision was a credit because of negative taxable income related
to the restructuring charge and other actions with an effective tax rate of
22.6%. The provision was higher in 1996 compared to 1995 because of a lower
research and development (R&D) tax credit recorded in 1996 of $1.1 million
compared to $3.0 million recorded in 1995. These R&D 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. The R&D tax credits
resulted in an effective tax rate of 29.6% for 1996 compared to 10.8% for 1995.
Joint Venture Income -- The Company's equity in income of joint ventures
was $3.1 million in 1997 compared to $4.2 million in 1996 and $3.9 million in
1995. The decrease in 1997 resulted from lower income at Marwal Systems (France)
due to payment of royalties to the Company, start-up costs for Marwal Argentina
and losses at Korea Automotive Fuel Systems. The increase in 1996 compared to
1995 resulted from increased income at Marwal Systems partially offset by losses
at Korea Automotive Fuel Systems.
Minority Interest -- Minority interest was $5.0 million in 1997 compared to
$0.3 million in 1996 and $0.5 million in 1995. The 1997 increase was due to the
sale of $69 million of Convertible Preferred Securities of Walbro Capital Trust
in February 1997. The preferred dividends are included as minority interest.
Net Income (Loss) and Income (Loss) Per Share -- Net loss for 1997 was
$36.6 million compared to net income of $11.2 million in 1996 and $13.8 million
in 1995. Net loss per share was $4.23 for 1997 compared with net income per
share of $1.30 for 1996 and $1.61 for 1995. The net loss for 1997 was the result
of the reasons stated above including the restructuring charge and warranty
reserve.
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.
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FOREIGN CURRENCY TRANSACTIONS
Approximately 48% of the Company's sales during the first three months of
1998, and approximately 50% during 1997, were derived from international
manufacturing operations in Europe, Asia, South America and Mexico. The
financial position and the results of operations of the Company's subsidiaries
in Europe (30% of sales), Japan (5% of sales), South America (2% of sales) and
China (1% of sales) were measured in local currency of the countries in which
they operated and translated into U.S. dollars.
The effects of foreign currency fluctuations in Europe, South America,
Japan and China are somewhat mitigated by the fact that expenses are generally
incurred in the same currencies in which sales are generated and the reported
income of these subsidiaries will be higher or lower depending on a weakening or
strengthening of the U.S. dollar.
For the Company's subsidiary in Singapore (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. The Company's subsidiary in
Mexico (8% of sales) operates as a maquiladora, or contract manufacturer, where
certain direct manufacturing expenses are incurred in the local currency and
sales are generated in U.S. dollars. Thus, results of operations of the
Company's subsidiary in Mexico are also more directly influenced by a weakening
or strengthening of the local currency.
Approximately 48% of the Company's assets at March 31, 1998, and
approximately 49% at December 31, 1997, were based in its foreign operations and
these assets are translated into U.S. dollars at foreign currency exchange rates
in effect as of the end of each period. Accordingly, the Company's consolidated
stockholders' equity will fluctuate depending upon the weakening or
strengthening of the U.S. dollar. In addition, the Company has equity
investments in unconsolidated joint ventures in Argentina, Brazil, France,
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 or option contracts to
manage its exposure to foreign currency fluctuations.
THE YEAR 2000 ISSUE
The year 2000 issue is the result of computer programs that were written
using two digits (rather than four) to define the applicable year. Any of the
Company's computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000, which could result
in miscalculations or system failures. The Company is working to resolve the
potential impact of the year 2000 on the processing of date-sensitive
information and is in the process of conducting an evaluation of the impact of
the issue at all locations. The evaluation includes computer programs used for
management information systems and computer programs used to electronically
control manufacturing equipment and other devices. The evaluation has not
progressed enough to allow management to assess whether the cost of addressing
this issue will have a material impact on the Company's financial position,
results of operations or cash flows in future periods. Management expects this
evaluation to be completed during 1998.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Company had outstanding $37.9 million in
short-term debt, including current portion of long-term debt, and $293.8 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, 1997 are $14.0 million in 1998, $7.4 million in 1999, $30.0 million in 2000,
$7.5 million in 2001, $6.8 million in 2002 and $239.6 million thereafter.
As of December 31, 1997, the Company had $40.2 million outstanding in
short-term debt, including current portion of long-term debt, and $291.4 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
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December 31, 1997 are $14.0 million in 1998, $7.4 million in 1999, $30.0 million
in 2000, $7.5 million in 2001, $6.8 million in 2002 and $239.6 million
thereafter.
In February 1997, the Company completed an offering of 2,760,000 shares or
$69 million of Convertible Preferred Securities of Walbro Capital Trust and the
proceeds were used to pay down borrowings on the $135 million secured bank
credit facility (the "Credit Facility"). In December 1997, the Company issued
$100 million of its 10.125% Senior Notes due 2007 and the proceeds were used to
pay down borrowings on the Credit Facility. With the issuance of the 2007 Senior
Notes the amount currently available under the Credit Facility was reduced to
$30 million. At February 1, 1998, the Company had approximately $11 million of
funds available to it under the Credit Facility. In April 1998, the Company
received a commitment for a $150 million line of credit (the "New Credit
Facility") consisting of a $125 million revolving line of credit and a $25
million capital expenditure facility. The New Credit Facility will be available
for five years after closing. Proceeds of the New Credit Facility will be used
to pay off $30 million under the Credit Facility, the Purchase Money Loan
Agreement, and the 2004 Notes (described below) including an early retirement
premium of approximately $2.0 million, to finance capital expenditures, and to
meet working capital needs. Closing of the New Credit Facility is subject to
customary conditions and is expected to occur by May 31, 1998. Failure to close
the New Credit Facility would have a material adverse effect on the Company's
liquidity. See Notes 6 and 21 of the Notes to Consolidated Financial Statements
for the year ended December 31, 1997 for further discussion.
The Company is a party to an Intercreditor Agreement (the "Intercreditor
Agreement") dated as of July 26, 1995 and executed by and among the Company, the
holders (the "2004 Noteholders") of the Senior Notes due October 1, 2004 (the
"2004 Notes") and the banks which are a party to the Credit Facility (the
"Banks"). The Company and the Banks and the 2004 Noteholders disagree with the
interpretation of certain provisions of the Intercreditor Agreement. As a
result, the Company has agreed to use its best efforts to retire the 2004 Notes
by no later the May 31, 1998 and the 2004 Noteholders have agreed that, until
May 31, 1998, they will forbear from taking any action under the 2004 Notes. The
Company will use the New Credit Facility to provide the financing to retire the
2004 Notes.
As of March 31, 1998, accounts receivable amounted to $160.8 million, an
increase of $12.4 million, compared to March 31, 1997. The average collection
period at March 31, 1998 was 82.3 days compared to 80.7 days at March 31, 1997.
The increase in accounts receivable was due to higher sales, larger amounts of
accounts receivable for customer tooling and the addition of foreign customers
with longer payment terms.
As of December 31, 1997, accounts receivable amounted to $145.0 million, an
increase of $18.5 million, compared to $126.5 million at December 31, 1996. The
average collection period at December 31, 1997 was 85.3 days compared to 81.3
days at December 31, 1996. The increase in accounts receivable was due to higher
sales, larger amounts of accounts receivable for customer tooling and the
addition of foreign customers with longer payment terms.
The Company's plans for 1998 capital expenditures for facilities, equipment
and tooling total approximately $50 million. The 1998 capital expenditure plan
includes new processing equipment and tooling. The Company intends to finance
the capital expenditures with borrowings under the New Credit Facility,
potential lease financing, access to capital markets and cash from operations.
Management believes that the Company's long-term cash needs will continue
to be provided principally by operating activities supplemented, to the extent
required, by borrowing under the Company's existing and future credit facilities
and by access to the capital markets. Management expects to replace these credit
facilities as they expire with comparable facilities.
RECENT EVENTS
On May 29, 1998, the Refinancing occurred in which the Company entered into
the New Credit Facility consisting of the Revolving Credit Facility and the
Capital Expenditure Facility and in which proceeds of the Revolving Credit
Facility were used to repay the indebtedness outstanding under the Credit
Facility (including the repayment of a $6.3 million industrial revenue bond
issued by the City of Ligonier, Indiana for
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construction of the facility at Sharon Manufacturing Company) and the Purchase
Money Facility, as well as to repay the 2004 Notes including an early retirement
premium of $2.0 million. The proceeds of the New Credit Facility will also be
used for capital expenditures and for general working capital purposes.
As a part of the restructuring program announced during the fourth quarter
of 1997, on June 1, 1998, the Company sold substantially all of the assets of
Sharon Manufacturing Company, one of the Guarantors, for a purchase price of
$4.6 million. The sale of these assets was permitted by, and the Company intends
to apply the proceeds of the sale in compliance with, the Indenture, as
applicable.
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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, plastic fuel rails and fuel level sensors
for sale to automotive OEMs. Products manufactured for the small engine market
include carburetors and ignitions for chain saws, outboard marine engines,
two-wheeled vehicles, industrial engines and lawn and garden equipment, such as
lawn mowers and weed trimmers. From 1992 to 1997, the Company increased net
sales at the compound rate of approximately 21% per year. This growth was
primarily due to the introduction of new automotive products, penetration of
additional automotive platforms and a recovery in the small engine industry from
depressed levels in the late 1980s. The Company had net sales of $619.9 million
and $585.4 million in 1997 and 1996.
Approximately 74% of the Company's net sales for 1997 were generated by
Walbro Automotive. Through Walbro Automotive, the Company designs, develops and
manufactures fuel storage and delivery systems and components for a broad range
of U.S. and foreign manufacturers of passenger automobiles and light trucks
(including minivans). The Company and its joint ventures hold a strong market
position in North America, Europe and South America and a growing market
presence in Asia. In July 1995, the Company substantially expanded its European
automotive business by acquiring the fuel systems business of Dyno Industrier
A.S. ("Dyno"). In 1997, management estimates that the Company supplied Chrysler
with approximately 79% of its fuel pump and fuel module requirements, including
all requirements for Chrysler's passenger cars and minivans and approximately
48% of the requirements for Chrysler's 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, Ford, General Motors,
Hyundai, Kia, Nedcar, Peugeot and Rover.
Approximately 20% of the Company's net sales for 1997 were generated by
Walbro Engine Management. Through Walbro Engine Management, the Company designs,
develops and manufactures diaphragm carburetors for portable engines (such as
those used in chain saws and weed trimmers), float feed carburetors for ground
supported engines (such as those used in lawn mowers and marine engines) and
ignition systems and other components for a variety of small engine products.
The Company believes that it is the world's largest independent manufacturer of
small engine carburetors, with an approximate 72% share of the global diaphragm
carburetor market including sales to such leading chain saw and weed trimmer
manufacturers as Poulan/Weedeater, Deere and Company (Homelite), Stihl
Incorporated, McCulloch Corporation, Ryobi Ltd. and Kioritz (Echo) Corporation.
The Company believes it has an approximate 10% share of the global float feed
carburetor market, including sales to Briggs & Stratton Corporation, the world's
largest small engine manufacturer, Kohler Company, Tecumseh Products Co., and
Mercury Marine, a major manufacturer of outboard marine engines. The Company
produces substantial volumes of float feed carburetors for the Chinese
two-wheeled vehicle market.
The remaining 6% of the Company's net sales for 1997 were primarily related
to replacement products for both the automotive and small engine aftermarkets.
The Company has recently begun pursuing initiatives to expand its aftermarket
customer base and product lines in an effort to grow this segment of its
business.
The Company was incorporated in Michigan in 1950 and reincorporated in
Delaware in 1972. The Company's principal executive offices are located at 6242
Garfield Street, Cass City, Michigan 48726-1325, and its telephone number is
(517) 872-2131.
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WALBRO AUTOMOTIVE
AUTOMOTIVE INDUSTRY OVERVIEW
A number of trends within the global automotive market have had and will
continue to have a fundamental impact on the Company's future profitability and
growth prospects, including: the shift by OEMs to the purchase of "systems"
rather than individual components, the globalization of the OEM supplier base,
the expansion of OEM supplier responsibilities and increased emissions
regulation. These trends have contributed to a consolidation of OEM suppliers
which the Company expects will continue.
Purchase of Integrated Systems. Automotive OEMs are relying increasingly on
suppliers who can provide entire systems rather than a number of different
parts. OEMs can reduce their own internal engineering efforts and the number of
suppliers by purchasing systems rather than components. Management believes the
engineering and technological challenges facing systems suppliers will continue
to grow as these systems become more complex. To strengthen the Company's
position as a major supplier of automotive fuel systems, the Company is
investing in its engineering and testing capabilities and actively pursuing its
systems philosophy. The Company believes that the systems approach is being
adopted outside North America and that the Company will be able to provide
systems to the European market in the future.
Globalization of the OEM Supplier Base. Several OEMs, including Ford,
General Motors and Volkswagen, are introducing automobile models which are
designed for the world automotive market ("World Cars"). This departure from the
historical practice of designing separate models for each regional market is
requiring suppliers to establish international development and manufacturing
facilities capable of providing system components with consistent quality on a
worldwide basis. The Company believes it is well positioned as a major supplier
of fuel storage and delivery systems ("FSDS") to the world automotive markets.
Expansion of OEM Supplier Responsibilities. Since the 1980s, Ford, Chrysler
and General Motors have been actively reducing their respective supplier bases
to those who accept significant responsibility for product management and meet
increasingly strict standards for product quality, on time delivery and
manufacturing costs. These suppliers are expected to control all aspects of
production of system components, including design, development, component
sourcing, manufacturing, quality assurance, testing and delivery to the
customer's assembly plant. The Company believes that many suppliers do not have
the resources to meet these OEM requirements and that the automotive OEM
supplier market will be divided among a smaller group of key suppliers. The
Company has received a number of quality awards from its OEM customers,
including the Ford Q1 Award, Chrysler QE Award and General Motors Supplier of
the Year Award, and believes that this supplier consolidation provides an
opportunity for the Company's increased penetration of the OEM market.
Increasing Emissions Regulation. Beginning in the late 1970s, U.S.
environmental regulations, including fuel economy regulations and the Clean Air
Act and its Amendments, have had a significant impact on fuel systems and the
controls placed on mobile source emissions. As a result, U.S. automotive fuel
systems have evolved from mechanically controlled carbureted systems to more
sophisticated, electronically controlled fuel injection systems. Governmental
action in many other parts of the world is forcing a similar transition to
engine management systems which produce less emissions. For example, the
European Economic Community, which previously had less stringent automotive
exhaust regulations, adopted exhaust standards effective January 1, 1993 which
are comparable to 1983 U.S. requirements.
Compliance with these regulations has resulted in efforts to reduce
evaporative emissions and the development of new "flexible" fuels such as
ethanol and methanol blends. In response to these changes, the Company has
developed a number of products including electric pumps designed for electronic
fuel injection systems, onboard running and vapor recovery ("ORVR") systems and
plastic fuel tanks which reduce hydrocarbon permeation and are corrosion
resistant to flexible fuels.
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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 began 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 $150, compared to a
typical 1987 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 1997 were 50% of the Company's net sales (excluding joint ventures) compared
to 52% in 1996. 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 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.
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. A 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 has begun construction of a new
systems center in Europe to provide product design and test capabilities.
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 plastic fuel rails.
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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 75% of cars and light trucks sold by General Motors, Ford and
Chrysler in North America in 1997 used fuel modules. In 1997, the Company
supplied approximately 20% of all of the fuel modules purchased in North
America, principally to Ford and Chrysler.
Approximately 25% of North American vehicles and 72% of European vehicles
produced in 1997 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 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 and was followed in 1997 by production of
fuel tanks for the 1998 Saturn, the 1998 GM Yukon/Tahoe and the 1998 Chassis
Cab. In addition a new facility in Meriden, Connecticut began production of the
fuel tanks for the 1998 Dodge Durango in September, 1997.
The Company is currently producing mono-layer plastic fuel tanks, which
include coatings and permeation barriers that meet European emission
requirements, for Audi, Mercedes-Benz, Nedcar, Peugeot, Renault, Rover, Saab,
Volkswagen and Volvo. As these customers require more sophisticated fuel tanks,
the Company will likely supplement a portion of its mono-layer blow molding
machines with multi-layer blow molding machines to provide the Company's OEM
customers in Europe with advanced, plastic fuel tank technology.
The Company also produces 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 3.0 liter engine in the Windstar. In 1997 Ford began to install
this new fuel rail on 3.0 liter 2-valve engines for Taurus and Sable vehicles,
as well as the 3.0 liter engines in the Windstar vans.
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. The first of these
devices entered production during 1997.
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<PAGE> 48
AUTOMOTIVE MARKETS AND CUSTOMER BASE
The Company currently provides a wide variety of products to a diverse
customer base in a number of geographic areas. The following table depicts a
summary of the various customers and platforms for which the Company supplied
products during 1997:
<TABLE>
<CAPTION>
CUSTOMER PLATFORM PRODUCT
-------- -------- -------
<S> <C> <C>
Chrysler Cirrus/Stratus, Dodge Dakota, Fuel Pump/Module Assembly
Dodge Durango, Dodge B-Van, Service Pump/Module
Dodge Ram Truck
K-Base Passenger Car, LH
(Intrepid Vision, Concord, New
Yorker and LHS), Minivan
(Caravan, Voyager and Town &
Country), Neon, Viper, Prowler
Dodge Durango Plastic Fuel Tank
Assembly
Ford Mustang, Ranger Oil Separator
Sable, Taurus Plastic Fuel Rail
F-Series, E-Series Light Trucks Fuel Pump
All North American Light Service Fuel Pump
Vehicle Platforms
F-100(1), BE-6(1), CE-14(1) Fuel Module
General Motors T600 Truck, Saturn, Plastic Fuel Tank
Yukon/Tahoe, Blazer/Jimmy,
Chassis Cab
Corvette Fuel Module
Fiat Tempra(1), Uno(1), 178(1) Fuel Module
Dedra(2), Fuel Pump, Bracket
Miero(2), Panda(2), Punto(2), Assembly
Tempra(2), Tipo(2), Uno(2) and Level Sensor
Land Rover/Rover Discovery, Defender Plastic Fuel Tank, Fill
Pipe and various
blow-molded parts
Rover, R-8(2), 200(2), 400(2) Fuel Pump and Bracket
Assembly
Mercedes-Benz C Class, Truck Glendewagen, Plastic Fuel Tank, Fill
Pipe,
Light Truck Expansion Tank
Nedcar S-40 Plastic Fuel Tank
300(2), 400(2) Fuel Module, Fuel Pump,
Bracket Assembly and
Sensor
Peugeot 306, 309, 405, 505 Plastic Fuel Tank, Fill
Pipe and Air Ducts
106(2), 205(2), 306(2), 405(2), Fuel Pump, Bracket
504(2), 505(2), 605(2) Assembly
and Level Sensor
Renault Twingo, Safrane, Espace, Spider Plastic Fuel Tank
R-19(1), CL10(1) Fuel Module
R-5(2), R-9/11(2), Twingo(2), Fuel Pump/Module
X-S4(2), X-06(2)
</TABLE>
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<PAGE> 49
<TABLE>
<CAPTION>
CUSTOMER PLATFORM PRODUCT
-------- -------- -------
<S> <C> <C>
Saab 900, 9000, 640, 9-5 Plastic Fuel Tank, Air
Hose,
Air Duct and Coolant
Reservoir
900(2), 9000(2), I16(2) Fuel Pump
Volkswagen/Audi Polo, Golf, Audi 100 Diesel, Plastic Fuel Tank
Audi V8, Van, GOL
Golf (1), Santana(1) Fuel Sending Unit
Volvo 850, 1150, 940, 960, P80, S-40, Plastic Fuel Tanks,
P-2X various other blow-molded
parts and Coolant
Reservoir
Heavy Truck Coolant Reservoir
Daewoo J-Car(3), T-Car(3), V-Car(3) Fuel Module
Honda AWD Fuel Module and Air Ducts
KIA Various Platforms Fuel Pump
S-2 ORVR
Ssangyong FJ(3), KJ(3) Fuel Module
Toyota Carina, Corolla Plastic Fuel Tank
Carina Air Duct
</TABLE>
- -------------------------
(1) South American customers supplied by Marwal do Brasil, Ltda.
(2) European customers supplied by Marwal Systems, S.N.C.
(3) Korean customers supplied through Korean Automotive Fuel Systems, Ltd.
In addition to the customers described above, the Company also supplies a
variety of its products to a number of other customers including, but not
limited to, the following: IBC, Iveco, J.I. Case, Lister Petter, New Holland,
Scandia, VME and Steyr-Puch.
North America. Net sales to Chrysler, General Motors and Ford for 1997
accounted for 19%, 5% and 5% of the Company's consolidated net sales,
respectively. 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. 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 plastic
fuel tank programs to outside suppliers, including the Company.
The Company has formed a joint venture with two minority business owners to
produce automotive components in Detroit's Empowerment Zone ("VITEC"). VITEC is
expected to manufacture FSDS products (including blow-molded plastic fuel
tanks). General Motors has awarded $450 million of new business to the joint
venture over a five-year period commencing in 1998. Chrysler has also awarded
new business to the 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. 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
these European manufacturers around the world. Approximately 72% of
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<PAGE> 50
the European light duty vehicles and 25% of the North American light duty
vehicles are equipped with plastic fuel tanks. Management estimates that
operations in Europe produced plastic fuel tanks accounting for approximately
19% of the European plastic fuel tank market in 1997.
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. In 1996, the Company 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 modules for the
domestic Korean automotive market and additional export markets established by
Korean OEMs. As part of the Restructuring, management is currently reviewing
alternatives to reduce the Company's investment in this joint venture.
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), Visteon (Ford's
component group) and Delphi Automotive Systems (GM's component group). In the
fuel rail market, the Company's major competitors include Delphi, Visteon,
Echlin Inc. and Siemens A.G. The Company has competition in the fuel module
market from Delphi, Robert Bosch GmbH, Denso Corp., VDO and Visteon. The
Company's largest competitors in the plastic fuel tank market include Kautex
Werke Reinold Hagen A.G. (which was acquired by Textron Inc. in January 1997),
Solvay S.A., Plastic Omnium Industries, Inc. and Visteon. 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 in 1998, the
Company will also have additional design and research capabilities to provide
OEMs in Europe with full-service product management. Because the Company has the
capability to provide comprehensive engineering 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.
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<PAGE> 51
AUTOMOTIVE WARRANTY AND OTHER PRODUCT EXPOSURE
The design and manufacture of fuel systems entails an inherent risk that a
governmental authority or a customer may require the recall of one of the
Company's products or a product in which one of the Company's products has been
installed. The Company has taken and intends to continue to take all reasonable
precautions to avoid the risk of exposure to an expensive recall campaign which
could have a material adverse effect on the business and financial condition of
the Company.
WALBRO ENGINE MANAGEMENT
SMALL ENGINE INDUSTRY OVERVIEW
The small engine industry is facing a number of environmentally-driven
changes which will require an increased emphasis on fuel systems technology and
the development of new fuel systems products. Growth opportunities outside of
the U.S. are expected to be driven by growth in the use of two-wheeled vehicles
and the increased use of gasoline-powered portable equipment in developing
countries.
Emphasis on Engine Management Systems and New Product
Development. Historically, exhaust emissions of gasoline-powered small engines
were unregulated. In 1992, the California Air Resources Board promulgated
comprehensive air quality regulations limiting small engine emissions, which
regulations became effective in August 1995. A more stringent phase is scheduled
to become effective in 1999. In addition, the EPA has implemented similar
regulations that became effective in August 1996, with a more stringent phase
expected to be phased in beginning 2002. The products designed to meet these new
emission standards in the small engine market will require more sophisticated
product research and new production capabilities. The increased technological
content and sophistication required to meet emission regulations is expected to
result in lower unit sales with greater value added per product and higher unit
prices.
Growing Demand in Developing Countries. The Company expects significant
growth in the demand for float feed carburetors in developing countries as per
capita income increases and two-wheeled vehicles become more affordable.
Production of two-wheeled vehicles in the People's Republic of China, for
example, increased from approximately 49,000 units in 1980 to approximately 3.4
million in 1993, 5.2 million in 1994, 7.8 million in 1995, 9.3 million in 1996
and 10.0 million in 1997. In addition, management believes demand for diaphragm
carburetors used in gasoline-powered portable tools will grow in these
developing countries. The inaccessibility of electrical power distribution and
geographic isolation of many projects, such as the clearing of land and highway
construction, hinder the use of electric-powered equipment.
SMALL ENGINE BUSINESS STRATEGY
To respond to the promulgation of increasingly strict emission regulations
in the small engine industry, the Company is working to develop a small engine
management system which will comply with new emission standards. As the leading
developer of fuel systems technology for portable engines, the Company is well
positioned to draw upon its expertise in carburetor and ignition system design
and development, as well as its experience in responding to emissions-driven
challenges in the automotive sector. The Company's advanced product design and
development facilities in Michigan and Japan, which are equipped with
sophisticated emission measurement instruments, provide the Company with the
facilities necessary to develop more sophisticated small engine management
systems.
In addition to developing new technologies, the Company intends to grow its
small engine business through expansion into foreign markets. The Company's
presence in developing countries such as the People's Republic of China will
allow it to benefit from the growing market for carburetors for two-wheeled
vehicles and from infrastructure development which requires portable power
tools.
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
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<PAGE> 52
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 57%, 29% and 14%,
respectively, of the Company's 1997 small engine net 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 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 73% 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,
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<PAGE> 53
including Briggs & Stratton and Tecumseh Products, both of which have greater
sales and financial resources than the Company. The Company's major competitors
in the ignition systems market are R.E. Phelon Company Inc. in the U.S.; Ikeda
Denki, Oppama Kougyou, Iida Denki, Kokusan Denki in Japan; and other internal
suppliers to engine manufacturers
AFTERMARKET PRODUCTS
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. The Company has recently begun pursuing initiatives to expand its
aftermarket customer base and product lines in an effort to grow this segment of
its business. Such initiatives include entry into components for performance
vehicles and recreational vehicles, as well as broader coverage of fuel pumps
and fuel modules.
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 companies which can enhance the Company's traditional
products and technologies and can provide additional growth opportunities. These
acquisitions would contribute new product technology and open new markets to the
Company. In evaluating these acquisitions, the Company seeks high quality
operations which fit with the Company's expertise in markets where it has an
established customer base and a clear vision of opportunities, thus decreasing
transition costs and other financial risks associated with corporate
acquisitions. Similarly, each of the Company's joint ventures provides the
Company with the opportunity to benefit from established customer relationships
or a unique technological advancement which the Company could not develop on its
own without the risk and expense of establishing marketing and manufacturing
organizations alone. In management's opinion, the Company's joint ventures
ultimately reduce the cost of penetrating new markets and limit the Company's
financial exposure with respect to these operations. At the present time the
Company has no specific agreements with respect to any new acquisitions or joint
ventures.
MANUFACTURING AND FACILITIES
The Company conducts operations in approximately 2.3 million square feet of
space in 28 locations. Six additional sites are operated as joint venture
operations. The Company believes that substantially all of its property and
equipment are 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 five years in a row
beginning in 1991. In 1995, Walbro Automotive was named
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<PAGE> 54
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. Approximately
half of the Company's manufacturing locations around the world have been
certified.
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 165 U.S. patents and 600 international
patents in the fuel systems field and has a number of applications pending.
These patents include proprietary ownership of designs for control devices for
engines and engine systems, fuel pumps, fuel rails, fuel regulators, fuel level
sensors, fuel reservoirs and fuel system vapor control devices, carburetors and
throttle bodies, as well as ancillary devices for engine and vehicle
applications.
Although these patents are significant to the Company, management believes
that in many cases the adaptation and use of the technology involved and the
proprietary process technology employed to manufacture these products are more
important. The Company maintains a systems center in Michigan for the research,
design and development of new products. The Company began construction of its
new European engineering center in June 1997. The Company's engineering
departments also engage in design, development and testing. In 1997, 1996, and
1995, the Company spent approximately $17.3 million, $18.4 million and $16.7
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 use
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.
EMPLOYEES
As of December 31, 1997, the Company had approximately 5,028 employees. The
Company believes that its relations with its employees are satisfactory. All of
the Company's approximately 600 European plant employees are unionized under
their traditional national organizations. All of the Company's United States
plant employees are non-unionized except approximately 400 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.
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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.
LEGAL PROCEEDINGS
Other than as set forth below, the Company is not currently a party to any
litigation which in the opinion of management is likely to have a material
adverse effect on the Company's business, results of operations or financial
condition.
International Container Services, Inc. v. Walbro Corporation, Walbro
Automotive Corporation, and U.S. Coexcell. This case was filed in June 1997 in
Michigan state court. John Hobstetter, a former Walbro employee, founded
International Container Services, Inc. ("ICS") in December 1996. Hobstetter is
one of the principals of ICS. ICS' Complaint alleges breach of contract,
promissory estoppel, tortious interference with prospective business
relationships, conversion and misappropriation of proprietary information, and
requests an accounting. ICS claims its damages "exceed $10,000,000."
Walbro, Walbro Automotive and U.S. Coexcell vigorously deny the
allegations. Walbro, Walbro Automotive and U.S. Coexcell filed an Answer to ICS'
Complaint on August 22, 1997. In addition to affirmatively denying all
substantive allegations, Walbro, Walbro Automotive and U.S. Coexcell asserted
several affirmation defenses and filed a Counterclaim against ICS. The
Counterclaim against ICS alleges tortious interference with prospective business
relations, conversion and misappropriation of confidential information and trade
secrets, and unjust enrichment. The Counterclaim seeks damages in an amount to
be determined at trial.
Walbro, Walbro Automotive and U.S. Coexcell also filed a Third-Party
Complaint against John Hobstetter and The Lovat Group, Inc. The Lovat Group has
a contractual relationship with ICS. The principals of The Lovat Group own or
will own an equity interest in ICS. The Third-Party Complaint alleges that
Hobstetter breached confidentiality and trade secret and stock purchase
agreements, breached his fiduciary duty, tortiously interfered with prospective
business relations and was unjustly enriched. The Third-Party Complaint also
alleges that The Lovat Group was unjustly enriched.
Hobstetter and The Lovat Group have answered the Third-Party Complaint, and
they have denied the substantive allegations therein and asserted affirmative
defenses. In addition, The Lovat Group filed a Third-Party Counterclaim against
Walbro, Walbro Automotive and U.S. Coexcell alleging claims virtually identical
to those alleged by ICS. Walbro, Walbro Automotive and U.S. Coexcell have
answered that complaint and denied all substantive allegations.
Discovery is ongoing, and is expected to continue during at least a
substantial portion of 1998. No trial date has been set.
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<PAGE> 56
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The directors and principal executive officers of the Company as of May 21,
1998 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Frank E. Bauchiero........... 62 President, Chief Executive Officer and Director
Vice President and a Director; President, Asia
Robert H. Walpole............ 57 Region
Lawrence C. Ward............. 45 President, North America Region
Richard H. Whitehead, III.... 52 President, Europe and South America Region
Daniel L. Hittler............ 62 Chief Administrative Officer and Secretary
Michael A. Shope............. 53 Chief Financial Officer and Treasurer
William T. Bacon, Jr......... 73 Director
J. Dwane Baumgardner......... 56 Director
Vernon E. Oechsle............ 55 Director
Robert D. Tuttle............. 72 Director
John E. Utley................ 56 Director
</TABLE>
The Company's Board of Directors consists of three classes of directors
serving three-year terms with one class standing for election at each annual
meeting of stockholders. Messrs. Bacon, Bauchiero and Oechsle have been elected
to serve for a term expiring in 1999. Messrs. Baumgardner, Tuttle and Walpole
have been elected to serve a term expiring in 2000. Mr. Utley has been elected
to serve for a term expiring in 2001.
Frank E. Bauchiero became Chief Executive Officer on April 15, 1998 and has
been President since August 1996. He was Chief Operating Officer from August
1996 to April 1998. He became a Director of the Company in 1990. Mr. Bauchiero
served as President-Industrial, North American Operations, Dana Corporation from
December 1990 until July 1996. Mr. Bauchiero was a Dana Group Vice President
from 1987 to 1990. Dana Corporation manufactures automotive product systems,
mobile off-highway equipment and industrial equipment. Mr. Bauchiero also serves
as a director of Regal Beloit Corp., a manufacturer of power transmissions,
gears and gear reducers and cutting tools.
Robert H. Walpole has been a Vice President of the Company since 1983,
President of Walbro Engine Management Corporation between 1991 and 1996, and
President, Asia Region since January 1997. Mr. Walpole joined the Company in
1970 and has served as a Director since 1983. Mr. Walpole is the brother-in-law
of Lambert E. Althaver, former Chief Executive Officer of the Company.
Lawrence C. Ward has been President, North America Region since February
1998. From 1996 to 1998, Mr. Ward was Vice President -- Global Operations for
Allied Signal Safety Restraints, a Division of Allied Signal Automotive (Allied
Signal's Safety Restraint division was acquired by Breed Technologies Inc. in
November 1997). Allied Signal Safety Restraints is a global manufacturer of
automotive air-bag systems and related safety components. Mr. Ward was Vice
President, Manufacturing and Services of Exabyte Corporation from 1993 to 1996
and Director, Worldwide Manufacturing and Operations of Quantum Corporation from
1992 to 1993.
Richard H. Whitehead, III became President, Europe and South America Region
in January 1997 and was a Vice President of the Company from 1988 to 1996. From
1988 to 1990, Mr. Whitehead served as the Vice President/General Manager of the
Company's Automotive Division -- Whitehead in Meriden, Connecticut. Mr.
Whitehead was the President of Whitehead Engineered Products, Inc. from 1980 to
1988, prior to its acquisition by the Company.
Daniel L. Hittler has served as Chief Administrative Officer since 1994 and
Secretary of the Company since 1993. He was Director of Administration from 1992
to 1993. He was the Director of Technical Planning from 1989 to 1992.
55
<PAGE> 57
Michael A. Shope has served as Chief Financial Officer of the Company since
December 1993 and as Treasurer since April 1994. From 1986 to 1993 he was the
Treasurer of Libbey-Owens-Ford Co., a manufacturer of glass for automotive and
industrial applications.
William T. Bacon, Jr. has served as a Director of the Company since 1972.
Mr. Bacon has been associated with ABN AMRO since 1994. ABN AMRO is a banking
services corporation with its headquarters in the Netherlands. Mr. Bacon also
served as an Honorary Director of Stifel Financial Corp. from 1984 to 1994.
Stifel Financial Corp. is an investment banking services corporation. Prior to
1994, he was a Managing Partner of Bacon Whipple & Co., Inc. Bacon Whipple &
Co., Inc. was an investment banking services corporation which merged with
Stifel Financial Corp.
J. Dwane Baumgardner, PhD since 1996 has been Chairman, Chief Executive
Officer and President of Donnelly Corporation, a manufacturer of automotive
vision systems, modular window systems and coated glass products. From 1982 to
1986, he was Chief Executive Officer, President and Chief Operating Officer of
Donnelley Corporation and prior to 1982 was Vice President of Technology of
Donnelley Corporation. Dr. Baumgardner joined the Company's Board of Directors
in October 1997, joined Donnelly in 1969 and is also a Director of SL
Industries, Inc., which produces glass products for the automotive industry.
Vernon E. Oechsle became a Director of the Company in October 1994. He has
been the President, Chief Executive Officer and a Director of Quanex
Corporation, a manufacturer of specialty steel and aluminum products, since
1996. He served as the Chief Operating Officer of Quanex Corporation from 1993
to 1995. From 1990 to 1992, he was Chief Executive Officer of Allied Signal
Automotive. Before that he was Group Executive of Automotive and Truck for Dana
Corporation and President of Hayes-Dana, Dana's Canadian subsidiary. Mr. Oechsle
also has served as a director of Precision Castparts Corporation, a manufacturer
of investment castings for aerospace and power generation customers, as well as
for industrial, automotive, medical and other commercial applications since
1996.
Robert D. Tuttle became a Director of the Company in 1981. Mr. Tuttle is
also a Director of Woodhead Industries, Inc. From 1980 to 1991, Mr. Tuttle was
Chairman, Chief Executive Officer and a Director of SPX Corporation, which
produces specialty tools and equipment and distributes automotive components.
John E. Utley became a Director of the Company in 1993. He is Senior Vice
President of LucasVarity, PLC, a supplier of automotive braking systems,
electrical systems and diesel systems, a position he has held since 1996. From
1994 until September 1996 he was Senior Vice President of Varity Corporation.
Mr. Utley was the Chairman of the Board of Kelsey-Hayes Company from 1992 to
September 1996 and was Vice Chairman and Vice President from 1989 to 1992.
During the first quarter of 1997, the Company modified its management
structure to reflect a matrix organization. In this regard, the Company
appointed three regional presidents who have operating responsibilities for the
North America, Europe/South America and Asia regions. In addition, global
responsibility for automotive products, small engine products and the Company's
strategic development activities were allocated to one of each of these three
regional presidents. The Company believes that the benefits of this matrix
organizational structure include (i) improved focus on the Company's customers
in their local markets, (ii) better global coordination of the Company's product
lines and development activities, (iii) reduced overhead expenses, (iv)
avoidance of duplication of costs between the Company's product lines and (v)
improved utilization of management expertise and technical facilities.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Pursuant to the provisions of the Delaware General Corporation Law
("DGCL"), the Company has adopted provisions in its Certificate of Incorporation
which eliminate the personal liability of its directors to the Company or its
stockholders for monetary damages for breach of their duty of due care to the
fullest extent permitted by the DGCL, and which require the Company to indemnify
its directors and permit the Company to indemnify its officers or employees to
the fullest extent permitted by DGCL, including those circumstances in which
indemnification would otherwise be discretionary, except that the Company shall
not be obligated to indemnify any such person (i) with respect to proceedings,
claims or actions initiated or brought voluntarily by
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<PAGE> 58
any such person and not by way of defense, or (ii) for any amounts paid in
settlement of an action indemnified against by the Company without the prior
written consent of the Company. The Company has a directors' and officers'
liability insurance policy.
EXECUTIVE COMPENSATION
The table below provides information concerning the annual and long-term
compensation for services in all capacities to the Company for the fiscal years
ended December 31, 1997, 1996 and 1995 of the persons who were at December 31,
1997 (i) the Chief Executive Officer and (ii) the four other most highly
compensated (based upon combined salary and bonus) executive officers of the
Company (collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION AWARDS
---------------------------------------
ANNUAL COMPENSATION AWARDS
--------------------------- ------------------------- PAYOUTS
OTHER RESTRICTED SECURITIES -----------
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) (#) (#) ($) ($)(1)
------------------ ---- ------ ----- ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lambert E. Althaver, (2).... 1997 450,000 0 0 0 0 1,862 9,000
Chairman and Former 1996 450,000 0 0 0 17,647 204,379 8,870
Chief Executive Officer 1995 375,000 0 0 0 15,625 0 9,100
Frank E. Bauchiero, (3)..... 1997 375,000 0 0 0 0 0 4,500
Chief Executive Officer 1996 141,173(4) 0 0 30,000 19,607 0 0
and President
Robert H. Walpole,.......... 1997 265,000 386,338(5) 0 0 0 0 9,000
Vice President 1996 265,000 283,070(5) 0 0 0 0 9,717
1995 254,000 0 0 0 0 0 8,550
Richard H. Whitehead, III,.. 1997 200,000 0 42,929(6) 0 0 0 10,500
Vice President 1996 200,000 0 42,000(6) 0 7,843 0 10,460
1995 180,000 0 42,000(6) 0 10,000 0 6,040
Michael A. Shope,........... 1997 165,000 22,500 0 0 0 0 9,090
Treasurer and 1996 150,000 27,000 0 0 3,529 0 10,035
Chief Financial Officer 1995 135,000 18,750 0 0 4,500 0 2,025
</TABLE>
- -------------------------
(1) These amounts represent matching and retirement contributions made by the
Company pursuant to its salary savings plan, entitled the "Advantage Plan."
(2) Mr. Althaver retired as Chief Executive Officer of the Company effective
April 15, 1998.
(3) At December 31, 1997, Mr. Bauchiero was the President and Chief Operating
Officer of the Company. Effective April 17, 1998, Mr. Bauchiero was
appointed to the additional position of Chief Executive Officer of the
Company.
(4) Salary for the period August 16, 1996 to December 31, 1996; executive began
employment on August 16, 1996.
(5) First and second of four cash bonus payments earned under the Company's
Engine Management Incentive Compensation Plan covering the period July 1,
1991 to June 30, 1996.
(6) 42,000 was paid in each of 1997, 1996 and 1995, to adjust for cost of living
and expatriate status. In 1997, $929 was compensation for personal use of a
corporate automobile.
INCENTIVE COMPENSATION
Beginning with fiscal year 1997, the executive officers became eligible for
a restructured incentive compensation program. The program is comprised of both
a short term and a long term incentive component. Short term incentive awards
are based solely on the financial performance of the Company for each fiscal
year.
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<PAGE> 59
Long term incentive awards are based in part on corporate financial performance.
Accordingly, audited financials must be used to determine these awards. Since
audited financials are not available until February following the close of any
fiscal year, the annual award cycle has been moved from December of the fiscal
year to the following February, and therefore there were no grants to the
executive officer of the Company of stock options nor any awards under the
Company's long term incentive plan in 1997.
The following table provides information for the Named Officers'
unexercised options at December 31, 1997. These options were granted under the
Company's Equity Based Long Term Incentive Plan (the "Equity Plan").
AGGREGATED OPTION EXERCISES IN 1997
AND YEAR-END 1997 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 (#) DECEMBER 31, 1997 ($)(1)
--------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Lambert E. Althaver............................. 88,621 0 $38,420 0
Frank E. Bauchiero.............................. 32,514 0 0 0
Robert H. Walpole............................... 0 0 0 0
Richard H. Whitehead, III....................... 31,426 0 0 0
Michael A. Shope................................ 11,338 0 0 0
</TABLE>
- -------------------------
(1) Based upon the difference between the exercise prices and the $13 7/16
closing price of the Company's Common Stock on the Nasdaq National Market on
December 31, 1997.
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company entered into employment agreements with Messrs. Hittler, Shope,
Whitehead and Walpole which have terms expiring on August 16, 1998 and provides
them minimum base salaries of $150,000, $150,000, $200,000 and $265,000,
respectively, subject to review and increase by the Board of Directors
Compensation Committee (the "Compensation Committee"). Each employment agreement
is renewable automatically for twelve months, subject to cancellation by the
Company prior to the anniversary date. The Company entered into employment
agreements with Messrs. Bauchiero and Lawrence C. Ward which have terms expiring
on October 3, 1998 and February 2, 1999, respectively, and provide them a base
salary of $375,000 and $260,000, respectively, subject to review and increase by
the Compensation Committee. In addition, each is entitled to participate in the
Equity Plan. The Company also entered into an employment agreement with Mr.
Althaver with a term expiring on August 16, 1998 which provided a minimum base
salary of $450,000 and which was renewable automatically for twelve months,
subject to cancellation by the Company prior to the anniversary date. However,
Mr. Althaver's employment agreement was terminated by a Separation Agreement and
General Release dated May 20, 1998 between the Company and Mr. Althaver in
connection with Mr. Althaver's retirement from the position of Chief Executive
Officer effective April 15, 1998.
For each of the executive officers, an employment agreement is linked to a
Termination and Change of Control Agreement ("COC Agreements"). In combination,
these agreements provide a severance provision under the terms of which the
employee is entitled to severance pay if during the initial term of the
agreement or a renewal term, his employment (i) is terminated (including
nonrenewal of his employment agreement) by the Company other than for cause or
(ii) is terminated voluntarily by him for good reason. The severance pay payable
under the agreements is an amount equal to the annual base compensation being
paid to the Named Officer at the date of termination.
The employment agreements and the COC Agreements were the result of a
determination by the Board of Directors that it was important to, and in the
best interests of the Company and its stockholders, to ensure
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<PAGE> 60
that in the event of a possible change in control of the Company, the stability
and continuity of management will continue unimpaired, free of distraction
incident to any such change in control.
The COC Agreements provide that if during a three-year period following a
Change in Control (as defined below) of the Company, an employee's employment is
terminated by the Company for cause or if the employee terminates employment for
good reason, the employee will receive (1) a single sum payment equal to three
times the employee's average compensation of the prior three calendar years
(including incentive bonus), (2) 36 months of additional medical, dental, life,
disability and accident insurance, (3) an amount equal to the actuarial
equivalent of the benefit under a SERP which the employee would receive if
employment would have continued for three years, (4) acceleration of any
performance awards granted prior to the extension date equal to the cash amount
payable plus the value of any shares of Common Stock payable upon achievement of
maximum performance, (5) a cash amount equal to the value of any phantom shares
of Common Stock credited to the employee's deferral account, (6) exercisable
stock options and restricted stock will be vested, (7) outplacement services at
the sole discretion of employee, and (8) other perquisites substantially similar
to those in effect for the employee at the time of the Change in Control of the
Company. In the event the present value of these payments and benefits exceed an
amount which would render them "parachute payments" under Section 280G of the
Internal Revenue Code of 1986, as amended, the Company will pay a gross up
amount to the employee to compensate him for the additional excise tax assessed
thereon. Each employee agrees that following his termination of employment with
the Company, he will cooperate with the Company in any litigation involving the
Company, will not disclose Company trade secrets, and for a one-year period
following the date of such employee's termination, will not compete with the
Company. "Change in Control" of the Company is defined to include certain
reorganizations, consolidations or mergers of the Company, certain sales or
transfers of substantially all the assets of the Company, approval by the
stockholders of the Company of its liquidation or dissolution, a change in the
composition of the Company's Board of Directors such that it is comprised of
directors, a majority of whom are not "Continuing Directors" as defined in the
COC Agreements, or the acquisition by certain persons of twenty percent or more
of the combined voting power of the Company's outstanding securities.
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<PAGE> 61
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of April 30, 1998 the total number of
shares of Common Stock of the Company beneficially owned, and the percentage so
owned, by (i) each director of the Company, (ii) each person known to the
Company to be the beneficial owner of more than five percent of the outstanding
Common Stock of the Company, (iii) each of the Company's executive officers, and
(iv) all directors and executive officers as a group. The number of shares owned
are those "beneficially owned," as determined under the rules of the Commission,
and such information is not necessarily indicative of beneficial ownership for
any other purpose.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENTAGE
NAME OWNERSHIP(1) OF CLASS
---- ------------ ----------
<S> <C> <C>
Franklin Resources, Inc. ................................... 1,200,500(2) 13.8%
Caisse de depot et placement du Quebec...................... 713,900(3) 8.2%
David L. Babson & Co., Inc. ................................ 651,900(4) 7.5%
Princeton Services, Inc. ................................... 466,900(5) 5.4%
Lambert E. Althaver......................................... 258,444(6) 2.9%
William T. Bacon, Jr. ...................................... 67,775(7) *
Frank E. Bauchiero.......................................... 74,783(8) *
J. Dwane Baumgardner........................................ 0 *
Vernon E. Oechsle........................................... 15,420(9) *
Michael A. Shope............................................ 13,438(10) *
Robert D. Tuttle............................................ 20,000(11) *
John E. Utley............................................... 17,383(12) *
Robert H. Walpole........................................... 195,828(13) 2.3%
Richard H. Whitehead, III................................... 134,586(14) 1.5%
All Directors and Executive Officers as a Group (12
persons).................................................. 830,241(15) 9.3%
</TABLE>
- -------------------------
* Indicates that the percentage beneficially owned does not exceed one
percent.
(1) The named stockholders have sole voting and dispositive power over all
shares except as otherwise noted and except as to those shares over which
beneficial ownership is disclaimed.
(2) As reported on a Schedule 13G dated February 11, 1998 filed with the
Commission by Franklin Resources, Inc., Rupert H. Johnson, Jr., Charles B.
Johnson and Templeton Investment Counsel, Inc., the securities reported
therein are beneficially owned by one or more open or closed-end investment
companies or other managed accounts which are advised by direct and
indirect investment advisory subsidiaries of Franklin Resources, Inc.
("FRI"). According to such Schedule 13G, neither FRI, Charles B. Johnson
nor Rupert H. Johnson, Jr. have any power to dispose or to direct the
disposition of any of the 1,200,500 shares; Templeton Investment Counsel,
Inc. has sole voting and dispositive power with respect to 518,100 shares;
Templeton Management Limited has sole voting and dispositive power with
respect to 302,100 shares; Templeton Global Advisors Limited has sole
voting power with respect to 277,900 shares and sole dispositive power with
respect to 306,300 shares; and Templeton Investment Management Limited has
sole voting and dispositive power with respect to 74,000 shares. The
address of FRI is 777 Mariners Island Boulevard, San Mateo, California
94404 and the address of Templeton Investment Counsel, Inc. is 500 East
Broward Boulevard, Suite 2100, Ft. Lauderdale, Florida 33394.
(3) As reported on a Schedule 13G dated November 28, 1997 filed with the
Commission by Caisse de depot et placement du Quebec ("Caisse"), Caisse has
sole voting power with respect to 713,900 shares. The address of Caisse is
1981 Avenue McGill College, Montreal, Quebec H3A 3C7.
(4) As reported on a Schedule 13G dated January 20, 1998 filed with the
Commission by David L. Babson & Co., Inc., David L. Babson & Co., Inc. has
sole voting power and sole dispositive power with respect to all 651,900 of
these shares. The address of this stockholder is One Memorial Drive,
Cambridge, Massachusetts 02142-1300.
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<PAGE> 62
(5) As reported on a Schedule 13G dated February 2, 1998 filed with the
Commission by Princeton Services, Inc. ("Princeton"), Fund Asset
Management, L.P. (d/b/a Fund Asset Management, "FAM") and Merrill Lynch
Special Value Fund, Inc. (the "Fund"), Princeton reports beneficial
ownership with respect to 466,900 shares (all of which Princeton disclaims
beneficial ownership of), while FAM and the Fund both report beneficial
ownership with respect to 434,800 of those 466,900 shares. FAM and Merrill
Lynch Asset Management, L.P. d/b/a Merrill Lynch Asset Management ("MLAM")
are investment advisers registered under the Investment Advisers Act of
1940 and are wholly-owned subsidiaries of Merrill Lynch & Co, Inc.
("ML&Co."). As a result of such affiliation, ML&Co. may be deemed to share
with FAM and MLAM investment discretion and voting authority. FAM and MLAM
act as investment advisers for certain investment companies registered
under the Investment Company Act of 1940 and for private accounts. One such
investment company managed by FAM is the Fund which holds 434,800 shares.
On an aggregate basis FAM and MLAM hold 466,900 shares. Princeton is a
parent holding company. The address of Princeton, FAM and the Fund is 800
Scudders Mill Road, Plainsboro, New Jersey 08536.
(6) Includes 74,643 shares owned by Mr. Althaver's wife. Mr. Althaver disclaims
beneficial ownership of these shares. Also includes 88,621 shares which are
covered by presently exercisable options granted under the Equity Plan and
18,224 shares held for the account of Mr. Althaver by the trustee of the
Advantage Plan.
(7) Includes 3,300 shares owned by Mr. Bacon's wife and 5,025 shares owned by
Mr. Bacon's son. Mr. Bacon disclaims beneficial ownership of these shares.
Also includes 10,000 shares over which Mr. Bacon shares voting power as
co-trustee of two trusts for the benefit of the beneficiaries of the estate
of his deceased mother. Includes 10,000 shares which are covered by
presently exercisable options granted under the Equity Plan.
(8) Includes 32,514 shares which are covered by presently exercisable options
granted under the Equity Plan and 9,976 shares which represent shares
convertible from the Convertible Trust Preferred Securities. Also includes
30,000 shares restricted per terms of an agreement dated October 3, 1996.
(9) Includes 14,420 shares which are covered by presently exercisable options
granted under the Equity Plan.
(10) Includes 11,338 shares which are covered by presently exercisable options
granted under the Equity Plan.
(11) Includes 10,000 shares over which Mr. Tuttle shares voting power as
co-trustee with his wife. Includes 10,000 shares which are covered by
presently exercisable options granted under the Equity Plan.
(12) Includes 500 shares over which Mr. Utley has voting power as trustee of a
trust and 15,883 shares which are covered by presently exercisable options
granted under the Equity Plan.
(13) Includes 79,385 shares over which Mr. Walpole shares voting power as
co-trustee of a trust for the benefit of the beneficiaries of the estate of
his deceased father. Includes 13,325 shares owned by Mr. Walpole's wife.
Mr. Walpole disclaims beneficial ownership of these shares. Also includes
2,093 shares held for the account of Mr. Walpole by the trustee of the
Advantage Plan.
(14) Includes 31,426 shares which are covered by presently exercisable options
granted under the Equity Plan. Also includes 3,160 shares held for the
account of Mr. Whitehead by the trustee of the Advantage Plan.
(15) Includes 240,753 shares which are covered by presently exercisable options
granted under the Equity Plan, as well as 11,618 shares which represent
shares convertible from the Convertible Trust Preferred Securities. Also
includes 23,477 shares held for the account of three officers of the
Company by the trustee of the Advantage Plan and includes 1,238 shares held
for one officer of the Company by the trustee of the Company's Employee
Stock Ownership Plan.
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INDEBTEDNESS OF MANAGEMENT
Lambert E. Althaver, the Company's former Chief Executive Officer, as of
April 2, 1998 owed $100,000 to the Company which is the maximum amount of
indebtedness Mr. Althaver has had to the Company since January 1, 1997. The
indebtedness relates to loans made by the Company to Mr. Althaver and to
approximately 24 other employees (collectively the "Borrowers") to permit them
to repay individual bank loans that came due. The bank loans originated
approximately eight years ago to enable the Borrowers collectively to acquire
approximately 84,500 shares of the Common Stock from UIS, Inc. which had
acquired the shares in 1987 as part of an unsuccessful tender offer strategy.
The loans carry interest at prime.
DESCRIPTION OF OTHER INDEBTEDNESS
NEW CREDIT FACILITY
The Company entered into the New Credit Facility on May 29, 1998.
For the first year of the New Credit Facility, the Revolving Credit
Facility bears interest at either the London Interbank Offered Rate ("LIBOR"),
plus 2.25% or at the Prime Rate, plus 0.25%. Availability under the Revolving
Credit Facility is subject to a borrowing base, consisting of 85% of the
eligible accounts receivable of the Company and certain of its subsidiaries, 60%
of certain raw materials and finished goods inventory and 70% of commodity raw
material resin inventory, less customary reserves. In addition, the Revolving
Credit Facility provides for a $25 million sub-facility for the issuance of
letters of credit. The Capital Expenditure Facility initially bears interest at
the Prime Rate, plus 0.50% or LIBOR, plus 2.50%. Amounts drawn under the Capital
Expenditure Facility are repayable in 20 equal quarterly principal installments,
beginning one quarter after such draw.
The New Credit Facility is available for a period of five years. If the
Revolving Credit Facility is terminated by the Company during the first three
years, certain pre-payment fees may be applicable.
The New Credit Facility contains numerous covenants, including financial
covenants such as a fixed charge ratio and a senior secured funded indebtedness
to EBITDA (earnings before interest, taxes depreciation and amortization) ratio,
and restrictions on additional indebtedness, liens, capital expenditures,
mergers and sales of assets and events of default. Obligations outstanding under
the Revolving Credit Facility are secured by accounts receivable, inventory and
general intangibles of the Company and certain of its subsidiaries, and also are
secured by a pledge of the stock of certain of the material domestic
subsidiaries of the Company and 65% of the stock of the material foreign
subsidiaries of the Company. Each advance under the Capital Expenditure Facility
will be secured by the item of equipment purchased with the proceeds of such
advance. The collateral for the Capital Expenditure Facility will not constitute
collateral for the Revolving Credit Facility. In addition, certain of the
subsidiaries of the Company provide guarantees of the obligations under the New
Credit Facility.
On May 29, 1998, the Refinancing occurred in which the proceeds of the New
Credit Facility were used to repay the indebtedness outstanding under the Credit
Facility (including the repayment of a $6.3 million industrial revenue bond
issued by the City of Ligonier, Indiana for construction of the facility at
Sharon Manufacturing Company) and the Purchase Money Facility, as well as to
repay the 2004 Notes including an early retirement premium of $2.0 million. The
proceeds of the New Credit Facility will also be used for capital expenditures
and for general working capital purposes. As of May 29, 1998, $78.0 million was
outstanding under the New Credit Facility.
The occurrence of a change of control may result in the lenders under the
New Credit Facility having the right to require the Company to repay all
indebtedness outstanding under the New Credit Facility.
CREDIT FACILITIES
The Credit Facility consisted of a multicurrency revolving loan facility
for the Company and certain of its wholly-owned domestic and foreign
subsidiaries. The Company also had the Purchase Money Facility, which
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<PAGE> 64
was issued by the same bank group as the Credit Facility. Amounts outstanding
under the Purchase Money Facility reduced availability under the Credit Facility
on a dollar-for-dollar basis. The maximum amount of availability under the
Credit Facility at March 31, 1998 was $30 million which was reduced from $135
million pursuant to amendment on August 27, 1997, was reduced to $35 million in
conjunction with the issuance of a consent and waiver on November 13, 1997, and
was reduced to $30 million in connection with an additional consent and waiver
on December 12, 1997. As of March 31, 1998, there was outstanding under the
Credit Facility $23.0 million in debt and $7.0 million in letters of credit.
Borrowings under the Credit Facilities bore interest at a per annum rate
equal to the agent's base rate plus 1% or the prevailing interbank offered rate
in the applicable offshore currency market, plus an additional margin ranging
from 0.5% to 1.75% based on certain financial ratios of the Company. The Company
was also required to pay a quarterly facility fee under the Credit Facility.
The Credit Facility was secured by first liens on the inventory, accounts
receivable and certain intangibles (excluding intellectual property) of the
Company and its wholly-owned domestic subsidiaries and by a pledge of 100% of
the stock of wholly-owned domestic subsidiaries, and up to 65% of the stock of
wholly-owned foreign subsidiaries. Collateral for the Credit Facility secured
the 2004 Notes on an equal and ratable basis. In addition, the $2.9 million
outstanding as of March 31, 1998 under the Purchase Money Facility was secured
by the equipment purchased with the borrowings thereunder. The Company and its
wholly-owned domestic subsidiaries guaranteed payment of domestic borrowings
under the Credit Facilities.
The Credit Facilities contained customary representations and warranties
and events of default and required compliance with certain covenants by the
Company and its subsidiaries, including, among other things: (i) maintenance of
certain financial ratios and compliance with certain financial tests and
limitations; (ii) limitations on the payment of dividends, incurrence of
additional indebtedness and granting of certain liens; and (iii) restrictions on
mergers, acquisitions, asset sales, capital expenditures and investments.
A portion of the proceeds of the New Credit Facility was utilized to repay
the Credit Facilities (including the repayment of a $6.3 million industrial
revenue bond issued by the City of Ligonier, Indiana for construction of the
facility at Sharon Manufacturing Company) in full.
SENIOR NOTES DUE 2005
In July 1995, the Company sold $110 million in aggregate principal amount
of 9.875% senior notes due 2005. 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 in part, at the option of the
Company at various redemption prices as set forth in the 2005 Notes Indenture,
plus accrued and unpaid interest thereon to the redemption date. In addition,
prior to July 15, 1998, the Company may, at its option, redeem up to an
aggregate of 30% of the principal amount of the 2005 Notes originally issued
with the net proceeds from one or more public equity offerings at the redemption
price specified of 110% 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. Further, in certain circumstances, the Company will be required to
make an offer to repurchase the 2005 Notes at a price equal to 100% of the
principal amount thereof, plus accrued interest to the date of repurchase, with
the net cash proceeds of certain asset sales.
The 2005 Notes Indenture contains customary events of default and covenants
which limit (i) the incurrence of additional indebtedness; (ii) the issuance of
preferred stock by subsidiaries; (iii) the creation of liens; (iv) sales of
assets and subsidiary stock; (v) mergers and consolidations; (vi) payments to
subsidiaries; and (vii) transactions with affiliates.
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SENIOR NOTES DUE 2004
In October 1994, the Company sold $45 million in principal amount of 7.68%
senior notes due 2004. The 2004 Notes required quarterly interest payments due
January 1, April 1, July 1 and October 1. The agreement required the Company to
maintain consolidated adjusted net worth (as defined in the 2004 Note Agreement
referred to below) of $85 million, plus 25% of cumulative net income for each
year beginning in 1995, and a funded debt to total capital ratio not greater
than .65 to 1. The agreement also prohibited the Company from consolidating or
merging with another corporation except under certain circumstances and from
disposing of substantially all of its assets. The agreement under which the 2004
Notes were issued (the "2004 Note Agreement") gave the holders of the 2004 Notes
the option of having their 2004 Notes repurchased at the principal amount
thereof in the event of a Change of Control (as defined in the 2004 Note
Agreement). In addition, the 2004 Note Agreement contained events of default
including (i) a default in the payment of interest, (ii) a default in the
payment of any principal or required prepayment premium, (iii) defaults under
certain other debt instruments, and (iv) certain events of insolvency or
bankruptcy of the Company or its subsidiaries. The 2004 Notes were secured
equally and ratably with the Credit Facility by the Company's and its domestic
subsidiaries' inventory, accounts receivable and certain intangibles and by a
pledge of 100% of the capital stock of wholly-owned domestic subsidiaries and up
to 65% of the capital stock of wholly-owned foreign subsidiaries.
A portion of the proceeds of the New Credit Facility was utilized to repay
the 2004 Notes, plus an early retirement premium of $2.0 million, in full.
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DESCRIPTION OF THE EXCHANGE NOTES
The Exchange Notes will be, and the Old Notes were, issued under an
indenture dated as of December 15, 1997 (the "Indenture") among Walbro
Corporation (the "Company"), the Guarantors and Bankers Trust Company, as
trustee (the "Trustee"). References to the Notes include the Old Notes and the
Exchange Notes unless the context otherwise requires. The following summary of
the material provisions of the Indenture does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the provisions of the
Indenture (a copy of which is filed as an exhibit to the Registration Statement
of which this Prospectus is a part), including the definitions of certain terms
contained therein and those terms made part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended, as in effect on the date of the
Indenture. The definitions of certain capitalized terms used in the following
summary are set forth below under "-- Certain Definitions."
GENERAL
The Old Notes are and the Exchange Notes will be general unsecured
obligations of the Company. The maximum aggregate principal amount of Notes to
be issued under the Indenture will be $100,000,000. The Notes will be guaranteed
by each of the Guarantors pursuant to the guarantees (the "Guarantees")
described below. The indebtedness represented by the Notes will rank pari passu
in right of payment with all existing and future senior unsecured obligations of
the Company. Each Guarantee will be a general unsecured obligation of the
applicable Guarantor and will rank pari passu in right of payment with all
existing and future senior unsecured obligations of such Guarantor.
The Old Notes are and the Exchange Notes will be effectively subordinate in
right of payment to all existing and future liabilities, including trade
payables, of the Company's Subsidiaries which are not Guarantors. In addition,
the Notes and the Guarantees will be effectively subordinate in right of payment
to all existing and future secured Indebtedness of the Company and its
Subsidiaries.
Substantially all of the operations of the Company are conducted by
Subsidiaries of the Company. As result, the Company is dependent upon the
earnings and cash flow of its Subsidiaries to meet its obligations, with respect
to the Notes. The Subsidiaries of the Company which are not Wholly-Owned
Restricted Subsidiaries and the Subsidiaries of the Company which are not
incorporated in the United States, any state therein or the District of Columbia
will not guarantee the Notes. Therefore, the Indebtedness represented by the
Notes will be structurally subordinated to all obligations of such Subsidiaries.
See "Risk Factors -- Holding Company Structure."
The Old Notes were and the Exchange Notes will be issued only in registered
form without coupons, in denominations of $1,000 and integral multiples thereof.
Principal of, premium, if any, and interest on the Notes will be payable, and
the Notes will be transferable, at the office of the Company's agent in the City
of New York located at the corporate trust office of the Trustee. In addition,
interest may be paid, at the option of the Company, by check mailed to the
person entitled thereto as shown on the register for the Notes. No service
charge will be made for any transfer, exchange or redemption of the Notes,
except in certain circumstances for any tax or other governmental charge that
may be imposed in connection therewith.
Any Notes that remain outstanding after the completion of the Exchange
Offer, together with the Exchange Notes issued in connection with the Exchange
Offer, will be treated as a single class of securities under the Indenture.
MATURITY, INTEREST AND PRINCIPAL
The Notes will mature on December 15, 2007. Interest on the Notes will
accrue at the rate of 10 1/8% per annum and will be payable semi-annually on
each June 15 and December 15, commencing June 15, 1998, to the holders of record
of Notes at the close of business on the June 1 and December 1 immediately
preceding such interest payment date. Interest on the Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the original date of issuance (the "Issue Date"). Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
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The Notes will not be entitled to the benefit of any mandatory sinking
fund.
REDEMPTION
Optional Redemption. The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after December 15, 2002. The
Notes may be so redeemed on not less than 30 nor more than 60 days' prior
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest, if any, to the redemption
date, if redeemed during the 12-month period beginning December 15 of the years
indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2002................................................ 105.063%
2003................................................ 103.375%
2004................................................ 101.688%
2005 and thereafter................................. 100.000%
</TABLE>
Optional Redemption upon Public Equity Offerings. At any time, or from time
to time, on or prior to December 15, 2000, the Company may, at its option, use
the net cash proceeds of one or more Public Equity Offerings (as defined) to
redeem up to an aggregate of 30% of the principal amount of Notes originally
issued, at a redemption price equal to 110.125% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of redemption. In order to
effect the foregoing redemption with the proceeds of a Public Equity Offering,
the Company shall send the redemption notice not later than 60 days after the
consummation of such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Capital Stock (other than Redeemable Capital
Stock) of the Company pursuant to a registration statement filed with and
declared effective by the Securities and Exchange Commission in accordance with
the Securities Act.
Mandatory Redemption upon a Change of Control and Certain Asset Sales. In
addition, as described below, the Company is obligated (a) upon the occurrence
of a Change of Control, to make an offer to purchase all outstanding Notes at a
purchase price of 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of purchase, and (b) to make an offer to purchase
Notes with a portion of the net cash proceeds of certain sales or other
dispositions of assets at a purchase price of 100% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of purchase. See
"-- Certain Covenants -- Change of Control" and "-- Disposition of Proceeds of
Asset Sales."
Selection and Notice. In the event that less than all of the Notes are to
be redeemed at any time, selection of such Notes for redemption will be made by
the Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed or, if the Notes are
not then listed on a national securities exchange by lot or by such method as
the Trustee shall deem fair and appropriate; provided, however, that no Notes of
a principal amount of $1,000 or less shall be redeemed in part. Notice of
redemption shall be mailed by first-class mail at least 30 but not more than 60
days before the redemption date to each holder of Notes to be redeemed at its
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the holder thereof upon
surrender for cancellation of the original Note. On and after the redemption
date, interest will cease to accrue on Notes or portions thereof called for
redemption, unless the Company defaults in the payment of the redemption price
therefor.
THE GUARANTEES
Each of the Guarantors will (so long as they remain Subsidiaries of the
Company) unconditionally guarantee on a joint and several basis all of the
Company's obligations under the Notes, including its obligations to pay
principal, premium, if any, and interest with respect to the Notes. Except as
provided in
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"-- Certain Covenants" below, the Company is not restricted from selling or
otherwise disposing of any of the Guarantors.
The Indenture provides that each Wholly-Owned Restricted Subsidiary other
than any Accounts Receivable Subsidiary incorporated in the United States, any
state therein or the District of Columbia which incurs (as defined below)
Indebtedness (other than to the Company or a Wholly-Owned Restricted Subsidiary)
in an aggregate principal amount in excess of $5,000,000 will be a Guarantor for
so long as such Wholly-Owned Restricted Subsidiary has Indebtedness outstanding
in excess of $5,000,000. At the Company's discretion, any other Subsidiary may
be a Guarantor.
The Indenture provides that if all of the assets of any Guarantor or all of
the Capital Stock of any Guarantor is sold (including by issuance or otherwise)
by the Company or any of its Subsidiaries in a transaction constituting an Asset
Sale, and if the Net Cash Proceeds from such Asset Sale are used in accordance
with the covenant "Disposition of Proceeds of Asset Sales," then such Guarantor
(in the event of a sale or other disposition of all of the Capital Stock of such
Guarantor) or the corporation or other entity acquiring such assets (in the
event of a sale or other disposition of all or substantially all of the assets
of such Guarantor) shall be released and discharged of its Guarantee
obligations.
CERTAIN COVENANTS
The Indenture contains the following covenants, among others:
Limitation on Indebtedness. The Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or in any manner become directly or indirectly liable,
contingently or otherwise, for the payment of (in each case, to "incur") any
Indebtedness (including, without limitation, any Acquired Indebtedness),
provided, however, that the Company or any Guarantor will be permitted to incur
Indebtedness (including, without limitation, Acquired Indebtedness) if, at the
time of such incurrence, and after giving pro forma effect thereto, the
Consolidated Fixed Charge Coverage Ratio of the Company is at least equal to
2:1.
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
may, to the extent specifically set forth below, incur each and all of the
following:
(a) Indebtedness of the Company evidenced by the Notes and
Indebtedness of any Guarantor evidenced by its Guarantee;
(b) Indebtedness of the Company and its Subsidiaries outstanding on
the Issue Date (including Indebtedness represented by the 2005 Notes and
the 2005 Notes Guarantees);
(c) Indebtedness of the Company and any Guarantor under the Credit
Facility and Indebtedness of any Accounts Receivable Subsidiary in
connection with any Accounts Receivable Transaction in an aggregate
principal amount at any one time outstanding not to exceed the greater of
(x) the sum of (A) 80% of the accounts receivable of the Company and its
Restricted Subsidiaries on a consolidated basis and (B) 60% of the
inventory of the Company and its Restricted Subsidiaries on a consolidated
basis, and (y) $135,000,000;
(d) (i) Interest Rate Protection Obligations of the Company covering
Indebtedness of the Company or a Restricted Subsidiary of the Company and
(ii) Interest Rate Protection Obligations of any Restricted Subsidiary of
the Company covering Indebtedness of such Restricted Subsidiary; provided,
however, that, in the case of either clause (i) or (ii), (x) any
Indebtedness to which any such Interest Rate Protection Obligations relate
is otherwise permitted to be incurred under this covenant and (y) the
notional principal amount of any such Interest Rate Protection Obligations
does not exceed the principal amount of the Indebtedness to which such
Interest Rate Protection Obligations relate;
(e) Indebtedness of a Wholly-Owned Restricted Subsidiary owed to and
held by the Company or another Wholly-Owned Restricted Subsidiary, in each
case which is not subordinated in right of payment to any Indebtedness of
such Wholly-Owned Restricted Subsidiary, except that (i) any transfer of
such Indebtedness by the Company or a Wholly-Owned Restricted Subsidiary
(other than to the Company or
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to a Wholly-Owned Restricted Subsidiary) and (ii) the sale, transfer or
other disposition by the Company or any Wholly-Owned Restricted Subsidiary
of Capital Stock of a Wholly-Owned Restricted Subsidiary which is owed
Indebtedness of another Wholly-Owned Restricted Subsidiary such that it
ceases to be a Wholly-Owned Restricted Subsidiary shall, in each case, be
an incurrence of Indebtedness by such Wholly-Owned Restricted Subsidiary,
subject to the other provisions of this covenant;
(f) Indebtedness of the Company owed to and held by a Wholly-Owned
Restricted Subsidiary which is unsecured and subordinated in right of
payment to the payment and performance of the Company's obligations under
the Indenture and the Notes except that (i) any transfer of such
Indebtedness by a Wholly-Owned Restricted Subsidiary (other than to another
Wholly-Owned Restricted Subsidiary) and (ii) the sale, transfer or other
disposition by the Company or any Wholly-Owned Restricted Subsidiary of
Capital Stock of a Wholly-Owned Restricted Subsidiary which holds
Indebtedness of the Company such that it ceases to be a Wholly-Owned
Restricted Subsidiary shall, in each case, be an incurrence of Indebtedness
by the Company, subject to the other provisions of this covenant;
(g) Indebtedness under Currency Agreements; provided that in the case
of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and its
Restricted Subsidiaries outstanding other than as a result of fluctuations
in foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(h) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within two business days of incurrence;
(i) Indebtedness of the Company or any of its Restricted Subsidiaries
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of business;
(j) Indebtedness of Restricted Subsidiaries of the Company which are
not Guarantors not to exceed the sum of (x) 90% of the accounts receivable
of any such Restricted Subsidiary, (y) 70% of the inventory of any
Restricted Subsidiary and (z) 10% of the Net Worth of any such Restricted
Subsidiary; provided that if any such Subsidiary shall sell or otherwise
transfer any of its accounts receivable, the Net Cash Proceeds from any
such sale or transfer shall be used to repay any Indebtedness of such
Subsidiary incurred pursuant to this clause (j);
(k) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries during any period of time when the Notes are rated Investment
Grade by S&P and Moody's (or if either S&P or Moody's does not make a
rating of the Notes publicly available, by either S&P or Moody's and an
equivalent rating by another Rating Agency) and no Default or Event of
Default shall have occurred and be continuing;
(l) Indebtedness of the Company or any Guarantor in addition to that
described in clauses (a) through (k) above, in an aggregate principal
amount outstanding at any time not exceeding $20,000,000; and
(m) (i) Indebtedness of the Company the proceeds of which are used
solely to refinance (whether by amendment, renewal, extension or refunding)
Indebtedness of the Company or any of its Restricted Subsidiaries and (ii)
Indebtedness of any Restricted Subsidiary of the Company the proceeds of
which are used solely to refinance (whether by amendment, renewal,
extension or refunding) Indebtedness of such Restricted Subsidiary, in each
case other than Indebtedness incurred under clause (c), (d), (e), (f), (g),
(h), (i), (j) or (l) of this covenant; provided, however, that (x) the
principal amount of Indebtedness incurred pursuant to this clause (m) (or,
if such Indebtedness provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration of the
maturity thereof, the original issue price of such Indebtedness) shall not
exceed the sum of the principal amount of Indebtedness so refinanced, plus
the amount of any premium required to be paid in connection
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with such refinancing pursuant to the terms of such Indebtedness or the
amount of any premium reasonably determined by the Board of Directors of
the Company as necessary to accomplish such refinancing by means of a
tender offer or privately negotiated purchase, plus the amount of
reasonable expenses in connection therewith, and (y) in the case of
Indebtedness incurred by the Company or any Guarantor pursuant to this
clause (m), such Indebtedness (A) has no scheduled principal payment prior
to the earlier of (1) the final maturity of the Indebtedness refinanced or
(2) the 91st day after the Final Maturity Date and (B) has an Average Life
to Stated Maturity greater than either (1) the Average Life to Stated
Maturity of the Indebtedness refinanced or (2) the remaining Average Life
to Stated Maturity of the Notes.
The Company will not, directly or indirectly, in any event incur any
Indebtedness which by its terms (or by the terms of any agreement governing such
Indebtedness) is subordinated in right of payment to any other Indebtedness of
the Company unless such Indebtedness is also by its terms (or by the terms of
any agreement governing such Indebtedness) made expressly subordinate in right
of payment to the Notes pursuant to subordination provisions that are
substantively identical to the subordination provisions of such Indebtedness (or
such agreement) that are most favorable to the holders of any other Indebtedness
of the Company.
Limitation on Restricted Payments. The Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly:
(a) declare or pay any dividend or make any other distribution or
payment on or in respect of Capital Stock of the Company or any of its
Restricted Subsidiaries or any payment made to the direct or indirect
holders (in their capacities as such) of Capital Stock of the Company or
any of its Restricted Subsidiaries (other than (x) dividends or
distributions payable solely in Capital Stock of the Company (other than
Redeemable Capital Stock) or in options, warrants or other rights to
purchase Capital Stock of the Company (other than Redeemable Capital
Stock), (y) the declaration or payment of dividends or other distributions
to the extent declared or paid to the Company or any Restricted Subsidiary
of the Company and (z) the declaration or payment of dividends or other
distributions by any Restricted Subsidiary of the Company to all holders of
Common Stock of such Restricted Subsidiary on a pro rata basis),
(b) purchase, redeem, defease or otherwise acquire or retire for value
any Capital Stock of the Company or any of its Restricted Subsidiaries
(other than any such Capital Stock owned by a Wholly-Owned Restricted
Subsidiary),
(c) make any principal payment on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund payment or other
Stated Maturity, any Subordinated Indebtedness (other than any such
Indebtedness owned by the Company or a Wholly-Owned Restricted Subsidiary),
or
(d) make any Investment (other than any Permitted Investment) in any
person
(such payments or Investments described in the preceding clauses (a), (b), (c)
and (d) are collectively referred to as "Restricted Payments"), unless, at the
time of and after giving effect to the proposed Restricted Payment (the amount
of any such Restricted Payment, if other than cash, shall be the Fair Market
Value on the date of such Restricted Payment of the asset(s) proposed to be
transferred by the Company or such Restricted Subsidiary, as the case may be,
pursuant to such Restricted Payment), (A) no Default or Event of Default shall
have occurred and be continuing, (B) immediately prior to and after giving
effect to such Restricted Payment, the Company would be able to incur $1.00 of
additional Indebtedness pursuant to the first paragraph of the covenant
described under "-- Limitation on Indebtedness" above (assuming a market rate of
interest with respect to such additional Indebtedness) and (C) the aggregate
amount of all Restricted Payments declared or made from and after the 2005 Notes
Issue Date would not exceed the sum of (1) 50% of the aggregate Consolidated Net
Income of the Company accrued on a cumulative basis during the period beginning
on the first day of the fiscal quarter of the Company during which the 2005
Notes Issue Date occurred and ending on the last day of the fiscal quarter of
the Company immediately preceding the date of such proposed Restricted Payment,
which period shall be treated as a single accounting period (or, if such
aggregate cumulative Consolidated Net Income of the Company for such period
shall be a deficit, minus 100%
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of such deficit), plus (2) the aggregate net proceeds (the amount of such
proceeds, if other than cash, shall be the Fair Market Value on the date such
proceeds are received by the Company of the asset(s) comprising such proceeds)
received by the Company either (x) as capital contributions to the Company after
the 2005 Notes Issue Date from any person (other than a Subsidiary of the
Company) or (y) from the issuance or sale of Capital Stock (excluding Redeemable
Capital Stock, but including Capital Stock issued upon the conversion of
convertible Indebtedness or from the exercise of options, warrants or rights to
purchase Capital Stock (other than Redeemable Capital Stock)) of the Company to
any person (other than to a Subsidiary of the Company) after the 2005 Notes
Issue Date plus (3) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after the 2005 Notes Issue
Date (excluding any Investment described in clause (v) of the following
paragraph), an amount equal to the lesser of the return of capital with respect
to such Investment and the initial amount of such Investment, in either case,
less the cost of the disposition of such Investment. For purposes of the
preceding clause (C)(2), the value of the aggregate net proceeds received by the
Company upon the issuance of Capital Stock upon the conversion of convertible
Indebtedness or upon the exercise of options, warrants or rights will be the net
proceeds received upon the issuance of such Indebtedness, options, warrants or
rights plus the incremental proceeds received by the Company upon the conversion
or exercise thereof.
None of the foregoing provisions will prohibit (i) the payment of any
dividend within 60 days after the date of its declaration, if at the date of
declaration such payment would be permitted by the foregoing paragraph; (ii) so
long as no Default or Event of Default shall have occurred and be continuing,
the redemption, repurchase or other acquisition or retirement of any shares of
any class of Capital Stock of the Company or any Restricted Subsidiary of the
Company in exchange for, or out of the net proceeds of, a substantially
concurrent (x) capital contribution to the Company from any person (other than a
Subsidiary of the Company) or (y) issue and sale of other shares of Capital
Stock (other than Redeemable Capital Stock) of the Company to any person (other
than to a Subsidiary of the Company); provided, however, that the amount of any
such net proceeds that are utilized for any such redemption, repurchase or other
acquisition or retirement shall be excluded from clause (C)(2) of the preceding
paragraph; (iii) so long as no Default or Event of Default shall have occurred
and be continuing, any redemption, repurchase or other acquisition or retirement
of Subordinated Indebtedness in exchange for, or out of the net proceeds of, a
substantially concurrent (x) capital contribution to the Company from any person
(other than a Subsidiary of the Company) or (y) issue and sale of (1) Capital
Stock (other than Redeemable Capital Stock) of the Company to any person (other
than to a Subsidiary of the Company); provided, however, that the amount of any
such net proceeds that are utilized for any such redemption, repurchase or other
acquisition or retirement shall be excluded from clause (C)(2) of the preceding
paragraph; or (2) Indebtedness of the Company issued to any person (other than a
Subsidiary of the Company), so long as such Indebtedness is Subordinated
Indebtedness which (x) has no Stated Maturity earlier than the 91st day after
the Final Maturity Date, (y) has an Average Life to Stated Maturity equal to or
greater than the remaining Average Life to Stated Maturity of the Notes and (z)
is subordinated to the Notes in the same manner and at least to the same extent
as the Subordinated Indebtedness so purchased, exchanged, redeemed, acquired or
retired; (iv) so long as no Default or Event of Default shall have occurred and
be continuing, the making of any Restricted Payment by the Company or any
Restricted Subsidiary of the Company during any period of time when the Notes
are rated Investment Grade by S&P and Moody's (or if either S&P or Moody's does
not make a rating of the Notes publicly available, by either S&P or Moody's and
an equivalent rating by another Rating Agency); (v) Investments constituting
Restricted Payments made as a result of the receipt of non-cash consideration
from any Asset Sale made pursuant to and in compliance with the covenant
described under "-- Disposition of Proceeds of Asset Sales" below; (vi) so long
as no Default or Event of Default has occurred and is continuing, repurchases by
the Company of Common Stock of the Company from employees of the Company or any
of its Subsidiaries or their authorized representatives upon the death,
disability or termination of employment of such employees, in an aggregate
amount not exceeding $1,000,000 in any calendar year; and (vii) so long as no
Default or Event of Default has occurred and is continuing, other Restricted
Payments in an aggregate amount not exceeding $5,000,000 from the 2005 Notes
Issue Date. In computing the amount of Restricted Payments previously made for
purposes of clause (C) of the preceding paragraph, Restricted
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Payments made under the preceding clauses (i), (iv), (vi) and (vii) shall be
included and clauses (ii), (iii) and (v) shall not be so included.
Limitation on Liens. The Company will not, and will not permit any of its
Restricted Subsidiaries to, create, incur, assume or suffer to exist any Liens
of any kind against or upon any of its property or assets, or any proceeds
therefrom, unless (x) in the case of Liens securing Subordinated Indebtedness,
the Notes are secured by a Lien on such property, assets or proceeds that is
senior in priority to such Liens and (y) in all other cases, the Notes are
equally and ratably secured, except for (a) Liens existing as of the Issue Date
and Liens under and as contemplated by agreements existing as of the Issue Date,
including Liens on Capital Stock of Subsidiaries of the Company and accounts
receivable, inventory and intangibles of the Company and its Restricted
Subsidiaries securing Indebtedness (including any guarantees) under the Credit
Facility and the 2004 Note Agreement; (b) Liens securing the Notes or any
Guarantee; (c) Liens securing the 2005 Notes and the 1995 Guarantees pursuant to
the terms of the 2005 Notes Indenture; (d) Liens in favor of the Company; (e)
Liens securing Indebtedness which is incurred to refinance Indebtedness which
has been secured by a Lien permitted under the Indenture and which has been
incurred in accordance with the provisions of the Indenture; provided, however,
that such Liens do not extend to or cover any property or assets of the Company
or any of its Restricted Subsidiaries not securing the Indebtedness so
refinanced; and (f) Permitted Liens.
Change of Control. Upon the occurrence of a Change of Control, the Company
shall be obligated to make an offer to purchase (a "Change of Control Offer"),
and shall purchase, on a business day (the "Change of Control Purchase Date")
not more than 60 nor less than 30 days following the occurrence of the Change of
Control, all of the then outstanding Notes at a purchase price equal to 101% of
the principal amount thereof, plus accrued and unpaid interest, if any, to the
Change of Control Purchase Date. The Company shall be required to purchase all
Notes properly tendered into the Change of Control Offer and not withdrawn. The
Change of Control Offer is required to remain open for at least 20 business days
and until the close of business on the Change of Control Purchase Date.
In order to effect such Change of Control Offer, the Company shall, not
later than the 30th day after the occurrence of the Change of Control, mail to
each holder of Notes notice of the Change of Control Offer, which notice shall
govern the terms of the Change of Control Offer and shall state, among other
things, the procedures that holders of Notes must follow to accept the Change of
Control Offer.
The occurrence of a Change of Control will require the Company to offer to
purchase all of the outstanding 2005 Notes at a purchase price equal to 101% of
the principal amount thereof, plus accrued and unpaid interest, and could have
resulted in the lenders under the 2004 Note Agreement and the Credit Facilities
having the right to require the Company to repay all Indebtedness outstanding
under the 2004 Note Agreement and the Credit Facilities, respectively. The
occurrence of a Change of Control may result in the lenders under the New Credit
Facility having the right to require the Company to repay all indebtedness
outstanding under the New Credit Facility. There can be no assurance that the
Company will have adequate resources to repay or refinance all Indebtedness
owing under the 2005 Notes and the New Credit Facility or to fund the purchase
of the Notes upon a Change of Control.
The Company shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements
applicable to a Change of Control Offer made by the Company and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that a Change of Control occurs and the
Company is required to purchase Notes as described above.
Disposition of Proceeds of Asset Sales. The Company will not, and will not
permit any of its Restricted Subsidiaries to, make any Asset Sale during any
period when the Notes are not rated Investment Grade by S&P and Moody's (or if
either S&P or Moody's does not make a rating of the Notes publicly available, by
either S&P or Moody's and an equivalent rating by another Rating Agency (such
period, the
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"Non-Investment Grade Period")) unless (a) the Company or such Restricted
Subsidiary, as the case may be, receives consideration at the time of such Asset
Sale at least equal to the Fair Market Value of the shares or assets sold or
otherwise disposed of and (b) at least 75% of such consideration consists of
cash or Cash Equivalents. To the extent the Net Cash Proceeds of any Asset Sale
consummated during the Non-Investment Grade Period are not required (a) to repay
any Indebtedness secured by the assets subject to such Asset Sale pursuant to
Liens permitted under the Indenture, (b) to repay Indebtedness incurred pursuant
to clause (j) under "-- Limitation on Indebtedness," (c) to be applied to repay,
and permanently reduce the commitments under, the New Credit Facility (as
required by the terms thereof) or (d) repay Indebtedness under the 2005 Notes,
or, in each case, are not so applied, the Company or such Restricted Subsidiary,
as the case may be, may, within 365 days of such Asset Sale, apply such Net Cash
Proceeds to an investment in properties and assets that replace the properties
and assets that were the subject of such Asset Sale or in properties and assets
that will be used in the businesses of the Company and its Restricted
Subsidiaries existing on the Issue Date or in businesses reasonably related
thereto ("Replacement Assets"). Any Net Cash Proceeds from any Asset Sale
consummated during the Non-Investment Grade Period that are neither used to
repay Indebtedness, as specified in the immediately preceding sentence, nor
invested in Replacement Assets within the 365-day period described above
constitute "Excess Proceeds," subject to disposition as provided below.
When the aggregate amount of Excess Proceeds equals or exceeds $10,000,000,
the Company shall make an offer to purchase (an "Asset Sale Offer"), from all
holders of the Notes, not more than 40 business days thereafter, an aggregate
principal amount of Notes equal to such Excess Proceeds, at a price in cash
equal to 100% of the outstanding principal amount thereof plus accrued and
unpaid interest, if any, to the purchase date. To the extent that the aggregate
principal amount of Notes tendered pursuant to an Asset Sale Offer is less than
the Excess Proceeds, the Company may use such deficiency for general corporate
purposes. If the aggregate principal amount of Notes validly tendered and not
withdrawn by holders thereof exceeds the Excess Proceeds, Notes to be purchased
will be selected on a pro rata basis. Upon completion of such Asset Sale Offer,
the amount of Excess Proceeds shall be reset to zero.
The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that an Asset Sale occurs and the
Company is required to purchase Notes as described above.
Limitation on Issuances and Sale of Preferred Stock by Restricted
Subsidiaries. The Company (a) will not permit any of its Restricted Subsidiaries
to issue any Preferred Stock (other than to the Company or a Wholly-Owned
Restricted Subsidiary) and (b) will not permit any person (other than the
Company or a Wholly-Owned Restricted Subsidiary) to own any Preferred Stock of
any Restricted Subsidiary of the Company; provided, however, that this covenant
shall not prohibit the issuance and sale of (x) all, but not less than all, of
the issued and outstanding Capital Stock of any Restricted Subsidiary of the
Company owned by the Company or any of its Restricted Subsidiaries in compliance
with the other provisions of the Indenture or (y) the issuance or sale of any
Preferred Stock of a Restricted Subsidiary during any period of time when the
Notes are rated Investment Grade by S&P and Moody's (or if either S&P or Moody's
does not make a rating of the Notes publicly available, by either S&P or Moody's
and an equivalent rating by another Rating Agency), so long as no Default or
Event of Default shall have occurred and be continuing.
Limitation on Transactions with Interested Persons. The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, enter into or suffer to exist any transaction or series of related
transactions (including, without limitation, the sale, transfer, disposition,
purchase, exchange or lease of assets, property or services) with, or for the
benefit of, any Affiliate of the Company, unless (a) such transaction or series
of related transactions is on terms that are no less favorable to the Company or
such Restricted Subsidiary, as the case may be, than those which could have been
obtained in a comparable transaction at such time from persons who are not
Affiliates of the Company, (b) with respect to a transaction or series of
transactions involving aggregate payments or value equal to or greater than
$5,000,000, the Company has obtained a written opinion from an Independent
Financial Advisor stating that the terms of such transaction or series of
transactions are fair to the Company or such Restricted Subsidiary, as the case
may be, from a financial point of view and (c) with respect to a transaction or
series of transactions involving aggregate
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payments or value equal to or greater than $2,500,000, the Company shall have
delivered an officers' certificate to the Trustee certifying that such
transaction or series of transactions complies with the preceding clause (a)
and, if applicable, certifying that the opinion referred to in the preceding
clause (b) has been delivered and that such transaction or series of
transactions has been approved by a majority of the Board of Directors of the
Company; provided, however, that this covenant will not restrict the Company
from (i) paying dividends in respect of its Capital Stock or making Investments
permitted under the covenant described under "-- Limitation on Restricted
Payments" above, (ii) paying reasonable and customary fees to directors of the
Company who are not employees of the Company or (iii) making loans or advances
to officers, employees or consultants of the Company and its Restricted
Subsidiaries (including travel and moving expenses) in the ordinary course of
business for bona fide business purposes of the Company or such Restricted
Subsidiary not in excess of $5,000,000 in the aggregate at any one time
outstanding.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary of the Company to (a) pay dividends, in cash or otherwise,
or make any other distributions on or in respect of its Capital Stock or any
other interest or participation in, or measured by, its profits, (b) pay any
Indebtedness owed to the Company or any other Restricted Subsidiary of the
Company, (c) make loans or advances to, or any investment in, the Company or any
other Restricted Subsidiary of the Company, (d) transfer any of its properties
or assets to the Company or any other Restricted Subsidiary of the Company or
(e) guarantee any Indebtedness of the Company or any other Restricted Subsidiary
of the Company, except for such encumbrances or restrictions existing under or
by reason of (i) applicable law, (ii) customary non-assignment provisions of any
contract or any lease governing a leasehold interest of the Company or any
Restricted Subsidiary of the Company, (iii) customary restrictions on transfers
of property subject to a Lien permitted under the Indenture which could not
materially adversely affect the Company's ability to satisfy its obligations
under the Indenture and the Notes, (iv) any agreement or other instrument of a
person acquired by the Company or any Restricted Subsidiary of the Company (or a
Restricted Subsidiary of such person) in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance or
restriction is not applicable to any person, or the properties or assets of any
person, other than the person, or the properties or assets of the person, so
acquired, (v) provisions contained in agreements or instruments relating to
Indebtedness which prohibit the transfer of all or substantially all of the
assets of the obligor thereunder unless the transferee shall assume the
obligations of the obligor under such agreement or instrument, (vi) encumbrances
and restrictions under and as contemplated by agreements governing Indebtedness
in effect on the Issue Date and encumbrances and restrictions in permitted
refinancings or replacements thereof which are no less favorable to the holders
of the Notes than those contained in the Indebtedness so refinanced or replaced,
and (vii) any Accounts Receivable Subsidiary in connection with any Accounts
Receivable Transaction.
Limitation on Sale-Leaseback Transactions. The Company will not, and will
not permit any of its Restricted Subsidiaries to, enter into any Sale-Leaseback
Transaction with respect to any property of the Company or any of its Restricted
Subsidiaries. Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries may enter into Sale-Leaseback Transactions with respect to property
acquired or constructed after the Issue Date; provided that (a) the Attributable
Value of such Sale-Leaseback Transaction shall be deemed to be Indebtedness of
the Company or such Restricted Subsidiary, as the case may be, and (b) after
giving pro forma effect to any such Sale-Leaseback Transaction and the foregoing
clause (a), the Company would be able to incur $1.00 of additional Indebtedness
pursuant to the first paragraph of the covenant described under "-- Limitation
on Indebtedness" above (assuming a market rate of interest with respect to such
additional Indebtedness).
Reporting Requirements. The Company will file with the Commission the
annual reports, quarterly reports and other documents required to be filed with
the Commission pursuant to Sections 13 and 15 of the Exchange Act, whether or
not the Company has a class of securities registered under the Exchange Act. The
Company will be required to file with the Trustee and provide to each holder of
Notes within 15 days after it
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files them with the Commission (or if any such filing is not permitted under the
Exchange Act, 15 days after the Company would have been required to make such
filing) copies of such reports and documents.
MERGER, SALE OF ASSETS, ETC.
Neither the Company nor any Guarantor will, in any transaction or series of
transactions, merge or consolidate with or into, or sell, assign, convey,
transfer, lease or otherwise dispose of all or substantially all of its
properties and assets as an entirety to, any person or persons, and the Company
will not permit any of its Restricted Subsidiaries to enter into any such
transaction or series of transactions if such transaction or series of
transactions, in the aggregate, would result in a sale, assignment, conveyance,
transfer, lease or other disposition of all or substantially all of the
properties and assets of the Company or the Company and its Restricted
Subsidiaries, taken as a whole, to any other person or persons, unless at the
time of and after giving effect thereto (a) either (i) if the transaction or
series of transactions is a merger or consolidation, the Company, the applicable
Guarantor or applicable Restricted Subsidiary shall be the surviving person of
such merger or consolidation, or (ii) the person formed by such consolidation or
into which the Company, such Guarantor or such Restricted Subsidiary is merged
or to which the properties and assets of the Company, such Guarantor or such
Restricted Subsidiary, as the case may be, are transferred (any such surviving
person or transferee person being the "Surviving Entity") shall be a corporation
organized and existing under the laws of the United States of America, any state
thereof or the District of Columbia and shall expressly assume by a supplemental
indenture executed and delivered to the Trustee, in form reasonably satisfactory
to the Trustee, all the obligations of the Company or such Guarantor, as the
case may be, under the Notes or such Guarantor's Guarantee, as the case may be,
and the Indenture, and in each case, the Indenture shall remain in full force
and effect; (b) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (including, without
limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions), no
Default or Event of Default shall have occurred and be continuing and the
Company or the Surviving Entity, as the case may be, after giving effect to such
transaction or series of transactions on a pro forma basis (including, without
limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions),
could incur $1.00 of additional Indebtedness pursuant to the first paragraph of
the covenant described under "-- Certain Covenants -- Limitation on
Indebtedness" above (assuming a market rate of interest with respect to such
additional Indebtedness); and (c) immediately after giving effect to such
transaction or series of transactions on a pro forma basis (including, without
limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions),
the Consolidated Net Worth of the Company or the Surviving Entity, as the case
may be, is at least equal to the Consolidated Net Worth of the Company
immediately before such transaction or series of transactions. The foregoing
provisions shall not apply to a transaction involving the consolidation or
merger of a Guarantor with or into another person, or the sale, lease,
conveyance or disposition of all or substantially all of the assets of such
Guarantor that results in such Guarantor being released from its Guarantee as
provided in "-- The Guarantees".
In connection with any consolidation, merger, transfer, lease, assignment
or other disposition contemplated hereby, the Company shall deliver, or cause to
be delivered, to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an officers' certificate and an opinion of counsel, each stating
that such consolidation, merger, transfer, lease, assignment or other
disposition and the supplemental indenture in respect thereof comply with the
requirements under the Indenture.
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of the Company in accordance with the foregoing in which the
Company is not the continuing corporation, the successor corporation formed by
such a consolidation or into which the Company is merged or to which such
transfer is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Indenture with the same effect
as if such successor corporation had been named as the Company therein; provided
that solely for purposes of computing amounts described in subclause (C) of the
covenant described under "-- Limitation on Restricted Payments" above, any such
successor person shall only be deemed to have
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succeeded to and be substituted for the Company with respect to periods
subsequent to the effective time of such merger, consolidation or transfer of
assets.
EVENTS OF DEFAULT
The following are "Events of Default" under the Indenture:
(i) default in the payment of the principal of or premium, if any, on
any Note when the same becomes due and payable (upon Stated Maturity,
acceleration, optional redemption, required purchase, scheduled principal
payment or otherwise); or
(ii) default in the payment of an installment of interest on any of
the Notes, when the same becomes due and payable, which default continues
for a period of 30 days; or
(iii) failure to perform or observe any other term, covenant or
agreement contained in the Notes or the Indenture or any Guarantee (other
than a default specified in clause (i) or (ii) above) and such default
continues for a period of 30 days after written notice of such default
requiring the Company to remedy the same shall have been given (x) to the
Company by the Trustee or (y) to the Company and the Trustee by holders of
25% in aggregate principal amount of the Notes then outstanding; or
(iv) default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under which
the Company or any Restricted Subsidiary of the Company then has
outstanding Indebtedness in excess of $5,000,000, individually or in the
aggregate, and either (a) such Indebtedness is already due and payable in
full or (b) such default or defaults have resulted in the acceleration of
the maturity of such Indebtedness; or
(v) one or more judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the
payment of money in excess of $5,000,000, either individually or in the
aggregate, shall be entered against the Company or any Restricted
Subsidiary of the Company or any of their respective properties and shall
not be discharged or fully bonded and there shall have been a period of 60
days after the date on which any period for appeal has expired and during
which a stay of enforcement of such judgment, order or decree shall not be
in effect; or
(vi) either (i) the collateral agent under the New Credit Facility or
(ii) any holder of at least $5,000,000 in aggregate principal amount of
Indebtedness of the Company or any of its Restricted Subsidiaries shall
commence judicial proceedings to foreclose upon assets of the Company or
any of its Restricted Subsidiaries having a Fair Market Value, individually
or in the aggregate, in excess of $5,000,000 or shall have exercised any
right under applicable law or applicable security documents to take
ownership of any such assets in lieu of foreclosure; or
(vii) any Guarantee ceases to be in full force and effect or is
declared null and void, or any Guarantor denies that it has any further
liability under any Guarantee or gives notice to such effect (other than by
reason of the termination of the Indenture or the release of any such
Guarantee in accordance with the Indenture) and such condition shall have
continued for a period of 60 days after written notice of such failure
(which notice shall specify the Default, demand that it be remedied and
state that it is a "Notice of Default") requiring the Guarantor and the
Company to remedy the same shall have been given (x) to the Company by the
Trustee or (y) to the Company and the Trustee by holders of at least 25% in
aggregate principal amount of the Notes then outstanding; or
(viii) certain events of bankruptcy, insolvency or reorganization with
respect to the Company or any Significant Subsidiary of the Company shall
have occurred.
If an Event of Default (other than as specified in clause (viii) above)
shall occur and be continuing, the Trustee, by notice to the Company, or the
holders of at least 25% in aggregate principal amount of the Notes then
outstanding, by notice to the Trustee and the Company, may declare the principal
of, premium, if any, and accrued and unpaid interest, if any, on all of the
outstanding Notes due and payable immediately, upon which declaration, all
amounts payable in respect of the Notes shall be immediately due and payable. If
an Event of Default specified in clause (viii) above occurs and is continuing,
then the principal of, premium, if
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any, and accrued and unpaid interest, if any, on all of the outstanding Notes
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any holder of Notes.
After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may rescind
such declaration if (a) the Company has paid or deposited with the Trustee a sum
sufficient to pay (i) all sums paid or advanced by the Trustee under the
Indenture and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, (ii) all overdue interest on all Notes,
(iii) the principal of and premium, if any, on any Notes which have become due
otherwise than by such declaration of acceleration and interest thereon at the
rate borne by the Notes, and (iv) to the extent that payment of such interest is
lawful, interest upon overdue interest and overdue principal at the rate borne
by the Notes which has become due otherwise than by such declaration of
acceleration; (b) the rescission would not conflict with any judgment or decree
of a court of competent jurisdiction; and (c) all Events of Default, other than
the non-payment of principal of, premium, if any, and interest on the Notes that
have become due solely by such declaration of acceleration, have been cured or
waived.
The holders of not less than a majority in aggregate principal amount of
the outstanding Notes may on behalf of the holders of all the Notes waive any
past defaults under the Indenture, except a default in the payment of the
principal of, premium, if any, or interest on any Note, or in respect of a
covenant or provision which under the Indenture cannot be modified or amended
without the consent of the holder of each Note outstanding.
No holder of any of the Notes has any right to institute any proceeding
with respect to the Indenture or the Notes or the Guarantees or any remedy
thereunder, unless the holders of at least 25% in aggregate principal amount of
the outstanding Notes have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as Trustee under the
Notes and the Indenture, the Trustee has failed to institute such proceeding
within 30 days after receipt of such notice and the Trustee, within such 30-day
period, has not received directions inconsistent with such written request by
holders of a majority in aggregate principal amount of the outstanding Notes.
Such limitations do not apply, however, to a suit instituted by a holder of a
Note for the enforcement of the payment of the principal of, premium, if any, or
interest on such Note on or after the respective due dates expressed in such
Note.
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, whether or not an Event of Default shall occur and be continuing, the
Trustee under the Indenture is not under any obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
holders unless such holders shall have offered to the Trustee reasonable
security or indemnity. Subject to certain provisions concerning the rights of
the Trustee, the holders of not less than a majority in aggregate principal
amount of the outstanding Notes have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee under the Indenture.
If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee shall mail to each holder of the Notes notice of the
Default or Event of Default within 30 days after obtaining knowledge thereof.
Except in the case of a Default or an Event of Default in payment of principal
of, premium, if any, or interest on any Notes, the Trustee may withhold the
notice to the holders of such Notes if a committee of its trust officers in good
faith determines that withholding the notice is in the interest of the holders
of the Notes.
The Company is required to furnish to the Trustee annual and quarterly
statements as to the performance by the Company of its obligations under the
Indenture and as to any default in such performance. The Company is also
required to notify the Trustee within ten days of any event which is, or after
notice or lapse of time or both would become, an Event of Default.
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DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate the obligations
of the Company and the Guarantors with respect to the outstanding Notes and
Guarantees ("defeasance"). Such defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, except for (i) the rights of holders of outstanding Notes to
receive payment in respect of the principal of, premium, if any, and interest on
such Notes when such payments are due, (ii) the Company's obligations to issue
temporary Notes, register the transfer or exchange of any Notes, replace
mutilated, destroyed, lost or stolen Notes and maintain an office or agency for
payments in respect of the Notes, (iii) the rights, powers, trusts, duties and
immunities of the Trustee, and (iv) the defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to terminate
the obligations of the Company and the Guarantors with respect to certain
covenants that are set forth in the Indenture, some of which are described under
"-- Certain Covenants" above (including the covenant described under "--Certain
Covenants -- Change of Control" above) and any subsequent failure to comply with
such obligations shall not constitute a Default or Event of Default with respect
to the Notes ("covenant defeasance").
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the holders of the Notes, cash in United States dollars, U.S. government
obligations, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on the outstanding Notes
to redemption or maturity (except lost, stolen or destroyed Notes which have
been replaced or paid); (ii) the Company shall have delivered to the Trustee an
opinion of counsel to the effect that the holders of the outstanding Notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such defeasance or covenant defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if such defeasance or covenant defeasance had not occurred (in the
case of defeasance, such opinion must refer to and be based upon a ruling of the
Internal Revenue Service or a change in applicable federal income tax laws);
(iii) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit; (iv) such defeasance or covenant defeasance shall not
cause the Trustee to have a conflicting interest with respect to any securities
of the Company; (v) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which it is bound; (vi) the Company shall have delivered to the Trustee an
opinion of counsel to the effect that after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; and (vii) the Company shall have delivered to the Trustee an
officers' certificate and an opinion of counsel, each stating that all
conditions precedent under the Indenture to either defeasance or covenant
defeasance, as the case may be, have been complied with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or repaid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation (except lost, stolen or destroyed Notes which have been replaced or
paid) have been called for redemption pursuant to the terms of the Notes or have
otherwise become due and payable and the Company has irrevocably deposited or
caused to be deposited with the Trustee funds in an amount sufficient to pay and
discharge the entire Indebtedness on the Notes not theretofore delivered to the
Trustee for cancellation, for principal of, premium, if any, and interest on the
Notes to the date of deposit together with irrevocable instructions from the
Company directing the Trustee to apply such funds to the payment thereof at
maturity or redemption, as the case may be; (ii) the Company has paid all other
sums payable under the Indenture by the Company; (iii) there exists no Default
or Event of
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Default under the Indenture; and (iv) the Company has delivered to the Trustee
an officers' certificate and an opinion of counsel stating that all conditions
precedent under the Indenture relating to the satisfaction and discharge of the
Indenture have been complied with.
AMENDMENTS AND WAIVERS
From time to time, the Company and the Guarantors, when authorized by a
resolution of their respective Boards of Directors, and the Trustee may, without
the consent of the holders of any outstanding Notes, amend, waive or supplement
the Indenture or the Notes or the Guarantees for certain specified purposes,
including, among other things, curing ambiguities, defects or inconsistencies,
qualifying, or maintaining the qualification of, the Indenture under the Trust
Indenture Act of 1939, as amended, or making any other change that does not
adversely affect the rights of any holder of Notes; provided, however, that the
Company has delivered to the Trustee an opinion of counsel stating that such
change does not adversely affect the rights of any holder of Notes. Other
amendments and modifications of the Indenture or the Notes or the Guarantees may
be made by the Company and the Trustee with the consent of the holders of not
less than a majority of the aggregate principal amount of the outstanding Notes;
provided, however, that no such modification or amendment may, without the
consent of the holder of each outstanding Note affected thereby, (i) reduce the
principal amount of, extend the fixed maturity of or alter the redemption
provisions of the Notes, (ii) change the currency in which any Notes or any
premium or the interest thereon is payable or make the principal of, premium, if
any, or interest on any Note payable in money other than that stated in the
Note, (iii) reduce the percentage in principal amount of outstanding Notes that
must consent to an amendment, supplement or waiver or consent to take any action
under the Indenture, any Guarantee or the Notes, (iv) impair the right to
institute suit for the enforcement of any payment on or with respect to the
Notes, (v) waive a default in payment with respect to the Notes, (v) amend,
change or modify the obligations of the Company to make and consummate a Change
of Control Offer in the event of a Change of Control or make and consummate the
Asset Sale Offer with respect to any Asset Sale or modify any of the provisions
or definitions with respect thereto, (vii) reduce or change the rate or time for
payment of interest on the Notes, (viii) modify or change any provision of the
Indenture affecting the ranking of the Notes or any Guarantee in a manner
adverse to the holders of the Notes, or (ix) release any Guarantor from any of
its obligations under its Guarantee or the Indenture other than in compliance
with the Indenture.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee thereunder will perform only such duties as are
specifically set forth in the Indenture. If an Event of Default has occurred and
is continuing, the Trustee will exercise such rights and powers vested in it
under the Indenture and use the same degree of care and skill in its exercise as
a prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as
amended, incorporated by reference therein contain limitations on the rights of
the Trustee thereunder, should it become a creditor of the Company, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however, that if it
acquires any conflicting interest (as defined in the Trust Indenture Act of
1939, as amended) it must eliminate such conflict or resign.
GOVERNING LAW
The Indenture, the Notes and the Guarantees are governed by the laws of the
State of New York, without regard to the principles of conflicts of law.
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CERTAIN DEFINITIONS
"2004 Note Agreement" means the 2004 Note Agreement dated as of October 1,
1994 by and among the Company and the Purchasers named on Schedule I thereto,
relating to the $45,000,000 aggregate principal amount of 7.68% Senior Notes due
October 1, 2004 of the Company.
"2005 Notes" means the $110,000,000 aggregate principal amount of 9.875%
Senior Notes of the Company issued under the 2005 Notes Indenture.
"2005 Notes Guarantees" means the guarantees of the 2005 Notes issued
pursuant to the 2005 Notes Indenture.
"2005 Notes Indenture" means the indenture dated as of July 27, 1995 among
the Company, the guarantors named therein and Bankers Trust Company, as trustee.
"2005 Notes Issue Date" means July 27, 1995.
"Accounts Receivable Subsidiary" means any Restricted Subsidiary organized
solely for the purpose of and engaged in purchasing, financing and collecting
accounts receivable obligations of the Company and its Subsidiaries and
activities incident thereto.
"Accounts Receivable Transaction" means the purchasing, financing and
collecting by an Accounts Receivable Subsidiary of accounts receivable
obligations of the Company and its Subsidiaries and activities incident thereto.
"Acquired Indebtedness" means Indebtedness of a person (a) assumed in
connection with an Asset Acquisition from such person or (b) existing at the
time such person becomes a Subsidiary of any other person.
"Affiliate" means, with respect to any specified person, any other person
directly or indirectly controlling or controlled by, or under direct or indirect
common control with, such specified person.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other person pursuant to which such
person shall become a Restricted Subsidiary of the Company, or shall be merged
with or into the Company or any Restricted Subsidiary of the Company, (b) the
acquisition by the Company or any Restricted Subsidiary of the Company of the
assets of any person (other than a Restricted Subsidiary of the Company) which
constitute all or substantially all of the assets of such person or (c) the
acquisition by the Company or any Restricted Subsidiary of the Company of any
division or line of business of any person (other than a Restricted Subsidiary
of the Company).
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease or other disposition to any person other than the Company or a
Wholly-Owned Restricted Subsidiary, in one or a series of related transactions,
of (a) any Capital Stock of any Restricted Subsidiary of the Company (other than
in respect of director's qualifying shares or investments by foreign nationals
mandated by applicable law); (b) all or substantially all of the properties and
assets of any division or line of business of the Company or any Restricted
Subsidiary of the Company; or (c) any other properties or assets of the Company
or any Restricted Subsidiary of the Company other than in the ordinary course of
business. For the purposes of this definition, the term "Asset Sale" shall not
include (i) any sale, transfer or other disposition of equipment, tools or other
assets (excluding Capital Stock of any Restricted Subsidiary of the Company) by
the Company or any of its Restricted Subsidiaries in one or a series of related
transactions in respect of which the Company or such Restricted Subsidiary
receives cash or property with an aggregate Fair Market Value of $5,000,000 or
less; (ii) any sale, issuance, conveyance, transfer, lease or other disposition
of properties or assets that is governed by the provisions described under "--
Merger, Sale of Assets, Etc." above; (iii) any sale, transfer or exchange of
Capital Stock of any person other than a Restricted Subsidiary to the extent
proceeds from which are Capital Stock of such person or its Affiliates; and (iv)
any sale, conveyance or transfer of accounts receivable in the ordinary course
of business to third parties which are not Affiliates of the Company or any of
its Subsidiaries.
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"Attributable Value" means, as to any particular lease under which any
person is at the time liable other than a Capitalized Lease Obligation, and at
any date as of which the amount thereof is to be determined, the total net
amount of rent required to be paid by such person under such lease during the
initial term thereof as determined in accordance with GAAP, discounted from the
last date of such initial term to the date of determination at a rate per annum
equal to the discount rate which would be applicable to a Capitalized Lease
Obligation with a like term in accordance with GAAP. The net amount of rent
required to be paid under any such lease for any such period shall be the
aggregate amount of rent payable by the lessee with respect to such period after
excluding amounts required to be paid on account of insurance, taxes,
assessments, utility, operating and labor costs and similar charges. In the case
of any lease which is terminable by the lessee upon the payment of a penalty,
such net amount shall also include the amount of such penalty, but no rent shall
be considered as required to be paid under such lease subsequent to the first
date upon which it may be so terminated. "Attributable Value" means, as to a
Capitalized Lease Obligation under which any person is at the time liable and at
any date as of which the amount thereof is to be determined, the capitalized
amount thereof that would appear on the face of a balance sheet of such person
in accordance with GAAP.
"Average Life to Stated Maturity" means, with respect to any Indebtedness,
as at any date of determination, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years (or any fraction thereof) from such
date to the date or dates of each successive scheduled principal payment
(including, without limitation, any sinking fund requirements) of such
Indebtedness multiplied by (b) the amount of each such principal payment by (ii)
the sum of all such principal payments.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real, personal
or mixed) that is required to be classified and accounted for as a capital lease
obligation under GAAP, and, for the purpose of the Indenture, the amount of such
obligation at any date shall be the capitalized amount thereof at such date,
determined in accordance with GAAP.
"Cash Equivalents" means, at any time, (i) any evidence of Indebtedness
with a maturity of 180 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or acceptances with a
maturity of 180 days or less of any financial institution that is a member of
the Federal Reserve System having combined capital and surplus and undivided
profits of not less than $500,000,000; (iii) certificates of deposit with a
maturity of 180 days or less of any financial institution that is organized
under the laws of the United States, any state thereof or the District of
Columbia that are rated at least A-1 by S&P or at least P-1 by Moody's or at
least an equivalent rating category of another Rating Agency; and (iv)
repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued or unconditionally guaranteed by the government of the
United States of America or issued by any agency thereof and backed by the full
faith and credit of the United States of America, in each case maturing within
180 days from the date of acquisition; provided that the terms of such
agreements comply with the guidelines set forth in the Federal Financial
Agreements of Depository Institutions With Securities Dealers and Others, as
adopted by the Comptroller of the Currency on October 31, 1985.
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act) other than a Permitted Holder or a group controlled by or
comprised of Permitted Holders is or becomes the "beneficial owner" (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time, upon the happening of an event or otherwise), directly or
indirectly, of more than 50% of the total Voting Stock of the Company; (b) the
Company consolidates with, or merges with or into, another person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
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substantially all of its assets to any person, or any person consolidates with,
or merges with or into, the Company, in any such event pursuant to a transaction
in which the outstanding Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any such
transaction where (i) the outstanding Voting Stock of the Company is converted
into or exchanged for (1) Voting Stock (other than Redeemable Capital Stock) of
the surviving or transferee corporation or (2) cash, securities and other
property in an amount which could then be paid by the Company as a Restricted
Payment under the Indenture, or a combination thereof, and (ii) immediately
after such transaction no "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) other than a Permitted Holder or a
group controlled by or comprised of Permitted Holders is the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time, upon the happening of an event or
otherwise), directly or indirectly, of more than 50% of the total Voting Stock
of the surviving or transferee corporation; (c) at any time during any
consecutive two-year period, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the stockholders of the Company was approved by a vote of a majority
of the directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office; or (d) the Company is liquidated or
dissolved or adopts a plan of liquidation.
"Common Stock" means, with respect to any person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or nonvoting) of, such person's common stock, whether
outstanding on the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Consolidated Cash Flow Available for Fixed Charges" means, with respect to
any person for any period, (i) the sum of, without duplication, the amounts for
such period, taken as a single accounting period, of (a) Consolidated Net
Income, (b) Consolidated Non-cash Charges, (c) Consolidated Interest Expense and
(d) Consolidated Income Tax Expense less (ii) any non-cash items increasing
Consolidated Net Income for such period.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
person, the ratio of the aggregate amount of Consolidated Cash Flow Available
for Fixed Charges of such person for the four full fiscal quarters immediately
preceding the date of the transaction (the "Transaction Date") giving rise to
the need to calculate the Consolidated Fixed Charge Coverage Ratio (such four
full fiscal quarter period being referred to herein as the "Four Quarter
Period") to the aggregate amount of Consolidated Fixed Charges of such person
for the Four Quarter Period. In addition to and without limitation of the
foregoing, for purposes of this definition, "Consolidated Cash Flow Available
for Fixed Charges" and "Consolidated Fixed Charges" shall be calculated after
giving effect on a pro forma basis for the period of such calculation to,
without duplication, (a) the incurrence of any Indebtedness (other than
revolving credit Indebtedness) of such person or any of its Restricted
Subsidiaries (and the application of the net proceeds thereof) during the period
commencing on the first day of the Four Quarter Period to and including the
Transaction Date (the "Reference Period"), including, without limitation, the
incurrence of the Indebtedness giving rise to the need to make such calculation
(and the application of the net proceeds thereof), as if such incurrence (and
application) occurred on the first day of the Reference Period, and (b) any
Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of such
person or one of its Restricted Subsidiaries (including any person who becomes a
Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming
or otherwise being liable for Acquired Indebtedness) occurring during the
Reference Period, as if such Asset Sale or Asset Acquisition occurred on the
first day of the Reference Period. Furthermore, in calculating "Consolidated
Fixed Charges" for purposes of determining the denominator (but not the
numerator) of this "Consolidated Fixed Charge Coverage Ratio," (i) interest on
outstanding Indebtedness determined on a fluctuating basis as of the Transaction
Date and which will continue to be so determined thereafter shall be deemed to
have accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; and (ii) if interest
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on any Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Reference Period. If such person or any of its Restricted Subsidiaries directly
or indirectly guarantees Indebtedness of a third person, the above clause shall
give effect to the incurrence of such guaranteed Indebtedness as if such person
or such Restricted Subsidiary had directly incurred or otherwise assumed such
guaranteed Indebtedness.
"Consolidated Fixed Charges" means, with respect to any person for any
period, the sum of, without duplication, the amounts for such period of (i)
Consolidated Interest Expense and (ii) the aggregate amount of dividends and
other distributions paid or accrued during such period in respect of Preferred
Stock and Redeemable Capital Stock of such person and its Restricted
Subsidiaries on a consolidated basis, multiplied by a fraction, the numerator of
which is one and the denominator of which is one minus the then current federal
statutory income tax rate of such person.
"Consolidated Income Tax Expense" means, with respect to any person for any
period, the provision for federal, state, local and foreign income taxes of such
person and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any person for any
period, without duplication, the sum of (i) the interest expense (net of
interest income) of such person and its Restricted Subsidiaries for such period
as determined on a consolidated basis in accordance with GAAP, including,
without limitation, (a) any amortization of debt discount, (b) the net cost
under Interest Rate Protection Obligations, (c) the interest portion of any
deferred payment obligation, (d) all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance financing
and (e) all accrued interest and (ii) the interest component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such
person and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any person, for any
period, the consolidated net income (or loss) of such person and its Restricted
Subsidiaries for such period as determined in accordance with GAAP, adjusted, to
the extent included in calculating such net income, by excluding, without
duplication, (i) all extraordinary gains or losses, (ii) the portion of net
income (but not losses) of such person and its Restricted Subsidiaries allocable
to minority interests in unconsolidated persons to the extent that cash
dividends or distributions have not actually been received by such person or one
of its Restricted Subsidiaries, (iii) net income (or loss) of any person
combined with such person or one of its Restricted Subsidiaries on a "pooling of
interests" basis attributable to any period prior to the date of combination,
(iv) any gain or loss realized upon the termination of any employee pension
benefit plan, on an after-tax basis, (v) gains in respect of any Asset Sales by
such person or one of its Restricted Subsidiaries and (vi) the net income of any
Restricted Subsidiary of such person to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that income
is not at the time permitted, directly or indirectly, by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Restricted Subsidiary or its
stockholders.
"Consolidated Net Worth" means, with respect to any person at any date, the
consolidated stockholders' equity of such person less the amount of such
stockholders' equity attributable to Redeemable Capital Stock of such person and
its Restricted Subsidiaries, as determined in accordance with GAAP.
"Consolidated Non-cash Charges" means, with respect to any person for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such person and its Restricted Subsidiaries reducing Consolidated Net Income of
such person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary item or loss or any such charge which required an
accrual of or a reserve for cash charges for any future period).
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"Credit Agreement" means the Credit Agreement dated as of the 2005 Notes
Issue Date, among the Company, certain of its Subsidiaries, Comerica Bank, in
its individual capacity and as agent, and the other banks which are or become
parties from time to time thereto, and as it may have been or may be amended,
restated, supplemented or otherwise modified from time to time, including all
exhibits and schedules thereto, and any successor or replacement facility.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect any
person or any of its Restricted Subsidiaries against fluctuations in currency
values.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Event of Default" has the meaning set forth under "-- Events of Default"
herein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any assets, the price, as
determined by the Board of Directors of the Company, acting in good faith, which
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of which is under pressure
or compulsion to complete the transaction; provided, however, that, with respect
to any transaction which involves an asset or assets in excess of $250,000, such
determination shall be evidenced by a resolution of the Board of Directors of
the Company delivered to the Trustee.
"Final Maturity Date" means December 15, 2007.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States of America, which are applicable from time to
time and are consistently applied.
"guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Guarantor" means (i) each of Walbro Automotive Corporation, a Delaware
corporation, Walbro Engine Management Corporation, a Delaware corporation,
Sharon Manufacturing Co., a Michigan corporation, and Whitehead Engineered
Products, Inc., a Delaware corporation, (ii) each Wholly-Owned Restricted
Subsidiary of the Company other than any Accounts Receivable Subsidiary which is
incorporated under the laws of the United States or any state therein or the
District of Columbia which incurs Indebtedness (other than to the Company or a
Wholly-Owned Restricted Subsidiary) in an aggregate principal amount in excess
of $5,000,000 for so long as such Wholly-Owned Restricted Subsidiary has
Indebtedness outstanding in excess of $5,000,000 and (iii) any other Subsidiary
that guarantees the Notes.
"Indebtedness" means, with respect to any person, without duplication, (a)
all liabilities of such person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities incurred in the ordinary course of business and which are
not overdue by more than 180 days, but including, without limitation or
duplication, all obligations, contingent or otherwise, of such person in
connection with any letter of credit, banker's acceptance or other similar
credit transaction, (b) all obligations of such person evidenced by bonds,
notes, debentures or other similar instruments, (c) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such person (even if the rights and remedies of
the seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade accounts payable
arising in the ordinary course of business, (d) all net Capitalized Lease
Obligations of such person,
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(e) all Indebtedness referred to in the preceding clauses of other persons and
all dividends of other persons, the payment of which is secured by (or for which
the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien upon property (including, without limitation,
accounts and contract rights) owned by such person, even though such person has
not assumed or become liable for the payment of such Indebtedness (the amount of
such obligation being deemed to be the lesser of the value of such property or
asset or the amount of the obligation so secured), (f) all guarantees of
Indebtedness referred to in this definition by such person, (g) all Redeemable
Capital Stock of such person valued at the greater of its voluntary or
involuntary maximum fixed repurchase price plus accrued dividends, (h) all net
obligations under or in respect of Currency Agreements and Interest Rate
Protection Obligations of such person, and (i) any amendment, supplement,
modification, deferral, renewal, extension or refunding of any liability of the
types referred to in clauses (a) through (h) above. For purposes hereof, the
"maximum fixed repurchase price" of any Redeemable Capital Stock which does not
have a fixed repurchase price shall be calculated in accordance with the terms
of such Redeemable Capital Stock as if such Redeemable Capital Stock were
purchased on any date on which Indebtedness shall be required to be determined
pursuant to the Indenture, and if such price is based upon, or measured by the
Fair Market Value of such Redeemable Capital Stock, such Fair Market Value.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company or any of its Subsidiaries and (ii)
which, in the judgment of the Board of Directors of the Company, is otherwise
independent and qualified to perform the task for which it is to be engaged.
"Interest Rate Protection Agreement" means any arrangement with any other
person whereby, directly or indirectly, such person is entitled to receive from
time to time periodic payments calculated by applying either a floating or a
fixed rate of interest on a stated notional amount in exchange for periodic
payments made by such person calculated by applying a fixed or a floating rate
of interest on the same notional amount and shall include, without limitation,
interest rate swaps, caps, floors, collars and similar agreements.
"Interest Rate Protection Obligations" means the obligations of any person
pursuant to an Interest Rate Protection Agreement.
"Investment" means, with respect to any person, any direct or indirect loan
or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by, any other person. In addition, the Fair
Market Value of the assets of any Subsidiary of the Company at the time that
such Subsidiary is designated as an Unrestricted Subsidiary shall be deemed to
be an Investment made by the Company in such Unrestricted Subsidiary at such
time. "Investments" shall exclude extensions of trade credit by the Company and
its Restricted Subsidiaries in the ordinary course of business in accordance
with normal trade practices of the Company or such Restricted Subsidiary, as the
case may be.
"Investment Grade" means, with respect to the Notes, (i) in the case of
S&P, a rating of at least BBB-, (ii) in the case of Moody's, a rating of at
least Baa3, and (iii) in the case of a Rating Agency other than S&P or Moody's,
the equivalent rating, or in each case, any successor, replacement or equivalent
definition as promulgated by S&P, Moody's or and other Rating Agency, as the
case may be; provided that a rating of BBB-, with respect to S&P, Baa3, with
respect to Moody's, or the equivalent rating of another Rating Agency other than
S&P or Moody's (or any such successor, replacement or equivalent definition)
shall not be Investment Grade if any such Rating Agency shall have then placed
the Notes on credit watch with negative implications.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim or preference
or priority or other encumbrance upon or with respect to any property of any
kind. A person shall be deemed to own subject to a Lien any property which such
person has acquired or holds subject to the interest of a vendor or lessor under
any conditional sale agreement, capital lease or other title retention
agreement.
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"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company or any Restricted Subsidiary of the Company) net of
(i) brokerage commissions and other fees and expenses (including, without
limitation, fees and expenses of legal counsel and investment bankers) related
to such Asset Sale, (ii) provisions for all taxes payable as a result of such
Asset Sale, (iii) amounts required to be paid to any person (other than the
Company or any Restricted Subsidiary of the Company) owning a beneficial
interest in the assets subject to the Asset Sale and (iv) appropriate amounts to
be provided by the Company or any Restricted Subsidiary of the Company, as the
case may be, as a reserve required in accordance with GAAP against any
liabilities associated with such Asset Sale and retained by the Company or any
Restricted Subsidiary of the Company, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, all as
reflected in an officers' certificate delivered to the Trustee.
"Net Worth" means, with respect to any person at any date, the
stockholders' equity of such person less the amount of such stockholders' equity
attributable to Redeemable Capital Stock of such person, as determined in
accordance with GAAP.
"Permitted Holder" means (i) each of Lambert E. Althaver, Robert H.
Walpole, Gary L. Vollmar, Richard H. Whitehead, Michael A. Shope and Daniel L.
Hittler; (ii) each spouse, lineal descendant and spouse of a lineal descendant
of a person named in clause (i); and (iii) the estate or legal representative of
a person named in clause (i) or (ii).
"Permitted Investments" means any of the following: (i) Investments in any
Wholly-Owned Restricted Subsidiary (including any person that pursuant to such
Investment becomes a Wholly-Owned Restricted Subsidiary) and any person that is
merged or consolidated with or into, or transfers or conveys all or
substantially all of its assets to, the Company or any Wholly-Owned Restricted
Subsidiary at the time such Investment is made; (ii) Investments in Cash
Equivalents; (iii) Investments in deposits with respect to leases or utilities
provided to third parties in the ordinary course of business; (iv) Investments
in the Notes and the 2005 Notes; (v) Investments in Currency Agreements on
commercially reasonable terms entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business in connection with
the operations of the business of the Company or its Restricted Subsidiaries to
hedge against fluctuations in foreign exchange rates; (vi) loans or advances to
officers, employees or consultants of the Company and its Restricted
Subsidiaries in the ordinary course of business for bona fide business purposes
of the Company and its Restricted Subsidiaries (including travel and moving
expenses) not in excess of $1,000,000 in the aggregate at any one time
outstanding; (vii) Investments in evidences of Indebtedness, securities or other
property received from another person by the Company or any of its Restricted
Subsidiaries in connection with any bankruptcy proceeding or by reason of a
composition or readjustment of debt or a reorganization of such person or as a
result of foreclosure, perfection or enforcement of any Lien in exchange for
evidences of Indebtedness, securities or other property of such person held by
the Company or any of its Restricted Subsidiaries, or for other liabilities or
obligations of such other person to the Company or any of its Restricted
Subsidiaries that were created in accordance with the terms of the Indenture;
(viii) Investments in Interest Rate Protection Agreements on commercially
reasonably terms entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business in connection with the
operations of the business of the Company or its Restricted Subsidiaries to
hedge against fluctuations in interest rates; and (ix) other Investments made
after the 2005 Notes Issue Date not to exceed $10,000,000 in the aggregate plus
an amount equal to the lesser of the return of capital with respect to such
Investment and the initial amount of such Investment, in either case, less the
cost of the disposition of such Investment.
"Permitted Liens" means the following types of Liens:
(a) Liens for taxes, assessments or governmental charges or claims
either (i) not delinquent or (ii) contested in good faith by appropriate
proceedings and as to which the Company or any of its
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Restricted Subsidiaries shall have set aside on its books such reserves as
may be required pursuant to GAAP;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(c) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, governmental
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(d) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(e) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(f) any interest or title of a lessor under any Capitalized Lease
Obligation or operating lease;
(g) purchase money Liens to finance the acquisition or construction of
property or assets of the Company or any Restricted Subsidiary of the
Company acquired in the ordinary course of business; provided, however,
that (i) the related purchase money Indebtedness shall not be secured by
any property or assets of the Company or any Restricted Subsidiary of the
Company other than the property and assets so acquired or construction,
(ii) the amount of Indebtedness secured by any such Lien shall not exceed
the purchase price of the property or assets acquired or constructed and
(iii) the Lien securing such Indebtedness either (x) exists at the time of
such acquisition or construction or (y) shall be created within 90 days of
such acquisition or construction;
(h) other purchase money Liens to finance the acquisition or
construction of property or assets of the Company or any Restricted
Subsidiary of the Company acquired in the ordinary course of business
securing Indebtedness of the Company and its Restricted Subsidiaries under
industrial revenue bonds or other Indebtedness of the Company and its
Restricted Subsidiaries for which a governmental entity or agency provides
direct or indirect credit support not to exceed $20,000,000 in the
aggregate at any one time outstanding; provided, however, that (i) the
amount of Indebtedness secured by any such Lien shall not exceed 125% of
the purchase price of the property or assets acquired or constructed and
(ii) the Lien securing such Indebtedness either (x) exists at the time of
such acquisition or construction or (y) shall be created within 90 days of
such acquisition or construction;
(i) other Liens; provided that at the time any such Lien is to be
incurred, all such Liens incurred pursuant to this clause (i) secure
obligations of the Company and its Restricted Subsidiaries not to exceed
10% of the Consolidated Net Worth of the Company after giving pro forma
effect to the Lien that is to be incurred;
(j) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods; and
(k) Liens on the property and assets of any Accounts Receivable
Subsidiary arising in connection with any Accounts Receivable Transaction.
"person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust, charitable
foundation, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
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"Preferred Stock" means, with respect to any person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of preferred or preference Capital Stock of such person.
"Rating Agency" means a nationally recognized securities rating agency,
selected by the Company and satisfactory to the Trustee.
"Redeemable Capital Stock" means any shares of any class or series of
Capital Stock that, either by the terms thereof, by the terms of any security
into which it is convertible or exchangeable or by contract or otherwise, is or
upon the happening of an event or passage of time would be required to be
redeemed prior to the Stated Maturity with respect to the principal of any Note
or is redeemable at the option of the holder thereof at any time prior to any
such Stated Maturity, or is convertible into or exchangeable for debt securities
at any time prior to any such Stated Maturity.
"Restricted Subsidiary" means a Subsidiary of any person which is not an
Unrestricted Subsidiary.
"Sale-Leaseback Transaction" of any person means an arrangement with any
lender or investor or to which such lender or investor is a party providing for
the leasing by such person of any property or asset of such person which has
been or is being sold or transferred by such person after the acquisition
thereof or the completion of construction or commencement of operation thereof
to such lender or investor or to any person to whom funds have been or are to be
advanced by such lender or investor on the security of such property or asset.
The stated maturity of such arrangement shall be the date of the last payment of
rent or any other amount due under such arrangement prior to the first date on
which such arrangement may be terminated by the lessee without payment of a
penalty.
"Securities Act" means the Securities Act of 1933, as amended.
"Significant Subsidiary" shall have the same meaning as in Rule 1-02(w) of
Regulation S-X under the Securities Act.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and its successors.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable, and when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness, or any installment of interest
thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Guarantor which is expressly subordinated in right of payment to the Notes or
the Guarantee of such Guarantor, as the case may be.
"Subsidiary" means, with respect to any person, (i) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
such person, by one or more Subsidiaries of such person or by such person and
one or more Subsidiaries thereof and (ii) any other person (other than a
corporation), including, without limitation, a joint venture, in which such
person, one or more Subsidiaries thereof or such person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, have at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other person performing
similar functions). For purposes of this definition, any directors' qualifying
shares or investments by foreign nationals mandated by applicable law shall be
disregarded in determining the ownership of a Subsidiary.
"Unrestricted Subsidiary" means (a) Walbro Capital Trust and (b) a
Subsidiary of the Company (i) none of whose properties or assets were owned by
the Company or any of its Subsidiaries on or prior to the 2005 Notes Issue Date,
other than any such assets as are transferred to such Unrestricted Subsidiary in
accordance with the covenant described under "-- Certain Covenants -- Limitation
on Restricted Payments", (ii) whose properties and assets, to the extent that
they secure Indebtedness, secure only Non-Recourse Indebtedness and (iii) which
has no Indebtedness other than Non-Recourse Indebtedness. As used above,
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"Non-Recourse Indebtedness" means Indebtedness as to which (i) neither the
Company nor any of its Restricted Subsidiaries (1) provides credit support
(including any undertaking, agreement or instrument which would constitute
Indebtedness), (2) guarantees or is otherwise directly or indirectly liable or
(3) constitutes the lender (in each case, other than pursuant to and in
compliance with the covenant described under "-- Certain Covenants -- Limitation
on Restricted Payments") and (ii) no default with respect to such Indebtedness
(including any rights which the holders thereof may have to take enforcement
action against the relevant Unrestricted Subsidiary or its assets) would permit
(upon notice, lapse of time or both) any holder of any other Indebtedness of the
Company or its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity. The Company shall not be permitted to designate any
Unrestricted Subsidiary as a Restricted Subsidiary unless, after giving pro
forma effect to such designation, (i) the Company would be permitted to incur
$1.00 of additional Indebtedness pursuant to the first paragraph of the covenant
described under "-- Certain Covenants -- Limitation on Indebtedness" above
(assuming a market rate of interest with respect to such Indebtedness) and (ii)
all Indebtedness and Liens of such Unrestricted Subsidiary would be permitted to
be incurred by a Restricted Subsidiary of the Company under the Indenture. An
Unrestricted Subsidiary shall not be designated as a Restricted Subsidiary
unless the Company shall have provided written notice to the Trustee as to
compliance with the Indenture. A designation of an Unrestricted Subsidiary as a
Restricted Subsidiary may not thereafter be rescinded.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any person (irrespective of whether or not, at the time, Capital
Stock of any other class or classes shall have, or might have, voting power by
reason of the happening of any contingency).
"Wholly-Owned Restricted Subsidiary" means any Restricted Subsidiary of the
Company of which 100% of the outstanding Capital Stock is owned by the Company
or one or more Wholly-Owned Restricted Subsidiaries or by the Company and one or
more Wholly-Owned Restricted Subsidiaries. For purposes of this definition, any
directors' qualifying shares or investments by foreign nationals mandated by
applicable law shall be disregarded in determining the ownership of a
Subsidiary.
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CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following summary of the material anticipated federal income tax
consequences of the issuance of the Exchange Notes and the Exchange Offer is
based upon the provisions of the Internal Revenue Code of 1986, as amended, the
final, temporary and proposed regulations promulgated thereunder, and
administrative rulings and judicial decisions now in effect, all of which are
subject to change (possibly with retroactive effect) or different
interpretations. The following summary is not binding on the Internal Revenue
Service ("IRS") and there can be no assurance that the IRS will take a similar
view with respect to the tax consequences described below. No ruling has been or
will be requested by the Company from the IRS on any tax matters relating to the
Exchange Notes or the Exchange Offer. This discussion is for general information
only and does not purport to address all of the possible federal income tax
consequences or any state, local or foreign tax consequences of the acquisition,
ownership and disposition of the Old Notes, the Exchange Notes or the Exchange
Offer. It is limited to investors who will hold the Old Notes and the Exchange
Notes as capital assets and does not address the federal income tax consequences
that may be relevant to particular investors in light of their unique
circumstances or to certain types of investors (such as dealers in securities;
insurance companies; financial institutions; foreign corporations; partnerships;
trusts; nonresident individuals; and tax-exempt entities) who may be subject to
special treatment under federal income tax laws.
INDEBTEDNESS
The Old Notes and the Exchange Notes should be treated as indebtedness of
the Company. In the unlikely event the Old Notes and the Exchange Notes were
treated as equity, the amount treated as a distribution on any such Old Note or
Exchange Note would first be taxable to the holder as dividend income to the
extent of the Company's current and accumulated earnings and profits, and would
next be treated as a return of capital to the extent of the holder's tax basis
in the Old Notes or Exchange Notes, with any remaining amount treated as a gain
from the sale of an Old Note or an Exchange Note. In addition, in the event of
equity treatment, the Company could not deduct interest on such Old Notes or
Exchange Notes. The remainder of this discussion assumes that the Old Notes and
the Exchange Notes will constitute indebtedness.
EXCHANGE OFFER
The exchange of the Old Notes for the Exchange Notes pursuant to the
Exchange Offer should not be treated as an "exchange" because the Exchange Notes
should not be considered to differ materially in kind or extent from the Old
Notes. Rather, the Exchange Notes received by a holder of the Old Notes should
be treated as a continuation of the Old Notes in the hands of such holder. As a
result, there should be no federal income tax consequences to holders exchanging
the Old Notes for the Exchange Notes pursuant to the Exchange Offer.
INTEREST
A holder of an Old Note or an Exchange Note will be required to report
stated interest on the Old Note and the Exchange Note as interest income in
accordance with the holder's method of accounting pursuant to the de minimis
exception to the "original issue discount" rules for tax purposes. Because the
Old Notes were issued at par, there will be no original issue discount.
TAX BASIS IN THE OLD NOTES AND THE EXCHANGE NOTES
A holder's tax basis in an Old Note will be the holder's purchase price for
the Old Note. If a holder of an Old Note exchanges the Old Note for an Exchange
Note pursuant to the Exchange Offer, the tax basis of the Exchange Note
immediately after such exchange should equal the holder's tax basis in the Old
Note immediately prior to the exchange.
DISPOSITION OF THE OLD NOTES OR THE EXCHANGE NOTES
The sale, exchange, redemption or other disposition of an Old Note or an
Exchange Note, except in the case of an exchange pursuant to the Exchange Offer
(see the above discussion), generally will be a taxable
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event. A holder generally will recognize gain or loss equal to the difference
between (i) the amount of cash plus the fair market value of any property
received upon such sale, exchange, redemption or other taxable disposition of
the Old Note or the Exchange Note (except to the extent attributable to accrued
interest) and (ii) the holder's adjusted tax basis in such debt instrument. Such
gain or loss will be capital gain or loss, and will be long term if the Old
Notes have been held for more than one year at the time of the sale or other
disposition.
PURCHASERS OF NOTES AT OTHER THAN ORIGINAL ISSUANCE PRICE OR DATE
The foregoing does not discuss special rules which may affect the treatment
of purchasers that acquire the Old Notes other than at par, including those
provisions of the Internal Revenue Code relating to the treatment of "market
discount," and "amortizable bond premium." Any such purchaser should consult its
tax advisor as to the consequences to him of the acquisition, ownership, and
disposition of the Old Notes.
BACKUP WITHHOLDING
Unless a holder provides its correct taxpayer identification number
(employer identification number or social security number) to the Company and
certifies that such number is correct, generally under the federal income tax
backup withholding rules, 31% of (1) the interest paid on the Old Notes and the
Exchange Notes, and (2) the issue price of the Exchange Notes, must be withheld
and remitted to the United States Treasury. Therefore, each holder should
complete and sign the Substitute Form W-9 included so as to provide the
information and certification necessary to avoid backup withholding. However,
certain holders (including, among others, certain foreign individuals) are not
subject to these backup withholding and reporting requirements. For a foreign
individual to qualify as an exempt foreign recipient, that exchanging holder
must submit a statement, signed under penalties of perjury, attesting to that
individual's exempt foreign status. Such statements can be obtained from the
Company. For further information concerning backup withholding and instructions
for completing the Substitute Form W-9 (including how to obtain a taxpayer
identification number if you do not have one and how to complete the Substitute
Form W-9 if the Notes are held in more than one name), contact the Secretary of
the Company at 6242 Garfield Street, Cass City, Michigan 48726-1325 (telephone
number (517) 872-2131).
Backup withholding is not an additional federal income tax. Rather, the
federal income tax liability of a person subject to withholding will be reduced
by the amount of tax withheld. If withholding results in an overpayment of
taxes, a refund may be obtained from the IRS.
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REGISTRATION RIGHTS OF THE OLD NOTES
Pursuant to the Registration Rights Agreement, the Company agreed to file
with the Commission the Registration Statement under the Securities Act with
respect to an offer to exchange the Old Notes for the Exchange Notes. Upon the
effectiveness of the Registration Statement, the Company will offer to the
holders of the Old Notes who are able to make certain representations the
opportunity to exchange their Old Notes for the Exchange Notes. If (i) the
Company is not permitted to file the Registration Statement or to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law or
Commission policy; or (ii) any holder of the Old Notes notifies the Company
within the specified time period that (A) due to a change in law or policy it is
not entitled to participate in the Exchange Offer, (B) due to a change in law or
policy it may not resell the Exchange Notes acquired by it in the Exchange Offer
to the public without delivering a prospectus and the prospectus contained in
the Registration Statement is not appropriate or available for such resales by
such holder, or (C) it is a broker-dealer and owns the Old Notes acquired
directly from the Company or an affiliate of the Company, the Company will file
with the Commission the Shelf Registration Statement to cover resales of the
Transfer Restricted Notes (as defined below) by the holders thereof. The Company
will use reasonable efforts to cause the applicable registration statement to be
declared effective as promptly as possible by the Commission. For purposes of
the foregoing, "Transfer Restricted Notes" means each Old Note until (i) the
date on which such Old Note has been exchanged by a person other than a
broker-dealer for an Exchange Note in the Exchange Offer, (ii) following the
exchange by a broker-dealer in the Exchange Offer of an Old Note for an Exchange
Note, the date on which such Exchange Note is sold to a purchaser who receives
from such broker-dealer on or prior to the date of such sale a copy of the
prospectus contained in the Registration Statement, (iii) the date on which such
Old Note has been effectively registered under the Securities Act and disposed
of in accordance with the Shelf Registration Statement, or (iv) the date on
which such Old Note is distributed to the public pursuant to Rule 144 under the
Securities Act.
Under existing Commission interpretations, the Exchange Notes would, in
general, be freely transferable after the Exchange Offer without further
registration under the Securities Act; provided that in the case of
broker-dealers participating in the Exchange Offer, a prospectus meeting the
requirements of the Securities Act will be delivered upon resale by such
broker-dealer in connection with resales of the Exchange Notes. The Company has
agreed, for a period of 180 days after the Registration Statement is declared
effective by the Commission, to make available a prospectus meeting the
requirements of the Securities Act to any such broker-dealer for use in
connection with any resale of any Exchange Notes acquired in the Exchange Offer.
A broker-dealer which delivers such a prospectus to purchasers in connection
with such resales will be subject to certain of the civil liability provisions
under the Securities Act and will be bound by the provisions of the Registration
Rights Agreement (including certain indemnification rights and obligations).
Each holder of the Old Notes who wishes to exchange such Old Notes for
Exchange Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business, (ii) it
has no arrangement with any person to participate in the distribution of the
Exchange Notes, and (iii) it is not an "affiliate," as defined in Rule 405 of
the Securities Act, of the Company or, if it is an affiliate, it will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable.
If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the
Exchange Notes. If the holder is a broker-dealer that will receive Exchange
Notes for its own account in exchange for the Old Notes that were acquired as a
result of market-making activities or other trading activities, it will be
required to acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes.
The Registration Rights Agreement provides that: (i) unless the Exchange
Offer would not be permitted by applicable law or Commission policy, the Company
will file the Registration Statement with the Commission on or prior to 60 days
after the date of original issuance of the Old Notes (the "Closing Date"), (ii)
unless the Exchange Offer would not be permitted by applicable law or Commission
policy, the Company will use its best efforts to have the Registration Statement
declared effective by the Commission on or prior to
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180 days after the Closing Date, (iii) unless the Exchange Offer would not be
permitted by applicable law or Commission policy, the Company will commence the
Exchange Offer and use reasonable efforts to issue, on or prior to 20 business
days after the date on which the Registration Statement was declared effective
by the Commission, Exchange Notes in exchange for all Old Notes tendered prior
thereto in the Exchange Offer and (iv) if obligated to file the Shelf
Registration Statement, the Company will file prior to the later of (x) 60 days
after the Closing Date or (y) 30 days after such filing obligation arises and
use its best efforts to cause the Shelf Registration Statement to be declared
effective by the Commission on or prior to the later of (A) 180 days after the
Closing Date, and (B) 90 days after such obligation arises. The Company shall
use its best efforts to keep such Shelf Registration Statement continuously
effective, supplemented and amended until the second anniversary of the date on
which the Shelf Registration Statement was initially declared effective or such
shorter period that will terminate when all the Transfer Restricted Notes
covered by the Shelf Registration Statement have been sold pursuant thereto. If
(a) the Company fails to file any of the registration statements required by the
Registration Rights Agreement on or before the date specified for such filing,
(b) any of such registration statements are not declared effective by the
Commission on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"), (c) the Company fails to consummate the Exchange
Offer within 20 business days of the Effectiveness Target Date with respect to
the Registration Statement, or (d) the Shelf Registration Statement or the
Registration Statement is declared effective but thereafter, subject to certain
exceptions, ceases to be effective or usable in connection with the Exchange
Offer or resales of Transfer Restricted Notes, as the case may be, during the
periods specified in the Registration Rights Agreement (each such event referred
to in clauses (a) through (d) above, a "Registration Default"), then the
interest rate on Transfer Restricted Notes will increase ("Additional
Interest"), with respect to the first 90-day period immediately following the
occurrence of such Registration Default by 0.50% per annum and will increase by
an additional 0.50% per annum with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of 2%
per annum. Following the cure of all Registration Defaults, the accrual of
Additional Interest will cease and the Interest Rate will revert to the original
rate.
This summary of certain provisions of the Registration Rights Agreement
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
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BOOK ENTRY; DELIVERY AND FORM
The Old Notes were and the Exchange Notes will be initially represented by
a single, permanent global certificate in definitive, fully registered form (the
"Global Note"). The Global Note will be deposited on the date of issuance with,
or on behalf of, DTC and registered in the name of a nominee of DTC.
THE GLOBAL NOTE
The Company expects that pursuant to procedures established by DTC (i) upon
the issuance of the Global Note, DTC or its custodian will credit, on its
internal system, the principal amount of Notes of the individual beneficial
interest represented by such Global Note to the respective accounts for persons
who have accounts with DTC and (ii) ownership of beneficial interest in the
Global Note will be shown on, and the transfer of such ownership will be
effected only through, records maintained by DTC or its nominee (with respect to
interests of participants) and the records of participants (with respect to
interests of persons other than participants). Such accounts initially will be
designated by or on behalf of the Initial Purchaser and ownership of beneficial
interests in the Global Note will be limited to persons who have accounts with
DTC ("participants") or persons who hold interest through participants.
Qualified institutional buyers hold their interests in the Global Note directly
through DTC, if they are participants in such system, or indirectly through
organizations which are participants in such system.
So long as DTC or its nominee is the registered owner or holder of the
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by such Global Note for all purposes
under the Indenture. No beneficial owner of an interest in any Global Note will
be able to transfer that interest except in accordance with DTC's procedures, in
addition to those provided for under the Indenture.
Payments of the principal of, premium, if any, and interest (including
Additional Interest) on, the Global Note will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of the Company, the
Trustee or any paying agent of the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the Global Note or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest (including Additional Interest) in
respect of the Global Note, will credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of the Global Note as shown on the records of DTC or its nominee. The
Company also expects that payments by participants to owners of beneficial
interest in the Global Note held through such participants will be governed by
standing instructions and customary practice, as is now the case with securities
held for the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in clearinghouse funds. If a
holder requires physical delivery of a Certificated Security for any reason,
including to sell Notes to persons in states which require physical delivery of
the Certificated Securities, or to pledge such securities, such holder must
transfer its interest in the Global Note in accordance with the normal
procedures of DTC and with the procedures set forth in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes (including the presentation of the Old Notes for
exchange as described herein) only at the direction of one or more participants
to whose account the DTC interests in the Global Note are credited and only in
respect of such portion of the aggregate principal amount of Notes as to which
such participant or participants has or have given such direction. However, if
there is an Event of Default under the Indenture, DTC will exchange the Global
Note for Certificated Securities, which it will distribute to its participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions of
93
<PAGE> 95
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. None of the Company, the Initial Purchaser or the
Trustee will have any responsibility for the performance by DTC or its
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations.
CERTIFICATED SECURITIES
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Note and a successor depositary is not appointed by the Company
within 90 days, Certificated Securities will be issued in exchange for the
Global Note.
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that the
Exchange Notes issued pursuant to the Exchange Offer in exchange for the Old
Notes may be offered for resale, resold and otherwise transferred by holders
thereof (other than any holder which is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that the Exchange Notes are acquired in the ordinary course of the holders'
business, and the holders are not engaged in, and do not intend to engage in,
and have no arrangement or understanding with any person to participate in, a
distribution of the Exchange Notes; and, provided further, that Participating
Broker-Dealers will be subject to a prospectus delivery requirement with respect
to resales of the Exchange Notes. To date, the staff of the Commission has taken
the position that Participating Broker-Dealers may fulfill their prospectus
delivery requirements with respect to transactions involving an exchange of
securities such as the exchange pursuant to the Exchange Offer (other than a
resale of an unsold allotment from the sale of the Old Notes to the Initial
Purchaser) with the Prospectus contained in the Registration Statement. Pursuant
to the Registration Rights Agreement, the Company agreed to permit Participating
Broker-Dealers and other persons, if any, subject to similar prospectus delivery
requirements to use this Prospectus in connection with the resale of the
Exchange Notes. The Company agreed, for a period of 180 days after the
Registration Statement is declared effective by the Commission, to make this
Prospectus, as amended or supplemented, available to any Participating
Broker-Dealer that requests such documents in the Letter of Transmittal.
Each holder of the Old Notes who wishes to exchange its Old Notes for the
Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company as set forth in "The Exchange Offer -- Resale of
the Exchange Notes." In addition, each holder who is a Participating Broker-
Dealer will be required to acknowledge that it will deliver a prospectus in
connection with any resale by it of the Exchange Notes.
The Company will not receive any proceeds from any sale of the Exchange
Notes by Participating Broker-Dealers. The Exchange Notes received by
Participating Broker-Dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Notes or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or at negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
Participating Broker-Dealer that
94
<PAGE> 96
resells the Exchange Notes that were received by it for its own account pursuant
to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of the
Exchange Notes and any commissions or concessions received by any such persons
may be deemed to be underwriting compensation under the Securities Act. The
Letter of Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
The Company agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Old Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act, as set
forth in the Registration Rights Agreement. Pursuant to the Registration Rights
Agreement, the Company agreed to use its best efforts to cause the Exchange
Notes to be listed on the New York Stock Exchange.
LEGAL MATTERS
Certain legal matters regarding the validity of the Exchange Notes offered
hereby will be passed upon for the Company by Katten Muchin & Zavis, a
partnership including professional corporations, Chicago, Illinois.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited consolidated financial statements of the Company at December
31, 1997 and 1996, and for each of the three years in the periods ended December
31, 1997, 1996 and 1995, included in this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as stated in their reports
appearing herein.
The audited financial statements of Marwal Systems S.N.C. at December 31,
1997, 1996 and 1995 and for each of the three years in the periods ended
December 31, 1997, 1996 and 1995, included in this Prospectus have been audited
by Ernst & Young Audit, independent public accountants, as stated in their
reports appearing herein.
95
<PAGE> 97
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
WALBRO CORPORATION
As of December 31, 1997 and 1996 and for the years ended
December 31, 1997, 1996 and 1995
Report of Independent Public Accountants.................. F-2
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Income......................... F-4
Consolidated Statements of Stockholders' Equity........... F-5
Consolidated Statements of Cash Flows..................... F-6
Notes to Consolidated Financial Statements................ F-7
As of March 31, 1998 and December 31, 1997 and for the three
months ended March 31, 1998 and 1997
Consolidated Balance Sheets (Unaudited)................... F-27
Consolidated Statements of Income (Unaudited)............. F-28
Consolidated Statements of Cash Flows (Unaudited)......... F-29
Notes to Consolidated Financial Statements (Unaudited).... F-30
MARWAL SYSTEMS S.N.C. FINANCIAL STATEMENTS
Letter from Ernst & Young re: compliance with US generally
accepted auditing standards............................ F-37
Statutory Auditor's General Report........................ F-38
Balance Sheet as of December 31, 1997..................... F-39
Income Statement for the year ended December 31, 1997..... F-40
Notes to the Financial Statements for 1997................ F-41
Statutory Auditor's General Report........................ F-48
Balance Sheet as of December 31, 1996..................... F-49
Income Statement for the year ended December 31, 1996..... F-50
Notes to the Financial Statements for 1996................ F-51
Statutory Auditor's General Report........................ F-58
Balance Sheet as of December 31, 1995..................... F-59
Income Statement for the year ended December 31, 1995..... F-60
Notes to the Financial Statements for 1995................ F-61
WALBRO CORPORATION -- SUPPLEMENTAL NOTES
Report of Independent Public Accountants.................. S-1
Supplemental Notes to Consolidated Financial Statements of
Walbro Corporation and Subsidiaries.................... S-2
</TABLE>
F-1
<PAGE> 98
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, 1997
and 1996 and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial statements of
Marwal Systems, S.N.C. and Marwal do Brasil Ltda., the investments in which are
reflected in the accompanying consolidated financial statements using the equity
method of accounting. The investments in Marwal Systems, S.N.C. and Marwal do
Brasil Ltda. together represent 3.7% and 4.1% of consolidated total assets in
1997 and 1996, respectively, and the equity in their net income represents
income of $3,710,000, $4,560,000 and $3,570,000 in 1997, 1996 and 1995,
respectively. Those statements were audited by other auditors whose report has
been furnished to us and our opinion, insofar as it relates to the amounts
included for those entities, is based solely on the report of the other
auditors.
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 and the reports of
other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Walbro Corporation and subsidiaries as of December 31,
1997 and 1996, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Detroit, Michigan,
February 11, 1998
(except with respect to the
matters discussed in Notes 6
and 21, as to which the
date is April 13, 1998).
F-2
<PAGE> 99
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
Current Assets:
Cash...................................................... $ 13,539 $ 18,213
Accounts receivable, net.................................. 144,985 126,509
Inventories............................................... 56,207 50,588
Prepaid expenses and other................................ 17,405 11,235
Deferred and refundable income taxes...................... 8,519 4,971
-------- --------
Total Current Assets................................... 240,655 211,516
-------- --------
Plant and Equipment, at cost:
Land...................................................... 5,230 5,190
Buildings and improvements................................ 90,099 69,741
Machinery and equipment................................... 297,032 288,369
-------- --------
392,361 363,300
Less -- Accumulated depreciation.......................... 116,991 83,413
-------- --------
Net Plant and Equipment................................ 275,370 279,887
-------- --------
Other Assets:
Funds held for construction............................... -- 1,140
Joint ventures............................................ 26,681 28,955
Investments............................................... 3,261 5,727
Goodwill, net............................................. 32,803 35,998
Notes receivable.......................................... 126 1,268
Deferred and refundable income taxes...................... 8,179 5,414
Other..................................................... 23,518 19,744
-------- --------
Total Other Assets..................................... 94,568 98,246
-------- --------
Total Assets........................................... $610,593 $589,649
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt......................... $ 13,960 $ 1,089
Bank and other borrowings................................. 26,204 22,072
Accounts payable.......................................... 84,209 77,939
Accrued liabilities....................................... 39,221 41,276
Dividends payable......................................... 1,788 865
-------- --------
Total Current Liabilities.............................. 165,382 143,241
-------- --------
Long-Term Liabilities:
Long-term debt, less current portion...................... 291,393 291,723
Pension obligations and other............................. 11,823 10,718
Deferred income taxes..................................... 2,077 4,914
Minority interest......................................... 1,052 1,320
-------- --------
Total Long-Term Liabilities............................ 306,345 308,675
-------- --------
Company-obligated mandatorily redeemable convertible
preferred securities of Walbro Capital Trust holding
solely convertible debentures............................. 69,000 --
Stockholders' Equity:
Common stock, $.50 par value; authorized 25,000,000;
outstanding 8,682,595 in 1997 and 8,652,737 in 1996.... 4,341 4,326
Paid-in capital........................................... 66,151 65,674
Retained earnings......................................... 33,938 74,039
Deferred compensation..................................... (379) (967)
Unrealized gain on securities available for sale.......... 68 688
Cumulative translation adjustments........................ (34,253) (6,027)
-------- --------
Total Stockholders' Equity............................. 69,866 137,733
-------- --------
Total Liabilities and Stockholders' Equity............. $610,593 $589,649
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 100
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net Sales........................................... $619,905 $585,389 $459,272
Costs and Expenses:
Cost of sales..................................... 538,751 488,134 377,755
Selling and administrative expenses............... 60,786 52,177 40,641
Research and development expenses................. 17,289 18,400 16,742
Restructuring and impairment charges.............. 27,000 -- --
-------- -------- --------
Operating Income (Loss)............................. (23,921) 26,678 24,134
Other Expense (Income):
Interest expense, net of capitalized interest of
$1,207 in 1997 and $3,683 in 1996.............. 25,410 20,535 12,420
Interest income................................... (674) (2,716) (960)
Royalty income, net............................... (3,878) (1,410) (237)
Foreign currency exchange (gain) loss............. (308) (70) 1,483
Other............................................. 365 (63) (255)
-------- -------- --------
Income (Loss) Before (Provision) Credit for Income
Taxes, Minority Interest and Equity in Income of
Joint Ventures.................................... (44,836) 10,402 11,683
(Provision) Credit for Income Taxes................. 10,131 (3,075) (1,258)
Minority Interest................................... (5,035) (285) (472)
Equity in Income of Joint Ventures.................. 3,113 4,187 3,877
-------- -------- --------
Net Income (Loss)................................... $(36,627) $ 11,229 $ 13,830
======== ======== ========
Basic Net Income (Loss) Per Share................... $ (4.23) $ 1.30 $ 1.61
======== ======== ========
Diluted Net Income (Loss) Per Share................. $ (4.23) $ 1.30 $ 1.61
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 101
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<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, 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)
Exercise of stock options........... 15 477 -- -- -- -- --
ESOP debt payments.................. -- -- -- 408 -- -- --
Change in restricted stock.......... -- -- -- 180 -- -- --
Net loss............................ -- -- (36,627) -- -- -- --
Cash dividends ($.40 per share)..... -- -- (3,474) -- -- -- --
Change in market value of securities
available for sale............... -- -- -- -- -- (620) --
Translation adjustments............. -- -- -- -- -- -- (28,226)
------ ------- ------- ------- ----- ------ --------
Balance --
December 31, 1997................... $4,341 $66,151 $33,938 $ (379) $ -- $ 68 $(34,253)
====== ======= ======= ======= ===== ====== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 102
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income (loss)......................................... $(36,627) $ 11,229 $ 13,830
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities --
Depreciation and amortization........................ 31,417 29,736 22,451
(Gain) loss on disposition of assets................. 1,459 774 (29)
Minority interest.................................... (624) (238) 472
Equity in income of joint ventures................... (3,113) (4,187) (3,877)
Restructuring and impairment charges................. 27,000 -- --
Change in assets and liabilities, net of effects of
acquisitions --
Deferred and refundable income taxes............ (8,631) (762) 1,721
Pension obligations and other................... (1,888) (2,049) 3,327
Accounts payable and accrued liabilities........ 12,687 25,507 4,870
Accounts receivable, net........................ (28,299) (16,956) (3,236)
Inventories..................................... (8,674) (473) (2,034)
Prepaid expenses and other...................... (10,933) (5,943) (6,607)
-------- --------- --------
Total adjustments................................. 10,401 25,409 17,058
-------- --------- --------
Net cash provided by (used in) operating
activities...................................... (26,226) 36,638 30,888
-------- --------- --------
Cash Flows From Investing Activities:
Purchase of plant and equipment........................... (62,019) (99,147) (46,240)
Acquisitions, net of cash acquired........................ -- (1,018) (116,238)
Purchase of other assets.................................. (3,087) (3,434) (7,263)
Investment in joint ventures and other.................... 1,756 (1,451) (2,054)
Proceeds from disposal of assets.......................... 5,415 4,156 4,127
-------- --------- --------
Net cash used in investing activities............. (57,935) (100,894) (167,668)
-------- --------- --------
Cash Flows From Financing Activities:
Borrowings under revolving lines-of-credit................ 199,981 200,548 161,114
Repayments under revolving lines-of-credit................ (283,116) (135,298) (97,317)
Debt repayments........................................... (1,210) (1,104) (13,541)
Proceeds from issuance of long-term debt.................. 105,404 2,772 110,550
Proceeds from issuance of convertible preferred
securities............................................. 69,000 -- --
Proceeds from issuance of common stock and options........ 492 771 168
Financing fees paid....................................... (5,680) (508) (4,778)
Cash dividends paid....................................... (3,463) (3,439) (3,428)
-------- --------- --------
Net cash provided by financing activities......... 81,408 63,742 152,768
-------- --------- --------
Effect of Exchange Rate Changes on Cash..................... (1,921) (1,065) (736)
-------- --------- --------
Net Increase (Decrease) in Cash............................. (4,674) (1,579) 15,252
Cash at Beginning of Year................................... 18,213 19,792 4,540
-------- --------- --------
Cash at End of Year......................................... $ 13,539 $ 18,213 $ 19,792
======== ========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 103
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the accounts of Walbro
Corporation and its wholly-owned and majority-owned subsidiaries (the Company).
Investments in joint ventures are 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 $809,000
and $753,000 as of December 31, 1997 and 1996, 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>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and components............................... $30,857 $23,964
Work-in-process............................................ 6,545 10,620
Finished products.......................................... 18,805 16,004
------- -------
$56,207 $50,588
======= =======
</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:
The carrying value of marketable equity securities is market value.
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.
F-7
<PAGE> 104
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
At December 31, 1997 and 1996, the fair market value of the Company's
investments classified as "trading" was $687,000 and $2,594,000, 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 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>
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Goodwill................................................... $39,449 $40,234
Less: Accumulated amortization............................. (6,646) (4,236)
------- -------
$32,803 $35,998
======= =======
</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 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 foreign currency exchange gain or loss.
Reclassifications:
Certain amounts in prior years' consolidated financial statements have been
reclassified to conform with the presentation used in 1997.
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.
F-8
<PAGE> 105
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 2. JOINT VENTURES
The investments in joint ventures as of December 31 are as follows:
<TABLE>
<CAPTION>
PERCENT BENEFICIAL
OWNERSHIP
------------------
1997 1996 1995
---- ---- ----
<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% 52% --
Marwal Argentina S.A. ...................................... 49% -- --
</TABLE>
The above joint ventures are generally involved in the design and
manufacture of precision fuel systems products for the global automotive market.
All of the above investments in joint ventures are accounted for using the
equity method. Certain adjustments are made to the joint ventures' income so
that recorded income is stated in accordance with United States generally
accepted accounting principles. At December 31, 1997 and 1996, the cumulative
effect of these adjustments was to increase the Company's equity in its joint
ventures by approximately $3,158,000 and $2,631,000, respectively. At December
31, 1997, the amount included in retained earnings as undistributed earnings of
foreign joint ventures was approximately $11,680,000.
In 1996, the Company entered into a joint venture (Marwal de Mexico S.A. de
C.V.) 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 the 4th Quarter 1996, the Company expanded its Marwal joint venture
locations to include Marwal Argentina S.A. This is a joint venture 1% owned by
Walbro, 1% by Magneti Marelli, and 98% owned by Marwal Systems S.N.C. Marwal
Argentina builds fuel sending units for the Argentinean 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,
------------------
1997 1996
---- ----
<S> <C> <C>
Balance sheet data:
Current assets............................................ $90,358 $54,030
Non-current assets........................................ 44,365 65,088
Current liabilities....................................... 65,162 52,038
Non-current liabilities................................... 13,355 9,493
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Income statement data:
Net sales................................................. $248,527 $200,276 $170,902
Gross margin.............................................. 31,846 24,806 20,500
Income before provision for income taxes.................. 12,769 14,510 11,641
Net income................................................ 5,978 7,515 7,366
</TABLE>
Dividends from joint ventures of approximately $40,000 and $415,000 were
received by the Company during 1997 and 1995, respectively. No dividends were
received from joint ventures in 1996. The Company
F-9
<PAGE> 106
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 2. JOINT VENTURES -- CONTINUED
had sales to joint ventures of approximately $64,109,000, $42,413,000 and
$29,280,000 for 1997, 1996 and 1995, respectively. Included in accounts
receivable are trade receivables from joint ventures of approximately
$12,741,000 and $11,967,000 as of December 31, 1997 and 1996, respectively and
royalty receivables of $1,674,000 and $1,162,000 as of December 31, 1997 and
1996, respectively. The Company had purchases from joint ventures of
approximately $41,447,000, $33,149,000 and $22,977,000 for 1997, 1996 and 1995,
respectively. Included in accounts payable are trade payables to joint ventures
of approximately $5,277,000 and $5,580,000 as of December 31, 1997 and 1996,
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. 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,
1997 and 1996 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, 1997, 1996 and 1995. Goodwill resulting from this transaction
is being amortized over 40 years using the straight-line method. The purchase
price was allocated to the purchased assets and liabilities as follows (in
thousands):
<TABLE>
<S> <C>
Cash consideration paid to seller, net of cash acquired of
$15,669................................................... $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 was required to relocate
certain facilities, 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
$11,721,000 of costs have been paid and charged against the liability as of
December 31, 1997.
Assuming the acquisition had taken place as of the beginning of 1995, the
consolidated pro forma results of operations of the Company would have been as
follows, after giving effect to certain adjustments, including
F-10
<PAGE> 107
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 3. DYNO ACQUISITION -- CONTINUED
depreciation and amortization adjustments, increased interest expense,
elimination of certain costs assumed by the seller and the related income tax
effects:
<TABLE>
<CAPTION>
1995
----
(UNAUDITED,
IN THOUSANDS)
<S> <C>
Net sales................................................... $581,291
Net income.................................................. $ 12,336
Net income per common share................................. $ 1.43
</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 period 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 sheets as of
December 31, 1997 and 1996 and the operations since the acquisition are included
in the accompanying consolidated statements of income and cash flows for the
years ended December 31, 1997, 1996 and 1995. Goodwill resulting from this
transaction was being amortized over 40 years using the straight-line method
until 1997. In 1997, the remaining balance of goodwill was written off as part
of the restructuring (Note 5).
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.
NOTE 5. RESTRUCTURING OF OPERATIONS AND OTHER ACTIONS
During the fourth quarter of 1997, the Company recorded a $27 million
pretax charge for restructuring its operations and other actions. The charge was
comprised of a $17 million charge for restructuring and a $10 million charge
associated with asset impairments. In addition, the Company took a pretax charge
of $5.7 million for warranty costs (included in cost of sales) which became
known in the fourth quarter.
The restructuring actions include divestiture of the Company's Ligonier,
Indiana, steel fuel rail manufacturing facility and disposition of its interest
in U.S. CoExcell Inc., a manufacturer of blow-molded plastic drums in Maumee,
Ohio. In addition, the Company will consolidate its small engine operations in
the Asia-Pacific region and restructure its European automotive fuel tank
operations. The asset impairment charge included the write off of obsolete
equipment and tooling, write off of its interest in Saginaw Plastics, an
injection molder in Saginaw, Michigan and charges related to its Korean
automotive activities. Lastly, the restructuring charge included a
corporate-wide headcount reduction of approximately 10 percent including
reductions related to the divestitures and restructuring.
The net sales of activities that will not be continued totaled
approximately $30.2 million, $32.0 million and $31.3 million for the years ended
December 31, 1997, 1996 and 1995, respectively, with accompanying operating
(losses) income of approximately $(4.6) million, $1.5 million, and $(4.1)
million for the same periods.
F-11
<PAGE> 108
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 6. LONG-TERM DEBT AND LINES OF CREDIT
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
(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 $292,000 and $331,000 at December 31, 1997 and
1996, respectively(a)..................................... $109,708 $109,669
Senior notes due 2007, unsecured, interest at 10.125%(a).... 100,000 --
Revolving credit facility, secured, interest at the agent's
base rate plus an additional margin (see below)(b)........ 19,700 114,062
Purchase money loan agreement, secured, interest payable
quarterly at the agent's base rate plus an additional
margin (see below)(c)..................................... 2,852 --
Senior notes, secured, interest at 7.68%, payable in annual
amounts from 1998 to 2004(d).............................. 45,000 45,000
Industrial revenue bond, secured, 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
Term loan payable in Belgian Francs, interest at 5.44%
payable in quarterly amounts from 2003 to 2007............ 5,163 --
Term loan from the State of Connecticut, secured, interest
at 6% per annum, payable in monthly amounts from 1998 to
2005...................................................... 3,400 3,400
Capital lease obligations, interest at 7.5%, payable in
monthly amounts through February 2002..................... 3,042 3,640
Other....................................................... 1,188 1,741
-------- --------
305,353 292,812
Less--current portion....................................... 13,960 1,089
-------- --------
$291,393 $291,723
======== ========
</TABLE>
The Company is party to an Intercreditor Agreement (Intercreditor
Agreement) dated as of July 26, 1995 and executed by and among the Company, the
holders (2004 Noteholders) of the 2004 Notes (as defined below) and the banks
which are a party to the Credit Facility (as defined below) (Banks). The Company
and the Banks and the 2004 Noteholders disagree with the interpretation of
certain provisions of the Intercreditor Agreement. As a result, the Company has
agreed to use its best efforts to retire the 2004 Notes by no later than May 31,
1998 and the 2004 Noteholders have agreed that, until May 31, 1998, they will
forbear from taking any action under the 2004 Notes. The Company will use
proceeds of the New Credit Facility (see Note 21 to Consolidated Financial
Statements for further discussion) to provide the financing to retire the 2004
Notes. The New Credit Facility is expected to be used to retire the debt
instruments identified below as (b), (c) and (d).
(a) In July 1995, the Company sold $110,000,000 in aggregate principal
amount of 9.875% Senior Notes due 2005 (the 2005 Notes). In December 1997, the
Company sold $100,000,000 in aggregate principal amount of 10.125% Senior Notes
due 2007 (the 2007 Notes). The 2005 Notes and 2007 Notes are general unsecured
obligations of the Company with interest payable semi-annually. The 2005 Notes
and 2007 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 and 2007 Notes are not redeemable at the Company's
option prior to July 15, 2000 and December 15, 2002, respectively. Thereafter,
the 2005 Notes and 2007 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 and 2007 Note Indenture. 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 and 2007 Notes at a premium. Also, in certain circumstances, the
F-12
<PAGE> 109
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 6. LONG-TERM DEBT AND LINES OF CREDIT -- CONTINUED
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.
(b) 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. The Credit Facility has a
maturity of July 2000. By amendment in December 1997, the aggregate advances
under the Credit Facility are limited to $30,000,000. 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 8.5% as of December 31, 1997 and rates ranging from 8.25% to
8.5% as of December 31, 1996. The Company is also required to pay a quarterly
facility fee of 0.2% to 0.625%, 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.
(c) In August 1997, the Company executed a new $25,000,000 purchase money
loan agreement. Under this agreement, the Company may borrow 70% of the cost of
new purchases of machinery, equipment and other fixed assets, which assets also
collateralize the loan. Borrowings under this facility bear the same rate of
interest as borrowings under the Credit Facility and reduce the Company's
availability under the Credit Facility. The purchase money loans are subject to
a call option under which all or any portion of the principal balance then
outstanding shall become due and payable within 30 days of the notice of the
call option.
(d) 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 to certain financial covenants from its lenders at
December 31, 1997 due to non-compliance with such covenants.
As of December 31, 1997 and 1996, assets recorded under a capital lease
were approximately $5,127,000 and $4,733,000, respectively, net of accumulated
amortization of approximately $806,000 and $394,000, respectively.
Aggregate minimum principal payment requirements on long-term debt,
including capital lease obligations, in each of the five years subsequent to
December 31, 1997 are as follows: 1998 - $13,960,000; 1999 - $7,406,000; 2000 -
$30,026,000; 2001 - $7,548,000; 2002 - $6,844,000; thereafter - $239,569,000.
Included in the current portion of long-term debt is $6,300,000 which is
required to be paid if the Ligonier, IN facility is sold as planned during 1998,
otherwise the obligation is not due until 2003 and thereafter as described in
the table above.
F-13
<PAGE> 110
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 6. LONG-TERM DEBT AND LINES OF CREDIT -- CONTINUED
In addition to long-term debt, the Company and its subsidiaries have line
of credit arrangements with foreign banks for short-term borrowings of
approximately $27,600,000, $36,340,000, and $17,191,000 at December 31, 1997,
1996 and 1995, respectively. The weighted average interest rate on short-term
bank borrowings outstanding under these arrangements was 4.1%, 3.1% and 6.1% as
of December 31, 1997, 1996 and 1995, respectively.
NOTE 7. COMMITMENTS AND CONTINGENCIES
The manufacture of automotive components entails the risk that a customer
or governmental authority may require the recall of one of the Company's
products or a product in which one of the Company's products has been installed.
The Company has taken and will continue to take all reasonable precautions to
avoid the risk of exposure to a recall or warranty claim that would have a
material effect on the financial position of the Company. The Company does not
believe that 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 8. INCOME TAXES
A summary of income (loss) before (provision) credit for income taxes,
minority interest and equity in income of joint ventures, and components of the
(provision) credit are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Income (loss) before (provision) credit for income
taxes, minority interest and equity in income of joint
ventures:
Domestic.............................................. $(31,095) $ 1,774 $ 4,268
Foreign............................................... (13,741) 8,628 7,415
-------- ------- -------
$(44,836) $10,402 $11,683
======== ======= =======
(Provision) credit for income taxes:
Currently payable--
Domestic.............................................. $ (3,297) $ (384) $ (843)
Foreign............................................... (1,334) (2,456) (2,977)
Utilization of tax credits............................ 1,000 2,517 3,182
-------- ------- -------
(3,631) (323) (638)
-------- ------- -------
Deferred--
Domestic.............................................. 14,053 (988) (945)
Foreign............................................... 3,264 (1,544) 325
Change in beginning of year valuation allowance....... (3,555) (220) --
-------- ------- -------
13,762 (2,752) (620)
-------- ------- -------
$ 10,131 $(3,075) $(1,258)
======== ======= =======
</TABLE>
F-14
<PAGE> 111
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 8. INCOME TAXES -- CONTINUED
Reconciliations of the U.S. Federal statutory income tax rates to the
Company's consolidated effective income tax rates applicable to continuing
operations are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<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... 6.4 9.4 2.1
Utilization of tax credits.............................. (2.2) (15.9) (27.2)
Increase in valuation allowance......................... 7.9 2.1 --
Goodwill amortization................................... .4 1.5 1.4
Write off of foreign tax credits........................ 3.4 -- --
Tax benefit on deductible preferred stock dividends..... (3.9) -- --
Other, net.............................................. .4 (2.5) (.5)
----- ----- ------
Effective income tax rates................................ (22.6)% 29.6% 10.8%
===== ===== ======
</TABLE>
The components of the net deferred income tax (asset) liability at December
31 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Deferred income tax liabilities:
Depreciation and basis difference......................... $ 8,715 $13,311
Unrealized gain on securities available for sale.......... 37 371
Other..................................................... 242 181
-------- -------
8,994 13,863
-------- -------
Deferred income tax assets:
Estimated net operating loss carryforwards................ (5,533) (2,966)
Employee benefits......................................... (2,802) (3,380)
Foreign tax credit carryforward........................... (980) (440)
Accruals.................................................. (3,444) (217)
Other tax credit carryforwards............................ (5,783) --
Inventory................................................. (931) (600)
Accounts and notes receivable reserve..................... (114) (22)
Write-down of investment.................................. (368) (368)
Loss on joint ventures.................................... (1,086) (1,052)
Other..................................................... (1,936) (649)
-------- -------
(22,977) (9,694)
Valuation allowance....................................... 4,519 964
-------- -------
(18,458) (8,730)
-------- -------
Net deferred income tax (asset) liability................... $ (9,464) $ 5,133
======== =======
</TABLE>
At December 31, 1997, the cumulative amount of undistributed earnings of
foreign subsidiaries was approximately $18,898,000. 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, 1997, the Company has net operating loss carryforwards
of approximately $17,190,000, which expire in varying amounts between 2003 and
2011, available from certain of its subsidiaries. The Company has recorded a
deferred tax asset of $5,533,000 associated with these carryfor-
F-15
<PAGE> 112
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 8. INCOME TAXES -- CONTINUED
wards. 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 (credits) for state income taxes are included in selling and
administrative expenses and amounted to $(22,000) in 1997, $197,000 in 1996 and
$1,369,000 in 1995.
NOTE 9. STOCK OPTION PLANS AND LONG-TERM INCENTIVE PLANS
The Company has 17,400 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 (Equity
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 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 4,900 and 6,754 as of December
31, 1997 and 1996, respectively.
Effective December 1997, the Company approved a Broad-Based Long Term
Incentive Plan (Broad-Based Plan), which consists of 572,129 shares of common
stock that are reserved and available for distribution to employees and
consultants to the Company, its Subsidiaries and Affiliates. The purpose of the
plan is to enable these persons to participate in the Company's future and to
aid in retaining employees of merit. Under the new plan, 5,200 options were
granted in 1997. Of the 5,200 options granted, 3,000 remain unexercisable as of
December 31, 1997.
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.
F-16
<PAGE> 113
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 9. STOCK OPTION PLANS AND LONG-TERM INCENTIVE PLANS -- CONTINUED
A summary of the stock option transactions of the 1983 Plan, the Equity
Plan, and the Broad-Based Plan for the years ended December 31, 1997, 1996 and
1995 is as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
--------------------------
EXERCISABLE OUTSTANDING OPTION PRICE (PER SHARE)
----------- ----------- ------------------------
<S> <C> <C> <C>
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
Granted.......................................... 19,804 13.75-22.75
Exercised........................................ (29,480) 9.25-19.125
Canceled......................................... (83,698) 9.25-33.25
-------
December 31, 1997.................................. 424,016 438,366 $ 9.25-33.25
=======
</TABLE>
The weighted-average fair value of options granted during the year is $5.01
and $7.63 for the years ended December 31, 1997 and 1996, respectively.
The following table summarizes information about options outstanding at
December 31, 1997:
<TABLE>
<S> <C> <C> <C> <C>
Options Outstanding:
Range of Exercise Prices...................... $ 9.25 $13.75-19.75 $20.00-27.13 $ 33.25
Number Outstanding at 12/31/97................ 12,875 283,322 124,769 17,400
Weighted-Average:
Remaining Contractual Life (years)......... 3.1 7.8 6.5 0.1
Exercise Price............................. $ 9.25 $ 18.03 $ 25.59 $ 33.25
Options Exercisable:
Number Exercisable at 12/31/97................ 12,875 272,260 121,481 17,400
Weighted Average Exercise Price............... $ 9.25 $ 18.05 $ 25.68 $ 33.25
</TABLE>
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 1997 1996
----------- ---- ----
<S> <C> <C>
Risk-free interest rate..................................... 5.7% 6.4%
Expected life............................................... 10 yrs. 10 yrs.
Expected volatility......................................... 34.6% 35.2%
Expected dividends.......................................... 2.0% 2.0%
</TABLE>
F-17
<PAGE> 114
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 9. STOCK OPTION PLANS AND LONG-TERM INCENTIVE PLANS -- CONTINUED
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 (loss) and earnings (loss)
per share would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C> <C>
Net income (loss)............................ As reported $(36,627) $11,229
Pro forma (36,644) 10,601
Basic net income (loss) per share............ As reported (4.23) 1.30
Pro forma (4.23) 1.23
</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 second of three payments was made
during 1997. The Company has accrued approximately $3,287,000 and $4,472,000 as
of December 31, 1997 and 1996, respectively, under this plan. Participants can
elect to receive their payments in either cash or common stock of the Company.
NOTE 10. 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>
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation (APBO)........ $3,800 $4,068
Plan assets at fair value................................... -- --
------ ------
APBO in excess of plan assets............................... 3,800 4,068
Unrecognized net gain....................................... 606 331
------ ------
Accrued postretirement benefit obligation................... $4,406 $4,399
====== ======
</TABLE>
The discount rates used in 1997 and 1996 were 7.00% and 7.25%,
respectively.
Net periodic postretirement benefit cost relates to interest costs of
$283,000, $319,000 and $350,000 for the years ended December 31, 1997, 1996 and
1995, respectively.
For measurement purposes, a 7.19% annual rate of increase was assumed in
per capita cost of covered health and dental care benefits for 1997. 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, 1997 by $336,000 and the interest cost component of net periodic
postretirement benefit cost for the year ended December 31, 1997 by $27,000.
NOTE 11. 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
F-18
<PAGE> 115
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 11. PENSION PLANS -- CONTINUED
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 $330,000 in 1997, $325,000 in 1996 and
$251,000 in 1995. 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>
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost................................................ $ 300 $ 285 $ 136
Interest on projected benefit obligation.................... 408 345 263
Actual return on assets..................................... (397) (324) (240)
Net amortization and deferral............................... 19 19 12
----- ----- -----
$ 330 $ 325 $ 171
===== ===== =====
</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>
1997 1996
------------------ ------------------
PBO< PBO> PBO< PBO>
ASSETS ASSETS ASSETS ASSETS
------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligation--
Vested........................................... $(5,952) $ (535) $(5,237) $ (511)
Nonvested........................................ (30) -- (50) --
------- ------- ------- -------
Accumulated benefit obligation................... (5,982) (535) (5,287) (511)
Effects of salary progression.................... -- (56) -- (116)
------- ------- ------- -------
Projected benefit obligation (PBO)............... (5,982) (591) (5,287) (627)
------- ------- ------- -------
Plan assets--
Cash equivalents................................. 1,309 -- 1,247 --
Equity securities................................ 5,306 -- 4,365 --
------- ------- ------- -------
6,615 -- 5,612 --
------- ------- ------- -------
Projected benefit obligation under (over) plan
assets........................................... 633 (591) 325 (627)
Unamortized net asset at transition................ (9) -- (31) --
Unamortized net (gain) loss........................ (224) -- (77) --
Unrecognized prior service cost.................... 768 -- 823 --
------- ------- ------- -------
Pension asset (liability) recorded in the
consolidated balance sheets...................... $ 1,168 $ (591) $ 1,040 $ (627)
======= ======= ======= =======
</TABLE>
The assumptions used in determining the funded status information shown
above were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Discount rate............................................... 6.0-7.0% 6.0-7.5% 7.25-7.5%
Long-term rate of return on assets.......................... 6.0-7.0% 6.0-7.25% 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
F-19
<PAGE> 116
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 11. PENSION PLANS -- CONTINUED
basis) of a participant's annual income. The cost of defined contributions
charged to earnings during 1997, 1996 and 1995 was approximately $2,108,000,
$2,252,000 and $2,255,000, 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 $463,000, $416,000 and $515,000 in 1997,
1996 and 1995, respectively. Contribution expense is net of dividends of
$105,000 in 1997, 1996 and 1995. As of December 31, 1997 and 1996, the following
are held by the ESOP: 238,000 and 218,000 allocated shares, respectively, and
zero and 28,000 suspense (unallocated) shares, respectively.
NOTE 12. DISCLOSURES ABOUT DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF
FINANCIAL INSTRUMENTS
The Company is a party to financial instruments with off-balance sheet risk
in the normal course of business to help meet financing needs and to reduce
exposure to fluctuating foreign currency exchange rates. The Company is exposed
to credit loss in the event of nonperformance by the other parties to the
financial instruments described below. However, the Company does not anticipate
nonperformance by the other parties. The Company does not engage in trading
activities with these financial instruments and does not generally require
collateral or other security to support these financial instruments. The
notional amounts of derivatives summarized below do not represent the amounts
exchanged by the parties and, thus, are not a measure of the exposure of the
Company through its use of derivatives. The amounts exchanged are calculated on
the basis of the notional amounts and the other terms of the derivatives.
Financial Instruments with Off-Balance Sheet Risk
The Company enters into forward currency exchange contracts to manage its
foreign currency exchange risk. As of December 31, 1997 and 1996, the notional
amounts of contracts outstanding were approximately $885,000 and $5,975,000,
respectively.
The Company enters into forward currency exchange contracts to reduce its
exposure against fluctuations in foreign currency exchange rates. During 1997,
the Company had seventeen forward currency exchange contracts, thirteen of which
matured during 1997, which exchanged 540,000,000 Japanese yen, 1,626,900
Deutsche marks and 7,000,000 Swedish krona. 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 and
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 $483,000 for the year ending December 31, 1997, 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.
F-20
<PAGE> 117
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 12. DISCLOSURES ABOUT DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF
FINANCIAL INSTRUMENTS -- CONTINUED
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>
1997 1996
----------------------- -----------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- ----- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Notes receivable............................ $ 140 $ 140 $ 1,268 $ 1,268
Long-term debt.............................. 305,353 298,232 292,812 293,212
Forward currency exchange contracts......... -- -- -- (258)
</TABLE>
NOTE 13. LEASES
The Company has leased certain of its buildings, equipment and vehicles
under operating leases. The leases involving buildings contain options enabling
the Company to renew the leases at the end of the respective lease terms. Rent
expense was approximately $6,178,000, $7,702,000 and $4,761,000 in 1997, 1996
and 1995, respectively.
Aggregate minimum future rentals under noncancellable leases are as
follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
(IN THOUSANDS)
<S> <C> <C>
1998........................................................ $ 871 $ 6,331
1999........................................................ 873 6,218
2000........................................................ 865 5,496
2001........................................................ 850 3,921
2002........................................................ 142 3,700
Thereafter.................................................. -- 25,539
------ -------
Total minimum lease payments.............................. 3,601 $51,205
=======
Amount representing interest................................ 418
------
Present value of net future minimum lease payments........ $3,183
======
</TABLE>
F-21
<PAGE> 118
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 14. ACCRUED LIABILITIES
Accrued liabilities consisted of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Compensation related....................................... $13,760 $10,336
Facilities and employee relocation......................... 606 7,471
Interest................................................... 7,385 7,449
Restructuring.............................................. 5,697 --
Other...................................................... 11,773 16,020
------- -------
$39,221 $41,276
======= =======
</TABLE>
The restructuring liability consists of severance related costs, loan
guarantees and other costs associated with the announced activities. There were
no significant costs paid and charged against the liability during 1997.
NOTE 15. CONVERTIBLE TRUST PREFERRED SECURITIES
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. Each preferred security is convertible, at
the option of the holder, into shares of common stock of the Company at the rate
of 1.1737 shares of common stock for each preferred security.
NOTE 16. STOCKHOLDERS' EQUITY
The Company has a stock rights plan which entitles the holder of each
right, upon the occurrence of certain events, to purchase one one-hundredth of a
share of a new series of preferred stock for $75. Furthermore, if the Company is
involved in a merger or other business combination at any time after the rights
become exercisable, the rights will entitle the holder to buy the number of
shares of common stock of the acquiring company having a market value of twice
the then current exercise price of each right. Alternatively, if a 15% or more
shareholder acquires the Company by means of a reverse merger in which the
Company and its stock survives, or engages in self-dealing transactions with the
Company, or if any person acquires 50% or more of the Company's common stock,
then each right not owned by a 15% or more shareholder will become exercisable
for the number of shares of common stock of the Company having a market value of
twice the then current exercise price of each right. The rights, which do not
have voting rights, expire in December 1998 and may be redeemed by the Company
at a price of $.01 per right at any time prior to their expiration or the time
they become exercisable.
The Company has authorized 1,000,000 shares of $1.00 par value preferred
stock.
NOTE 17. BUSINESS SEGMENT INFORMATION
The Company operates through its subsidiaries in the following industry
segments:
1. Automotive, which designs, develops and manufactures fuel storage
and delivery products for a broad range of U.S. and foreign manufacturers
of passenger automobiles and light trucks (including minivans),
F-22
<PAGE> 119
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 17. BUSINESS SEGMENT INFORMATION -- CONTINUED
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 and
3. Aftermarket and Corporate which includes aftermarket operations for
both the automotive and small engine markets and the Corporate
headquarters, including its direct investments.
Selected financial information about the Company's business and geographic
segments are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Financial Information by Business Segment
Net sales to customers:
Automotive................................................ $467,821 $444,239 $324,963
Small Engine.............................................. 130,015 127,914 116,743
Aftermarket and Corporate................................. 35,911 29,689 28,562
-------- -------- --------
633,747 601,842 470,268
Eliminations................................................ (13,842) (16,453) (10,996)
-------- -------- --------
Total net sales............................................. $619,905 $585,389 $459,272
======== ======== ========
Operating profit (loss):
Automotive................................................ $(15,105) $ 24,909 $ 20,167
Small Engine.............................................. 2,145 6,851 11,345
Aftermarket and Corporate................................. (10,961) (5,082) (7,378)
-------- -------- --------
Operating profit (loss)..................................... $(23,921) $ 26,678 $ 24,134
======== ======== ========
Identifiable assets:
Automotive................................................ $477,238 $463,144 $377,975
Small Engine.............................................. 87,468 67,020 52,798
Aftermarket and Corporate................................. 45,887 59,485 62,700
-------- -------- --------
Total identifiable assets................................... $610,593 $589,649 $493,473
======== ======== ========
Depreciation and amortization:
Automotive................................................ $ 23,907 $ 20,779 $ 12,967
Small Engine.............................................. 5,984 6,334 6,090
Aftermarket and Corporate................................. 1,526 2,623 3,394
-------- -------- --------
Total depreciation and amortization......................... $ 31,417 $ 29,736 $ 22,451
======== ======== ========
Capital expenditures:
Automotive................................................ $ 46,464 $ 84,293 $ 35,609
Small Engine.............................................. 13,107 11,769 9,692
Aftermarket and Corporate................................. 2,448 3,085 939
-------- -------- --------
Total capital expenditures.................................. $ 62,019 $ 99,147 $ 46,240
======== ======== ========
</TABLE>
F-23
<PAGE> 120
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 17. BUSINESS SEGMENT INFORMATION -- CONTINUED
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Financial Information by Geographic Segment
Net sales to customers:
United States............................................. $372,013 $342,883 $314,697
Europe.................................................... 201,377 214,400 88,736
Far East and Other Foreign................................ 46,515 28,106 55,839
-------- -------- --------
619,905 585,389 459,272
Net sales between geographic areas........................ 28,856 30,034 27,663
-------- -------- --------
648,761 615,423 486,935
Eliminations................................................ (28,856) (30,034) (27,663)
-------- -------- --------
Total net sales............................................. $619,905 $585,389 $459,272
======== ======== ========
Operating profit (loss):
United States............................................. $(23,305) $ 16,328 $ 14,313
Europe.................................................... (922) 7,595 3,335
Far East and Other Foreign................................ 306 2,755 6,486
-------- -------- --------
Operating Profit (loss)..................................... $(23,921) $ 26,678 $ 24,134
======== ======== ========
Identifiable assets:
United States............................................. $339,516 $324,988 $262,020
Europe.................................................... 191,630 194,017 193,876
Far East and Other Foreign................................ 79,447 70,644 37,577
-------- -------- --------
Total identifiable assets................................... $610,593 $589,649 $493,473
======== ======== ========
</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. Identifiable assets are those assets used in the
operations in each geographic area. Export sales from domestic locations were
approximately $119,300,000, $127,248,000 and $78,985,000 for 1997, 1996 and
1995, 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 19%, 20% and 19% of
consolidated sales in 1997, 1996 and 1995, respectively. Sales to another such
customer amounted to 5%, 10% and 21% of consolidated sales in 1997, 1996 and
1995, 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.
NOTE 18. SUPPLEMENTAL CASH FLOW INFORMATION
In 1997, 1996 and 1995, the Company paid $4,376,000, $5,048,000 and
$3,290,000 for income taxes and $29,957,000, $21,674,000 and $7,191,000 for
interest, respectively.
F-24
<PAGE> 121
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 19. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Selected quarterly financial information for the years ended December 31,
1997 and 1996 is as follows:
<TABLE>
<CAPTION>
QUARTER
-----------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
----- ------ ----- ------ -----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
1997--
Net sales.............................. $154,019 $153,842 $146,523 $165,521 $619,905
Cost of sales.......................... 129,821 131,437 125,911 151,582 538,751
-------- -------- -------- -------- --------
Gross profit........................ $ 24,198 $ 22,405 $ 20,612 $ 13,939 $ 81,154
======== ======== ======== ======== ========
Net income (loss)...................... $ 2,362 $ 1,184 $ (1,190) $(38,983) $(36,627)
======== ======== ======== ======== ========
Basic net income (loss) per share...... $ .27 $ .14 $ (.14) $ (4.49) $ (4.23)
======== ======== ======== ======== ========
Diluted net income (loss) per share.... $ .27 $ .14 $ (.14) $ (4.49) $ (4.23)
======== ======== ======== ======== ========
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 (loss)...................... $ 4,534 $ 4,824 $ 2,346 $ (475) $ 11,229
======== ======== ======== ======== ========
Basic net income (loss) per share...... $ .53 $ .56 $ .27 $ (.05) $ 1.30
======== ======== ======== ======== ========
Diluted net income (loss) per share.... $ .53 $ .56 $ .27 $ (.05) $ 1.30
======== ======== ======== ======== ========
</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 20. EARNINGS PER SHARE
In 1997, the Company adopted SFAS No. 128, "Earnings per Share," which was
effective December 15, 1997. The statement changes the calculation of earnings
per share to be more consistent with countries outside of the United States. In
general, the statement requires two calculations of earnings per share to be
disclosed, basic EPS and diluted EPS. Basic EPS is computed using only weighted
average shares outstanding. Diluted EPS is computed using the average share
price for the period when calculating the dilution of stock options. The
following is the Company's calculation of earnings per share.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net income (in thousands)................................ $ (36,627) $ 11,229 $ 13,830
========== ========== ==========
Weighted average share outstanding....................... 8,661,432 8,608,837 8,579,976
Dilutive options issued to executives.................... 6,664 40,543 29,455
---------- ---------- ----------
Diluted shares outstanding............................... 8,668,096 8,649,380 8,609,431
========== ========== ==========
Basic net income (loss) per share........................ $ (4.23) $ 1.30 $ 1.61
========== ========== ==========
Diluted net income (loss) per share...................... $ (4.23) $ 1.30 $ 1.61
========== ========== ==========
</TABLE>
NOTE 21. SUBSEQUENT EVENT
In April 1998, the Company received a commitment (Commitment) for a
$150,000,000 line of credit, consisting of a $125,000,000 revolving line of
credit (Revolving Credit Facility) and a $25,000,000 capital
F-25
<PAGE> 122
NOTE 21. SUBSEQUENT EVENT -- CONTINUED
expenditure facility (Capital Expenditure Facility). Closing of the transaction
contemplated by the Commitment is subject to various terms and conditions.
Under the terms of the Commitment, for the first year of the transaction,
the Revolving Credit Facility will bear interest at either the London Interbank
Offered Rate (LIBOR), plus 2.25% or at the Prime Rate, plus 0.25%. Availability
under the Revolving Credit Facility is subject to a borrowing base, consisting
of 85% of the eligible accounts receivable of the Company and certain of its
subsidiaries, 60% of certain raw materials and finished goods inventory and 70%
of commodity raw material resin inventory, less customary reserves. In addition,
the Revolving Credit Facility provides for a $25,000,000 sub-facility for the
issuance of letters of credit. The Capital Expenditure Facility initially bears
interest at the rate equal to the Prime Rate, plus 0.50% or LIBOR, plus 2.50%.
Amounts drawn under the Capital Expenditure Facility are repayable in 20 equal
quarterly principal installments, beginning one quarter after such draw.
Each of the Revolving Credit Facility and the Capital Expenditure Facility
(collectively, the New Credit Facility) is available for a period of five years
after the closing. If the Revolving Credit Facility is terminated by the Company
during the first three years, certain pre-payment fees may be applicable.
The New Credit Facility will contain numerous covenants, including
financial covenants such as a fixed charge ratio and a senior secured funded
indebtedness to EBITDA (earnings before interest, taxes, depreciation and
amortization) ratio, and restrictions on additional indebtedness, liens, capital
expenditures, mergers and sales of assets, and events of default. Obligations
outstanding under the Revolving Credit Facility will be secured by accounts
receivable, inventory and general intangibles of the Company and certain of its
subsidiaries, and also will be secured by a pledge of the stock of certain of
the material domestic subsidiaries of the Company and 65% of the stock of the
material foreign subsidiaries of the Company. Each advance under the Capital
Expenditure Facility will be secured by the item of equipment purchased with the
proceeds of such advance. The collateral for the Capital Expenditure Facility
will not constitute collateral for the Revolving Credit Facility. In addition,
certain of the subsidiaries of the Company will provide guarantees of the
obligations under the New Credit Facility. The proceeds of the New Credit
Facility will be used to replace the existing Credit Facility and the existing
purchase money loan agreement, to refinance the 2004 Notes including an early
retirement premium of approximately $2.3 million, for capital expenditures and
for general working capital purposes.
F-26
<PAGE> 123
WALBRO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 17,090 $ 13,539
Accounts receivable (net)................................. 160,761 144,985
Inventories............................................... 58,504 56,207
Other current assets...................................... 26,903 25,924
--------- ---------
Total Current Assets................................... 263,258 240,655
Property, Plant & Equipment:
Land, buildings and improvements.......................... 96,304 95,329
Machinery and equipment................................... 298,457 297,032
--------- ---------
Subtotal............................................... 394,761 392,361
Less -- Accumulated depreciation.......................... (123,962) (116,991)
--------- ---------
Net Property, Plant and Equipment...................... 270,799 275,370
Other Assets:
Goodwill (net)............................................ 32,668 32,803
Joint ventures, investments and other..................... 62,781 61,765
--------- ---------
Total Other Assets..................................... 95,449 94,568
--------- ---------
Total Assets........................................... $ 629,506 $ 610,593
========= =========
LIABILITIES
Current Liabilities:
Current portion long-term debt............................ $ 13,938 $ 13,960
Notes payable -- banks.................................... 23,940 26,204
Accounts payable.......................................... 100,884 84,209
Accrued liabilities....................................... 45,181 41,009
--------- ---------
Total Current Liabilities................................. 183,943 165,382
Long-Term Liabilities:
Long-term debt, net of current............................ 293,804 291,393
Other long-term liabilities............................... 15,572 14,952
--------- ---------
Total Long-Term Liabilities............................ 309,376 306,345
Company-obligated mandatorily redeemable convertible
preferred securities of Walbro Capital Trust holding
solely convertible debentures............................. 69,000 69,000
Stockholders' Equity
Common stock, $.50 par value; authorized 25,000,000;
outstanding 8,682,914 in 1998 and 8,682,595 in 1997.... 4,341 4,341
Paid-in capital........................................... 66,151 66,151
Retained earnings......................................... 34,508 33,938
Accumulated other comprehensive income.................... (37,813) (34,564)
--------- ---------
Total Stockholders' Equity............................. 67,187 69,866
--------- ---------
Total Liabilities and Stockholders' Equity............. $ 629,506 $ 610,593
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-27
<PAGE> 124
WALBRO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
MARCH 31, MARCH 31,
1998 1997
--------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Net Sales................................................... $169,292 $154,019
Cost of Sales & Expenses:
Cost of sales............................................. 144,058 129,821
Selling and administrative expenses....................... 12,951 12,120
Research and development expenses......................... 4,007 3,350
--------- ---------
Operating Income............................................ 8,276 8,728
Other Expense (Income):
Interest expense.......................................... 7,665 6,023
Interest income........................................... (162) (131)
Other (income) expense.................................... (1,468) (1,089)
--------- ---------
Income (Loss) Before Income Taxes, Minority Interest, and
Joint Ventures............................................ 2,241 3,925
Provision for Income Taxes.................................. 752 1,380
Minority Interest........................................... 1,391 984
Equity in (Income) of Joint Ventures........................ (474) (801)
--------- ---------
Net Income (Loss)........................................... $ 572 $ 2,362
========= =========
Basic Net Income Per Share.................................. $ 0.07 $ 0.27
========= =========
Diluted Net Income Per Share................................ $ 0.07 $ 0.27
========= =========
Weighted Average Shares Outstanding......................... 8,682,602 8,652,737
Dilutive Options Issued to Executives....................... 3,885 21,710
--------- ---------
Diluted Shares Outstanding.................................. 8,686,487 8,674,447
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-28
<PAGE> 125
WALBRO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
MARCH 31, MARCH 31,
1998 1997
--------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income................................................ $ 572 $ 2,362
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation & amortization............................ 9,718 8,180
(Gain) loss on disposition of assets................... (549) 123
Minority interest...................................... 26 110
(Income) of joint ventures............................. (474) (801)
Changes in assets and liabilities:
Deferred income taxes................................ (612) 108
Pension obligations & other.......................... 583 (592)
Accounts payable and accrued liabilities............. 34,819 (4,182)
Accounts receivable, net............................. (19,703) (20,412)
Inventories.......................................... (2,640) 1,646
Prepaid expenses and other........................... (5,284) (578)
-------- --------
Total adjustments.................................... 15,884 (16,398)
-------- --------
Net cash provided by (used in) operating activities.... 16,456 (14,036)
Cash Flows From Investing Activities:
Purchase of fixed assets.................................. (11,826) (14,232)
Purchase of other assets.................................. (12) (206)
Investment in joint ventures & other...................... (1,838) (2,654)
Proceeds from disposal of assets.......................... 3,689 24
-------- --------
Net cash used in investing activities.................. (9,987) (17,068)
Cash Flows From Financing Activities:
Borrowings under lines-of-credit.......................... 21,713 32,187
Repayments under lines-of-credit.......................... (23,600) (61,562)
Debt repayments........................................... (156) (143)
Proceeds from issuance of stock & options................. -- 69,000
Financing fees paid....................................... (366) (3,241)
Cash dividends paid....................................... (868) (865)
-------- --------
Net cash provided by (used in) financing activities.... (3,277) 35,376
Effect of exchange rate changes on cash................... 359 (2,014)
-------- --------
Net increase (decrease) in cash........................... 3,551 2,258
Cash and cash equivalents beginning balance............... 13,539 18,213
-------- --------
Cash and cash equivalents ending balance.................. $ 17,090 $ 20,471
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-29
<PAGE> 126
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) NEW CREDIT FACILITY
In April 1998 the Company received a commitment (Commitment) for a $150
million line of credit, consisting of a $125 million revolving line of credit
(Revolving Credit Facility) and a $25 million capital expenditure facility
(Capital Expenditure Facility). Closing of the transaction contemplated by the
Commitment is subject to various terms and conditions.
Under the terms of the Commitment, for the first year of the transaction,
the Revolving Credit Facility will bear interest at either the London Interbank
Offered Rate (LIBOR), plus 2.25% or at the Prime Rate, plus 0.25%. Availability
under the Revolving Credit Facility is subject to a borrowing base, consisting
of 85% of eligible accounts receivable of the Company and certain of its
subsidiaries, 60% of certain raw materials and finished goods inventory and 70%
of commodity raw material resin inventory, less customary reserves. In addition,
the Revolving Credit Facility provides for a $25 million sub-facility for the
issuance of letters of credit. The Capital Expenditure Facility initially bears
interest at the rate equal to the prime rate, plus 0.50% or LIBOR, plus 2.50%.
Amounts drawn under the Capital Expenditure Facility are repayable in 20 equal
quarterly principal installments, beginning one quarter after such draw.
Each of the Revolving Credit Facility and the Capital Expenditure Facility
(collectively, the New Credit Facility) is available for a period of five years
after closing. If the Revolving Credit Facility is terminated by the Company
during the first three years, certain pre-payment fees may be applicable.
The New Credit Facility will contain numerous covenants, including
financial covenants such as a fixed charge ratio and a senior secured funded
indebtedness to EBITDA (earnings before interest, taxes, depreciation and
amortization) ratio, and restrictions on additional indebtedness, liens, capital
expenditures, mergers and sales of assets, and events of default. Obligations
outstanding under the Revolving Credit Facility will be secured by accounts
receivable, inventory and general intangibles of the Company and certain
subsidiaries, and also will be secured by a pledge of the stock of certain of
the material domestic subsidiaries of the Company and 65% of the stock of the
material foreign subsidiaries of the Company. Each advance under the Capital
Expenditure Facility will be secured by the item of equipment purchased with the
proceeds of such advance. The collateral for the Capital Expenditure Facility
will not constitute collateral for the Revolving Credit Facility. In addition,
certain of the subsidiaries of the Company will provide guarantees of the
obligations under the New Credit Facility. The proceeds of the New Credit
Facility will be used to replace the existing credit facility and the existing
purchase money loan agreement, to refinance the Senior Notes due 2004 including
an early retirement premium of approximately $2.3 million, for capital
expenditures and for general working capital purposes.
(2) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market. Inventories include raw material and component parts, work-in-process
and finished products. Work-in-process and finished products inventories include
material, labor and manufacturing overhead costs.
Inventories are comprised of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and components.......................... $33,701 $30,857
Work-in-process....................................... 9,585 6,545
Finished products..................................... 15,218 18,805
------- -------
$58,504 $56,207
======= =======
</TABLE>
F-30
<PAGE> 127
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(3) COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted SFAS No. 130 "Reporting
Comprehensive Income." The impact of adoption has been to include changes in
deferred compensation, unrealized gain or loss on securities and foreign
currency translation, which have not been recognized in determining net income,
in a new presentation of comprehensive income, as presented below.
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------
MARCH 31, MARCH 31,
1998 1997
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Net income.............................................. $ 572 $ 2,362
------- -------
Foreign currency translation............................ (3,386) (8,452)
Unrealized gains (losses) on securities................. (1) (95)
Deferred compensation................................... 138 299
------- -------
Other comprehensive income (loss)....................... (3,249) (8,248)
------- -------
Comprehensive income (loss)............................. $(2,677) $(5,886)
======= =======
</TABLE>
F-31
<PAGE> 128
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(4) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
-------------------------------------------------------------------------
WALBRO CONSOLIDATION
CORPORATION AND
GUARANTOR NONGUARANTOR (PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ ------------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................. $ (841) $ 8,297 $ 9,634 $ -- $ 17,090
Accounts receivable, net................... 86,045 73,964 752 -- 160,761
Accounts receivable, intercompany.......... (130,438) (42,355) 163,810 8,983 --
Inventories................................ 25,689 31,873 942 -- 58,504
Prepaid expenses and other................. 11,219 5,324 657 -- 17,200
Deferred and refundable income taxes....... 491 1,428 7,784 -- 9,703
--------- -------- -------- --------- ---------
Total Current Assets (7,835) 78,531 183,579 8,983 263,258
--------- -------- -------- --------- ---------
Plant and Equipment, Net..................... 124,977 141,169 4,545 108 270,799
--------- -------- -------- --------- ---------
Other Assets:
Funds held for construction................ -- -- -- -- --
Joint ventures............................. 10,778 16,276 -- -- 27,054
Investments................................ 125,284 24,492 52,471 (197,948) 4,299
Goodwill, net.............................. 14,228 11,443 (1,524) 8,541 32,688
Notes receivable........................... -- 10,719 191,599 (202,182) 136
Deferred income taxes...................... -- 4,054 4,178 -- 8,232
Other...................................... 8,847 2,441 11,752 -- 23,040
--------- -------- -------- --------- ---------
Total Other Assets....................... 159,137 69,425 258,476 (391,589) 95,449
--------- -------- -------- --------- ---------
Total Assets............................. $ 276,279 $289,125 $446,600 $(382,498) $ 629,506
========= ======== ======== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt.......... $ 7,026 $ 54 $ 6,858 $ -- $ 13,938
Bank and other borrowings.................. -- 23,940 -- -- 23,940
Accounts payable........................... 40,256 54,789 5,839 -- 100,884
Accrued liabilities........................ 5,585 20,043 19,421 (788) 44,261
Dividends payable.......................... -- 920 -- -- 920
--------- -------- -------- --------- ---------
Total Current Liabilities................ 52,867 99,746 32,118 (788) 183,943
--------- -------- -------- --------- ---------
Long-Term Liabilities
Long-term debt, less current portion....... 164,425 12,236 340,219 (223,076) 293,804
Pension obligations........................ 2,818 2,765 7,076 -- 12,659
Deferred income taxes...................... -- 1,964 -- -- 1,964
Minority interest.......................... -- 949 -- -- 949
--------- -------- -------- --------- ---------
Total Long-Term Liabilities.............. 167,243 17,914 347,295 (223,076) 309,376
--------- -------- -------- --------- ---------
Redeemable Preferred Stock...................
Stockholders' Equity....................... -- 69,000 -- -- 69,000
Common stock, $.50 par value; authorized
25,000,000; outstanding 8,682,914 in
1998; 8,682,595 in 1997.................. -- 23,935 4,341 (23,935) 4,341
Paid-in capital............................ -- 72,770 66,151 (72,770) 66,151
Retained earnings.......................... 58,756 31,439 34,508 (90,195) 34,508
Deferred compensation...................... -- -- (241) -- (241)
Minimum pension liability adjustment....... -- -- -- -- --
Unrealized gain on securities available for
sale..................................... -- -- 67 -- 67
Cumulative translation adjustments......... (2,587) (25,679) (37,639) 28,266 (37,639)
--------- -------- -------- --------- ---------
Total Stockholders' Equity............... 56,169 102,465 67,187 (158,634) 67,187
--------- -------- -------- --------- ---------
Total Liabilities and Stockholders'
Equity................................. $ 276,279 $289,125 $446,600 $(382,498) $ 629,506
========= ======== ======== ========= =========
</TABLE>
F-32
<PAGE> 129
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(4) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS --
CONTINUED
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
---------------------------------------------------------------------------
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 and cash equivalents......... $ (744) $ 13,431 $ 852 $ -- $ 13,539
Accounts receivable, net.......... 80,936 63,194 855 -- 144,985
Accounts receivable,
intercompany.................... (144,222) (37,755) 171,052 10,925 --
Inventories....................... 26,086 29,012 1,109 -- 56,207
Prepaid expenses and other........ 5,988 9,549 1,868 -- 17,405
Deferred and refundable income
taxes........................... 470 1,253 6,796 -- 8,519
--------- -------- -------- --------- --------
Total Current Assets............ (31,486) 78,684 182,532 10,925 240,655
--------- -------- -------- --------- --------
Plant and Equipment, Net............ 123,635 144,423 7,204 108 275,370
--------- -------- -------- --------- --------
Other Assets:
Funds held for construction....... -- -- -- -- --
Joint ventures.................... 10,739 15,942 -- -- 26,681
Investments....................... 117,720 24,433 50,959 (189,851) 3,261
Goodwill, net..................... 14,342 11,444 (1,524) 8,541 32,803
Notes receivable -- 6,499 196,198 (202,571) 126
Deferred income taxes............. -- 4,001 4,178 -- 8,179
Other............................. 9,045 2,860 11,613 -- 23,518
--------- -------- -------- --------- --------
Total Other Assets.............. 151,846 65,179 261,424 (383,881) 94,568
--------- -------- -------- --------- --------
Total Assets...................... $ 243,995 $288,286 $451,160 $(372,848) $610,593
========= ======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term
debt............................ $ 7,026 $ 76 $ 6,858 $ -- $ 13,960
Bank and other borrowings......... -- 26,204 -- -- 26,204
Accounts payable.................. 21,540 55,730 6,939 -- 84,209
Accrued liabilities............... 1,103 18,699 20,127 (708) 39,221
Dividends payable................. -- 920 868 -- 1,788
--------- -------- -------- --------- --------
Total Current Liabilities....... 29,669 101,629 34,792 (708) 165,382
--------- -------- -------- --------- --------
Long-Term Liabilities
Long-term debt, less current
portion......................... 164,581 11,818 339,809 (224,815) 291,393
Pension obligations............... 2,505 2,625 6,693 -- 11,823
Deferred income taxes............. -- 2,077 -- -- 2,077
Minority interest................. -- 1,052 -- -- 1,052
--------- -------- -------- --------- --------
Total Long-Term Liabilities..... 167,086 17,572 346,502 (224,815) 306,345
--------- -------- -------- --------- --------
Redeemable Preferred Stock.......... -- 69,000 -- -- 69,000
Stockholders' Equity
Common stock, $.50 par value;
authorized 25,000,000;
outstanding 8,682,914 in 1998;
8,682,595 in 1997............... -- 23,935 4,341 (23,935) 4,341
Paid-in capital................... -- 72,819 66,151 (72,819) 66,151
Retained earnings................. 49,827 28,747 33,938 (78,574) 33,938
Deferred compensation............. -- -- (379) -- (379)
Minimum pension liability
adjustment...................... -- -- -- -- --
Unrealized gain on securities
available for sale.............. -- -- 68 -- 68
Cumulative translation
adjustments..................... (2,587) (25,416) (34,253) 28,003 (34,253)
--------- -------- -------- --------- --------
Total Stockholders' Equity...... 47,240 100,085 69,866 (147,325) 69,866
--------- -------- -------- --------- --------
Total Liabilities and
Stockholders' Equity.......... $ 243,995 $288,286 $451,160 $(372,848) $610,593
========= ======== ======== ========= ========
</TABLE>
F-33
<PAGE> 130
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(4) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS --
CONTINUED
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
-------------------------------------------------------------------------
WALBRO CONSOLIDATION
CORPORATION AND
GUARANTOR NONGUARANTOR (PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ ------------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net Sales.............................. $93,868 $83,421 $ 667 $(8,664) $169,292
Costs and Expenses:
Cost of sales........................ 80,829 71,223 670 (8,664) 144,058
Selling, administration & other
expenses.......................... 7,389 6,344 3,225 -- 16,958
------- ------- ------- ------- --------
Operating Income (Loss)................ 5,650 5,854 (3,228) -- 8,276
Other Expense (Income):
Interest expense..................... 4,096 2,851 8,471 (7,753) 7,665
Interest income...................... (1,853) (1,752) (4,310) 7,753 (162)
Foreign currency exchange loss
(gain)............................ (8) 96 -- -- 88
Other................................ (1,062) 98 (592) -- (1,556)
------- ------- ------- ------- --------
Income Before Provision for Income
Taxes, Minority Interest, Equity
in (income) Loss of Joint Ventures
and Subsidiaries.................. 4,477 4,561 (6,797) -- 2,241
Provision (credit) for Income
Taxes............................. 1,608 1,784 (2,640) -- 752
Minority Interest.................... -- 1,391 -- -- 1,391
Equity in (Income) Loss of Joint
Ventures.......................... (39) (435) -- -- (474)
Equity in (Income) of Subsidiaries... (1,980) -- (4,729) 6,709 --
------- ------- ------- ------- --------
Net Income........................... $ 4,888 $ 1,821 $ 572 $(6,709) $ 572
======= ======= ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997
-------------------------------------------------------------------------
WALBRO CONSOLIDATION
CORPORATION AND
GUARANTOR NONGUARANTOR (PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ ------------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net Sales.............................. $83,462 $76,336 $ 340 $(6,119) $154,019
Costs and Expenses:
Cost of sales........................ 69,021 66,641 278 (6,119) 129,821
Selling, administration & other
expenses.......................... 8,162 5,293 2,263 -- 15,718
------- ------- ------- ------- --------
Operating Income (Loss)................ 6,279 4,402 (2,201) -- 8,480
Other Expense (Income):
Interest expense..................... 4,009 1,737 6,335 (6,306) 5,775
Interest income...................... (1,134) (899) (4,404) 6,306 (131)
Foreign currency exchange loss
(gain)............................ 28 (71) 15 -- (28)
Other................................ (1,038) (23) -- -- (1,061)
------- ------- ------- ------- --------
Income Before Provision for Income
Taxes, Minority Interest, Equity
in (Income) Loss of Joint Ventures
and Subsidiaries.................. 4,414 3,658 (4,147) -- 3,925
Provision (credit) for Income
Taxes............................. 1,527 1,405 (1,552) -- 1,380
Minority Interest.................... -- 984 -- -- 984
Equity in (Income) Loss of Joint
Ventures.......................... (300) (501) -- -- (801)
Equity in (Income) of Subsidiaries... (1,793) (52) (4,957) 6,802 --
------- ------- ------- ------- --------
Net Income........................... $ 4,980 $ 1,822 $ 2,362 $(6,802) $ 2,362
======= ======= ======= ======= ========
</TABLE>
F-34
<PAGE> 131
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(4) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS --
CONTINUED
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
---------------------------------------------------------------------------
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>
Net cash provided by (used in)
operating activities $8,494 $ 3,947 $4,015 $-- $ 16,456
------ -------- ------ --- --------
Cash Flows from Investing Activities:
Purchase of plant and equipment........ (4,807) (7,011) (8) -- (11,826)
Acquisitions, net of cash acquired..... -- -- -- -- --
Purchase of other assets............... (94) 89 (7) -- (12)
Investment in joint ventures and
other................................ (3,534) (282) 1,978 -- (1,838)
Proceeds/(payments) of intercompany
note rec............................. -- -- -- -- --
Proceeds from disposal of assets -- 51 3,638 -- 3,689
------ -------- ------ --- --------
Net cash provided by (used in)
investing activities................. (8,435) (7,153) 5,601 -- (9,987)
------ -------- ------ --- --------
Cash Flows from Financing Activities:
Net borrowings (repayments) under
revolving line-of-credit
agreements........................... -- (2,287) 400 -- (1,887)
Debt repayments (156) -- -- -- (156)
Proceeds from issuance of long-term
debt................................. -- -- -- -- --
Proceeds from issuance of stock and
options.............................. -- -- -- -- --
Financing fees paid.................... -- -- (366) -- (366)
Cash dividends paid.................... -- -- (868) -- (868)
------ -------- ------ --- --------
Net cash provided (used in) financing
activities........................... (156) (2,287) (834) -- (3,277)
------ -------- ------ --- --------
Effect of Exchange Rate Changes on
Cash................................. -- 359 -- -- 359
------ -------- ------ --- --------
Net Increase (Decrease) in Cash........ (97) (5,134) 8,782 -- 3,551
Cash and Cash Equiv. at Begin of
Year................................. (744) 13,431 852 -- 13,539
------ -------- ------ --- --------
Cash and Cash Equiv. at End of
Period............................... $ (841) $ 8,297 $9,634 $-- $ 17,090
====== ======== ====== === ========
</TABLE>
F-35
<PAGE> 132
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(4) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS --
CONTINUED
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
-------------------------------------------------------------------------
WALBRO CONSOLIDATION
CORPORATION AND
GUARANTOR NONGUARANTOR (PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ ------------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities............................ $ 15,267 $ 8,273 $(37,576) $-- $(14,036)
-------- -------- -------- --- --------
Cash Flows From Investing Activities:
Purchase of plant and equipment....... (8,192) (5,945) (95) -- (14,232)
Acquisitions, net of cash acquired.... -- -- -- -- --
Purchase of other assets.............. (359) 22 131 -- (206)
Investment in joint ventures and
other.............................. (4,329) (164) 1,839 -- (2,654)
Proceeds/(payments) of intercompany
note rec........................... -- -- -- -- --
Proceeds from disposal of assets...... (1) 25 -- -- 24
-------- -------- -------- --- --------
Net cash provided by(used in) investing
activities............................ (12,881) (6,062) 1,875 -- (17,068)
-------- -------- -------- --- --------
Cash Flows From Financing Activities:
Net borrowings (repayments) under
revolving line-of-credit
agreements......................... -- (1,813) (27,562) -- (29,375)
Debt repayments....................... (145) 2 -- -- (143)
Proceeds from issuance of long-term
debt............................... -- (69,000) 69,000 -- --
Proceeds from issuance of stock and
options............................ -- 69,000 -- -- 69,000
Financing fees paid................... -- -- (3,241) -- (3,241)
Cash dividends paid................... -- -- (865) -- (865)
-------- -------- -------- --- --------
Net cash provided by (used in) financing
activities............................ (145) (1,811) 37,332 -- 35,376
-------- -------- -------- --- --------
Effect of Exchange Rate Changes on
Cash.................................. -- (654) (1,360) -- (2,014)
-------- -------- -------- --- --------
Net Increase (Decrease) in Cash......... 2,241 (254) 271 -- 2,258
Cash and Cash Equiv. at Begin of Year... 299 17,779 135 -- 18,213
-------- -------- -------- --- --------
Cash and Cash Equiv. at End of Period... $ 2,540 $ 17,525 $ 406 $-- $ 20,471
======== ======== ======== === ========
</TABLE>
F-36
<PAGE> 133
[ERNST & YOUNG LETTERHEAD]
Mr. Mike Shope
Walbro Corporation
6242 Garfield Street
Cass City, Michigan 48726-1325
April 14, 1998
Dear Sirs,
With respect to the contemplated filing of a registration statement by
Walbro Corporation and the inclusion in this filing of the audited financial
statements under French GAAP of Marwal Systems for fiscal years ended December
31, 1995, 1996 and 1997, we confirm that our audits of these Marwal Systems
financial statements were conducted substantially in accordance with US
generally accepted auditing standards.
Yours faithfully,
/s/ GILLES MEYER
- --------------------------------------
Gilles Meyer
Partner
F-37
<PAGE> 134
MARWAL SYSTEMS, S.N.C.
STATUTORY AUDITOR'S GENERAL REPORT
Year Ended December 31, 1997
In our capacity as statutory auditor, we present below our report on:
- the accompanying annual accounts of Marwal Systems,
- the specific procedures and disclosures prescribed by law,
for the year ended December 31, 1997.
These annual accounts are the responsibility of the Company's management.
Our responsibility is to express an opinion on these annual accounts based on
our audit.
1. OPINION ON THE ANNUAL ACCOUNTS
We conducted our audit in accordance with French auditing standards. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the annual accounts are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the annual accounts. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall annual account presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the annual accounts present fairly, in all material
respects, the financial position of the Company at December 31, 1997 and the
results of its operations for the year then ended.
11. SPECIFIC PROCEDURES AND DISCLOSURES PRESCRIBED BY LAW
We have also carried out, in accordance with professional standards, the
specific procedures prescribed by law.
We have nothing to report with respect to the fairness of information
contained in the Directors' Report and its consistency with the annual accounts
and other information presented to shareholders concerning the financial
position and annual accounts.
The Statutory Auditor
ERNST & YOUNG Audit
/s/ GILLES MEYER
--------------------------------------
Gilles Meyer
March 6, 1998
F-38
<PAGE> 135
MARWAL SYSTEMS, S.N.C.
BALANCE SHEET AS OF DECEMBER 31, 1997
(In French Francs)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------------------------
ACCUMULATED
DEPRECIATION
AMORTIZATION AND
GROSS ALLOWANCES NET BOOK VALUE
----- ---------------- --------------
<S> <C> <C> <C>
ASSETS
Fixed assets
Intangible fixed assets................................. 20.729.684,88 20.016.820,12 712.864,76
Tangible fixed assets................................... 195.110.282,11 109.881.452,28 85.228.829,83
Financial investments:
- -- Associates........................................... 22.791.879,00 -- 22.791.879,00
- -- Others............................................... 6.374.518,03 -- 6.374.518,03
-------------- -------------- --------------
Sub-total........................................... 245.006.364,02 129.898.272,40 115.108.091,62
-------------- -------------- --------------
Inventories
- -- Raw materials........................................ 23.749.844,00 1.763.056,00 21.986.788,00
- -- Work in-progress..................................... 2.791.156,00 114.766,00 2.676.390,00
- -- Furnished goods...................................... 7.625.179,00 760.089,00 6.865.090,00
-------------- -------------- --------------
Sub-total........................................... 34.166.179,00 2.637.911,00 31.528.268,00
-------------- -------------- --------------
Current assets
Advances and payments on accounts....................... 1.890.152,18 -- 1.890.152,18
Trade accounts and notes receivable:
- -- Customers and related accounts....................... 133.366.850,61 3.783.169,22 129.583.681,39
- -- Other................................................ 11.275.924,08 -- 11.275.924,08
Other receivables....................................... 1.262.790,11 -- 1.262.790,11
Cash and cash equivalent................................ 106.831.529,38 -- 106.831.529,38
Payments in advance..................................... 390.780,96 -- 390.780,96
Deferred Charges........................................ -- -- --
Foreign exchange translation differences................ 1.273.073,37 -- 1.273.073,37
-------------- -------------- --------------
Sub-total........................................... 256.291.100,69 3.783.169,22 252.507.931,47
-------------- -------------- --------------
Total Assets...................................... 535.463.643,71 136.319.352,62 399.144.291,09
============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
<S> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity
Share capital............................................... 90.660.000,00
Reserves.................................................... 4.305.050,83
Revaluation reserve
Retained earnings at January 1st............................ 37.762.183,66
Result for the year......................................... 41.682.692,84
--------------
Sub-total............................................... 174.409.927,33
--------------
Provisions for contingencies and charges.................... 5.265.122,88
Liabilities
Financial debts:
- -- Amounts owed to financial institutions................... 234.153,20
- -- Other financial debts.................................... 14.812.419,38
Government subsidies........................................ 2.300.000,00
Accounts payable and related
accounts.................................................... 161.799.190,73
Social charges payable...................................... 20.560.799,82
Taxes....................................................... 3.224.082,14
Other....................................................... 4.927.588,11
Other creditors:
- -- Accounts payable on fixed assets......................... 6.164.893,10
- -- Group.................................................... --
- -- Other.................................................... 24,00
Deferred income............................................. 4.785.923,26
Foreign exchange translation differences.................... 660.167,14
--------------
Sub-total............................................... 219.469.240,88
--------------
Total Liabilities and Shareholders' Equity............ 399.144.291,09
==============
</TABLE>
F-39
<PAGE> 136
MARWAL SYSTEMS, S.N.C.
INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1997
(In French Francs)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------
<S> <C> <C>
INCOME STATEMENT FOR THE YEAR
Operating revenues:......................................... 701.704.308,65
Sale of goods............................................... 676.820.865,02
Sale of services............................................ 15.333.088,92
Net sales................................................... 692.153.953,94
Movement in finished goods and work-in progress............. (2.537.150,00)
In-home production.......................................... 285.562,25
Grants...................................................... 490.998,85
Reversal of provisions and transfer of charges.............. 10.021.636,96
Other income................................................ 1.289.306,65
Operating expenses.......................................... 652.633.885,77
Purchases of raw materials and other supplies............... 342.138.752,19
Movements in raw materials stock............................ 4.649.952,00
Other purchases and extend charges.......................... 112.782.904,48
Taxes and similar charges................................... 9.511.399,78
Wages & salaries............................................ 101.299.556,33
Social charges.............................................. 42.615.435,07
Depreciation and amortisation expenses and provisions:
- - Fixed assets.............................................. 24.149.418,15
- - Current assets............................................ 1.205.055,28
- - Contingencies and charges................................. 3.905.450,94
Other charges............................................... 10.377.961,55
--------------
652.633.885,77
Operating profit............................................ 49.070.422,88
Financial income:
From other investments...................................... --
Other interest and similar income........................... 2.691.468,39
Reversal of provisions and transfer of charges.............. 1.608.447,02
Foreign exchange gains...................................... 9.381.457,05
--------------
13.681.372,46
Financial expenses:
Depreciation and provisions................................. 1.425.880,37
Interest and similar charges................................ 4.846.615,22
Foreign gains............................................... 10.464.489,91
--------------
16.736.985,50
Net financial income/(expenses)............................. (3.055.613,84)
Profit before taxation...................................... 46.014.809,84
Exceptional income:......................................... 1.904.436,60
From operating activities................................... --
From capital transactions................................... 409.464,60
Reversal of provisions and transfer of charges.............. 1.494.972,00
--------------
1.904.436,60
Exceptional charges:........................................ 2.596.473,60
From operating activities................................... 2.320.049,99
From capital transactions................................... 145.203,61
Depreciation and provisions................................. 131.220,00
--------------
2.596.473,60
Exceptional profit (loss)................................... (692.037,00)
Profit before taxation...................................... 45.322.772,84
Profit-Sharing.............................................. 3.640.080,00
Income Tax.................................................. --
Profit after taxation....................................... 41.682.692,84
</TABLE>
F-40
<PAGE> 137
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS
(In Thousands of French Francs)
EVENTS DURING THE YEAR
The company owns 98% of the shares of Marwal Argentina S.A. as from
12/30/97 (11.760 shares), for an amount of 60,564 French Francs
NOTE 1: ACCOUNTING POLICIES
The accounts of the Company have been prepared based upon generally
accepted accounting principles in France which conform with the Chart of
Accounts as set out in the French law dated April 30, 1983 and the decree of
November 29, 1983.
1.1 INTANGIBLE FIXED ASSETS
The intangible fixed assets consist mainly of goodwill which is amortised
on a straight line basis over 5 years and totally amortised at the end of 1997.
The amortisation methods and the useful lives for other categories are as
follows:
<TABLE>
<S> <C>
- - Set-up costs 3 years straight line
- - Computer software 1-3 years straight line
</TABLE>
1.2 TANGIBLE FIXED ASSETS
Tangible fixed assets are valued at historical purchase price or cost of
production when they have been produced in house. The cost of production is made
up of the following elements: purchase price of raw materials, consumables and
direct production costs.
Assets are depreciated on a straight line basis or declining balance, when
applicable, for items purchased during or after 1992.
The depreciation methods and the useful lives applied are as follows:
<TABLE>
<S> <C>
Installations 10 years straight line
Machinery 5-6 2/3 straight line / declining balance
Toolings 1-5 years straight line / declining balance
Leasehold improvements -- Mac./Toolings 5-6 2/3 straight line / declining balance
Vehicles 4-5 years straight line
Fixtures and fittings 10 years straight line
Computer hardware 4-5 years straight line/ declining balance
</TABLE>
1.3 FINANCIAL INVESTMENTS
The investments in associates are valued at their acquisition cost in the
assets of the Company. A reserve is recorded when their fair value is less than
their book value.
1.4 INVENTORY AND WORK IN PROGRESS
The policies used are as follows
- Inventory is valued at the total cost of production.
- Raw materials and consumables are valued at the average weighted
cost for goods received in the last three months. This method is similar to
FIFO.
- The Cost of production includes direct and indirect production
expenses and an allocation of the costs of running the Head Office, to the
extent that they are related to the production.
F-41
<PAGE> 138
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
NOTE 1: ACCOUNTING POLICIES -- CONTINUED
- The provision for obsolescence is determined based upon the
anticipated sales.
1.5 ALLOWANCE FOR DOUBTFUL ACCOUNTS
The receivables are valued at their face value, a provision is recorded
when the value recoverable is less than the book value.
1.6 FOREIGN EXCHANGE TRANSACTIONS
The receivables and payables denominated in foreign currency are translated
into French Francs at the December 31st exchange rate. The resulting differences
with amounts translated at historical exchange rates are shown in the balance
sheet as "foreign exchange translation differences."
A provision for exchange losses is recorded separately for unrealized
losses.
1.7 RETIREMENT INDEMNITY LIABILITIES
The "Projected Benefit Obligation" has been applied to calculate the
retirement obligation.
The total obligation is covered by:
- a fund run by La Mondiale, with a value of KFRF.9,680
- a provision of KFRF.1,000 included in the Marwal accounts at
December 31, 1997
- an amount payable to La Mondiale of KFRF.450.
NOTE 2: FIXED ASSETS
The movements in gross value are as follows:
<TABLE>
<CAPTION>
12/31/96 INCREASE DECREASE 12/31/97
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Intangible fixed assets................................... 19761 969 -- 20730
Tangible fixed assets..................................... 156594 42804 4288 195110
Financial investments..................................... 27760 2,029 623 29,166
</TABLE>
The movements in amortisation and depreciation are analysed as follows:
<TABLE>
<CAPTION>
12/31/96 INCREASE DECREASE 12/31/97
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Intangible fixed assets................................... 19075 942 -- 20017
Tangible fixed assets 90817 23207 4143 109881
</TABLE>
NOTE 3: INVENTORIES AND WORK IN PROGRESS
The reserve for obsolescence for raw materials, consumables and finished
goods at 31/12/97 amounts to KFRF.2.638.
NOTE 4: ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES
At December 31, 1997, accounts receivable can be split by maturity date as
follows:
<TABLE>
<CAPTION>
TOTAL LESS THAN 1 YEAR GREATER THAN 1 YEAR
----- ---------------- -------------------
<S> <C> <C> <C>
Long term receivables................................ 6,375 6,307 68
Current assets....................................... 147796 147796 --
</TABLE>
F-42
<PAGE> 139
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
NOTE 5: SHORT TERM INVESTMENTS
N/A
NOTE 6: PREPAYMENTS AND DEFERRED INCOME
<TABLE>
<CAPTION>
12/31/97
--------
<S> <C>
Prepayments
Fees...................................................... 159
Prepaid maintenance....................................... 29
Leasing................................................... 203
---
391
</TABLE>
<TABLE>
<CAPTION>
12/31/97
--------
<S> <C>
Deferred income
Finished goods sales...................................... 74
Long term contracts (tooling)............................. 4712
----
4786
</TABLE>
NOTE 7: DEFERRED CHARGES
<TABLE>
<CAPTION>
CHARGED TO
INCOME STATEMENT
TOTAL 1997 12/31/97
----- ---------------- --------
<S> <C> <C> <C>
Deferred charges
Amortised over 3 years........................ 497 497 0
</TABLE>
NOTE 8: SHAREHOLDERS' EQUITY
The capital stock is made up of 906,600 shares with a nominal value of
FRF.100, completely paid up.
The accounts of the Company are consolidated in the group accounts of the
Magneti Marelli Spa Group.
NOTE 9: TAX PROVISIONS AND PROVISIONS FOR CONTINGENCIES AND CHARGES
The movements in the year are analysed as follows:
<TABLE>
<CAPTION>
12/31/96 ADDITIONS REVERSALS 12/31/97
-------- --------- --------- --------
<S> <C> <C> <C> <C>
Provisions for contingencies and charges of which:...... 11223 5333 11290 5266
- - Provision for payments on retirement.................. 672 1000 672 1000
- - Provision for guarantee............................... 5812 1948 5812 1948
- - Provision for reorganisation.......................... 70 0 70 0
- - Provision for litigation.............................. 2586 653 2691 548
- - Provision for loss on foreign exchange................ 762 1273 762 1273
- - Provision for charges................................. 1283 409 1283 409
- - Provision for unproductive hours...................... 38 50 -- 88
</TABLE>
F-43
<PAGE> 140
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
NOTE 10: CREDITORS
At December 31, 1997, debts, excluding advances and deposits received,
deferred income and foreign exchange differences, can be analysed by maturity
date as follows:
<TABLE>
<CAPTION>
LESS THAN BETWEEN 1 AND
TOTAL 1 YEAR 5 YEARS >5 YEARS
----- --------- ------------- --------
<S> <C> <C> <C> <C>
Government subsidy................................... 2300 2300
Other financial debts................................ 14812 14812
Trade payables and other liabilities++............... 196677 193037 3640
Overdraft............................................ 234 234
</TABLE>
- -------------------------
++ of which trade bills payable: 55338
NOTE 11: INFORMATION ON SUBSIDIARY
<TABLE>
<CAPTION>
EQUITY CAPITAL
SHARE OTHER THAN LAST CLOSING
SHARE IN % DETAILED INFORMATION CAPITAL CAPITAL RESULT
- ---------- -------------------- ------- -------------- ------------
(IN THOUSANDS OF PESOS)
<C> <S> <C> <C> <C>
95% Marwal de Mexico S.A. de C.V. Tepotzotplan
Estado de Mexico............................... 49655* (8739)* 8923*
98% Marwal Argentina S.A. Buenos Aires Estado de
Argentina...................................... 12000 Non available Non available
</TABLE>
- -------------------------
* after reevaluation
<TABLE>
<CAPTION>
GROSS NET BOOK LOANS GUARANTEE DIVIDENDS
DETAILED INFORMATION VALUE VALUE GIVEN GIVEN RECEIVED
-------------------- ----- -------- ----- --------- ---------
(IN THOUSANDS OF FRANCS)
<S> <C> <C> <C> <C> <C>
Marwal de Mexico S.A. de C.V..................... 22731 22731 -- -- --
Marwal Argentina S.A............................. 60 60 6085 -- --
</TABLE>
The exemption of sub-groups enables Marwal Systems to not consolidate its
subsidiaries.
NOTE 12: RELATED PARTIES
The related parties transactions are included in the different accounts in
the balance sheet as follows:
<TABLE>
<CAPTION>
ASSETS LIABILITIES
------ -----------
<S> <C> <C> <C>
Trade receivables............ 51778 Trade payables............... 15020
Other receivables............ 2953 Other payables............... 2906
Cash and cash equivalent..... 106522 Financial debt............... --
</TABLE>
Interest expenses and financial income with related parties are as follows:
<TABLE>
<S> <C> <C> <C>
Operating income............. 73062 Operating expenses........... 45322
Financial income............. 2953 Interest expenses............ 2812
</TABLE>
F-44
<PAGE> 141
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
NOTE 13: ACCRUALS AND INCOME RECEIVABLE RELATING TO DIFFERENT BALANCE SHEET
ACCOUNTS
<TABLE>
<CAPTION>
ASSETS LIABILITIES
------ -----------
<S> <C> <C> <C>
Trade receivables
- - Customers.......................... 6092 Trade payables
- - Suppliers.......................... 240 - Suppliers.......................... 12337
- - Other.............................. 3100 - Tax and social charges............. 16248
- Customers.......................... 1793
- Other.............................. 3135
Other liabilities.................... --
Other receivables.................... -- Financial debts...................... 2050
</TABLE>
NOTE 14: EXCHANGE DIFFERENCES RELATED TO BALANCE SHEET ACCOUNTS
<TABLE>
<CAPTION>
EXCHANGE DIFFERENCE
--------------------
ASSET LIABILITY
----- ---------
<S> <C> <C>
Assets
Trade receivables........................................... 736 85
Liabilities
Trade payables.............................................. 537 575
</TABLE>
NOTE 15: SALES TURNOVER ANALYSIS
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Sales....................................................... 610479 692154
Sales of goods.............................................. 596746 676821
Sales of services........................................... 13733 15333
Split between export/domestic
Domestic.................................................... 323428 290827
Export...................................................... 287051 401327
Sales....................................................... 610479 692154
</TABLE>
NOTE 16: DEFERRED TAX POSITION
<TABLE>
<CAPTION>
12/31/96 MOVEMENTS 12/31/97
----------------- ----------------- -----------------
ASSET LIABILITY ASSET LIABILITY ASSET LIABILITY
----- --------- ----- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Timing differences
Accrued expenses payable to La
Mondiale........................................ 811 811 450 450
Organic......................................... 799 799 797 797
Provision for contingencies and charges......... 1976 1976 1459 1459
Profit sharing.................................. 6348 6348 3650 3640
Expenses to amortize............................ 497 497
Elements having an impact on 1997 fiscal
result........................................
Vehicle leasing................................. 4
Difference on foreign exchange unrealised
gains......................................... (605)
</TABLE>
F-45
<PAGE> 142
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
NOTE 17: EMPLOYEE INFORMATION
<TABLE>
<CAPTION>
PERMANENT STAFF TEMPORARY STAFF
--------------- ---------------
<S> <C> <C>
Executives & Management............................ 79
Employees.......................................... 155 7
Labor and production............................... 475 56
--- --
Total............................................ 709 63
=== ==
</TABLE>
NOTE 18: LEASE COMMITMENTS
The company leases certain of its buildings:
<TABLE>
<CAPTION>
DEPRECIATION EXPENSE
ACQUISITION -------------------------- NET BOOK
BALANCE SHEET ACCOUNT COST PERIOD ENDED ACCUMULATED VALUE
--------------------- ----------- ------------ ----------- --------
<S> <C> <C> <C> <C>
Buildings
Chalons........................................... 5000 172 632 4368
Saint-Martin...................................... 8059 101 101 7958
----- --- --- -----
Total........................................... 13059 273 733 12326
===== === === =====
</TABLE>
NOTE 19: COMMITMENTS UNDERTAKEN AND RECEIVED
<TABLE>
<S> <C>
Discounted trade bills receivable but not matured........... 83007
</TABLE>
LEASING:
* present value of lease payments based on the BT01 index (value at 01.01.97 =
538.3 francs)
<TABLE>
<CAPTION>
LEASE PAYMENTS FUTURE LEASE PAYMENTS
-------------------- -------------------------------------------
PERIOD LESS THAN Between 1 5 TERM
BALANCE SHEET CATEGORY ENDED ACCUMULATED 1 YEAR AND 5 YEARS YEARS TOTAL PRICE
---------------------- ------ ----------- --------- ----------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Buildings
Chalons*........................ 588.4 2160.3 591.0 2364.1 1797.9 4753.0
Saint-Martin.................... 113.8 113.8 535.4 3391.4 6089.8 10016.6
----- ------ ------ ------ ------ ------- -
Total........................... 702.2 2274.1 1126.4 5755.5 7887.7 14769.6 0
===== ====== ====== ====== ====== ======= =
</TABLE>
NOTE 20: INFORMATION RELATING TO MANAGEMENT
N/A
NOTE 21: EXCEPTIONAL INCOME
<TABLE>
<S> <C> <C>
Exceptional income from operating activities................ 0
Exceptional income from capital transactions................ 409
Income from the sale of fixed assets........................ 409
Reversal of provisions and transfer of charges.............. 1495
Provision for reorganisation................................ 70
Provision for litigation.................................... 392
Provision for charges....................................... 1033
</TABLE>
F-46
<PAGE> 143
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
NOTE 22: EXCEPTIONAL CHARGES
<TABLE>
<S> <C> <C>
Exceptional charges on operating activities................. 2320
Redundancy payments......................................... 1382
Reimplantation costs........................................ 531
Non refunded IVA............................................ 391
Other....................................................... 16
Exceptional charges from capital transactions............... 145
Net book value of fixed assets sold......................... 145
Depreciation and provisions................................. 131
Provisions for risk......................................... 131
</TABLE>
NOTE 23: CHANGE IN ACCOUNTING POLICIES
N/A
NOTE 24: ANALYSIS OF INCOME TAX
As Marwal Systems became a partnership as from 10/01/95, there is no income
tax booked.
<TABLE>
<CAPTION>
BASE TAX
-------- ---
12/31/97
--------
<S> <C> <C>
Operating profits........................................... 46015 0
Exceptional items........................................... (692) 0
-
Profit before tax........................................... 45323 0
Income tax credit........................................... 0
-
Total Income Tax for the Company.......................... 0
=
</TABLE>
NOTE 25: RECONCILIATION TO U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The accompanying financial statements of Marwal Systems S.N.C. have been
prepared in accordance with accounting principles required in France. A
reconciliation of these reported results to generally accepted principles in the
United States is as follows:
<TABLE>
<CAPTION>
1997
----
<S> <C>
Profit after taxation as shown in the financial
statements................................................ 41,683
Adjust depreciable life of goodwill......................... (375)
Adjust depreciable expense of fixed assets.................. 1,821
Other....................................................... (416)
------
Net income according to generally accepted accounting
principles in the United States........................... 42,713
</TABLE>
F-47
<PAGE> 144
MARWAL SYSTEMS, S.N.C.
STATUTORY AUDITOR'S GENERAL REPORT
Year Ended December 31, 1996
In our capacity as statutory auditor, we present below our report on:
- the accompanying annual accounts of Marwal Systems,
- the specific procedures and disclosures prescribed by law,
for the year ended December 31, 1996.
These annual accounts are the responsibility of the Company's management.
Our responsibility is to express an opinion on these annual accounts based on
our audit.
1. OPINION ON THE ANNUAL ACCOUNTS
We conducted our audit in accordance with French auditing standards. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the annual accounts are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the annual accounts. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall annual account presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the annual accounts present fairly, in all material
respects, the financial position of the Company at December 31, 1996 and the
results of its operations for the year then ended.
II. SPECIFIC PROCEDURES AND DISCLOSURES PRESCRIBED BY LAW
We have also carried out, in accordance with professional standards, the
specific procedures prescribed by law.
We have nothing to report with respect to the fairness of information
contained in the Directors' Report and its consistency with the annual accounts
and other information presented to shareholders concerning the financial
position and annual accounts.
The Statutory Auditor
ERNST & YOUNG Audit
/s/ GILLES MEYER
- --------------------------------------
Gilles Meyer
March 7, 1997
F-48
<PAGE> 145
MARWAL SYSTEMS, S.N.C.
BALANCE SHEET AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------------------
ACCUMULATED
DEPRECIATION
AMORTIZATION AND
GROSS ALLOWANCES NET BOOK VALUE
----- ---------------- --------------
(IN FRENCH FRANCS)
<S> <C> <C> <C>
ASSETS
Fixed Assets
Intangible fixed assets...................... 19.761.392,48 19.074.600,32 686.792,16
Tangible fixed assets........................ 156.594.185,63 90.816.990,28 65.777.195,35
Financial investments:
- -- Associates................................ 22.731.315,00 -- 22.731.315,00
- -- Others.................................... 5.029.079,77 -- 5.029.079,77
-------------- --------------- ---------------
Sub-total............................... 204.115.972,88 109.891.590,60 94.224.382,28
-------------- --------------- ---------------
Inventories
- -- Raw materials............................. 28.365.181,00 2.416.159,00 25.949.022,00
- -- Work-in-progress.......................... 2.868.378,00 233.271,00 2.635.107,00
- -- Finished goods............................ 10.119.722,00 928.075,00 9.191.647,00
-------------- --------------- ---------------
Sub-total............................... 41.353.281,00 3.577.505,00 37.775.776,00
-------------- --------------- ---------------
Current assets
Advances and payments on accounts............ 932.195,00 932.195,00
Trade accounts and notes receivable:
- -- Customers and related accounts............ 118.214.952,27 3.803.797,82 114.411.154,45
- -- Other..................................... 9.530.704,08 9.530.704,08
Other receivables............................ 1.489.686,35 1.489.686,35
Cash and cash equivalent..................... 101.785.260,99 101.785.260,99
Payments in advance.......................... 244.063,94 244.063,94
Deferred charges............................. 497.004,94 497.004,94
Foreign exchange translation differences..... 761.691,02 761.691,02
-------------- --------------- ---------------
Sub-total............................... 233.455.558,59 3.803.797,82 229.651.760,77
-------------- --------------- ---------------
Total Assets.......................... 478.924.812,47 117.272.893,42 361.651.919,05
============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
<S> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity
Share capital............................................. 90.660.000,00
Reserves.................................................. 1.470.178,30
Revaluation reserve
Retained earnings at January 1st.......................... 24.306.987,50
Result for the year....................................... 56.697.450,69
--------------
Sub-total............................................ 173.134.616,49
--------------
Provisions for contingencies and charges.................... 11.222.783,62
Liabilities
Financial debts:
- - Amounts owed to financial institutions.................... 71.741,14
- - Other financial debts..................................... 7.637.640,38
Accounts payable and related accounts....................... 130.236.872,44
Social charges payable...................................... 21.804.322,68
Taxes....................................................... 3.224.512,15
Other....................................................... 4.710.583,24
Other creditors:
- - Accounts payable on fixed assets.......................... 7.006.722,04
- - Group..................................................... 449,84
- - Other..................................................... 64.874,81
Deferred income............................................. 1.271.517,00
Foreign exchange translation differences.................... 1.265.283,22
--------------
Sub-total............................................ 177.294.518,94
--------------
Total Liabilities and Shareholders' Equity........ 361.651.919,05
==============
</TABLE>
F-49
<PAGE> 146
MARWAL SYSTEMS, S.N.C.
INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
(IN FRENCH FRANCS)
<S> <C> <C>
INCOME STATEMENT FOR THE YEAR
Operating revenues:......................................... 616.818.427,92
Sale of goods............................................... 596.746.296,62
Sale of services............................................ 13.732.425,85
Net sales................................................... 610.478.722,77
Movement in finished goods and work-in-progress............. (1.616.414,00)
In-house production......................................... 568.066,00
Grants...................................................... 493.725,00
Reversal of provisions and transfer of charges.............. 5.013.288,15
Other income................................................ 1.881.040,00
Operating expenses.......................................... 554.232.751,85
Purchases of raw materials and other supplies............... 284.395.019,10
Movements in raw materials stock............................ (3.520.706,00)
Other purchases and external charges........................ 95.604.496,22
Taxes and similar charges................................... 9.677.879,14
Wages & salaries............................................ 91.916.790,49
Social charges.............................................. 39.787.018,33
Depreciation and amortisation expenses and provisions:
- - Fixed assets.............................................. 23.855.292,82
- - Current assets............................................ 2.259.789,97
- - Contingencies and charges................................. 8.262.354,05
Other charges............................................... 1.994.817,73
--------------
554.232.751,85
Operating profit............................................ 62.585.676,07
Financial income:
From other investments...................................... 136,92
Other interest and similar income........................... 2.245.533,46
Reversal of provisions and transfer of charges.............. --
Foreign exchange gains...................................... 10.316.211,72
--------------
12.561.882,10
Financial expenses:
Depreciation and provisions................................. 1.022.855,69
Interest and similar charges................................ 3.906.694,57
Foreign exchange losses..................................... 4.124.523,99
--------------
9.054.074,25
Net financial income/(expenses)............................. 3.507.807,85
Profit before taxation..................................... 66.093.483,92
Exceptional income:......................................... 3.104.503,48
From operating activities................................... 1.448.388,61
From capital transactions................................... 431.443,87
Reversal of provisions and transfer of charges.............. 1.224.671,00
--------------
3.104.503,48
Exceptional charges:........................................ 6.152.294,71
From operating activities................................... 4.382.238,16
From capital transactions................................... 275.084,55
Depreciation and provisions................................. 1.494.972,00
--------------
6.152.294,71
Exceptional profit (loss)................................... (3.047.791,23)
Profit before taxation...................................... 63.045.692,69
Profit-Sharing.............................................. 6.348.242,00
Income Tax.................................................. --
Profit after taxation....................................... 56.697.450,69
</TABLE>
F-50
<PAGE> 147
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS
(In Thousands of French Francs)
EVENTS DURING THE YEAR
The financial investment in Marwal de Mexico was raised from 36.369 French
Francs to 22.731.315 French Francs, which is 95% of the shares.
NOTE 1: ACCOUNTING POLICIES
The accounts of the Company have been prepared based upon generally
accepted accounting principles in France which conform with the Chart of
Accounts as set out in the French law dated April 30, 1983 and the decree of
November 29, 1983.
1.1 INTANGIBLE FIXED ASSETS
The intangible fixed assets consist mainly of goodwill which is amortised
on a straight line basis over 5 years and totally amortised at the end of 1996.
The amortisation methods and the useful lives for other categories are as
follows:
- - Set-up costs
- - Computer software
3 years straight line
1-3 years straight line
1.2 TANGIBLE FIXED ASSETS
Tangible fixed assets are valued at historical purchase price or cost of
production when they have been produced in house. The cost of production is made
up of the following elements: purchase price of raw materials, consumables and
direct production costs.
Assets are depreciated on a straight line basis or declining balance, when
applicable, for items purchased during or after 1992.
The depreciation methods and the useful lives applied are as follows:
Installations
Machinery
Toolings
Leasehold improvements-Mac/Toolings
Vehicles
Fixtures and fittings
Computer hardware
10 years straight line
5-6 2/3 straight line/declining balance
1-5 years straight line/declining balance
5-6 2/3 straight line/declining balance
4-5 years straight line
10 years straight line
4-5 years straight line/declining balance
1.3 FINANCIAL INVESTMENTS
- The investments in associates are valued at their acquisition cost
in the assets of the Company.
- A reserve is recorded when their fair value is less than their book
value.
1.4 INVENTORY AND WORK-IN-PROGRESS
The policies used are as follows:
- Inventory is valued at the total cost of production.
- Raw materials and consumables are valued at the average weighted
cost for goods received in the last month. This method is similar to FIFO.
- The Cost of production includes direct and indirect production
expenses and an allocation of the costs of running the Head Office, to the
extent that they are related to the production.
F-51
<PAGE> 148
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
- The provision for obsolescence is determined based upon the
anticipated sales.
1.5 ALLOWANCE FOR DOUBTFUL ACCOUNTS
The receivables are valued at their face value, a provision is recorded
when the value recoverable is less than the book value.
1.6 FOREIGN EXCHANGE TRANSACTIONS
The receivables and payables denominated in foreign currency are translated
into French Francs at the December 31st exchange rate. The resulting differences
with amounts translated at historical exchange rates are shown in the balance
sheet as "foreign exchange translation differences".
A provision for exchange losses is recorded separately for unrealised
losses.
1.7 RETIREMENT INDEMNITY LIABILITIES
The "Projected Benefit Obligation" has been applied to calculate the
retirement obligation.
The total obligation is covered by:
- a fund run by La Mondiale, with a value of KFRF.9,006,
- a provision of KFRF.652 included in the Marwal accounts at December
31, 1996,
- an amount payable to La Mondiale of KFRF.810.
NOTE 2: FIXED ASSETS
The movements in gross value are as follows:
<TABLE>
<CAPTION>
12/31/95 INCREASE DECREASE 12/31/96
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Intangible fixed assets................................... 18226 1535 -- 19761
Tangible fixed assets..................................... 128952 28909 1267 156594
Financial investments..................................... 1047 26812 99 27760
</TABLE>
The movements in amortisation and depreciation are analysed as follows:
<TABLE>
<CAPTION>
12/31/95 INCREASE DECREASE 12/31/96
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Intangible fixed assets................................... 16433 2642 -- 19075
Tangible fixed assets..................................... 70815 21213 1211 90817
</TABLE>
NOTE 3: INVENTORIES AND WORK IN PROGRESS
The reserve for obsolescence for raw materials, consumables and finished
goods at 31/12/96 amounts to KFRF.3,577.
NOTE 4: ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES
At December 31, 1996, accounts receivable can be split by maturity date as
follows:
<TABLE>
<CAPTION>
TOTAL LESS THAN 1 YEAR GREATER THAN 1 YEAR
----- ---------------- -------------------
<S> <C> <C> <C>
Long term receivables................................. 5029 5026 3
Current assets........................................ 130167 130167 --
</TABLE>
F-52
<PAGE> 149
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
NOTE 5: SHORT TERM INVESTMENTS
N/A.
NOTE 6: PREPAYMENTS AND DEFERRED INCOME
<TABLE>
<CAPTION>
PREPAYMENTS 12/31/96
----------- --------
<S> <C>
Documentation............................................... 2
Prepaid maintenance......................................... 43
Leasing..................................................... 199
---
244
</TABLE>
<TABLE>
<CAPTION>
12/31/96
--------
<S> <C>
Deferred income.............................................
Long term contracts (tooling)............................... 1272
</TABLE>
NOTE 7: DEFERRED CHARGES
<TABLE>
<CAPTION>
CHARGED TO
INCOME STATEMENT
TOTAL 1996 12/31/96
----- ---------------- --------
<S> <C> <C> <C>
Deferred charges................................
Amortised over 3 years.......................... 2005 1508 497
</TABLE>
NOTE 8: SHAREHOLDERS' EQUITY
The capital stock is made up of 906,600 shares with a nominal value of
FRF.100, completely paid up.
The accounts of the Company are consolidated in the group accounts of the
Magneti Marelli Spa Group.
NOTE 9: TAX PROVISIONS AND PROVISIONS FOR CONTINGENCIES AND CHARGES
The movements in the year are analysed as follows:
<TABLE>
<CAPTION>
12/31/95 ADDITIONS REVERSALS 12/31/96
-------- --------- --------- --------
<S> <C> <C> <C> <C>
Provisions for contingencies and charges of which:...... 5513 10953 5243 11223
- - Provision for payments on retirement.................. 357 672 357 672
- - Provision for guarantee............................... 2523 5812 2523 5812
- - Provision for loss on foreign exchange................ 433 762 433 762
- - Provision for litigation.............................. 455 1892 455 1892
- - Provision for reimplantation -- 1033 -- 1033
</TABLE>
NOTE 10: CREDITORS
At December 31, 1996, debts, excluding advances and deposits received,
deferred income and foreign exchange differences, can be analysed by maturity
date as follows:
<TABLE>
<CAPTION>
LESS THAN BETWEEN 1 5
TOTAL 1 YEAR AND 5 YEARS YEARS
----- --------- ----------- -----
<S> <C> <C> <C> <C>
Other financial debts.................................. 7638 7638
Trade payables and other liabilities*.................. 167048 160700* 6348
Overdraft.............................................. 71 71
</TABLE>
- -------------------------
* of which trade bills payable: 46031
F-53
<PAGE> 150
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
NOTE 11: INFORMATION ON SUBSIDIARY
<TABLE>
<CAPTION>
EQUITY CAPITAL
SHARE OTHER THAN LAST CLOSING
IN % DETAIL INFORMATION SHARE CAPITAL CAPITAL RESULT
- ----- ------------------ ------------- -------------- ------------
(IN THOUSANDS OF PESOS)
<S> <C> <C> <C> <C>
95% Marwal de Mexico S.A. de C.V.......................
Tepotzotplan....................................... 42870 (5075) 1325
Estado de Mexico...................................
</TABLE>
<TABLE>
<CAPTION>
GROSS NET BOOK LOANS GUARANTEE DIVIDENDS
DETAILED INFORMATION VALUE VALUE GIVEN GIVEN RECEIVED
-------------------- ----- -------- ----- --------- ---------
(IN THOUSANDS OF FRANCS)
<S> <C> <C> <C> <C> <C>
Marwal de Mexico S.A. de C.V...................... 22731 22731 -- -- --
</TABLE>
The exemption of sub-groups enables Marwal Systems to not consolidate
Marwal de Mexico.
NOTE 12: RELATED PARTIES
The related parties transactions are included in the different accounts in
the balance sheet as follows:
<TABLE>
<CAPTION>
ASSETS LIABILITIES
------ -----------
<S> <C> <C> <C>
Trade receivables............ 42640 Trade payables............... 12212
Other receivables............ 1972 Other payables............... 2069
Cash and cash equivalent..... 100323 Financial debt............... --
</TABLE>
Interest expenses and financial income with related parties are as follows:
<TABLE>
<S> <C> <C> <C>
Operating income............. 57100 Operating expenses........... 46067
Financial income............. 1972 Interest expenses............ 3535
</TABLE>
NOTE 13: ACCRUALS AND INCOME RECEIVABLE RELATING TO DIFFERENT BALANCE SHEET
ACCOUNTS
<TABLE>
<CAPTION>
ASSETS LIABILITIES
------ -----------
<S> <C> <C> <C>
Trade receivables Trade payables
- - Customers................... 8442 - Suppliers................... 14284
- - Suppliers................... -- - Tax and social charges...... 17107
- - State....................... 2000 - Other....................... 1896
Other receivables............. -- Other liabilities............. --
Financial debts............... 804
</TABLE>
NOTE 14: EXCHANGE DIFFERENCES RELATED TO BALANCE SHEET ACCOUNTS
<TABLE>
<CAPTION>
EXCHANGE
DIFFERENCE
------------------
ASSET LIABILITY
----- ---------
<S> <C> <C>
Assets
Trade receivables......................................... 80 1257
Liabilities
Trade payables............................................ 682 8
</TABLE>
F-54
<PAGE> 151
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
NOTE 15: SALES TURNOVER ANALYSIS
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Sales....................................................... 559587 610479
Sales of goods.............................................. 540479 596746
Sales of services........................................... 19108 13733
Split between export/domestic
Domestic.................................................. 318495 323428
Export.................................................... 241092 287051
Sales....................................................... 559587 610479
</TABLE>
NOTE 16: DEFERRED TAX POSITION
<TABLE>
<CAPTION>
12/31/95 MOVEMENTS 12/31/96
------------------ ------------------ ------------------
ASSET LIABILITY ASSET LIABILITY ASSET LIABILITY
----- --------- ----- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Timing differences
Organic........................................ 730 730 799 799
</TABLE>
ELEMENTS HAVING AN IMPACT ON 1996 FISCAL RESULT
None.
NOTE 17: EMPLOYEE INFORMATION
<TABLE>
<CAPTION>
PERMANENT TEMPORARY
STAFF STAFF
--------- ---------
<S> <C> <C>
Executives & Management................................... 67
Employees................................................. 143 3
Labor and production...................................... 468 23
--- --
Total................................................ 678 26
=== ==
</TABLE>
NOTE 18: LEASE COMMITMENTS
None.
NOTE 19: COMMITMENTS UNDERTAKEN AND RECEIVED
<TABLE>
<S> <C> <C>
Discounted trade bills receivable but not matured........... 82132
</TABLE>
NOTE 20: INFORMATION RELATING TO MANAGEMENT
N/A.
F-55
<PAGE> 152
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
NOTE 21: EXCEPTIONAL INCOME
<TABLE>
<S> <C> <C>
Exceptional income from operating activities................ 1448
Grant relating to training.................................. 1400
Other....................................................... 48
Exceptional income from capital transactions................ 431
Income from the sale of fixed assets........................ 136
Other....................................................... 295
Reversal of provisions and transfer of charges.............. 1225
Provision for delocalisation................................ 1225
</TABLE>
NOTE 22: EXCEPTIONAL CHARGES
<TABLE>
<S> <C> <C>
Exceptional charges on operating activities................. 4382
Redundancy payments......................................... 1543
Training costs.............................................. 2756
Other....................................................... 83
Exceptional charges from capital transactions............... 275
Net book value of fixed assets sold......................... 55
Other....................................................... 220
Depreciation and provisions................................. 1495
Provision for risk.......................................... 392
Other....................................................... 70
Provision for charges....................................... 1033
</TABLE>
NOTE 23: CHANGE IN ACCOUNTING POLICIES
Effective January 1, 1996, the toolings participation with Walbro, that
used to be booked in deferred charges and amortized over 3 years, are recorded
in fixed assets. The amount involved is KFRF. 4,650 at 1996 year end. Past years
participations have not been reclassified and are still shown as deferred
charges for an amount of KFRF. 497 at December 31, 1996.
NOTE 24: ANALYSIS OF INCOME TAX
As Marwal Systems became a partnership as from 10/01/95, there is no income
tax booked.
<TABLE>
<CAPTION>
BASE
12/31/96 TAX
-------- ---
<S> <C> <C>
Operating profit............................................ 66094 0
Exceptional items........................................... (3048) 0
Profit before tax........................................... 63046 0
Income tax credit 1994...................................... 0
Total Income Tax for the Company....................... 0
</TABLE>
F-56
<PAGE> 153
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
NOTE 25: RECONCILIATION TO U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The accompanying financial statements of Marwal Systems S.N.C. have been
prepared in accordance with accounting principles required in France. A
reconciliation of these reported results to generally accepted principles in the
United States is as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
---- ---- ----
(IN THOUSANDS OF FRENCH FRANCS)
<S> <C> <C> <C>
Profit after taxation as shown in the financial
statements................................................ 56,697 25,473 15,534
Adjust depreciable life of goodwill......................... 1,375 2,625 2,625
Adjust depreciation expense of fixed assets................. 1,361 1,597 4,827
Other....................................................... 537 409 89
Deferred taxes.............................................. -- 3,582 (1,657)
------ ------ ------
Net income according to generally accepted accounting
principles in the United States........................... 59,970 33,686 21,418
====== ====== ======
</TABLE>
F-57
<PAGE> 154
MARWAL SYSTEMS, S.N.C.
(MARWAL SYSTEMS, S.A. UNTIL SEPTEMBER 30, 1995)
STATUTORY AUDITOR'S GENERAL REPORT
Year Ended December 31, 1995
In our capacity as statutory auditor, we present below our report on:
- the accompanying annual accounts of Marwal Systems,
- the specific procedures and disclosures prescribed by law,
for the year ended December 31, 1995.
These annual accounts are the responsibility of the Company's management.
Our responsibility is to express an opinion on these annual accounts based on
our audit.
I. OPINION ON THE ANNUAL ACCOUNTS
We conducted our audit in accordance with French auditing standards. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the annual accounts are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the annual accounts. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall annual account presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the annual accounts present fairly, in all material
respects, the financial position of the Company at December 31, 1995 and the
results of its operations for the year then ended.
II. SPECIFIC PROCEDURES AND DISCLOSURES PRESCRIBED BY LAW
We have also carried out, in accordance with professional standards, the
specific procedures prescribed by law.
We have nothing to report with respect to the fairness of information
contained in the Directors' Report and its consistency with the annual accounts
and other information presented to shareholders concerning the financial
position and annual accounts.
The Statutory Auditor
ERNST & YOUNG Audit
/s/ GILLES MEYER
- --------------------------------------
Gilles Meyer
February 26, 1996
F-58
<PAGE> 155
MARWAL SYSTEMS, S.N.C.
BALANCE SHEET AS OF DECEMBER 31, 1995
(In French Francs)
<TABLE>
<CAPTION>
DECEMBER 31, 1995
--------------------------------------------------
ACCUMULATED
DEPRECIATION
AMORTIZATION AND
GROSS ALLOWANCES NET BOOK VALUE
----- ---------------- --------------
<S> <C> <C> <C>
ASSETS
Fixed assets
Intangible fixed assets................................. 18.226.005,10 16.433.332,65 1.792.672,45
Tangible fixed assets................................... 128.951.636,21 70.814.996,81 58.136.639,40
Financial investments:
- -- Associates........................................... 36.369,00 36.369,00
- -- Others............................................... 1.011.340,15 1.011.340,15
-------------- -------------- --------------
Sub-total........................................... 148.225.350,46 87.248.329,46 60.977.021,00
-------------- -------------- --------------
Inventories
- -- Raw materials........................................ 24.844.475,00 2.489.620,00 22.354.855,00
- -- Work-in-progress..................................... 2.910.543,00 258.005,00 2.652.538,00
- -- Finished goods....................................... 11.693.971,00 1.057.171,00 10.636.800,00
-------------- -------------- --------------
Sub-total........................................... 39.448.989,00 3.804.796,00 35.644.193,00
-------------- -------------- --------------
Current assets
Advances and payments on accounts....................... 823.782,34 823.782,34
Trade accounts and notes receivable:
- -- Customers and related accounts....................... 109.941.372,93 3.971.285,50 105.970.087,43
- -- Other................................................ 13.189.440,94 13.189.440,94
Other receivables....................................... 2.327.218,02 2.327.218,02
Cash and cash equivalent................................ 67.163.748,22 67.163.748,22
Payments in advance..................................... 2.113,74 2.113,74
Deferred Charges........................................ 2.004.784,97 2.004.784,97
Foreign exchange translation differences................ 432.784,33 432.784,33
-------------- -------------- --------------
Sub-total........................................... 195.885.245,49 3.971.285,50 191.913.959,99
-------------- -------------- --------------
Total Assets...................................... 383.559.584,95 95.024.410,96 288.535.173,99
============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------
<S> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity
Share capital............................................... 90.660.000,00
Reserves.................................................... 196.550,23
Revaluation reserve......................................... 0
Retained earnings at January 1st............................ 108.054,10
Result for the year......................................... 25.472.561,45
--------------
Sub-total............................................... 116.437.165,78
--------------
Provisions for contingencies and charges.................... 5.513.067,65
Liabilities
Financial debts:
- - Amounts owed to financial institutions.................... 0
- - Other financial debts..................................... 2.695.629,49
Accounts payable and related accounts....................... 130.472.854,90
Social charges payable...................................... 19.810.842,99
Taxes....................................................... 2.808.171,90
Other....................................................... 2.115.551,85
Other creditors:
- - Accounts payable on fixed assets.......................... 6.502.143,36
- - Group..................................................... 0
- - Other..................................................... 128.985,44
Deferred income............................................. 1.112.983,10
Foreign exchange translation differences.................... 937.777,53
--------------
Sub-total............................................... 166.584.940,56
--------------
Total Liabilities and Shareholders' Equity............ 288.535.173,99
==============
</TABLE>
F-59
<PAGE> 156
MARWAL SYSTEMS, S.N.C.
INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1995
(In French Francs)
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------------
<S> <C> <C>
Operating revenues:......................................... 565.719.064,53
Sale of goods............................................... 540.478.654,89
Sale of services............................................ 19.107.848,98
--------------
Net sales................................................... 559.586.503,87
Movement in finished goods and work-in-progress............. (957.292,00)
In-house production......................................... 958.322,00
Grants...................................................... 1.004.628,42
Reversal of provisions and transfer of charges.............. 4.277.496,90
Other income................................................ 849.405,34
--------------
565.719.064,53
Operating expenses.......................................... 515.796.687,06
Purchases of raw materials and other supplies............... 267.809.549,46
Movements in raw materials stock............................ 4.985.449,00
Other purchases and external charges........................ 81.354.762,36
Taxes and similar charges................................... 9.142.104,58
Wages & salaries............................................ 85.212.941,72
Social charges.............................................. 37.218.880,73
Depreciation and amortisation expenses and provisions:
- - Fixed assets.............................................. 23.363.492,27
- - Current assets............................................ 1.571.179,46
- - Contingencies and charges................................. 4.826.888,73
Other charges............................................... 311.438,75
--------------
515.796.687,06
Operating profit............................................ 49.922.377,47
Financial income:........................................... 14.072.141,78
From other investments...................................... 521,35
Other interest and similar income........................... 2.887.113,46
Reversal of provisions and transfer of charges.............. 3.136.636,82
Foreign exchange gains...................................... 8.047.870,15
--------------
14.072.141,78
22.428.209,50
Financial expenses:
Depreciation and provisions................................. 924.032,56
Interest and similar charges................................ 6.080.465,40
Foreign exchange losses..................................... 15.423.711,54
--------------
22.428.209,50
Net financial income/(expenses)............................. (8.356.067,72)
Profit before taxation...................................... 41.566.309,75
Exceptional income:......................................... 8.712.352,95
From operating activities................................... 2.897.314,03
From capital transactions................................... 1.072.032,92
Reversal of provisions and transfer of charges.............. 4.743.006,00
--------------
8.712.352,95
Exceptional charges:........................................ 9.209.111,25
From operating activities................................... 7.178.141,85
From capital transactions................................... 1.217.422,40
Depreciation and provisions................................. 813.547,00
--------------
9.209.111,25
Exceptional profit (loss)................................... (496.758,30)
Profit before taxation...................................... 41.069.551,45
Profit-Sharing.............................................. 4.750.000,00
Income tax.................................................. 10.846.990,00
Profit after taxation....................................... 25.472.561,45
Total income................................................ 588.503.559,26
Total expenditure........................................... 563.030.997,81
Profit...................................................... 25.472.561,45
</TABLE>
F-60
<PAGE> 157
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS
(In Thousands of French Francs)
EVENTS DURING THE YEAR
The Marwal branch based in Italy was closed on December 31, 1995.
An extraordinary shareholders' meeting held on September 29, 1995 decided
the transformation of the Company into a "Societe en Nom Collectif", a
partnership, with effect from October 1 , 1995.
NOTE 1: ACCOUNTING POLICIES
The accounts of the Company have been prepared based upon generally
accepted accounting principles in France which conform with the Chart of
Accounts as set out in the French law dated April 30, 1983 and the decree of
November 29, 1983.
1.1 INTANGIBLE FIXED ASSETS
The intangible fixed assets consist mainly of goodwill which is amortised
on a straight line basis over 5 years.
The amortisation methods and the useful lives for other categories are as
follows:
<TABLE>
<S> <C>
- - Set-up costs 3 years straight line
- - Computer software 1-3 years straight line
</TABLE>
1.2 TANGIBLE FIXED ASSETS
Tangible fixed assets are valued at historical purchase price or cost of
production when they have been produced in house. The cost of production is made
up of the following elements: purchase price of raw materials, consumables and
direct production costs.
Assets are depreciated on a straight line basis or declining balance, when
applicable, for items purchased during or after 1992.
The depreciation methods and the useful lives applied are as follows:
<TABLE>
<S> <C>
Installations 10 years straight line
Machinery 5-6 2/3 straight line / declining balance
Toolings 1-5 years straight line / declining balance
Leasehold improvements - Mac./Toolings 5-6 2/3 straight line / declining balance
Vehicles 4-5 years straight line
Fixtures and fittings 10 years straight line
Computer hardware 4-5 years straight line / declining balance
</TABLE>
1.3 FINANCIAL INVESTMENTS
- The investments in associates are valued at their acquisition cost
in the assets of the Company.
- A reserve is recorded when their fair value is less than their book
value.
1.4 INVENTORY AND WORK-IN-PROGRESS
The policies used are as follows:
- Inventory is valued at the total cost of production.
- Raw materials and consumables are valued at the average weighted
cost for goods received in the last month. This method is similar to FIFO.
F-61
<PAGE> 158
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
- The Cost of production includes direct and indirect production
expenses and an allocation of the costs of running the Head Office, to the
extent that they are related to the production.
- The provision for obsolescence is determined based upon the sales.
1.5 ALLOWANCE FOR DOUBTFUL ACCOUNTS
The receivables are valued at their face value, a provision is recorded
when the value recoverable is less than the book value.
1.6 FOREIGN EXCHANGE TRANSACTIONS
The receivables and payables denominated in foreign currency are translated
into French Francs at the December 31st exchange rate. The resulting differences
with amounts translated at historical exchange rates are shown in the balance
sheet as "foreign exchange translation differences".
A provision for exchange losses is recorded separately for unrealised
losses.
1.7 RETIREMENT INDEMNITY LIABILITIES
The "Projected Benefit Obligation" has been applied to calculate the
retirement obligation.
The total obligation is covered by:
- a fund run by La Mondiale, with a value of KFRF.8,343,
- a provision of KFRF.357 included in the Marwal accounts at December
31, 1995.
NOTE 2: FIXED ASSETS
The movements in gross value are as follows:
<TABLE>
<CAPTION>
12/31/94 INCREASE DECREASE 12/31/95
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Intangible fixed assets................................... 18519 307 600 18226
Tangible fixed assets..................................... 107067 24751 2866 128952
Financial investments..................................... 1122 852 927 1047
</TABLE>
The movements in amortisation and depreciation are analysed as follows:
<TABLE>
<CAPTION>
12/31/94 INCREASE DECREASE 12/31/95
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Intangible fixed assets................................... 13658 3375 600 16433
Tangible fixed assets..................................... 52431 19988 1604 70815
</TABLE>
NOTE 3: INVENTORIES AND WORK IN PROGRESS
The reserve for obsolescence for raw materials, consumables and finished
goods at 31/12/95 amounts to KFRF. 3,805.
NOTE 4: ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES
At December 31, 1995, accounts receivable can be split by maturity date as
follows:
<TABLE>
<CAPTION>
LESS THAN GREATER
TOTAL 1 YEAR THAN 1 YEAR
----- --------- -----------
<S> <C> <C> <C>
Long term receivables....................................... 1011 1008 3
Current assets.............................................. 126284 126284 --
</TABLE>
F-62
<PAGE> 159
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
NOTE 5: SHORT TERM INVESTMENTS
N/A.
NOTE 6: PREPAYMENTS AND DEFERRED INCOME
<TABLE>
<CAPTION>
12/31/95
--------
<S> <C>
Prepayments.................................................
Other....................................................... 2
</TABLE>
<TABLE>
<CAPTION>
12/31/95
--------
<S> <C>
Deferred income.............................................
Long term contracts (tooling)............................... 1089
Other....................................................... 24
----
1113
====
</TABLE>
NOTE 7: DEFERRED CHARGES
<TABLE>
<CAPTION>
CHARGED TO
INCOME STATEMENT
TOTAL 1995 12/31/95
----- ---------------- --------
<S> <C> <C> <C>
Deferred charges............................................
Amortised over 3 years...................................... 3921 1916 2005
</TABLE>
NOTE 8: SHAREHOLDERS' EQUITY
The capital stock is made up of 906,600 shares with a nominal value of
FRF.100, completely paid up.
The accounts of the Company are consolidated in the group accounts of the
Magneti Marelli Spa Group.
NOTE 9: TAX PROVISIONS AND PROVISIONS FOR CONTINGENCIES AND CHARGES
The movements in the year are analysed as follows:
<TABLE>
<CAPTION>
12/31/94 ADDITIONALS REVERSALS 12/31/95
-------- ----------- --------- --------
<S> <C> <C> <C> <C>
Provisions for contingencies and charges of which:..... 10058 5104 9649 5513
- - Provision for payments on retirement................. 0 357 0 357
- - Provision for guarantee.............................. 1000 2523 1000 2523
- - Provision for loss on foreign exchange............... 3136 433 3136 433
</TABLE>
NOTE 10: CREDITORS
At December 31, 1995, debts, excluding advances and deposits received,
deferred income and foreign exchange differences, can be analysed by maturity
date as follows:
<TABLE>
<CAPTION>
LESS THAN BETWEEN 1
TOTAL 1 YEAR AND 5 YEARS 5 YEARS
----- --------- ----------- ---------
<S> <C> <C> <C> <C>
Other financial debts................................. 2696 2696
Trade payables and other liabilities*................. 161839 157089* 4750
</TABLE>
- -------------------------
* of which trade bills payable: 27225
F-63
<PAGE> 160
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
NOTE 11: RELATED PARTIES
The related parties transactions are included in the different accounts in
the balance sheet as follows:
<TABLE>
<CAPTION>
ASSETS LIABILITIES
------ -----------
<S> <C> <C> <C>
Trade receivables................... 16856 Trade payables...................... 14716
Other receivables................... 198 Other payables...................... 8
Cash and cash equivalent............ 73017 Financial debt...................... 432
</TABLE>
Interest expenses and financial income with related parties are as follows:
<TABLE>
<S> <C> <C> <C>
Operating income.................... 47440 Operating expenses.................. 54317
Financial income.................... 2373 Interest expenses................... 5991
</TABLE>
NOTE 12: ACCRUALS AND INCOME RECEIVABLE RELATING TO DIFFERENT BALANCE SHEET
ACCOUNTS
<TABLE>
<CAPTION>
ASSETS LIABILITIES
------ -----------
<S> <C> <C> <C>
Trade receivables Trade payables
- - Customers.......................... 6558 - Suppliers.......................... 14246
- - Suppliers.......................... 2354 - Tax and social charges............. 14641
- - State.............................. 2490 - Other.............................. 1283
Other receivables.................... 534 Other liabilities.................... 390
</TABLE>
NOTE 13: EXCHANGE DIFFERENCES RELATED TO BALANCE SHEET ACCOUNTS
<TABLE>
<CAPTION>
EXCHANGE DIFFERENCE
-----------------------
ASSET LIABILITY
----- ---------
<S> <C> <C>
Asset
Trade receivables.......................................... 431 3
Liabilities
Trade payables............................................. 1 935
</TABLE>
NOTE 14: SALES TURNOVER ANALYSIS
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Sales....................................................... 565671 559587
Sales of goods.............................................. 535259 540479
Sales of services........................................... 30412 19108
Split between export/domestic
Domestic.................................................... 353114 318495
Export...................................................... 212557 241092
Sales....................................................... 565671 559587
</TABLE>
NOTE 15: DEFERRED TAX POSITION
<TABLE>
<CAPTION>
12/31/94 MOVEMENTS 12/31/95
------------------ ------------------ ------------------
NATURE ASSET LIABILITY ASSET LIABILITY ASSET LIABILITY
------ ----- --------- ----- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Timing differences...............................
Organic.......................................... 559 559 730 730
</TABLE>
F-64
<PAGE> 161
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
NOTE 16: EMPLOYEE INFORMATION
<TABLE>
<CAPTION>
PERMANENT STAFF TEMPORARY STAFF
--------------- ---------------
<S> <C> <C>
Executives & Management............................ 55
Employees.......................................... 135 4
Labor and production............................... 476 10
--- --
Total.............................................. 666 14
</TABLE>
NOTE 17: LEASE COMMITMENTS
None.
NOTE 18: COMMITMENTS UNDERTAKEN AND RECEIVED
<TABLE>
<S> <C> <C>
Discounted trade bills receivable but not matured........... 89827
</TABLE>
NOTE 19: INFORMATION RELATING TO MANAGEMENT
N/A.
NOTE 20: EXCEPTIONAL INCOME
<TABLE>
<S> <C> <C>
Exceptional income from operating activities................ 2897
Redundancy payments reinvoiced to Jaeger S.A................ 251
Grant relating to training.................................. 2565
Other....................................................... 81
Exceptional income from capital transactions................ 1072
Income from the sale of fixed assets........................ 1066
Other....................................................... 6
Reversal of provisions and transfer of charges.............. 4743
Provision for delocalisation................................ 1700
Provision for the starting of pumps......................... 1304
Other....................................................... 1739
</TABLE>
NOTE 21: EXCEPTIONAL CHARGES
<TABLE>
<S> <C> <C>
Exceptional charges on operating activities................. 7178
Redundancy payments......................................... 3378
Training costs.............................................. 3056
Other....................................................... 744
Exceptional charges from capital transactions............... 1217
Net book value of fixed assets sold......................... 1217
Depreciation and provisions................................. 813
Provision for delocalisation and other...................... 813
</TABLE>
NOTE 22: CHANGE IN ACCOUNTING POLICIES
N/A.
F-65
<PAGE> 162
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
NOTE 23: ANALYSIS OF INCOME TAX
The income tax accounted for is that which is calculated for the accounts
to 9/30/1995, Marwal Systems becoming a partnership as from 10/01/95.
<TABLE>
<CAPTION>
BASE BASE TAX
12/31/95 9/30/95 9/30/95
-------- ------- -------
<S> <C> <C> <C>
Operating profit................................... 41566 28083 10977
Exceptional items.................................. (497) (156) (61)
----- ----- ------
Profit before tax.................................. 41069 27927 10916
Income tax credit 1994............................. 69
------
Total income tax for the Company................. (10847)
</TABLE>
F-66
<PAGE> 163
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of Walbro Corporation:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in Walbro Corporation and
Subsidiaries' annual report to shareholders included or incorporated by
reference in this Form 10-K, and have issued our report thereon dated February
11, 1998 (except with respect to the matters discussed in Notes 6 and 21, as to
which the date is April 13, 1998). 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 S-2 to S-12 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.
/s/ ARTHUR ANDERSEN LLP
Detroit, Michigan,
February 11, 1998
S-1
<PAGE> 164
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, 1997 (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Allowance for Doubtful Accounts:
Balance Beginning of Year................................. $ 753 $ 978 $ 368
Additions charged to operations........................ 378 302 327
Additions due to acquisition........................... -- -- 309
Deductions for uncollectible accounts written off, net
of recoveries......................................... (238) (508) (51)
Currency translation adjustment........................ (84) (19) 25
------- ----- -----
Balance End of Year....................................... $ 809 $ 753 $ 978
======= ===== =====
Reserve for Inventory Valuation:
Balance Beginning of Year................................. $ 668 $ 808 $ 238
Additions charged to operations........................ 3,425 724 182
Additions due to acquisition........................... -- -- 376
Deductions for inventory disposal...................... (1,380) (870) --
Currency translation adjustment........................ (68) 6 12
------- ----- -----
Balance End of Year....................................... $ 2,645 $ 668 $ 808
======= ===== =====
Allowance for Notes Receivable:
Balance Beginning of Year................................. $ -- $ -- $ 454
Additions charged to operations........................ -- -- --
Deductions............................................. -- -- (454)
------- ----- -----
Balance End of Year....................................... $ -- $ -- $ --
======= ===== =====
</TABLE>
S-2
<PAGE> 165
WALBRO CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------------------------------------------
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..................................... $ (744) $ 13,431 $ 852 $ -- $ 13,539
Accounts receivable, net................. 80,936 63,194 855 -- 144,985
Accounts receivable, intercompany........ (144,222) (37,755) 171,052 10,925 --
Inventories.............................. 26,086 29,012 1,109 -- 56,207
Prepaid expenses and other............... 5,988 9,549 1,868 -- 17,405
Deferred and refundable income taxes..... 470 1,253 6,796 -- 8,519
--------- -------- -------- --------- --------
Total current assets.............. (31,486) 78,684 182,532 10,925 240,655
--------- -------- -------- --------- --------
Plant and Equipment, Net................... 123,635 144,423 7,204 108 275,370
--------- -------- -------- --------- --------
Other Assets:
Funds held for construction.............. -- -- -- -- --
Joint ventures........................... 10,739 15,942 -- -- 26,681
Investments.............................. 117,720 24,433 50,959 (189,851) 3,261
Goodwill, net............................ 14,342 11,444 (1,524) 8,541 32,803
Notes receivable......................... -- 6,499 196,198 (202,571) 126
Deferred and refundable income taxes..... -- 4,001 4,178 -- 8,179
Other.................................... 9,045 2,860 11,613 -- 23,518
--------- -------- -------- --------- --------
Total other assets................... 151,846 65,179 261,424 (383,881) 94,568
--------- -------- -------- --------- --------
Total assets............................... $ 243,995 $288,286 $451,160 $(372,848) $610,593
========= ======== ======== ========= ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt........ $ 7,026 $ 76 $ 6,858 $ -- $ 13,960
Bank and other borrowings................ -- 26,204 -- -- 26,204
Accounts payable......................... 21,540 55,730 6,939 -- 84,209
Accrued liabilities...................... 1,103 18,699 20,127 (708) 39,221
Dividends payable........................ -- 920 868 -- 1,788
--------- -------- -------- --------- --------
Total current liabilities............ 29,669 101,629 34,792 (708) 165,382
--------- -------- -------- --------- --------
Long-Term Liabilities:
Long-term debt, less current portion..... 164,581 11,818 339,809 (224,815) 291,393
Pension obligations and other............ 2,505 2,625 6,693 -- 11,823
Deferred income taxes.................... -- 2,077 -- -- 2,077
Minority interest........................ -- 1,052 -- -- 1,052
--------- -------- -------- --------- --------
Total long-term liabilities.......... 167,086 17,572 346,502 (224,815) 306,345
--------- -------- -------- --------- --------
Company-obligated mandatorily redeemable
convertible preferred securities of
Walbro Capital Trust holding solely
convertible debentures................... -- 69,000 -- -- 69,000
Stockholders' Equity:
Common stock, $.50 par value; authorized
25,000,000; outstanding 8,579,976 in
1995................................... -- 23,935 4,341 (23,935) 4,341
Paid-in capital.......................... -- 72,819 66,151 (72,819) 66,151
Retained earnings........................ 49,827 28,747 33,938 (78,574) 33,938
Deferred compensation.................... -- -- (379) -- (379)
Minimum pension liability adjustment..... -- -- -- -- --
Unrealized gain on securities available
for sale............................... -- -- 68 -- 68
Cumulative translation adjustments....... (2,587) (25,416) (34,253) 28,003 (34,253)
--------- -------- -------- --------- --------
Total stockholders' equity........... 47,240 100,085 69,866 (147,325) 69,866
--------- -------- -------- --------- --------
Total liabilities and stockholders'
equity................................... $ 243,995 $288,286 $451,160 $(372,848) $610,593
========= ======== ======== ========= ========
</TABLE>
S-3
<PAGE> 166
WALBRO CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS --
CONTINUED
<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>
S-4
<PAGE> 167
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, 1997
---------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ --------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net Sales........................... $323,189 $316,828 $ 2,302 $(22,414) $619,905
Costs and Expenses:
Cost of sales..................... 299,913 286,119 2,133 (22,414) 565,751
Selling and administrative
expenses....................... 38,423 27,354 12,298 -- 78,075
-------- -------- -------- -------- --------
Operating Income (Loss)............. (15,147) 3,355 (12,129) -- (23,921)
Other Expense (Income):
Interest expense.................. 23,060 14,720 22,313 (34,683) 25,410
Interest income................... (11,671) (6,079) (17,607) 34,683 (674)
Royalty income, net............... (4,477) 599 -- -- (3,878)
Foreign currency exchange loss
(gain)......................... (900) 534 58 -- (308)
Other............................. 425 (50) (10) -- 365
-------- -------- -------- -------- --------
Income before (provision) credit for
income taxes, minority interest,
equity in income (loss) of joint
ventures and subsidiaries......... (21,584) (6,369) (16,883) -- (44,836)
(Provision) credit for income
taxes............................. 7,818 28 2,285 -- 10,131
Minority interest................... (450) (4,585) -- -- (5,035)
Equity in income of joint
ventures.......................... 1,007 2,106 -- -- 3,113
Equity in income (loss) of
subsidiaries...................... (4,036) -- (22,028) 26,064 --
-------- -------- -------- -------- --------
Net income.......................... $(17,245) $ (8,820) $(36,626) $ 26,064 $(36,627)
======== ======== ======== ======== ========
</TABLE>
S-5
<PAGE> 168
WALBRO CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS --
CONTINUED
<TABLE>
<CAPTION>
FOR THE YEAR 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....................... 49,599 21,607 (629) -- 70,577
-------- -------- -------- -------- --------
Operating Income (Loss)............. 11,124 14,616 938 -- 26,678
Other Expense (Income):
Interest expense.................. 14,824 5,773 22,214 (22,276) 20,535
Interest income................... (5,416) (1,999) (17,577) 22,276 (2,716)
Royalty income, net............... (2,042) 632 -- -- (1,410)
Foreign currency exchange loss
(gain)......................... (309) (131) 370 -- (70)
Other............................. (4) 158 (217) -- (63)
-------- -------- -------- -------- --------
Income before (provision) credit for
income taxes, minority interest,
equity in income 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 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>
S-6
<PAGE> 169
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....................... 40,598 12,766 4,019 -- 57,383
-------- -------- -------- -------- --------
Operating Income (Loss)............. 18,102 9,295 (3,263) -- 24,134
Other Expense (Income):
Interest expense.................. 10,387 4,300 10,852 (13,119) 12,420
Interest income................... (2,974) (797) (10,308) 13,119 (960)
Royalty income, net............... (938) 701 -- -- (237)
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 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 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>
S-7
<PAGE> 170
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, 1997
-------------------------------------------------------------------------------
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........... $ 25,529 $ 12,845 $(64,600) $ -- $(26,226)
-------- -------- -------- ------- --------
Cash Flows from Investing
Activities:
Purchase of plant and
equipment................. (29,952) (31,783) (284) -- (62,019)
Acquisitions, net of cash
acquired.................. -- -- -- -- --
Purchase of other assets.... (2,974) (27) (86) -- (3,087)
Investment in joint ventures
and other................. (2,350) 8,142 (4,036) -- 1,756
Proceeds/(payments) of
intercompany note
receivable................ -- -- -- -- --
Proceeds from disposal of
assets.................... 9,370 (5,247) 1,292 -- 5,415
-------- -------- -------- ------- --------
Net cash provided by (used in)
investing activities........... (25,906) (28,915) (3,114) -- (57,935)
-------- -------- -------- ------- --------
Cash Flows from Financing
Activities:
Net borrowings (repayments)
under revolving
line-of-credit
agreements................ -- 8,375 (91,510) -- (83,135)
Debt repayments............. (666) (136) (408) -- (1,210)
Proceeds from issuance of
long-term debt............ -- (63,596) 169,000 -- 105,404
Proceeds from issuance of
convertible preferred
securities................ -- 69,000 -- -- 69,000
Proceeds from issuance of
common stock and
options................... -- -- 492 -- 492
Financing fees paid......... -- -- (5,680) -- (5,680)
Cash dividends paid......... -- -- (3,463) -- (3,463)
-------- -------- -------- ------- --------
Net cash provided by (used in)
financing activities........... (666) 13,643 68,431 -- 81,408
-------- -------- -------- ------- --------
Effect of Exchange Rate Changes
on Cash........................ -- (1,921) -- -- (1,921)
-------- -------- -------- ------- --------
Net Increase (Decrease) in
Cash........................... (1,043) (4,348) 717 -- (4,674)
Cash at Beginning of Year........ 299 17,779 135 -- 18,213
-------- -------- -------- ------- --------
Cash at End of Year.............. $ (744) $ 13,431 $ 852 $ -- $ 13,539
======== ======== ======== ======= ========
</TABLE>
S-8
<PAGE> 171
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>
S-9
<PAGE> 172
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>
Basis of Presentation -- In July 1995, the Company issued $110,000,000 in
aggregate principal amount of 9.875% Senior Notes due in 2005 (the 2005 Notes).
In December 1997, the Company sold $100,000,000 in aggregate principal amount of
10.125% Senior Notes due in 2007 (the 2007 Notes). The 2005 and 2007 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
S-10
<PAGE> 173
WALBRO CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS --
CONTINUED
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 1997, 1996 and 1995, the
Parent Corporation allocated $5,267,000, $10,422,000 and $3,637,000,
respectively, of corporate selling and administrative expenses to its operating
subsidiaries.
Long-term debt of the Parent Corporation and the Guarantors consisted of
the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<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........................................ $109,708 $109,669
Senior notes due 2007, unsecured, interest at 10.125%....... 100,000 --
Revolving credit facility, secured, interest at the agent's
base rate plus an additional margin....................... 19,700 114,062
Purchase money loan agreement, secured, interest payable
quarterly at the agents base rate plus an additional
margin (see below)........................................ 2,852 --
Term loan from the State of Connecticut, secured, interest
at 6% per annum, payable in monthly amounts from 1997 to
2005...................................................... 3,400 3,400
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
Capital lease obligations, interest at 7.5%, payable in
monthly installments through February 2002................ 3,042 3,640
Other....................................................... 462 884
-------- --------
299,464 291,955
Less -- Current portion..................................... 13,884 1,007
-------- --------
$285,580 $290,948
======== ========
</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, 1997 are as follows (in thousands): 1998 -- $13,884 ;
1999 -- $7,349 ; 2000 -- $29,965 ; 2001 -- $7,484 ; 2002 -- $6,844 and
thereafter -- $233,938.
S-11
<PAGE> 174
============================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER CONTAINED
HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE INITIAL PURCHASER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR A SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER
THAN THOSE TO WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR THE
SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION................................ 4
DOCUMENTS INCORPORATED BY REFERENCE.................. 4
FORWARD-LOOKING STATEMENTS........................... 5
PROSPECTUS SUMMARY................................... 6
SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA...... 13
RISK FACTORS......................................... 15
USE OF PROCEEDS...................................... 20
CAPITALIZATION....................................... 20
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
DATA............................................... 21
THE EXCHANGE OFFER................................... 25
SELECTED FINANCIAL AND OPERATING DATA................ 33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................ 35
BUSINESS............................................. 43
MANAGEMENT........................................... 55
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT......................................... 60
DESCRIPTION OF OTHER INDEBTEDNESS.................... 62
DESCRIPTION OF THE EXCHANGE NOTES.................... 65
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES......... 89
REGISTRATION RIGHTS OF THE OLD NOTES................. 91
BOOK ENTRY; DELIVERY AND FORM........................ 93
PLAN OF DISTRIBUTION................................. 94
LEGAL MATTERS........................................ 95
INDEPENDENT PUBLIC ACCOUNTANTS....................... 95
INDEX TO FINANCIAL PAGES............................. F-1
</TABLE>
============================================================
============================================================
WALBRO LOGO
WALBRO CORPORATION
OFFER TO EXCHANGE
10 1/8% SENIOR NOTES DUE 2007, SERIES B
FOR ALL OUTSTANDING
10 1/8% SENIOR NOTES DUE 2007, SERIES A
------------------------
PROSPECTUS
------------------------
JUNE 3, 1998
============================================================
<PAGE> 175
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify any persons, including directors and officers, who are
(or are threatened to be made) parties to any threatened, pending or completed
legal action, suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of their being directors or officers of the
corporation. The indemnity may include expenses, attorneys' fees, judgments,
fines and amounts paid in settlement, provided such sums were actually and
reasonably incurred in connection with the action, suit or proceeding and
provided the director or officer acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the corporation's best interests
and, in the case of criminal proceedings, provided he had no reasonable cause to
believe that his or her conduct was unlawful. The corporation may indemnify
directors and officers in a derivative action (in which suit is brought by a
stockholder on behalf of the corporation) under the same conditions, except that
no indemnification is permitted without judicial approval if the director or
officer is adjudged liable to the corporation. If the director or officer is
successful on the merits or otherwise in defense of any actions referred to
above, the corporation must indemnify him against the expenses and attorneys'
fees he actually and reasonably incurred.
Article VIII of the Company's By-Laws provides that the Company shall
indemnify its officers and directors to the fullest extent permitted by Section
145.
Under an existing policy of insurance, the Company is entitled to be
reimbursed for certain indemnity payments it is required or permitted to make to
directors and officers of the Company.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<S> <C>
2 Agreement for Sale of the Assets of Sharon Manufacturing
Company dated April 9, 1998 between Sharon Manufacturing
Company, the Company and Millennium Industries
Corporation.(1)
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.(2)
3.2 By-laws of the Company, as amended through July 7, 1993.(1)
3.3 Amendment to Section 2.9 of the By-laws of the Company,
filed as Exhibit 3.3 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994.(2)
4.1 Indenture for the 10 1/8% Senior Notes due 2007 dated as of
December 15, 1997 among the Company, Walbro Automotive
Corporation, Walbro Engine Management Corporation, Sharon
Manufacturing Company, Whitehead Engineered Products, Inc.
and Bankers Trust Company, as Trustee (including form of the
Exchange Note and form of Guarantee), filed as Exhibit 4.1
to the Company's Registration Statement on Form S-4, File
No. 333-45693.(2)
4.2 Purchase Agreement dated December 11, 1997 among the
Company, Walbro Automotive Corporation, Walbro Engine
Management Corporation, Sharon Manufacturing Company,
Whitehead Engineered Products, Inc. and Salomon Brothers
Inc., filed as Exhibit 4.2 to the Company's Registration
Statement on Form S-4, File No. 333-45693.(2)
4.3 Registration Rights Agreement dated December 11, 1997 among
the Company, Walbro Automotive Corporation, Walbro Engine
Management Corporation, Sharon Manufacturing Company,
Whitehead Engineered Products, Inc. and Salomon Brothers
Inc., filed as Exhibit 4.3 to the Company's Registration
Statement on Form S-4, File No. 333-45693.(2)
4.4 Form of the Exchange Note (included in Exhibit 4.1).
</TABLE>
II-1
<PAGE> 176
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <S>
4.5 Form of Guarantee (included in Exhibit 4.1).
4.6 Shareholder Rights Plan dated December 8, 1988, filed as the
Exhibit to the Company's Registration Statement on Form 8-A
for Shareholder Stock Purchase Rights filed December 12,
1988.(2)
4.7 First Amendment to Rights Agreement dated February 6,
1991.(1)
4.8 Loan Agreement between City of Ligonier, Indiana, and Sharon
Manufacturing Company dated as of June 1, 1992.(1)
4.9 Loan Agreement between Walbro Automotive Corporation and the
Town of Ossian, Indiana, dated as of December 1, 1993, filed
as Exhibit 4.13 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993.(2)
4.10 Note Agreement among the Company and the purchasers named
therein dated as of October 1, 1994 relating to the 7.68%
Senior Notes of the Company, filed as Exhibit 4.9 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994.(2)
4.11 Indenture for the 9 7/8% Senior Notes due 2005 dated as of
July 27, 1995 among the Company, Walbro Automotive
Corporation, 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.(2)
4.12 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.(2)
4.13 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 Annual
Report on Form 10-K for the fiscal year ended December 31,
1995.(2)
4.14 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 Annual Report on Form
10-K for the fiscal year ended December 31, 1995.(2)
4.15 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.(2)
4.16 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, filed as Exhibit 4.11 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.(2)
4.17 Indenture between Walbro Corporation and Bankers Trust
Company, as Indenture Trustee, dated as of February 3, 1997,
filed as Exhibit 4.12 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996.(2)
4.18 Form of Preferred Security issued by Walbro Capital Trust,
included as Exhibit A-1 to Exhibit 4.11 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.(2)
4.19 Convertible Debenture issued by Walbro Corporation to Walbro
Capital Trust, included as Exhibit A to Exhibit 4.12 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.(2)
</TABLE>
II-2
<PAGE> 177
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <S>
4.20 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, filed
as Exhibit 4.15 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996.(2)
4.21 Second Amendment dated as of March 17, 1997 to Credit
Agreement among the Company, Comerica Bank, as agent, and
Harris Bank, as co-agent, filed as Exhibit 4.21 to the
Company's Registration Statement on Form S-4, File No.
333-45693.(2)
4.22 Third Amendment dated as of August 27, 1997 to Credit
Agreement among the Company, Comerica Bank, as agent, and
Harris Bank, as co-agent, filed as Exhibit 4.22 to the
Company's Registration Statement on Form S-4, File No.
333-45693.(2)
4.23 Purchase Money Loan Agreement dated as of August 27, 1997
among the Company, Comerica Bank, as agent, and Harris Bank,
as co-agent, filed as Exhibit 4.23 to the Company's
Registration Statement on Form S-4, File No. 333-45693.(2)
4.24 Purchase Money Guaranty dated as of August 27, 1997 by the
Company and certain of its subsidiaries to Comerica Bank, as
agent, filed as Exhibit 4.24 to the Company's Registration
Statement on Form S-4, File No. 333-45693.(2)
4.25 Purchase Money Security Agreement dated as of August 27,
1997 among the Company, and certain of its subsidiaries and
Comerica Bank, as agent, filed as Exhibit 4.25 to the
Company's Registration Statement on Form S-4, File No.
333-45693.(2)
4.26 Amended and Restated Second Amendment and Waiver Agreement
dated as of March 3, 1998 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 4.26 to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997.(2)
4.27 Financing and Securities Agreement dated May 29, 1998
between the Company and subsidiaries and NationsBank, N.A.,
as Administrative Agent and Lender.(1)
5 Opinion of Katten Muchin & Zavis as to the legality of the
securities being registered (including consent).(1)
10.1 Joint Venture Agreement between the Company and Mitsuba
Electric Manufacturing Company, Ltd. dated December 12,
1986.(1)
10.2 The Company's Equity Based Long-Term Incentive Plan as
amended and restated effective June 20, 1994.(1)
10.3 Retirement Income Plan for Directors dated February 23,
1988.(1)(3)
10.4 The Company's Employee Stock Ownership Plan as amended and
restated effective January 1, 1997.(1)
10.5 Walbro Engine Management Incentive Compensation Plan.(1)(3)
10.6 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.(2)
10.7 Joint Venture Agreement between the Company and Jaeger S.A.
dated as of January 1, 1993 relating to the Marwal do Brasil
joint venture.(1)
10.8 The Company's Advantage Plan, as amended and restated
effective January 1, 1997.(1)(3)
10.9 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.(1)
10.10 Agreement among the Company, Walbro Automotive Corporation
and Magneti Marelli France S.A. dated February 7, 1995.(1)
</TABLE>
II-3
<PAGE> 178
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <S>
10.11 Joint Venture Agreement between the Company and Daewoo
Precision Industries, Ltd. dated November 30, 1994.(1)
10.12 Purchase and Sale Agreement dated as of April 7, 1995
between the Company and Dyno Industrier AS, filed as Exhibit
2.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995.(2)
10.13 Addendum to Purchase and Sale Agreement between the Company
and Dyno Industrier AS dated as of July 27, 1995, filed as
Exhibit 2.2 to the Company's Current Report on Form 8-K
dated July 27, 1995.(2)
10.14 General Partnership Agreement dated August 18, 1995 between
Iwaki Diecast U.S.A., Inc. and Walbro Tucson Corp.(1)
10.15 Employment Agreement between the Company and L.E. Althaver
dated August 16, 1996, filed as Exhibit 10.21 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.(2)(3)
10.16 Termination and Change of Control Agreement between the
Company and L.E. Althaver dated August 16, 1996, filed as
Exhibit 10.22 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996.(2)(3)
10.17 Employment Agreement between the Company and Daniel L.
Hittler dated August 16, 1996, filed as Exhibit 10.23 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.(2)(3)
10.18 Termination and Change of Control Agreement between the
Company and Daniel L. Hittler dated August 16, 1996, filed
as Exhibit 10.24 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996.(2)(3)
10.19 Employment Agreement between the Company and Michael A.
Shope dated August 16, 1996, filed as Exhibit 10.25 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.(2)(3)
10.20 Termination and Change of Control Agreement between the
Company and Michael A. Shope dated August 16, 1996, filed as
Exhibit 10.26 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996.(2)(3)
10.21 Employment Agreement between the Company and Robert H.
Walpole dated August 16, 1996, filed as Exhibit 10.27 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.(2)(3)
10.22 Termination and Change of Control Agreement between the
Company and Robert H. Walpole dated August 16, 1996, filed
as Exhibit 10.28 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996.(2)(3)
10.23 Employment Agreement between the Company and R.H. Whitehead
III dated August 16, 1996, filed as Exhibit 10.29 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.(2)(3)
10.24 Termination and Change of Control Agreement between the
Company and R.H. Whitehead III dated August 16, 1996, filed
as Exhibit 10.30 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996.(2)(3)
10.25 Employment Agreement between the Company and Frank E.
Bauchiero dated October 3, 1996, filed as Exhibit 10.31 to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.(2)(3)
10.26 Termination and Change of Control Agreement between the
Company and Frank E. Bauchiero dated October 3, 1996, filed
as Exhibit 10.32 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996.(2)(3)
10.27 The Company's Broad-Based Long Term Incentive Plan, filed as
Exhibit 10.33 to the Company's Registration Statement on
Form S-4, File No. 333-45693.(2)
</TABLE>
II-4
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<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <S>
10.28 The Company's Supplemental Employee Retirement Plan,
effective January 1, 1997.(1)
10.29 Separation Agreement and General Release dated May 20, 1998
between the Company and Lambert E. Althaver.(1)(3)
12 Computation of ratio of earnings to fixed charges.(1)
21 Subsidiaries of the Company, filed as Exhibit 21 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997.(2)
23.1 Consent of Arthur Andersen LLP.(1)
23.2 Consent of Ernst & Young Audit.(1)
23.3 Consent of Katten Muchin & Zavis (contained in its opinion
filed as Exhibit 5).
24 Power of Attorney, included in signature page to the
Company's Registration Statement on Form S-4, File No.
333-45693.(2)
25 Statement of eligibility under the Trust Indenture Act of
1939, as amended, on Form T-1 of Bankers Trust Company, as
Trustee under the Indenture, filed as Exhibit 25 to the
Company's Registration Statement on Form S-4, File No.
333-45693.(2)
27 Financial Data Schedule.(1)
99.1 Form of Letter of Transmittal for the Exchange Notes, filed
as Exhibit 99.1 to the Company's Registration Statement on
Form S-4, File No. 333-45693.(2)
99.2 Form of Notice of Guaranteed Delivery for the Exchange
Notes, filed as Exhibit 99.2 to the Company's Registration
Statement on Form S-4, File No. 333-45693.(2)
99.3 Form of Letter to Registered Holders and Depository Trust
Company Participants, filed as Exhibit 99.3 to the Company's
Registration Statement on Form S-4, File No. 333-45693.(2)
99.4 Form of Letter to Clients, filed as Exhibit 99.4 to the
Company's Registration Statement on Form S-4, File No.
333-45693.(2)
99.5 Form of Instruction to Registered Holder and/or Book Entry
Transfer Participant from Beneficial Owner, filed as Exhibit
99.5 to the Company's Registration Statement on Form S-4,
File No. 333-45693.(2)
99.6 Guidelines for Certificate of Taxpayer Identification Number
on Substitute Form W-9, filed as Exhibit 99.6 to the
Company's Registration Statement on Form S-4, File No.
333-45693.(2)
</TABLE>
- -------------------------
(1) Filed herewith.
(2) Incorporated by reference.
(3) Management contract or compensatory plan or arrangement.
II-5
<PAGE> 180
(b) Financial Statement Schedules.
(1) VALUATION AND QUALIFYING ACCOUNTS.
The financial statement schedule Valuation and Qualifying Accounts is
included in the Supplemental Notes to Consolidated Financial Statements.
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
The financial statement schedule Supplemental Guarantor Condensed
Consolidating Financial Statements is included in the Supplemental Notes to
Consolidated Financial Statements.
(c) Not Applicable.
ITEM 22. UNDERTAKINGS.
(a) (i) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(ii) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to
directors, officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(iii) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
II-6
<PAGE> 181
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-7
<PAGE> 182
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Cass City, State of Michigan on May 29, 1998.
WALBRO CORPORATION
By: /s/ FRANK E. BAUCHIERO
------------------------------------
Frank E. Bauchiero
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------------------- ------------
<S> <C> <C>
/s/ FRANK E. BAUCHIERO Chief Executive Officer, President and
- --------------------------------------------- Director May 29, 1998
Frank E. Bauchiero
*
- --------------------------------------------- Vice President and Director May 29, 1998
Robert H. Walpole
/s/ MICHAEL A. SHOPE Chief Financial Officer and Treasurer
- --------------------------------------------- (Principal Financial and Accounting May 29, 1998
Michael A. Shope Officer)
*
- --------------------------------------------- Director May 29, 1998
William T. Bacon, Jr.
*
- --------------------------------------------- Director May 29, 1998
J. Dwane Baumgardner
*
- --------------------------------------------- Director May 29, 1998
Vernon E. Oechsle
*
- --------------------------------------------- Director May 29, 1998
Robert D. Tuttle
*
- --------------------------------------------- Director May 29, 1998
John E. Utley
*By: /s/ MICHAEL A. SHOPE
---------------------------------------
Michael A. Shope
Attorney-In-Fact
</TABLE>
II-8
<PAGE> 183
SIGNATURES
Each of the Guarantors pursuant to the requirements of the Securities Act
of 1933, as amended, has duly caused this Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cass City, State of Michigan on May 29, 1998.
WALBRO AUTOMOTIVE CORPORATION
WALBRO ENGINE MANAGEMENT CORPORATION
SHARON MANUFACTURING COMPANY
WHITEHEAD ENGINEERED PRODUCTS, INC.
By: /s/ FRANK E. BAUCHIERO
-------------------------------------
Frank E. Bauchiero
Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------ ------------
<S> <C> <C>
/s/ FRANK E. BAUCHIERO Chief Executive Officer, President and
- ------------------------------------------ Director (Principal Executive Officer) May 29, 1998
Frank E. Bauchiero
/s/ MICHAEL A. SHOPE Treasurer (Principal Financial and
- ------------------------------------------ Accounting Officer) May 29, 1998
Michael A. Shope
</TABLE>
II-9
<PAGE> 184
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
2 Agreement for Sale of the Assets of Sharon Manufacturing
Company dated April 9, 1998 between Sharon Manufacturing
Company, the Company and Millennium Industries
Corporation.(1)
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.(2)
3.2 By-laws of the Company, as amended through July 7, 1993.(1)
3.3 Amendment to Section 2.9 of the By-laws of the Company,
filed as Exhibit 3.3 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994.(2)
4.1 Indenture for the 10 1/8% Senior Notes due 2007 dated as of
December 15, 1997 among the Company, Walbro Automotive
Corporation, Walbro Engine Management Corporation, Sharon
Manufacturing Company, Whitehead Engineered Products, Inc.
and Bankers Trust Company, as Trustee (including form of the
Exchange Note and form of Guarantee), filed as Exhibit 4.1
to the Company's Registration Statement on Form S-4, File
No. 333-45693.(2)
4.2 Purchase Agreement dated December 11, 1997 among the
Company, Walbro Automotive Corporation, Walbro Engine
Management Corporation, Sharon Manufacturing Company,
Whitehead Engineered Products, Inc. and Salomon Brothers
Inc., filed as Exhibit 4.2 to the Company's Registration
Statement on Form S-4, File No. 333-45693.(2)
4.3 Registration Rights Agreement dated December 11, 1997 among
the Company, Walbro Automotive Corporation, Walbro Engine
Management Corporation, Sharon Manufacturing Company,
Whitehead Engineered Products, Inc. and Salomon Brothers
Inc., filed as Exhibit 4.3 to the Company's Registration
Statement on Form S-4, File No. 333-45693.(2)
4.4 Form of the Exchange Note (included in Exhibit 4.1).
4.5 Form of Guarantee (included in Exhibit 4.1).
4.6 Shareholder Rights Plan dated December 8, 1988, filed as the
Exhibit to the Company's Registration Statement on Form 8-A
for Shareholder Stock Purchase Rights filed December 12,
1988.(2)
4.7 First Amendment to Rights Agreement dated February 6,
1991.(1)
4.8 Loan Agreement between City of Ligonier, Indiana, and Sharon
Manufacturing Company dated as of June 1, 1992.(1)
4.9 Loan Agreement between Walbro Automotive Corporation and the
Town of Ossian, Indiana, dated as of December 1, 1993, filed
as Exhibit 4.13 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993.(2)
4.10 Note Agreement among the Company and the purchasers named
therein dated as of October 1, 1994 relating to the 7.68%
Senior Notes of the Company, filed as Exhibit 4.9 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994.(2)
4.11 Indenture for the 9 7/8% Senior Notes due 2005 dated as of
July 27, 1995 among the Company, Walbro Automotive
Corporation, 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.(2)
4.12 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.(2)
4.13 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 Annual
Report on Form 10-K for the fiscal year ended December 31,
1995.(2)
</TABLE>
<PAGE> 185
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
4.14 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 Annual Report on Form
10-K for the fiscal year ended December 31, 1995.(2)
4.15 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.(2)
4.16 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, filed as Exhibit 4.11 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.(2)
4.17 Indenture between Walbro Corporation and Bankers Trust
Company, as Indenture Trustee, dated as of February 3, 1997,
filed as Exhibit 4.12 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996.(2)
4.18 Form of Preferred Security issued by Walbro Capital Trust,
included as Exhibit A-1 to Exhibit 4.11 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.(2)
4.19 Convertible Debenture issued by Walbro Corporation to Walbro
Capital Trust, included as Exhibit A to Exhibit 4.12 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.(2)
4.20 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, filed
as Exhibit 4.15 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996.(2)
4.21 Second Amendment dated as of March 17, 1997 to Credit
Agreement among the Company, Comerica Bank, as agent, and
Harris Bank, as co-agent, filed as Exhibit 4.21 to the
Company's Registration Statement on Form S-4, File No.
333-45693.(2)
4.22 Third Amendment dated as of August 27, 1997 to Credit
Agreement among the Company, Comerica Bank, as agent, and
Harris Bank, as co-agent, filed as Exhibit 4.22 to the
Company's Registration Statement on Form S-4, File No.
333-45693.(2)
4.23 Purchase Money Loan Agreement dated as of August 27, 1997
among the Company, Comerica Bank, as agent, and Harris Bank,
as co-agent, filed as Exhibit 4.23 to the Company's
Registration Statement on Form S-4, File No. 333-45693.(2)
4.24 Purchase Money Guaranty dated as of August 27, 1997 by the
Company and certain of its subsidiaries to Comerica Bank, as
agent, filed as Exhibit 4.24 to the Company's Registration
Statement on Form S-4, File No. 333-45693.(2)
4.25 Purchase Money Security Agreement dated as of August 27,
1997 among the Company, and certain of its subsidiaries and
Comerica Bank, as agent, filed as Exhibit 4.25 to the
Company's Registration Statement on Form S-4, File No.
333-45693.(2)
4.26 Amended and Restated Second Amendment and Waiver Agreement
dated as of March 3, 1998 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 4.26 to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997.(2)
4.27 Financing and Security Agreement date May 29, 1998 between
the Company and subsidiaries and NationsBank, N.A., as
Administrative Agent and Lender.(1)
5 Opinion of Katten Muchin & Zavis as to the legality of the
securities being registered (including consent).(1)
10.1 Joint Venture Agreement between the Company and Mitsuba
Electric Manufacturing Company, Ltd. dated December 12,
1986.(1)
</TABLE>
<PAGE> 186
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
10.2 The Company's Equity Based Long-Term Incentive Plan as
amended and restated effective June 20, 1994.(1)
10.3 Retirement Income Plan for Directors dated February 23,
1988.(1)(3)
10.4 The Company's Employee Stock Ownership Plan as amended and
restated effective January 1, 1997.(1)
10.5 Walbro Engine Management Incentive Compensation Plan.(1)(3)
10.6 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.(2)
10.7 Joint Venture Agreement between the Company and Jaeger S.A.
dated as of January 1, 1993 relating to the Marwal do Brasil
joint venture.(1)
10.8 The Company's Advantage Plan, as amended and restated
effective January 1, 1997.(1)(3)
10.9 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.(1)
10.10 Agreement among the Company, Walbro Automotive Corporation
and Magneti Marelli France S.A. dated February 7, 1995.(1)
10.11 Joint Venture Agreement between the Company and Daewoo
Precision Industries, Ltd. dated November 30, 1994.(1)
10.12 Purchase and Sale Agreement dated as of April 7, 1995
between the Company and Dyno Industrier AS, filed as Exhibit
2.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995.(2)
10.13 Addendum to Purchase and Sale Agreement between the Company
and Dyno Industrier AS dated as of July 27, 1995, filed as
Exhibit 2.2 to the Company's Current Report on Form 8-K
dated July 27, 1995.(2)
10.14 General Partnership Agreement dated August 18, 1995 between
Iwaki Diecast U.S.A., Inc. and Walbro Tucson Corp.(1)
10.15 Employment Agreement between the Company and L.E. Althaver
dated August 16, 1996, filed as Exhibit 10.21 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.(2)(3)
10.16 Termination and Change of Control Agreement between the
Company and L.E. Althaver dated August 16, 1996, filed as
Exhibit 10.22 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996.(2)(3)
10.17 Employment Agreement between the Company and Daniel L.
Hittler dated August 16, 1996, filed as Exhibit 10.23 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.(2)(3)
10.18 Termination and Change of Control Agreement between the
Company and Daniel L. Hittler dated August 16, 1996, filed
as Exhibit 10.24 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996.(2)(3)
10.19 Employment Agreement between the Company and Michael A.
Shope dated August 16, 1996, filed as Exhibit 10.25 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.(2)(3)
10.20 Termination and Change of Control Agreement between the
Company and Michael A. Shope dated August 16, 1996, filed as
Exhibit 10.26 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996.(2)(3)
</TABLE>
<PAGE> 187
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
10.21 Employment Agreement between the Company and Robert H.
Walpole dated August 16, 1996, filed as Exhibit 10.27 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.(2)(3)
10.22 Termination and Change of Control Agreement between the
Company and Robert H. Walpole dated August 16, 1996, filed
as Exhibit 10.28 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996.(2)(3)
10.23 Employment Agreement between the Company and R.H. Whitehead
III dated August 16, 1996, filed as Exhibit 10.29 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.(2)(3)
10.24 Termination and Change of Control Agreement between the
Company and R.H. Whitehead III dated August 16, 1996, filed
as Exhibit 10.30 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996.(2)(3)
10.25 Employment Agreement between the Company and Frank E.
Bauchiero dated October 3, 1996, filed as Exhibit 10.31 to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.(2)(3)
10.26 Termination and Change of Control Agreement between the
Company and Frank E. Bauchiero dated October 3, 1996, filed
as Exhibit 10.32 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996.(2)(3)
10.27 The Company's Broad-Based Long Term Incentive Plan, filed as
Exhibit 10.33 to the Company's Registration Statement on
Form S-4, File No. 333-45693.(2)
10.28 The Company's Supplemental Employee Retirement Plan,
effective January 1, 1997.(1)
10.29 Separation Agreement and General Release dated May 20, 1998
between the Company and Lambert E. Althaver.(1)(3)
12 Computation of ratio of earnings to fixed charges.(1)
21 Subsidiaries of the Company, filed as Exhibit 21 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997.(2)
23.1 Consent of Arthur Andersen LLP.(1)
23.2 Consent of Ernst & Young Audit.(1)
23.3 Consent of Katten Muchin & Zavis (contained in its opinion
filed as Exhibit 5).
24 Power of Attorney, included in signature page to the
Company's Registration Statement on Form S-4, File No.
333-45693.(2)
25 Statement of eligibility under the Trust Indenture Act of
1939, as amended, on Form T-1 of Bankers Trust Company, as
Trustee under the Indenture, filed as Exhibit 25 to the
Company's Registration Statement on Form S-4, File No.
333-45693.(2)
27 Financial Data Schedule.(1)
99.1 Form of Letter of Transmittal for the Exchange Notes, filed
as Exhibit 99.1 to the Company's Registration Statement on
Form S-4, File No. 333-45693.(2)
99.2 Form of Notice of Guaranteed Delivery for the Exchange
Notes, filed as Exhibit 99.2 to the Company's Registration
Statement on Form S-4, File No. 333-45693.(2)
99.3 Form of Letter to Registered Holders and Depository Trust
Company Participants, filed as Exhibit 99.3 to the Company's
Registration Statement on Form S-4, File No. 333-45693.(2)
99.4 Form of Letter to Clients, filed as Exhibit 99.4 to the
Company's Registration Statement on Form S-4, File No.
333-45693.(2)
</TABLE>
<PAGE> 188
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
99.5 Form of Instruction to Registered Holder and/or Book Entry
Transfer Participant from Beneficial Owner, filed as Exhibit
99.5 to the Company's Registration Statement on Form S-4,
File No. 333-45693.(2)
99.6 Guidelines for Certificate of Taxpayer Identification Number
on Substitute Form W-9, filed as Exhibit 99.6 to the
Company's Registration Statement on Form S-4, File No.
333-45693.(2)
</TABLE>
- -------------------------
(1) Filed herewith.
(2) Incorporated by reference.
(3) Management contract or compensatory plan or arrangement.
<PAGE> 1
EXHIBIT 2
AGREEMENT FOR SALE OF THE
ASSETS OF SHARON MANUFACTURING COMPANY
This Agreement is entered into on April 9, 1998, between Sharon Manufacturing
Company, a corporation organized under the laws of the State of Michigan, with
its principal office located at 925 N. Main, Ligonier, IN ("Seller"), and Walbro
Corporation, a corporation organized under the laws of the State of Delaware,
with its principal office located at 6242 Garfield, Cass City, Michigan 48726
("Walbro"), the sole shareholder of the Sharon, and Millennium Industries
Corporation, a corporation organized under the laws of the State of Michigan,
with its principal office located at 4429 Doerr Rd, Cass City, MI 48726,
Michigan ("Buyer").
In consideration of the mutual covenants of the parties, Seller, Walbro
and Buyer agree:
SECTION ONE
DEFINITIONS
1.1 "Acquired Assets" means all of the assets of Seller used in the production,
processing, assembling, distribution and sale of stamped and brazed steel fuel
rails and fuel rail assemblies, as currently conducted at the Ligonier, Indiana,
facility other than the Excluded Assets. The Acquired Assets include Inventory,
Tangible Personal Property, Contracts, Contract Rights, Real Property, Books and
Records, Customer Information, Supplier Information Permits, Proprietary Rights,
Products, prepaid amounts, deposits, leasehold rights and improvements, and
rights of action.
1.2 "Books and Records" means all records, books of accounts, ledgers,
financial records, data, and other recorded information, whether maintained
electronically or from hard copies,
<PAGE> 2
pertaining to the Business, the Acquired Assets, or the financial affairs,
customers, or suppliers of the Business, excluding, however, any Excluded
Assets, the corporate records of Seller, all tax records, and records maintained
by Seller's accountants and attorneys.
1.3 "Business" means the production, processing, assembling, distribution, and
sale of stamped and brazed steel fuel rails and fuel rail assemblies, and other
stampings and assemblies carried on at the Ligonier Facility.
1.4 "Closing" means the consummation of the purchases, sales, assignments, and
assumptions contemplated under this Agreement and the Transaction Documents,
which shall take place on the Closing Date. Unless otherwise agreed in writing
by the parties hereto, the Closing shall commence at 9:00 a.m. (eastern time),
at the Auburn Hills offices of Walbro, on the Closing Date.
1.5 "Closing Date" means the date of the Closing, which shall be not more than
30 days after delivery of the Environmental Survey described in Section 5.1.9,
or such other date as provided in Section Ten of this Agreement.
1.6 "Closing Time" means 12:01 a.m. (eastern time) on the Closing Date.
1.7 "Code" means the Internal Revenue Code of 1986, as amended.
1.8 "Contracts" means those contracts described in Section 2.1.4.
1.9 "Contract Rights" means all of Seller's rights and obligations under: (i)
the agreements, contracts, leases, purchase orders, and other commitments that
are outstanding and executory in whole or in part on April 9, 1998, and that
remain outstanding and executory in whole or in part as of the Closing Time and
(ii) the agreements, contracts, leases, purchase orders, and other
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commitments of any kind entered into by Seller in the ordinary course of the
conduct of the Business.
1.10 "Customer Information" means all lists, records, credit and payment
histories, and other information of any kind relating to past, current, and
prospective customers of Seller and the Business.
1.11 "Excluded Assets" means those assets described in Section 2.2, and listed
on Schedule 2.2, which shall not be part of the purchase and sale contemplated
under this Agreement.
1.12 "Encumbrance" means any mortgage, pledge, security interest, lien
(statutory or otherwise), option, or charge of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and the filing of or any agreement to give any financing statement
under the Uniform Commercial Code of any jurisdiction), or any other kind of
preferential arrangement for the purpose, or having the effect, of protecting a
creditor against loss or securing the payment or performance of an obligation.
1.13 "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board (or any successor authority)
consistently applied.
1.14 "Governmental Authority" means any administrative, executive, judicial, or
legislative body, or any agency, authority, bureau, commission, branch, court,
department, or other instrumentality of any foreign, federal, state, or local
government.
1.15 "Inventory" means all of Seller's finished goods, raw materials and work in
process, wherever located.
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1.16 "Knowledge" when used herein with respect to Buyer means the actual
knowledge of Joe Ruffolo, John Neeb, Kelly Smith and Gary Vollmar.
1.17 "Material Adverse Effect" means any change, effect or circumstance that is
reasonably likely to be materially adverse to the business, prospects, Acquired
Assets, financial condition or results of operations of the party making the
representation, warranty, or disclosure.
1.18 "Permits" means all of Seller's licenses, permits, variances, orders,
approvals, and contracts from Governmental Authorities that are legally
necessary or material, to the operation of the Business. All such Permits are
listed on Schedule 2.1.6 hereto.
1.19 "Products" means all of the stamped, formed and/or brazed parts and
products that are (i) manufactured, assembled, or held or offered for sale or
distribution by Seller or any other Person in connection with the operation of
the Business, or (ii) are being developed by or on behalf of Seller solely in
connection with the operation of the Business.
1.20 "Proprietary Rights" mean all know-how, trade secrets, inventions, uses of
ideas, intellectual property or property rights owned, developed, held under
license or similar arrangement by Seller that are employed in or necessary for
the operation of the Business, including, without limitation, computer software
(or copies thereof), patents, patent applications and registrations, trademarks,
trademark applications and registrations, trade names, service marks and service
mark applications and registrations, all goodwill associated with such patents,
trademarks, service marks and registrations and applications therefor, and all
other intellectual property of any kind whatsoever and all mailing lists,
proprietary data and technical, manufacturing, and marketing strategies and
information, provided, however, that Proprietary Rights shall not include any
computer software that is subject to a lease, license, or other
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agreement that precludes the transfer of such software to persons not parties
thereto, but excluding the names "Walbro" and "Sharon" or any variation thereof.
Schedule 2.1.5 lists all of the Proprietary Rights.
1.21 "Supplier Information" means all agreements with suppliers and other
vendors of Seller and the Business and all lists, records, and other information
of any kind relating to past, current and prospective suppliers and vendors of
Seller and the Business.
1.22 "Tangible Personal Property" means equipment, furniture, fixtures,
machinery and equipment, dies, vehicles, tools and tooling.
1.23 "Transaction Documents" means this Agreement and the Certificates
specified in this Agreement, and all other agreements or instruments to be
executed and delivered by any party hereto or thereto in connection with the
consummation of the transactions contemplated hereunder and thereunder.
SECTION TWO
SALE OF ASSETS
2.1 Sale of Assets. Seller shall sell, assign, and deliver to Buyer, and
Buyer shall purchase and accept, on the Closing Date, all of the Acquired Assets
owned by Seller or in which Seller has any right, title or interest, inchoate or
otherwise, of every kind and description, wherever located, used in the Business
as currently conducted at the Ligonier, Indiana, facility (the "Ligonier
Facility"), including:
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2.1.1 All the real estate which is currently owned by Seller and
located in Ligonier, Indiana, together with all easements and rights connected
therewith, as set forth in Schedule 2.1.1 attached hereto (the "Real Property").
2.1.2 The Tangible Personal Property owned by Seller at the Closing
Date. Attached as Schedule 2.1.2 is a listing of the Tangible Personal Property
on the books of Seller (whether fully depreciated or not), at December 31, 1997.
2.1.3 All Inventory as of the Closing Date.
2.1.4 All Contract Rights, Books and Records, Customer Information,
leasehold rights and improvements, Supplier Information, contracts, rights of
action, and sales or purchase orders.
2.1.5 Proprietary Rights used in the Business, including those patents
and the software listed in Schedule 2.1.5 attached hereto.
2.1.6 All Permits, to the extent they are transferable, as set forth in
Schedule 2.1.6 attached hereto.
2.1.7 All Products of Seller as set forth in Schedule 2.1.7, attached
hereto.
2.2 Excluded Assets. The Acquired Assets shall not include any accounts
receivable, cash, cash equivalents, customer receivables for tooling central
office assets, the name "Walbro" and "Sharon," the HR 2000 software and two sets
of vendor owned CD Rom 200 select computer diskettes, and all other assets which
are not acquired assets (collectively, the "Excluded Assets").
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SECTION THREE
CONSIDERATION
3.1 Payment. In consideration of the sale of Acquired Assets and of all other
things done and agreed to be done by Seller and Walbro, Buyer shall pay to the
Seller, in immediately available funds at the Closing, the sum of Four Million
Six Hundred Twenty One Thousand and NO/100 Dollars ($4,621,000.00) (the
"Purchase Price") less the Earnest Money paid pursuant to Section 3.2 hereof.
3.2 Earnest Money Payment. In consideration of the continued efforts by Seller
and Walbro between the date of the execution of this Agreement and the first to
occur of (i) the Closing Date, or (ii) the termination of this Agreement as
provided in Section 13 herein, Buyer shall pay to the Seller, in immediately
available funds upon the execution of this Agreement, the sum of Three Hundred
Thousand and NO/100 Dollars ($300,000.00) (the "Earnest Money").
3.3 Post-Closing Inventory Price Adjustment. As soon as possible, but not later
than ten days after the Closing Date, Seller will prepare a report showing the
amount of Gross Inventory (as defined below) as reported on the accounts of the
Seller as of the Closing Date. Buyer shall permit Seller full access to the
Books and Records and computer system to prepare such report. The report shall
be complied solely from the accounting records of Seller and there will not be a
physical Inventory taken. For purposes of this Section 3.3, Gross Inventory
shall be the full cost of inventory before reduction for any (1) reserves for
obsolescence and excess quantities, (2) writedowns to net realizable value, or
(3) other inventory devaluation. Such calculation shall be made consistent with
the methodology utilized in calculating Seller's January 31, 1998 Gross
Inventory which amount was agreed by Buyer and Seller to be $2,974,000.
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Buyer shall have ten business days to review the report and either
accept such calculation or give Seller written notice of its objection with
detailed explanations. If no such notice of objection is made within such time
frame, the report shall be deemed accepted. If there is a dispute with respect
to the report which the parties are not able to resolve within thirty days after
delivery of the report, the calculation shall be submitted for resolution to a
independent certified public accounting firm ("CPA") jointly selected by the
parties. If the parties cannot agree upon a CPA, then each party shall pick a
CPA and the two CPA's shall pick a third CPA. The determination of the CPA will
be final and binding upon the parties hereto.
If the amount of the Gross Inventory is greater than $2,800,000, Buyer
shall pay the amount of such excess to Seller in cash within ten business days
after such amount is determined and agreed upon. If the Gross Inventory is less
than $2,800,000, Seller shall pay to Buyer the amount of the deficiency in cash
within ten business days after such amount is determined.
SECTION FOUR
LIABILITIES
4.1 Non-Assumption of Liabilities. Unless expressly agreed herein, Buyer shall
not assume any liabilities, costs or other obligations of Seller existing prior
to the Closing Time including, without limitation, any taxes, employee wages,
bonuses, healthcare and post-retirement benefits, workers compensation claims,
product liability claims, environmental liabilities, unfavorable customer
tooling audits, and product warranty claims, except for (hereinafter the
"Assumed Liabilities"):
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4.1.1 Purchase orders entered into in the ordinary course of business.
4.1.2 Equipment leases and supply contracts entered into in the
ordinary course of business.
SECTION FIVE
REPRESENTATIONS AND WARRANTIES OF SELLER
5.1 Seller and Walbro represent and warrant that:
5.1.1 Ownership. Seller is a corporation duly organized, existing, and
in good standing under the laws of the State of Michigan, and is authorized and
entitled to carry on its business in the State of Indiana. Seller has no
subsidiaries. Walbro owns all of the issued and outstanding capital stock of
Seller. There are no outstanding contracts, agreements, options, warrants,
rights, subscriptions, obligations, or other commitments of Seller, directly or
indirectly relating to or requiring the authorization, issuance, transfer, sale,
of other disposition of or the repurchase of other acquisition of any shares,
issued or unissued, of the capital stock or any other voting interests of any
kind of Seller or securities convertible or exchangeable into or for any of the
foregoing.
5.1.2 Corporate Authority. Seller and Walbro have the full right,
power, legal capacity, and authority to enter into and to perform their
obligations under this Agreement and the Transaction Documents. The form,
execution, and delivery of this Agreement and the Transaction Documents and the
performance by Seller and Walbro of their obligations hereunder and thereunder
have been duly approved by their respective Boards of Directors. No other
approvals, permits, authorizations, consents, or proceedings are required under
Seller's and
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Walbro's Articles of Incorporation or By-Laws, the laws of the State of Michigan
or the State of Delaware, or any judgment, order, writ, injunction, decree,
ordinance, law, rule or regulation of any federal, state or local Governmental
Authority or any instrument, contract, or agreement to which Seller or Walbro is
a party, or by which Seller or Walbro is bound. This Agreement is a valid and
binding agreement of each of Seller and Walbro, and is enforceable against each
of them in accordance with its terms.
5.1.3 No Violations. Except as set forth on Schedule 5.1.3, neither the
execution and delivery of this Agreement or any Transaction Document nor the
consummation of the transactions contemplated hereby or thereby will (i) violate
or conflict with, or result in a default or breach under, the Articles of
Incorporation or By-Laws of Seller or Walbro, or any provision of any material
agreement, contract, instrument or document of any kind to which Seller or
Walbro is a party or by which Seller or Walbro is bound or to which the
Business, properties, or assets of any of them are subject, or any statute, law,
rule, regulation, or ordinance or any judgment, decree, instrument, or order of
any Governmental Authority applicable to and binding upon them, (ii) cause any
acceleration of maturity of any loan or obligation to which Seller is a party or
by which Seller is bound or with respect to which Seller is an obligor or
guarantor, or (iii) result in the creation or imposition of any lien, claim,
charge, restriction, or other Encumbrance of any kind whatsoever upon, or give
to any other person any interest or right (including any right of termination or
cancellation) in or with respect to any of the Acquired Assets, except for any
occurrence in (i), (ii), or (iii) above which would not reasonably be likely to
have a Material Adverse Effect.
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5.1.4 Permits. Seller has all Permits necessary to operate the
Business. Except as provided in Schedule 5.1.4, Seller is in material compliance
with the terms of each of the Permits, and there does not exist under any of the
Permits any default or event of default or event which, with notice or lapse of
time or both, would constitute an event of default under, or violation of, such
Permits by Seller, except any default or violation which would not have a
Material Adverse Effect.
5.1.5 Real Property. Seller has marketable title to the Real Property.
The real property is free and clear of all mortgages, liens, and encumbrances
and is not subject to any right-of-way, easement, or restriction that interferes
materially with the present use of the real property, except as otherwise
specifically referred to in this Agreement. The Real Property is in material
compliance with all applicable state and local use, zoning, and building
statutes, ordinances, codes, regulations, and requirements and is able to be
used for commercial purposes including the conduct of the Business as currently
operated without any governmental restrictions or limitations thereon, except
customary restrictions which do not affect the use or operation thereof. The
Ligonier Facility is the only location at which Seller maintains or stores
Inventories, tools, tooling, dies, or fixtures and equipment related to the
Business, except as specifically set forth in Schedule 5.1.5. Seller has no
knowledge of any material citations, notices, or claims made by any Governmental
Authorities of any violations relating to the Ligonier Facility.
5.1.6 Tangible Personal Property. Except as set forth on Schedule
5.1.6, Tangible Personal Property that are Acquired Assets are owned or leased
free and clear of all mortgages, liens and encumbrances.
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5.1.7 Patents and Intellectual Property. All Proprietary Rights listed
in Schedule 2.1.5 as being owned, controlled, or used by Seller, are valid and
in force; all patent applications of Seller listed therein are in good standing,
all without challenge or infringement of any kind. Seller owns the entire right,
title, and interest in and to such patents and patent applications without
qualification, limitation, or Encumbrance of any kind except as specifically
provided herein or which would not have a Material Adverse Effect on the
Business. Seller has previously given Buyer correct and complete list of all
Proprietary Rights.
5.1.8 No Infringement. To Seller's knowledge, the operations of the
Ligonier Facility have not infringed and do not infringe upon any rights of
third parties with respect to any patent, patent right, trademark, service mark,
trade name, or copyright or registration thereof. Seller and Walbro have no
knowledge of any claim or threat that any such infringement has been made or
implied in respect of any of the foregoing, and no claim of invalidity of any
patent described in Schedule 2.1.5, has been made, and no proceedings are
pending or, to the knowledge of Seller or Walbro, threatened against Seller that
challenges the validity or ownership of any patent or other Proprietary Right
described in Schedule 2.1.5, and neither Seller nor Walbro knows of infringing
use of any of the same by any other Person.
5.1.9 Environmental. The operations of Seller and Walbro pertaining to
the Ligonier Facility comply with all applicable Environmental Laws, except as
set forth on Schedule 5.1.9. In the event the environmental survey undertaken by
Seller and to be provided to Buyer prior to the Closing (the "Environmental
Survey") discloses contamination on the premises occupied by the Ligonier
Facility, Seller and Walbro will remedy the such environmental contamination as
disclosed by the Environmental Survey.
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5.1.9.1 Except as disclosed in Section 5.1.9, none of Seller's
business operations pertaining to the Ligonier Facility, or the Ligonier
Facility, is or, during the period of the Seller's ownership of the Ligonier
Facility, has been subject to any investigation by, notice of potential
liability regarding, order from, or agreement with any Person respecting (i)
compliance with or obligation under any Environmental Law, (ii) any Remedial
Action or (iii) any claim of liability arising from the Release or threatened
Release of a Contaminant.
5.1.9.2 Except as disclosed in Section 5.1.9, to the best of
the knowledge of Seller after due inquiry, at no time during the period before
the Seller's acquisition of the Ligonier Facility was the Ligonier Facility
subject to any investigation by, order from, or agreement with any Person
respecting (i) compliance with or obligation under any Environmental Law, (ii)
any Remedial Action or (iii) any claim of liability arising from the Release or
threatened Release of a Contaminant.
5.1.9.3 Except as disclosed in Section 5.1.9, neither Seller
nor Walbro has filed any notice with any Governmental Authority reporting a
violation of any applicable Environmental Law pertaining to the Ligonier
Facility.
5.1.9.4 Except as disclosed in Section 5.1.9, to the best of
Seller's and Walbro's knowledge after due inquiry, there is not now, nor has
there ever been, on or in the Ligonier Facility (i) any underground storage tank
or surface impoundment or (ii) any release of a Contaminant, except where such
Release was in compliance with Environmental Law or except where remedial action
has not been or will not be required prior to the Closing Date with respect to
such Release under Environmental Law.
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5.1.9.5 No Environmental Encumbrance has attached to the Ligonier
Facility.
5.1.9.6 There is no asbestos-containing material on the Ligonier
Facility.
5.1.9.7 None of the Products or Discontinued Products produced at the
Ligonier Facility, contains or contained asbestos-containing material.
5.1.9.8 For purposes of this Section:
"Contaminant" means any pollutant, hazardous substance, radioactive
substance or waste, toxic substance, hazardous or extremely hazardous waste,
special waste, petroleum or petroleum-derived substance or waste, asbestos,
polychlorinated biphenyls, any hazardous or toxic constituent thereof and
includes, but is not limited to, these items as defined in Environmental Laws,
as well as any other substance that is required by a Governmental Authority to
be investigated, cleaned up, removed, treated or otherwise abated.
"Environmental Encumbrance" means any lien, claim, or charge in favor
of any foreign, federal, state, local or other Governmental Authority for (i)
any liability under any Environmental Law, or (ii) damages arising from, or
costs incurred by such Governmental Authority in response to, a Release or
threatened Release of a Contaminant.
"Environmental Law" means all federal, state and local laws, statutes,
regulations, rules, codes, ordinances, or common law relating to or addressing
the environment, health or safety, including but not limited to CERCLA, OSHA and
RCRA and any state equivalent thereof.
"Release" means release, spill emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching, or migration of a
Contaminant into the indoor or
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outdoor environment or into or out of any real property, including the movement
of Contaminants through or in the air, soil, surface water, groundwater,
municipal waste water system, or real property.
"Remedial Action" means actions required to (i) clean up, remove, treat
or in any other way address Contaminants in the indoor or outdoor environment;
(ii) prevent the Release or threatened Release or minimize the further release
of Contaminants, or (iii) investigate and determine if a remedial response is
needed and to design such a response and post-remedial investigation,
monitoring, operating, maintenance, and care.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Section 9601 et seq., any amendments thereto, and
any regulations promulgated thereunder.
"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq., any amendments thereto, and any regulations promulgated
thereunder.
5.1.9.9 Health and Safety Schedule 5.1.9.9 sets forth for the calendar
years 1995, 1996 and 1997 a complete list of (i) all occupational, safety and
health reports filed by Walbro or Seller with respect to the Business or the
Ligonier Facility with any Governmental Authority, (ii) annual summaries of
workers compensation liabilities of Seller, (iii) all citations, notices,
orders, consent orders, or administrative or judicial enforcement proceedings by
or from Governmental Authorities with respect to health or safety matters
pending with respect to the Business or the Ligonier Facility, and (iv)
identification of each inspection by any Governmental Authority concerning
health, safety or environmental matters conducted with respect to the Business
or the Ligonier Facility.
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5.1.10 Contractual Obligations. Seller is not a party to any material
employment agreement, labor union agreement, agreement for the future purchase
of materials, supplies, or equipment, sales agreement, pension, profit-sharing,
or retirement plan or agreement, distributorship or sales agency agreement, or
lease agreement that relate to any period beyond the Closing Date, whether
written or oral, except as listed in Schedule 5.1.10. Copies of all such written
agreements have been supplied to Buyer, and Buyer has been advised of the terms
of all such oral agreements. Buyer shall be obligated to use its best efforts to
ratify any or all of said contracts as Buyer.
5.1.11 Customer Relations. Seller enjoys good relations with Ford Motor
Company, and there have been no significant difficulties experienced that would
indicate that this good relationship will not continue past the Closing Date,
except that, Buyer is aware of Seller' loss of its Q-1 Rating with Ford Motor
Company for the Ligonier Facility and the reasons therefore. Schedule 5.1.11 is
a list of Seller's key customers as of February 5, 1998. Neither Seller nor
Walbro has any agreement, arrangement, or understanding with any customer with
respect to discriminatory allowances, preferential or special terms of sale, or
exclusive dealing or special delivery terms, and, to Seller's and Walbro's
knowledge, nothing has been done or said by Seller or Walbro to cause any
customer to expect any such special conditions as a prerequisite for its
continued purchase of products from Seller or its successor corporation.
5.1.12 Default. Seller is not in default under any Contract, agreement,
lease, or other material document to which it is a party which would have a
Material Adverse Effect.
5.1.13 Pledge of Assets. Seller has not mortgaged or pledged any of its
Proprietary Rights.
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5.1.14 Marketing. Since the date of the Letter of Intent signed
December 11, 1997, there has been no substantial change in the marketing
activities of Seller.
5.1.15 No Violations. Except as disclosed on Schedule 5.1.9, Seller is
in material compliance, and has complied, in all material respects, with all
federal, state, and local laws, regulations, rules, orders, decrees, judgments,
codes, and ordinances that are applicable to Seller or the Business.
5.1.16 No Litigation. No lawsuit, action, claim, suit, proceeding, or
investigation is pending or to Seller's knowledge, threatened, that questions
the legality or propriety of any of the transactions contemplated by this
Agreement.
5.1.17 No Change of Law. To the knowledge of Seller and Walbro,
excluding general business and economic conditions, no legislative or regulatory
proposal has been adopted or is pending that reasonably would be expected to
adversely affect the production, assembly, marketing, or sale of any Product or
that is applicable to the operations of the Business and that reasonably would
be expected to have a Material Adverse Effect.
5.1.18 Products. Except for those Inventories located at the Ligon
"Air" warehouse and in the storage trailer as described in Schedule 5.1.5., the
finished goods inventories conform in all material respects to all applicable
Product specifications, labeling requirements, service or Product warranties,
all standards or specifications of Governmental Authorities, and any applicable
standards related to auto-industry practices. Seller and Walbro have no
knowledge of any latent or patent or overt design, manufacturing, or other
defect in any of Seller's Products or discontinued Products.
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5.1.19 Product Warranties. Seller's Product warranties and guaranties,
whether express or implied, now in effect with respect to the Products or
services provided in connection with the Business are standard for the Industry.
Seller and Walbro shall be solely responsible for all product warranties for
failure to meet customer specifications related to finished goods produced or
sold prior to the Closing.
5.1.20 Disclosure. To Seller's and Walbro's knowledge, none of the
representations or warranties of Seller and Walbro contained herein, none of the
information contained in the Schedules provided by Seller or Walbro referred to
in this Agreement, is false or misleading in any material respect, or, contains
or will contain any materially untrue statement, or omits to or will omit to
state a material fact herein or therein necessary to make the statements herein
or therein not misleading, under the circumstances.
5.1.21 Sufficiency. Except for working capital and Excluded Assets, the
Acquired Assets and the Transaction Documents constitute all of the assets,
properties, and rights necessary for Buyer's operation of the Business.
5.1.22 Raw Materials. The inventory levels of the raw materials held by
Seller and used in the manufacture of the Products are sufficient for the
conduct of the Business. There has been no impairment of Seller's relationship
with any of its vendors or suppliers, which would materially interfere with
Buyer's ability to continue to conduct business with such vendors or suppliers
in a reasonably commercial manner subsequent to the Closing.
5.1.23 Construction. For purposes of this Agreement, Seller and Walbro
will be considered to have "knowledge" or "know" of a matter if the plant
manager of Seller or any officer, or director of Seller or Walbro has actual
knowledge thereof or if any such plant
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manager, officer or director should reasonably be expected to have had such
knowledge in the ordinary course of his duties.
5.1.24 Contemplated Acts. Except as may be required by law, neither
Seller nor Walbro has committed any act which will interfere with the
transaction contemplated in this Agreement or with Buyer's ability to continue
its ownership of the Acquired Assets subsequent to the Closing.
SECTION SIX
REPRESENTATIONS AND WARRANTIES OF BUYER
6.1 Buyer represents and warrants to Seller and to Walbro as follows:
6.1.1 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Michigan, and has the power and authority to carry on the Business.
6.1.2 Power, Authority, Execution and Delivery. Buyer has full right,
power, legal capacity and authority to enter into and to perform its obligations
under this Agreement, the Transaction Documents and instruments to be executed
and delivered by it pursuant to this Agreement and to consummate the
transactions contemplated herein and thereby. This Agreement has been duly
executed and delivered by Buyer and constitutes, and the Transaction Documents
and instruments, when duly executed and delivered by Buyer, will constitute,
legal, valid, and binding obligations of Buyer and will be enforceable against
Buyer in accordance with its terms.
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6.1.3 Authorization for this Agreement. Except as specifically provided
herein, no approval, consent, or other order or action of or filing with any
Governmental Authority or other third party is required for the execution and
delivery by Buyer of this Agreement or the other agreements to be executed and
delivered by Buyer pursuant hereto.
6.1.4 Encumbrances Created By This Agreement. The execution, delivery,
and performance of this Agreement and the other agreements and instruments to be
executed, delivered, and performed pursuant hereto and the consummation of the
transaction contemplated herein and thereby will not result in any breach of or
constitute a material default (or would not constitute a default but for the
requirement that notice be given or time pass or both) under, and will not
accelerate or permit the acceleration of the performance required by, any of the
terms or provisions of the Articles of Incorporation or By-laws of Buyer or any
material contract, agreement, indenture, instrument, or commitment to which
Buyer is a party or by which Buyer is bound or affected.
6.1.5 No Violations. Neither the execution and delivery of this
Agreement or any Transaction Document nor the consummation of the transactions
contemplated hereby or thereby will violate or conflict with, or result in a
default or breach under, the Articles of Incorporation or By-Laws of Buyer, or
any provision of any material agreement, contract, instrument or document of any
kind to which Buyer is a party or by which Buyer is bound or ordinance or any
judgment, decree, instrument, or order of any Governmental Authority applicable
to and binding upon them.
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6.1.6 No Litigation. As to Buyer, no lawsuit, action, claim, suit,
proceeding, or investigation is pending or to Buyer's knowledge, threatened,
that questions the legality or propriety of any of the transactions contemplated
by this Agreement.
6.1.7 Disclosure. To Buyer's knowledge, none of the representations or
warranties of Buyer contained herein is false or misleading in any material
respect, or, contains or will contain any materially untrue statement, or omits
to or will omit to state a material fact herein or therein necessary to make the
statements herein or therein not misleading, under the circumstances.
SECTION SEVEN
EMPLOYEES AND BENEFITS
7.1 Employees. At the Closing Time, Buyer shall employ at least 85% of the
employees of Seller on substantially similar terms as their current employment,
except Buyer shall not assume the employment contract of the plant manager, and
Seller shall be solely liable under same. Seller shall pay to its employees any
earned but unused vacation up to the Closing Date, and shall deduct from
paychecks issued to employees any used but unearned vacation up to the Closing
Date.
7.2 No Third Party Beneficiaries. Nothing express or implied in this
Agreement is intended by Buyer or Seller to confer upon any employee of Seller
or the Business any right or remedies, including, but not limited to any rights
of employment for any specified period of time, and no past, present, or future
employees of Seller or Buyer shall be treated as third party beneficiaries of
this Agreement or this Section.
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7.3 Employee Benefit Plans. Seller shall be responsible for all required
contributions to the employee benefit plans when due under each such plan for
the employees of Seller that accrue up to the Closing.
7.3.1 Each employee benefit plan, fund, policy or arrangement
established or maintained by Buyer shall grant credit to each former Seller
employee for all service on or prior to the Closing Date with Seller.
7.3.2 Within thirty days of the Closing Date, Buyer shall establish or
maintain a 401(k) plan, which plan shall accept both plan to plan or
trustee-to-trustee transfers of the account balances (including loans)
attributable to each former Seller employee.
7.3.3 Effective as of the Closing Time, Buyer shall establish or
maintain a group health plan which shall cover all former Seller employees and
their family members who, immediately prior to the Closing Date were covered
under any group health plan maintained by Seller. Any such group health plan
established or maintained by Buyer shall (i) waive any waiting period, (ii)
waive any exclusion or limitation for pre-existing conditions which were covered
(generally and/or specifically as to any individual) under any group health plan
maintained by Seller prior to the Closing Date, and (iii) grant credit (for
purposes of annual deductibles, copayments and out-of-pocket limits) for any
covered claims incurred or payments made on or prior to the Closing Date. Buyer
shall not recommend or in any way encourage any individual to elect continuation
coverage under any Seller group health plan.
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SECTION EIGHT
CONDUCT PRIOR TO CLOSING
8.1 Seller's Covenants. Seller covenants and undertakes, from the date of
execution of this Agreement until the Closing or the earlier termination of this
Agreement, that Seller shall:
8.1.1 Operation of Business. Operate the Business only in the ordinary
course on a basis consistent with past practices, except that Seller may not
replace any employee who is terminated or resigns.
8.1.2 Hypothecation. Not sell, offer, lease, license, transfer, assign,
pledge, donate, divide or distribute, or otherwise dispose of the Business or
any part thereof or any of the Acquired Assets nor create, incur, or permit to
exist any additional Encumbrance of any kind on any of the Acquired Assets
except in the ordinary course of the Business, provided that Seller may sell
Products in the ordinary course of the Business.
8.1.3 Assumed Liabilities. Not assign any Assumed Liability or any
interest in any of the Assumed Liabilities without the prior written consent of
Buyer.
8.1.4 Guarantees. Not create, incur, assume, or guarantee or agree to
create, incur, assume, or guarantee any indebtedness for borrowed money or enter
into as a lessee any capitalized lease obligation, except in the ordinary course
of the Business; and except in the ordinary course of the Business, not enter
into any other contract, agreement, or commitment that would be binding upon or
with respect to the Business without Buyer's approval.
8.1.5 Books and Records. Not destroy or dispose of any Books and
Records or other material data and files pertaining to the Business, Acquired
Assets, or Assumed Liabilities
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without the prior written consent of Buyer, which consent shall not unreasonably
be withheld or delayed.
8.1.6 Waiver. Not waive any rights Seller may have with respect to any
Acquired Asset.
8.1.7 Modification. Not terminate, modify, amend, or otherwise, alter
the terms and conditions of, or default under, any Assumed Liability or Contract
without the prior written consent of Buyer, which consent shall not unreasonably
be withheld or delayed.
8.1.8 New Transactions. Not enter into any other transaction or
agreement of any kind with respect to the Business, Acquired Assets, or Assumed
Liabilities other than in the ordinary course of business consistent with the
past practices of the Business without Buyer's prior written consent.
8.1.9 Permits. Not terminate or fail to renew or preserve any Permits,
unless, in the reasonable business judgment of Seller, such Permit no longer is
necessary for the operation of the Business consistent with past practice.
8.1.10 Repair. Not fail to maintain and repair any Acquired Asset in
accordance with ordinary and customary maintenance and repair procedures.
8.1.11 Disposal. Not dispose of or permit to lapse any Proprietary
Rights without consent of the Buyer, which consent shall not be unreasonably
withheld.
8.1.12 Insurance. Not terminate or fail to renew any existing insurance
coverage with respect to the Acquired Assets or Business.
8.1.13 Access to Properties and Records. Consult with Buyer about the
operations of the Business and keep Buyer advised of all material developments
relevant to such
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operations and the consummation of the transaction contemplated by this
Agreement; give Buyer and its representatives, advisors and financial
institution full and continuing access to the Business, the Assumed Liabilities,
the Acquired Assets, and personnel of Seller during regular business hours upon
reasonable prior notice.
8.1.14 Consents and Filings. Take all required action to obtain all
releases of Encumbrances on the Acquired Assets, except those Encumbrances
which, in accordance with the provisions of this Agreement, will remain in
effect after the Closing Date. If any contract, license, lease, commitment, or
sales or purchase order assignable to Buyer under this Agreement may not be
assigned without the consent of the other party thereto, Seller will use their
reasonable efforts to obtain the consent of the other party to the assignment.
Seller shall also diligently cooperate at its sole expense and in good faith
with Buyer's efforts to obtain Permits under Subsection 8.2.1 hereof.
8.1.15 Litigation and Proceedings. Promptly advise Buyer of all
developments in all litigation, proceedings, or investigations to which Seller
is or becomes a party that relates in any way to the Business, Acquired Assets,
Products, discontinued Products, or Assumed Liabilities. Without the prior
written consent of Buyer, which consent shall not unreasonably be withheld or
delayed, Seller shall not take any action therein, including settlement of any
litigation, proceedings, or investigations that could adversely affect Buyer,
the Business, Acquired Assets, Products, or Assumed Liabilities.
8.1.16 Information Furnished to Buyer. Furnish Buyer for inclusion in
any report or filings of Buyer such information as may be reasonably necessary
under the rules and
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regulations of any Governmental Authority. Seller covenants that all such
information shall be accurate in all material respects.
8.1.17 Notice of Certain Matters. Promptly notify Buyer of any event of
which Seller or Walbro obtains knowledge that could reasonably be expected to
have a Material Adverse Affect on the Business or the Acquired Assets, that if
known as of the date hereof, would have been required to be disclosed to Buyer.
Seller shall give prompt notice to Buyer of (i) the occurrence, or failure to
occur, of any event that would reasonably be expected to cause any
representation or warranty of Seller or Walbro contained in this Agreement to be
untrue or inaccurate in any material respect at any time from the date of this
Agreement to the Closing Date, (ii) any failure or inability of Seller or Walbro
to comply with or satisfy, in any material respect, any covenant, condition, or
agreement to be complied with or satisfied by Seller, or Walbro under this
Agreement or any of the Transaction Documents, or (iii) any damage to or loss to
any Acquired Asset in excess of Five Thousand and NO/100 ($5,000.00) Dollars.
8.1.18 Suppliers. Seller shall not knowingly commit any act which may
reasonably be expected to materially interfere with Buyers ability to continue
to conduct business with any vendors or suppliers of Seller in a reasonably
commercial manner subsequent to Closing.
8.1.19 Inventory Levels. Seller shall maintain inventory levels
consistent with past practices.
8.2 Buyer's Covenants.
8.2.1 Permits and Approvals. Buyer covenants and undertakes, from the
date of execution of this Agreement (unless terminated as provided herein) that
it shall be responsible
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for taking all such action as is reasonably necessary to obtain the assignment
or issuance of all applicable Permits to Buyer as may be necessary to permit the
consummation of the transactions contemplated hereunder and Buyer's operation of
the Business after the Closing in a manner consistent with prior operation.
8.2.2 Notification Regarding Representations and Warranties. Buyer
covenants and undertakes, from the date of execution of this Agreement until the
earlier of the Closing or the termination of this Agreement that it shall give
prompt notice to Walbro of the occurrence, or failure to occur, of any event
that would be likely to cause any representation or warranty of Buyer, Seller or
Walbro contained in this Agreement to be untrue or inaccurate in any material
respect any time from the date of execution of this Agreement to the Closing
Date.
SECTION NINE
INSTRUMENTS OF TRANSFER
9.1 Documents. The sales, assignments, and deliveries to be made to Buyer
pursuant to this Agreement shall be effected by deeds, bills of sale,
endorsements, checks, and other instruments of transfer in such form as Buyer's
counsel shall reasonably request. Seller shall prepare appropriate forms of
instruments of transfer and conveyance in conformity with this Agreement, and a
commitment for title insurance in an amount not less than $2,700,000, and shall
submit them to Buyer for examination at least 10 days in advance of the Closing
Date. Any time and from time to time after the Closing Date, on Buyer's request,
Seller will do, execute, acknowledge, and deliver all such further acts, deeds,
assignments, transfers, and powers of
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attorney as may be required in conformity with this Agreement for the adequate
assigning, transferring, granting, and confirming to Buyer of the assets and
properties sold to Buyer.
SECTION TEN
CLOSING
10.1 Time and Place. The Closing Date shall be not more than 30 days
after delivery of the Environmental Survey, and shall take place at 11:00
o'clock A.M. in the Auburn Hills offices of Walbro Corporation, or at such
other time and place as the parties shall agree. Notwithstanding the
foregoing, and subject to the satisfaction of the conditions set forth in
Section 10.3 hereof, Buyer shall use its best efforts to satisfy all of its
obligations in connection with this Agreement as soon as possible after the
receipt by Buyer of a commitment letter for or other notification of the
funding by a lender of the Purchase Price to be paid by Buyer.
10.2 Joint Conditions Precedent to Obligations of Buyer and Seller.
10.2.1 No Proceedings. No claim, action, suit, proceeding, or
governmental investigation shall have been threatened or instituted by any
Governmental Authority questioning or challenging the validity of this Agreement
or the transactions contemplated herein and which could reasonably be expected
to materially affect the right or ability of Buyer to consummate the
transactions contemplated hereunder.
10.2.2 No Change of Law. Since the date of this Agreement, no foreign,
federal, state, or local law, legislation, rule or regulation shall have been
enacted or adopted or become apparent through interpretation that has a Material
Adverse Effect on the ability of Seller,
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Walbro or Buyer to consummate the transactions contemplated herein or to enjoy
the benefits of such transactions.
10.3 Conditions Precedent to Obligations of Buyer. The obligation of
Buyer to consummate the transactions contemplated by this Agreement shall be
subject to satisfaction on or prior to the Closing Date of each of the
following conditions (which may be waived in whole or in part by Buyer at or
before the Closing in writing):
10.3.1 Validity of Documents. The instruments executed and delivered to
Buyer by Seller and Walbro pursuant to this Agreement are valid in accordance
with their terms, and effectively vest in Buyer good and marketable title to the
assets and business as contemplated by this Agreement, free and clear of any
liabilities, obligations, and encumbrances, except those liabilities and
obligations expressly assumed by Buyer as provided in this Agreement.
10.3.2 Approval of Documents. All actions, proceedings, instruments,
and documents required of Seller under this Agreement shall be in a form
approved by counsel for Buyer, provided that such approval shall not be
unreasonably withheld.
10.3.3 Representations, Warranties and Covenants of Seller and Walbro.
Seller and Walbro shall have complied with all of their respective agreements
and covenants contained herein and in the Transaction Documents in all material
respects, and all of the representations and warranties of Seller and Walbro
contained herein and in the Transaction Documents shall have been true and
correct in all material respects both when given and as of the Closing Date as
through such representations and warranties had been made at and as of the
Closing.
10.3.4 No Material Adverse Change. There shall not have been a material
adverse change in the financial condition of the Seller, the Acquired Assets,
the Business,
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business projects or operating results of the Seller since the date hereof.
Notwithstanding the foregoing, continuing operational losses consistent with the
past 12 months shall not be deemed a material adverse change.
10.3.5 Consents. All necessary consents, approvals, authorizations, and
clearances of Governmental Authorities and all consents or approvals of third
parties (including, without limitation, the consents of other parties to the
Contracts) required for or in connection with the execution or delivery of this
Agreement or the consummation of all the transactions contemplated herein shall
have been obtained and the waiting periods applicable to any applications,
qualifications, designations, declarations, notices, reports, and other filings
that Seller is required to make with any Governmental Authority for or in
connection with the execution or delivery of this Agreement or the consummation
of the transactions contemplated herein shall have expired and no such
Governmental Authority shall have requested more information from Buyer or
Seller.
10.3.6 Deliveries. There shall have been delivered to Buyer the
following instruments in form and substance satisfactory to Buyer in its sole
discretion, executed, where necessary, by a duly authorized officer of Seller or
Walbro, as applicable:
10.3.6.1 Certificates, dated as of the Closing Date, of the President
or Chief Financial Officers of Seller and Walbro, to the effect that the
conditions of Section Eight, have been satisfied.
10.3.6.2 Resolutions of the Boards of Directors of Seller authorizing
the execution, delivery, and performance of (i) this Agreement, the transaction
documents, and the
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transactions contemplated herein and therein, certified by the Secretary or any
Assistant Secretary of Seller.
10.3.6.3 Executed original of the Warranty Deed covering the real
property in the form of Exhibit 10.3.6.3, attached hereto.
10.3.6.4 Executed original Bill of Sale in substantially the form
of Exhibit 11.2.11.4 attached hereto.
10.3.6.5 True, complete and updated lists of the Contracts,
referred to in Schedule 2.1.4, as of the close of business on the business day
immediately preceding the Closing Date, together with any required consents
to Buyer's assumption thereof.
10.3.6.6 Executed originals of the Confidentiality and
Non-Competition Agreement in substantially the form of Exhibit 10.3.6.6,
attached hereto.
10.3.6.7 Evidence of releases of all Encumbrances on the Acquired
Assets, including UCC-3 termination statements signed by all Persons having
security interests in any of the Acquired Assets.
10.3.6.8 Such other executed agreements and instruments or
evidence of performance as Buyer may reasonably request.
10.4 Conditions Precedent to Obligations of Seller. The obligations of
Seller to consummate the transactions contemplated by and to close under this
Agreement shall be subject to satisfaction, at or prior to the Closing of all
of the following conditions (which may be waived in whole or part by Seller at
or before the Closing in writing):
10.4.1 Representations, Warranties and Covenants of Buyer. Buyer shall
have complied in all material respects with all of its agreements and covenants
contained herein to be
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performed at or prior to the Closing, and all of the representations and
warranties by Buyer contained herein and in the Transaction Documents shall have
been accurate when given and as of the Closing Date as though such
representations and warranties had been made at and as of the Closing Date.
10.4.2 Consents. All necessary consents, approvals, authorizations, and
clearances of Governmental Authorities required in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated herein shall have been obtained and the waiting periods applicable
to any applications, qualifications, designations, declarations, notices,
reports, and other filings that Buyer is required to make with any Governmental
Authority for or in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated herein shall have expired
and no such Governmental Authority shall have requested additional information
from Seller or Buyer.
10.4.3 Deliveries. There shall have been delivered to Seller and Walbro
the following instruments in form and substance satisfactory to Seller in their
sole discretion, executed, where necessary, by a duly authorized officer of
Buyer:
10.4.3.1 Resolutions of the Boards of Directors of Buyer and the
authorizing of the execution, delivery, and performance of this Agreement, the
Transaction Documents, and the transactions contemplated herein and therein,
certified by the Secretary of Buyer.
10.4.3.2 Buyer shall have paid that part of the Purchase Price
required to be paid at the Closing pursuant to Section Three hereof.
10.4.3.3 Executed originals of the Confidentiality and
Non-Competition Agreement in substantially the form of Exhibit 10.3.6.6,
attached hereto.
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10.3.3.4 Such other executed agreements and instruments or
evidence of performance as Buyer may reasonably request.
SECTION ELEVEN
Seller POST CLOSING COVENANTS
11.1 Walbro shall, subsequent to Closing:
11.1.1 Purchases. Purchase cam lock rings and coverplates from Buyer,
based upon the projected levels and prices in Walbro's 1998 business plan as
provided to Buyer, for a period of at least three years.
11.1.2 Customer Transition. Provide Buyer with sufficient assistance by
Walbro's account manager to effectuate an orderly transition of account
management for the current customer base and existing prospects, at no charge,
for a period of one year from the Closing Date.
11.1.3 Testing Support. Provide engineering testing at the Auburn Hills
and Caro Test Centers consistent with past custom and practice, at no charge,
for a period of one year from the Closing Date, with respect to the Business
subject to customary disclaimers for the automotive testing industry.
11.1.4 Tax Abatements. Cooperate with and assist Buyer in obtaining all
applicable benefits of tax abatement for the Acquired Assets.
11.1.5 Confidentiality and Non-Competition. Execute originals of the
Confidentiality and Non-Competition Agreement in substantially the form of
Exhibit 10.3.6.6 attached hereto.
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SECTION TWELVE
WARRANTIES AND INDEMNIFICATION
12.1 Seller's and Walbro's Indemnification. Seller and Walbro hereby
agree, jointly and severally, to indemnify and hold Buyer and its affiliates,
officers, directors, employees, agents, authorized representatives, successors
and assigns harmless from and against and with respect to the
following:
12.1.1 Expenses. Costs, claims, losses, liabilities, penalties, fines,
damages, expenses (including, without limitation, reasonable attorneys' fees and
expenses) or deficiencies (each a "Claim") that arise out of, result from, or
are connected with (i) any misrepresentation, false statement or omission or any
other agreement, instrument, or document delivered to Buyer, or its
representatives by Seller or Walbro or their respective employees, officers,
directors, owners, agents, or representative pursuant to this Agreement or any
Transaction Document or in connection with the transactions contemplated
hereunder or thereunder (collectively, the "Other Documents"); (ii) any breach
of any of the warranties made by Seller or Walbro in this Agreement; (iii) any
breach, or default in performance by Seller or Walbro of any of the obligations
that are to be performed by, or covenants made by Seller or Walbro in this
Agreement or any schedule hereto; (iv) any liability or obligation of any nature
(absolute or accrued) constituting, relating to, or arising from or in
connection with the Excluded Liabilities or Excluded Assets; and (v) any
liability or obligation of any nature (absolute or accrued) relating to the use
or operation of Acquired Assets or the Business before the Closing Date or the
manufacture, assembly, or sale of discontinued products and of Products shipped
before the Closing Date.
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12.1.2 Notification of Claim. Buyer shall notify Seller and Walbro in
writing of any claim under this Section with reasonable promptness after Buyer
becomes aware of such claim, including in any such notice a detailed description
of and the basis for the claim.
12.1.3 Limitation. Notwithstanding the foregoing, Buyer shall not be
liable under Section 12.1.1 with respect to any individual Claim unless and
until (i) such Claim exceeds $7,500 (each an "Included Claim"), and (ii) the
aggregate cumulative amount of all Included Claims with respect to all matters
referred to in Section 12.1.1 exceeds $50,000 (the "Threshold Amount"), and then
Seller and Walbro shall be liable for all Claims in excess of the Threshold
Amount. In no event shall the aggregate cumulative liability of Seller and
Walbro under Section 12.1.1 exceed $4,621,000.
12.1.4 Buyer Notification. Seller and Walbro shall have no liability to
indemnify Buyer for any Claim arising out of or resulting from the inaccuracy,
breach, non-fulfillment or non-performance of any representation, warranty,
covenant or agreement (each an "Inaccuracy") if such Inaccuracy is known by
Buyer prior to the signing of this Agreement. If between the date of this
Agreement and the Closing Date, Buyer learns of an Inaccuracy and intentionally
fails to give notice to Seller and Walbro of such Inaccuracy to Seller, Buyer
shall be construed to have waived, or acquiesced in, the breach of such
Inaccuracy.
12.2 Buyer's Indemnification. Buyer hereby agrees to indemnify and
hold Seller and Walbro and their respective affiliates, officers, directors,
employees, agents, authorized representatives, successors and assigns, harmless
from and against and in respect of the following:
12.2.1 Expenses. Claims that arise out of, result from, or are
connected with the investigation, defense or settlement of any of the foregoing
arising or resulting from (i) any
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misrepresentation, false statement or omissions made by Buyer in this Agreement,
its Schedules, any Transaction Document or any other agreement or instrument
delivered pursuant to this Agreement, any Transaction Document or other
documents; (ii) any breach of any of the warranties made by Buyer in this
Agreement, Schedules, any Transaction Document, or any other agreement delivered
pursuant to this Agreement or any Transaction Document; (iii) any breach, or
default in performance by Buyer of any of the obligations that are to be
performed by, or covenants made by Buyer pursuant to this Agreement or any other
agreement or instrument delivered pursuant to this Agreement delivered pursuant
to this Agreement or any Transaction Document; (iv) any severance pay claims
from former employees of Seller who are not hired by Buyer pursuant to Section
7.1; and (v) any other claim, liability, obligation or commitment of any nature
arising after the Closing Date with respect to Buyer's ownership and use or
performance of the Acquired Assets, Assumed Liabilities, and Contracts from and
after the Closing Date, or Buyer's operation of the Business from and after the
Closing Date.
12.2.2 Notification of Claim. Seller or Walbro shall notify Buyer in
writing of any claim under this Section with reasonable promptness after any of
Seller or Walbro becomes aware of such claim, including in any such notice a
detailed description of and the basis for the claim.
12.2.3 Limitation. Notwithstanding the foregoing, (a) Buyer shall not
be liable under Section 12.2.1 with respect to any individual Claim unless and
until (i) such Claim are Included Claims, and (ii) the aggregate cumulative
amount of all Included Claims with respect to all matters referred to in Section
12.2.1 exceeds the "Threshold Amount" and then Buyer
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shall be liable for all Claims in excess of the Threshold Amount. In no event
shall the aggregate cumulative liability of Buyer under Section 12.2.1 exceed
$4,621,000.
12.3 Notice and Right to Defend. Seller, Walbro, and Buyer agree to
give prompt notice to one another of the assertion of any claim, or the
commencement of any suit, action, or proceeding in respect of which indemnity
may be sought hereunder. The indemnifying party shall have the right to assume
the defense of any claim, suit, action, or proceeding in respect of which
indemnity may be sought hereunder, and the indemnified party may nevertheless
participate in the defense of any such claim, suit, action, or proceeding at its
own expense, and at the request and expense of the indemnifying party shall
assume such defense. No indemnifying party shall be liable under this Section
Twelve for any settlement effected without its consent (which consent shall not
be unreasonably withheld or delayed) of any claims, litigation, or proceeding in
respect of which indemnity may be sought hereunder, and any such settlement that
is not so consented to shall not establish the amount of the indemnified loss or
expense to which the indemnified party may be entitled under this Section.
SECTION THIRTEEN
TERMINATION
13.1 This Agreement may be terminated as follows:
13.1.1 By Buyer, Seller, or Walbro at any time if the Closing has not
occurred on or before May 11, 1998.
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13.1.2 By Buyer, upon written notice to Seller and Walbro, if any of
the conditions set forth in Section 10.3 hereof have not been satisfied by the
Closing Date or waived on or before the Closing Date.
13.1.3 By Seller and Walbro, upon written notice to Buyer, if any of
the conditions set forth in Section 10.4 hereof have not been satisfied by the
Closing Date or waived on or before the Closing Date.
13.1.4 By mutual written consent of the parties hereto.
13.2 Remedies. Absent a party's bad faith or breach of a covenant contained
in this Agreement, upon a termination under Section 13.1 of this Agreement and
except as provided in Section 13.2(ii) below, (i) neither party shall be liable
to the other, at law or in equity, in contract, in tort, or otherwise by reason
of the failure of the Closing to have occurred, and (ii) notwithstanding
Section 13.2(i) above, and except as a result of the failure of the conditions
in Section 10.2 to have been satisfied, if the Closing has not occurred on or
before May 11, 1998 for any reason other than Seller's intentional failure to
close, Buyer shall forfeit the Earnest Money.
13.3 Termination. If this Agreement is terminated pursuant to Subsection
13.1 of this Agreement, all further obligations of the parties hereto shall
terminate except for those obligations set forth in Sections 13.2 (ii), 14.1,
15.2, 15.11 and this Section Thirteen, hereof, which shall survive and continue
in full force and effect.
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SECTION FOURTEEN
ADDITIONAL AGREEMENTS
14.1 Finder's Fees and Commissions. Seller, Walbro, and Buyer agree to indemnify
each other and hold each other harmless from any liability cost, or expense
(including, but not limited to, fees and disbursements of legal counsel)
resulting from any agreement, arrangement, or understanding made by the
indemnifying party with any third party for brokerage or finder's fees or other
commissions in connection with this Agreement or the transaction contemplated
herein.
14.2 Additional Documents. From time to time at or after the Closing, after
written request therefor by Buyer, Seller shall, without further consideration,
execute and deliver or cause to be executed and delivered to Buyer in proper
form for relevant recording, filing, or registration, such assignments, deeds,
powers of attorney, and any other instruments of conveyance and transfer and
such other documents, all prepared by Buyer and reasonably acceptable to Seller,
as may be reasonably necessary or desirable to more effectively transfer to and
vest and confirm in Buyer the Acquired Assets, and to facilitate the effective
recordation of title thereto or put Buyer in actual possession and operating
control thereof.
14.3 Evidence of Satisfaction of Assumed Liabilities. At the Closing, and
thereafter from time to time promptly after request therefor by Seller, Buyer
shall take all steps and execute and deliver to Seller all appropriate documents
and instruments that it may reasonably desire, as prepared by Seller and
reasonably acceptable to Buyer, to effectuate or evidence Buyer's assumption and
discharge of Assumed Liabilities and to conclude the other transactions
contemplated hereunder and under the other agreements and instruments to be
executed, delivered, and performed pursuant hereto.
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14.4 Apportionment of Purchase Price. Buyer shall prepare a schedule allocating
the purchase price among the Acquired Assets, subject to Seller's approval,
which shall not be unreasonably withheld. Buyer and Seller agree to file Form
8594, with the Internal Revenue Service with their tax returns for their
respective tax years in which the Closing Date occurs consistent with such
allocation.
14.5 Taxes. Seller shall pay when due, and indemnify and hold Buyer harmless
against, all accrued foreign, federal, state and local income, employment, ad
valorem, and other taxes, assessments, or charges (and any penalties or interest
related thereto) payable by Seller with respect to the ownership of the Acquired
Assets and the conduct of the Business through the Closing Time. Seller shall be
liable for and shall pay any tax, assessment, or change of any Governmental
Authority (including any sales, use or documentary stamp tax) attributable to
the sale or transfer of the Acquired Assets by Seller to Buyer pursuant to this
Agreement (the "Transfer Taxes"). At the Closing, Buyer shall sign and deliver
to Seller such certificates reasonably requested in writing by Seller within a
reasonable time in advance of the Closing to establish an exemption from (or
otherwise reduce) such transfer taxes, including, to the extent appropriate, but
not limited to, valid resale exemption certificates, if available under
applicable law or regulation.
14.6 Exclusivity. From the date of this Agreement until the earlier of the
Closing or the termination of this Agreement in accordance with its terms,
neither Seller nor Walbro shall not, directly, or indirectly through any
employee, agent, or other representative, solicit or entertain offers from,
negotiate with or in any manner encourage, discuss, accept, or consider any
proposal of, any other Person relating to the acquisition of the Acquired
Assets, capital stock
- 40 -
<PAGE> 41
of Seller, or the Business, in whole or in part, whether through direct
purchase, merger, consolidation, or other business combination (other than sales
of Products in the ordinary course of the conduct of the Business).
SECTION FIFTEEN
MISCELLANEOUS
15.1 Survival. All representations, warranties and agreements made by any party
to this Agreement in or pursuant to this Agreement shall be true on and as of
the Closing Date with the same effect as if made on and as of the Closing Date,
and shall survive the execution, delivery, and performance of this Agreement,
any investigation made by or in behalf of any party hereto any time prior to the
Closing, and for one year after the Closing hereunder. All written statements,
documents, schedules, or certificates delivery by a party pursuant to this
Agreement shall be deemed a representation by such party of the truth, accuracy
and completeness of such statement, document, schedule, or certificate.
15.2 Costs and Expenses. Except as expressly otherwise provided in this
Agreement, whether or not the transactions contemplated by this Agreement are
consummated, each party hereto shall bear its own costs and expenses in
connection with the negotiation, preparation, execution, and performance of this
Agreement, the Transaction Documents, and the other agreements and instruments
to be delivered pursuant hereto and thereto, and the transactions contemplated
herein and thereby, including all legal and accounting fees and disbursements.
15.3 Schedules. The Schedules referred to in and attached to this Agreement are
incorporated herein by reference and are made a part of this Agreement.
- 41 -
<PAGE> 42
15.4 Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns, heirs, beneficiaries, and personal representatives. Except as herein
provided, neither this Agreement, nor any right or liability hereunder, shall be
assignable by Buyer or by Seller, provided, however, that Seller acknowledge
that Buyer and its affiliates intend to enter lending agreements and in
connection therewith assign, as security, its rights under this Agreement
(including, without limitation, its rights with respect to the representations
and warranties of Seller and Walbro) to each institution that becomes a party to
any such lending agreement, and Seller and Walbro agree that such institutions
and their successors and assigns are permitted assigns of Buyer hereunder.
15.5 Amendment, Waiver, Discharge, Etc. This Agreement and the other agreements,
documents, and instruments to be executed, delivered, and performed hereunder
may be amended only by an instrument in writing, specifically identified as an
amendment hereto to thereto, duly executed by the parties hereto or thereto.
This Agreement may not be released, discharged, abandoned, changed, or modified
in any manner except by an instrument in writing signed or behalf of the parties
hereto by their duly authorized officers or representatives. The failure of any
party hereto to enforce at any time any of the provisions of this Agreement
shall in no way be construed to be a wavier of any such provision, nor in any
way to affect the validity of this Agreement or any party hereof or the right of
any party thereafter to enforce each and every such provision. No waiver of any
breach, or any failure to comply with any provision, of this Agreement shall be
held to be a wavier of any other subsequent breach or failure to comply.
- 42 -
<PAGE> 43
15.6 Captions. The captions appearing in this Agreement are inserted only as a
matter of convenience and as a reference and in no way define, limit, or
describe the scope or intent of this Agreement or any of the provisions hereof.
15.7 Enforcement. If after the Closing any party hereto must initiate any
proceedings, including litigation, against any other party to collect amounts
due hereunder, the non-prevailing party in any such proceeding or litigation
shall pay all of the other party's costs and expenses, including reasonable
attorneys' fees and expenses, incurred in such collection, proceeding, or
litigation.
15.8 Notices. Any notice, request, or other document required to be given
hereunder to the other party hereto shall be in writing and shall be deemed
sufficiently given when delivered personally, when transmitted by telegram,
telex, or telecopier (confirmed by registered or certified mail), or when
deposited in the United State mail by registered or certified mail, return
receipt requested, postage prepaid (such mailed notice to be deemed effective on
the date such receipt is acknowledged or refused) and addressed as follows:
To Buyer:
Millennium Industries Corporation
4429 Doerr Rd., Cass City MI, 48726
Fax: (517) 269-8844
Attn: John Neeb
- 43 -
<PAGE> 44
To Seller:
Walbro Corporation
1227 Center Road
Auburn Hills, MI 48326
Fax: (248) 377-6820
Attn: Frank E. Bauchiero
With a copy to:
Katten Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, IL 60661
Fax: 312-902-1061
Attn: Arnold S. Harrison, Esq.
or to such other address and/or designee as any party may hereafter specify in
notice in writing to the other.
15.9 Entire Agreement. This Agreement, the Schedules and Exhibits hereto, the
Transaction Documents, and the other agreements and instruments to be delivered
pursuant hereto, contain the entire agreement among the parties hereto and there
are no representations or warranties, express or implied, made by any of the
parties except such as are stated herein or therein. This Agreement supersedes
all prior agreements, undertakings, and understandings between the parties
hereto relating to the subject matter hereof and thereof.
- 44 -
<PAGE> 45
15.10 Counterparts. This Agreement and all Transaction Documents and all
other agreements to be executed and delivered pursuant hereto may be executed
in one or more counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same instrument. Any
such counterpart may be executed and delivered by facsimile copy, provided that
the originally executed copy is transmitted to the other parties hereto by
means of a nationally recognized overnight courier.
15.11 Confidentiality. In the event this Agreement or the transactions
contemplated herein are not consummated:
15.11.1 Buyer shall treat, and shall cause its officer, employees,
agents, representatives, or financial institutions to treat, as Seller'
confidential property, all information provided before or after the date of
execution of this Agreement by Seller and their respective employees, agents,
assistants, attorneys, and authorized representatives to Buyer about Seller, the
Business, Acquired Assets, Assumed Liabilities (the "Confidential Information").
15.11.2 Buyer will, upon Seller's request, promptly deliver to Seller,
or at Buyer's option, destroy all of the Confidential Information, including all
copies, reproductions, summaries, analyses, or extracts thereof or based thereon
in Buyer's possession or in the possession of any of its employees, agents, or
authorized representatives. Such destruction shall, upon demand, be certified in
writing to Seller by an authorized officer of Buyer supervising such
destruction.
15.11.3 Unless otherwise agreed to in writing by Seller, Buyer agrees
(i) to keep all Confidential Information Confidential and not to disclose or
reveal any Confidential Information to any person other than those employed by
Buyer on Buyer's behalf who are actively and
- 45 -
<PAGE> 46
directly participating in the evaluation or consummation of the transactions
contemplated herein or who otherwise need to know the confidential Information
for the purpose of evaluating or assisting the consummation of the transactions
contemplated herein and to cause those persons to observe the terms of this
Section 19, and (ii) not to use Confidential Information for any purpose other
than in connection with the consummation of the transactions contemplated
herein, in a manner that Seller have approved.
15.11.4 Unless otherwise required by law, if this Agreement or the
transactions contemplated herein are not consummated, neither Buyer nor its
representatives, employees, agents, or authorized representatives will, without
the prior written consent of Seller, disclose to any person (other than those
actively and directly participating in evaluating or assisting the consummation
of the transactions contemplated herein) any information about the transactions
contemplated herein or the terms, conditions, or other facts relating thereto or
the status thereof, or the fact that the Confidential Information has been made
available to Buyer.
15.11.5 Notwithstanding anything in this Section to the contrary, Buyer
may disclose such Confidential Information as is necessary (i) to obtain the
transfer of Permits and licenses and all consents or approvals of Governmental
Authorities required for the consummation of the transactions contemplated
herein, and (ii) in connection with any report or filing that Buyer makes under
the rules and regulations of any Governmental Authority.
15.13 Governing Law. This Agreement shall be governed by and construed under
the laws of Michigan, without giving effect to principles of conflicts of law.
- 46 -
<PAGE> 47
IN WITNESS WHEREOF, the parties have executed this Agreement at the day
and year first above written.
Sharon Manufacturing Company
/s/ DANIEL L. HITTLER
-------------------------------------
By
Secretary
-------------------------------------
Its
Walbro Corporation
/s/ MICHAEL SHOPE
-------------------------------------
By
Treasurer and Chief Financial Officer
-------------------------------------
Its
Millennium Industries Corporation
/s/ JOHN NEEB
-------------------------------------
By
Secretary
-------------------------------------
Its
<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
WALBRO CORPORATION
Amended and Restated 7/7/93
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
Page
Number
------
ARTICLE I
OFFICES
<S> <C> <C>
SECTION 1.1. Registered Office..........................................................................1
SECTION 1.2. Other Offices..............................................................................1
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.1. Place of Meetings..........................................................................1
SECTION 2.2. Time of Annual Meeting and Vote Required to Elect Directors................................1
SECTION 2.3. Notice of Annual Meetings..................................................................1
SECTION 2.4. Voting Lists...............................................................................1
SECTION 2.5. Special Meetings...........................................................................1
SECTION 2.6. Notice of Special Meetings.................................................................2
SECTION 2.7. Business to be Transacted at Special Meetings..............................................2
SECTION 2.8. Quorum and Adjournments....................................................................2
SECTION 2.9. Vote Required..............................................................................2
ARTICLE III
DIRECTORS
SECTION 3.1. Number, Classification, and Term of Office.................................................2
SECTION 3.2. Vacancies..................................................................................2
SECTION 3.3. General Powers.............................................................................2
SECTION 3.4. Place of Meetings..........................................................................3
SECTION 3.5. Regular Meetings...........................................................................3
SECTION 3.6. Special Meetings...........................................................................3
SECTION 3.7 Quorum.....................................................................................3
SECTION 3.8. Resignations...............................................................................3
SECTION 3.9. Informal Action............................................................................3
SECTION 3.10. Participation by Conference Telephone......................................................3
SECTION 3.11. Presumption of Assent......................................................................3
SECTION 3.12. Appointment and Powers.....................................................................4
SECTION 3.13. Committee Rules and Minutes................................................................4
SECTION 3.14. Compensation...............................................................................4
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
Number
------
ARTICLE IV
NOTICES
<S> <C> <C>
SECTION 4.1. Manner of Notice...........................................................................4
SECTION 4.2. Waiver.....................................................................................4
ARTICLE V
OFFICERS
SECTION 5.1. Number and Qualifications..................................................................5
SECTION 5.2. Election...................................................................................5
SECTION 5.3. Other Officers and Agents..................................................................5
SECTION 5.4. Salaries...................................................................................5
SECTION 5.5. Term of Office.............................................................................5
SECTION 5.6. The Chairman of the Board..................................................................5
SECTION 5.7. The President..............................................................................5
SECTION 5.8. The Vice-Presidents........................................................................5
SECTION 5.9. The Secretary..............................................................................6
SECTION 5.10. The Assistant Secretary....................................................................6
SECTION 5.11. The Treasurer..............................................................................6
SECTION 5.12. The Assistant Treasurer....................................................................6
ARTICLE VI
CERTIFICATES OF STOCK, TRANSFERS, AND RECORD DATES
SECTION 6.1. Form of Certificates.......................................................................6
SECTION 6.2. Facsimile Signatures.......................................................................7
SECTION 6.3. Lost Certificates..........................................................................7
SECTION 6.4. Transfers of Stock.........................................................................7
SECTION 6.5. Fixing Record Date.........................................................................7
SECTION 6.6. Registered Stockholders....................................................................7
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.1. Dividends..................................................................................8
SECTION 7.2. Annual Statement...........................................................................8
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
SECTION 7.3. Checks.....................................................................................8
SECTION 7.4. Fiscal Year................................................................................8
SECTION 7.5. Seal.......................................................................................8
SECTION 7.6. Stock in Other Corporations................................................................8
ARTICLE VIII
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
SECTION 8.1. Indemnification of Directors and Officers..................................................9
SECTION 8.2. Contract with the Corporation..............................................................9
SECTION 8.3. Indemnification of Employees and Agents....................................................9
SECTION 8.4. Other Rights of Indemnification............................................................9
SECTION 8.5. Liability Insurance........................................................................9
ARTICLE IX
Amendments...................................................................................................9
</TABLE>
<PAGE> 5
WALBRO CORPORATION
BY-LAWS (as amended)
ARTICLE I
OFFICES
SECTION 1.1 Registered Office. The registered office shall in the City of
Wilmington, County of New Castle, State of Delaware.
SECTION 1.2 Other Offices. The corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.1. Place of Meeting. All meetings of the stockholders for the
election of directors shall be held in the city of Cass City, State of Michigan,
at such place as may be fixed from time to time by the Board of Directors, or at
such place either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting. Meetings of stockholders for any other purpose may be held at such time
and place, within or without the State of Delaware, as shall be stated in the
notice of meeting or in a duly executed waiver of notice thereof.
SECTION 2.2. Time of Annual Meeting and Vote Required to Elect Directors.
Annual meetings of stockholders shall be held on the last Tuesday of April, if
not a legal holiday, and if a legal holiday, then on the next secular day
following, at 11:00 a.m., or at such other date and time as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting, at which they shall elect by a plurality vote directors to succeed
those whose terms then expire and transact such other business as may properly
be brought before the meeting.
SECTION 2.3. Notice of Annual Meetings. Written or printed notice of the
annual meeting stating the place, date and hour of the meeting shall be given to
each stockholder entitled to vote at such meeting not less than ten (10) nor
more than sixty (60) days before the date of the meeting.
SECTION 2.4. Voting Lists. The officer who has charge of the stock ledger
of the corporation shall prepare and make, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
SECTION 2.5. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the Chairman of the Board of the
President and shall be called by the President or Secretary at the request in
<PAGE> 6
writing of a majority of the Board of Directors, or at the request in writing of
stockholders owing a majority in amount of the entire capital stock of the
corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting.
SECTION 2.6. Notice of Special Meetings. Written notice of special meeting
stating the place, date and hour of the meeting and the purpose or purposes for
which the meeting is called, shall be given not less than ten ( 10 ) nor more
than sixty (60) days before the date of the meeting, to each stockholder
entitled to vote at such meeting.
SECTION 2.7. Business to be Transacted at Special Meetings. Business
transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice.
SECTION 2.8. Quorum and Adjournments. The holders of a majority of the
stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute or by the certificate of incorporation. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 2.9. Vote Required. In all matters other than the election of
directors, the affirmative vote of the majority of shares present in person or
represented by proxy at the meeting and entitled to vote on the subject matter
shall be the act of the stockholders. Directors shall be elected by plurality of
the votes of the shares present in person or represented by proxy at the meeting
and entitled to vote on the election of directors."
ARTICLE III
DIRECTORS
SECTION 3.1. Number, Classification, Election and Term of Office. The
matters contained herein shall be governed by the certificate of incorporation.
SECTION 3.2. Vacancies. Any vacancies in the Board of Directors for any
reasons, and any newly created directorships resulting from any increase in the
authorized number of directors, may be filled by the affirmative vote of a
majority of the directors then in office, even though less than a quorum, or by
a sole remaining director. Any directors so chosen shall hold office until the
next annual election of the class for which such directors shall have been
chosen, and until their successors shall be elected and qualified.
SECTION 3.3. General Powers. The business of the corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the corporation and do all such lawful acts and things as are
not by statute or by the certificate of incorporation or by these by-laws
directed or required to be exercised or done by the stockholders.
<PAGE> 7
MEETINGS OF THE BOARD OF DIRECTORS
SECTION 3.4. Place of Meetings. The Board of Directors of the corporation
may hold meetings, both regular and special, either within or without the State
of Delaware.
SECTION 3.5. Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this by-law, immediately after, and at
the same place as, the annual meeting of stockholders. The Board of Directors
may provide, by resolution, the time and place, either within or without the
State of Delaware, for the holding of additional regular meetings without other
notice than such resolution.
SECTION 3.6. Special Meetings. Special meetings of the Board may be called
by the Chairman of the Board or by the President on three (3) days notice to
each director, either personally or by mail or by telegram, mailgram, telex,
telecopier, courier, `electronic mail' or any other similar medium; special
meetings shall be called by the President or Secretary in like manner and on
like notice on the written request of any two (2) of the directors.
SECTION 3.7. Quorum. At all meetings of the Board , a majority of directors
shall constitutes a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the Board of Directors the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
SECTION 3.8. Resignations. Any director of the corporation may resign at
any time by giving written notice to the Board of Directors, the Chairman of the
Board, the President, or the Secretary of the corporation. Such resignation
shall take effect at the time specified therein and, unless tendered to take
effect upon acceptance thereof, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 3.9. Informal Action. Unless otherwise restricted by the
certificate of incorporation or these by-laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
SECTION 3.10. Participation by Conference Telephone. Unless otherwise
restricted by the certificate of incorporation, or these by-laws, members of the
Board of Directors, or any committee designated by such Board, may participate
in a meeting of such Board, or committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to this
subsection shall constitute presence in person at such meeting.
SECTION 3.11. Presumption of Assent. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be conclusively presumed to have assented to the action
taken unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as the secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the Secretary of the
<PAGE> 8
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
COMMITTEES OF DIRECTORS
SECTION 3.12. Appointment and Powers. The Board of Directors may, by
resolution passed by a majority of the whole board, designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the certificate of incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease, or exchange of
all or substantially all of the corporation's property and assets, recommending
to the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the by-laws of the corporation; and, unless the
resolution so provides, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors.
SECTION 3.13. Committee Rules and Minutes. Each committee shall fix its own
rules of procedure and shall keep regular minutes of rules, its meetings and
report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
SECTION 3.14. Compensation. The Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE IV
NOTICES
SECTION 4.1. Manner of Notice. Whenever, under the provisions of the
statutes or of the certificate of incorporation or of these by-laws, notice is
required to be given to any stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed to
such stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may be given by telegram, mailgram, telex, telecopier,
courier, "electronic mail" or any other similar medium.
<PAGE> 9
SECTION 4.2. Waiver. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
SECTION 5.1. Number and Qualifications. The officers of the corporation
shall be chosen by the Board of Directors and shall be a Chairman of the Board,
a President, a Vice-president, a Secretary and a Treasurer. The Board of
Directors may also choose additional Vice-presidents, and one or more assistant
secretaries and assistant treasurers. The Chairman of the Board shall be chosen
from among the members of the Board, but membership on the Board shall not be a
prerequisite to the holding of any other office. Any number of offices may be
held by the same person, unless the certificate of incorporation or these
by-laws otherwise provide.
SECTION 5.2. Election. The Board of Directors at its first meeting after
each annual meeting of stockholders shall elect a Chairman of the Board, a
President, one or more Vice-presidents, (one of whom may be chosen Executive
Vice-president), a Secretary and a Treasurer, and may choose one or more
Assistant Secretaries and Assistant Treasurers.
SECTION 5.3. Other Officers and Agents. The Board of Directors may choose
such other officers and agents as it shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board.
SECTION 5.4. Salaries. The salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.
SECTION 5.5. Term of Office. The officers of the corporation shall hold
office until their successors are chosen and qualify. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. Any vacancy occurring
in any office of the corporation shall be filled by the Board of Directors.
SECTION 5.6. The Chairman of the Board. The Chairman of the Board shall
preside at meetings of the Board and shall act as Chairman of meetings of the
stockholders. The Chairman shall nominate for Board consideration the
memberships of Committees of the Board.
SECTION 5.7. The President. The President shall be the Chief Executive
Officer of the corporation. The Chief Executive Officer shall, under the
direction of the Board of Directors, have general supervision, direction and
control of the officers, employees, business and affairs of the corporation. He
shall see that orders and resolutions of the Board of Directors are carried into
effect. He may sign bonds, mortgages, certificates for shares and all other
contracts and documents whether or not under the seal of the corporation except
in cases where the signing and execution thereof shall be expressly delegated by
law, by the Board of Directors or by these by-laws to some other officer or
agent of the corporation. He shall have general powers of supervision and shall
be the final arbiter of all differences between officers of the corporation and
his decision as to any matter affecting the corporation shall be final and
binding as between the officers of the corporation subject only to its Board of
Directors.
<PAGE> 10
SECTION 5.8. The Vice-Presidents. In the absence of the President or in the
event of his inability or refusal to act, the Vice-president (or in the event
there be more than one vice-president, the Executive Vice-president and then the
other Vice-president or Vice-presidents in the order designated, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the President, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the President. The Vice-Presidents
shall perform such other duties and have such other powers as the Chief
Executive Officer or the Board of Directors may from time to time prescribe.
SECTION 5.9. The Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or the Chief Executive Officer, under whose supervision he shall
be. He shall have custody of the corporate seal of the corporation and he, or an
Assistant Secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by his signature or by the
signature of such Assistant Secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the corporation and to
attest the affixing by his signature.
SECTION 5.10. The Assistant Secretary. The Assistant Secretary, or if there
be more than one, the Assistant Secretaries in the order determined by the Board
of Directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Chief Executive Officer or the Board of Directors may from time to time
prescribe.
SECTION 5.11. The Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all his transactions as
Treasurer and of the financial condition of the corporation. If required by the
Board of Directors, he shall give the corporation a bond (which shall be renewed
every six (6) years) in such sum and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
SECTION 5.12. The Assistant Treasurer. The Assistant Treasurer, or if there
shall be more than one, the Assistant Treasurers in the order determined by the
Board of Directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the Treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the
Chief Executive Officer or the Board of Directors may from time to time
prescribe.
<PAGE> 11
ARTICLE VI
CERTIFICATES OF STOCK, TRANSFERS, AND RECORD DATES
SECTION 6.1. Form of Certificates. Every holder of stock in the corporation
shall be entitled to have a certificate, signed by, or in the name of the
corporation by, the Chairman of the Board of Directors, or the President or a
Vice-president and the Treasurer or an Assistant Treasurer, or the secretary or
an Assistant Secretary of the corporation, certifying the number of shares owned
by him in the corporation. If the corporation shall be authorized to issue more
than one class of stock; or more than one series of any class, the powers,
designation, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in Section 202 of the General Corporation Law
of Delaware, in lieu of the foregoing requirements, there may be set forth in
full or summarized on the face or back of the certificate which the corporation
shall issue to represent such class or series of stock, a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
SECTION 6.2. Facsimile Signatures. Where a certificate is countersigned (1)
by a transfer agent other than the corporation or its employee, or, (2) by a
registrar other than the corporation or its employee, any other signature on the
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
SECTION 6.3. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnifying against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
SECTION 6.4. Transfers of Stock. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
SECTION 6.5. Fixing Record Date. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty ( 60 ) nor less than
ten ( 10 ) days before the date of such meeting, nor more than sixty (60) days
prior to any other action. A determination of
<PAGE> 12
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the board of directors may fix a new record date for the adjourned meeting
SECTION 6.6. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation. Before payment of any dividend there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or by
repairing or maintaining any property of the corporation, or by such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
SECTION 7.2 Annual Statement. The Board of Directors shall present at each
annual meeting, and at any special meeting of the stockholders when called for
by vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
SECTION 7.3. Checks. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
SECTION 7.4. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
SECTION 7.5. Seal. The corporate seal shall have inscribed thereon the name
of the corporation and the words "Corporate Seal, Delaware". The seal may be
used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
SECTION 7.6. Stock in Other Corporations. Shares of any other corporation
which may from time to time be held by this corporation may be represented and
voted at any meeting of shareholders of such corporation by the Chairman of the
Board, the President or a Vice-president, or by any proxy appointed in writing
by the Chairman of the Board, the President or a Vice-president of the
corporation or by any other person or persons thereunto authorized by the Board
of Directors. Shares represented by certificates standing in the name of the
corporation may be endorsed for sale or transfer in the name of the corporation
by the Chairman of the Board, the President or any Vice-president or by any
other officer or officers thereunto authorized by the Board of Directors. Shares
belonging to the corporation need not stand
<PAGE> 13
in the name of the corporation, but may be held for the benefit of the
corporation in the individual name of the Treasurer or of any other nominee
designated for the purpose of the Board of Directors.
ARTICLE VIII
INDEMNIFICATION OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS
SECTION 8.1. Indemnification of Directors and Officers. The corporation
shall to the fullest extent to which it is empowered to do so by the General
Corporation Law of the State of Delaware, indemnify any person who was or is
threatened to be made a defendant or respondent to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer of
the corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, against all 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.
SECTION 8.2. Contract with the Corporation. The provisions of this Article
VIII shall be deemed to be a contract between the corporation and each director
or officer who serves in any such capacity at any time while this Article VIII
and the relevant provisions of be General Corporation Law of the State of
Delaware are in effect, and any repeal or modification of any such law or of
this Article VIII shall not affect any rights or obligations then existing with
respect to any state of facts then or theretofore existing or any action, suit
or proceeding theretofore or thereafter brought or threatened based in whole or
in part upon any such state of facts.
SECTION 8.3. Indemnification of Employees and Agents. Persons who are not
covered by the foregoing provisions of this Article VIII and who are or were
employees or agents of the corporation, or are or were serving at the request of
the corporation as employees or agents of another corporation, partnership,
joint venture, trust or other enterprise, may be indemnified to the extent
authorized at any time or from time to time by the Board of Directors.
SECTION 8.4. Other Rights of Indemnification. The indemnification provided
or permitted by this Article VIII shall not be deemed exclusive of any other
rights to which those indemnified may be entitled by law or otherwise, and shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs executors and administrators
of such person.
SECTION 8.5. Liability Insurance. The corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
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 corporation
would have the power to indemnify him against such liability under the
provisions of this Article VIII.
<PAGE> 14
ARTICLE IX
AMENDMENTS
These by-laws may be altered, amended or repealed or new by-laws may be
adopted by the stockholders or by the Board of Directors at any regular meeting
of the Board of Directors of the stockholders or at any special meeting of the
Board of Directors or of the stockholders, if notice of such alteration,
amendment, repeal or adoption of new by-laws be contained in the notice of such
special meeting of the Stockholders or the Board of Directors.
<PAGE> 1
EXHIBIT 4.7
FIRST AMENDMENT TO RIGHTS AGREEMENT
THIS FIRST AMENDMENT TO RIGHTS AGREEMENT is entered into as of this
____ day of February, 1991, by and between WALBRO CORPORATION, a Delaware
corporation (the "Company"), and HARRIS TRUST AND SAVINGS BANK (the "Rights
Agent") amending that certain Rights Agreement (the "Rights Agreement") dated as
of December 8, 1988 between the Company and the Rights Agent.
W I T N E S S E T H:
WHEREAS, the Company and the Rights Agent desire to amend the Rights
Agreement, as authorized by Section 27 of the Rights Agreement, by altering,
adding, and deleting the provisions set forth herein in the manner set forth
below; and
WHEREAS, the parties have complied with or satisfied all conditions
necessary to the amendment of the Rights Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth in the Rights Agreement and this First Amendment, the parties hereby
agree as follows:
A. DEFINITIONS. All terms used herein as defined terms which are not
defined in this Amendment shall have the meanings ascribed to them in the Rights
Agreement.
2. AMENDMENTS. The Rights Agreement shall be amended as follows:
(a) Section 1(a) shall be deleted in its entirety and replaced
by a new Section 1(a), which shall read as follows:
(a) "Acquiring Person" shall mean any Person (as such
term is hereinafter defined) who or which, together with all
Affiliates, Associates, and Group Members (as such terms are
hereinafter defined) of such Person, without the prior written
approval of the Company given as provided in the last two
sentences of this Section 1(a), shall be the Beneficial Owner
(as such term is hereinafter defined) of 15% or more of the
Common Shares of the Company then outstanding, but shall not
include the Company, any Subsidiary (as such term is
hereinafter defined) of the Company, any employee benefit plan
of the Company or any Subsidiary of the Company, or any entity
holding Common Shares for or pursuant to the terms of any such
plan. Notwithstanding the foregoing, no Person shall become an
Acquiring Person as the result of (i) an acquisition of Common
Shares by the Company which, by reducing the number of shares
outstanding, increases the
<PAGE> 2
proportionate number of shares beneficially owned by such
Person to 15% or more of the Common Shares of the Company then
outstandingly; provided, however, that if a Person shall
become the beneficial owner of 15% or more of the Common
Shares of the Company then outstanding by reason of share
repurchases by the Company and shall, after such share
purchases by the Company, become the Beneficial Owner of any
additional Common Shares of the Company, then such Person
shall immediately thereafter be an Acquiring Person, or (ii)
such Person being a party to or bound by a certain Agreement
Among Shareholders Among Walbro Corporation dated as of
September 29, 1987, as amended. The Company's Board of
Directors, acting by majority vote, shall have the sole right
and authority to grant approval to a Person to, together with
such Person's Affiliates, Associates and Group Members, become
the beneficial Owner of 15% or more of the Common Shares of
the Company then outstanding; provided that for one year after
a majority of the Company's Board of Directors ceases to be
comprised of either Independent Directors (as hereinafter
defined) or Continuing Directors (as hereinafter defined),
such Board may not grant the approval provided for in this
Section 1(a). The approval provided for in Section 1(a) may be
subject to such conditions as may be determined by the Board
of Directors of the Company, including without limitation,
that a Person, together with such Person's Affiliates,
Associates and Group Members, maintain beneficial ownership of
less than a specified percentage of the Common Shares, and if
a Person granted a conditional approval fails to comply with
such conditions, such Person shall become an Acquiring Person
immediately upon the occurrence of such failure.
(b) Section 1(j) shall be deleted in its entirety.
(c) A new Section 1(u) shall be added, which shall read as
follows:
(u) "Continuing Director" shall mean any member of
the Company's Board of Directors who is duly serving on such
Board and who (A) is not (i) an Acquiring Person or an
Affiliate, Associate or Group Member of an Acquiring Person,
or a Person whose Series A or Series B Rights have become void
under the provisions hereof, or (ii) a Person nominated by, or
acting as a representative of or for the interests of any
Person described in clause 1(i)(A)(i) above, and (B) either
was a member of the Company's Board of Directors on the date
of this Agreement or, at the time such member was elected to
the Company's Board of Directors, such election was
recommended, nominated, approved or voted for by a majority of
the Continuing Directors at such time.
-2-
<PAGE> 3
(d) A new Section 1(v) shall be added, which shall read as
follows:
(v) "Independent Director" shall mean a director of
the Company who is not (i) a Continuing Director, (ii) elected
to the Board of Directors at a special meeting of shareholders
or by action of the Company's shareholders by written consent,
or (iii) serving after being nominated by, or in connection
with an attempt to facilitate a transaction with, an Acquiring
Person or Interested Person (as hereinafter defined), or an
Affiliate, Associate or Group Member thereof.
(e) A new Section 1(w) shall be added, which shall read as
follows:
(w) "Interested Person" with respect to any
transaction shall mean (x) any Person, other than the Company,
any Subsidiary of the Company, any employee benefit plan of
the Company or a Subsidiary, or any entity holding shares for
or pursuant to the terms of any such plan, who (i) is or will
become an Acquiring Person if a transaction were to be
consummated, without regard to any required approval of the
Company, or (ii) directly or indirectly proposed or nominated
a director of the Company which director (or a successor of
such Person elected to the Board of Directors for the purpose
of either facilitating a transaction with such Interested
Person or circumventing directly or indirectly the provisions
of this paragraph) is in office at the time of consideration
of the transaction in question, or (y) an Affiliate, Associate
or Group Member of such a Person.
(f) A new Section 1(x) shall be added, which shall read as
follows:
(x) "Permitted Offer" shall mean a tender or exchange
offer made at a price, and on terms, determined prior to the
purchase of shares under such tender or exchange offer, by the
Company's Board of Directors to be both adequate and otherwise
in the best interests of the Company, its stockholders (other
than the Person, or an Affiliate, Associate or Group Member
thereof on whose behalf the offer is being made) and other
relevant constituencies which directors may consider under
Delaware law; provided that for one year after the time when a
majority of the Board of Directors of the Company is comprised
of Persons who are not Independent Directors or Continuing
Directors, no offer by an Interested Person may be deemed a
Permitted Offer.
(g) Section 11(a) (iii) shall be deleted in its entirety.
(h) The following shall be added to the end of Section 13:
-3-
<PAGE> 4
Notwithstanding any provision in this Agreement to the
contrary, Section 13 shall not be applicable to a transaction
if such transaction is consummated with a Person or Persons
who acquired Common Shares pursuant to a Permitted Offer (or a
wholly-owned Subsidiary of any such Person or Persons). Upon
consummation of any transaction with a Person acquiring shares
pursuant to a Permitted Offer as contemplated by the previous
sentence, all Rights hereunder shall expire.
(i) Section 23(c) shall be deleted in its entirety.
(j) Section 23(d) shall be deleted in its entirety and
replaced by a new Section, renumbered as Section 23(c), which shall read as
follows:
(c) Immediately upon the action of the Board of
Directors of the Company ordering the redemption of the Series
A Rights pursuant to paragraph (b) of this Section 23, and
without any further action and without any notice, the right
to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the
Redemption Price. The Company shall promptly give public
notice of any such redemption; provided, however, that the
failure to give, or any defect in, any such notice shall not
affect the validity of such redemption. Within ten days after
such action of the Board of Directors ordering the redemption
of the Series A Rights pursuant to paragraph (b), the Company
shall mail a notice of redemption to all holders of the then
outstanding Rights at their last addresses as they appear upon
the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent
for the Common Shares. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not
the holder receives the notice. Each such notice of redemption
will state the method by which the payment of the Redemption
Price will be made. Neither the Company nor any of its
Affiliates, Associates or Group members may redeem, acquire or
purchase for value any Rights at any time in any manner other
than that specifically set forth in this Section 23 or in
Section 24 hereof, and other than in connection with the
purchase of Common Shares prior to the Share Acquisition Date.
3. RIGHTS AGREEMENT. Except as amended hereby, the Rights Agreement
shall remain in full force and effect.
4. GOVERNING LAW. This First Amendment to Rights Agreement shall be
deemed to be a contract made under the laws of the State of Delaware and for all
purposes shall be governed by and construed in accordance with the laws of such
state applicable to contracts made and performed entirely within such state.
-4-
<PAGE> 5
5. COUNTERPARTS. This First Amendment to Rights Agreement may be
executed in any number of counterparts and each of such counterparts shall for
all purposes be deemed to be an original, and all such counterparts shall
together constitute one and same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to Rights Agreement to be duly executed and attested, all as of the date first
above written.
ATTEST: WALBRO CORPORATION
By:
____________________ ________________________
Assistant Secretary Its:
_______________________
ATTEST: HARRIS TRUST AND SAVINGS BANK
___________________
By:
_________________________
Its:
_________________________
-5-
<PAGE> 1
EXHIBIT 4.8
LOAN AGREEMENT
BETWEEN
________________________________________________________________________________
________________________________________________________________________________
CITY OF LIGONIER, INDIANA
AND
SHARON MANUFACTURING COMPANY
________________________________________________________________________________
________________________________________________________________________________
RELATING TO
$6,300,000
CITY OF LIGONIER, INDIANA
ECONOMIC DEVELOPMENT REVENUE BONDS
(SHARON MANUFACTURING COMPANY PROJECT)
SERIES 1992
DATED AS OF JUNE 1, 1992
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Page
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ARTICLE I. DEFINITIONS.......................................................................... 3
ARTICLE II. REPRESENTATIONS...................................................................... 5
SECTION 2.1. Representations by the Company....................................................... 5
SECTION 2.2. Representations of the Issuer........................................................ 9
ARTICLE III. LOAN AND REPAYMENT................................................................... 11
SECTION 3.1. Amount and Evidence of Loan.......................................................... 11
SECTION 3.2. Loan Repayments...................................................................... 11
SECTION 3.3. Mandatory and Optional Prepayments of the Promissory Note............................ 11
SECTION 3.4. Additional Payment Obligations of the Company........................................ 12
SECTION 3.5. Payment of Issuer Expenses........................................................... 13
SECTION 3.6. Administrative Expenses.............................................................. 13
SECTION 3.7. Letter of Credit; Alternate Credit Facility.......................................... 13
SECTION 3.8. Credit for Bonds Surrendered......................................................... 14
ARTICLE IV. SECURITY INTEREST.................................................................... 15
SECTION 4.1. Priority and Maintenance of Lien; Recording.......................................... 15
SECTION 4.2. Further Assurances; After-acquired Property.......................................... 15
SECTION 4.3. Company Duties Under Indenture....................................................... 15
ARTICLE V. CONSTRUCTION OF THE PROJECT.......................................................... 16
SECTION 5.1. Disbursements from the Construction Fund............................................. 16
SECTION 5.2. Obligation of the Company to Complete the Project and to Pay Costs in Event
Construction Fund Insufficient....................................................... 16
SECTION 5.3. Investment of Construction Fund, Bond Fund and Bond Purchase Fund Moneys............. 16
SECTION 5.4. Certificate as to Completion......................................................... 17
ARTICLE VI. USE OF PROJECT, MAINTENANCE, TAXES AND INSURANCE..................................... 18
SECTION 6.1. Use, Maintenance and Modifications of Project by Company............................. 18
SECTION 6.2. Taxes, Other Governmental Charges and Utility Charges................................ 18
SECTION 6.3. Insurance............................................................................ 19
</TABLE>
i
<PAGE> 3
<TABLE>
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ARTICLE VII. DAMAGE, DESTRUCTION AND CONDEMNATION................................................. 20
ARTICLE VIII. SPECIAL COVENANTS.................................................................... 21
SECTION 8.1. Unconditional Obligation............................................................. 21
SECTION 8.2. Right of Access to the Project....................................................... 21
SECTION 8.3. Maintenance of Corporation Existence and Qualification............................... 21
SECTION 8.4. Granting Easements................................................................... 22
SECTION 8.5. Covenant as to Non-Impairment of Tax-Exempt Status................................... 22
SECTION 8.6. Indemnity, Expenses.................................................................. 23
ARTICLE IX. ASSIGNMENT, LEASING, EQUIPMENT....................................................... 25
SECTION 9.1. Transfer, Assignment and Leasing..................................................... 25
SECTION 9.2. Substitution and Removal of Machinery and Equipment.................................. 25
SECTION 9.3. Installation of Company's Own Machinery and Equipment................................ 26
ARTICLE X. EVENTS OF DEFAULT AND REMEDIES....................................................... 27
SECTION 10.1. Events of Default.................................................................... 27
SECTION 10.2. Remedies on Default.................................................................. 28
SECTION 10.3. No Remedy Exclusive.................................................................. 28
SECTION 10.4. Agreement to Pay Attorneys' Fees and Expenses........................................ 29
SECTION 10.5. No Additional Waiver Implied by One Waiver........................................... 29
ARTICLE XI. PAYMENT OF SURPLUS BOND PROCEEDS FROM THE BOND FUND.................................. 30
SECTION 11.1. Surplus Bond Proceeds................................................................ 30
ARTICLE XII. THE BONDS............................................................................ 31
SECTION 12.1. Issuance of the Series 1992 Bonds.................................................... 31
SECTION 12.2. Additional Bonds..................................................................... 31
SECTION 12.3. Compliance with Indenture............................................................ 31
SECTION 12.4. Consent to Issuer's Pledge........................................................... 31
SECTION 12.5. Rights of Trustee Hereunder.......................................................... 31
SECTION 12.6. Amendments to Indenture and this Agreement........................................... 32
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE XIII. MISCELLANEOUS........................................................................ 33
SECTION 13.1. Amounts Remaining in Funds........................................................... 33
SECTION 13.2. Rights of the Bank................................................................... 33
SECTION 13.3. Notices.............................................................................. 33
SECTION 13.4. Bondholders' Action.................................................................. 34
SECTION 13.5. Binding Effect....................................................................... 34
SECTION 13.6. Severability......................................................................... 35
SECTION 13.7. Captions............................................................................. 35
SECTION 13.8. Interpretation....................................................................... 35
SECTION 13.9. Execution in Counterparts............................................................ 35
</TABLE>
iii
<PAGE> 5
LOAN AGREEMENT
THIS LOAN AGREEMENT is entered into as of June 1, 1992, between the
CITY OF LIGONIER, INDIANA, (the "Issuer"), a municipal corporation organized
under the laws of the State of Indiana and SHARON MANUFACTURING COMPANY, a
Michigan corporation (the "Company").
WHEREAS, the Indiana Code Title 36, Article 7, Chapters 11.9 and 12, as
amended (the "Act"), declares that the financing of economic development
facilities constitutes a public purpose; and
WHEREAS, the Company has applied to the Issuer for a Loan (as
hereinafter defined) of $6,300,000 to finance the Costs of the Project (as
hereinafter defined); and
WHEREAS, the Issuer has determined that granting the Loan request by
the Company and issuing the Series 1992 Bonds (as hereinafter defined) will
promote and serve the intended purposes of and in all respects will conform to
the provisions and requirements of the Act; and
WHEREAS, the Issuer and the Company desire to set forth the terms and
conditions of the Loan;
GRANTING CLAUSES
In consideration of the loan of the proceeds of the Series 1992 Bonds
to be made by the Issuer, the acceptance of the Series 1992 Promissory Note
attached as Exhibit C hereto (the "Promissory Note") by the Issuer, and of other
good and valuable consideration, the receipt and sufficiency whereof are hereby
acknowledged, and in order to secure the payment of the principal of, premium,
if any, and interest payable on the Promissory Note, any additional notes issued
hereunder and any notes issued in substitution therefore (herein collectively
referred to as the "Notes") and the performance of all the covenants of the
Company contained herein, the Company has executed and delivered this Loan
Agreement and by these presents does grant a security interest to the Issuer and
its successors forever, in all the Company's right, title, and interest in, to
and under any and all of the following described property (herein called the
"Trust Estate");
DIVISION I
Any and all property of every kind and nature from time to time
hereafter, by delivery or by writing of any kind, conveyed, pledged or
transferred for and as additional security hereunder by the Company or by anyone
on its behalf to the Issuer or the Trustee, including without limitation, funds
of the Company, other than those on deposit in the Rebate Fund, held by the
Trustee as security for the Bonds;
<PAGE> 6
DIVISION II
All moneys and securities other than those on deposit in the Rebate
Fund, from time to time held by the Issuer or the Trustee under the terms of
this Agreement or the Indenture;
TO HAVE AND TO HOLD all and singular the above-described Trust Estate,
whether now owned or hereafter acquired, unto the Issuer, its successors and
assigns forever, provided, however, that this Agreement is executed upon the
express condition that if the Company shall pay or cause to be paid all
indebtedness secured hereby and shall keep, perform and observe all and singular
the covenants and promises expressed in the Note and in this Agreement, to be
kept, performed and observed by the Company, then this Agreement and the rights
granted hereunder shall cease, determine and be void; otherwise to remain in
full force and effect.
NOW, THEREFORE, in consideration of the premises and of the covenants
and undertakings herein expressed, the parties hereto agree as follows:
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<PAGE> 7
ARTICLE I.
DEFINITIONS
All terms used herein which are defined in the Indenture identified
below shall have the meanings set forth, which definitions are by this reference
incorporated herein and made a part of this Agreement. In addition to the terms
elsewhere defined in this Agreement, the words "this Agreement" as used herein
shall mean this Loan Agreement and the following terms used in this Agreement
unless the context indicates a difference meaning or intent and such definitions
shall be equally applicable to both the singular and plural forms of any of the
terms herein defined:
"Completion Date" means the date of completion of the Project, as set
forth in a completion certificate delivered pursuant to Section 5.4 hereof.
"Costs of the Project" means (a) obligations of the Issuer or the
Company incurred, or reimbursement to the Company, for labor and to contractors,
builders and materialmen in connection with the acquisition, construction and
installation of the Project; (b) the cost of contract bonds and of insurance of
all kinds that may be required or necessary during the course of acquisition of
the Project which is not paid by the contractor or contractors or otherwise
provided for; (c) all costs of architectural and engineering services, including
estimates and supervising acquisition, as well as for the performance of all
other duties required by or consequent upon the proper acquisition and
construction of the Project; (d) Issuance Costs; (e) all other costs which the
Company shall be required to pay, under the terms of any contract or contracts,
for the acquisition, construction and installation of the Project; (f) interest
allocable to the Series 1992 Bonds and property taxes through the Completion
Date; (g) all other costs relating to the Project to the extent that (i) such
costs are eligible for payment under the Act, including, but not limited to, all
such costs described in attached Exhibit B, and (ii) payment of such costs will
not cause the interest on the Series 1992 Bonds to be included in gross income
for federal income tax purposes; and (h) other costs of a nature comparable to
those described in clauses (a) through (g) above which the Company shall be
required to pay as a result of the damage, destruction, condemnation or taking
of the Project or any portion thereof.
"Indenture" means the Trust Indenture dated as of June 1, 1992 between
the Issuer and the Trustee, as the same may be amended or supplemented from time
to time as permitted thereby.
"Issuance Costs" means items of expense payable or reimbursable
directly or indirectly by the Issuer or the Company and related to the
authorization, sale and issuance of the Series 1992 Bonds and authorization and
execution of this Agreement which items of expense shall include, but not be
limited to, application fees and expenses, publication costs, printing costs,
costs of reproducing documents, filing and recording fees, Bond Counsel and
Counsel fees, costs of credit ratings, initial fees of the Trustee, Placement
Agent fees, charges for execution,
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transportation and safekeeping of the Series 1992 Bonds and related documents,
and other costs, charges and fees in connection with the foregoing.
"Land" means that certain parcel of land described on Exhibit F
attached hereto.
"Loan" means the Loan made pursuant to Section 3.1 of this Agreement.
"Loan Repayments" means all amounts required to be paid by the Company
to the Trustee as the assignee of the Issuer pursuant to the Promissory Note and
Section 3.2 of this Agreement.
"Principal User" means a principal user of the Project as such term is
used in Section 144(a) of the Code.
"Project" means the acquisition, construction and equipping of a
manufacturing facility, all as more fully described in attached Exhibit D.
"Promissory Note" means the promissory note given by the Company
pursuant to this Agreement, in the form of attached Exhibit C, as the same may
be amended, modified or supplemented in accordance with the terms hereof.
"Requisition Certificate" means a certificate in the form of attached
Exhibit B delivered pursuant to Section 5.1 hereof.
"Series 1992 Bonds" means the City of Ligonier, Indiana Economic
Development Revenue Bonds (Sharon Manufacturing Company Project), Series 1992
issued in the aggregate principal amount of $6,300,000.
"Trustee" means Fort Wayne National Bank or any successor appointed
under the Indenture.
(End of Article I)
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<PAGE> 9
ARTICLE II.
REPRESENTATIONS
SECTION 2.1. Representations by the Company. As an inducement to the
Issuer to issue the Series 1992 Bonds and to make the Loan to the Company, the
Company makes the following representations, warranties and covenants:
(a) The Company is a corporation duly organized and existing under the
laws of the State of Michigan and is duly authorized to transact business as a
foreign corporation in the State of Indiana.
(b) There are no actions, suits, proceedings, inquiries or
investigations pending or, to the knowledge of the Company, threatened against
or affecting the Company, except as set forth in the General Certificate of the
Company in any court or before any governmental authority or arbitration board
or tribunal which, if determined adversely to the Company, would materially and
adversely affect the transactions contemplated by this Agreement, the Pledge
Agreement, the Promissory Note, the Reimbursement Agreement or the Indenture or
which, in any way, would materially and adversely affect the enforceability or
validity of the Series 1992 Bonds, the Indenture, the Reimbursement Agreement,
the Pledge Agreement, the Promissory Note or this Agreement or the ability of
the Company to perform its obligations under this Agreement.
(c) The execution, delivery and performance of this Agreement, the
Pledge Agreement, the Promissory Note and the Reimbursement Agreement and the
compliance by the Company with all of the provisions hereof and thereof are
within its corporate powers, have been duly authorized by corporate action, and
are not in contravention of law or of the terms of the Company's Articles of
Incorporation or By-Laws, or any unwaived provision of any mortgage, deed,
instrument or undertaking to which the Company is a party or by which it or its
property is bound.
(d) This Agreement, the Pledge Agreement, the Promissory Note and the
Reimbursement Agreement are valid, binding and enforceable in accordance with
their terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws affecting creditors' rights generally
and general principles of equity.
(e) The Company has obtained all licenses, permits and approvals
necessary and obtainable as of the Issue Date for the ownership or conduct of
its business on the Land, including the ownership and utilization of the Project
thereon and such other transactions as are contemplated by this Agreement, the
Indenture, the Pledge Agreement, the Promissory Note and the Reimbursement
Agreement.
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<PAGE> 10
(f) The financing, acquisition, construction and completion of the
Project is expected to result in an increase of the productivity of the Company
and the creation of ninety (90) new jobs.
(g) The Company intends to cause the Project to operate at all times
during the term of this Agreement so as to qualify as an "economic development
facility" as defined in the Act.
(h) The Project will be acquired and constructed in such manner as to
conform with all applicable zoning, planning, environmental and other
regulations of governmental authorities having jurisdiction of the Project; all
necessary utilities are or will be available to the Project; and the Company has
obtained or caused to be obtained, or will obtain or cause to be obtained, all
requisite zoning, planning, environmental and other permits necessary for the
acquisition and construction and the use contemplated for the Project.
(i) None of the proceeds of the Bonds shall be applied to any costs of
the acquisition or construction of the Project which were paid or incurred
(within the meaning of Section 103 of the Code) prior to the inducement
resolution adopted by the Issuer with respect to the Project on December 16,
1991.
(j) No bonds as described in Section 144(a)(2) of the Code have been
issued by any state, political subdivision, district, public body, agency,
authority, commission or instrumentality, the proceeds of which have been or
will be used with respect to facilities located within the unincorporated are of
Noble County, Indiana, the Principal User of which is the Company or a Related
Person as defined in Section 144(a)(3) of the Code.
(k) The Project constitutes land or property of a character subject to
the allowance for depreciation provided by the Code, and at least 95% of the net
proceeds of the Series 1992 Bonds are being used to acquire property of such
character and subject to such allowance.
(l) The amount of Issuance Costs financed from the proceeds of the sale
of the Series 1992 Bonds shall not exceed 2% of the proceeds of the Series 1992
Bonds.
(m) The Company has supplied the Issuer in its Tax Representation
Certificate the estimates of the Costs of the Project, the Completion Date and
periods of usefulness of the Project. The Company hereby warrants that such
estimates were made in good faith and are fair, reasonable and realistic based
upon information known to the Company as of the Issue Date.
(n) There are no other bonds described in Section 144(a) of the Code
which have been issued, or are contemplated to be issued, pursuant to Section
144(a) of the Code (or its predecessor provision), for the benefit of the
Company or any Related Person to the Company and which (i) were or are to be
sold within 31 days of the Issue Date; (ii) were or are to be sold pursuant to a
common plan of marketing as of the marketing plan for the Series 1992 Bonds;
(iii) were or are to be sold at substantially the same rate of interest as the
interest rate on the
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<PAGE> 11
Series 1992 Bonds; and (iv) are payable directly or indirectly by the Company or
from the source from which the Series 1992 Bonds are payable.
(o) The information furnished by the Company and used by the Issuer in
preparing the Form 8038, Information Return for Private Activity Issues, which
has been filed by or on behalf of the Issuer with the Internal Revenue Service
in Philadelphia, Pennsylvania pursuant to Section 149)e) of the Code, was true
and complete as of the date of filing of said Form 8038.
(p) The average maturity of the Series 1992 Bonds does not exceed 120%
of the average reasonably expected economic life of the components compromising
the Project, as determined pursuant to Section 147(b) of the Code.
(q) No more than 25% of the net proceeds of the Series 1992 Bonds will
be used to provide a facility the primary purpose of which is retail food and
beverage services, automobile sales or service, or the provisions of recreation
or entertainment. No portion of the net proceeds of the Series 1992 Bonds will
be used to provide any private or commercial golf course, country club, massage
parlor, tennis club, skating facility (including roller skating, skateboard and
ice skating), racquet sports facility (including any handball or racquetball
court), hot tub facility, suntan facility, racetrack, airplane, skybox or other
private luxury box, health club facility, facility primarily used for gambling,
store the principal business of which is the sale of alcoholic beverages for off
premises consumption or residential real property for family units.
(r) Less than 25% of the net proceeds of the Series 1992 Bonds will be
used to acquire land. No portion of the proceeds of the Series 1992 Bonds will
be used to acquire land (or an interest therein) to be used for farming
purposes.
(s) The sum of the authorized face amount of the Series 1992 Bonds
allocable to each test-period beneficiary (as defined in Section 144(a)(10)(D)
of the Code) plus the respective aggregate face amount of all tax-exempt
facility related bonds (as defined in Section 144(a)(10)(B) of the Code)
presently outstanding which are allocable to each such test-period beneficiary
does not exceed $40,000,000.
(t) The Project does not consist of a portion of a single building,
enclosed shopping mall or strip of offices, stores or warehouses using
substantial common facilities with any other portion or portions of such
property (of which the Project is a part) and where any such other portions are
or will be financed with qualified bonds the interest in which is excluded from
gross income for federal income tax purposes under Section 103(a) of the Code.
(u) The payment of principal or interest with respect to the Series
1992 Bonds is not guaranteed in whole or in part by the United States or any
agency or instrumentality thereof. The Series 1992 Bonds are not issued as part
of an issue a significant portion of the proceeds of which are to be used in
making loans the payment of principal or interest with respect to which are to
be guaranteed in whole or in part by the United States or any agency or
instrumentality thereof, or invested directly or indirectly in federally insured
deposits or
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<PAGE> 12
accounts. The payment of principal or interest on the Series 1992 Bonds is not
otherwise indirectly guaranteed in whole or in part by the United States or any
agency or instrumentality thereof within the meaning of Section 149(b) of the
Code.
(v) The Company will comply with the provisions of Section 148 of
the Code applicable to the Series 1992 Bonds.
(w) The Company will not make any payments, or agreements to pay, to
any party other than the United States an amount that is required to be paid to
the United States under the rebate requirements under Section 148(f) of the Code
by entering into any transaction that reduces the amount required to be paid to
the United States because such transaction results in a smaller profit or a
larger loss than would have resulted if the transaction had been at arm's length
and had the yield on the Series 1992 Bonds not been relevant to either party.
The Company will not acquire with Series 1992 Bond proceeds any certificate of
deposit, investment contract, or any other type of investment that does not
comply with the provisions of the Code.
(x) No event has occurred and no condition exists with respect to the
Company that would constitute an "Event of Default" under this Agreement or
that, with the lapse of time or the giving of notice or both, would become an
"Event of Default" under this Agreement.
(y) At least 95% of the proceeds of the Series 1992 Bonds will be used
to finance a "manufacturing facility" within the meaning of Section
144(a)(12)(C) of the Code, and no more than 25% of the net proceeds of the
Series 1992 Bonds will be used to finance facilities that are "directly related
an ancillary" thereto within the meaning of Section 144(a)(12)(C) of the Code.
For this purpose, the term "manufacturing facility" means any facility which is
used in the manufacturing or production of tangible personal property (including
the processing resulting in a change in the condition of such property).
Manufacturing facilities do not include an office unless such office is located
on the premises of the manufacturing facility and not more than a de minimus
(5%) portion of the functions to be performed at such office is not directly
related to the day-to-day operations at such facility. Manufacturing facilities
do not include storage facilities for raw materials, work in process, or
finished goods or other materials unless such storage facilities are located on
the premises of the manufacturing facility and are directly related to a
manufacturing activity conducted at such facility as opposed to a warehousing,
distributing, wholesaling, retailing or other non-manufacturing activity.
(z) We will not knowingly participate in the sale pursuant to a common
plan of marketing of the Series 1992 Bonds in connection with any other
tax-exempt bonds which will be sold at substantially the same time (i.e., within
the next 31 days) and share common or pooled security, including particularly a
letter of credit issued by NBD Bank, N.A. For purposes of this paragraph a
common plan of marketing means any situation where obligations are sold under
the same Indenture or the same Private Placement Memorandum pursuant to which
the Series 1992 Bonds were issued and offered for sale, respectively, or when
the purchase of one obligation is conditioned on the purchase of another
obligation by the same holder or group of holders.
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SECTION 2.2. Representations of the Issuer. The Issuer makes the
following representations and warranties:
(a) The Issuer is a municipal corporation organized under the laws of
the State and is authorized and empowered by the provisions of the Act and the
ordinance authorizing the issuance of the Bonds to enter into the transactions
contemplated by this Agreement and to carry out its obligations hereunder, and
by proper action of its governing body had been duly authorized to execute and
deliver this Agreement. The Project constitutes an "economic development
facility" within the meaning of the Act.
(b) The Issuer has performed all duties, undertaken all acts, made all
findings and held all hearings prerequisite to the adoption of the Bond
Ordinance and the issuance of the Bonds.
(c) Heretofore the Issuer and the Company did agree that the Issuer
would finance the Costs of the Project. The Company has estimated that the
aggregate amount thereof will not be less than $6,300,000, and on that basis the
Issuer now proposes to issue its Bonds in the aggregate principal amount of
$6,300,000, which Bonds will be dated, mature and bear interest as set forth in
the Indenture, and which Bonds will be subject to redemption and purchase at the
times and the prices set forth in the Indenture, in order to finance the Costs
of the Project.
(d) The Bonds are to be issued under and secured by the Indenture,
pursuant to which certain of the Issuer's interests in this Agreement, and the
revenues and receipts to be derived by the Issuer pursuant to this Agreement,
will be pledged and assigned to the Trustee as security for payment of the
principal or purchase price of, premium, if any, and interest in this Agreement,
or the revenues and receipts derived pursuant to this Agreement, excepting
Unassigned Rights, other than to the Trustee under the Indenture to secure the
Bonds.
(e) The Issuer finds and determines that the financing of the Costs of
the Project is in the public interest and in compliance with the purposes and
provisions of the Act.
(f) Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, nor the fulfillment of or
compliance with the terms and conditions of this Agreement conflicts with or
results in a breach of the terms, conditions or provisions of any restriction,
agreement or instrument to which the Issuer is a party, or by which it or any of
its property is bound, or constitutes a default under any of the foregoing.
(g) The Issuer covenants not to purchase any of the Bonds at any time
that the Letter of Credit is available to be drawn therefor.
(h) No member of the Common Council of the Issuer has a pecuniary
interest in any employment, contract or agreement related to the transactions
contemplated by this Agreement, except as disclosed by such member in accordance
with the Act. No member of the Common
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Council of the Issuer has a pecuniary interest in any property required for the
acquisition, construction and installation of the Project.
(End of Article II)
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<PAGE> 15
ARTICLE III.
LOAN AND REPAYMENT
SECTION 3.1. Amount and Evidence of Loan. Concurrently with the
issuance and delivery of the Series 1992 Bonds, the Issuer shall make and the
Company shall receive the Loan in the principal sum of $6,300,000. The proceeds
of the Loan shall be used to make a deposit of $6,300,000 to the Construction
Fund for payment of the Costs of the Project to be disbursed in accordance with
Section 5.1 hereof. The Loan shall be evidenced by the Promissory Note.
SECTION 3.2. Loan Repayments. On or before each date on which a payment
of principal, premium, if any, or interest is due on the Bonds, whether by
acceleration or otherwise, and until the principal of, premium, if any, and
interest on the Bonds shall have been fully paid or provided for as set forth in
Article V of the Indenture, the Company shall pay, or cause to be paid, to the
Trustee, in immediately available funds for deposit in the Bond Fund, the Loan
Repayments, including the amounts payable as principal of, premium, if any, and
interest due on the Bonds on such date, less any Eligible Funds held by the
Trustee in the Bond Fund and required to be applied to the payment of such
principal, premium, if any, and interest on such date.
Notwithstanding any provision in this Section 3.2 to the contrary, if
the Letter of Credit is outstanding and drawings may be made thereunder for the
purpose of making payments with respect to the principal of, premium, if any,
and interest due on the Bonds which are required to be made pursuant to this
Section 3.2, such payments shall be made on such dates on behalf of the Company
by the Trustee with funds drawn by the Trustee under the Letter of Credit
pursuant to clause (i) of Section 309(a) of the Indenture, and no additional
payments shall be due or paid by the Company hereunder with respect to the
payment of principal of, premium, if any, or interest on such Bonds to the
extent that funds are so drawn on the Letter of Credit and applied by the
Trustee for such payment on such dates. The Company shall have the right to
presume payment by the Bank under the Letter of Credit or any Alternate Credit
Facility which shall be in effect at said times unless the Company receives by
1:00 p.m., Detroit, Michigan time, written notice from the Trustee by telecopier
(confirmed by telephone) that such payment has not been received by the Trustee
by 12:00 noon, Detroit, Michigan time.
SECTION 3.3. Mandatory and Optional Prepayments of the Promissory Note.
The Company shall have the option to prepay the Promissory Note in whole or in
part, at any time and from time to time, in increments of principal of $100,000
during the Variable Rate Period or $5,000 during the Fixed Rate Period and
direct the redemption of the corresponding amount of Series 1992 Bonds then
outstanding on such dates and pursuant to the provisions and limitations, and
upon payment of any required premium, set forth in Section 217(a) of the
Indenture.
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The Company shall be obligated to prepay the Promissory Note at such
times in order to enable the Trustee to redeem all or a portion of the Series
1992 Bonds as required in Sections 217(b), (c) and (d) of the Indenture.
In the event the Company repays or prepays Loan Repayments and other
amounts owing to the Trustee under this Agreement and the Indenture and to the
Bank under the Reimbursement Agreement in such a manner so as to permit the
Security to be released from the lien of the Indenture in accordance with
Article V of the Indenture, then the Loan shall be deemed fully repaid and this
Agreement and the Promissory Note shall be cancelled on the date on which the
Security is so released. To confirm such cancellation, the Company shall have
the right to require the Trustee to cancel the Promissory Note and execute any
further reasonable evidence of cancellation on the date the Security is so
released.
In the event of any optional prepayment of the Promissory Note, on or
before the date set for redemption of the Series 1992 Bonds to be redeemed in
connection therewith, the Company shall deposit, or cause to be deposited from a
draw on the Letter of Credit, in the Bond Fund with the Trustee immediately
available Eligible Funds which, when added to Eligible Funds on hand with the
Trustee, are sufficient to pay the principal of, premium, if any, and interest
on the Series 1992 Bonds and to pay all fees, costs, and expenses of the Issuer
and Trustee specified in Sections 3.5, 3.6, 6.4, 8.6, and 10.4 accruing through
the date set for redemption of the Series 1992 Bonds (provided that no moneys
derived from a draw on the Letter of Credit shall be used to pay such fees,
costs and expenses of the Issuer or the Trustee).
SECTION 3.4. Additional Payment Obligations of the Company. The Company
agrees to pay, or cause to be paid, to the Trustee, for deposit in the Bond
Purchase Fund, on or before each Optional Tender Date and on the Conversion Date
and on each Mandatory Purchase Date, an amount sufficient, together with any
moneys then held by the Trustee in the Bond Purchase Fund and available for such
purpose under Section 403 of the Indenture, to enable the Trustee to pay the
Purchase Price of all Bonds to be purchased on such date pursuant to Section 205
of the Indenture at the price specified therein; provided, however, that if the
Letter of Credit is outstanding and drawings may be made thereunder for such
purpose, payments with respect to the Purchase Price of the Bonds on such date
which are required to be made by the Company under this Section 3.4 shall be
made on behalf of the Company by the Trustee with funds drawn by the Trustee
under the Letter of Credit pursuant to clause (ii) of Section 309(a) of the
Indenture, and no additional payments shall be due or paid by the Company
hereunder with respect to the Purchase Price of such Bonds to the extent that
funds are so drawn under the Letter of Credit for the payment of the Purchase
Price of Bonds purchased on such date. Anything herein to the contrary
notwithstanding, if on any Optional Tender Date or Mandatory Purchase Date or on
the Conversion Date the amount theretofore paid by or on behalf of the Comapny
hereunder together with the amount theretofore drawn under the Letter of Credit
is, for any reason, insufficient to pay the Purchase Price of the Bonds being
tendered on such date as provided in the Indenture, the Company hereby agrees to
immediately pay an amount equal to such deficiency to the Trustee as its
corporate trust office in lawful money of the United States of America and such
payment shall be made at such times as are
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necessary so that sufficient funds will be available at such times as are
necessary to pay the Purchase Price of the Bonds tendered under the Indenture at
the times and in the manner contemplated by the Indenture.
SECTION 3.5. Payment of Issuer Expenses. The Company shall pay, within
10 days of demand therefor, the reasonable expenses of the Issuer related to the
Project, or incurred by the Issuer in performing or enforcing the provisions of
this Agreement or the Indenture.
SECTION 3.6. Administrative Expenses. The Company shall pay, or cause
to be paid, an amount equal to (i) the reasonable fees and charges of the
Trustee for services rendered as Trustee under the Indenture and its reasonable
expenses incurred as Trustee under the Indenture, as and when the same become
due, including the reasonable fees of its counsel and (ii) the reasonable fees
and charges of the Placement Agent for acting as Placement Agent under the
Indenture, as and when the same become due, including the reasonable fees of its
Counsel.
SECTION 3.7. Letter of Credit; Alternate Credit Facility. The Company
shall cause the Original Letter of Credit to be delivered to the Trustee on or
before the Issue Date. The Original Letter of Credit shall terminate no earlier
than the earliest of (i) the payment in full by the Bank of funds authorized to
be drawn thereunder, (ii) payment in full of the Series 1992 Bonds pursuant to
the provisions of the Indenture, as certified by the Trustee to the Bank, (iii)
5 p.m., Detroit, Michigan time, on June 15, 1997 (subject to extensions) or (iv)
the fifth day following the Conversion Date.
The Company shall have the right (but is not obligated) to arrange for
the renewal, reissuance or extension of any Letter of Credit. Any renewal,
reissuance or extension shall be for a period of at least one year and shall
expire on a June 15.
At any time upon at least 45 days prior written notice to the Trustee,
the Company may, at its option, provide for delivery of an Alternate Credit
Facility which shall be effective on the date such Alternate Credit Facility is
accepted by the Trustee in accordance herewith. Any Alternate Credit Facility
shall have the same terms as the Original Letter of Credit, except that such
Alternate Credit Facility shall be for a period of at least one year and shall
expire on a June 15. On or before the date of delivery of any Alternate Credit
Facility to the Trustee, as a condition of acceptance of any Alternate Credit
Facility by the Trustee, the Company shall furnish to the Trustee (i) an opinion
of bond Counsel stating that the delivery of such Alternate Credit Facility is
authorized under and complies with this Section 3.7, and (ii) an opinion of
Counsel stating that the Alternate Credit Facility is a binding and enforceable
obligation of the issuer thereof (except as enforceability may be limited by (A)
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
creditors rights generally and (B) the availability of equitable remedies,
including specific performance and injunctive relief), and that payments
thereunder will not constitute a voidable preference under the United States
Bankruptcy Code (in the event of bankruptcy, insolvency or reorganization of the
Issuer, the "Company" or any "insider" of the Company). In the case of an
Alternate Credit Facility issued by a branch or agency of a foreign commercial
bank there shall also be delivered an opinion of Counsel
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satisfactory to the Trustee and licensed to practice law in the jurisdiction in
which the head office of such bank is located, to the effect that the Alternate
Credit Facility is the legal, valid and binding obligation of such bank
enforceable in accordance with its terms.
SECTION 3.8. Credit for Bonds Surrendered. The Company shall have the
right to surrender Bonds, other than Bonds pledged to the Bank pursuant to the
Pledge Agreement, acquired by it to the Trustee. Bonds so surrendered shall be
forthwith cancelled and the principal amount thereof shall be applied as credits
with respect to the Loan Repayments due and payable on the respective maturity
dates on such Bonds. Further, with respect to the amounts credited resulting
from Bonds surrendered, interest due on said amounts credited shall cease to
accrue on the date on which said amount is credited. The Trustee shall provide
the Bank with a certificate for the reduction of the amounts available to be
drawn under the Letter of Credit as a result of such payments in accordance with
the terms of the Letter of Credit.
(End of Article III)
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ARTICLE IV.
SECURITY INTEREST
SECTION 4.1. Priority and Maintenance of Lien; Recording. This
Agreement shall constitute a security interest in the Trust Estate and shall be
superior to any other lien. The Company will, at its expense, take all necessary
action to maintain and preserve the security interest of this Agreement so long
as the Promissory Note is outstanding. The Company will, forthwith after the
execution and delivery of this Agreement and thereafter from time to time, cause
this Agreement and any financing statements in respect thereof to be filed,
registered and recorded in such manner and in such places as may be required by
law in order to publish notice of and fully to protect the security interest
hereof upon the Trust Estate; and from time to time will perform or cause to be
performed any other act as provided by law and will execute or cause to be
executed any and all continuation statements and further instruments that may be
requested by the Issuer or Trustee for such publication and protection. The
Company will pay or cause to be paid all filing, registration and recording fees
incident to such filing, registration and recording, and all expenses incident
to the preparation, execution and acknowledgement of such instruments of further
assurance, and all federal or state fees and other similar fees, duties,
imposts, assessments and charges arising out of or in connection with the
execution and delivery of this Agreement and such instruments of further
assurance.
SECTION 4.2. Further Assurances; After-acquired Property. The Company
will do, execute, acknowledge and deliver, or cause to be done, executed,
acknowledged and delivered, all such further acts, assignments, transfers and
assurances as the Issuer or Trustee reasonably may require for the better
assuring, assigning and confirming unto the Issuer and the Trustee all and
singular the Trust Estate as now or hereafter constituted.
SECTION 4.3. Company Duties Under Indenture. The Company agrees to
perform all matters provided by the Indenture to be performed by the Company and
to comply with all provisions of the Indenture applicable to the Company.
(End of Article IV)
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ARTICLE V.
CONSTRUCTION OF THE PROJECT
SECTION 5.1. Disbursements from the Construction Fund. Moneys in the
Construction Fund shall be used for payment of the Costs of the Project and for
the other purposes set forth in this Agreement, but for no other purposes. The
Trustee shall not be obligated to make any disbursement to the Company out of
the Construction Fund upon the occurrence and continuation of an Event of
Default under Section 10.1 hereof.
Each of the payments to be made for Costs of the Project as herein
provided shall be made only upon delivery to the Trustee of a Requisition
Certificate signed by an authorized officer of the Company. The Company shall
deliver or cause to be delivered to the Trustee, (i) an itemization of Costs of
the Project in sufficient detail to evidence the incurring of the costs thereof,
and (ii) such other documentation as the Trustee may reasonably request. All
requests for payment under this Section 5.1 will be honored within 5 business
days of meeting the requirements of this Section, to the extent monies are
available therefor.
SECTION 5.2. Obligation of the Company to Complete the Project and to
Pay Costs in Event Construction Fund Insufficient. The Company hereby agrees to
substantially complete the Project on or before June 12, 1995 or such other date
acceptable to the Bank. If requested, the Company shall make available to the
Issuer, the Bank and the Trustee such information concerning the Project as any
of them may reasonably request. The Company may revise the Project, provided,
however, that the Project shall not be materially altered in scope, character,
value or operation without the prior witness consent of the Issuer, the Trustee
and the Bank, and provided, further, that the expenditure of moneys for the
Project as modified is permitted by the Act and will not impair the exclusion of
interest on the Bonds from gross income for federal income tax purposes.
In the event the moneys in the Construction Fund are insufficient to
complete the Project and to pay all costs, fees and expenses in connection
therewith, the Company nevertheless agrees to substantially complete the Project
on or before the date and in the manner specified above, and promptly to pay all
such costs, fees and expenses. The Issuer does not make any warranty, either
express or implied, that the moneys which will be paid into the Construction
Fund will be sufficient to pay the entire amount of such costs, fees and
expenses of the Project. The Company shall not be entitled to any reimbursement
from the Issuer or the Trustee, on account of its payment of any such excess
costs, fees and expenses, nor shall it be entitled to any diminution in or
postponement of any payment required hereunder or under the Promissory Note.
SECTION 5.3. Investment of Construction Fund, Bond Fund and Bond
Purchase Fund Moneys. Any moneys held in the Construction Fund, Bond Fund or
Bond Purchase Fund shall, pending disbursement and upon written request of the
Company or upon oral request of the Company later confirmed in writing, be
invested only in Permitted Investments in accordance
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with the provisions of Section 406 of the Indenture, all at such maturities,
rates of interest and other specifications as the Company may indicate in its
request to the Trustee. The investments shall mature not later than the
respective dates estimated by the Company when the moneys in such Funds shall be
needed for the purposes provided in this Agreement and the Indenture, but should
the cash balance in a Fund be insufficient for such purpose, the Trustee is
authorized to sell the necessary portion of such investments to meet that
purpose. Recognizing that such investments shall be made at the written
direction of the Company, the Issuer agrees to cooperate with the Company and
the Company covenants that it will restrict the use of the proceeds of the bonds
(and any other funds or moneys which may be deemed to be proceeds of the Bonds
pursuant to Section 148(a) of the Code), in such manner and to such extent, if
any, as may be necessary, after taking into account reasonable expectations at
the time the Bonds are issued, so that the Bonds will not constitute "arbitrage
bonds" under Section 148(a) of the Code.
SECTION 5.4. Certificate as to Completion. The Completion Date of the
Project and the payment of Costs of the Project shall be evidenced to the
Trustee, the Bank and the Issuer by a completion certificate signed by the
Company substantially in the form of attached Exhibit A. All Surplus Bond
Proceeds shall be transferred to the Bond Fund to be applied by the Trustee in
the manner provided in Section 11.1 hereof.
(End of Article V)
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ARTICLE VI.
USE OF PROJECT, MAINTENANCE, TAXES AND INSURANCE
SECTION 6.1. Use, Maintenance and Modifications of Project by Company.
The Company intends to use, or cause to be used, the Project during the term of
this Agreement principally for manufacturing purposes. The Company does not know
of any reason why the Project will not be so used. Notwithstanding the
foregoing, the Company shall have the right to use the Project during the term
of this Agreement for any lawful purpose that will not affect the validity of
the Bonds or impair the exclusion of interest on the Bonds from gross income for
federal income tax purposes. The failure of the Company to use, or cause to be
used, the Project for its intended purposes shall not in any way abate or reduce
the obligation of the Company to repay the Loan under the provisions of this
Agreement, and shall not be deemed a default under this Agreement in any respect
as long as such alternative use does not impair the exclusion of interest on the
Bonds from gross income for federal income tax purposes.
The Company may modify the Project from time to time as the Company, in
its discretion, may deem to be desirable, provided, however, that such
additions, modifications and improvements do not impair the exclusion of
interest on the Bonds from gross income for federal income tax purposes and do
not contravene the provisions of the Act. The Trustee, the Issuer or the Bank
may request opinions of Bond Counsel, satisfactory to the Issuer, the Trustee
and the Bank, as to the satisfaction of the requirements set forth in this
paragraph.
SECTION 6.2. Taxes, Other Governmental Charges and Utility Charges. The
Company shall pay, promptly as the same become due and payable, every lawful
cost, expense and obligatio for every kind and nature, foreseen or unforeseen,
for the payment of which the Company is or shall become liable by reason of its
estate or interest in the Project or any portion thereof, by reason of any right
or interest of the Company in or under this Agreement, or by reason of or in any
manner connected with or arising out of the possession, operation, maintenance,
alteration, repair, rebuilding, use or occupancy of the Project or any portion
thereof, including, without limitation, all taxes, assessments, whether general
or special, and governmental charges of any kind whatsoever that may at any time
be lawfully assessed or levied against or with respect to the Project or any
machinery, equipment or other property installed or brought by the Company
therein or thereon (including, without limiting the generality of the foregoing,
any taxes levied upon or with respect to the receipts, income or profits of the
Issuer from the Project and all utility and other charges incurred in the
operation, maintenance, use, occupancy and upkeep of the Project); provided,
that with respect to special assessments or other governmental charges that may
lawfully be paid in installments over a period of years, the Company shall be
obligated to pay only such installments as the become due.
The Company may, at its expense and in its own name, in good faith
contest any such taxes, assessments and other charges.
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The Company shall furnish to the Issuer promptly, upon request, proof
of the payment of any such tax, assessment or other governmental or similar
charge, or any other charge which is payable by the Company as set forth above.
SECTION 6.3. Insurance. The Company shall from the date hereof,
continuously insure the Project or cause the Project to be insured against such
risks as are customarily insured against by businesses of like size and
character.
All insurance policies required under this Section 6.3 shall be
effected with insurance companies qualified under the laws of the State to
assume the risks undertaken. The required insurance may be in the form of
blanket insurance policies and may be provided by so-called umbrella coverage.
(End of Article VI)
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ARTICLE VII.
DAMAGE, DESTRUCTION AND CONDEMNATION
In the event (i) the Project is destroyed or sustains damage or (ii)
title to or temporary use of all or substantially all of the Project is taken in
condemnation or by the exercise of the power of eminent domain by any
governmental body or by any Person acting under governmental authority, the
Company shall promptly give written notice thereof to the Issuer, the Bank and
the Trustee. If the cost of restoration or repair equals or does not exceed
$25,000 the Company will restore or repair the Project as hereinafter provided,
to the extent that insurance proceeds are made available therefor. If the cost
of restoration or repair exceeds $25,000, or if title to or use of all or
substantially all of the Project is taken in condemnation or by eminent domain,
as soon as practicable, but not later than 60 days after such damage,
destruction or taking, the Company shall elect in writing to the Issuer, the
Bank and the Trustee whether to restore the Project as hereinafter provided or
to prepay the Loan and cause the Series 1992 Bonds to be paid or redeemed to the
extent of the available insurance or condemnation proceeds.
(End of Article VII)
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ARTICLE VIII.
SPECIAL COVENANTS
SECTION 8.1. Unconditional Obligation. The Company hereby acknowledges
and agrees that the Company's obligation to make Loan Repayments and the other
payments required hereunder and to perform and observe the other agreements
herein contained shall be absolute and unconditional and shall not be subject to
any abatement, reduction, set-off, defense, counterclaim or recoupment for any
reason whatsoever. Except as otherwise expressly provided herein, this Agreement
shall not terminate, nor shall the obligations of the Company be affected, by
reasons of any defect in or damage to or loss or destruction of all or any part
of the Project, the failure of the Issuer to perform or observe any agreement,
liability or obligation hereunder or the lawful prohibition of the Company's or
any other Person's use of the Project, the interference with such use by any
Person, the invalidity or unenforceability or lack of due authorization or other
infirmity of this Agreement or any part hereof, lack of right, power or
authority of the Issuer to enter into this Agreement, or for any other cause
whether similar or dissimilar to the foregoing, any present or future tax or
other law to the contrary notwithstanding, it being the intention of the parties
hereto that Loss Repayments and other amounts payable by the Company hereunder
shall continue to be payable in all events unless the obligation to pay the same
shall be terminated pursuant to the express provisions of this Agreement.
In the event the Company shall fail to make or cause to be made any of
the payments required to be made under this Agreement, the unpaid amount shall
continue to be an obligation of the Company until such amount shall be fully
paid, and the Company agrees to pay the same with interest thereon from the date
when due until paid at the greater of the rate borne by the Series 1992 Bonds or
the per annum rate of interest equal to the rate of interest announced from time
to time by the Trustee as its "reference rate" plus 3%.
SECTION 8.2. Right of Access to the Project. Subject to the reasonable
security, safety and confidentiality requirements of the Company, the Company
agrees that the Issuer, the Bank and the Trustee, and their respective duly
authorized agents, shall have the right at all reasonable times upon reasonable
prior notice to enter upon the Project to examine and inspect the same, and
shall have the right at all reasonable times to inspect all books and records of
the Company relating to the Project to confirm compliance with this Agreement
and make copies thereof.
SECTION 8.3. Maintenance of Corporation Existence and Qualification.
The Company agrees that throughout the term of this Agreement it shall maintain
its corporate existence and shall not merge or consolidate with any other
corporation and shall not transfer or convey all or substantially all of its
property, assets and licenses, except as otherwise provided in the Reimbursement
Agreement.
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The Company warrants (i) that it is and throughout the term hereof it
will continue to be qualified to do business in the State, and (ii) that if it
elects to consolidate with, merge into or transfer all or substantially all of
its assets to another corporation in accordance with this Section, and such
other corporation is not organized under the laws of the State, the Company, as
a condition of such consolidation, merger or transfer of assets, shall cause
such other corporation to qualify to do business as a foreign corporation in the
State and to remain so qualified continuously during the term hereof.
SECTION 8.4. Granting Easements. The Company may at any time or times
grant easements, licenses, rights-of-way and other rights or privileges in the
nature of easements with respect to the Land, or release existing easements,
licenses, rights-of-way and other rights or privileges with or without
consideration.
SECTION 8.5. Covenant as to Non-Impairment of Tax-Exempt Status. The
Company covenants that, notwithstanding any provision of this Agreement or the
rights of the Company hereunder, it will not knowingly take, or permit to be
taken on its behalf, any action that would impair the exclusion of interest on
the Bonds from gross income for federal income tax purposes and that it will
take such reasonable action as may be necessary to continue such exclusion,
including, without limitation, the preparation and filing of any statements
required to be filed by it in order to maintain such exclusion.
The Company will not cause or permit any proceeds of the Bonds to be
invested in a manner contrary to the provisions of Section 148 of the Code and
will assure compliance with such requirements on behalf of the Issuer. At least
every year, the Company will furnish to the Trustee a report showing the amounts
that will be required to be paid to the United States of America pursuant to the
provisions of Section 148(f) of the Code as of the end of such year. The Company
shall calculate and timely pay to the United States of America, for the account
of the Issuer, all amounts required to be so paid in accordance with said
Section 148(f) and shall maintain, on behalf of the Issuer, all records required
to be maintained pursuant to said Section 148(f). At least once every five
years, and not later than sixty days after the payment in full of each series of
Bonds, the Company will furnish to the Issuer and the Trustee a certificate
showing compliance with the applicable provisions of said Section 148(f), which
certificate shall be accompanied by an opinion of Counsel or certificate of
accountants supporting the matters set forth in such certificate.
In addition to the foregoing covenants, the Company further covenants
that (i) it will requisition, apply and spend the moneys in the Construction
Fund in a manner so that at least 95% of the total amount requisitioned from the
Construction Fund will be applied to finance costs (incurred after December 6,
1991) for the acquisition, or improvement of land and other property which is of
a character subject to an allowance for depreciation under Section 167 of the
Code; (ii) it will not permit moneys in the Bond Fund, Bond Purchase Fund or
Construction Fund to be invested in such a manner as to cause the Bonds to be
"arbitrage bonds" under Section 148(a) of the Code; (iii) it will promptly
notify the Trustee if, at any time, the Company proposes to take any action, or
any action is to be taken by or on behalf of any Principal User
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of the Project or any Related Person, the effect of which could be to cause
interest on the Bonds to become includable in the gross income of owners thereof
for federal income tax purposes by reason of the $10,000,000 capital expenditure
limitation imposed by Section 144(a)(4) of the Code being exceeded or the
$40,000,000 limitation imposed by Section 144(a)(10) of the Code being exceeded;
(iv) it will not requisition from the Construction Fund more than $126,000 to
pay Issuance Costs; and (v) no portion of the net proceeds of the Series 1992
Bonds will be used for the acquisition of any property (or an interest therein)
unless the first use of such property is pursuant to such acquisition.
The Company acknowledges that a failure to abide by the foregoing
covenants may result in a Determination of Taxability. In the event of a
Determination of Taxability for any reason, the sole and exclusive remedy of the
holders of the Bonds and the Trustee on their behalf shall be the early
redemption of the Bonds as provided therein under the caption "Mandatory
Redemption."
SECTION 8.6. Indemnity, Expenses.
(a) Except as provided in subsection (b), the Ligonier Economic
Development Commission (the "Commission") and the Issuer and their respective
members, officers, agents and employees (hereinafter the "Indemnified Persons")
shall not be liable to the Company for any reason. The Company shall indemnify
and hold the Issuer and the Indemnified Persons harmless from any loss, expense
(including reasonable counsel fees), or liability of any nature due to any and
all suits, actions, legal or administrative proceedings, or claims arising or
resulting from, or in any way connected with: (i) the financing, installation,
construction, operation, use, or maintenance of the Project, (ii) any act,
failure to act, or misrepresentation by any person in connection with the
issuance, sale, delivery or remarketing of the Bonds, or (iii) any act, failure
to act, or misrepresentation by the Issuer in connection with this Agreement or
any other document involving the Issuer in this matter. If any suit, action or
proceeding is brought against the Issuer or any Indemnified Person, that suit,
action or proceeding shall be defended by Counsel to the Company, which Counsel
shall be reasonably acceptable to the Issuer. If the Company shall not have
employed counsel or if an Indemnified Person shall have reasonably concluded
that there may be defenses available to it which are different from or
additional to those available to the Company (in which case the Company shall
not have the right to direct the defense of such action on behalf of such
Indemnified Person), legal and other expenses thereafter reasonably incurred by
the Indemnified Person shall be borne by the Company. The Company shall not be
liable for any settlement of any proceeding made without its consent (which
consent shall not be unreasonably withheld).
(b) (i) The Company shall not be obligated to indemnify the Issuer or
any Indemnified Person under subsection (a), if a court with competent
jurisdiction finds the liability in question was caused by the willful
misconduct or gross negligence of the Issuer or the involved Indemnified
Person(s), unless the Court determines that, despite the adjudication of
liability but in view of all circumstances of the case, the Issuer or the
Indemnified Person(s) is (are) fairly and reasonably entitled to indemnity for
the expenses which the Court considers proper.
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(ii) Notwithstanding anything to the contrary contained herein or in
the Indenture, the Bonds, or in any other instrument or document executed by or
on behalf of the Issuer in connection with the issuance of the Bonds, no
stipulation, covenant, agreement or obligation contained herein or therein shall
be deemed or construed to be a stipulation, covenant, agreement or obligation or
any present or future member, commissioner, director, trustee, officer, employee
or agent of the Issuer or its Economic Development Commission, or of any
incorporator, member, commissioner, director, trustee, officer, employee or
agent of any successor to the Issuer or its Economic Development Commission, in
any such person's individual capacity, and no such person, in his individual
capacity, shall be liable personally for any breach or non-observance of or for
any failure to perform, fulfill or comply with any such stipulations, covenants,
agreements or the principal of, premium, if any, or interest on any of the Bonds
or for any claim based thereon or on any such stipulation, covenant, agreement
or obligation, against any such person, in his individual capacity, whether
directly or through the Issuer or any successor to the Issuer, under any rule of
law or equity, statute or constitution or by the enforcement of any assessment
or penalty or otherwise, and all such liability of any such person in his
individual capacity, is hereby expressly waived and released.
(iii) The Company shall also indemnify the Issuer for all reasonable
costs and expenses, including reasonable Counsel fees, incurred in: (i)
successfully enforcing any obligation of the Company under this Agreement or any
related agreement, (ii) taking any action requested by the Company, (iii) taking
any action required by this Agreement or any related agreement, or (iv) taking
any action considered necessary by the Issuer and which is authorized by this
Agreement or any related agreement.
(iv) The Company shall indemnify and save the Trustee harmless against
and from all loss, liability or damages and reasonable attorneys' fees incurred
by it in the exercise and performance of any of its powers and duties hereunder
or under the Indenture except to the extent that such loss, liability or damage,
including reasonable attorney fees, is incurred by reason of its negligence or
willful misconduct.
(v) The obligations of the Company under this Section 8.6 with respect
to events arising during the term of the Company's obligation under this
Agreement shall survive any assignment or termination of this Agreement.
(End of Article VIII)
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ARTICLE IX.
ASSIGNMENT, LEASING, EQUIPMENT
SECTION 9.1. Transfer, Assignment and Leasing. The Company may lease
any portion of the project constituting less than or equal to 10% of the Project
to any other tenant without the consent of the Bank and may lease any portion of
the Project exceeding 10% of the Project to any other tenant with the consent of
the Bank (if a Letter of Credit or Alternate Credit Facility is in effect)
provided that the Company delivers to the Bank (if a Letter of Credit or
Alternate Credit Facility is in effect), the Issuer and the Trustee in
connection with any such leasing an opinion of Bond Counsel that subsequent to
the execution of the lease, interest on the Bonds will remain wholly excludeable
from gross income of the Bondholders for federal income tax purposes. No leasing
shall relieve the Company from primary liability for any of its tax purposes. No
leasing shall relieve the Company from primary liability for any of its
obligations hereunder, and in the event of any such leasing the Company shall
continue to remain primarily liable for the payment of Loan Repayments and for
performance and observance of the other agreements herein on its part to be
performed and observed.
The Company may assign this Agreement and convey, whether by operation
of law or otherwise, the Project with the prior written consent of the Bank (if
a Letter of Credit or Alternate Credit Facility is in effect), the Bondholders
(if no Letter of Credit or Alternate Credit Facility is in effect) and the
Issuer. Any assignee shall assume in writing the obligations of the Company
hereunder.
The Company shall furnish to the Issuer, the Bank (if a Letter of
Credit or Alternate Credit Facility is in effect) and the Trustee a true and
complete copy of each assignment or lease, as the case may be, together with, if
the lease involves 10% or more of the Project, an opinion of Bond Counsel that
such assignment or leasing will not adversely affect the exclusion of interest
on the Bonds from gross income for federal income tax purposes.
SECTION 9.2. Substitution and Removal of Machinery and Equipment.
Except as provided in this Section machinery and equipment comprising part of
the Project shall remain on the Land. The Company shall have the privilege of
removing any machinery or equipment comprising a part of the Project provided
that in the opinion of Bond Counsel, such removal shall not impair the exclusion
of interest on the Bonds from gross income for federal income tax purposes. The
Company may, at its option, replace such removed machinery and equipment with
like or different machinery or equipment. Any such substituted machinery and
equipment shall be identified in writing by the Company to the Issuer, the
Trustee and the Bank and shall become a part of the Project and be included
under the terms of this Agreement. The Company may, with the consent of the
Bank, sell any machinery and equipment comprising a portion of the Project
without substitution therefore so long as the removal of such machinery and
equipment from the Project will not, in the opinion of Bond Counsel, impair the
exclusion of interest on the Bonds from gross income for federal income tax
purposes.
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SECTION 9.3. Installation of Company's Own Machinery and Equipment. In
addition to the Project, the Company may from time to time, in its sole
discretion and at its own expense, install additional movable personal property,
machinery, equipment or furniture on or in the Project. The Company agrees to
pay as due the purchase price of, and all costs and expenses with respect to,
the acquisition and installation of any such property installed pursuant to this
Section. No such property shall constitute a part of the Project under this
Agreement.
(End of Article IX)
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ARTICLE X.
EVENTS OF DEFAULT AND REMEDIES
SECTION 10.1. Events of Default. The following shall be events of
default under this Agreement and the terms "Event of Default" or "Default" shall
mean, whenever they are used in this Agreement, any one or more of the following
events:
(a) Failure by the Company to pay the Loan Repayments in the amounts
and at the times provided in this Agreement or the Promissory Note; provided,
however, that no Event of Default described in this subparagraph (a) shall be
deemed to have occurred solely by reason of such failure to make such payments
if and to the extent that payments have nonetheless been made by the Bank to the
Trustee pursuant to the Letter of Credit for deposit in the Bond Fund at such
times and in such manner so as to prevent an event of default described under
Section 601(a) or (b) of the Indenture;
(b) Failure by the Company to make payments in the amounts and at the
times provided in Section 3.4 of this Agreement; provided, however that no Event
of Default described in this paragraph (b) shall be deemed to have occurred
solely by reason of such failure to make such payments if and to the extent that
payments have nonetheless been made by the Bank to the Trustee pursuant to the
Letter of Credit for deposit in the Bond Purchase fund at such times and in such
manner so as to prevent an event of default described under Section 601(c) of
the Indenture;
(c) Failure by the Company to observe and perform any other covenant,
condition or agreement on its part to be observed or performed herein or in the
Promissory Note for a period of thirty (30) days after written notice,
specifying such failure and requesting that it be remedied, shall have been
given to the Company by the Trustee; provided, however, that if the Company
shall be unable to observe or perform any such covenant, condition, undertaking
or agreement which, if begun and prosecuted with due diligence, can be completed
but not within a period of thirty (30) days, then such period shall be increased
to such extent as shall be necessary to enable the Company to observe or perform
such covenant, condition, undertaking or agreement through the exercise of due
diligence;
(d) Any representation or warranty made by the Company in any document
delivered by the Company to the Trustee or the Bank or the Issuer in connection
with the sale and delivery of the Series 1992 Bonds which proves to be untrue
when made in any material respect (subject to cure rights contained in such
documents);
(e) Occurrence of an Event of Default under the Indenture (provided
that remedying such Event of Default under the Indenture shall, ipso facto,
remedy such hereunder); or
(f) The Company (i) shall generally not pay its debts as they become
due, (ii) shall admit in writing its inability to pay its debts generally, (iii)
shall make a general assignment for
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the benefit of creditors, (iv) shall institute any proceeding or voluntary case
(A) seeking to adjudicate it a bankrupt or insolvent or (B) seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief or protection or debtors or (C) seeking the entry of
an order for relief or the appointment of a receiver, trustee, custodian or
other similar official for it or for any substantial part of its property, (v)
shall take any action to authorize any of the actions described above in this
subsection (f), or (vi) shall have instituted against it any proceeding (A)
seeking to adjudicate it a bankrupt or insolvent or (B) seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief or protection of debtors or (C) seeking the entry of
an order for relief or the appointment of a receiver, trustee, custodian or
other similar official for it or for any substantial part of its property, and,
if such proceeding is being contested by the Company in good faith, such
proceeding shall remain undismissed or unstayed for a period of 120 days.
SECTION 10.2. Remedies on Default. Whenever an Event of Default
referred to in Section 10.1 hereof shall have occurred and be continuing, and if
acceleration of the principal amount of the Series 1992 Bonds has been declared
pursuant to Section 602 of the Indenture;
(a) The Trustee shall declare all Loan Repayments to be immediately due
and payable, whereupon the same shall become immediately due and payable and the
Trustee shall thereupon draw up the Letter of Credit in accordance with its
terms and the terms of the Indenture;
(b) Subject to the reasonable security and safety requirements of the
Company, the Trustee may have access to and inspect, examine, and make copies of
the books and records of the Company insofar as they relate to the Project or
the Event of Default and the remedying thereof; and
(c) To the extent of any insufficiency after drawing under the Letter
of Credit, the Trustee may pursue all remedies now or hereafter existing at law
or in equity to collect all amounts then due and thereafter to become due under
this Agreement, the Promissory Note or to enforce the performance of any other
obligation or agreement of the Company under such documents.
Any amounts collected pursuant to action taken under this Section shall
be applied in accordance with Section 607 of the Indenture.
Notwithstanding any other provision of this Agreement (except Section
13.2 hereof) or the Indenture, the Issuer shall be entitled to cause the Company
to perform the Company's obligations under Sections 3.5, 8.6 and 10.4 hereof for
the benefit of the Issuer.
SECTION 10.3. No Remedy Exclusive. No remedy conferred upon or reserved
to the Issuer or the Trustee by this Agreement is intended to be exclusive of
any other available
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remedy or remedies, but each and every such remedy shall be cumulative and shall
be in addition to every other remedy given under this Agreement, or the
Indenture, or now or hereafter existing at law or in equity. No delay or
omission to exercise any right or power accruing upon any Default shall impair
any such right or power or shall be construed to be a waiver thereof, but any
such right and power may be exercised from time to time and as often as may be
deemed expedient. In order to entitle the Issuer or the Trustee to exercise any
remedy reserved to it in this Article, it shall not be necessary to give any
notice, other than such notice as may be herein expressly required.
Notwithstanding any other provision of this Agreement (except Section
13.2 hereof) or the Indenture, the Issuer or the Trustee shall not be entitled
to exercise any remedy reserved to it in this Article X without the prior
written consent of the Bank, except that the Issuer may after notice to, but
without the prior written consent of, the Bank institute an action against the
Company to recover any fees or expenses to which the Issuer is entitled under
this Agreement.
SECTION 10.4. Agreement to Pay Attorneys' Fees and Expenses. In the
event that the Issuer, the Bank or the Trustee employs attorneys or incurs other
expenses for the enforcement of performance or observance of any obligation or
agreement on the part of the Company contained in the Promissory Note, the
Placement Agreement or in this Agreement, the Company agrees that it will on
demand therefor promptly reimburse the reasonable fees of such attorneys and
such other expenses so incurred.
SECTION 10.5. No Additional Waiver Implied by One Waiver. In the event
any term, condition or covenant contained in this Agreement should be breached
by either party and thereafter waived by the other party, such waiver shall be
limited to the particular breach so waived and shall not be deemed to waive any
other breach hereunder. Because of the assignment of the Issuer's rights and
interest in this Agreement to the Trustee under the Indenture, the Issuer shall
have no power to waive or release the Company from any Event of Default or the
performance or observance of any obligation or condition of the Company under
this Agreement without prior written consent of the Trustee and the Bank, but
the Issuer shall so waive or release the Company if requested by the Trustee and
the Bank, provided the Issuer receives an opinion of its Counsel that such
action will not impose any pecuniary obligation or liability or adverse
consequence upon the Issuer and the Issuer shall have been provided such
indemnification from the Company or the Trustee or the Bank, as the Issuer shall
deem necessary.
(End of Article X)
29
<PAGE> 34
ARTICLE XI.
PAYMENT OF SURPLUS BOND PROCEEDS FROM THE BOND FUND
SECTION 11.1. Surplus Bond Proceeds. All Surplus Bond Proceeds
transferred to the Bond Fund pursuant to the provisions of Section 5.4, Article
VIII and Section 9.2 hereof shall be applied by the Trustee at the direction of
the Company after the date on which such moneys first become Eligible Funds in
the Bond Fund (i) to the purchase of Bonds on the open market for cancellation,
or (ii) to the redemption of series 1992 Bonds on the first date on which the
Series 1992 Bonds may be called for optional redemption without a premium or
penalty as set forth in Section 217(a) of the Indenture. Such excess shall be
invested at a yield which will not exceed the yield on the Bonds or, in the
opinion of Bond Counsel, will not impair the exclusion of interest on the Series
1992 Bonds from gross income for federal income tax purposes.
(End of Article XI)
30
<PAGE> 35
ARTICLE XII.
THE BONDS
SECTION 12.1. Issuance of the Series 1992 Bonds. The obligations of the
Issuer and the Company hereunder are expressly conditioned upon the execution of
the Placement Agreement, satisfaction or waiver of its terms and conditions, and
payment for the Series 1992 Bonds pursuant thereto.
SECTION 12.2. Additional Bonds. At the request of the Company and with
the prior written consent of the Bank, the Issuer may, but shall not be required
to, authorize the issuance of Additional Bonds in accordance with Section 220 of
the Indenture. The terms of any Additional Bonds shall be approved by the
Company and the Bank in writing. Additional Bonds may be issued only to finance
any one or more of the following: (i) the cost of completing the Project; (ii)
the costs of making improvements to the Project; (iii) the refunding of all or
any part of the Bonds; and (iv) the costs of issuance relating to the Additional
Bonds and other costs reasonably related to the financing as shall be agreed
upon by the Company and the Issuer. Any improvements to the Project acquired
with the proceeds of the Additional Bonds shall become a part of the Project and
shall be included under this Agreement. Refusal for any reason by the Issuer to
Issue Additional Bonds shall not release the Company from any provisions of this
Agreement. The foregoing shall not prohibit the issuance of debt obligations by
or for the benefit of the Company under the Indenture.
SECTION 12.3. Compliance with Indenture. The Issuer agrees to comply
with the covenants, requirements and provisions of the Indenture and perform all
of its obligations thereunder.
SECTION 12.4. Consent to Issuer's Pledge. The Company hereby
acknowledges and consents to the assignment and pledge by the Issuer to the
Trustee, for the benefit of the Bondholders, and the Bank, of (i) the Promissory
Note; (ii) the moneys deposited to the various funds and accounts hereunder and
under the Indenture (including investments); and (iii) all of the Issuer's
rights and powers under this Agreement, including the right to receive Loan
Repayments (but excluding certain rights of the Issuer as specified in Section
301(iv) of the Indenture) and the right and power to enforce, either jointly
with the Issuer or separately, the performance of the obligations of the Company
under this Agreement. The Company further acknowledges and consents to the right
of the Trustee and the Bank, as the case may be, to enforce all rights of the
Issuer and Bondholders assigned under the Indenture.
SECTION 12.5. Rights of Trustee Hereunder. The parties hereto recognize
and agree that the terms of this Agreement and the enforcement thereof are
essential to the security of the Trustee (for the benefit of the Bondholders)
and the Bank and are entered into for the benefit of the Trustee (on behalf of
the Bondholders) and the Bank. The Trustee (and any assignee or subrogee to the
Trustee) and the Bank shall accordingly have contractual rights and duties in
this agreement and be entitled to require the enforcement of the terms hereof.
31
<PAGE> 36
Except for the rights of the Company set forth in Section 13.1 hereof,
the Company and the Issuer each acknowledge that neither the Company nor the
Issuer has any interest in the Bond Fund or the Bond Purchase Fund and any
moneys deposited therein and that the Bond Fund and the Bond Purchase Fund and
any moneys deposited therein shall be in the custody of and held by the Trustee
in trust for the benefit of the Bondholders and the Bank as provided in the
Indenture.
SECTION 12.6. Amendments to Indenture and this Agreement. The Issuer
shall not amend nor consent to any amendment to the Indenture or this Agreement
except as specified in Article VIII of the Indenture, which Article VIII is
incorporated herein by this reference as if it were fully set forth herein. The
Company hereby agrees to be bound by the provisions of Article VIII of the
Indenture.
(End of Article XII)
32
<PAGE> 37
ARTICLE XIII.
MISCELLANEOUS
SECTION 13.1. Amounts Remaining in Funds. Any amounts remaining in the
Construction Fund, the Bond Purchase Fund and the Bond Fund upon expiration or
sooner cancellation or termination of this Agreement, after the Loan and the
Bonds shall be deemed to have been paid and discharged under the provisions of
the Indenture and the fees, charges and expenses of the Trustee and all other
amounts required to be paid under the Indenture, the Reimbursement Agreement and
this Agreement shall have been paid, shall be paid to the Company as an
overpayment of the Loan.
SECTION 13.2. Rights of the Bank. All rights of the Bank under this
Agreement to consent to certain extensions, remedies, waivers, actions and
amendments hereunder shall cease, terminate and become null and void (i) for so
long as the Bank wrongfully dishonors any draft presented in strict conformity
with the Letter of Credit and until it has honored a subsequent draft, if any,
thereunder or (ii) if the Letter of Credit is no longer in effect and any and
all of the Company's obligations to the Bank pursuant to the Reimbursement
Agreement have been paid.
SECTION 13.3. Notices. All notices, certificates, requests or other
communications hereunder shall be sufficiently given and shall be deemed given
when mailed by registered or certified mail, postage prepaid, addressed as
follows:
If to the Issuer: City of Ligonier, Indiana
City Hall
103 West 3rd Street
Ligonier, Indiana 46767-1999
Attention: City Attorney
Telephone: (219) 894-4113
FAX: (219) 894-3999
If to the Company: Sharon Manufacturing Company
c/o Walbro Automotion Corporation
1227 Centre Road
P.O. Box 215257
Auburn Hills, Michigan 48326
Attention: Guy Barnicoat
Telephone: (313) 856-4151
FAX: (313) 856-2773
33
<PAGE> 38
<TABLE>
<S> <C>
If to the Trustee: Fort Wayne National Bank
(Correspondence sent P.O. Box 110
via regular mail) Fort Wayne, Indiana 46801
Attention: Corporate Trust Department
Telephone: (219) 426-0555
FAX: (219) 461-6198
If to the Trustee: Fort Wayne National Bank
(Correspondence sent 6230 Bluffton Road
via Certified, Registered, Fort Wayne, Indiana 46809
Overnight or Couriered Delivery) Attention: Corporate Trust Department
Telephone: (219) 426-0555
FAX: (219) 461-6198
If to the Bank: NBD Bank, N.A.
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Manager,
Commercial Loan Department
Telephone: (313) 225-1257
FAX: (313) 225-3074
If to the Placement Agent: First Commerce Capital, a division of
Porter, White & Yardley, Inc.
272 Commerce Street
Montgomery, Alabama 36104
Attention: Joseph A. Whitehead
Telephone: (205) 269-0044
FAX: (205) 262-0179
</TABLE>
The Company, the Issuer, the Bank, the Trustee and the Placement Agent
may designate, by notice given hereunder, any further or different addresses to
which subsequent notices, certificates, requests or other communications shall
be sent, but no notice directed to any one such entity shall thereby be required
to be sent to more than two addresses.
SECTION 13.4. Bondholders' Action. Whenever any consent, approvals,
waivers or other actions are required of the Bondholders hereunder, under the
Indenture, the Promissory Note or any other instrument or document delivered
with respect to the Bonds, such consent shall only be given in compliance with
Section 806 of the Indenture.
SECTION 13.5. Binding Effect. This Agreement shall inure to the benefit
of and shall be binding upon the Issuer, the Company and their respective
successors and assigns, subject to the limitation that any obligation of the
Issuer created by or arising out of this Agreement
34
<PAGE> 39
shall not be a general debt of the Issuer but shall be payable solely out of the
Trust Estate, anything herein contained to the contrary by implication or
otherwise notwithstanding.
SECTION 13.6. Severability. If any clause, provision or section of this
Agreement be held illegal or invalid by any court, the invalidity of such
clause, provision or section shall not affect any of the remaining clauses,
provisions or sections hereof and this Agreement shall be construed and enforced
as if such illegal or invalid clause, provision or section had not been
contained herein. In case any agreement or obligation contained in this
agreement be held to be in violation of law, then such agreement or obligation
shall be deemed to be the agreement or obligation of the Issuer or the Company,
as the case may be, to the full extent permitted by law.
SECTION 13.7. Captions. The captions or headings in this Agreement are
for convenience only and in no way define, limit or describe the scope or intent
of any provision or sections of this Agreement.
SECTION 13.8. Interpretation. This Agreement shall be governed by and
interpreted in accordance with the laws of the State.
SECTION 13.9. Execution in Counterparts. This Agreement may be executed
in several counterparts, each of which shall be an original and all of which
shall constitute but one and the same instrument.
(End of Article XIII)
35
<PAGE> 40
IN WITNESS WHEREOF, the Issuer has caused this Loan Agreement to be
executed in its name by its Mayor, and attested thereto by its Clerk-Treasurer,
and said Clerk-Treasurer has caused its corporate seal to be hereunto affixed,
and the Company has caused this Loan agreement to be executed in its name by its
authorized representative, all as of the date first above written.
CITY OF LIGONIER, INDIANA
(SEAL) By:
----------------------
Mayor
Attest:-----------------------
Clerk-Treasurer
SHARON MANUFACTURING COMPANY
By:
-------------------------
Gary Vollmer, Treasurer
36
<PAGE> 41
EXHIBIT A
COMPLETION CERTIFICATE
TO: CITY OF LIGONIER, INDIANA
NBD BANK, N.A.
FORT WAYNE NATIONAL BANK
FROM: SHARON MANUFACTURING COMPANY
SUBJECT: LOAN AGREEMENT DATED AS OF THE 1ST DAY OF JUNE, 1992
The undersigned does hereby certify:
1. The acquisition, construction and installation of the Project have
been substantially completed in such manner as to conform with all applicable
zoning and planning regulations of the governmental authorities having
jurisdiction of the Project, as of __________, 19__ (the "Completion Date").
2. The Costs of the Project have been paid in full except for those not
yet due and payable, which are described below and for which moneys for payment
thereof are being held in the Construction Fund:
Cost of the Project not yet due and payable:
Description Amount
$__________
Total $__________
3. The Moneys in the Construction Fund in excess of the totals set
forth in 2 above represent Surplus Bond Proceeds and the Trustee is hereby
authorized and directed to transfer all such Surplus Bond Proceeds to the Bond
Fund pursuant to Section 5.4 of the Loan Agreement.
4. No event of default has occurred under the Promissory Note, the Loan
Agreement or the Reimbursement Agreement nor has any event occurred which with
the giving of notice or lapse of time or both shall become such an event of
default. Nothing has occurred to the knowledge of the Company that would prevent
the performance of its obligations under the Promissory Note, the Loan Agreement
or the Reimbursement Agreement.
37
<PAGE> 42
This certificate is given without prejudice to any rights against third
parties which exist at the date hereof or which may subsequently come into
being.
Executed his _____ day of __________, 19__.
SHARON MANUFACTURING COMPANY
By: ____________________________________
Its: ____________________________________
38
<PAGE> 43
EXHIBIT B
COSTS OF THE PROJECT
The following are the estimated costs of the Project paid for out of
proceeds of the Bonds:
<TABLE>
<S> <C>
Construction Costs $4,500,000
Machinery and Equipment 1,800,000
Issuance Costs -0-
TOTAL $6,300,000
</TABLE>
39
<PAGE> 44
EXHIBIT C
CITY OF LIGONIER, INDIANA
PROMISSORY NOTE
$6,300,000 Dated as of June 1, 1992
FOR VALUE RECEIVED, Sharon Manufacturing Company, a Michigan
corporation (the "Company"), promises to pay to the order of the City of
Ligonier, Indiana (the "Issuer"), the principal sum of Six Million Three Hundred
Thousand Dollars ($6,300,000) together with (a) interest thereon in an amount
sufficient to enable the Issuer to make payment of all interest becoming due and
payable on the Issuer's Economic Development Revenue Bonds (Sharon Manufacturing
Company Project), Series 1992, dated as of June 12, 1992 (the "Bonds") in the
principal amount of Six Million Three Hundred Thousand Dollars ($6,300,000),
issued pursuant to a Trust Indenture dated as of June 1, 1992 (the "Indenture")
between the Issuer and Fort Wayne National Bank, a national banking association,
as Trustee (the "Trustee"), which Indenture and Bonds are incorporated herein by
reference and made a part hereof, and (b) such redemption premiums and other
amounts as are required to be paid by the Company to the Issuer as Loan
Repayments as provided in the Loan Agreement, dated as of June 1, 1992 between
the Company and the Issuer (the "Loan Agreement"), which is incorporated herein
by reference and made a part hereof.
The foregoing amounts shall be paid by means of Loan Repayments which
shall be due and payable (less any credits to which the Company may be entitled
under the Loan Agreement), in immediately available funds, as follows:
A. On or before each date on which a payment of interest is due on the
Bonds, the Company shall pay interest in an amount equal to the aggregate unpaid
interest due or to become due on the Bonds on such payment date, less any
Eligible Funds (as defined in the Indenture) then held by the Trustee in the
Bond Fund (as defined in the Indenture) which are then being held for
application to the payment of interest on the Bonds in accordance with the
Indenture;
B. On or before each date on which a payment of principal and premium,
if any, is due on the Bonds, whether by maturity, redemption, acceleration or
otherwise, the Company shall pay principal and premium, if any, in an amount
equal to principal and premium, if any, then due or to become due on the Bonds
on such payment date, less any Eligible Funds then held by the Trustee in the
Bond Fund, other than those Eligible Funds applied to payment of interest on the
Bonds as set forth above, which are then being held for the payment of principal
and premium, if any, on the Bonds under the Indenture.
40
<PAGE> 45
The Company shall have the option to make advance payments of Loan
Repayments, from time to time, which advance payments shall be deposited with
the Trustee in the Bond Fund and shall be applied as provided in the Loan
Agreement and the Indenture.
All payments shall be made in coin or currency of the United States of
America in immediately available funds at the principal office of the Trustee,
or at the office of any successor trustee.
If the Company fails to pay any installment of principal, premium, if
any, and interest when due under this Promissory Note and the Trustee fails to
receive sufficient moneys pursuant to one or more draws under the Letter of
Credit (as defined in the Indenture) to pay any such installment, or upon the
occurrence of any one or more of the events of default specified in the Loan
Agreement, the Trustee then, or at any time thereafter, may under certain
conditions specified in Section 602 of the Indenture give notice to the Company
declaring all unpaid amounts then outstanding hereunder or under the Loan
Agreement (including all fees), to be due and payable, and thereupon, without
further notice or demand, all such amounts shall become and be immediately due
and payable. Failure to exercise this option shall not constitute a waiver of
the right to exercise the same at any time in the event of any continuing or
subsequent default.
All payments hereon shall be applied first to accrued interest, then to
premium, if any, and then to principal.
The undersigned waives demand, protest, presentment for payment and
notice of nonpayment and agrees to pay all costs of collection when incurred,
including reasonable attorneys' fees, and to perform and comply with each of the
covenants, conditions, provisions and agreements of the undersigned contained in
every instrument evidencing or securing the indebtedness evidenced hereby. No
extension of the time for the payment of this Promissory Note made by agreement
with any person now or hereafter liable for the payment of this Promissory Note
shall operate to release, discharge, modify, change or affect the original
liability under this Promissory Note, either in whole or in part, of the
undersigned if not a party to such agreement.
This Promissory Note is issued under and is subject to the terms and
conditions of the Loan Agreement.
41
<PAGE> 46
This Promissory Note and all instruments securing the same are to be
construed according to the laws of the State of Indiana.
SHARON MANUFACTURING COMPANY
By: ____________________________
Gary Vollmer, Treasurer
Attest:
_____________________
42
<PAGE> 47
ENDORSEMENT
Pay to the order of Fort Wayne National Bank, as Trustee under the
Trust Indenture dated as of June 1, 1992, without warranty or recourse.
CITY OF LIGONIER, INDIANA
By: _____________________
Mayor
(SEAL)
Attest:
________________________________
Clerk-Treasurer
43
<PAGE> 48
EXHIBIT D
PROJECT DESCRIPTION
The construction of an approximate 158,000 square foot manufacturing
facility to be located adjacent to County Road 860 W in Noble County, Indiana,
on an approximate 20-acre parcel more particularly described below for the
production of automobile fuel rails, and the acquisition of furnishings,
machinery and equipment to be installed and located therein, including but not
limited to brazing furnaces, stamping presses, tool room equipment, parts
washer, office furnishings.
44
<PAGE> 49
EXHIBIT E
REQUISITION CERTIFICATE
TO: FORT WAYNE NATIONAL BANK
AS TRUSTEE
FROM: SHARON MANUFACTURING COMPANY
(THE "COMPANY")
SUBJECT: LOAN AGREEMENT DATED AS OF THE FIRST DAY OF JUNE, 1992
This represents Requisition Certificate No. _____ in the total amount
of $__________ for payment of those Costs of the Project detailed in the
schedule attached.
The undersigned does certify that:
1. All of the expenditures for which moneys are requested hereby
represent proper Costs of the Project, have not been included in a previous
Requisition Certificate and have been properly recorded on the Company's books.
2. The moneys requested hereby are not greater than those necessary to
meet obligations due and payable or to reimburse the Company for funds actually
advanced for Costs of the Project. The moneys requested do not include retention
or other moneys not yet due or earned under construction contracts.
3. After payment of moneys hereby requested, there will remain
available to the Company (from, among other sources, the Construction Fund)
sufficient funds to complete the Project.
4. At least 95% of the sum of the payment herein requested from the
Construction Fund and all other payments from the proceeds of the Series 1992
Bonds heretofore and hereafter to be made from the Construction Fund have been
and will be used to finance the acquisition and installation of machinery and
equipment for the Project, all of which property other than land is of a
character subject to the allowance for depreciation under Section 167 of the
Code, all of which costs for such property or land were first incurred
subsequent to December 16, 1991, and no more than 5% of the sum of the payment
herein requested from the Construction Fund and all other payments from the
proceeds of the Series 1992 Bonds heretofore and hereafter to be made from the
Construction Fund has been or will be used, directly or indirectly, as working
capital or to finance inventory or Issuance Costs.
45
<PAGE> 50
5. The Company is not in default under the Promissory Note, the Loan
Agreement or the Reimbursement Agreement and nothing has occurred to the
knowledge of the Company that would prevent the performance of its obligations
under the Loan Agreement, the Promissory Note or the Reimbursement Agreement.
6. Delivered herewith are all of the documents in form and content
required by Section 5.1 of the Loan Agreement and the following other documents
requested by either of you:
Executed this _____ day of __________, 19__.
SHARON MANUFACTURING COMPANY
By: ____________________________________
Its: ____________________________________
46
<PAGE> 51
SCHEDULE TO REQUISITION CERTIFICATE NO. _____
PAYEE AND LOCATION AMOUNT
$__________
47
<PAGE> 52
EXHIBIT F
LAND
The Project site consists of a tract of land located in the Northwest
Quarter of Section 22, Township 35 North, Range 8 East, in Noble County, the
State of Indiana, as more fully described as follows:
Commencing at the Northeast Corner of said Northwest Quarter marked by
a Harrison Marker found this survey; thence N. 89E 17' 20" W. (1), along the
North line of said Northwest Quarter, for 706.70 feet to the intersection of the
center line of Main Street extended with the North line of said Northwest
Quarter; thence S. 00E 14' 29" W., along the center line of Main Street
Extended, for 1180.36 feet to the point of beginning marked by a RR Spike set
this survey; thence continuing S. 00E 14' 29" W., along the center line of Main
Street Extended, for 935.00 feet to a RR Spike set this survey at a point that
is N. 00E 14' 29" E., a distance of 62.00 feet from the Northeast Corner of a
tract of land deeded to Jimmy L. Hill per Noble County Deed Record Book 185,
Page 533; thence N. 85E 10' 31" W., parallel to the North line of said tract of
land deeded to Jimmy L. Hill, for 970.92 feet to a Rebar set this survey; thence
N. 00E 14' 29" E., parallel to the center line of Main Street Extended, for
865.35 feet to a Rebar set this survey; thence S. 89E 17' 20" E., parallel to
the North line of said Northwest Quarter, for 967.85 feet to the point of
beginning, said tract containing 20.00 Acres, more or less, and being subject to
all public road right-of-ways and all easements of record.
(1) Basis of Bearing for this survey is the same as that shown on Plat
of Survey #35-08-15-01 as prepared by Sexton and Associates. The West line of
the Southwest Quarter of Section 15, Township 35 North, Range 8 East was assumed
to be North-South.
A survey of said tract being represented by Plat of Survey #35-08-22-08
as prepared by Sexton and Associates, 419 North State Street, Kendallville,
Indiana 46755. Any apparent encroachments affecting said tract of land are as
shown on the Plat of Survey. The above described tract of land does not lie
within Zone A Flood Hazard Boundary as shown on the Flood Insurance Rate Map
Community-Panel Number 180183-0025B as prepared by the Federal Emergency
Management Agency.
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<PAGE> 53
EXHIBIT G
NO ACT OF BANKRUPTCY CERTIFICATE
TO: City of Ligonier, Indiana (the "Issuer"), Fort Wayne National Bank
(the "Trustee") and NBD Bank, N.A.
FROM: Sharon Manufacturing Company (the "Company")
SUBJECT: $6,300,000 City of Ligonier, Indiana Economic Development
Revenue Bonds (Sharon Manufacturing Company Project), Series 1992
The undersigned does hereby certify:
1. That on __________, 19__ (the "Payment Date") the Company made its
due and timely Loan Repayment as required by the Loan Agreement and/or moneys
were transferred to the Bond Fund for which this certificate is required prior
to such moneys becoming Eligible Funds as provided in the Loan Agreement in the
amount of $__________.
2. That between the Payment Date and the date hereof not less than
__________ (_____) consecutive full calendar days have elapsed prior to and
during which period no voluntary or involuntary petition in bankruptcy (or other
commencement of a bankruptcy or similar proceeding) has been filed by or against
the Company as debtor under any applicable bankruptcy, insolvency,
reorganization or similar law, now or hereafter in effect.
The Company acknowledges that the Trustee may conclusively rely on this
Certificate.
Under penalties of perjury, this Certificate has been executed this
_____ day of __________, 19__, by the duly authorized officers of the Company.
____________________________________
Company
49
<PAGE> 1
EXHIBIT 4.27
Financing and Security Agreement
Dated May 29, 1998
By and Between
WALBRO CORPORATION and Subsidiaries
and
NationsBank, N. A., as Administrative Agent and Lender
<PAGE> 2
<TABLE>
<S> <C>
FINANCING AND SECURITY AGREEMENT 1
RECITALS 1
AGREEMENTS 1
ARTICLE I DEFINITIONS 1
SECTION 1.1 CERTAIN DEFINED TERMS. 1
SECTION 1.2 ACCOUNTING TERMS AND OTHER DEFINITIONAL PROVISIONS. 29
ARTICLE II THE CREDIT FACILITIES 30
SECTION 2.1 THE REVOLVING CREDIT FACILITY. 30
2.1.1 Revolving Credit Facility. 30
2.1.2 Procedure for Making Advances Under the Revolving Loans; Lender Protection Loans. 31
2.1.3 Borrowing Base. 33
2.1.4 Borrowing Base Report. 34
2.1.5 Revolving Credit Notes. 34
2.1.6 Mandatory Prepayments of Revolving Loan. 35
2.1.7 Optional Prepayments of Revolving Loan. 35
2.1.8 The Collateral Accounts. 35
2.1.9 Revolving Loan Account. 37
2.1.10 Revolving Credit Unused Line Fee. 37
2.1.11 Early Termination Fee. 38
2.1.12 Required Availability under the Revolving Credit Facility. 39
SECTION 2.2 THE LETTER OF CREDIT FACILITY. 39
2.2.1 Letters of Credit. 39
2.2.2 Letter of Credit Fees. 40
2.2.3 Terms of Letters of Credit; Post-Expiration Date Letters of Credit. 40
2.2.4 Procedures for Letters of Credit. 42
2.2.5 Payments of Letters of Credit. 42
2.2.6 Change in Law; Increased Cost. 43
2.2.7 General Letter of Credit Provisions. 44
2.2.8 Participations in the Letters of Credit. 45
2.2.9 Payments by the Lenders to the Appropriate Letter of Credit Issuer. 45
SECTION 2.3 MULTI-CURRENCY PARTICIPATIONS. 47
2.3.1 Multi-Currency Participants. 47
2.3.2 Representations of Multi-Currency Lender and Multi-Currency Letter of Credit Issuer. 48
2.3.3 Standing of Multi-Currency Participant. 49
2.3.4 Reports of Multi-Currency Agent 49
SECTION 2.4 THE CAPITAL EXPENDITURE LINE FACILITY. 50
2.4.1 Capital Expenditure Line Facility. 50
2.4.2 Procedure for Making Advances Under the Capital Expenditure Line. 50
2.4.3 Capital Expenditure Line Notes. 51
2.4.4 Payments of Capital Expenditure Line. 52
2.4.5 Optional Prepayments of Capital Expenditure Line. 52
2.4.6 Application of Capital Expenditure Line Partial Prepayments. 52
SECTION 2.5 INTEREST. 53
2.5.1 Applicable Interest Rates. 53
2.5.2 Selection of Interest Rates. 54
2.5.3 Inability to Determine Eurodollar Base Rate. 56
2.5.4 Indemnity. 56
2.5.5 Payment of Interest. 57
SECTION 2.6 GENERAL FINANCING PROVISIONS. 57
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C>
2.6.1 Borrowers' Representatives. 57
2.6.2 Computation of Interest and Fees. 59
2.6.3 Liens; Setoff. 59
2.6.4 Requirements of Law. 60
2.6.5 Administrative Agency Fees. 60
2.6.6 Origination Fee. 60
2.6.7 Funds Transfer Services. 60
2.6.8 Guaranty. 62
SECTION 2.7 SETTLEMENT AMONG LENDERS. 65
2.7.1 Capital Expenditure Line. 65
2.7.2 Revolving Loan. 65
2.7.3 Settlement Procedures as to Revolving Loan. 65
2.7.4 Settlement of Other Obligations. 68
2.7.5 Presumption of Payment. 69
SECTION 2.8 ASSESSMENTS; WITHHOLDING. 70
2.8.1 Payment of Assessments. 70
2.8.2 Indemnification. 70
2.8.3 Receipts. 71
2.8.4 Foreign Bank Certifications. 71
ARTICLE III THE COLLATERAL 73
SECTION 3.1 DEBT AND OBLIGATIONS SECURED. 73
SECTION 3.2 GRANT OF LIENS. 73
SECTION 3.3 COLLATERAL DISCLOSURE LIST. 74
SECTION 3.4 ADDITIONAL COLLATERAL. 74
SECTION 3.5 RECORD SEARCHES. 75
SECTION 3.6 COSTS. 75
SECTION 3.7 RELEASE. 75
SECTION 3.8 INCONSISTENT PROVISIONS. 76
ARTICLE IV REPRESENTATIONS AND WARRANTIES 76
SECTION 4.1 REPRESENTATIONS AND WARRANTIES. 76
4.1.1 Subsidiaries. 76
4.1.2 Good Standing. 76
4.1.3 Power and Authority. 76
4.1.4 Binding Agreements. 77
4.1.5 No Conflicts. 77
4.1.6 No Defaults, Violations. 77
4.1.7 Compliance with Laws. 77
4.1.8 Margin Stock. 77
4.1.9 Investment Company Act; Margin Securities. 78
4.1.10 Litigation. 78
4.1.11 Financial Condition. 78
4.1.12 Full Disclosure. 78
4.1.13 Indebtedness for Borrowed Money. 79
4.1.14 Subordinated Debt. 79
4.1.15 Taxes.
4.1.16 ERISA.
4.1.17 Title to Properties. 80
4.1.18 Patents, Trademarks, Etc. 80
4.1.19 Employee Relations. 80
4.1.20 Presence of Hazardous Materials or Hazardous Materials Contamination. 81
4.1.21 Perfection and Priority of Collateral. 81
4.1.22 Places of Business and Location of Collateral. 81
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4.1.23 Business Names and Addresses. 82
4.1.24 Capital Expenditure Line Equipment. 82
4.1.25 Inventory. 82
4.1.26 Accounts. 82
4.1.27 Assigned Local Currency Receivables. 82
4.1.28 Compliance with Eligibility Standards. 83
4.1.29 Year 2000 Compliance 83
SECTION 4.2 SURVIVAL; UPDATES OF REPRESENTATIONS AND WARRANTIES. 83
ARTICLE V CONDITIONS PRECEDENT 84
SECTION 5.1 CONDITIONS TO THE INITIAL ADVANCE AND INITIAL LETTER
OF CREDIT. 84
5.1.1 Organizational Documents - Domestic Borrowers. 84
5.1.2 Opinion of Domestic Borrowers' Counsel. 85
5.1.3 Opinion of Local Currency Borrowers' Counsel. 85
5.1.4 Consents, Licenses, Approvals, Etc. 85
5.1.5 Notes. 85
5.1.6 Financing Documents and Collateral. 85
5.1.7 Additional Financial Matters. 86
5.1.8 Solvency Certificate. 86
5.1.9 Other Financing Documents. 86
5.1.10 Other Documents, Etc. 86
5.1.11 Payment of Fees. 86
5.1.12 Collateral Disclosure List. 86
5.1.13 Recordings and Filings. 86
5.1.14 Insurance Certificate. 87
5.1.15 Landlord's Waivers. 87
5.1.16 Bailee Acknowledgements. 87
5.1.17 Field Examination. 87
5.1.18 Stock Certificates and Stock Powers. 87
5.1.19 Collateral Account Acknowledgments. 87
SECTION 5.2 CONDITIONS TO ADVANCES AND LETTERS OF CREDIT FOR
LOCAL CURRENCY BORROWERS. 87
5.2.1 Organizational Documents - Local Currency Borrowers. 88
5.2.2 Opinion of Local Currency Borrowers' Counsel. 89
5.2.3 Consents, Licenses, Approvals, Etc. 89
SECTION 5.3 CONDITIONS TO MULTI-CURRENCY LOANS AND MULTI-CURRENCY
LETTERS OF CREDIT. 89
SECTION 5.4 CONDITIONS TO ALL EXTENSIONS OF CREDIT. 89
5.4.1 Compliance. 89
5.4.2 Borrowing Base. 89
5.4.3 Default. 90
5.4.4 Representations and Warranties. 90
5.4.5 Adverse Change. 90
5.4.6 Legal Matters. 90
ARTICLE VI COVENANTS OF THE BORROWERS 90
SECTION 6.1 AFFIRMATIVE COVENANTS. 90
6.1.1 Financial Statements. 90
6.1.2 Reports to SEC and to Stockholders. 93
6.1.3 Recordkeeping, Rights of Inspection, Field Examination, Etc. 93
6.1.4 Corporate Existence. 94
6.1.5 Compliance with Laws. 94
6.1.6 Preservation of Properties. 94
6.1.7 Line of Business. 94
6.1.8 Insurance. 95
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6.1.9 Taxes. 95
6.1.10 ERISA. 95
6.1.11 Notification of Events of Default and Adverse Developments. 96
6.1.12 Hazardous Materials; Contamination. 97
6.1.13 Disclosure of Significant Transactions. 97
6.1.14 Financial Covenants. 98
6.1.15 Collection of Receivables. 98
6.1.16 Assignments of Receivables. 99
6.1.17 Government Accounts. 99
6.1.18 Notice of Returned Goods, etc. 100
6.1.19 Inventory. 100
6.1.20 Insurance With Respect to Capital Expenditure Line Equipment and Inventory. 100
6.1.21 Maintenance of the Collateral. 101
6.1.22 Assigned Local Currency Receivables 101
6.1.23 Capital Expenditure Line Equipment. 101
6.1.24 Defense of Title and Further Assurances. 102
6.1.25 Business Names; Locations. 102
6.1.26 Subsequent Opinion of Counsel as to Recording Requirements. 103
6.1.27 Use of Premises and Equipment. 103
6.1.28 Protection of Collateral. 103
SECTION 6.2 NEGATIVE COVENANTS. 104
6.2.1 Mergers, Acquisition or Sale of Assets. 104
6.2.2 Subsidiaries. 104
6.2.3 Purchase or Redemption of Securities, Dividend Restrictions. 104
6.2.4 Indebtedness for Borrowed Money. 104
6.2.5 Investments, Loans and Other Transactions. 105
6.2.6 Stock of Subsidiaries. 106
6.2.7 Subordinated Indebtedness. 106
6.2.8 Liens. 107
6.2.9 Transactions with Affiliates. 107
6.2.10 Other Businesses. 107
6.2.11 ERISA Compliance. 107
6.2.12 Prohibition on Hazardous Materials. 108
6.2.13 Method of Accounting; Fiscal Year. 108
6.2.14 Compensation. 108
6.2.15 Transfer of Collateral. 108
6.2.16 Sale and Leaseback. 108
6.2.17 Disposition of Collateral. 109
ARTICLE VII DEFAULT AND RIGHTS AND REMEDIES 109
SECTION 7.1 EVENTS OF DEFAULT. 109
7.1.1 Failure to Pay. 109
7.1.2 Breach of Representations and Warranties. 109
7.1.3 Failure to Comply with Covenants. 109
7.1.4 Default Under Other Financing Documents or Obligations. 110
7.1.5 Receiver; Bankruptcy. 110
7.1.6 Involuntary Bankruptcy, etc. 110
7.1.7 Judgment. 111
7.1.8 Execution; Attachment. 111
7.1.9 Default Under Other Borrowings. 111
7.1.10 Challenge to Agreements. 111
7.1.11 Material Adverse Change. 111
7.1.12 Liquidation, Termination, Dissolution, Change in Control etc. 111
7.1.13 Change in Control. 112
SECTION 7.2 REMEDIES. 112
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7.2.1 Acceleration. 112
7.2.2 Further Advances. 112
7.2.3 Uniform Commercial Code. 112
7.2.4 Specific Rights With Regard to Collateral. 113
7.2.5 Application of Proceeds. 115
7.2.6 Performance by Administrative Agent. 115
7.2.7 Other Remedies. 115
ARTICLE VIII THE AGENT 116
SECTION 8.1 APPOINTMENT. 116
SECTION 8.2 NATURE OF DUTIES. 116
8.2.1 In General 116
8.2.2 Express Authorization 117
SECTION 8.3 RIGHTS, EXCULPATION, ETC. 118
SECTION 8.4 RELIANCE. 119
SECTION 8.5 INDEMNIFICATION. 119
SECTION 8.6 NATIONSBANK INDIVIDUALLY. 119
SECTION 8.7 SUCCESSOR ADMINISTRATIVE AGENT. 120
8.7.1 Resignation. 120
8.7.2 Appointment of Successor. 120
8.7.3 Successor Agents. 120
SECTION 8.8 COLLATERAL MATTERS. 121
8.8.1 Release of Collateral, Guaranties. 121
8.8.2 Confirmation of Authority, Execution of Releases. 122
8.8.3 Absence of Duty. 122
SECTION 8.9 AGENCY FOR PERFECTION. 123
SECTION 8.10 EXERCISE OF REMEDIES. 123
SECTION 8.11 CONSENTS. 123
SECTION 8.12 DISSEMINATION OF INFORMATION. 123
SECTION 8.13 DISCRETIONARY ADVANCES. 124
ARTICLE IX MISCELLANEOUS 124
SECTION 9.1 NOTICES. 124
SECTION 9.2 AMENDMENTS; WAIVERS. 125
9.2.1 In General. 125
9.2.2 Circumstances Where Consent of all of the Lenders is Required. 126
SECTION 9.3 CUMULATIVE REMEDIES. 127
SECTION 9.4 SEVERABILITY. 128
SECTION 9.5 ASSIGNMENTS BY LENDERS. 128
SECTION 9.6 PARTICIPATIONS BY LENDERS. 129
SECTION 9.7 DISCLOSURE OF INFORMATION BY LENDERS. 129
SECTION 9.8 SUCCESSORS AND ASSIGNS. 129
SECTION 9.9 CONTINUING AGREEMENTS. 129
SECTION 9.10 ENFORCEMENT COSTS. 130
SECTION 9.11 APPLICABLE LAW; JURISDICTION. 130
9.11.1 Applicable Law. 130
9.11.2 Submission to Jurisdiction. 131
9.11.3 Appointment of Administrative Agent for Service of Process. 131
9.11.4 Service of Process. 131
SECTION 9.12 DUPLICATE ORIGINALS AND COUNTERPARTS. 131
SECTION 9.13 HEADINGS. 132
SECTION 9.14 NO AGENCY. 132
SECTION 9.15 DATE OF PAYMENT. 132
SECTION 9.16 ENTIRE AGREEMENT. 132
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SECTION 9.17 WAIVER OF TRIAL BY JURY. 132
SECTION 9.18 LIABILITY OF THE ADMINISTRATIVE AGENT AND THE LENDERS. 133
SECTION 9.19 INDEMNIFICATION. 133
SECTION 9.20 CONFIDENTIALITY. 134
LIST OF SCHEDULES 138
SCHEDULE 1.1-A DOMESTIC BORROWERS 138
SCHEDULE 1.1-B LOCAL CURRENCY BORROWERS 138
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FINANCING AND SECURITY AGREEMENT
THIS FINANCING AND SECURITY AGREEMENT (this "Agreement") is made this
29th day of May, 1998, by and among WALBRO CORPORATION, a corporation organized
under the laws of the State of Delaware (the "Parent"), and each corporation
identified on Schedule 1.1-A attached to and made a part of this Agreement (each
a "Domestic Borrower," collectively, the "Domestic Borrowers"), jointly and
severally (each of Parent and each Domestic Borrower, a "Borrower"; Parent and
the Domestic Borrowers collectively, the "Borrowers"); and NATIONSBANK, N. A., a
national banking association ("NationsBank"), and each other Person which is a
party to this Agreement whether by execution of this Agreement or otherwise as a
lender (collectively, the "Lenders" and individually, a "Lender"); NATIONSBANK,
N. A., a national banking association, in its capacity as both collateral and
administrative agent for each of the Lenders (the "Administrative Agent").
RECITALS
A. The Borrowers have applied to the Lenders for credit
facilities consisting of (i) a revolving credit facility in the maximum
principal amount of $125,000,000 and (iii) a capital expenditure line facility
in the maximum principal amount of $25,000,000, to be used by the Borrowers for
the Permitted Uses described in this Agreement.
B. The Lenders severally are willing to make those credit
facilities available jointly and severally to the Borrowers upon the terms and
subject to the conditions set forth in this Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms.
As used in this Agreement, the terms defined in the Preamble and
Recitals hereto shall have the respective meanings specified therein, and the
following terms shall have the following meanings:
"Account" individually and "Accounts" collectively mean all presently
existing or hereafter acquired or created accounts, accounts receivable,
contract rights, notes, drafts, instruments, acceptances, chattel paper, leases
and writings evidencing a monetary obligation or a security interest in, or a
lease of, goods, all rights to receive the payment of money or other
consideration under present or future contracts (including, without limitation,
all rights to receive payments under presently existing or hereafter acquired or
created letters of credit), or by virtue
<PAGE> 9
of merchandise sold or leased, services rendered, loans and advances made or
other considerations given, by or set forth in or arising out of any present or
future chattel paper, note, draft, lease, acceptance, writing, bond, insurance
policy, instrument, document or general intangible, and all extensions and
renewals of any thereof, all rights under or arising out of present or future
contracts, agreements or general interest in merchandise which gave rise to any
or all of the foregoing, including all goods, all claims or causes of action now
existing or hereafter arising in connection with or under any agreement or
document or by operation of law or otherwise, all collateral security of any
kind (including, without limitation, real property mortgages and deeds of trust)
and letters of credit given by any Person with respect to any of the foregoing,
all books and records in whatever media (paper, electronic or otherwise)
recorded or stored, with respect to any or all of the foregoing and all
equipment and general intangibles necessary or beneficial to retain, access
and/or process the information contained in those books and records, and all
proceeds (cash and non-cash) of the foregoing.
"Account Debtor" means any Person who is obligated on a Receivable and
"Account Debtors" mean all Persons who are obligated on the Receivables.
"Additional Borrower" means each Person that has executed and delivered
an Additional Borrower Joinder Supplement that has been accepted and approved by
the Administrative Agent.
"Additional Borrower Joinder Supplement" means an Additional Borrower
Joinder Supplement in substantially the form attached hereto as Exhibit A, with
the blanks appropriately completed and executed and delivered by the Additional
Borrower and accepted by the Parent on behalf of the Borrowers.
"Administrative Agency Fee" and "Administrative Agency Fees" have the
meanings described in Section 2.6.5 (Administrative Agency Fees).
"Affiliate" means, with respect to any designated Person, any other
Person, (a) directly or indirectly controlling, directly or indirectly
controlled by, or under direct or indirect common control with the Person
designated, (b) directly or indirectly owning or holding five percent (5%) or
more of any equity interest in such designated Person, or (c) five percent (5%)
or more of whose stock or other equity interest is directly or indirectly owned
or held by such designated Person. For purposes of this definition, the term
"control" (including with correlative meanings, the terms "controlling",
"controlled by" and "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through ownership of voting securities or
other equity interests or by contract or otherwise.
"Administrative Agent" means the Person defined as the "Administrative
Agent" in the preamble of this Agreement and shall also include any successor
Administrative Agent appointed pursuant to Section 8.7.3 (Successor Agents).
"Agent" means the reference to the Administrative Agent, the
Syndication Agent, the Multi-Currency Agent, or any other Person designated from
time to time as an "Agent" under this Agreement, as the case may be and each of
their respective successors and assigns; and "Agent" means each of the
Administrative Agent, the Syndication Agreement, the Multi-
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Currency Agent and any other Person designated as an "Agent" under this
Agreement and each of their respective successors and assigns.
"Agents' Obligations" means the collective reference to any and all
Obligations payable solely to and for the exclusive benefit of any one or more
of the Agents by any or all of the Borrowers under the terms of this Agreement
and/or any of the other Financing Documents, including, without limitation,
Interest Rate Exposure, Foreign Exchange Exposure, the Origination Fee, any and
all Letter of Credit Fronting Fees, and/or Administrative Agency Fees.
"Agreement" means this Financing and Security Agreement, as amended,
restated, supplemented or otherwise modified in writing in accordance with the
provisions of Section 9.2 (Amendments; Waivers).
"Applicable Interest Rate" means (a) the Eurodollar Rate, or (b) the
Base Rate.
"Applicable Margin" means the applicable rate per annum added, as set
forth in Section 2.5.1 (Applicable Interest Rates), to the Eurodollar Base Rate
or the Prime Rate.
"Appropriate Letter of Credit Issuer" means, at any time, with respect
to matters relating to US Letters of Credit, the US Letter of Credit Issuer and,
with respect to matters relating to Multi-Currency Letters of Credit issued for
the account of any Local Currency Borrower, the Multi-Currency Letter of Credit
Issuer.
"Appropriate Notice Office" shall mean with respect (i) to US Revolving
Loans and US Letters of Credit and funding of participations in Multi-Currency
Revolving Loans or Current Letter of Credit Obligations, the office of the
Administrative Agent located at 100 South Charles Street, 4th Floor, Baltimore,
Maryland 21201, Attention: David B. Thayer, or such other office or person as
the Administrative Agent may designate to the Borrowers and the Lenders from
time to time and (ii) Multi-Currency Revolving Loans and Multi-Currency Letters
of Credit denominated in any Currency, the office of the Multi-Currency Agent as
the Multi-Currency Agent may designate to the Local Currency Borrowers and the
Lenders from time to time.
"Appropriate Payment Office" shall mean with respect (i) to US
Revolving Loans, US Letters of Credit and funding of participations in
Multi-Currency Revolving Loans or Current Letter of Credit Obligations, the
office of the Administrative Agent located at 100 South Charles Street, 4th
Floor, Baltimore, Maryland 21201, Attention: David B. Thayer or such other
office or person as the Administrative Agent may designate to the Borrowers and
the Lenders from time to time, and (ii) Multi-Currency Revolving Loans and
Multi-Currency Letters of Credit denominated in any Currency, the office of the
Multi-Currency Agent as the Multi-Currency Agent may designate to the Local
Currency Borrowers and the Lenders from time to time.
"Approved Foreign Currency" means each of Irish Pounds, Pounds
Sterling, French Francs, German Marks, Japanese Yen, Belgian Francs and such
other currencies as shall be agreed among the relevant Local Currency Borrower,
the Parent, the Multi-Currency Agent and the Agent from time to time and shall
also mean, as applicable, the European Monetary Unit or such other European
common currency unit equivalent thereof.
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"Assessments" has the meaning set forth in Section 2.8.1(a).
"Assets" means at any date all assets that, in accordance with GAAP
consistently applied, should be classified as assets on a consolidated balance
sheet of the Borrowers and their respective Subsidiaries.
"Assigned Local Currency Receivable" means each account of a Local
Currency Borrower (a) which is the subject of an assignment which (i) is valid,
binding and enforceable according to its terms, (ii) assigns to the Parent
absolutely all right, title and interest in the Account free and clear of all
claims of creditors, the Local Currency Borrower (including, without limitation,
its successors, assigns, and others who at any time derive any interest from the
Account Debtor) Governmental Authority and all other Persons whatsoever, and
(iii) entitles the Parent under all applicable Laws to collect and enforce the
Account directly against the Account Debtor without any limitation whatsoever
(including, without limitation, any requirement for notice or filing) which has
not been accomplished, (b) which is subject to no Liens other than Liens arising
under the Security Documents, (c) the assignment of which complies with all
applicable Laws and does not constitute a breach of any agreement of the Local
Currency Borrower, the Parent or any of the other Borrowers, and (d) which
immediately upon assignment is subject to a Lien in favor of the Administrative
Agent, for the benefit of the Lenders ratably and the Agents, which Lien is
perfected as to the account by the filing of financing statements in the State
of Michigan naming the Parent only as debtor and which Lien constitutes a first
priority security interest and Lien.
"Assignee" means any Person to which any Lender assigns all or any
portion of its interests under this Agreement, any Commitment, and any Loan, in
accordance with the provisions of Section 9.5 (Assignments by Lenders), together
with any and all successors and assigns of such Person; "Assignees" means the
collective reference to all Assignees.
"Assignments of Patents" means the collective reference to each
collateral assignment of patents, as the same may be amended, modified,
restated, substituted, extended and renewed at any time and from time to time,
from the Parent to the Administrative Agent for the benefit of the Lenders
ratably and the Agents.
"Assignments of Purchase Agreement" means the collective reference to
each collateral assignment of Purchase Agreement, as the same may be amended,
modified, restated, substituted, extended and renewed at any time and from time
to time, identified on Schedule 1.1- C attached to and made and made a part of
this Agreement.
"Assignments of Trademarks" means the collective reference to each
collateral assignment of trademarks, as the same may be amended, modified,
restated, substituted, extended and renewed at any time and from time to time,
from the Parent to the Administrative Agent for the benefit of the Lenders
ratably and the Agents.
"Bankruptcy Code" means the United States Bankruptcy Code, as amended
from time to time, and any successor Laws.
"Base Rate" means the sum of (a) the Applicable Margin plus (b) the
Prime Rate.
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"Base Rate Loan" means any Loan for which interest is to be computed
with reference to the Base Rate.
"Borrower" means each Person defined as a "Borrower" in the preamble of
this Agreement and each Additional Borrower; "Borrowers" means the collective
reference to all Persons defined as "Borrowers" in the preamble to this
Agreement and all Additional Borrowers.
"Borrowing" means the incurrence of one Type of Loan by any Borrower
from all of the Lenders on a pro rata basis on a given date (or resulting from
conversions on a given date), having in the case of Eurodollar Loans the same
Interest Period.
"Borrowing Base" has the meaning described in Section 2.1.3 (Borrowing
Base).
"Borrowing Base Deficiency" has the meaning described in Section 2.1.3
(Borrowing Base).
"Borrowing Base Report" has the meaning described in Section 2.1.4
(Borrowing Base Report).
"Business Day" shall mean (i) for all purposes other than as covered by
clauses (ii) and (iii) below, any day excluding Saturday, Sunday and any day
which shall be in Baltimore, Maryland or in the case of the Lenders other than
NationsBank, in the jurisdictions identified in the addresses stated after their
names on the signature pages of this Agreement, designated as a legal holiday or
a day on which banking institutions are authorized by law or other governmental
actions to close, (ii) with respect to all notices and determinations in
connection with, and payments of principal and interest on, Eurodollar Loans,
any day which is a Business Day described in clause (i) and which is also a day
for trading by and between banks in US dollar deposits in the London interbank
Eurodollar market, and (iii) if the applicable Business Day relates to any
Multi-Currency Loans or Multi-Currency Letters of Credit, any day on which banks
are not required or authorized to close in the city of the jurisdiction of such
Currency where the Appropriate Payment Office for such Currency is located.
"Capital Expenditure" means an expenditure (whether payable in cash or
other property or accrued as a liability) for assets which are required to be
included in or reflected by, the property, plant and equipment or similar fixed
asset accounts on the balance sheet prepared in accordance with GAAP.
"Capital Expenditure Line" has the meaning described in Section 2.4.1
(Capital Expenditure Line Facility).
"Capital Expenditure Line Commitment" means the agreement of a Lender
relating to the making the Capital Expenditure Line and advances thereunder
subject to and in accordance with the provisions of this Agreement; and "Capital
Expenditure Line Commitments" means the collective reference to the Capital
Expenditure Line Commitment of each of the Lenders.
"Capital Expenditure Line Commitment Period" means the period of time
from the Closing Date to the earlier of March 31, 2003 or the Capital
Expenditure Line Termination Date.
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"Capital Expenditure Line Committed Amount" has the meaning described
in Section 2.4.1 (Capital Expenditure Line Facility).
"Capital Expenditure Line Equipment" means all equipment, machinery,
furniture, and fixtures now or hereafter purchased or financed with the proceeds
of the Capital Expenditure Line, whether or not the same shall be deemed to be
affixed to real property, together with all accessions, additions, fittings,
accessories, parts, special tools, improvements thereto and substitutions
therefor and all parts and equipment which may be attached to or which are
necessary or beneficial for the operation, use and/or disposition of such
personal property, all licenses, warranties, franchises and general intangibles
related thereto or necessary or beneficial for the operation, use and/or
disposition of the same, together with all Accounts, chattel paper, instruments
and other consideration received by any Borrower on account of the sale, lease
or other disposition of all or any part of the foregoing, and together with all
rights under or arising out of present or future documents and contracts
relating to the foregoing and all proceeds (cash and non-cash) of the foregoing.
"Capital Expenditure Line Expiration Date" means May 1, 2003.
"Capital Expenditure Line Facility" means the facility established by
the Lenders pursuant to Section 2.4.1 (Capital Expenditure Line Facility).
"Capital Expenditure Line Note" and "Capital Expenditure Line Notes"
have the meaning described in Section 2.4.3 (Capital Expenditure Line Notes).
"Capital Expenditure Line Notice" has the meaning described in Section
2.4.2.
"Capital Expenditure Line Optional Prepayment" and "Capital Expenditure
Line Optional Prepayments" have the meanings described in Section 2.4.5 (Capital
Expenditure Line Optional Prepayment).
"Capital Expenditure Line Pro Rata Share" has the meaning described in
Section 2.4.1 (Capital Expenditure Line Facility).
"Capital Expenditure Line Payment Schedule" has the meaning described
in Section 2.4.4 (Payments of Capital Expenditure Line).
"Capital Expenditure Line Termination Date" means the earlier of (a)
the Capital Expenditure Line Expiration Date, or (b) the Revolving Credit
Termination Date.
"Capital Lease" means with respect to any Person any lease of real or
personal property, for which the related Lease Obligations have been or should
be, in accordance with GAAP consistently applied, capitalized on the balance
sheet of that Person.
"Cash Equivalents" means (a) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed or insured by the
United States Government or any agency thereof, (b) certificates of deposit with
maturities of one (1) year or less from the date of acquisition of, or money
market accounts maintained with, the Administrative Agent, any
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Affiliate of the Administrative Agent, or any other domestic commercial bank
having capital and surplus in excess of One Hundred Million Dollars
($100,000,000.00) or such other domestic financial institutions or domestic
brokerage houses to the extent disclosed to, and approved by, the Administrative
Agent and (c) commercial paper of a domestic issuer rated at least either A-1 by
Standard & Poor's Corporation (or its successor) or P-1 by Moody's Investors
Service, Inc. (or its successor) with maturities of six (6) months or less from
the date of acquisition.
"Closing Date" means the Business Day, in any event not later than May
29, 1998, on which the Administrative Agent shall be satisfied that the
conditions precedent set forth in Section 5.1 (Conditions to Initial Advance)
have been fulfilled or otherwise waived by the Administrative Agent.
"Collateral" means all property of each and every Borrower subject from
time to time to the Liens of this Agreement, any of the Security Documents
and/or any of the other Financing Documents, together with any and all cash and
non-cash proceeds and products thereof.
"Collateral Account" has the meaning described in Section 2.1.8 (The
Collateral Account).
"Collateral Disclosure List" has the meaning described in Section 3.3
(Collateral Disclosure List).
"Collection" means each check, draft, cash, money, instrument, item,
and other remittance in payment or on account of payment of the Accounts or
otherwise with respect to any Collateral, including, without limitation, cash
proceeds of any returned, rejected or repossessed goods, the sale or lease of
which gave rise to an Account, and other proceeds of Collateral; and
"Collections" means the collective reference to all of the foregoing.
"Commitment" means with respect to each Lender, such Lender's Revolving
Credit Commitment, the Letter of Credit Commitment, and Capital Expenditure Line
Commitment as the case may be, and "Commitments" means the collective reference
to the Revolving Credit Commitments and Capital Expenditure Line Commitments of
all of the Lenders.
"Committed Amount" means with respect to each Lender, such Lender's
Revolving Loan Committed Amount or Capital Expenditure Line Committed Amount, as
the case may be, and "Committed Amounts" means collectively the Revolving Loan
Committed Amount and Capital Expenditure Line Committed Amount of each of the
Lenders.
"Compliance Certificate" means a periodic Compliance Certificate
described in Section 6.1.1 (Financial Statements).
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with any Borrower within the meaning
of Section 414(b) or (c) of the Internal Revenue Code.
"Consolidated Net Income" shall mean, for any period, net income or
loss (income after tax payments) determined on a consolidated basis for
Borrowers and their Subsidiaries in
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<PAGE> 15
accordance with GAAP; provided, however, that there shall not be included in
such Consolidated Net Income:
(i) any net income of any person if such person is not a
Subsidiary, except that equity in the net income of such person for
such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such person as a
dividend or other distribution (subject, in the case of a dividend or
other distribution to a Subsidiary, to the limitation contained in
clause (iii) below);
(ii) any net income of any person acquired in a pooling of
interest transaction for any period prior to the date of such
acquisition;
(iii) any net income of any Subsidiary if such Subsidiary is
subject to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions by such Subsidiary, directly
or indirectly, to the Parent, except that equity in the net income of
any such Subsidiary for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Subsidiary during such period as a dividend or
other distribution;
(iv) any gain or loss realized upon the sale or other
disposition of any property, plant or equipment (including pursuant to
any sale-leaseback arrangement) which is not sold or otherwise disposed
of in the ordinary course of business and any gain or loss realized
upon the sale or other disposition of any capital stock of any person;
gains or losses arising solely from currency fluctuations; or
(v) other extraordinary items including, without limitation,
one-time charges for the fourth quarter of fiscal year 1997.
"Credit Facility" means with respect to each Lender, such Lender's Pro
Rata Share of the Revolving Credit Facility, the Letter of Credit Facility or
the Capital Expenditure Line Facility, as the case may be, and "Credit
Facilities" means collectively with respect to each Lender, such Lender's Pro
Rata Share of the Revolving Credit Facility, the Letter of Credit Facility and
the Capital Expenditure Line Facility and any and all other credit facilities
now or hereafter extended under or secured by this Agreement.
"Currency" means US Dollars or any Approved Foreign Currency.
"Default" means an event which, with the giving of notice or lapse of
time, or both, could or would constitute an Event of Default under the
provisions of this Agreement.
"Dollar Equivalent" means, with respect to any amount denominated in a
currency other than Dollars on the date of determination thereof, the Foreign
Currency Equivalent of such amount in US Dollars.
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<PAGE> 16
"Dollars" and "$" mean the lawful money of the United States of America.
"Domestic Borrower" means each of the Parent and each Domestic Borrower,
as the case may be and each of their respective successors and assigns, and
"Domestic Borrowers" means the Parent and each of the Domestic Borrowers and
each of their respective successors and assigns.
"Early Termination Fee" has the meaning described in Section 2.1.11 (Early
Termination Fee).
"EBITDA" means as to each Borrower and its Subsidiaries for any period
of determination thereof, the sum of (a) Consolidated Net Income determined in
accordance with GAAP consistently applied, plus (b) interest expense, regularly
scheduled preferred dividends paid with respect to the Parent's $69,000,000
aggregate principal amount 8% Convertible Subordinated Debentures due 2017, and
income tax provisions for such period, plus (c) depreciation, amortization and
other non-cash charges and credits (including, without limitation, amortization
of goodwill, deferred financing fees and other intangibles) for such period, but
only to the extent the items described in items (b) and (c) were deducted in the
determination of Consolidated Net Income for such period.
"Eligible Inventory" means the collective reference to all Inventory of
each Domestic Borrower held for sale in the ordinary course of business, valued
(in Dollars or Dollar Equivalent) at the lowest of the net purchase cost or net
manufacturing cost, the lowest bulk market price, such Domestic Borrower's
lowest bulk selling price, minus estimated expenses for completion and disposal,
and minus an allowance for normal profit margin for bulk sales, any ceiling
prices which may be established by any Law of any Governmental Authority or
prevailing market value, excluding, however, any Inventory which consists of:
(a) any Inventory located outside of a jurisdiction in which
the Administrative Agent has properly and unavoidably perfected the
Liens of the Administrative Agent and the Lenders under this Agreement
by filing in that jurisdiction, free and clear of all other Liens,
except to the extent provided in subsection (d)(ii) below;
(b) any Inventory not in the actual possession of a Domestic
Borrower, except to the extent provided in subsection (d) below;
(c) any Inventory in the possession of a bailee, warehouseman,
consignee or similar third party, except to the extent that such
bailee, warehouseman, consignee or similar third party has entered into
an agreement with the Administrative Agent in which such bailee,
warehouseman, consignee or similar third party consents and agrees to
the Administrative Agent's and Lenders' Lien on such Inventory and to
such other terms and conditions as may be required by the
Administrative Agent;
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<PAGE> 17
(d) (i) except as set forth on Schedule 1.1-D and (ii) except
for Inventory in transit subject to a commercial Letter of Credit
issued by NationsBank for which documents of title required as a
condition of draw under the Letter of Credit have been delivered to
NationsBank, to include inventory subject to commercial letters of
credit issued by NationsBank requiring delivery of documents of title
as a condition of draw, any Inventory located on premises leased or
rented to a Domestic Borrower or otherwise not owned by a Domestic
Borrower, unless the Administrative Agent has received a waiver and
consent from the lessor, landlord and/or owner, in form and substance
satisfactory to the Administrative Agent and from any mortgagee of such
lessor, landlord or owner to the extent required by the Administrative
Agent;
(e) any Inventory the sale or other disposition of which has
given rise to an Account or other receivable;
(f) any Inventory which fails to meet all standards and
requirements imposed by any Governmental Authority over such Inventory
or its production, storage, use or sale;
(g) work-in-process, supplies, displays, packaging and
promotional materials;
(h) any Inventory as to which the Administrative Agent
determines in the reasonable exercise of its discretion at any time and
in good faith is not in good condition or is defective, unmerchantable,
post-seasonal, slow moving or obsolete; and
(i) any Inventory which the Administrative Agent in the
reasonable exercise of its discretion has deemed to be ineligible
because the Administrative Agent otherwise considers the collateral
value to the Administrative Agent and the Lenders to be impaired or its
or their ability to realize such value to be insecure.
In the event of any dispute under the foregoing criteria as to whether Inventory
is, or has ceased to be, Eligible Inventory, the decision of the Administrative
Agent in the reasonable exercise of its discretion shall control.
"Eligible Receivable" and "Eligible Receivables" mean, at any time of
determination thereof, the unpaid portion (valued in Dollars) of each account
(which may include Assigned Local Currency Receivables) (net of any returns,
discounts, claims, credits, charges, accrued rebates or other allowances,
offsets, deductions, counterclaims, disputes or other defenses and reduced by
the aggregate amount of all reserves (including, without limitation, reserves to
cover value added taxes or sales taxes), limits and deductions provided for by
the Administrative Agent in the reasonable exercise of its discretion )
receivable by the Borrower (other than a Local Currency Borrower) in United
States Dollars or, in the case of a Local Currency Borrower, receivable as part
of the Assigned Local Currency Receivables by the Parent in United States
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<PAGE> 18
Dollars or in the Approved Foreign Currency of the applicable Local Currency
Borrower, provided each account conforms and continues to conform to the
following criteria to the satisfaction of the Administrative Agent:
(a) the account arose in the ordinary course of a Borrower's
business from a bona fide outright sale of Inventory by such Borrower
or from services performed by such Borrower (including, without
limitation, accounts arising from a written agreement with a customer
of the Borrower to provide tools and/or dies for the customer);
(b) the account is a valid, legally enforceable obligation of
the Account Debtor and requires no further act on the part of any
Person under any circumstances to make the account payable by the
Account Debtor;
(c) the account is based upon an enforceable order or
contract, written or oral, for Inventory shipped or for services
performed, and the same were shipped or performed substantially in
accordance with such order or contract;
(d) if the account arises from the sale of Inventory, the
Inventory the sale of which gave rise to the account has been shipped
or delivered to the Account Debtor on an absolute sale basis and not on
a bill and hold sale basis, a consignment sale basis, a guaranteed sale
basis, a sale or return basis, or on the basis of any other similar
understanding;
(e) if the account arises from the performance of services,
such services have been fully rendered and do not relate to any
warranty claim or obligation;
(f) the account is evidenced by an invoice or other
documentation in form reasonably acceptable to the Administrative
Agent, dated no later than the date of shipment or performance and
containing only terms normally offered by the respective Borrower to
the Account Debtor in question;
(g) the amount shown on the books of a Borrower and on any
invoice, certificate, schedule or statement delivered to the
Administrative Agent is owing to such Borrower and no partial payment
has been received unless reflected with that delivery;
(h) the account is not outstanding more than ninety (90) days
from the date of the invoice therefor;
(i) the account is not owing by any Account Debtor for which
the Administrative Agent has deemed fifty percent (50%) or more of such
Account Debtor's other accounts (or any portion thereof) due to a
Borrower, individually, or all of the Borrowers collectively, to be
non-Eligible Receivables;
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<PAGE> 19
(j) the account is not owing by an Account Debtor or a group
of affiliated Account Debtors to any Borrower whose then existing
accounts owing to that Borrower individually exceed in aggregate face
amount fifteen percent (15%) of that Borrower's total Eligible
Receivables and is not owing by an Account Debtor or a group of
affiliated Account Debtors whose then existing accounts to any and all
of the Borrowers collectively exceed in aggregate face amount fifteen
percent (15%) of the total Eligible Receivables of all Borrowers;
(k) the Account Debtor has not returned, rejected or refused
to retain, or otherwise notified a Borrower of any dispute concerning,
or claimed nonconformity of, any of the Inventory or services from the
sale or furnishing of which the account arose;
(l) the account is not subject to any present or contingent
(and the applicable Borrower has no notice of any facts which exist
which are the basis for any future) offset, claim, deduction or
counterclaim, dispute or defense in law or equity on the part of such
Account Debtor, or any claim for credits, allowances, or adjustments by
the Account Debtor because of returned, inferior, or damaged Inventory
or unsatisfactory services, or for any other reason including, without
limitation, those arising on account of a breach of any express or
implied representation or warranty;
(m) except with respect to such joint venture net receivables
as the Administrative Agent may approve from time to time, the Account
Debtor is not a Subsidiary or Affiliate of any Borrower or an employee,
officer, director or shareholder of any Borrower or any Subsidiary or
Affiliate of any Borrower;
(n) the Account Debtor with respect to such account is not
insolvent or the subject of any bankruptcy or insolvency proceedings of
any kind or of any other proceeding or action, threatened or pending;
(o) the Account Debtor is not a Governmental Authority, unless
all rights of each Borrower with respect to such account have been
assigned to the Administrative Agent for the benefit of the Lenders
ratably and the Administrative Agent on terms acceptable to the
Administrative Agent pursuant to the Assignment of Claims Act of 1940,
as amended;
(p) no Borrower is indebted in any manner to the Account
Debtor (as creditor, lessor, supplier or otherwise), with the exception
of customary credits, adjustments and/or discounts given to an Account
Debtor by a Borrower in the ordinary course of its business;
(q) the account does not arise from services under or related
to any warranty obligation of a Borrower or out of service charges,
finance charges or other fees for the time value of money;
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<PAGE> 20
(r) the account is not evidenced by chattel paper or an
instrument of any kind and is not secured by any letter of credit,
unless the same is in the possession of the Administrative Agent as
part of the Collateral;
(s) the title of the respective Borrower to the account is
absolute and is not subject to any prior assignment, claim, Lien, or
security interest, except Permitted Liens and except in the case of
Assigned Local Currency Receivables, title thereto is in the Parent;
(t) no bond or other undertaking by a guarantor or surety has
been or is required to be obtained, supporting the performance of any
Borrower or any other obligor in respect of any of such Borrower's
agreements with the Account Debtor unless the same is part of the
Collateral;
(u) no bond or other undertaking by a guarantor or surety has
been or is required to be obtained, supporting the account and any of
the Account Debtor's obligations in respect of the account;
(v) the Borrower (or, in the case of Assigned Local Currency
Receivables, the Parent only) has the full and unqualified right and
power to assign and grant a security interest in, and Lien on, the
account to the Administrative Agent and the Lenders as security and
collateral for the payment of the Obligations and the Agents'
Obligations;
(w) the account does not arise out of a contract with, or
order from, an Account Debtor that, by its terms or by applicable Laws,
forbids, makes void or unenforceable, limits, or affects the first Lien
priority of the assignment or grant of a security interest by the
Borrower (or, in the case of Assigned Local Currency Receivables, the
Parent only) to the Administrative Agent, for the benefit of the
Lenders ratably and the Administrative Agent, of the account arising
from such contract or order;
(x) the account is subject to a Lien in favor of the
Administrative Agent, for the benefit of the Lenders ratably and the
Administrative Agent, which Lien is perfected as to the account by the
filing of financing statements and which Lien upon such filing
constitutes a first priority security interest and Lien;
(y) the Inventory giving rise to the account was not, at the
time of the sale thereof, subject to any Lien, except those in favor of
the Administrative Agent, for the benefit of the Lenders ratably and
the Administrative Agent, and except, with respect to Assigned Local
Currency Receivables, those Liens which attach to inventory of the
Local Currency Borrower as a matter of applicable Laws in the
jurisdiction of such Local Currency Borrower, but which do not attach
to the Assigned Local Currency Receivables or any of the other
Collateral;
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<PAGE> 21
(z) except for those representing customer tooling, no part
of the account represents a progress billing or a retainage;
(aa) the Administrative Agent in the reasonable exercise of
its discretion has not deemed the account ineligible because of
uncertainty as to the creditworthiness of the Account Debtor or because
the Administrative Agent otherwise considers the collateral value of
such account to the Administrative Agent and the Lenders to be impaired
or its or their ability to realize such value to be insecure.
For purposes of calculating the Dollar Equivalent of Eligible Receivables
included in the Borrowing Base and not denominated in US Dollars, the Dollar
Equivalent shall decrease by such percentage (not to exceed two percent (2%)) as
the Administrative Agent in its reasonable discretion may determine. In the
event of any dispute, under the foregoing criteria, as to whether an account is,
or has ceased to be, an Eligible Receivable, the decision of the Administrative
Agent in the good faith exercise of its discretion shall control.
"Enforcement Costs" means all expenses, charges, costs and fees whatsoever
(including, without limitation, reasonable outside and, without duplication,
allocated in-house counsel attorney's fees and expenses) of any nature
whatsoever paid or incurred by or on behalf of the Administrative Agent and/or
any of the Lenders in connection with (a) any or all of the Obligations, this
Agreement and/or any of the other Financing Documents, (b) the creation,
perfection, collection, maintenance, preservation, defense, protection,
realization upon, disposition, sale or enforcement of all or any part of the
Collateral, this Agreement or any of the other Financing Documents, including,
without limitation, those costs and expenses more specifically enumerated in
Section 3.6 (Costs) and/or Section 9.10 (Enforcement Costs), and (c) the
monitoring, administration, processing and/or servicing of any or all of the
Obligations, the Financing Documents, and/or the Collateral.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurodollar Base Rate" means for any Interest Period with respect to any
Eurodollar Loan, the per annum interest rate rounded upward, if necessary, to
the nearest 1/100 of 1%, appearing on Telerate Page 3750 (or any successor page)
as the London interbank offered rate for deposits in Dollars at or about 11:00
a.m. (London time) on the date that is two (2) Eurodollar Business Days prior to
the first day of such Interest Period for a term comparable to such Interest
Period. If for any reason such rate is not available, the term "Eurodollar Rate"
shall mean, for any Eurodollar Loan for any Interest Period therefor, the rate
per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing
on Reuters Screen LIBO Page as the London interbank offered rate for deposits in
ollars at approximately 11:00 a.m. (London time) two (2) Eurodollar Business
Days prior to the first day of such Interest Period for a term comparable to
such Interest Period; provided, however, if more than one rate is specified on
Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of
all such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%).
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<PAGE> 22
"Eurodollar Business Day" means any Business Day on meeting the requirements
of clause (ii) of the definition of "Business Day."
"Eurodollar Loan" means any Loan for which interest is to be computed with
reference to the Eurodollar Rate.
"Eurodollar Rate" means for any Interest Period with respect to any
Eurodollar Loan, (a) the Applicable Margin, plus (b) the per annum rate of
interest calculated pursuant to the following formula:
Eurodollar Base Rate
------------------------
1.00 - Reserve Percentage
"Event of Default" has the meaning described in ARTICLE VII (Default and
Rights and Remedies).
"Facilities" means the collective reference to the loan, letter of credit,
interest rate protection, foreign exchange risk, cash management, and other
credit facilities now or hereafter provided to any one or more of the Borrowers
by the Administrative Agent or the Lenders under this Agreement or otherwise by
NationsBank.
"Federal Funds Rate" means for any day of determination, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or, if such day is not a Business Day) by the Federal Reserve Bank for the
next preceding Business Day) by the Federal Reserve Bank of Richmond or, if such
rate is not so published for any day that is a Business Day, the average of
quotations for such day on such transactions received by the Administrative
Agent from three (3) Federal funds brokers of recognized standing selected by
the Administrative Agent.
"Fees" means the collective reference to each fee payable to the
Administrative Agent, for its own account or for the ratable benefit of the
Lenders, under the terms of this Agreement or under the terms of any of the
other Financing Documents, including, without limitation, the Revolving Credit
Unused Line Fees, the Letter of Credit Fees, the Early Termination Fee, the
Origination Fee, and the Administrative Agency Fees.
"Financing Documents" means at any time collectively this Agreement, the
Notes, the Security Documents, the Letter of Credit Documents, Foreign Exchange
Protection Agreement, Interest Rate Protection Agreements, and any other
instrument, agreement or document previously, simultaneously or hereafter
executed and delivered by any Borrower and/or any other Person, singly or
jointly with another Person or Persons, evidencing, securing, guarantying or in
connection with this Agreement, any Note, any of the Security Documents, any of
the Facilities, and/or any of the Obligations.
"Fixed Charges" means as to the Borrowers and their Subsidiaries for any
period of determination, the scheduled or required payments for principal and
interest (excluding, if otherwise included, the Administrative Agent's annual
$100,000 administrative fee) on all Indebtedness For Borrowed Money of the
Borrowers and their Subsidiaries, plus unfinanced
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<PAGE> 23
Capital Expenditures of the Borrowers and their Subsidiaries, plus cash
dividends paid, plus cash income taxes paid, by the Borrowers and their
Subsidiaries. For the purposes of this definition "unfinanced Capital
Expenditures" shall be calculated by deducting from Capital Expenditures an
amount equal to the sum of (i) gross financed Capital Expenditures plus (ii) the
cash proceeds or purchase price credit received by the Borrowers and their
Subsidiaries from the sale or sale-leaseback of fixed or capital assets during
the period tested.
"Fixed or Capital Assets" of a Person at any date means all assets which
would, in accordance with GAAP consistently applied, be classified on the
balance sheet of such Person as property, plant or equipment or similar fixed
asset accounts at such date.
"Foreign Currency Equivalent" means, on any date of determination, the
equivalent in any Approved Foreign Currency of an amount in US dollars, or in US
dollars of an amount in any Approved Foreign Currency, determined at the rate of
exchange quoted by the Multi-Currency Agent in New York City, at 9:00 A.M. (New
York City time) on such date of determination, to prime banks in New York City
for the spot purchase in the New York foreign exchange market of such amount of
US dollars with such Approved Foreign Currency or such amount of such Approved
Foreign Currency with US Dollars.
"Foreign Exchange Protection Agreement" means any foreign exchange, currency
spot, foreign exchange forward contracts and other similar agreements and
arrangements between any Borrower and a Person acceptable to the Administrative
Agent in its reasonable credit judgement, providing for the transfer or
mitigation of foreign exchange currency risks either generally or under specific
contingencies.
"Foreign Exchange Exposure" means at any time and from time to time of
determination, the amount of the obligations and liabilities of any or all of
the Borrowers with respect to each Foreign Exchange Protection Agreement with a
Person who is the Administrative Agent, a Lender or an Affiliate of the
Administrative Agent or any Lender arising as a result of a determination of the
amount of Dollars required at such time to purchase such amount of the foreign
currency covered by such Foreign Exchange Protection Agreement at the Spot Rate.
"Funded Debt to EBITDA Ratio" means the ratio, determined for the Borrowers
on a consolidated basis, of (a) Funded Indebtedness which is secured and which
is not subordinated to all other Indebtedness for Borrowed Money of the
Borrowers to (b) EBITDA.
"Funded Indebtedness" shall mean all (a) Indebtedness for Borrowed Money
under the Credit Facilities, and (b) all other Indebtedness for Borrowed Money.
"GAAP" means generally accepted accounting principles in the United States
of America in effect from time to time.
"General Intangibles" means all general intangibles of every nature, whether
presently existing or hereafter acquired or created, and without implying any
limitation of the foregoing, further means all books and records, claims
(including without limitation all claims for income tax and other refunds),
chooses in action, claims, causes of action in tort or equity, contract rights,
judgments, customer lists, patents, trademarks, licensing agreements, rights in
intellectual
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<PAGE> 24
property, goodwill (including goodwill of any Borrower's business symbolized by
and associated with any and all trademarks, trademark licenses, copyrights
and/or service marks), royalty payments, licenses, rights as lessee under any
lease of real or personal property, literary rights, copyrights, service names,
service marks, logos, trade secrets, amounts received as an award in or
settlement of a suit in damages, deposit accounts, interests in joint ventures,
general or limited partnerships, or limited liability companies or partnerships,
rights in applications for any of the foregoing, books and records in whatever
media (paper, electronic or otherwise) recorded or stored, with respect to any
or all of the foregoing and all equipment and general intangibles necessary or
beneficial to retain, access and/or process the information contained in those
books and records, and all proceeds (cash and non-cash) of the foregoing.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
and any department, agency or instrumentality thereof.
"Hazardous Materials" means (a) any "hazardous waste" as defined by the
Resource Conservation and Recovery Act of 1976, as amended from time to time,
and regulations promulgated thereunder; (b) any "hazardous substance" as defined
by the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended from time to time, and regulations promulgated thereunder; (c)
any substance the presence of which on any property now or hereafter owned,
acquired or operated by any of the Borrowers is prohibited by any Law similar to
those set forth in this definition; and (d) any other substance which by Law
requires special handling in its collection, storage, treatment or disposal.
"Hazardous Materials Contamination" means the contamination (whether
presently existing or occurring after the date of this Agreement) by Hazardous
Materials of any property owned, operated or controlled by any of the Borrowers
or for which any of the Borrowers has responsibility, including, without
limitation, improvements, facilities, soil, ground water, air or other elements
on, or of, any property now or hereafter owned, acquired or operated by any of
the Borrowers, and any other contamination by Hazardous Materials for which any
of the Borrowers is, or is claimed to be, responsible.
"Indebtedness for Borrowed Money" of a Person means at any date, without
duplication, (i) liabilities for borrowed money and redemption obligations in
respect of mandatorily redeemable preferred stock, (ii) liabilities for the
deferred purchase price of acquired property (excluding accounts payable arising
in the ordinary course of business but including all liabilities created through
any conditional sale or title retention agreement with respect to acquired
property), (iii) rentals capitalized in accordance with GAAP under any Capital
Lease, (iv) liabilities for borrowed money secured by a Lien or any other charge
on assets, (v) all liabilities in respect of unreimbursed draws under letters of
credit, bankers acceptances or similar instruments, (vi) net payment obligations
with respect to interest rate swaps, currency swaps and similar obligations
which require payments, whether periodically or upon the happening of a
contingency, (viii) all indebtedness or other obligations of others with respect
to which such Person has become liable through a guarantee or an obligation of
indemnification to the extent that the indebtedness or obligations guaranteed
are obligations that would constitute
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<PAGE> 25
Indebtedness for Borrowed Money, and (ix) liabilities, whether or not in any
such case the same was for money borrowed, (x) represented by notes payable, and
drafts accepted, that represent extensions of credit, (y) constituting
obligations evidenced by bonds, debentures, notes or similar instruments, or (z)
upon which interest charges are customarily paid or that was issued or assumed
as full or partial payment for property (other than trade credit that is
incurred in the ordinary course of business).
"Indemnified Parties" has the meaning set forth in Section 9.19.
"Insolvency Proceeding" means any receivership, conservatorship, general
meeting of creditors, insolvency or bankruptcy proceeding, assignment for the
benefit of creditors, or any proceeding or action by or against any Borrower for
any relief under any bankruptcy or insolvency law or other Laws relating to the
relief of debtors, readjustment of indebtedness, reorganizations, dissolution,
liquidation, compositions or extensions, or the appointment of any receiver,
intervenor or conservator of, or trustee, or similar officer for, any Borrower
or any substantial part of its properties or assets, including, without
limitation, proceedings under the Bankruptcy Code, or under other Laws of the
United States or any other Governmental Authority, all whether now or hereafter
in effect.
"Instrument" means a negotiable instrument (as defined under Article 3 of
the Uniform Commercial Code), a "certificated security" (as defined under
Article 8 of the Uniform Commercial Code), or any other writing which evidences
a right to payment of money and is not itself a security agreement or lease and
is of a type which is in the ordinary course of business transferred by delivery
with any necessary endorsement.
"Intercompany Allocation" has the meaning described in Section 6.1.1(d)
(Monthly Statements and Certificates).
"Interest Payment Date" means with respect to the Revolving Loan the first
day of each calendar month commencing on July 1, 1998 and continuing thereafter
until the Obligations have been irrevocably paid in full.
"Interest Period" means as to any Eurodollar Loan, the period commencing on
and including the date such Eurodollar Loan is made (or on the effective date of
the Borrowers' election to convert any Base Rate Loan to a Eurodollar Loan in
accordance with the provisions of this Agreement) and ending on and including
the day which is one month, two months, three months or six months thereafter,
as selected by the Borrowers in accordance with the provisions of this
Agreement, and thereafter, each period commencing on the last day of the then
preceding Interest Period for such Eurodollar Loan and ending on and including
the day which is one month, two months, three months or six months thereafter,
as selected by the Borrowers in accordance with the provisions of this
Agreement; provided, however that:
(a) the first day of any Interest Period shall be a
Eurodollar Business Day;
(b) if any Interest Period would end on a day that shall not
be a Eurodollar Business Day, such Interest Period shall be extended to the
next succeeding
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<PAGE> 26
Eurodollar Business Day unless such next succeeding Eurodollar Business Day
would fall in the next calendar month, in which case, such Interest Period
shall end on the next preceding Eurodollar Business Day; and
(c) no Interest Period shall extend beyond the Revolving Credit
Expiration Date or the scheduled maturity date of the Capital
Expenditure Line, as appropriate.
"Interest Rate Election Notice" has the meaning described in Section
2.5.2(e).
"Interest Rate Protection Agreement" means any interest rate or currency
swap agreements, hedging, cap, floor, and collar agreements, currency spot and
forward contracts and other similar agreements and arrangements with the
Administrative Agent or any Affiliate of the Administrative Agent.
"Interest Rate Exposure" means at any time and from time to time of
determination, the amount, determined on a mark-to-market basis, of the
obligations and liabilities of any or all of the Borrowers with respect to each
Interest Rate Protection Agreement.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
from time to time, and the Income Tax Regulations issued and proposed to be
issued thereunder.
"Inventory" means all inventory of each Borrower and all right, title and
interest of each Borrower in and to all of its now owned and hereafter acquired
goods, merchandise and other personal property furnished under any contract of
service or intended for sale or lease, including, without limitation, all raw
materials, work-in-process, finished goods and materials and supplies of any
kind, nature or description which are used or consumed in any Borrower's
business or are or might be used in connection with the manufacture, packing,
shipping, advertising, selling or finishing of such goods, merchandise and other
licenses, warranties, franchises, general intangibles, personal property and all
documents of title or documents relating to the same and all proceeds (cash and
non-cash) of the foregoing.
"Item of Payment" means each check, draft, cash, money, instrument, item,
and other remittance in payment or on account of payment of the Receivables or
otherwise with respect to any Collateral, including, without limitation, cash
proceeds of any returned, rejected or repossessed goods, the sale or lease of
which gave rise to a Receivable, and other proceeds of Collateral; and "Items of
Payment" means the collective reference to all of the foregoing.
"Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs, or decrees of any Governmental Authority.
"Lease Obligations" of a Person means for any period the rental commitments
of such Person for such period under leases for real and/or personal property
(net of rent from subleases thereof, but including taxes, insurance, maintenance
and similar expenses which such Person, as the lessee, is obligated to pay under
the terms of said leases, except to the extent that such taxes, insurance,
maintenance and similar expenses are payable by sublessees), including rental
commitments under Capital Leases.
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<PAGE> 27
"Letter of Credit" and "Letters of Credit" shall have the meanings described
in Section 2.2.1 (Letters of Credit).
"Letter of Credit Agreement" means the collective reference to each letter
of credit application and agreement substantially in the form of the Appropriate
Letter of Credit Issuer's then standard form of application for letter of credit
or such other form as may be approved by the Administrative Agent and the
Appropriate Letter of Credit Issuer, executed and delivered by any one or more
of the Borrowers in connection with the issuance of a Letter of Credit, as the
same may from time to time be amended, restated, supplemented or modified; and
"Letter of Credit Agreements" means all of the foregoing in effect at any time
and from time to time.
"Letter of Credit Documents" means any and all drafts under or purporting to
be under a Letter of Credit, any Letter of Credit Agreement, and any other
instrument, document or agreement executed and/or delivered by any one or more
of the Borrowers or any other Person under, pursuant to or in connection with a
Letter of Credit or any Letter of Credit Agreement.
"Letter of Credit Facility" means the facility established pursuant to
Section 2.2 (Letter of Credit Facility).
"Letter of Credit Commitment Fee" and "Letter of Credit Commitment Fees"
have the meanings described in Section 2.2.2 (Letter of Credit Fees).
"Letter of Credit Fronting Fee" and "Letter of Credit Fronting Fees" have
the meanings described in Section 2.2.2(a) (Letter of Credit Fees).
"Letter of Credit Obligations" means the collective reference to all
Obligations of any one or more of the Borrowers with respect to the Letters of
Credit and the Letter of Credit Agreements.
"Liabilities" means at any date all liabilities that in accordance with GAAP
consistently applied should be classified as liabilities on a consolidated
balance sheet of the Borrowers and their respective Subsidiaries.
"Lien" means any mortgage, deed of trust, deed to secure debt, grant,
pledge, security interest, assignment, encumbrance, judgment, lien,
hypothecation, provision in any instrument or other document for confession of
judgment, cognovit or other similar right or remedy, claim or charge of any
kind, whether perfected or unperfected, avoidable or unavoidable, including,
without limitation, any conditional sale or other title retention agreement, any
lease in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction,
excluding the precautionary filing of any financing statement by any lessor in a
true lease transaction, by any bailor in a true bailment transaction or by any
consignor in a true consignment transaction under the Uniform Commercial Code of
any jurisdiction or the agreement to give any financing statement by any lessee
in a true lease transaction, by any bailee in a true bailment transaction or by
any consignee in a true consignment transaction. Rights of setoff arising by
operation of law are not included in the definition of "Liens".
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<PAGE> 28
"Loan" means each of the Revolving Loan or the Capital Expenditure Line as
the case may be, and "Loans" means the collective reference to the Revolving
Loan and the Capital Expenditure Line.
"Loan Notice" has the meaning described in Section 2.1.2(a) (Procedure for
Making Advances).
"Local Currency Borrower" means each corporation identified on Schedule
1.1-B attached to and made a part of this Agreement and "Local Currency
Borrowers" means the collective reference to all Local Currency Borrowers.
"Lockbox" has the meaning described in Section 2.1.8 (The Collateral
Account).
"Material Adverse Effect" means a material adverse effect upon the (i)
business, properties, operations or financial condition of the Borrowers, taken
as a whole, (ii) ability of the Borrowers to perform their respective
obligations under the Financing Documents, (iii) ability of the Lenders to
enforce their rights and remedies under the Financing Documents, or (iv) value
of, or the ability of the Agents and/or the Lenders to realize upon the value
of, the Collateral as security for the Obligations and/or the Agents'
Obligations with the priority required by this Agreement.
"Multi-Currency Agent" means a Person who is designated by NationsBank to
perform the duties of Multi-Currency Agent and who has assumed those duties by a
joinder to this Agreement, and shall include any successor to the Multi-Currency
Agent appointed pursuant to 8.7.3(Successor Agents).
"Multi-Currency Lender" means such Lenders as shall be agreed from time to
time among the Lenders, the Multi-Currency Agent, the Administrative Agent and
the Borrowers to be Multi-Currency Lenders.
"Multi-Currency Letter of Credit" shall have the meanings described in
Section 2.2.1 (Letters of Credit).
"Multi-Currency Letter of Credit Issuer" means the Multi-Currency Agent.
"Multi-Currency Letter of Credit Obligations" means, at any time, the sum
of, without duplication, all Letter of Credit Obligations with respect to
Multi-Currency Letters of Credit.
"Multi-Currency Participant" shall have the meaning provided in 2.3.1.
"Multi-Currency Revolving Loan", and, collectively, the "Multi-Currency
Revolving Loans" have the meaning set forth in Section 2.1.1(d).
"Multi-employer Plan" means a Plan which is a Multi-employer plan as defined
in Section 4001(a)(3) of ERISA.
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<PAGE> 29
"Net Outstandings" of any Lender means, at any time, the sum of (a) all
amounts paid by such Lender (other than pursuant to Section 8.5
(Indemnification)) to the Administrative Agent in respect to the Revolving Loan
or otherwise under this Agreement, minus (b) all amounts paid by the
Administrative Agent to such Lender which are received by the Administrative
Agent and which, pursuant to this Agreement, are paid over to such Lender for
application in reduction of the outstanding principal balance of the Revolving
Loan.
"Non-Ratable Loan" means an advance under the Revolving Loan made by
NationsBank in accordance with the provisions of Section 2.7.3(b) (Selection of
Settlement Dates).
"Note" means any Revolving Credit Note or any Capital Expenditure Line Note
as the case may be, and "Notes" means collectively each Revolving Credit Note,
each Capital Expenditure Line Note, and any other promissory note which may from
time to time evidence all or any portion of the Obligations.
"Obligations" means all present and future indebtedness, duties,
obligations, and liabilities, whether now existing or contemplated or hereafter
arising, of any one or more of the Borrowers to the Lenders and/or
Administrative Agent and/or the other Agents under, arising pursuant to, in
connection with and/or on account of the provisions of this Agreement, each
Note, each Security Document, Foreign Exchange Protection Agreement, Interest
Rate Protection Agreement and/or any of the other Financing Documents, the
Loans, and/or any of the Facilities including, without limitation, the principal
of, and interest on, each Note, late charges, the Fees, Interest Rate Exposure,
Foreign Exchange Exposure, Enforcement Costs, and prepayment fees (if any),
letter of credit fees or fees charged with respect to any guaranty of any letter
of credit; whether owed to the Administrative Agent, other Agents, the Lenders,
and/or to NationsBank or its Affiliates pursuant to or in connection with the
transactions contemplated by any of the Financing Documents of any nature
whatsoever regardless of whether such debts, obligations and liabilities be
direct, indirect, primary, secondary, joint, several, joint and several, fixed
or contingent; and also means any and all renewals, extensions, substitutions,
amendments, restatements and rearrangements of any such debts, obligations and
liabilities.
"Origination Fee" has the meaning described in Section 2.6.6 (Origination
Fee).
"Outstanding Letter of Credit Obligations" has the meaning described in
Section 2.2.3 (Terms of Letters of Credit).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Liens" means: (a) Liens for Taxes which are not delinquent or
which the Administrative Agent has determined in the exercise of its sole and
absolute discretion (i) are being diligently contested in good faith and by
appropriate proceedings, and such contest operates to suspend collection of the
contested Taxes and enforcement of a Lien, (ii) the respective Borrower has the
financial ability to pay, with all penalties and interest, at all times without
materially and adversely affecting such Borrower, and (iii) are not, and will
not be with appropriate filing, the giving of notice and/or the passage of time,
entitled to priority over any Lien of the Administrative Agent and/or the
Lenders; (b) deposits or pledges to secure obligations under workers'
compensation, social security or similar laws, or under unemployment
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<PAGE> 30
insurance in the ordinary course of business; (c) Liens securing the
Obligations; (d) judgment Liens to the extent the entry of such judgment does
not constitute an Event of Default under the terms of this Agreement or result
in the sale or levy of, or execution on, any of the Collateral; (e) Liens
securing the Senior Notes but only to the limited extent (i) such Liens do not
cover any Collateral described in Section 3.2, (ii) the property and assets
covered by such Liens equally and ratably secure the Obligations and the Agents'
Obligations by Liens which arose by operation of Section 3.4, and (iii) the
failure to grant such Liens at the time the Liens were granted to secure the
Obligations and the Agents' Obligations would have constituted an event of
default under the Indentures (excluding any modifications thereto), (f)
statutory liens of landlords, statutory liens of carriers, warehousemen,
mechanics, suppliers, materialmen and repairmen and other statutory liens which
arise by operation of law, which liens are incurred in the ordinary course of
business and which liens are not overdue for a period of more than 60 days or
are being contested in good faith by appropriate proceedings diligently pursued
provided that in the case of any such contest (i) any proceedings commenced for
the enforcement of such liens and encumbrances shall have been duly suspended;
and (ii) such provision for the payment of such liens and encumbrances has been
made on the books of such Person as may be required by GAAP; (g) easements,
zoning restrictions and other similar encumbrances with respect to real property
which do not interfere materially with the ordinary conduct of the business of
the Borrowers; (h) Liens arising from the filing of UCC financing statements for
precautionary purposes in connection with true leases of personal property; and
(i) such other Liens, if any, as are set forth on Schedule 4.1.21. attached
hereto and made a part hereof.
"Permitted Uses" means (a) with respect to the initial advance under the
Revolving Loan, the repayment of the existing indebtedness under the Parent's
7.68% Senior Notes due 2004 and to Comerica Bank and transaction costs related
to the closing of this Agreement, (b) with respect to the initial advance under
the Capital Expenditure Line, the repayment of the existing equipment financing
indebtedness under the Borrowers' credit facility with Comerica Bank, (c) the
purchase of equipment or the repayment of any advances under the Revolving Loan
used for the purchase of equipment, and (d) with respect to subsequent advances
under the Revolving Loan, the ongoing, ordinary course working capital needs of
each Borrower's business.
"Person" means and includes an individual, a corporation, a partnership, a
joint venture, a limited liability company or partnership, a trust, an
unincorporated association, a Governmental Authority, or any other organization
or entity.
"Plan" means any pension plan that is covered by Title IV of ERISA and in
respect of which any Borrower or a Commonly Controlled Entity is an "employer"
as defined in Section 3 of ERISA.
"Post-Default Rate" means the Prime Rate plus the Applicable Margin plus two
hundred (200) basis points.
"Prepayment" means a Revolving Loan Mandatory Prepayment, a Revolving Loan
Optional Prepayment or a Capital Expenditure Line Optional Prepayment, as the
case may be, and "Prepayments" mean collectively all Revolving Loan Mandatory
Prepayments, all Revolving Loan Optional Prepayments and all Capital Expenditure
Line Optional Prepayments.
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<PAGE> 31
"Pricing Ratio" means the Funded Debt to EBITDA Ratio.
"Prime Rate" means the floating and fluctuating per annum prime commercial
lending rate of interest of the Administrative Agent, as established and
declared by the Administrative Agent at any time or from time to time. The Prime
Rate shall be adjusted automatically, without notice, as of the effective date
of any change in such prime commercial lending rate. The Prime Rate does not
necessarily represent the lowest rate of interest charged by the Administrative
Agent or any of the Lenders to borrowers.
"Pro Rata Share" means at any time and as to any Lender, the percentage
derived by dividing the unpaid principal amount of the Loans and Letter of
Credit Obligations owing to that Lender by the aggregate unpaid principal amount
of all Loans and Letter of Credit Obligations then outstanding; or if no Loans
or Letter of Credit Obligations are outstanding, by dividing the total amount of
such Lender's Commitments by the total amount of the Commitments of the
Administrative Agent and all of the Lenders.
"Purchase Agreements" means the collective reference to each assignment and
other agreement by which a Local Currency Borrower transfers all of its accounts
and related rights to the Parent for the purpose of having such accounts
included among the Assigned Local Currency Receivables, and further means each
acknowledgement by a Local Currency Borrower that each such assignment and
agreement is subject to an Assignment of Purchase Agreement.
"Receivable" means one of each Borrower's now owned and hereafter owned,
acquired or created Accounts, chattel paper, General Intangibles and instruments
which are part of the Collateral; and "Receivables" means all of each Borrower's
now or hereafter owned, acquired or created Accounts, chattel paper, General
Intangibles and instruments which are part of the Collateral, and all cash and
non-cash proceeds and products thereof.
"Relevant Currency Time" means, for any Borrowing in any currency, the local
time in the city where the Appropriate Payment Office for such currency is
located.
"Reportable Event" means any of the events set forth in Section 4043(c) of
ERISA or the regulations thereunder.
"Reserve Percentage" means, at any time, the then current maximum rate for
which reserves (including any basic, special, supplemental, marginal and
emergency reserves) are required to be maintained by member banks of the Federal
Reserve System under Regulation D of the Board of Governors of the Federal
Reserve System against "Eurocurrency liabilities", as that term is defined in
Regulation D. Without limiting the effect of the foregoing, the Reserve
Percentage shall reflect any other reserves required to be maintained by such
member banks with respect to (i) any category of liabilities which includes
deposits by reference to which the Eurodollar Rate is to be determined, or (ii)
any category of extensions of credit or other assets which include Eurodollar
Loans. The Eurodollar Rate shall be adjusted automatically on and as of the
effective date of any change in the Reserve Percentage.
"Responsible Officer" means for each Borrower, its chief executive officer
or president or, with respect to financial matters, its chief financial officer
or Treasurer.
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<PAGE> 32
"Requisite Lenders" means at any time of determination one or more of the
Lenders holding at least sixty-six and two-thirds percent (66-2/3%) of the
Commitments.
"Revolving Credit Commitment" means the agreement of a Lender relating to
the making the Revolving Loan and advances thereunder subject to and in
accordance with the provisions of this Agreement; and "Revolving Credit
Commitments" means the collective reference to the Revolving Credit Commitment
of each of the Lenders.
"Revolving Credit Commitment Period" means the period of time from the
Closing Date to the Business Day preceding the Revolving Credit Termination
Date.
"Revolving Credit Committed Amount" has the meaning described in Section
2.1.1 (Revolving Credit Facility).
"Revolving Credit Expiration Date" means May 31, 2003, extending
automatically for successive periods of one (1) year (but in no event later than
May 31, 2008) unless the Administrative Agent in the exercise of its sole and
absolute discretion has notified the Parent, or the Parent in the exercise of
its sole and absolute discretion has notified the Administrative Agent, no later
than the February 28th immediately preceding the next scheduled Revolving Credit
Expiration Date of its intention to terminate the Revolving Credit Facility as
of the next scheduled Revolving Credit Expiration Date..
"Revolving Credit Facility" means the facility established by the Lenders
pursuant to Section 2.1 (Revolving Credit Facility).
"Revolving Credit Note" and "Revolving Credit Notes" have the meanings
described in Section 2.1.5 (Revolving Credit Notes).
"Revolving Credit Pro Rata Share" has the meaning described in Section 2.1.1
(Revolving Credit Facility).
"Revolving Credit Termination Date" means the earlier of (a) the Revolving
Credit Expiration Date, or (b) the date on which the Revolving Credit
Commitments are terminated pursuant to Section 7.2 (Remedies) or otherwise.
"Revolving Credit Unused Line Fee" and "Revolving Credit Unused Line Fees"
have the meanings described in Section 2.1.10 (Revolving Credit Unused Line
Fee).
"Revolving Loan" has the meaning described in Section 2.1.1 (Revolving
Credit Facility).
"Revolving Loan Account" has the meaning described in Section 2.1.9
(Revolving Loan Account).
"Revolving Loan Mandatory Prepayment" and "Revolving Loan Mandatory
Prepayments" have the meanings described in Section 2.1.6 (Mandatory Prepayments
of Revolving Loan).
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<PAGE> 33
"Revolving Loan Optional Prepayment" and "Revolving Loan Optional
Prepayments" have the meanings described in Section 2.1.7 (Optional Prepayments
of Revolving Loan).
"Security Documents" means collectively any assignment, pledge agreement,
security agreement, mortgage, deed of trust, deed to secure debt, financing
statement and any similar instrument, document or agreement under or pursuant to
which a Lien is now or hereafter granted to, or for the benefit of, the
Administrative Agent and/or the Lenders on any real or personal property of any
Person to secure all or any portion of the Obligations, all as the same may from
time to time be amended, restated, supplemented or otherwise modified,
including, without limitation, this Agreement, Stock Pledge Agreements, the
Assignments of Patents, the Assignments of Trademarks, and the Assignments of
Purchase Agreement.
"Security Procedures" means the rules, policies and procedures adopted and
implemented by the Administrative Agent and its Affiliates at any time and from
time to time with respect to security procedures and measures relating to
electronic funds transfers, all as the same may be amended, restated,
supplemented, terminated, or otherwise modified at any time and from time to
time by the Administrative Agent in its sole and absolute discretion.
"Senior Notes" means the collective reference to (a) $110,000,000 aggregate
principal amount 9-7/8% Senior Notes due 2005 issued pursuant to the provisions
of an indenture dated as of July 27, 1995, among the Parent, certain of the
Domestic Borrowers as the Guarantors (as defined herein), and Bankers Trust
Company, as trustee , and (b) $100,000,000 aggregate principal amount 10-1/8%
Senior Notes due 2007 issued pursuant to the provisions of an indenture dated as
of December 15, 1997, among the Parent, certain of the Domestic Borrowers as the
Guarantors (as defined herein), and Bankers Trust Company, as trustee.
"Senior Notes Indentures" means the collective reference to the indentures
described in the definition of "Senior Notes."
"Senior Notes Trustees" means the collective reference to the trustees under
the Senior Notes Indentures."
"Settlement Date" means each Business Day after the Closing Date selected by
the Administrative Agent in its sole discretion subject to and in accordance
with the provisions of Section 2.7.3 (Settlement Procedures as to Revolving
Loan) as of which a Settlement Report is delivered by the Administrative Agent
and on which settlement is to be made among the Lenders in accordance with the
provisions of Section 2.7 (Settlement Among Lenders).
"Settlement Report" means each report prepared by the Administrative Agent
and delivered to each Lender and setting forth, among other things, as of the
Settlement Date indicated thereon and as of the next preceding Settlement Date,
the aggregate outstanding principal balance of the Revolving Loan, each Lender's
Revolving Credit Pro Rata Share thereof, each Lender's Net Outstandings and all
Non-Ratable Loans made, and all payments of principal, interest and Fees
received by the Administrative Agent from the Borrowers during the period
beginning on such next preceding Settlement Date and ending on such Settlement
Date.
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<PAGE> 34
"Spot Rate" means, as of any determination with respect to the conversion of
an amount in a currency into Dollars, the rate of exchange quoted at 11:00 a.m.
(Baltimore time) by "CRT" tele-rate service for the spot purchase in the foreign
exchange market in Chicago of such amount of that currency with Dollars.
"State" means the State of Maryland.
"Stock Pledge Agreements" means collective reference to each pledge,
assignment and security agreement dated the date hereof from the Parent and from
Walbro Automotive Corporation to the Administrative Agent for the benefit of the
Lenders ratably and the Agents, as the same may from time to time be amended,
restated, supplemented or otherwise modified covering collectively 100% of the
common stock of the Domestic Borrowers (but not the Parent) and 65% of the
common stock of the Local Currency Borrowers.
"Subordinated Indebtedness" means all Indebtedness for Borrowed Money,
including, without limitation, the Subordinated Debt, incurred at any time by
any one or more of the Borrowers, which is in amounts, subject to repayment
terms, and subordinated to the Obligations, as set forth in one or more written
agreements, all in form and substance satisfactory to the Administrative Agent
in its sole and absolute discretion.
"Subsidiary" means as to any Person, any corporation, association or other
business entity in which such Person or one or more of its Subsidiaries or such
Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions of such entity), and any partnership or joint venture if more
than 50% of the interest in the profits or capital thereof is owned by such
Person or one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries).
"Subsidiary Securities" means the collective reference to each and every
"investment property" (as defined under the provisions of Title 9 of the
Uniform Commercial Code in the State, whether or not that Title actually
applies to or governs) of the Parent of any one or more of the Borrowers in a
Subsidiary.
"Syndication Date" shall mean the date upon which the Administrative Agent
determines (and notifies the Borrowers) that the primary syndication (and
resultant addition of Persons as Lenders pursuant to Section 9.5) has been
completed (it being understood and agreed that prior to the 180th day after the
Closing Date the Administrative Agent agrees to use its reasonable efforts to
have the Syndication Date occur on the last day of an Interest Period applicable
to outstanding Eurodollar Loans).
"Taxes" means all taxes and assessments whether general or special, ordinary
or extraordinary, or foreseen or unforeseen, of every character (including all
penalties or interest thereon), which at any time may be assessed, levied,
confirmed or imposed by any Governmental Authority on any or all of the
Borrowers or any of its or their properties or assets or any part thereof or in
respect of any of its or their franchises, businesses, income or profits.
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"Total Capital Expenditure Line Committed Amount" has the meaning described
in Section 2.4.1.
"Total Revolving Credit Committed Amount" has the meaning described in
Section 2.1.1.
"Type" means any type of Loan determined with respect to the interest option
applicable thereto, i.e., a Base Rate Loan or a Eurodollar Loan.
"Unused Availability" means as of the date of determination the Borrowing
Base minus the outstanding principal amount of the aggregate of (a) the
Revolving Loan plus (b) without duplication, Outstanding Letter of Credit
Obligations plus (c) Interest Rate Exposure plus (d) Foreign Exchange Exposure.
"US Dollars" and the sign "$" shall each mean freely transferable lawful
money of the United States of America.
"US Letter of Credit" shall have the meanings described in Section 2.2.1
(Letters of Credit).
"US Letter of Credit Issuer" shall mean NationsBank.
"Uniform Commercial Code" means, unless otherwise provided in this
Agreement, the Uniform Commercial Code as adopted by and in effect from time to
time in the State or in any other jurisdiction, as applicable.
"Wholly Owned Subsidiary" means any corporation all the shares of stock of
all classes of which (other than directors' qualifying shares) at the time are
owned directly or indirectly by a Borrower and/or by one or more Wholly Owned
Subsidiaries of a Borrower.
"Wire Transfer Procedures" means the rules, policies and procedures adopted
and implemented by the Administrative Agent and its Affiliates at any time and
from time to time with respect to electronic funds transfers, including, without
limitation, the Security Procedures, all as the same may be amended, restated,
supplemented, terminated or otherwise modified at any time and from time to time
by the Administrative Agent in its sole and absolute discretion.
"Year 2000 Problem" has the meaning set forth in Section 4.1.29 (Year 2000
Compliance).
Section 1.2 Accounting Terms and Other Definitional Provisions.
Unless otherwise defined herein, as used in this Agreement and in any
certificate, report or other document made or delivered pursuant hereto,
accounting terms not otherwise defined herein, and accounting terms only partly
defined herein, to the extent not defined, shall have the respective meanings
given to them under GAAP, as consistently applied to the applicable Person.
Unless otherwise defined herein, all terms used herein which are defined by the
Uniform Commercial Code shall have the same meanings as assigned to them by the
Uniform Commercial Code unless and to the extent varied by this Agreement. The
words "hereof",
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<PAGE> 36
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and article, section, subsection, schedule and exhibit
references are references to articles, sections or subsections of, or schedules
or exhibits to, as the case may be, this Agreement unless otherwise specified.
As used herein, the singular number shall include the plural, the plural the
singular and the use of the masculine, feminine or neuter gender shall include
all genders, as the context may require. Reference to any one or more of the
Financing Documents shall mean the same as the foregoing may from time to time
be amended, restated, substituted, extended, renewed, supplemented or otherwise
modified. Reference in this Agreement and the other Financing Documents to the
"Borrower", the "Borrowers", "each Borrower" or otherwise with respect to any
one or more of the Borrowers shall mean each and every Borrower and any one or
more of the Borrowers, jointly and severally, unless a specific Borrower is
expressly identified.
ARTICLE II
THE CREDIT FACILITIES
Section 2.1 The Revolving Credit Facility.
2.1.1 Revolving Credit Facility.
(a) Subject to and upon the provisions of this Agreement, the
Lenders collectively, but severally, establish a revolving credit facility in
favor of the Borrowers. The amount of each Lender's commitment to lend under the
Revolving Loan is herein called such Lender's "Revolving Credit Committed
Amount" and is set forth below each Lender's signature to this Agreement. The
total of each Lender's Revolving Credit Committed Amount equals One Hundred
Twenty-five Million Dollars ($125,000,000) and is herein called the "Total
Revolving Credit Committed Amount." The proportionate share set forth below each
Lender's signature is herein called such Lender's "Revolving Credit Pro Rata
Share." Neither the Administrative Agent nor any of the Lenders shall be
responsible for the Revolving Credit Commitment of any other Lender, nor will
the failure of any Lender to perform its obligations under its Revolving Credit
Commitment in any way relieve any other Lender from performing its obligations
under its Revolving Credit Commitment.
(b) During the Revolving Credit Commitment Period, any or all of
the Borrowers may request advances under the Revolving Credit Facility (each, a
"Revolving Loan" and, collectively, the "Revolving Loans") in accordance with
the provisions of this Agreement; provided that after giving effect to any
Borrower's request:
(i) the aggregate outstanding principal balance of the
Revolving Loans and all Letter of Credit Obligations would not exceed the
lesser of (A) the Total Revolving Credit Committed Amount minus Interest
Rate Exposure minus Foreign Exchange Exposure, or (B) the Borrowing Base;
and
(ii) the outstanding principal balance of each Lender's
Pro Rata Share of the Revolving Loans and of the Letter of
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Credit Obligations would not exceed the lesser of (A) such Lender's
Revolving Credit Committed Amount minus an amount equal to such Lender's
Revolving Credit Pro Rata Share multiplied by the aggregate of (1) Interest
Rate Exposure plus (2) the Foreign Exchange Exposure, or (B) such Lender's
Revolving Credit Pro Rata Share of the Borrowing Base.
(c) As part of the Revolving Credit Facility and subject to the
further limitations of 2.1.1(b), each Lender severally agrees, on the terms and
conditions set forth herein, to make Revolving Loans denominated in US Dollars
(each, a "US Revolving Loan" and, collectively, the "US Revolving Loans") to the
Parent and the Domestic Borrowers from time to time.
(d) As part of the Revolving Credit Facility and subject to the
further limitations of 2.1.1(b) and subject to fulfillment of the additional
conditions set forth in Section 5.3, each Multi-Currency Lender agrees, on the
terms and conditions set forth in this Agreement, to make its Revolving Credit
Pro Rata Share of Revolving Loans denominated in the currency (which shall be an
Approved Foreign Currency) of the jurisdiction where the applicable Local
Currency Borrower is located (each, a "Multi-Currency Revolving Loan", and,
collectively, the "Multi-Currency Revolving Loans") to any Local Currency
Borrower from time to time in an amount which, when added to the Multi-Currency
Lender's Revolving Credit Pro Rata Share of the aggregate principal amount of
all Multi-Currency Revolving Loans then outstanding and owed by such Local
Currency Borrower plus the aggregate amount of all Multi-Currency Letter of
Credit Obligations issued for the account of such Local Currency Borrower at
such time, would not exceed the applicable limitations established pursuant to
Section 5.3
(e) Each Revolving Loan (i) shall be denominated in US Dollars
or an Approved Foreign Currency, and (ii) except as hereinafter provided, may,
at the option of the Borrower to which such Revolving Loan was made, be incurred
and maintained as and/or converted into Base Rate Loans or Eurodollar Loans,
provided that (x) all Revolving Loans made as part of the same Borrowing shall,
unless otherwise specifically provided herein, consist of Revolving Loans of the
same Type and (y) unless the Administrative Agent has determined that the
Syndication Date has occurred (at which time this clause (y) shall no longer be
applicable), each Borrowing of Eurodollar Loans may only have an Interest Period
of one month.
(f) Notwithstanding any other provision of this Agreement to the
contrary, the Borrowers and the Administrative Agent acknowledge and agree that
all Revolving Loans shall be US Revolving Loans and all Letters of Credit shall
be US Letters of Credit unless and until the Parent gives the Administrative
Agent notice that the Parent wishes to obtain Multi-Currency Revolving Loans and
a Multi-Currency Agent has been designated by the Administrative Agent and has
joined into this Agreement to assume the duties of Multi-Currency Agent under
this Agreement and the other Financing Documents and the other conditions set
forth in Section 5.3 have been met. The parties to this Agreement agree that to
be effective such joinder and assumption may be in a writing signed only by the
Administrative Agent and the Multi-Currency Agent, with a copy delivered to the
Parent, provided, however, the parties agree to execute and deliver promptly
such acknowledgements and agreements with respect thereto as the Administrative
Agent may reasonably request.
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<PAGE> 38
2.1.2 Procedure for Making Advances Under the Revolving Loans;
Lender Protection Loans.
(a) Whenever a Borrower desires to incur Loans, (i)
with respect to any Borrowing of US Revolving Loans, it shall give the
Administrative Agent at the Appropriate Notice Office, prior to noon (Baltimore
City time), (x) at least three Business Days' prior written notice (or
telephonic notice promptly confirmed by telecopy) of each Borrowing of
Eurodollar Loans and (y) same day written notice (or telephonic notice promptly
confirmed by telecopy) of each Borrowing of Base Rate Loans to be made hereunder
and (ii) with respect to any Borrowing of Multi-Currency Revolving Loans, it
shall give the Multi-Currency Agent at the Appropriate Notice Office, prior to
12:00 P.M. (Relevant Currency Time), (x) at least three Business Days' prior
written notice (or telephonic notice promptly confirmed by telecopy) of each
Borrowing of Eurodollar Loans and (y) at least one Business Day's prior written
notice (or telephonic notice promptly confirmed by telecopy) of each Borrowing
of Base Rate Loans to be made hereunder. Each such notice (each, a "Loan
Notice") shall, except under the circumstances described in Section 2.5.3, be
irrevocable, and, in the case of each written notice and each confirmation of
telephonic notice, shall specify (i) the aggregate principal amount and the
Approved Foreign Currency, if any, of the Loans to be made pursuant to such
Borrowing, (ii) the date of such Borrowing (which shall be a Business Day), (ii)
whether the respective Borrowing shall consist of Base Rate Loans or, to the
extent permitted hereunder, Eurodollar Loans and, if Eurodollar Loans, the
Interest Period to be initially applicable thereto and (iii) in the case of a
Borrowing of Multi-Currency Loans, the Multi-Currency Lender requested to make
such Multi-Currency Revolving Loan. The Administrative Agent or the
Multi-Currency Agent, as the case may be, shall promptly give each Lender
written notice (or telephonic notice promptly confirmed in writing) of each
proposed Borrowing, of such Lender's proportionate share thereof, if any, and of
the other matters covered by the Loan Notice. The Administrative Agent or the
Multi-Currency Agent, as applicable, promptly will make available to the
requesting Borrower by depositing to its account at such Appropriate Payment
Office the aggregate of the amounts received made available in the type of funds
received.
(b) Without in any way limiting the obligation of any
Borrower to confirm in writing any telephonic notice permitted to be given
hereunder, the Administrative Agent, the Multi-Currency Agent, or any Letter of
Credit Issuer (in the case of the issuance of Letters of Credit), as the case
may be, may prior to receipt of written confirmation act without liability upon
the basis of such telephonic notice, believed by the Administrative Agent, the
Multi-Currency Agent, or such Letter of Credit Issuer, as the case may be, in
good faith to be from a Responsible Officer of the relevant Borrower. In each
such case, each Borrower hereby waives the right to dispute the Administrative
Agent's, the Multi-Currency Agent's, or any Letter of Credit Issuer's record of
the terms of such telephonic notice, absent manifest error.
(c) In the case of any Borrowing that the related Loan
Notice specifies is to be comprised of Eurodollar Loans, the Parent and the
requesting Borrower shall indemnify, except under the circumstances described in
Section 2.5.3, each Lender against any loss, cost or expense incurred by such
Lender as a result of any failure to fulfill on or before the date specified in
such Loan Notice for such Borrowing the applicable conditions set forth in
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<PAGE> 39
Section 5.2 (Conditions to All Extensions of Credit), including, without
limitation, any loss, cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund the Loan
to be made by such Lender as part of such Borrowing when such Loan, as a result
of such failure, is not made on such date.
(d) Upon receipt of any such Loan Notice, the
Administrative Agent shall promptly notify each Lender of the amount of each
advance to be made by such Lender on the requested borrowing date under such
Lender's Revolving Credit Commitment.
(e) No later than 1:00 p.m. (Baltimore City Time) on
each requested borrowing date for the making of advances under the Revolving
Credit Facility, each Lender shall, if it has received timely notice from the
Administrative Agent of the Borrowers' request for such advances, make
available to the Administrative Agent, in funds immediately available to
the Administrative Agent at the Administrative Agent's office set forth in
Section 9.1 (Notices), such Lender's Pro Rata Share of the advances to be made
on such date.
(f) In addition, each of the Borrowers hereby irrevocably
authorize the Lenders at any time and from time to time, without further request
from, but with notice to follow to the Parent, to make advances under the
Revolving Credit Facility which the Administrative Agent, in its sole and
absolute discretion, deems necessary or appropriate to protect the interests of
the Administrative Agent, the Multi-Currency Agent, other Agents and/or any or
all of the Lenders under this Agreement, including, without limitation, advances
under the Revolving Credit Facility made to cover debit balances in the
Revolving Loan Account, principal of, and/or interest on, any Loan, the
Obligations (including any Letter of Credit Obligations), and/or Enforcement
Costs, prior to, on, or after the termination of other advances under this
Agreement, regardless of whether the outstanding principal amount of the
Revolving Credit Facility which the Lenders may advance hereunder exceeds the
Total Revolving Credit Committed Amount.
2.1.3 Borrowing Base.
As used in this Agreement, the term "Borrowing Base" means at any
time, an amount equal to the aggregate of (a) eighty-five percent (85%) of the
amount of Eligible Receivables, plus (b) the lesser of (i) the sum of sixty
percent (60%) of the amount of Eligible Inventory consisting of raw materials
(other than resin raw materials) and finished goods plus seventy percent (70%)
of the amount of Eligible Inventory consisting of resin raw materials or (ii)
Fifty Million Dollars ($50,000,000), less (c) such reserves as the
Administrative Agent shall deem proper in its reasonable judgment based on
customary asset-based lending practices.
The Borrowing Base shall be computed based on the Borrowing Base
Report most recently delivered to and accepted by the Administrative Agent in
its sole and absolute discretion. In the event the Borrowers fail to furnish a
Borrowing Base Report required by Section 2.1.4 (Borrowing Base Report), or in
the event the Administrative Agent believes that a Borrowing Base Report is no
longer accurate, the Administrative Agent may, in its sole and absolute
discretion exercised from time to time and without limiting other rights and
remedies under this Agreement, but with a substantially concurrent notice to the
Borrowers, direct the
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<PAGE> 40
Lenders to suspend the making of or limit advances under the Revolving Credit
Facility. The Borrowing Base shall be subject to reduction by amounts credited
to the Collateral Account since the date of the most recent Borrowing Base
Report and by the amount of any Receivable or any Inventory which was included
in the Borrowing Base but which the Administrative Agent determines in its good
faith discretion fails to meet the respective criteria applicable from time to
time for Eligible Receivables or Eligible Inventory.
If at any time the total of the aggregate principal amount of the
Revolving Loans, Outstanding Letter of Credit Obligations, plus Interest Rate
Exposure plus Foreign Exchange Exposure, exceeds the Borrowing Base, a borrowing
base deficiency ("Borrowing Base Deficiency") shall exist. Each time a Borrowing
Base Deficiency exists, the Borrowers at the sole and absolute discretion of the
Administrative Agent exercised from time to time shall pay the Borrowing Base
Deficiency ON DEMAND to the Administrative Agent for the benefit of the Lenders
from time to time.
Without implying any limitation on the Administrative Agent's
discretion with respect to the Borrowing Base, the criteria for Eligible
Receivables and for Eligible Inventory contained in the respective definitions
of Eligible Receivables and of Eligible Inventory are in part based upon the
business operations of the Borrowers existing on or about the Closing Date and
upon information and records furnished to the Administrative Agent by the
Borrowers. If at any time or from time to time hereafter, the business
operations of the Borrowers change or such information and records furnished to
the Administrative Agent is incorrect or misleading, the Administrative Agent in
its discretion may at any time and from time to time during the duration of this
Agreement change such criteria or add new criteria. The Administrative Agent
shall communicate such changed or additional criteria to the Borrowers from time
to time either orally or in writing.
2.1.4 Borrowing Base Report.
The Borrowers will furnish to the Administrative Agent no less
frequently than monthly and at such other times as may be requested by the
Administrative Agent a report of the Borrowing Base (each a "Borrowing Base
Report"; collectively, the "Borrowing Base Reports") in the form required from
time to time by the Administrative Agent, appropriately completed and duly
signed. The Borrowing Base Report shall contain the amount and payments on the
Receivables, the value of Inventory, and the calculations of the Borrowing Base,
all in such detail, and accompanied by such supporting and other information, as
the Administrative Agent may from time to time request. Upon the Administrative
Agent's request and upon the creation of any Receivables, or at such intervals
as the Administrative Agent may require, the Borrowers will provide the
Administrative Agent with (a) confirmatory assignment schedules; (b) copies of
Account Debtor invoices; (c) evidence of shipment or delivery; and (d) such
further schedules, documents and/or information regarding the Receivables and
the Inventory as the Administrative Agent may reasonably require. The items to
be provided under this subsection shall be in form satisfactory to the
Administrative Agent, and certified as true and correct by a Responsible
Officer, and delivered to the Administrative Agent from time to time solely for
the Administrative Agent's convenience in maintaining records of the Collateral.
Any Borrowers' failure to deliver any of such items to the Administrative Agent
shall not affect, terminate,
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modify, or otherwise limit the Liens of the Administrative Agent and the Lenders
in the Collateral.
2.1.5 Revolving Credit Notes.
The obligation of the Borrowers to pay each Lender's Pro Rata Share of
the Revolving Loan, with interest, shall be evidenced by a series of promissory
notes (as from time to time extended, amended, restated, supplemented or
otherwise modified, collectively the "Revolving Credit Notes" and individually a
"Revolving Credit Note") substantially in the form of EXHIBIT "B-1" attached
hereto and made a part hereof, with appropriate insertions. Each Lender's
Revolving Credit Note shall be dated as of the Closing Date, shall be payable to
the order of such Lender at the times provided in the Revolving Credit Note, and
shall be in the principal amount of such Lender's Revolving Credit Pro Rata
Share. Each of the Borrowers acknowledge and agree that, if the outstanding
principal balance of the Revolving Loan outstanding from time to time exceeds
the aggregate face amount of the Revolving Credit Notes, the excess shall bear
interest at the rates provided from time to time for advances under Revolving
Loan evidenced by the Revolving Credit Notes and shall be payable, with accrued
interest, ON DEMAND. The Revolving Credit Notes shall not operate as a novation
of any of the Obligations or nullify, discharge, or release any such Obligations
or the continuing contractual relationship of the parties hereto in accordance
with the provisions of this Agreement.
2.1.6 Mandatory Prepayments of Revolving Loan.
The Borrowers shall make the mandatory prepayments (each a "Revolving
Loan Mandatory Prepayment" and collectively, the "Revolving Loan Mandatory
Prepayments") of the Revolving Loan at any time and from time to time in such
amounts requested by the Administrative Agent pursuant to Section 2.1.3
(Borrowing Base) in order to cover any Borrowing Base Deficiency.
2.1.7 Optional Prepayments of Revolving Loan.
The Borrowers shall have the option at any time and from time to time
prepay (each a "Revolving Loan Optional Prepayment" and collectively the
"Revolving Loan Optional Prepayments") the Revolving Loan, in whole or in part
without premium or penalty.
2.1.8 The Collateral Accounts.
(a) The Borrowers will deposit, or cause to be deposited, all
Items of Payment into bank accounts designated or approved by the Administrative
Agent (collectively, the "Collateral Accounts; " each a "Collateral Account").
The Borrowers agree that following an Event of Default and/or if the Borrowers
at any time fail to maintain the availability required by the Section 2.1.12(b),
the Administrative Agent, at its option, shall have sole power of access to and
withdrawal from the Collateral Accounts. Each depository bank of a Collateral
Account shall confirm in a writing that, following notice from the
Administrative Agent, the depository bank will honor only the Administrative
Agent's instructions with respect to the Collateral Account for which it is the
depository.
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<PAGE> 42
(b) Each deposit to the Collateral Accounts shall be made not
later than the next Business Day after the date of receipt of the Items of
Payment. The Items of Payment shall be deposited in precisely the form received,
except for the endorsements of the Borrowers where necessary to permit the
collection of any such Items of Payment, which endorsement the Borrowers hereby
agree to make. In the event the Borrowers fail to do so, the Borrowers hereby
authorize the Administrative Agent to make the endorsement in the name of any or
all of the Borrowers. Prior to such a deposit, the Borrowers will not commingle
any Items of Payment with any of the Borrowers' other funds or property, but
will hold them separate and apart in trust and for the account of the
Administrative Agent for the benefit of the Lenders ratably and the Agents.
(c) Notwithstanding the provisions of subsections (a) and (b)
above, prior to an Event of Default and/or the Borrowers' failure to maintain
the availability required by the Section 2.1.12(b), (i) the Parent may continue
to use its demand deposit account with Thumb National Bank consistent with past
practices and with balances consistent with the Parent's immediate cash needs
and (ii) the Local Currency Borrowers may continue to use their demand deposit
account with local banks consistent with past practices and with balances
consistent with their immediate cash needs.
(d) In addition, if so directed by the Administrative Agent
following an Event of Default and/or if the Borrowers at any time fail to
maintain the availability required by the Section 2.1.12(b), the Borrowers shall
direct the mailing of all Items of Payment from their Account Debtors to one or
more post-office boxes designated by the Administrative Agent, or to such other
additional or replacement post-office boxes pursuant to the request of the
Administrative Agent from time to time (collectively, the "Lockbox"). The
Administrative Agent shall have unrestricted and exclusive access to the
Lockbox.
(e) The Borrowers hereby authorize the Administrative Agent, from
and after the occurrence and during the continuation of an Event of Default,
and/or for so long as the Borrowers fail to maintain the availability required
by Section 2.1.12(b), to inspect all Items of Payment, endorse all Items of
Payment in the name of any or all of the Borrowers, and deposit such Items of
Payment in the Collateral Accounts. The Administrative Agent reserves the right,
exercised in its sole and absolute discretion, from and after the occurrence and
during the continuation of an Event of Default, and/or for so long as the
Borrowers fail to maintain the availability required by Section 2.1.12(b), to
provide to the Collateral Accounts credit prior to final collection of an Item
of Payment and to disallow credit for any Item of Payment which is
unsatisfactory to the Administrative Agent. In the event Items of Payment are
returned to the Administrative Agent for any reason whatsoever, the
Administrative Agent may, in the exercise of its discretion from time to time,
forward such Items of Payment a second time. Any returned Items of Payment shall
be charged back to the Collateral Accounts, the Revolving Loan Account, or other
account, as appropriate.
(f) Unless the Administrative Agent has notified the Borrowers
otherwise following an Event of Default and/or if the Borrowers at any time fail
to maintain the availability required by the Section 2.1.12(b), the Borrowers
may use the amounts
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deposited in the Collateral Accounts for those uses which are Permitted Uses for
the Revolving Loan after the Closing Date.
(g) In the event the Administrative Agent determines the
application of proceeds of the Collateral Accounts pursuant to this Section
2.1.8, the Administrative Agent will apply the whole or any part of the
collected funds received by the Administrative Agent from the Collateral
Accounts against the Revolving Loan (or with respect to Items of Payment which
are not proceeds of Accounts or Inventory or after an Event of Default, against
any of the Obligations).
2.1.9 Revolving Loan Account.
The Administrative Agent will establish and maintain a loan account on
its books (the "Revolving Loan Account") to which the Administrative Agent will
(a) debit (i) the principal amount of each advance under the Revolving Loan made
by the Lenders hereunder as of the date made, (ii) the amount of any interest
accrued on the Revolving Loan as and when due, and (iii) any other amounts due
and payable by the Borrowers to the Administrative Agent and/or the Lenders from
time to time under the provisions of this Agreement in connection with the
Revolving Loan, including, without limitation, Enforcement Costs, Fees, late
charges, and service and collection fees, as and when due and payable, and (b)
credit all payments made by the Borrowers to the Administrative Agent on account
of the Revolving Loan as of the date made including, without limitation, funds
credited to the Revolving Loan Account from the Collateral Account. The
Administrative Agent may debit the Revolving Loan Account for the amount of any
Item of Payment which is returned to the Administrative Agent unpaid. All credit
entries to the Revolving Loan Account are conditional and shall be readjusted as
of the date made if final and indefeasible payment is not received by the
Administrative Agent in cash or solvent credits. The Borrowers hereby promise to
pay to the order of the Administrative Agent for the ratable benefit of the
Lenders, ON DEMAND, an amount equal to the excess, if any, of all debit entries
over all credit entries recorded in the Revolving Loan Account under the
provisions of this Agreement. Any and all periodic or other statements or
reconciliations, and the information contained in those statements or
reconciliations, of the Revolving Loan Account shall be presumed conclusively to
be correct, and shall constitute an account stated between the Administrative
Agent, the Lenders and the Borrowers unless the Administrative Agent receives
specific written objection thereto from any Borrower and/or any Lender within
thirty (30) Business Days after such statement or reconciliation shall have been
sent by the Administrative Agent. Any and all periodic or other statements or
reconciliations, and the information contained in those statements or
reconciliations, of the Revolving Loan Account shall be final, binding and
conclusive upon the Borrowers in all respects, absent manifest error, unless the
Administrative Agent receives specific written objection thereto from the
Borrowers within thirty (30) Business Days after such statement or
reconciliation shall have been sent by the Administrative Agent.
2.1.10 Revolving Credit Unused Line Fee.
(a) The Borrowers shall pay to the Administrative Agent for the
ratable benefit of the Lenders a monthly revolving credit facility fee
(collectively, the "Revolving Credit Unused Line Fees" and individually, a
"Revolving Credit Unused Line Fee")
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based on the average daily unused and undisbursed portion of the Total Revolving
Credit Committed Amount in effect from time to time accruing during the
preceding month. The accrued and unpaid portion of the Revolving Credit Unused
Line Fee shall be paid by the Borrowers to the Administrative Agent on the first
day of each month, commencing on the first such date following the date hereof,
and on the Revolving Credit Termination Date.
(b) The Revolving Credit Unused Line Fee shall initially be
thirty-seven and one-half (37.5) basis points per annum. Changes in the
Revolving Credit Unused Line Fee shall be made not more frequently than
quarterly based on the Borrowers' Pricing Ratio from the fiscal quarter reports
required by Section 6.1.1(c), except that the first such determination shall be
made based on the Borrowers' annual financial statements required by Section
6.1.1(a) for the Borrowers' fiscal year ended December 31, 1998. The Revolving
Credit Unused Line Fee (expressed as basis points) shall vary depending upon the
Borrowers' Pricing Ratio, as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Pricing Ratio Revolving Credit Unused Line Fee
- -------------------------------------------------------------------------------
<S> <C>
Equal to or greater than 4.0 to 1.0 37.5
- -------------------------------------------------------------------------------
Equal to or greater than 3.0 to 1.0 25.0
- -------------------------------------------------------------------------------
Less than 3.0 to 1.0 12.5
- -------------------------------------------------------------------------------
</TABLE>
(c) Notwithstanding the foregoing, following the occurrence and
during the continuance of an Event of Default, at the option of the
Administrative Agent, the Revolving Credit Unused Line Fee shall equal to
thirty-seven and one-half (37.5) basis points per annum.
2.1.11 Early Termination Fee.
In the event of the termination by, or on behalf of, the Borrowers, of
the Revolving Credit Commitment, the Borrowers shall pay a fee (the "Early
Termination Fee") equal to following amount at the following times:
<TABLE>
<CAPTION>
Period Early Termination Fee
------ ---------------------
<S> <C>
Closing Date through and including, May 31, 1999 $500,000
June 1, 1999, through and including, May 31, 2000 $250,000
June 1, 2000 through and including, May 31, 2001 $100,000
Thereafter $0
</TABLE>
Payment of the Revolving Loan in whole or in part by or on behalf of
the Borrowers, by court order or otherwise, following and as a result of the
institution of any bankruptcy proceeding by or against the Borrowers, shall be
deemed to be a prepayment of the Revolving Loan subject to the Early Termination
Fee provided in this subsection. The Early Termination Fee shall be paid to the
Administrative Agent for the ratable benefit of the Lenders.
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<PAGE> 45
Notwithstanding the foregoing, there shall not, however, be an Early
Termination Fee due if the termination of the Revolving Credit Commitments and
Letters of Credit and repayment of the Revolving Credit Facility is made solely
as a result of (a) a replacement credit facility extended by NationsBank and/or
its Affiliates to the Borrowers, which generates sufficient proceeds and is in
fact used to repay all Obligations (including all Letter of Credit Obligations)
in full and, if, in connection with such repayment of all Obligations, all
Letters of Credit are terminated, secured by cash or back-to-back letter of
credit, and/or released or if the issuers release the Lenders from their
obligations to the issuer with respect to the Letters of Credit, or (b) a
simultaneous initial public offering of the Parent's common stock with net
proceeds to the Parent, of $20,000,000 or more, or (c) the generation and
retention of "excess cash flow" sufficient to have maintained the outstanding
principal balance of the Revolving Loan at zero for at least one fiscal quarter
and the demonstration to the Administrative Agent's reasonable satisfaction that
there is no use, need for or contemplation of senior revolving debt for the next
four (4) fiscal quarters. As used in this paragraph "excess cash flow" means for
any annual period of determination, as determined on a consolidated basis, an
amount equal to the Borrowers' EBITDA less Debt Service minus cash taxes paid,
minus increases in working capital plus decreases in working capital, minus
unfinanced Capital Expenditures, as shown on the annual financial statements for
such annual period, furnished to the Administrative Agent in accordance with
Section 6.1.1(a); or in the event that the Borrowers fail to deliver such
financial statements to the Administrative Agent as and when required, the
Administrative Agent shall estimate, in its good faith discretion, the amount of
excess cash flow for such period.
2.1.12 Required Availability under the Revolving Credit Facility.
(a) On the Closing Date, Unused Availability (after allowance
for the payment of the amount of the Permitted Uses of the Revolving Loan
required to be made on the Closing Date and the amount of the costs relating to
the closing of this Agreement (including, without limitation, applicable Fees,
recording costs, recording taxes, and the fees and expenses of the Borrowers'
and the Lender's professionals and allowance for the payment the amount of the
Borrowers' trade payables in the ordinary course of their businesses and after
giving effect to the receipt by the Administrative Agent of the net proceeds
from the sale on the Closing Date of the assets of Sharon Manufacturing
Company) shall not be less than Twenty Million Dollars ($20,000,000).
(b) After the Closing Date, Unused Availability shall at no time
be less than Five Million Dollars ($5,000,000). The Parent agrees to use all
reasonable efforts to cause Walbro Automotive S. A., its Subsidiary corporation
organized under the laws of France, and Walbro Japan, Inc. its Subsidiary
corporation organized under the laws of Japan, to enter into Purchase Agreements
and provide such other documents and information as the Administrative Agent may
reasonably require, which would allow their respective accounts to be included
among Assigned Local Currency Receivables on or before June 30, 1998. In the
event of such inclusion for either or both of those Subsidiaries, Unused
Availability shall at no time be less than Ten Million Dollars ($10,000,000)
(c) The Borrowers shall make a Revolving Loan Mandatory
Prepayment pursuant to the provisions of Section 2.1.6 (Mandatory Prepayments
of Revolving Loan) to the extent necessary to achieve compliance with this
Section.
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Section 2.2 The Letter of Credit Facility.
2.2.1 Letters of Credit.
Subject to and upon the provisions of this Agreement, and as a
part of the Revolving Credit Commitments, each of the Borrowers, upon the prior
approval of the Administrative Agent, may obtain commercial and standby letters
of credit for drawing in US Dollars (each a "US Letter of Credit", and
collectively, the "US Letters of Credit") from the US Letter of Credit Issuer,
and for drawing in an Approved Foreign Currency (each a "Multi-Currency Letter
of Credit" and, collectively, the "Multi-Currency Letters of Credit") from the
Multi-Currency Letter of Credit Issuer (the US Letters of Credit and the
Multi-Currency Letters of Credit being collectively, the "Letters of Credit;"
and each a "Letter of Credit") from time to time from the Closing Date until
the Business Day preceding the Revolving Credit Termination Date. The Borrowers
will not be entitled to obtain a Letter of Credit unless (a) the Borrowers are
then able to obtain a Revolving Loan (subject to any applicable Approved Local
Currency or other restrictions) from the Lenders in an amount not less than the
proposed face amount of the Letter of Credit requested by the Borrowers, and
(b) the sum of the then Outstanding Letter of Credit Obligations (including the
amount of the requested Letter of Credit) does not exceed Twenty-five Million
Dollars ($25,000,000).
2.2.2 Letter of Credit Fees.
(a) The Borrowers shall pay to the Appropriate Letter of
Credit Issuer, for its own account, a fee of twenty-five (25) basis points per
annum of the aggregate face amount of the Letters of Credit outstanding on the
first day of the month, without regard for provisions contained in the Letters
of Credit which may give rise to a reduction in the outstanding principal
amount of the Letters of Credit unless such reduction has actually occurred
(each a "Letter of Credit Fronting Fee" and collectively, the "Letter of Credit
Fronting Fees"). The accrued and unpaid portion of each Letter of Credit
Fronting Fee shall be paid in arrears on the first day of each month and upon
the expiration or termination date of the respective Letter of Credit
Agreements. In addition, the Borrowers shall pay to the Appropriate Letter of
Credit Issuer, for its own account, any and all additional issuance,
negotiation, processing, transfer or other charges to the extent and as and
when required by the provisions of any Letter of Credit Agreement. All Letter
of Credit Fronting Fees and such other charges are included in and are a part
of the "Fees" payable by the Borrowers under the provisions of this Agreement
and are for the sole and exclusive benefit of the Appropriate Letter of Credit
Issuer and are a part of the Agents' Obligations.
(b) In addition and in connection with each Letter of
Credit Agreement, the Borrowers shall pay to the Administrative Agent for the
ratable (based upon each Lender's Revolving Credit Pro Rata Share) benefit of
the Lenders a fee (each a "Letter of Credit Commitment Fee" and collectively
the "Letter of Credit Commitment Fees") in an amount equal to one hundred
seventy-five (175) basis points per annum (calculated monthly in arrears on the
basis of actual number of days elapsed in a year of 360 days) of the
outstanding face amount of each Letter of Credit on the first day of the
month, without regard for provisions contained in the Letters of Credit which
may give rise to a reduction in the outstanding principal amount of the Letters
of Credit unless such reduction has actually occurred. The accrued and unpaid
portion of
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each Letter of Credit Commitment Fee shall be paid in arrears on the first day
of each month and upon the expiration or termination date of the respective
Letter of Credit Agreements.
2.2.3 Terms of Letters of Credit; Post-Expiration Date Letters of
Credit.
Each Letter of Credit shall (a) be opened pursuant to a Letter of
Credit Agreement and (b) expire on a date not later than the Business Day
preceding the Revolving Credit Expiration Date; provided, however, if any Letter
of Credit does have an expiration date later than the Business Day preceding the
Revolving Credit Termination Date (each a "Post-Expiration Date Letter of
Credit" and collectively, the "Post-Expiration Date Letters of Credit"),
effective as of the Business Day preceding the Revolving Credit Termination Date
and without prior notice to or the consent of the Borrowers, the Lenders shall
make advances under the Revolving Loan for the account of the Borrowers in the
aggregate face amount of all such Letters of Credit. The amount of each Lender's
advance shall be equal to its Revolving Credit Pro Rata Share of the aggregate
face amount of all such Post-Expiration Date Letters of Credit. The
Administrative Agent shall deposit the proceeds of such advances into one or
more non-interest bearing accounts with and in the name of the Administrative
Agent and over which the Administrative Agent alone shall have exclusive power
of access and withdrawal (collectively, the "Letter of Credit Cash Collateral
Account"). The Letter of Credit Cash Collateral Account is to be held by the
Administrative Agent, for the ratable benefit of the Lenders, as additional
collateral and security for any Letter of Credit Obligations relating to the
Post-Expiration Date Letters of Credit. The Borrowers hereby assign, pledge,
grant and set over to the Administrative Agent, for the ratable benefit of the
Lenders, a first priority security interest in, and Lien on, all of the funds on
deposit in the Letter of Credit Cash Collateral Account, together with any and
all proceeds (cash and non-cash) and products thereof as additional collateral
and security for the Letter of Credit Obligations relating to the
Post-Expiration Date Letters of Credit. The Borrowers acknowledge and agree that
the Administrative Agent shall be entitled to fund any draw or draft on any
Post-Expiration Date Letter of Credit from the monies on deposit in the Letter
of Credit Cash Collateral Account without notice to or consent of the Borrowers
or any of the Lenders. The Borrowers further acknowledge and agree that the
Administrative Agent's election to fund any draw or draft on any Post-Expiration
Date Letter of Credit from the Letter of Credit Cash Collateral shall in no way
limit, impair, lessen, reduce, release or otherwise adversely affect the
Borrowers' obligation to pay any Letter of Credit Obligations under or relating
to the Post-Expiration Date Letters of Credit. At such time as all
Post-Expiration Date Letters of Credit have expired and all Letter of Credit
Obligations relating to the Post-Expiration Date Letters of Credit have been
paid in full, the Administrative Agent agrees to apply the amount of any
remaining funds on deposit in the Letter of Credit Cash Collateral Account to
the then unpaid balance of the Obligations under the Revolving Credit Facility
in such order and manner as the Administrative Agent shall determine in its sole
and absolute discretion in accordance with the provisions of this Agreement.
Each Letter of Credit shall be used to support the Borrowers'
ordinary course working capital purposes and shall be in a face amount at least
equal to Two Hundred Fifty Thousand Dollars ($250,000) or the Foreign Currency
Equivalent thereof. The aggregate face amount of all Letters of Credit at any
one time outstanding and issued by the Appropriate Letter of Credit
Issuer pursuant to the provisions of this Agreement, including, without
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<PAGE> 48
limitation, any and all Post-Expiration Date Letters of Credit, plus the amount
of any unpaid Letter of Credit Fees accrued or scheduled to accrue thereon, and
less the aggregate amount of all drafts issued under or purporting to have been
issued under such Letters of Credit that have been paid by the Appropriate
Letter of Credit Issuer and for which the Appropriate Letter of Credit Issuer
has been reimbursed by the Borrowers in full in accordance with Section 2.2.5
below and the Letter of Credit Agreements, and for which the Appropriate Letter
of Credit Issuer has no further obligation or commitment to restore all or any
portion of the amounts drawn and reimbursed, is herein called the "Outstanding
Letter of Credit Obligations".
2.2.4 Procedures for Letters of Credit.
The Borrowers shall give the Appropriate Letter of Credit Issuer
written notice at least five (5) Business Days prior to the date on which a
Borrower desires the Appropriate Letter of Credit Issuer to issue a Letter of
Credit. Such notice shall be accompanied by a duly executed Letter of Credit
Agreement specifying, among other things: (a) the name and address of the
intended beneficiary of the Letter of Credit, (b) the requested face amount of
the Letter of Credit, (c) whether the Letter of Credit is to be revocable or
irrevocable, (d) the Business Day on which the Letter of Credit is to be opened
and the date on which the Letter of Credit is to expire, (e) the terms of
payment of any draft or drafts which may be drawn under the Letter of Credit,
and (f) any other terms or provisions the Borrowers desire to be contained in
the Letter of Credit. Such notice shall also be accompanied by such other
information, certificates, confirmations, and other items as the Appropriate
Letter of Credit Issuer may require to assure that the Letter of Credit is to be
issued in accordance with the provisions of this Agreement and a Letter of
Credit Agreement. In the event of any conflict between the provisions of this
Agreement and the provisions of a Letter of Credit Agreement, the provisions of
this Agreement shall prevail and control unless otherwise expressly provided in
the Letter of Credit Agreement. Upon (x) receipt of such notice, (y) payment of
all Letter of Credit Fees and all other Fees payable in connection with the
issuance of such Letter of Credit, and (z) receipt of a duly executed Letter of
Credit Agreement, the Appropriate Letter of Credit Issuer shall process such
notice and Letter of Credit Agreement in accordance with its customary
procedures and open such Letter of Credit on the Business Day specified in such
notice.
2.2.5 Payments of Letters of Credit.
The Borrowers hereby promise to pay to the Appropriate Letter of Credit
Issuer, ON DEMAND and in United States Dollars, the following which are herein
collectively referred to as the "Current Letter of Credit Obligations":
(a) the amount which the Appropriate Letter of Credit Issuer has
paid or will be required to pay under each draft or draw on a Letter of Credit,
whether such demand be in advance of the Appropriate Letter of Credit Issuer 's
payment or for reimbursement for such payment;
(b) any and all reasonable charges and expenses which the
Appropriate Letter of Credit Issuer may pay or incur relative to the Letter of
Credit and/or such draws or drafts; and
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(c) interest on the amounts described in (a) and (b) not paid by
the Borrowers as and when due and payable under the provisions of (a) and (b)
above from the day the same are due and payable until paid in full at a rate per
annum equal to the Post-Default Rate.
In addition, the Borrowers hereby promise to pay any and all other
Letter of Credit Obligations as and when due and payable in accordance with the
provisions of this Agreement and the Letter of Credit Agreements. The obligation
of the Borrowers to pay Current Letter of Credit Obligations and all other
Letter of Credit Obligations shall be absolute and unconditional under any and
all circumstances and irrespective of any setoff, counterclaim or defense to
payment which the Borrowers or any other account party may have or have had
against the beneficiary of such Letter of Credit, the Appropriate Letter of
Credit Issuer, the Agents, any of the Lenders, or any other Person, including,
without limitation, any defense based on the failure of any draft or draw to
conform to the terms of such Letter of Credit, any draft or other document
proving to be forged, fraudulent or invalid, or the legality, validity,
regularity or enforceability of such Letter of Credit, any draft or other
documents presented with any draft, any Letter of Credit Agreement, this
Agreement, or any of the other Financing Documents, all whether or not the
Appropriate Letter of Credit Issuer, any Agent or any of the Lenders had actual
or constructive knowledge of the same, and irrespective of any Collateral,
security or guarantee therefor or right of offset with respect thereto and
irrespective of any other circumstances whatsoever which constitutes, or might
be construed to constitute, an equitable or legal discharge of the Borrowers for
any Letter of Credit Obligations, in bankruptcy or otherwise; provided, however,
that the Borrowers shall not be obligated to reimburse the Appropriate Letter of
Credit Issuer for any wrongful payment under such Letter of Credit made as a
result of the Appropriate Letter of Credit Issuer's gross negligence or willful
misconduct. The obligation of the Borrowers to pay the Letter of Credit
Obligations shall not be conditioned or contingent upon the pursuit by the
Appropriate Letter of Credit Issuer or any other Person at any time of any right
or remedy against any Person which may be or become liable in respect of all or
any part of such obligation or against any Collateral, security or guarantee
therefor or right of offset with respect thereto.
The Letter of Credit Obligations shall continue to be effective, or be
reinstated, as the case may be, if at any time payment of all or any portion of
the Letter of Credit Obligations is rescinded or must otherwise be restored or
returned by the Appropriate Letter of Credit Issuer or any of the Agents or
Lenders upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of any Person, or upon or as a result of the appointment of a
receiver, intervenor, or conservator of, or trustee or similar officer for, any
Person, or any substantial part of such Person's property, all as though such
payments had not been made.
2.2.6 Change in Law; Increased Cost.
If any change in any law or regulation or in the interpretation thereof
by any court or other Governmental Authority charged with the administration
thereof shall either (a) impose, modify or deem applicable any reserve, special
deposit or similar requirement against Letters of Credit issued by the
Appropriate Letter of Credit Issuer, or (b) impose on the Appropriate Letter of
Credit Issuer or any of the Agents or Lenders any other condition
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regarding this Agreement or any Letter of Credit, and the result of any event
referred to in clauses (a) or (b) above shall be to increase the cost to the
Appropriate Letter of Credit Issuer of issuing, maintaining or extending the
Letter of Credit or the cost to any of the Lenders of funding any obligation
under or in connection with the Letter of Credit (which increase in cost shall
be the result of the Appropriate Letter of Credit Issuer's reasonable allocation
of the aggregate of such cost increases resulting from such events), then, upon
demand by the Appropriate Letter of Credit Issuer, the Borrowers shall
immediately pay to the Appropriate Letter of Credit Issuer from time to time as
specified by the Appropriate Letter of Credit Issuer, additional amounts which
shall be sufficient to compensate the Appropriate Letter of Credit Issuer, the
Agents and the Lenders for such increased cost, together with interest on each
such amount from the date demanded until payment in full thereof at a rate per
annum equal to the then highest current rate of interest on the Revolving Loan.
A certificate as to such increased cost incurred by the Appropriate Letter of
Credit Issuer and/or any of the Lenders or Agents, submitted by the
Administrative Agent to the Borrowers, shall be conclusive, absent manifest
error. Notwithstanding the foregoing, each Lender hereby agrees to (i) use good
faith efforts to change its Appropriate Payment Office, if such change (A) would
eliminate the necessity for the payment of such additional amounts and (B) not
have an adverse effect on such Lender and (ii) treat the Borrowers in
substantially the same manner as it treats all similarly situated borrowers with
respect to the requirement to pay such additional amounts.
2.2.7 General Letter of Credit Provisions.
The Borrowers hereby instruct the Appropriate Letter of Credit Issuer
to pay any draft complying with the terms of any Letter of Credit irrespective
of any instructions of the Borrowers to the contrary. The Borrowers assume all
risks of the acts and omissions of the beneficiary and other users of any Letter
of Credit. The Appropriate Letter of Credit Issuer, the Agents, the Lenders and
their respective branches, Affiliates and/or correspondents shall not be
responsible for and the Borrowers hereby indemnify and hold the Appropriate
Letter of Credit Issuer, the Agents, the Lenders and their respective branches,
Affiliates and/or correspondents harmless from and against all liability, loss
and expense (including reasonable attorney's fees and costs) incurred by the
Appropriate Letter of Credit Issuer, the Agents, the Lenders and/or their
respective branches, Affiliates and/or correspondents relative to and/or as a
consequence of (a) any failure by the Borrowers to perform the agreements
hereunder and under any Letter of Credit Agreement, (b) any Letter of Credit
Agreement, this Agreement, any Letter of Credit and any draft, draw and/or
acceptance under or purported to be under any Letter of Credit, (c) any action
taken or omitted by the Appropriate Letter of Credit Issuer, any of the Lenders,
Agents and/or any of their respective branches, Affiliates and/or correspondents
at the request of the Borrowers, (d) any failure or inability to perform in
accordance with the terms of any Letter of Credit by reason of any control or
restriction rightfully or wrongfully exercised by any de facto or de jure
Governmental Authority, group or individual asserting or exercising governmental
or paramount powers, and/or (e) any consequences arising from causes beyond the
control of the Appropriate Letter of Credit Issuer, any of the Lenders, Agents
and/or any of their respective branches, Affiliates and/or correspondents.
Except for gross negligence or willful misconduct, the Appropriate
Letter of Credit Issuer, the Lenders, the Agents and their respective branches,
Affiliates and/or
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correspondents, shall not be liable or responsible in any respect for any (a)
error, omission, interruption or delay in transmission, dispatch or delivery of
any one or more messages or advices in connection with any Letter of Credit,
whether transmitted by cable, telegraph, mail or otherwise and despite any
cipher or code which may be employed, and/or (b) action, inaction or omission
which may be taken or suffered by it or them in good faith or through
inadvertence in identifying or failing to identify any beneficiary or otherwise
in connection with any Letter of Credit.
Any Letter of Credit may be amended, modified or revoked only upon the
receipt by the Appropriate Letter of Credit Issuer from the Borrowers and the
beneficiary (including any transferee and/or assignee of the original
beneficiary), of a written consent and request therefor.
If any Laws, order of court and/or ruling or regulation of any
Governmental Authority of the United States (or any state thereof) and/or any
country other than the United States permits a beneficiary under a Letter of
Credit to require the Appropriate Letter of Credit Issuer, the Lenders, the
Agents and/or any of their respective branches, Affiliates and/or correspondents
to pay drafts under or purporting to be under a Letter of Credit after the
expiration date of the Letter of Credit, the Borrowers shall reimburse the
Appropriate Letter of Credit Issuer and the Lenders and Agents, as appropriate,
for any such payment pursuant to provisions of Section 2.2.6 (Change in Law;
Increased Cost).
Except as may otherwise be specifically provided in a Letter of Credit
or Letter of Credit Agreement, the laws of the State of Maryland and the Uniform
Customs and Practice for Documentary Credits, 1993 Revision, International
Chamber of Commerce Publication No. 500 shall govern the Letters of Credit. The
Laws, rules, provisions and regulations of the Uniform Customs and Practice for
Documentary Credits are hereby incorporated by reference. In the event of a
conflict between the Uniform Customs and Practice for Documentary Credits and
the laws of the State of Maryland, the Uniform Customs and Practice for
Documentary Credits shall prevail.
2.2.8 Participations in the Letters of Credit.
Each Lender hereby irrevocably authorizes the Appropriate Letter of
Credit Issuer to issue Letters of Credit in accordance with the provisions of
this Agreement. As of the date each Letter of Credit is opened or issued by the
Appropriate Letter of Credit Issuer pursuant to the provisions of this
Agreement, each Lender shall have an undivided participating interest in (a) the
rights and obligations of the Appropriate Letter of Credit Issuer under such
Letter of Credit, and (b) the Outstanding Letter of Credit Obligations of the
Borrowers with respect to such Letter of Credit, in an amount equal to each
Lender's Revolving Credit Pro Rata Share of such Outstanding Letter of Credit
Obligations.
2.2.9 Payments by the Lenders to the Appropriate Letter of Credit
Issuer.
If the Borrowers fail to pay to the Appropriate Letter of Credit Issuer
any Current Letter of
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Credit Obligations as and when due and payable, the Appropriate Letter of Credit
Issuer shall promptly notify each of the Lenders and shall demand payment from
each of the Lenders such Lender's Revolving Credit Pro Rata Share of such unpaid
Current Letter of Credit Obligations. In addition, if any amount paid to the
Appropriate Letter of Credit Issuer on account of Current Letter of Credit
Obligations is rescinded or required to be restored or turned over by the
Appropriate Letter of Credit Issuer upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Borrowers or upon or as a
result of the appointment of a receiver, intervenor, trustee, conservator or
similar officer for the Borrowers, or is otherwise not indefeasibly covered by
an advance under the Revolving Loan, the Appropriate Letter of Credit Issuer
shall promptly notify each of the Lenders and shall demand payment from each of
the Lenders of its Revolving Credit Pro Rata Share of its portion of the Current
Letter of Credit Obligations to be remitted to the Borrowers.
Each of the Lenders irrevocably and unconditionally agrees to honor any
such demands for payment under this Section and promises to pay to the
Appropriate Letter of Credit Issuer's account on the same Business Day as
demanded the amount of its Revolving Credit Pro Rata Share of the Current Letter
of Credit Obligations in immediately available funds, without any setoff,
counterclaim or deduction of any kind. Any payment by a Lender hereunder shall
in no way release, discharge or lessen the obligation of the Borrowers to pay
Current Letter of Credit Obligations to the Appropriate Letter of Credit Issuer
in accordance with the provisions of this Agreement.
The obligation of each of the Lenders to remit the amounts of its
Revolving Credit Pro Rata Share of Current Letter of Credit Obligations for the
account of the Appropriate Letter of Credit Issuer pursuant to this Section
shall be unconditional and irrevocable under any and all circumstances and may
not be terminated, suspended or delayed for any reason whatsoever, provided that
all payments of such amounts by each of the Lenders shall be without prejudice
to the rights of each of the Lenders with respect to the Appropriate Letter of
Credit Issuer's alleged willful misconduct. Any claim any Lender may have
against the Appropriate Letter of Credit Issuer as a result of the Appropriate
Letter of Credit Issuer's alleged willful misconduct may be brought by such
Lender in a separate action against the Appropriate Letter of Credit Issuer but
may not be used as a defense to payment under the provisions of this Section.
No failure of any Lender to remit the amount of its Revolving Credit
Pro Rata Share of Current Letter of Credit Obligations to the Appropriate Letter
of Credit Issuer pursuant to this Section shall affect the obligations of the
Appropriate Letter of Credit Issuer under any Letter of Credit, and if any
Lender does not remit to the Appropriate Letter of Credit Issuer the amount of
its Revolving Credit Pro Rata Share of Current Letter of Credit Obligations on
the same day as demanded, then without limiting such Lender's obligation to
transmit funds on the same Business Day as demanded, such Lender shall be
obligated to pay, on demand of the Appropriate Letter of Credit Issuer and
without setoff, counterclaim or deduction of any kind whatsoever interest on the
unpaid amount at the Federal Funds Rate for each day from the date such amount
shall be due and payable to the Appropriate Letter of Credit Issuer until the
date such amount shall have been paid in full to the Appropriate Letter of
Credit Issuer by such Lender.
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Section 2.3 Multi-Currency Participations.
2.3.1 Multi-Currency Participants.
At any time that a Multi-Currency Lender makes a Multi-Currency Loan or
the Multi-Currency Letter of Credit Issuer issues a Multi-Currency Letter of
Credit, each other Lender shall be deemed, without further action by any Person,
to have purchased from such Multi-Currency Lender or Multi-Currency Letter of
Credit Issuer, as the case may be, an unfunded participation in any such
Multi-Currency Loan or Multi-Currency Letter of Credit, as the case may be, in
an amount equal to such Lender's Revolving Credit Pro Rata Share of the
aggregate principal amount of such Multi-Currency Revolving Loan or stated
amount of such Multi-Currency Letter of Credit and shall be obligated to fund
such participation at such time and in the manner provided below. Upon (i) the
occurrence and during the continuance of a Default, and (ii) the demand
(confirmed within a reasonable time in writing) (notwithstanding any other fact
or circumstance) by any Multi-Currency Lender or Multi-Currency Letter of Credit
of Credit Issuer, as the case may be to the Multi-Currency Agent and the
Administrative Agent (with prompt telephonic notice of such demand followed by a
copy of such written demand to each other Lender, each such other Lender, a
"Multi-Currency Participant") and each Borrower with respect to any outstanding
Multi-Currency Revolving Loan made by such Multi-Currency Lender or Current
Letter of Credit Obligations in respect of any drawing under a Multi-Currency
Letter of Credit, each Multi-Currency Participant shall purchase from such
Multi-Currency Lender or Multi-Currency Letter of Credit Issuer, as the case may
be, without recourse to such Multi-Currency Lender or Multi-Currency Letter of
Credit Issuer, as the case may be (except in the case of a breach of the
representation and warranty set forth below in this clause (ii)), and such
Multi-Currency Lender shall sell and assign to each such Multi-Currency
Participant, such Multi-Currency Participant's Revolving Credit Pro Rata Share
of the aggregate principal amount of such outstanding Multi-Currency Revolving
Loan or such Current Letter of Credit Obligations with respect to a
Multi-Currency Letter of Credit as of the date of such demand. Any such demand
made by a Multi-Currency Lender or Multi-Currency Letter of Credit Issuer, as
the case may be, shall specify the amount of US Dollars (based upon the actual
exchange rate at which the Multi-Currency Agent anticipates being able to obtain
the relevant Foreign Currency (with any excess payment being refunded to the
Multi-Currency Participants and any deficiency remaining payable by the
Multi-Currency Participants)) required from such Multi-Currency Participant in
order to effect the purchase and funding by such Multi-Currency Participant of
its Revolving Credit Pro Rata Share of the aggregate principal amount of any
such Multi-Currency Revolving Loan or such Current Letter of Credit Obligations
with respect to a Multi-Currency Letter of Credit. Each Multi-Currency
Participant shall effect such purchase, sale, assignment and funding by making
available to the Multi-Currency Agent for the account of such Multi-Currency
Lender or Multi-Currency Letter of Credit Issuer, as the case may be, by deposit
to the Appropriate Payment Office, in same day funds in US Dollars, such amount
required to effect the purchase by such Multi-Currency Participant of its
Revolving Credit Pro Rata Share of the aggregate principal amount of such
outstanding Multi-Currency Revolving Loan or such Current Letter of Credit
Obligations with respect to a Multi-Currency Letter of Credit. Each Borrower
hereby agrees to each such purchase, sale and assignment. Each Multi-Currency
Participant agrees to purchase and fund its Revolving Credit Pro Rata Share of
the aggregate principal amount of an outstanding Multi-Currency Revolving Loan
or Current Letter
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of Credit Obligations in respect of any drawing under a Multi-Currency Letter of
Credit on (1) the US Business Day on which demand therefor is made by a
Multi-Currency Lender or Multi-Currency Letter of Credit Issuer, as the case may
be, provided that notice of such demand is given not later than 11:00 a.m.
(Baltimore City time) on such US Business Day or (2) the first US Business Day
next succeeding such demand if notice of such demand is given after such time.
2.3.2 Representations of Multi-Currency Lender and Multi-Currency
Letter of Credit Issuer.
Upon any such purchase, sale and assignment by a Multi-Currency Lender
or a Multi-Currency Letter of Credit Issuer to any Multi-Currency Participant of
a portion of a Multi-Currency Revolving Loan or Current Letter of Credit
Obligations under a Multi-Currency Letter of Credit, such Multi-Currency Lender
or Multi-Currency Letter of Credit Issuer, as applicable, represents and
warrants to such Multi-Currency Participant that such Multi-Currency Lender or
Multi-Currency Letter of Credit Issuer, as applicable, is the legal and
beneficial owner of such interest being sold and assigned by it, but makes no
other representation or warranty and assumes no responsibility with respect to
such Multi-Currency Revolving Loan or Multi-Currency Letter of Credit, the
Financing Documents or any Credit Party. If and to the extent that any
Multi-Currency Participant shall not have so made the amount of its purchase
price with respect to such Multi-Currency Revolving Loan or Current Letter of
Credit Obligations in respect of any drawing under a Multi-Currency Letter of
Credit available to the Multi-Currency Letter of Credit Issuer, such
Multi-Currency Participant agrees to pay to the Multi-Currency Letter of Credit
Issuer forthwith on demand such amount together with interest thereon, for each
day from the date of demand by such Multi-Currency Lender or Multi-Currency
Letter of Credit Issuer to the date such amount is paid to the Multi-Currency
Letter of Credit Issuer, at the Federal Funds Rate. If such Multi-Currency
Participant shall pay to the Multi-Currency Letter of Credit Issuer such amount
for the account of a Multi-Currency Lender or Multi-Currency Letter of Credit
Issuer on any Business Day, such amount so paid in respect of principal shall
constitute a Multi-Currency Revolving Loan made by such Multi-Currency
Participant in its capacity as a Lender (and for such purposes such Lender shall
be deemed to be a Multi-Currency Lender with respect to such Multi-Currency
Revolving Loan) on such Business Day for purposes of this Agreement, and the
outstanding principal amount of such Multi-Currency Revolving Loan originally
made by such Multi-Currency Lender shall be reduced by such amount on such
Business Day. Each Multi-Currency Participant acknowledges and agrees that,
notwithstanding anything in this Agreement to the contrary, its obligation to
purchase and fund its Revolving Credit Pro Rata Share of the aggregate principal
amount of any Multi-Currency Revolving Loan or in respect of any drawing under a
Multi-Currency Letter of Credit hereunder is absolute and unconditional and
shall not be affected by any circumstance whatsoever, including, without
limitation, (i) the occurrence and continuance of any Default or Event of
Default, (ii) the existence of any claim, set-off, defense or other right that
such Multi-Currency Participant may have at any time against any Multi-Currency
Lender, any Multi-Currency Letter of Credit Issuer, any other Lender, any
Borrower or any other Person, whether in connection with the transactions
contemplated by this Agreement or any unrelated transaction or (iii) any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, such Multi-Currency Participant.
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<PAGE> 55
2.3.3 Standing of Multi-Currency Participant.
If, and for so long as any Multi-Currency Participant's public debt
rating (as defined below) is below A- by S&P or Moody's (or, with respect to any
Multi-Currency Participant that does not have such a public debt rating at any
time of determination, the Multi-Currency Lenders shall determine that such
Multi-Currency Participant's ability to meet such Multi-Currency Participant's
obligations under Section 2.3.1 above has declined since the date such
Multi-Currency Participant became a Multi-Currency Participant hereunder), (1)
such Multi-Currency Participant shall, immediately upon demand by any
Multi-Currency Lender or Multi-Currency Letter of Credit Issuer, as the case may
be, cash collateralize its Revolving Credit Pro Rata Share of the aggregate
principal amount of all outstanding Multi-Currency Revolving Loans and all
outstanding Multi-Currency Letters of Credit by depositing an amount equal to
such Revolving Credit Pro Rata Share into a cash collateral account designated
by the Administrative Agent (and, if necessary, established for such purposes
and, so long as no Default or Event of Default has occurred and is continuing,
established in such location as determined after consultation with the
Borrowers), and (2) each such Multi-Currency Participant shall, if so demanded
by any Multi-Currency Lender in its sole discretion, or by any Multi-Currency
Letter of Credit Issuer in its sole discretion, as the case may be, by written
notice to the Administrative Agent, the Multi-Currency Agent, the Borrowers and
such Multi-Currency Participant, prior to the funding by the Multi-Currency
Lender of any Multi-Currency Revolving Loans in connection with each additional
Multi-Currency Revolving Loan and prior to the issuance of each additional
Multi-Currency Letter of Credit, deposit to such cash collateral account an
amount equal to such Multi-Currency Participant's Revolving Credit Pro Rata
Share of the aggregate amount of such Multi-Currency Revolving Loan or the
Letter of Credit Obligations with respect to such Multi-Currency Letter of
Credit, as the case may be. Amounts deposited by any Multi-Currency Participant
in any such cash collateral account shall be held for the benefit of the
Multi-Currency Lenders, shall be applied by the Administrative Agent to satisfy
such Multi-Currency Participant's obligations under clause (i) above and shall,
to the extent such amounts exceed at any time such Multi-Currency Participant's
Revolving Credit Pro Rata Share of all outstanding Multi-Currency Revolving
Loans and all outstanding Multi-Currency Letters of Credit, be returned to such
Multi-Currency Participant. The term "public debt rating" means, as of any date
with respect to any Person, the rating that has been most recently announced by
either S&P or Moody's, as the case may be, for any class of non-credit enhanced
long-term senior unsecured debt issued by such Person.
2.3.4 Reports of Multi-Currency Agent
The Multi-Currency Agent shall furnish to the Administrative Agent and
each Lender on the first Business Day of each week a written report summarizing
the aggregate principal amount of Multi-Currency Revolving Loans outstanding in
each Approved Foreign Currency (including the U.S. Dollar Foreign Currency
Equivalent thereof) during the preceding week.
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<PAGE> 56
Section 2.4 The Capital Expenditure Line Facility.
2.4.1 Capital Expenditure Line Facility.
Subject to and upon the provisions of this Agreement, the Lenders
collectively, but severally, establish a capital expenditure line facility in
favor of the Borrowers. The aggregate of all advances under the Capital
Expenditure Line Facility are sometimes referred to in this Agreement
collectively as the "Capital Expenditure Line".
The amount set forth below each Lender's signature to this Agreement is
herein called such Lender's "Capital Expenditure Line Committed Amount" and the
total of each Lender's Capital Expenditure Line Committed Amount equals
Twenty-five Million Dollars ($25,000,000) and is herein called the "Total
Capital Expenditure Line Committed Amount". The proportionate share set forth
below each Lender's signature to this Agreement is herein called such Lender's
"Capital Expenditure Line Pro Rata Share."
During the Capital Expenditure Line Commitment Period, any or all of
the Borrowers may request advances under the Capital Expenditure Line Facility
in accordance with the provisions of this Agreement; provided that after giving
effect to any Borrower's request:
(a) the outstanding principal balance of each Lender's Capital
Expenditure Line Pro Rata Share of the Capital Expenditure Line would not
exceed such Lender's Capital Expenditure Line Pro Rata Share; and
(b) the aggregate outstanding principal balance of the Capital
Expenditure Line would not exceed the Total Capital Expenditure Line
Committed Amount.
Amounts repaid on the Capital Expenditure Line may not be reborrowed.
2.4.2 Procedure for Making Advances Under the Capital Expenditure Line.
The Borrowers may borrow under the Capital Expenditure Line Facility on
any Business Day. A Borrower shall give the Administrative Agent written notice
(a "Capital Expenditure Line Notice") at least five (5) Business Days prior to
the date on which such Borrower desires an advance under the Capital Expenditure
Line. Each Capital Expenditure Line Notice shall be accompanied by (a) a
contract of sale, purchase order or invoice, in form and substance reasonably
satisfactory to the Administrative Agent, which accurately and completely
describes the equipment which is the subject of the requested advance and the
purchase price therefor, and in the case of Capital Expenditure Line Equipment,
expressly identifying and excluding the costs of delivery, installation, taxes,
and other "soft" costs, and (b) evidence satisfactory to the Administrative
Agent indicating that such equipment has been delivered to and accepted by the
respective Borrower not more than 90 days prior to the date of the advance. Each
Capital Expenditure Line Notice shall also be accompanied by such other
information, certificates, confirmations, and other items as the Administrative
Agent may require
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<PAGE> 57
to determine the value and the delivery of the subject equipment and compliance
with the other terms of this Agreement. The amount to be advanced with respect
to a Capital Expenditure Line Notice shall not exceed the lesser of (a) the
amount requested by such Borrower or (b) 80% of the purchase price (excluding
the costs of delivery, installation, taxes, and other "soft" costs) of the
Capital Expenditure Line Equipment. The Administrative Agent must be satisfied
that the equipment for which an advance is requested shall, at the time of
advance and at all other times (i) not be affixed to any real property, (ii) not
be subject to any Liens in favor of parties other than the Agents and Lenders
hereunder, (iii) be free of, and not become, accessions, additions, fittings and
accessories which are subject to a Lien in favor of any other person including,
without limitation, the holders of the Senior Notes or the Senior Notes Trustees
or others acting on their behalf, and (iv) not be subject to any claim by any
Person including, without limitation, the holders Senior Notes, that such Person
is entitled to pari passu lien. Upon receipt of any such Capital Expenditure
Line Notice, the Administrative Agent shall promptly notify each Lender of the
amount of each advance to be made by such Lender on the requested borrowing date
under such Lender's Capital Expenditure Line Commitment. Each advance under the
Capital Expenditure Line shall be not less than $500,000.
Not later than 2:00 p.m. (Baltimore City Time) on each requested
borrowing date for the making of advances under the Capital Expenditure Line,
each Lender shall, if it has received timely notice from the Administrative
Agent of the Borrower's request for such advances, make available to the
Administrative Agent, in funds immediately available to the Administrative Agent
at the Administrative Agent's office set forth in Section 9.1, such Lender's
Capital Expenditure Line Pro Rata Share of the advances to be made on such date.
2.4.3 Capital Expenditure Line Notes.
The obligation of the Borrowers to pay each Lender's Capital
Expenditure Line Pro Rata Share of the Capital Expenditure Line, with interest,
shall be evidenced by a series of promissory notes (as from time to time
extended, amended, restated, supplemented or otherwise modified, collectively
the "Capital Expenditure Line Notes" and individually a "Capital Expenditure
Line Note") substantially in the form of EXHIBIT "B-2" attached hereto and made
a part hereof, with appropriate insertions. Each Lender's Capital Expenditure
Line Note shall be dated as of the Closing Date, shall be payable to the order
of such Lender at the times provided in the Capital Expenditure Line Note, and
shall be in the principal amount of such Lender's Capital Expenditure Line Pro
Rata Share. Each of the Borrowers acknowledges and agrees that, if the
outstanding principal balance of the Capital Expenditure Line outstanding from
time to time exceeds the aggregate face amount of the Capital Expenditure Line
Notes, the excess shall bear interest at the rates provided from time to time
for the Capital Expenditure Line evidenced by the Capital Expenditure Line Notes
and shall be payable, with accrued interest, ON DEMAND. The Capital Expenditure
Line Notes shall not operate as a novation of any of the Obligations or nullify,
discharge, or release any such Obligations or the continuing contractual
relationship of the parties hereto in accordance with the provisions of this
Agreement.
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<PAGE> 58
2.4.4 Payments of Capital Expenditure Line.
Each advance under the Capital Expenditure Line shall be repayable in
installment payments of principal quarterly (on the first day of each August,
November, February, and May after the date of such advance) in an amount equal
to 1/20th of the amount of the advance. At the time of each advance under the
Capital Expenditure Line, the Parent on behalf of the Borrowers shall furnish a
"Capital Expenditure Line Payment Schedule" substantially in the form of EXHIBIT
"B-3" attached hereto and made a part hereof, with appropriate insertions, which
shall set forth the installment payments with respect to the advance and the
aggregate payments due thereafter on all Capital Expenditure Line advances. The
Capital Expenditure Line Payment Schedules shall not operate as a novation of
any of the Obligations or nullify, discharge, or release any such Obligations or
the continuing contractual relationship of the parties hereto in accordance with
the provisions of this Agreement or the Capital Expenditure Line Notes. In
addition, in the event Capital Expenditure Line Equipment is sold or otherwise
disposed of (by casualty or otherwise) and the proceeds of such sale or
disposition which are received by the Lenders for application to the Capital
Expenditure Line are not sufficient to pay in full an amount equal to the
aggregate of the quarterly installment payments of principal remaining with
respect to the advance for such Capital Expenditure Line Equipment, then the
Borrowers shall pay to the Administrative Agent UPON DEMAND the amount of such
deficiency for application to the Capital Expenditure Line and the Borrowers
shall furnish a Capital Expenditure Line Payment Schedule reflecting the amount
repaid and the new installment amounts.
2.4.5 Optional Prepayments of Capital Expenditure Line.
The Borrowers may, at their option, at any time and from time to time
prepay (each a "Capital Expenditure Line Optional Prepayment" and collectively
the "Capital Expenditure Line Optional Prepayments") the Capital Expenditure
Line, in whole or in part without premium or penalty. The amount to be so
prepaid, together with interest accrued thereon to date of prepayment if the
amount is intended as a prepayment of the Capital Expenditure Line in whole,
shall be paid by the Borrowers to the Administrative Agent for the ratable
(based upon each Lender's Capital Expenditure Line Pro Rata Share) benefit of
the Lenders on the date specified for such prepayment.
2.4.6 Application of Capital Expenditure Line Partial Prepayments.
Partial Capital Expenditure Line Loan Optional Prepayments shall be in
an amount not less than the aggregate amount of the next principal installment
under the Capital Expenditure Line Notes and shall be applied first to all
accrued and unpaid interest on the principal of the Capital Expenditure Line
Notes, and then pro rata to the balloon payment due at maturity and to the
principal installment payments, which proration for each payment shall be equal
to the amount to be prepaid times a fraction, the numerator of which is the
amount of the balloon or installment (as applicable) payment and the denominator
of which is the aggregate outstanding principal balance of the Capital
Expenditure Line immediately prior to the prepayment. The Borrowers may not,
however, make a partial Capital Expenditure Line Optional
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<PAGE> 59
Prepayment unless the Borrowers have furnished a Capital Expenditure Line
Payment Schedule reflecting the amount to be prepaid and the new installment
amounts.
Section 2.5 Interest.
2.5.1 Applicable Interest Rates.
(a) Each Loan shall bear interest until maturity (whether by
acceleration, declaration, extension or otherwise) at either the Base Rate or
the Eurodollar Rate, as selected and specified by the Borrowers in an Interest
Rate Election Notice furnished to the Lender in accordance with the provisions
of Section 2.5.2(e), or as otherwise determined in accordance with the
provisions of this ARTICLE II, and as may be adjusted from time to time in
accordance with the provisions of Section 2.5.3 (Inability to Determine
Eurodollar Base Rate).
(b) Notwithstanding the foregoing, following the occurrence and
during the continuance of an Event of Default, at the option of the
Administrative Agent, all Loans and all other Obligations shall bear interest at
the Post-Default Rate.
(c) The Applicable Margin for (i) Eurodollar Loans shall be 225
basis points per annum, and (ii) Base Rate Loans shall be 25 basis points per
annum unless and until a change is required by the operation of Section
2.5.1(d).
(d) Changes in the Applicable Margin shall be made not more
frequently than quarterly based on the Borrowers' Pricing Ratio determined as of
the end of each fiscal quarter by the Administrative Agent based on the
Borrowers' statements required by Section 6.1.1(c) (Quarterly Statements and
Certificates), except that the first such determination shall be made based on
the Borrowers' annual financial statements required by Section 6.1.1(a) (Annual
Statements and Certificates ) for the Borrowers' fiscal year ended December 31,
1998 and shall be effective as of the first day of the first month after the
Administrative Agent receives such statements.
(e) The Applicable Margin (expressed as basis points) for the
Revolving Credit Facility shall vary depending upon the Borrowers' Pricing
Ratio, as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Pricing Ratio Applicable Margin for Applicable Margin for Base
Eurodollar Loans Rate Loans
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Equal to or greater than
4.0 to 1.0 225 25
- -----------------------------------------------------------------------------------------
Equal to or greater than
3.0 to 1.0 200 0
- -----------------------------------------------------------------------------------------
Less than 3.0 to 1.0 175 0
- -----------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 60
(f) The Applicable Margin (expressed as basis points) for the
Capital Expenditure Line shall vary depending upon the Borrowers' Pricing Ratio,
as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Pricing Ratio Applicable Margin for Applicable Margin for Base
Eurodollar Loans Rate Loans
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Equal to or greater than
4.0 to 1.0 250 50
- -----------------------------------------------------------------------------------------
Equal to or greater than
3.0 to 1.0 225 25
- -----------------------------------------------------------------------------------------
Less than 3.0 to 1.0 200 0
- -----------------------------------------------------------------------------------------
</TABLE>
2.5.2 Selection of Interest Rates.
(a) The Borrowers may select the initial Applicable Interest Rate
or Applicable Interest Rates to be charged on the Loans.
(b) From time to time after the date of this Agreement as provided
in this Section, by a proper and timely Interest Rate Election Notice furnished
to the Administrative Agent in accordance with the provisions of Section
2.5.2(e), the Borrowers may select an initial Applicable Interest Rate or
Applicable Interest Rates for any Loans or may convert the Applicable Interest
Rate and, when applicable, the Interest Period, for any existing Loan to any
other Applicable Interest Rate or, when applicable, any other Interest Period.
(c) The Borrowers' selection of an Applicable Interest Rate and/or
an Interest Period, the Borrowers' election to convert an Applicable Interest
Rate and/or an Interest Period to another Applicable Interest Rate or Interest
Period, and any other adjustments in an interest rate are subject to the
following limitations:
(i) the Borrowers shall not at any time select or change to
an Interest Period that extends beyond the Revolving Credit Expiration Date
in the case of the Revolving Loan or beyond the scheduled maturity of the
Capital Expenditure Line in the case of the Capital Expenditure Line;
(ii) except as otherwise provided in Section 2.5.4
(Indemnity), no change from the Eurodollar Rate to the Base Rate shall
become effective on a day other than a Business Day and on a day which is
the last day of the then current Interest Period, no change of an Interest
Period shall become effective on a day other than the last day of the then
current Interest Period, and no change from the Base Rate to the Eurodollar
Rate shall become effective on a day other than a day which is a Eurodollar
Business Day;
(iii) any Applicable Interest Rate change for any Loan to be
effective on a date on which any principal payment on account of such Loan
is scheduled to be paid shall be made only after such payment shall have
been made;
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<PAGE> 61
(iv) no more than ten (10) different Eurodollar Rates may be
outstanding at any time and from time to time with respect to the Revolving
Loan;
(v) only three (3) Eurodollar Rates may be outstanding at any
time and from time to time with respect to the Capital Expenditure Line;
(vi) the first day of each Interest Period shall be a
Eurodollar Business Day;
(vii) as of the effective date of a selection, there shall
not exist an Event of Default; and
(viii) the minimum principal amount of a Eurodollar Loan
shall be One Million Dollars ($1,000,000).
(d) If a request for an advance under the Loans is not accompanied
by an Interest Rate Election Notice or does not otherwise include a selection of
an Applicable Interest Rate and, if applicable, an Interest Period, or if, after
having made a selection of an Applicable Interest Rate and, if applicable, an
Interest Period, the Borrowers fail or are not otherwise entitled under the
provisions of this Agreement to continue such Applicable Interest Rate or
Interest Period, the Borrowers shall be deemed to have selected the Base Rate as
the Applicable Interest Rate until such time as the Borrowers have selected a
different Applicable Interest Rate and specified an Interest Period in
accordance with, and subject to, the provisions of this Section.
(e) The Lenders will not be obligated to make Loans, to convert
the Applicable Interest Rate on Loans to another Applicable Interest Rate, or to
change Interest Periods, unless the Administrative Agent shall have received an
irrevocable written or telephonic notice (an "Interest Rate Election Notice")
from the Borrowers specifying the following information:
(i) the amount to be borrowed or converted;
(ii) a selection of the Base Rate or the Eurodollar Rate;
(iii) the length of the Interest Period if the Applicable
Interest Rate selected is the Eurodollar Rate; and
(iv) the requested date on which such election is to be
effective.
Any telephonic notice must be confirmed by telecopy within three (3)
Business Days. Each Interest Rate Election Notice must be received by the
Administrative
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<PAGE> 62
Agent not later than 10:00 a.m. (Baltimore City time) on the Business Day of any
requested borrowing or conversion in the case of a selection of the Base Rate
and not later than 10:00 a.m. (Baltimore City time) on the third Business Day
before the effective date of any requested borrowing or conversion in the case
of a selection of the Eurodollar Rate.
2.5.3 Inability to Determine Eurodollar Base Rate.
In the event that (a) the Administrative Agent shall have determined
that, by reason of circumstances affecting the London interbank eurodollar
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Base Rate for any requested Interest Period with respect to a Loan
the Borrowers have requested to be made as or to be converted to a Eurodollar
Loan or (b) the Administrative Agent shall determine that the Eurodollar Base
Rate for any requested Interest Period with respect to a Loan the Borrowers have
requested to be made as or to be converted to a Eurodollar Loan does not
adequately and fairly reflect the cost to the Lenders of funding or converting
such Loan, the Administrative Agent shall give telephonic or written notice of
such determination to the Borrowers at least one (1) day prior to the proposed
date for funding or converting such Loan. If such notice is given, any request
for a Eurodollar Loan shall be made as or converted to a Base Rate Loan. Until
such notice has been withdrawn by the Administrative Agent, the Borrowers will
not request that any Loan be made as or converted to a Eurodollar Loan.
2.5.4 Indemnity.
(a) The Borrowers agree to indemnify and reimburse the
Administrative Agent and the Lenders and to hold the Administrative Agent and
the Lenders harmless from any loss (including loss of anticipated profits), cost
(including administrative costs) or expense which any one or more of the
Administrative Agent or the Lenders may sustain or incur as a consequence of (a)
a default by the Borrowers in payment when due of the principal amount of or
interest on any Eurodollar Loan, (b) the failure of the Borrowers to make, or
convert the Applicable Interest Rate of, a Loan after the Borrowers has given a
Loan Notice or an Interest Rate Election Notice, (c) the failure of the
Borrowers to make any prepayment of a Eurodollar Loan after the Borrowers have
given notice of such intention to make such a prepayment, and/or (d) the making
by the Borrowers of a prepayment of a Eurodollar Loan on a day which is not the
last day of the Interest Period for such Eurodollar Loan including, without
limitation, any such loss (including loss of anticipated profits) or expense
arising from the reemployment of funds obtained by the Lenders to maintain any
Eurodollar Loan or from fees payable to terminate the deposits from which such
funds were obtained.
(b) In addition to the foregoing, until the earlier of (i) the
Syndication Date and (ii) the 180th day following the Closing Date, each
Borrower severally shall compensate each Lender (including each Person that
becomes a Lender pursuant to Section 9.5), upon its written request (which
request shall set forth the basis for requesting such compensation), for all
reasonable losses, expenses and liabilities (including, without limitation, any
loss, expense or liability incurred by reason of the liquidation or reemployment
of deposits or other funds required by such Lender to fund such Borrower's
Eurodollar Loans including loss of anticipated profit with respect to any
Eurodollar Loans) which such Lender may sustain in
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<PAGE> 63
connection with the Administrative Agent's and the Syndication Agent's
syndication of this Agreement to additional Lenders during such period to the
extent that such losses, expenses and liabilities arise from assignments of,
incurrences of, or repayments of, Eurodollar Loans, provided, however, that the
Lenders agree to use good faith efforts to cause the syndication date to occur
at the end of an Interest Period.
2.5.5 Payment of Interest.
(a) Unpaid and accrued interest on any portion of the
Loans which consists of a Base Rate Loan shall be paid monthly, in arrears, on
the first day of each calendar month, commencing on the first such date
after the date of this Agreement, and on the first day of each calendar month
thereafter, and at maturity (whether by acceleration, declaration, extension or
otherwise).
(b) Notwithstanding the foregoing, any and all unpaid
and accrued interest on any Base Rate Loan converted to a Eurodollar Loan
or prepaid shall be paid immediately upon such conversion and/or
prepayment, as appropriate.
(c) Unpaid and accrued interest on any Eurodollar Loan
shall be paid monthly and on the last Business Day of each Interest Period for
such Eurodollar Loan and at maturity (whether by acceleration, declaration,
extension or otherwise); provided, however that any and all unpaid and accrued
interest on any Eurodollar Loan prepaid prior to expiration of the then current
Interest Period for such Eurodollar Loan shall be paid immediately upon
prepayment.
Section 2.6 General Financing Provisions.
2.6.1 Borrowers' Representatives.
The Borrowers hereby represent and warrant to the
Administrative Agent and the Lenders that each of them will derive benefits,
directly and indirectly, from each Letter of Credit and from each Loan,
both in their separate capacity and as a member of the integrated group to
which each of the Borrowers belong and because the successful operation of the
integrated group is dependent upon the continued successful performance of the
functions of the integrated group as a whole, because (a) the terms of the
consolidated financing provided under this Agreement are more favorable than
would otherwise would be obtainable by the Borrowers individually, and (b) the
Borrowers' additional administrative and other costs and reduced flexibility
associated with individual financing arrangements which would otherwise be
required if obtainable would substantially reduce the value to the Borrowers of
the financing. The Borrowers in the discretion of their respective managements
are to agree among themselves as to the allocation of the benefits of Letters
of Credit and the proceeds of Loans, provided, however, that the Borrowers
shall be deemed to have represented and warranted to the Administrative Agent
and the Lenders at the time of allocation that each benefit and use of proceeds
is a Permitted Use.
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<PAGE> 64
For administrative convenience, each Borrower hereby irrevocably
appoints the Parent as such Borrower's attorney-in-fact, with power of
substitution (with the prior written consent of the Administrative Agent in the
exercise of its sole and absolute discretion), in the name of the Parent or in
the name of such Borrower or otherwise to take any and all actions with respect
to the this Agreement, the other Financing Documents, the Obligations and/or the
Collateral (including, without limitation, the proceeds thereof) as the Parent
may so elect from time to time, including, without limitation, actions to (i)
request advances under the Loans, apply for and direct the benefits of Letters
of Credits, and direct the Administrative Agent to disburse or credit the
proceeds of any Loan directly to an account of the Parent, any one or more of
the Borrowers or otherwise, which direction shall evidence the making of such
Loan and shall constitute the acknowledgement by each of the Borrowers of the
receipt of the proceeds of such Loan or the benefit of such Letter of Credit,
(ii) enter into, execute, deliver, amend, modify, restate, substitute, extend
and/or renew this Agreement, any Additional Borrower Joinder Supplement, any
other Financing Documents, security agreements, mortgages, deposit account
agreements, instruments, certificates, waivers, letter of credit applications,
releases, documents and agreements from time to time, and (iii) endorse any
check or other item of payment in the name of such Borrower or in the name of
the Parent. The foregoing appointment is coupled with an interest, cannot be
revoked without the prior written consent of the Administrative Agent, and may
be exercised from time to time through the Parent's duly authorized officer,
officers or other Person or Persons designated by the Parent to act from time to
time on behalf of the Parent.
Each of the Borrowers hereby irrevocably authorizes each of the Lenders
to make Loans to any one or more all of the Borrowers, and hereby irrevocably
authorizes the Administrative Agent to issue or cause to be issued Letters of
Credit for the account of any or all of the Borrowers, pursuant to the
provisions of this Agreement upon the written, oral or telephone request any one
or more of the Persons who is from time to time a Responsible Officer of a
Borrower under the provisions of the most recent certificate of corporate
resolutions and/or incumbency of the Borrowers on file with the Administrative
Agent and also upon the written, oral or telephone request of any one of the
Persons who is from time to time a Responsible Officer of the Parent under the
provisions of the most recent certificate of corporate resolutions and/or
incumbency for the Parent on file with the Administrative Agent.
Neither the Administrative Agent nor any of the Lenders assumes any
responsibility or liability for any errors, mistakes, and/or discrepancies in
the oral, telephonic, written or other transmissions of any instructions,
orders, requests and confirmations between the Administrative Agent and the
Borrowers or the Administrative Agent and any of the Lenders in connection with
the Credit Facilities, any Loan, any Letter of Credit or any other transaction
in connection with the provisions of this Agreement, except to the extent any
such errors, mistakes and/or discrepancies are the proximate result of gross
negligence or willful misconduct by the Administrative Agent or any Lender.
Without implying any limitation on the joint and several nature of the
Obligations, the Lenders agree that, notwithstanding any other provision of this
Agreement, the Borrowers may create reasonable inter-company indebtedness
between or among the Borrowers with respect to the allocation of the benefits
and proceeds of the advances and Credit Facilities under this Agreement. The
Borrowers agree among themselves, and the Administrative Agent and the Lenders
consent to that agreement, that each Borrower shall have
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<PAGE> 65
rights of contribution from all of the other Borrowers to the extent such
Borrower incurs Obligations in excess of the proceeds of the Loans received by,
or allocated to purposes for the direct benefit of, such Borrower. All such
indebtedness and rights shall be, and are hereby agreed by the Borrowers to be,
subordinate in priority and payment to the indefeasible repayment in full in
cash of the Obligations, and, unless the Administrative Agent agrees in writing
otherwise, shall not be exercised or repaid in whole or in part until all of the
Obligations have been indefeasibly paid in full in cash. The Borrowers agree
that all of such inter-company indebtedness and rights of contribution are part
of the Collateral and secure the Obligations. Each Borrower hereby waives all
rights of counterclaim, recoupment and offset between or among themselves
arising on account of that indebtedness and otherwise. Each Borrower shall not
evidence the inter-company indebtedness or rights of contribution by note or
other instrument, and shall not secure such indebtedness or rights of
contribution with any Lien or security. Notwithstanding anything contained in
this Agreement to the contrary, the amount covered by each Borrower under the
Obligations shall be limited to an aggregate amount (after giving effect to any
collections from, rights to receive contribution from or payments made by or on
behalf of any other Borrower in respect of the Obligations) which, together with
other amounts owing by such Borrowers to the Administrative Agent and the
Lenders under the Obligations, is equal to the largest amount that would not be
subject to avoidance under the Bankruptcy Code or any applicable provisions of
any applicable, comparable state or other Laws.
2.6.2 Computation of Interest and Fees.
All applicable Fees and interest shall be calculated on the basis of a
year of 360 days for the actual number of days elapsed. Any change in the
interest rate on any of the Obligations resulting from a change in the Base Rate
shall become effective as of the opening of business on the day on which such
change in the Base Rate is announced.
2.6.3 Liens; Setoff.
The Borrowers hereby grant to the Administrative Agent and to the
Lenders a continuing Lien for all of the Obligations (including, without
limitation, the Agents' Obligations) upon any and all monies, securities, and
other property of the Borrowers and the proceeds thereof, now or hereafter held
or received by or in transit to, the Administrative Agent, any of the Lenders,
and/or any Affiliate of the Administrative Agent and/or any of the Lenders, from
or for the Borrowers, and also upon any and all deposit accounts (general or
special) and credits of the Borrowers, if any, with the Administrative Agent,
any of the Lenders or any Affiliate of the Administrative Agent or any of the
Lenders, at any time existing, excluding any deposit accounts held by the
Borrowers in their capacity as trustee for Persons who are not Borrowers or
Affiliates of the Borrowers. Without implying any limitation on any other rights
the Administrative Agent and/or the Lenders may have under the Financing
Documents or applicable Laws, during the continuance of an Event of Default, the
Administrative Agent is hereby authorized by the Borrowers at any time and from
time to time, without notice to the Borrowers, to set off, appropriate and apply
any or all items hereinabove referred to against all Obligations (including,
without limitation, the Agents' Obligations) then outstanding (whether or
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not then due), all in such order and manner as shall be determined by the
Administrative Agent in its sole and absolute discretion.
2.6.4 Requirements of Law.
In the event that any Lender shall have determined in good faith that
(a) the adoption of any Laws regarding capital adequacy, or (b) any change
therein or in the interpretation or application thereof or (c) compliance by
such Lender or any corporation controlling such Lender with any request or
directive regarding capital adequacy (whether or not having the force of law)
from any central bank or Governmental Authority, does or shall have the effect
of reducing the rate of return on the capital of such Lender or any corporation
controlling such Lender, as a consequence of the obligations of the such Lender
hereunder to a level below that which such Lender or any corporation controlling
such Lender would have achieved but for such adoption, change or compliance
(taking into consideration the policies of such Lender and the corporation
controlling such Lender, with respect to capital adequacy) by an amount deemed
by such Lender to be material, then from time to time, after submission by such
Lender to the Borrowers of a written request therefor and a statement of the
basis for such determination, the Borrowers shall pay to such Lender such
additional amount or amounts in order to compensate for such reduction,
provided, however, that each Lender agrees to (i) use good faith efforts to
change its Appropriate Payment Office if such change would (A) eliminate the
necessity for such additional payments and (B) not have an adverse effect on
such Lender and (ii) treat the Borrowers in substantially the same manner as it
treats all similarly situated borrowers with respect to the requirement to
payment of such additional amounts.
2.6.5 Administrative Agency Fees.
The Borrowers shall pay to the Administrative Agent an administrative
agency fee (collectively, the "Administrative Agency Fees" and individually an
"Administrative Agency Fee"), which Administrative Agency Fees shall be payable
quarterly in advance on the Closing Date and on the first day of each August,
November, February, and May of each year commencing on the first such date
following the Closing Date, and continuing until the last such date prior to
which all Obligations arising out of, or under, the Credit Facilities then
outstanding have been paid in full. Each Administrative Agency Fee shall be in
the amount of $25,000 per quarter.
2.6.6 Origination Fee.
The Borrowers shall pay to the Administrative Agent for the sole and
exclusive benefit of the Administrative Agent on or before the Closing Date an
origination fee in the amount set forth in the Administrative Agent's fee letter
(the "Origination Fee"), which Origination Fee shall be fully earned and
nonrefundable upon payment and shall be a part of the Agents' Obligations.
2.6.7 Funds Transfer Services.
(a) Each Borrower acknowledges that the Administrative Agent has
made available to the Borrowers Wire Transfer Procedures a copy of which is
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attached to this Agreement as EXHIBIT C and which include a description of
security procedures regarding funds transfers executed by the Administrative
Agent or an Affiliate bank at the request of the Borrowers (the "Security
Procedures"). The Borrowers and the Administrative Agent agree that the Security
Procedures are commercially reasonable. Each Borrower further acknowledges that
the full scope of the Security Procedures which the Administrative Agent or such
Affiliate bank offers and strongly recommends for funds transfers is available
only if the Borrowers communicate directly with the Administrative Agent or such
Affiliate bank as applicable in accordance with said procedures. If a Borrower
attempts to communicate by any other method or otherwise not in accordance with
the Security Procedures, the Administrative Agent or such Affiliate bank, as
applicable, shall not be required to execute such instructions, but if the
Administrative Agent or such Affiliate bank, as applicable, does so, the
Borrowers will be deemed to have refused the Security Procedures that the
Administrative Agent or such Affiliate bank as applicable offers and strongly
recommends, and the Borrowers will be bound by any funds transfer, whether or
not authorized, which is issued in any Borrower's name and accepted by the
Administrative Agent or such Affiliate bank, as applicable, in good faith. The
Administrative Agent or such Affiliate bank, as applicable, may modify Wire
Transfer Procedures including, without limitation, the Security Procedures at
such time or times and in such manner as the Administrative Agent or such
Affiliate bank, as applicable, in its sole discretion, deems appropriate to meet
prevailing standards of good banking practice. By continuing to use the
Administrative Agent's or such Affiliate bank's, as applicable, wire transfer
services after receipt of any modification of the Wire Transfer procedures
including, without limitation, the Security Procedures, each Borrower agrees
that the Security Procedures, as modified, are likewise commercially reasonable.
Each Borrower further agrees to establish and maintain procedures to safeguard
the Security Procedures and any information related thereto. Neither the
Administrative Agent nor any Affiliate of the Administrative Agent is
responsible for detecting any error in payment order sent by any Borrower to the
Administrative Agent or any of the Lenders.
(b) The Administrative Agent or such Affiliate bank, as
applicable, will generally use the Fedwire funds transfer system for domestic
funds transfers, and the funds transfer system operated by the Society for
Worldwide International Financial Telecommunication (SWIFT) for international
funds transfers. International funds transfers may also be initiated through the
Clearing House InterBank Payment System (CHIPs) or international cable. However,
the Administrative Agent or such Affiliate bank, as applicable, may use any
means and routes that the Administrative Agent or such Affiliate bank, as
applicable, in its sole discretion, may consider suitable for the transmission
of funds. Each payment order, or cancellation thereof, carried out through a
funds transfer system or a clearinghouse will be governed by all applicable
funds transfer system rules and clearing house rules and clearing arrangements,
whether or not the Administrative Agent or such Affiliate bank, as applicable,
is a member of the system, clearinghouse or arrangement and each Borrower
acknowledges that the Administrative Agent's or such Affiliate bank's, as
applicable, right to reverse, adjust, stop payment or delay posting of an
executed payment order is subject to the laws, regulations, rules, circulars and
arrangements described herein.
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2.6.8 Guaranty.
(a) Each Domestic Borrower hereby unconditionally and irrevocably,
guarantees to the Agents and the Lenders:
(i) the due and punctual payment in full (and not merely the
collectibility) by the other Borrowers of the Obligations, including unpaid
and accrued interest thereon, in each case when due and payable, all
according to the terms of this Agreement, the Notes and the other Financing
Documents;
(ii) the due and punctual payment in full (and not merely the
collectibility) by the other Borrowers of all other sums and charges which
may at any time be due and payable in accordance with this Agreement, the
Notes or any of the other Financing Documents;
(iii) the due and punctual performance by the other Borrowers
of all of the other terms, covenants and conditions contained in the
Financing Documents; and
(iv) all the other Obligations of the other Borrowers.
(b) The obligations and liabilities of each Domestic Borrower as a
guarantor under this Section 2.6.8 shall be absolute and unconditional and joint
and several, irrespective of the genuineness, validity, priority, regularity or
enforceability of this Agreement, any of the Notes or any of the Financing
Documents or any other circumstance which might otherwise constitute a legal or
equitable discharge of a surety or guarantor. Each Domestic Borrower in its
capacity as a guarantor expressly agrees that the Administrative Agent and the
Lenders may, in their sole and absolute discretion, without notice to or further
assent of such Domestic Borrower and without in any way releasing, affecting or
in any way impairing the joint and several obligations and liabilities of such
Domestic Borrower as a guarantor hereunder:
(i) waive compliance with, or any defaults under, or grant
any other indulgences under or with respect to any of the Financing
Documents;
(ii) modify, amend, change or terminate any provisions of any
of the Financing Documents;
(iii) grant extensions or renewals of or with respect to the
Credit Facilities, the Notes or any of the other Financing Documents;
(iv) effect any release, subordination, compromise or
settlement in connection with this Agreement, any of the Notes or any of the
other Financing Documents;
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(v) agree to the substitution, exchange, release or other
disposition of the Collateral or any part thereof, or any other collateral
for the Loan or to the subordination of any lien or security interest
therein;
(vi) make advances for the purpose of performing any term,
provision or covenant contained in this Agreement, any of the Notes or any
of the other Financing Documents with respect to which the Borrowers shall
then be in default;
(vii) make future advances pursuant to the Financing
Agreement or any of the other Financing Documents;
(viii) assign, pledge, hypothecate or otherwise transfer the
Commitments, the Obligations, the Notes, any of the other Financing
Documents or any interest therein, all as and to the extent permitted by the
provisions of this Agreement;
(ix) deal in all respects with the other Borrowers as if this
Section 2.6.8 were not in effect;
(x) effect any release, compromise or settlement with any of
the other Borrowers, whether in their capacity as a Borrower or as a
guarantor under this Section 2.6.8, or any other guarantor; and
(xi) provide debtor-in-possession financing or allow use of
cash collateral in proceedings under the Bankruptcy Code or other Insolvency
Proceedings, it being expressly agreed by all Borrowers that any such
financing and/or use would be part of the Obligations.
(c) The obligations and liabilities of each Domestic Borrower, as
guarantor under this Section 2.6.8, shall be primary, direct and immediate,
shall not be subject to any counterclaim, recoupment, set off, reduction or
defense based upon any claim that a Domestic Borrower may have against any one
or more of the other Borrowers, the Administrative Agent, any one or more of the
Lenders and/or any other guarantor and shall not be conditional or contingent
upon pursuit or enforcement by the Administrative Agent or other Lenders of any
remedies it may have against the Borrowers with respect to this Agreement, the
Notes or any of the other Financing Documents, whether pursuant to the terms
thereof or by operation of law. Without limiting the generality of the
foregoing, the Administrative Agent and the Lenders shall not be required to
make any demand upon any of the Borrowers, or to sell the Collateral or
otherwise pursue, enforce or exhaust its or their remedies against the Borrowers
or the Collateral either before, concurrently with or after pursuing or
enforcing its rights and remedies hereunder. Any one or more successive or
concurrent actions or proceedings may be brought against each Domestic Borrower
under this Section 2.6.8 in the same action, if any, brought against any one or
more of the Borrowers or in separate actions or proceedings, as often
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as the Administrative Agent may deem expedient or advisable. Without limiting
the foregoing, it is specifically understood that any modification, limitation
or discharge of any of the liabilities or obligations of any one or more of the
Borrowers, any other guarantor or any obligor under any of the Financing
Documents, arising out of, or by virtue of, any bankruptcy, arrangement,
reorganization or similar proceeding for relief of debtors under federal or
state law initiated by or against any one or more of the Borrowers, in their
respective capacities as borrowers and guarantors under this Section 2.6.8 under
any of the Financing Documents shall not modify, limit, lessen, reduce, impair,
discharge, or otherwise affect the liability of each Domestic Borrower under
this Section 2.6.8 in any manner whatsoever, and this Section 2.6.8 shall remain
and continue in full force and effect. It is the intent and purpose of this
Section 2.6.8 that each Domestic Borrower shall and does hereby waive all rights
and benefits which might accrue to any other guarantor by reason of any such
proceeding, and the Borrowers agree that they shall be liable for the full
amount of the obligations and liabilities under this Section 2.6.8, regardless
of, and irrespective to, any modification, limitation or discharge of the
liability of any one or more of the Borrowers, (other than the discharge of all
Borrowers as a result of the indefeasible payment in full in cash of all
Obligations) any other guarantor or any obligor under any of the Financing
Documents, that may result from any such proceedings
(d) Each Domestic Borrower, as guarantor under this Section 2.6.8,
hereby unconditionally, jointly and severally, irrevocably and expressly waives:
(i) presentment and demand for payment of the Obligations and
protest of non-payment;
(ii) notice of acceptance of this Section 2.6.8 and of
presentment, demand and protest thereof;
(iii) notice of any default hereunder or under the Notes or
any of the other Financing Documents and notice of all indulgences;
(iv) notice of any increase in the amount of any portion of
or all of the indebtedness guaranteed by this Section 2.6.8;
(v) demand for observance, performance or enforcement of any
of the terms or provisions of this Section 2.6.8, the Notes or any of the
other Financing Documents;
(vi) all errors and omissions in connection with the Lender's
administration of all indebtedness guaranteed by this Section 2.6.8, except
errors and omissions resulting from acts of bad faith, gross negligence or
willful misconduct;
(vii) any right or claim of right to cause a marshalling of
the assets of any one or more of the other Borrowers;
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(viii) any act or omission of the Administrative Agent
or the Lenders which changes the scope of the risk as guarantor hereunder;
and all other notices and demands otherwise required by law which the
Domestic Borrower may lawfully waive.
Within ten (10) days following any request of the
Administrative Agent so to do, each Domestic Borrower will furnish the
Administrative Agent and the Lenders and such other persons as the
Administrative Agent may direct with a written certificate, duly acknowledged
stating in detail whether or not any credits, offsets or defenses exist with
respect to this Section 2.6.8.
Section 2.7 Settlement Among Lenders.
2.7.1 Capital Expenditure Line.
The Administrative Agent shall pay to each Lender on each
Interest Payment Date or date provided in the Capital Expenditure Line
Installment Payment Schedule, as the case may be, such Lender's Capital
Expenditure Line Pro Rata Share of all payments received by the Administrative
Agent in immediately available funds on account of the Capital Expenditure
Line, net of any amounts payable by such Lender to the Administrative Agent,
by wire transfer of same day funds; the amount payable to each Lender shall be
based on the principal amount of the Capital Expenditure Line owing to such
Lender.
2.7.2 Revolving Loan.
It is agreed that each Lender's Net Outstandings are intended
by the Lenders to be equal at all times to such Lender's Revolving Credit Pro
Rata Share of the aggregate outstanding principal amount of the Revolving Loan
outstanding. Notwithstanding such agreement, the several and not joint
obligation of each Lender to fund the Revolving Loan made in accordance with
the terms of this Agreement ratably in accordance with such Lender's Revolving
Credit Pro Rata Share and each Lender's right to receive its ratable share of
principal payments on the Revolving Loan in accordance with its Revolving
Credit Pro Rata Share, the Lenders agree that in order to facilitate the
administration of this Agreement and the Financing Documents that settlement
among them may take place on a periodic basis in accordance with the provisions
of this Section 2.7.
2.7.3 Settlement Procedures as to Revolving Loan.
(a) In General. To the extent and in the manner
hereinafter provided in this Section 2.7.3, settlement among the Lenders as to
the Revolving Loan may occur periodically on Settlement Dates determined from
time to time by the Administrative Agent, which may occur before or after the
occurrence or during the continuance of a Default or Event of Default and
whether or not all of the conditions set forth in Section 5.4 (Conditions to
All Extensions of Credit) have been met. On each Settlement Date payments shall
be made by or to NationsBank and the other Lenders in the manner provided in
this Section 2.7.3 in accordance with the Settlement Report delivered by the
Administrative Agent pursuant to the provisions of
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this Section 2.7.3 in respect of such Settlement Date so that as of each
Settlement Date, and after giving effect to the transactions to take place on
such Settlement Date, each Lender's Net Outstandings shall equal such Lender's
Revolving Credit Pro Rata Share of the Revolving Loan outstanding.
(b) Selection of Settlement Dates. If the Administrative Agent
elects, in its discretion, but subject to the consent of NationsBank, to settle
accounts among the Lenders with respect to principal amounts of Revolving Loan
less frequently than each Business Day, then the Administrative Agent shall
designate periodic Settlement Dates which may occur on any Business Day after
the Closing Date; provided, however, that the Administrative Agent shall
designate as a Settlement Date any Business Day which is an Interest Payment
Date; and provided further, that a Settlement Date shall occur at least once
during each seven-day period. The Administrative Agent shall designate a
Settlement Date by delivering to each Lender a Settlement Report not later than
12:00 noon (Baltimore City Time) on the proposed Settlement Date, which
Settlement Report shall be with respect to the period beginning on the next
preceding Settlement Date and ending on such designated Settlement Date.
(c) Non-Ratable Loans and Payments. Between Settlement Dates, the
Administrative Agent shall request and NationsBank may (but shall not be
obligated to) advance to the Borrowers out of NationsBank's own funds, the
entire principal amount of any advance under the Revolving Loan requested or
deemed requested pursuant to Section 2.1.2(f) (Procedure for Making Advances
Under the Revolving Loan) (any such advance under the Revolving Loan being
referred to as a "Non-Ratable Loan"). The making of each Non-Ratable Loan by
NationsBank shall be deemed to be a purchase by NationsBank of a 100%
participation in each other Lender's Revolving Credit Pro Rata Share of the
amount of such Non-Ratable Loan. All payments of principal, interest and any
other amount with respect to such Non-Ratable Loan shall be payable to and
received by the Administrative Agent for the account of NationsBank. Upon demand
by NationsBank, with notice to the Administrative Agent, each other Lender shall
pay to NationsBank, as the repurchase of such participation, an amount equal to
100% of such Lender's Revolving Credit Pro Rata Share of the principal amount of
such Non-Ratable Loan. Any payments received by the Administrative Agent between
Settlement Dates which in accordance with the terms of this Agreement are to be
applied to the reduction of the outstanding principal balance of Revolving Loan,
shall be paid over to and retained by NationsBank for such application, and such
payment to and retention by NationsBank shall be deemed, to the extent of each
other Lender's Revolving Credit Pro Rata Share of such payment, to be a purchase
by each such other Lender of a participation in the advance under the Revolving
Loan (including the repurchase of participations in Non-Ratable Loans) made by
NationsBank. Upon demand by another Lender, with notice thereof to the
Administrative Agent, NationsBank shall pay to the Administrative Agent, for the
account of such other Lender, as a repurchase of such participation, an amount
equal to such other Lender's Revolving Credit Pro Rata Share of any such amounts
(after application thereof to the repurchase of any participations of
NationsBank in such other Lender's Revolving Credit Pro Rata Share of any
Non-Ratable Loans) paid only to NationsBank by the Administrative Agent.
(d) Net Decrease in Outstandings. If on any Settlement Date the
increase, if any, in the dollar amount of any Lender's Net Outstandings which is
required to
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comply with the first sentence of Section 2.7.2 (Revolving Loan) is less than
such Lender's Revolving Credit Pro Rata Share of amounts received by the
Administrative Agent but paid only to NationsBank since the next preceding
Settlement Date, such Lender and the Administrative Agent, in their respective
records, shall apply such Lender's Revolving Credit Pro Rata Share of such
amounts to the increase in such Lender's Net Outstandings, and NationsBank shall
pay to the Administrative Agent, for the account of such Lender, the excess
allocable to such Lender.
(e) Net Increase in Outstandings. If on any Settlement Date the
increase, if any, in the dollar amount of any Lender's Net Outstandings which is
required to comply with the first sentence of Section 2.7.2 (Revolving Loan)
exceeds such Lender's Revolving Credit Pro Rata Share of amounts received by the
Administrative Agent but paid only to NationsBank since the next preceding
Settlement Date, such Lender and the Administrative Agent, in their respective
records, shall apply such Lender's Revolving Credit Pro Rata Share of such
amounts to the increase in such Lender's Net Outstandings, and such Lender shall
pay to the Administrative Agent, for the account of NationsBank, any excess.
(f) No Change in Outstandings. If a Settlement Report indicates
that no advance under the Revolving Loan has been made during the period since
the next preceding Settlement Date, then such Lender's Revolving Credit Pro Rata
Share of any amounts received by the Administrative Agent but paid only to
NationsBank shall be paid by NationsBank to the Administrative Agent, for the
account of such Lender. If a Settlement Report indicates that the increase in
the dollar amount of a Lender's Net Outstandings which is required to comply
with the first sentence of Section 2.7.2 (Revolving Loan) is exactly equal to
such Lender's Revolving Credit Pro Rata Share of amounts received by the
Administrative Agent but paid only to NationsBank since the next preceding
Settlement Date, such Lender and the Administrative Agent, in their respective
records, shall apply such Lender's Revolving Credit Pro Rata Share of such
amounts to the increase in such Lender's Net Outstandings.
(g) Return of Payments. If any amounts received by NationsBank in
respect of the Obligations are later required to be returned or repaid by
NationsBank to the Borrowers or any other obligor or their respective
representatives or successors in interest, whether by court order, settlement or
otherwise, in excess of the NationsBank's Revolving Credit Pro Rata Share of all
such amounts required to be returned by all Lenders, each other Lender shall,
upon demand by NationsBank with notice to the Administrative Agent, pay to the
Administrative Agent for the account of NationsBank, an amount equal to the
excess of such Lender's Revolving Credit Pro Rata Share of all such amounts
required to be returned by all Lenders over the amount, if any, returned
directly by such Lender.
(h) Payments to Administrative Agent, Lenders.
(i) Payment by any Lender to the Administrative Agent shall
be made not later than 2:00 p.m. (Baltimore City Time) on the Business Day
such payment is due, provided that if such payment is due on demand by
another Lender, such demand is made on the paying Lender not later than
10:00 a.m. (Baltimore City Time) on such
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Business Day. Payment by the Administrative Agent to any Lender shall be
made by wire transfer, promptly following the Administrative Agent's receipt
of funds for the account of such Lender and in the type of funds received by
the Administrative Agent, provided that if the Administrative Agent receives
such funds at or prior to 12:00 p.m. noon (Baltimore City Time), the
Administrative Agent shall pay such funds to such Lender by 2:00 p.m.
(Baltimore City Time) on such Business Day. If a demand for payment is made
after the applicable time set forth above, the payment due shall be made by
2:00 p.m. (Baltimore City Time) on the first Business Day following the date
of such demand.
(ii) If a Lender shall, at any time, fail to make any
payment to the Administrative Agent required hereunder, the Administrative
Agent may, but shall not be required to, retain payments that would
otherwise be made to such Lender hereunder and apply such payments to such
Lender's defaulted obligations hereunder, at such time, and in such order,
as the Administrative Agent may elect in its sole discretion.
(iii) With respect to the payment of any funds under
this Section 2.7.3, whether from the Administrative Agent to a Lender or
from a Lender to the Administrative Agent, the party failing to make
full payment when due pursuant to the terms hereof shall, upon demand by
the other party, pay such amount together with interest on such amount at
the Federal Funds Rate.
2.7.4 Settlement of Other Obligations.
All other amounts received by the Administrative Agent on
account of, or applied by the Administrative Agent to the payment of, any
Obligation owed to the Lenders (including, without limitation, Fees payable to
the Lenders and proceeds from the sale of, or other realization upon, all or
any part of the Collateral following an Event of Default) that are received by
the Administrative Agent not later than 11:00 a.m. (Baltimore City Time) on a
Business Day will be paid by the Administrative Agent to each Lender on the
same Business Day, and any such amounts that are received by the Administrative
Agent after 11:00 a.m. (Baltimore City Time) will be paid by the Administrative
Agent to each Lender on the following Business Day. Unless otherwise stated
herein, the Administrative Agent shall distribute Fees payable to the Lenders
ratably to the Lenders based on each Lender's Revolving Credit Pro Rata Share
and shall distribute proceeds from the sale of, or other realization upon, all
or any part of the Collateral following an Event of Default ratably to the
Lenders based on the amount of the Obligations then owing to each Lender.
2.7.5 Presumption of Payment.
Unless the Administrative Agent shall have received notice from a
Lender prior to 12:00 p.m. noon (Baltimore City Time) on the date of the
requested date for the making
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of advances under the Revolving Loan that such Lender will not make available to
the Administrative Agent such Lender's Revolving Credit Pro Rata Share of the
advances to be made on such date, the Administrative Agent may assume that such
Lender has made such amount available to the Administrative Agent on such date
in accordance with this Section 2.7, and the Administrative Agent, in its sole
discretion may, in reliance upon such assumption, make available to the
Borrowers on such date a corresponding amount on behalf of such Lender.
If and to the extent such Lender shall not have so made available to
the Administrative Agent its Revolving Credit Pro Rata Share of the advances
under the Revolving Loan made on such date, and the Administrative Agent shall
have so made available to the Borrowers a corresponding amount on behalf of such
Lender, such Lender shall, on demand, pay to the Administrative Agent such
corresponding amount, together with interest thereon, at the Federal Funds Rate,
for each day from the date such corresponding amount shall have been so
available by the Administrative Agent to the Borrowers until the date such
amount shall have been repaid to the Administrative Agent. Such Lender shall not
be entitled to payment of any interest which accrues on the amount made
available by the Administrative Agent to the Borrowers for the account of such
Lender until such time as such Lender reimburses the Administrative Agent for
such amount, together with interest thereon, as provided in this Section 2.7.5.
A certificate of the Administrative Agent submitted to any Lender with
respect to any amounts owing to the Administrative Agent by such Lender under
this Section 2.7 shall be conclusive and binding on such Lender, absent manifest
error. If such Lender does not pay such amounts to the Administrative Agent
promptly upon the Administrative Agent's demand, the Administrative Agent shall
promptly notify the Borrowers of such Lender's failure to make payment, and the
Borrowers shall immediately repay such amounts to the Administrative Agent,
together with accrued interest thereon at the applicable rate on the Revolving
Loan, all without prejudice to the rights and remedies of the Administrative
Agent against any defaulting Lender. Any and all amounts due and payable to the
Administrative Agent by the Borrowers under this Section 2.7 constitute and
shall be part of the Agents' Obligations.
Unless the Administrative Agent shall have received notice from the
Borrowers prior to the date on which any payment is due to the Administrative
Agent that the Borrowers will not make such payment in full, the Administrative
Agent may assume that the Borrowers have made such payment in full to the
Administrative Agent on such date and the Administrative Agent in its sole
discretion may, in reliance upon such assumption, cause to be distributed to
each Lender on such due date an amount equal to the amount then due such Lender.
If and to the extent the Borrowers shall not have so made such payment in full
to the Administrative Agent and the Administrative Agent shall have distributed
to any Lender all or any portion of such amount, such Lender shall repay to the
Administrative Agent on demand the amount so distributed to such Lender,
together with interest thereon at the Federal Funds Rate, for each day from the
date such amount is distributed to such Lender until the date such Lender repays
such amount to the Administrative Agent.
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Section 2.8 Assessments; Withholding.
2.8.1 Payment of Assessments.
(a) Any and all payments by the Borrowers hereunder or
under any Note or other document evidencing any obligations shall be made free
and clear of and without reduction for any and all taxes, levies, imposts,
deductions, charges, withholdings, and all stamp or documentary taxes, excise
taxes, ad valorem taxes and other taxes imposed on the value of the Collateral,
charges or levies which arise from the execution, delivery or registration, or
from payment or performance under, or otherwise with respect to, any of the
Financing Documents or the Revolving Credit Commitments and all other
liabilities with respect thereto excluding, in the case of each Lender and the
Administrative Agent, taxes imposed on its income, capital, profits or gains and
franchise taxes imposed on it by (i) the United States, except certain
withholding taxes contemplated pursuant to Section 2.8.4(b)(iii), (ii) the
Governmental Authority of the jurisdiction in which such Applicable Lending
Office is located or any political subdivision thereof, (iii) the Governmental
Authority in which such Person is organized, managed and controlled or any
political subdivision thereof or (iv) any political subdivision of the United
States, unless such taxes are imposed solely as a result of such Lender's
performance of any of the Financing Documents in such political subdivision and
such Lender would not otherwise be subject to tax by such political subdivision
(all such non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as "Assessments").
(b) If a Borrower shall be required by law to
withhold or deduct any Assessments from or in respect of any sum payable
hereunder or under any such Note or document to any Lender or the Administrative
Agent, (i) the sum payable to such Lender or the Administrative Agent shall be
increased as may be necessary so that after making all required withholding or
deductions (including withholding or deductions applicable to additional sums
payable under this Section 2.8) such Lender or the Administrative Agent (as the
case may be) receives an amount equal to the sum it would have received had no
such withholding or deductions been made, (ii) such Borrower shall make such
withholding or deductions, and (iii) such Borrower shall pay the full amount
withheld or deducted to the relevant taxation authority or other authority in
accordance with applicable law.
2.8.2 Indemnification.
The Borrowers jointly and severally agree to indemnify each
Lender and the Administrative Agent against, and reimburse each on demand for,
the full amount of all Assessments (including, without limitation, any
Assessments imposed by any Governmental Authority on amounts payable under this
Section 2.8 and any additional income or franchise taxes resulting therefrom)
incurred or paid by such Lender or the Administrative Agent (as the case may be)
or any of their respective Affiliates and any liability (including penalties,
interest, and out-of-pocket expenses paid to third parties) arising therefrom or
with respect thereto, whether or not such Assessments were lawfully payable
(other than any liability that results from the gross negligence or willful
misconduct of the Lenders and the Administrative Agent, whether or not such
Assessments were correctly or legally asserted by the relevant taxing authority
or other governmental authority). A certificate as to any additional amount
payable to any Person
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under this Section 2.8 submitted by it to the Borrower shall, absent manifest
error, be final, conclusive and binding upon all parties hereto. Each Lender and
the Administrative Agent agrees (ii) within a reasonable time after receiving a
written request from the Parent, to provide the Parent and the Administrative
Agent with such certificates as are reasonably required, (ii) to take such other
actions as are reasonably necessary to claim such exemptions as such Lender, the
Administrative Agent or such Affiliate may be entitled to claim in respect of
all or a portion of any Assessments which are otherwise required to be paid or
deducted or withheld pursuant to this Section 2.8 in respect of any payments
under this Agreement or under the Notes, (iii) to take such actions, including
changing of the Appropriate Payment Office, to avoid the necessity of paying
such Assessments, provided such change would not have an adverse effect on the
business of the applicable Lender and (iv) treat the Borrowers in the same
manner as it treats all similarly situated borrowers with respect to the
requirement to pay such Assessments. If any Lender or the Administrative Agent
receives a refund in respect of any Assessments for which such Lender or the
Administrative Agent has received payment from a Borrower hereunder, it shall
promptly apply such refund (including any interest received by such Lender or
the Administrative Agent from the taxing authority with respect to the refund
with respect to such Assessments) to the obligations of such Borrower, net of
all out-of-pocket expenses of such Lender or the Administrative Agent; provided
that such Borrower, upon the request of such Lender or the Administrative Agent,
agrees to reimburse such refund (plus penalties, interest or other charges) to
such Lender or the Administrative Agent in the event such Lender or the
Administrative Agent is required to repay such refund.
2.8.3 Receipts.
Within thirty (30) days after the date of any payment of
Assessments pursuant to this Section 2.8 by any Borrower or any of the
Borrowers' Subsidiaries, the Parent will furnish to the Administrative Agent at
its request, at its address referred to in Section 9.1, a copy of a receipt, if
any, or other documentation reasonably satisfactory to the Administrative Agent,
evidencing payment thereof. The Borrowers shall furnish to the Administrative
Agent, within thirty (30) days after the request of the Administrative Agent
from time to time, a certificate of a Responsible Officer stating that all
Assessments of which they are aware are due have been paid and that no
additional Assessments of which it is aware are due.
2.8.4 Foreign Bank Certifications.
(a) Each Lender that is not created or organized under
the laws of the United States or a political subdivision thereof has delivered
to the Borrowers and the Administrative Agent on the date on which such Lender
became a Lender or shall deliver to the Borrowers on the date such Lender
becomes a Lender, if such date is after the Closing Date, a true and accurate
certificate executed in duplicate by a duly authorized officer of such Lender to
the effect that such Lender is eligible to receive all payments hereunder and
under the Notes without deduction or withholding of United States federal income
tax (i) under the provisions of an applicable tax treaty concluded by the United
States (in which case the certificate shall be accompanied by two duly completed
copies of IRS Form 1001 (or any successor or substitute form or forms)) or (ii)
under Section 1441(c)(1) as modified for purposes of Section 1442(a) of the
Internal Revenue Code (in which case the certificate shall be accompanied by two
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duly completed copies of IRS Form 4224 (or any successor or substitute form or
forms)). If a Lender is unable to deliver the certificate and forms described
in, and on the dates required by, the preceding sentence, then the applicable
Borrower shall withhold the applicable tax and shall have no indemnification
obligation with respect to such withholding tax.
(b) Each Lender further agrees to promptly deliver to
the Borrowers and the Administrative Agent from time to time, a true and
accurate certificate executed in duplicate by a duly authorized officer of such
Lender before or promptly upon the occurrence of any event requiring a change in
the most recent certificate previously delivered by it to the Borrowers and the
Administrative Agent pursuant to this Section 2.8.4 (including, but not limited
to, a change in such Lender's lending office). Each certificate required to be
delivered pursuant to this Section 2.8.4 shall certify as to one of the
following:
(i) that such Lender can continue to receive
payments hereunder and under the Notes without deduction or
withholding of United States federal income tax;
(ii) that such Lender cannot continue to
receive payments hereunder and under the Notes without deduction or
withholding of United States federal income tax as specified therein
but does not require additional payments pursuant to Section 2.8.1
because it is entitled to recover the full amount of any such
deduction or withholding from a source other than the Borrowers;
(iii) that such Lender is no longer capable of
receiving payments hereunder and under the Notes without deduction or
withholding of United States federal income tax as specified therein
by reason of a change in law (including the Internal Revenue Code or
applicable tax treaty) after the later of the Closing Date or the date
on which such Lender became a Lender and that it is not capable of
recovering the full amount of the same from a source other than the
Borrowers; or
(iv) that such Lender is no longer capable of
receiving payments hereunder without deduction or withholding of
United States federal income tax as specified therein other than by
reason of a change in law (including the Internal Revenue Code or
applicable tax treaty) after the later of the Closing Date or the date
on which such Lender became a Lender.
(c) Each Lender agrees to deliver to the Borrowers
and the Administrative Agent further duly completed copies of the
above-mentioned IRS forms on or before the earlier of (i) the date that any such
form expires or becomes obsolete or otherwise is required to be resubmitted as a
condition to obtaining an exemption from withholding from United States federal
income tax and (ii) fifteen (15) days after the occurrence of any event
requiring a change in the most recent form previously delivered by such Lender
to the Borrowers
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and the Administrative Agent, unless any change in treaty, law, regulation or
official interpretation thereof which would render such form inapplicable or
which would prevent the Lender from duly completing and delivering such form has
occurred prior to the date on which any such delivery would otherwise be
required and the Lender or promptly advises the Borrowers that it is not capable
of receiving payments hereunder or under the Notes without any deduction or
withholding of United States federal income tax.
ARTICLE III
THE COLLATERAL
Section 3.1 Debt and Obligations Secured.
All property and Liens assigned, pledged or otherwise granted under or in
connection with this Agreement (including, without limitation, those under
Section 3.2 (Grant of Liens)) or any of the Financing Documents shall secure (a)
the payment of all of the Obligations, including, without limitation,
Obligations with respect to any and all Outstanding Letter of Credit Obligations
and any and all Agents' Obligations, and (b) the performance, compliance with
and observance by the Borrowers of the provisions of this Agreement and all of
the other Financing Documents or otherwise under the Obligations; provided,
however, that notwithstanding the foregoing, the Capital Expenditure Line
Equipment shall secure only the Obligations (including, without limitation,
interest and Enforcement Costs) with respect to the amount advanced under the
Capital Expenditure Line, the proceeds of which were utilized to purchase the
applicable items of Capital Expenditure Line Equipment. The security interest
and Lien of each Lender in such property shall rank equally in priority with the
interest of each other Lender, but the security interest and Lien of the
Administrative Agent with respect to the Agents' Obligations shall be superior
and paramount to the security interest and Lien of the Lenders.
Section 3.2 Grant of Liens.
Each of the Domestic Borrowers hereby assigns, pledges and grants to the
Administrative Agent, for the ratable benefit of the Lenders and for the benefit
of the Administrative Agent and the other Agents with respect to the Agents'
Obligations, and agrees that the Administrative Agent, the other Agents and the
Lenders shall have a perfected and continuing security interest in, and Lien on,
all of the Domestic Borrowers' Accounts, Inventory, Capital Expenditure Line
Equipment, and General Intangibles, whether now owned or existing or hereafter
acquired or arising, all returned, rejected or repossessed goods, the sale or
lease of which shall have given or shall give rise to an Account or chattel
paper, all insurance policies relating to the foregoing, all books and records
in whatever media (paper, electronic or otherwise) recorded or stored, with
respect to the foregoing and all equipment and general intangibles necessary or
beneficial to retain, access and/or process the information contained in those
books and records, and all cash and non-cash proceeds and products of the
foregoing. Each of the Domestic Borrowers further agrees that the Administrative
Agent, for the ratable benefit of the Lenders and for the benefit of the
Administrative Agent and the other Agents with respect to the Agents'
Obligations, shall have in respect thereof all of the rights and remedies of a
secured party under the Uniform Commercial Code as well as those provided in
this Agreement, under each of the other Financing Documents and under applicable
Laws.
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Section 3.3 Collateral Disclosure List.
On or prior to the Closing Date, the Domestic Borrowers shall deliver to
the Administrative Agent a list (the "Collateral Disclosure List") which shall
contain such information with respect to each Borrower's business and real and
personal property as the Administrative Agent may require and shall be certified
by a Responsible Officer of each of the Domestic Borrowers, all in the form
provided to the Domestic Borrowers by the Administrative Agent. Promptly after
demand by the Administrative Agent, but no more frequently than on a semi-annual
basis, unless and until an event of Default shall have occurred and be
continuing, in which case the foregoing limitation shall not apply, the Domestic
Borrowers, as appropriate, shall furnish to the Administrative Agent an update
of the information contained in the Collateral Disclosure List at any time and
from time to time as may be requested by the Administrative Agent.
Section 3.4 Additional Collateral.
Following an Event of Default and during the continuation thereof, the
Administrative Agent, in its sole and absolute discretion exercised from time to
time, may require that the Borrowers further secure the Obligations, for the
ratable benefit of the Lenders and for the benefit of the Administrative Agent
with respect to the Agents' Obligations, by a first priority (subject only to
Permitted Liens), perfected Lien, in form and substance satisfactory to the
Administrative Agent and its counsel, on all or any part (as the Administrative
Agent , in its sole and absolute discretion exercised from time to time may
require) of the real and personal property and other assets of the Borrowers
which are not part of the Collateral described in Section 3.2 and on which a
Permitted Lien may arise solely by operation of and in conformance with clause
(e) (relating to Liens securing the Indentures) of the definition of "Permitted
Lien." Without implying any limitation on the Borrowers' obligations under
Section 6.1.24, but subject to the provisions of the immediately preceding
sentence, the Administrative Agent may obtain and/or require the Borrowers to
obtain with respect to such real and personal property and other assets,
opinions of counsel, corporate resolutions, record searches, title insurance,
assignments, waivers, certificates and other documents, certificates,
instruments and information as the Administrative Agent may require, all in form
and substance satisfactory to the Administrative Agent and its counsel, in the
exercise of their sole and absolute discretion.
Section 3.5 Record Searches.
As of the Closing Date and thereafter at the time any Financing Document is
executed and delivered by the Domestic Borrowers pursuant to this Section, the
Administrative Agent shall have received, in form and substance reasonably
satisfactory to the Administrative Agent, such Lien or record searches with
respect to all of the Domestic Borrowers and/or any other Person, as
appropriate, and the property covered by such Financing Document showing that
the Lien of such Financing Document will be a perfected first priority Lien on
the property covered by such Financing Document subject only to Permitted Liens
or to such other matters as the Administrative Agent may approve.
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Section 3.6 Costs.
The Borrowers agree to pay, as part of the Enforcement Costs and to the
fullest extent permitted by applicable Laws, on demand all reasonable costs,
fees and expenses incurred by the Administrative Agent and/or any of the Lenders
in connection with the taking, perfection, preservation, protection and/or
release of a Lien on the Collateral, including, without limitation:
(a) customary fees and expenses incurred by the
Administrative Agent and/or any of the Lenders in preparing,
reviewing, negotiating and finalizing the Financing Documents from
time to time (including, without limitation, reasonable attorneys'
fees incurred in connection with preparing, reviewing, negotiating,
and finalizing any of the Financing Documents, including, any
amendments and supplements thereto);
(b) all filing and/or recording taxes or fees;
(c) all costs of Lien and record searches;
(d) reasonable attorneys' fees in connection with all
legal opinions required;
(e) appraisal costs; and
(f) all related costs, fees and expenses.
Section 3.7 Release.
Upon the indefeasible repayment in full in cash of the Obligations and
performance of all Obligations of the Borrowers and all obligations and
liabilities of each other Person, other than the Administrative Agent and the
Lenders, under this Agreement and all other Financing Documents, the termination
and/or expiration of all of the Commitments, all Letters of Credit and all
Outstanding Letter of Credit Obligations, upon the Borrowers' request and at the
Borrowers' sole cost and expense, the Administrative Agent shall release and/or
terminate any Financing Document but only if and provided that there is no
commitment or obligation (whether or not conditional) of the Administrative
Agent and/or any of the Lenders to re-advance amounts which would be secured
thereby and/or no commitment or obligation of the Administrative Agent to issue
any Letter of Credit or return or restore any payment of any Current Letter of
Credit Obligations.
Section 3.8 Inconsistent Provisions.
In the event that the provisions of any Financing Document directly
conflict with any provision of this Agreement, the provisions of this Agreement
govern.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties.
The Borrowers, for themselves and for each other, represent and warrant to
the Administrative Agent and the Lenders, as follows:
4.1.1 Subsidiaries.
The Borrowers have the Subsidiaries listed on the Collateral
Disclosure List attached hereto and made a part hereof and no others. Each of
the Subsidiaries is a Wholly Owned Subsidiary except as shown on the Collateral
Disclosure List, which correctly indicates the nature and amount of each
Borrower's ownership interests therein.
4.1.2 Good Standing.
Each Borrower and its Subsidiaries (a) is a corporation duly
organized, existing and in good standing under the laws of the jurisdiction of
its incorporation, (b) has the corporate power to own its property and to carry
on its business as now being conducted, and (c) is duly qualified to do business
and is in good standing in each jurisdiction in which the character of the
properties owned by it therein or in which the transaction of its business makes
such qualification necessary.
4.1.3 Power and Authority.
Each Borrower has full corporate power and authority to
execute and deliver this Agreement the Purchase Agreements, and the other
Financing Documents to which it is a party, to make the borrowings and request
Letters of Credit under this Agreement and to incur and perform the Obligations
whether under this Agreement, the other Financing Documents or otherwise, all of
which have been duly authorized by all proper and necessary corporate action. No
consent or approval of shareholders or any creditors of any Borrower, and no
consent, approval, filing or registration with or notice to any Governmental
Authority on the part of any Borrower which has not been obtained or taken, is
required as a condition to the execution, delivery, validity or enforceability
of this Agreement, the Purchase Agreements, or any of the other Financing
Documents and the performance by any Borrower of the Obligations.
4.1.4 Binding Agreements.
This Agreement and the other Financing Documents executed
and delivered by the Borrowers have been properly executed and delivered and
constitute the valid and legally binding obligations of the Borrowers and are
fully enforceable against each of the Borrowers in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization, moratorium
and other laws of general applications affecting the rights and remedies of
creditors and secured parties, and general principles of equity regardless of
whether applied in a proceeding in equity or at law.
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4.1.5 No Conflicts.
Neither the execution, delivery and performance of the
terms of this Agreement or of any of the other Financing Documents executed and
delivered by any Borrower nor the consummation of the transactions contemplated
by this Agreement will conflict with, violate or be prevented by (a) any
Borrower's charter or bylaws, (b) any existing mortgage, indenture, contract or
agreement binding on any Borrower or affecting its property, except to the
extent any such conflict or violation would not reasonably be expected to have a
Material Adverse Effect, or (c) any Laws applicable to any Borrower.
4.1.6 No Defaults, Violations.
(a) No Default or Event of Default has occurred
and is continuing.
(b) None of the Borrowers nor any of their
respective Subsidiaries is in default under or with respect to any obligation
under any existing mortgage, indenture, contract or agreement binding on it or
affecting its property in any respect, which default reasonably would be
expected to have a Material Adverse Effect.
4.1.7 Compliance with Laws.
None of the Borrowers nor any of their respective
Subsidiaries is in violation of any applicable Laws (including, without
limitation, any Laws relating to employment practices, to environmental,
occupational and health standards and controls) or order, writ, injunction,
decree or demand of any court, arbitrator, or any Governmental Authority
affecting any Borrower or any of its properties, the violation of which,
considered in the aggregate, reasonably would be expected to have a Material
Adverse Effect.
4.1.8 Margin Stock.
None of the proceeds of the Loans will be used, directly or
indirectly, by any Borrower or any Subsidiary for the purpose of purchasing or
carrying, or for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry, any "margin security" within the
meaning of Regulation G (12 CFR Part 207), or "margin stock" within the meaning
of Regulation U (12 CFR Part 221), of the Board of Governors of the Federal
Reserve System or for any other purpose which reasonably would be expected to
make the transactions contemplated in this Agreement a "purpose credit" within
the meaning of said Regulation G or Regulation U, or cause this Agreement to
violate any other regulation of the Board of Governors of the Federal Reserve
System or the Securities Exchange Act of 1934 or the Small Business Investment
Act of 1958, as amended, or any rules or regulations promulgated under any of
such statutes.
4.1.9 Investment Company Act; Margin Securities.
None of the Borrowers nor any of their respective
Subsidiaries is an investment company within the meaning of the Investment
Company Act of 1940, as amended,
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nor is it, directly or indirectly, controlled by or acting on behalf of any
Person which is an investment company within the meaning of said Act. None of
the Borrowers nor any of their respective Subsidiaries is engaged principally,
mor as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying "margin security" within the meaning of
Regulation G (12 CFR Part 207), or "margin stock" within the meaning of
Regulation U (12 CFR Part 221), of the Board of Governors of the Federal Reserve
System.
4.1.10 Litigation.
Except as otherwise disclosed on Schedule 4.1.10 attached
to and made a part of this Agreement, there are no proceedings, actions or
investigations pending or, so far as any Borrower has notice in writing,
threatened before or by any court, arbitrator or any Governmental Authority
which, in any one case or in the aggregate, if determined adversely to the
interests of any Borrower or any Subsidiary, reasonably would be expected to
have a Material Adverse Effect.
4.1.11 Financial Condition.
The consolidated financial statements of the Borrowers dated
December 31, 1997, are complete and correct and fairly present in all material
respects the financial position of each of the Borrowers and its Subsidiaries
and the results of their operations and transactions in their surplus accounts
as of the date and for the period referred to and have been prepared in
accordance with GAAP applied on a consistent basis throughout the period
involved. There are no liabilities, direct or indirect, fixed or contingent, of
any Borrower or any Subsidiary as of the date of such financial statements which
are not reflected therein or in the notes thereto. There has been no material
adverse change in the financial condition or operations of any Borrower or any
Subsidiary since the date of such financial statements and to the Borrowers'
knowledge no such material adverse change is pending or threatened. None of the
Borrowers nor any Subsidiary has guaranteed the obligations of, or made any
investment in or advances to, any Person, except as disclosed in such financial
statements.
4.1.12 Full Disclosure.
The financial statements referred to in Section 4.1.11
(Financial Condition) of this Agreement, the Financing Documents (including,
without limitation, this Agreement), and the statements, reports or certificates
furnished by any Borrower in connection with the Financing Documents (a) do not
contain any untrue statement of a material fact and (b) when taken in their
entirety, do not omit any material fact necessary to make the statements
contained therein not misleading. There is no fact known to any Borrower which
such Borrower has not disclosed to the Administrative Agent and the Lenders in
writing prior to the date materially and adversely affects or in the future
would reasonably be expected to have a Material Adverse Effect.
4.1.13 Indebtedness for Borrowed Money.
Except for the Obligations and except as set forth in
Schedule 4.1.13 attached to and made a part of this Agreement, the Borrowers
have no Indebtedness for
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Borrowed Money. The Administrative Agent has received photocopies of all
promissory notes evidencing any Indebtedness for Borrowed Money set forth in
Schedule 4.1.13, together with any and all subordination agreements, and other
material agreements, documents, or instruments securing, evidencing, guarantying
or otherwise executed and delivered in connection therewith.
4.1.14 Subordinated Debt.
None of the Subordinated Debt Loan Documents has been
amended, supplemented, restated or otherwise modified except as otherwise
disclosed to the Administrative Agent in writing on or before the effective date
of any such amendment, supplement, restatement or other modification. In
addition, there does not exist any default or any event which upon notice or
lapse of time or both would constitute a default under the terms of any of the
Subordinated Debt Loan Documents.
4.1.15 Taxes.
Except for any extensions which have been filed and are in
effect in accordance with applicable law, each of the Borrowers and its
Subsidiaries has filed all returns, reports and forms for Taxes which, to the
knowledge of the Borrowers, are required to be filed, and has paid all Taxes as
shown on such returns or on any assessment received by it, to the extent that
such Taxes have become due, unless and to the extent only that such Taxes,
assessments and governmental charges are currently contested in good faith and
by appropriate proceedings by a Borrower, such Taxes are not the subject of any
Liens other than Permitted Liens, and adequate reserves therefor have been
established as required under GAAP. All tax liabilities of the Borrowers were as
of the date of audited financial statements referred to in Section 4.1.11
(Financial Condition), and are now, adequately provided for on the books of the
Borrowers and its Subsidiaries, as appropriate. No tax liability has been
asserted by the Internal Revenue Service or any state or local authority against
any Borrower for Taxes in excess of those already paid.
4.1.16 ERISA.
With respect to any Plan that is maintained or contributed
to by the Borrower and/or by any Commonly Controlled Entity or as to which any
of the Borrowers retains material liability: (a) no "accumulated funding
deficiency" as defined in Code Section 412 or ERISA Section 302 has occurred,
whether or not that accumulated funding deficiency has been waived; (b) no
Reportable Event has occurred other than events for which reporting has been
waived or that are unlikely to result in material liability for any of the
Borrowers; (c) no termination of any plan subject to Title IV of ERISA has
occurred; (d) neither the Borrower nor any Commonly Controlled Entity has
incurred a "complete withdrawal" within the meaning of ERISA Section 4203 from
any Multi-employer Plan that is reasonably likely to result in material
liability for one or more of the Borrowers; (e) neither the Borrower nor any
Commonly Controlled Entity has incurred a "partial withdrawal" within the
meaning of ERISA Section4205 with respect to any Multi-employer Plan that is
likely to result in material liability for one or more of the Borrowers; (f) no
Multi-employer Plan to which the Borrower or any Commonly Controlled Entity has
an obligation to contribute is to the knowledge of the Borrowers, in
"reorganization" within the
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meaning of ERISA Section 4241 nor has notice been received by the Borrower or
any Commonly Controlled Entity that such a Multi-employer Plan will be
placed in "reorganization".
4.1.17 Title to Properties.
The Borrowers have good and marketable title to all of their
respective properties, including, without limitation, the Collateral and the
properties and assets reflected in the balance sheets described in Section
4.1.11 (Financial Condition). The Borrowers have legal and enforceable rights to
use freely such property and assets subject to no contest with respect to any
material portion of such property of which any Borrower has knowledge. All of
such properties, including, without limitation, the Collateral which were
purchased, were purchased for fair consideration and reasonably equivalent value
in the ordinary course of business of both the seller and the Borrowers and not,
by way of example only, as part of a bulk sale.
4.1.18 Patents, Trademarks, Etc.
Each of the Borrowers and its Subsidiaries owns, possesses,
or has the right to use all necessary patents, licenses, trademarks, copyrights,
permits and franchises to own its properties and to conduct its business as now
conducted, without known conflict with the rights of any other Person. Any and
all obligations to pay royalties or other charges with respect to such
properties and assets are properly reflected on the financial statements
described in Section 4.1.11 (Financial Condition).
4.1.19 Employee Relations.
Except as disclosed on Schedule 4.1.19 attached hereto and
made a part hereof, (a) no Borrower nor any Subsidiary thereof nor any of the
Borrower's or Subsidiary's employees is subject to any collective bargaining
agreement, (b) no petition for certification or union election is pending with
respect to the employees of any Borrower or any Subsidiary and no union or
collective bargaining unit currently is seeking such certification or
recognition with respect to the employees of a Borrower, (c) there are no
strikes, slowdowns, work stoppages or controversies pending or, to the best
knowledge of the Borrowers after due inquiry, threatened between any Borrower
and its employees, and (d) no Borrower nor any Subsidiaries is subject to an
employment contract, severance agreement, commission contract, consulting
agreement or bonus agreement. Hours worked and payments made to the employees of
any one or more of the Borrowers have not been in violation of the Fair Labor
Standards Act or any other applicable law dealing with such matters. All
payments due from any one or more of the Borrowers or for which any claim may be
made against a Borrower, on account of wages and employee and retiree health and
welfare insurance and other benefits have been paid or accrued as a liability on
its books. The consummation of the transactions contemplated by the Financing
Agreement or any of the other Financing Documents will not give rise to a right
of termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which any Borrower is a party or by which it
is bound.
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4.1.20 Presence of Hazardous Materials or Hazardous
Materials Contamination.
To the best of each Borrower's knowledge, (a) no Hazardous
Materials are located on any real property owned, controlled or operated by any
Borrower or for which any Borrower is, or is claimed to be, responsible, except
for reasonable quantities of necessary supplies for use by a Borrower in the
ordinary course of its current line of business and stored, used and disposed of
in accordance with applicable Laws; and (b) no property owned, controlled or
operated by any Borrower or for which any Borrower has, or is claimed to have,
responsibility has ever been used as a manufacturing, storage, or dump site for
Hazardous Materials nor is affected by Hazardous Materials Contamination at any
other property.
4.1.21 Perfection and Priority of Collateral.
The Administrative Agent and the Lenders have, or upon
execution and recording of this Agreement and the Security Documents will have,
and provided continuous possession is maintained for that portion of the
Collateral for which possession is required to obtain and maintain perfection,
will continue to have as security for the Obligations, a valid and perfected
Lien on and security interest in all Collateral, free of all other Liens, claims
and rights of third parties whatsoever except Permitted Liens, including,
without limitation, those described on Schedule 4.1.21.
4.1.22 Places of Business and Location of Collateral.
The information contained in the Collateral Disclosure List
is complete and correct. The Collateral Disclosure List completely and
accurately identifies the address of (a) the chief executive office of each
Borrower, (b) any and each other place of business of each Borrower, (c) the
location of all books and records pertaining to the Collateral, and (d) each
location, other than the foregoing, where any of the Collateral is located. The
proper and only places to file financing statements with respect to the
Collateral within the meaning of the Uniform Commercial Code are the filing
offices for those jurisdictions in which any one or more of the Borrowers
maintains a place of business as identified on the Collateral Disclosure List.
4.1.23 Business Names and Addresses.
In the twelve (12) years preceding the date hereof, no
Borrower has changed its name, identity or corporate structure, has conducted
business under any name other than its current name, or has conducted its
business in any jurisdiction other than those disclosed on the Collateral
Disclosure List.
4.1.24 Capital Expenditure Line Equipment.
All Capital Expenditure Line Equipment is personalty and is
not and will not be affixed to real estate in such manner as to become a fixture
or part of such real estate. No equipment is held by any Borrower on a sale on
approval basis.
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4.1.25 Inventory.
The Inventory of the Borrowers is (a) of good and
merchantable quality, free from defects of which the Borrowers have knowledge,
(b) not stored with a bailee, warehouseman, carrier, or similar party, (c) not
on consignment, sale on approval, or sale or return, and (d) located at the
places of business set forth on the Collateral Disclosure List. No goods offered
for sale by any Borrower are consigned to or held on sale or return terms by
that Borrower.
4.1.26 Accounts.
With respect to all Accounts and to the best of the
Borrowers' knowledge (a) they are genuine, and in all respects what they purport
to be, and are not evidenced by a judgment, an instrument, or chattel paper
(unless such judgment has been assigned and such instrument or chattel paper has
been endorsed and delivered to the Administrative Agent for the benefit of
itself and the Lenders); (b) they represent bona fide transactions completed in
accordance with the terms and provisions contained in the invoices, purchase
orders and other contracts relating thereto, and the underlying transaction
therefor is in accordance with all applicable Laws; (c) the amounts shown on the
respective Borrower's books and records, with respect thereto are actually and
absolutely owing to that Borrower and are not contingent or subject to reduction
for any reason other than regular discounts, credits or adjustments allowed by
that Borrower in the ordinary course of its business; (d) no payments have been
or shall be made thereon except payments turned over to the Administrative Agent
by the Borrowers; (e) all Account Debtors thereon have the capacity to contract;
and (f) the goods sold, leased or transferred or the services furnished giving
rise thereto are not subject to any Liens except the security interest granted
to the Administrative Agent and the Lenders by this Agreement and Permitted
Liens.
4.1.27 Assigned Local Currency Receivables.
The Administrative Agent has received true and correct
photocopies of the Purchase Agreements executed, delivered and/or furnished on
or before the Closing Date. The Purchase Agreements have not been modified,
changed, supplemented, canceled, amended or otherwise altered or affected,
except as otherwise disclosed to the Agent in writing on or before the Closing
Date. The transactions described in the Purchase Agreements have been effected,
closed and consummated pursuant to, and in accordance with, the terms and
conditions of the Purchase Agreements and with all applicable Laws. The Purchase
Agreements effect the transfer of the accounts covered by the Purchase
Agreements, which accounts meet each requirement for inclusion among Assigned
Local Currency Receivables. Each Account included in the calculation of the
Assigned Local Currency Receivables does and will at all times meet and comply
with all of the components of the definition of "Assigned Local Currency
Receivables."
4.1.28 Compliance with Eligibility Standards.
Each account and all inventory included in the calculation
of the Borrowing Base does and will at all times meet and comply with all of the
standards for Eligible Receivables and Eligible Inventory. With respect to those
accounts which the Administrative
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Agent has deemed Eligible Receivables (a) each account which originated as an
account of a Local Currency Borrower or which arose on account of goods or
services provided by a Local Currency Borrower and which the Administrative
Agent has deemed to be an Eligible Receivables, is an Assigned Local Currency
Receivable, (b) without implying any limitation on the effect of clause (a), to
the best of the Borrowers' knowledge, there are no facts, events or occurrences
which reasonably would be expected to impair the validity, collectibility or
enforceability thereof or tend to reduce the amount payable thereunder; and (c)
there are no proceedings or actions known to any Borrower which are threatened
or pending against any Account Debtor which reasonably would be expected to
result in any material adverse change in the Borrowing Base.
4.1.29 Year 2000 Compliance
The Borrowers have (i) initiated a review and assessment of
all areas within the Borrowers and each of their Subsidiaries' businesses and
operations (including those affected by suppliers and vendors) with respect to
which the "Year 2000 Problem" (that is, the risk that computer applications used
by the Borrowers or any of their Subsidiaries (or its suppliers and vendors) may
be unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999) reasonably would be
expected to have a Material Adverse Effect, (ii) developed a plan and timeline
for addressing the Year 2000 Problem on a timely basis, and (iii) to date,
implemented that plan in accordance with that timetable. The Borrowers
reasonably believe that all computer applications (including those of its
suppliers and vendors) that are material to the Borrowers or any of their
Subsidiaries' businesses and operations will on a timely basis be able to
perform properly date-sensitive functions for all dates before and after January
1, 2000 (that is, be "Year 2000 compliant"), except to the extent that a failure
to do so would not reasonably be expected to have a Material Adverse Effect.
Section 4.2 Survival; Updates of Representations and Warranties.
All representations and warranties contained in or made under or in
connection with this Agreement and the other Financing Documents shall survive
the Closing Date, the making of any advance under the Loans and extension of
credit made hereunder, and the incurring of any other Obligations and shall be
deemed to have been made at the time of each request for, and again at the time
the making of, each advance under the Loans or the issuance of each Letter of
Credit, except that the representations and warranties which relate to financial
statements which are referred to in Section 4.1.11 (Financial Condition), shall
also be deemed to cover financial statements furnished from time to time to the
Administrative Agent and the Lenders pursuant to Section 6.1.1 (Financial
Statements).
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ARTICLE V
CONDITIONS PRECEDENT
Section 5.1 Conditions to the Initial Advance and Initial Letter of
Credit.
The making of the initial advance under the Loans and the issuance of the
initial Letter of Credit is subject to the fulfillment on or before the Closing
Date of the following conditions precedent in a manner reasonably satisfactory
in form and substance to the Administrative Agent and its counsel:
5.1.1 Organizational Documents - Domestic Borrowers.
The Administrative Agent shall have received for each
Domestic Borrower:
(a) a certificate of good standing certified by
the Secretary of State, or other appropriate Governmental
Authority, of the state of incorporation of such Domestic
Borrower;
(b) a certificate of qualification to do business
for such Domestic Borrower certified by the Secretary of
State or other Governmental Authority of each state in which
such Domestic Borrower conducts business;
(c) a certificate dated as of the Closing Date by
the Secretary or an Assistant Secretary of such Domestic
Borrower covering:
(d) true and complete copies of that Domestic
Borrower's corporate charter, bylaws, and all amendments
thereto;
(e) true and complete copies of the resolutions
of its Board of Directors authorizing (A) the execution,
delivery and performance of the Financing Documents to which
it is a party, (B) the borrowings hereunder, (C) the
granting of the Liens contemplated by this Agreement and the
Financing Documents to which that Domestic Borrower is a
party;
(f) the incumbency, authority and signatures of
the officers of such Domestic Borrower authorized to sign
this Agreement and the other Financing Documents to which
such Domestic Borrower is a party; and
(g) the identity of such Domestic Borrower's
current directors, common stock holders and other equity
holders, as well as their respective percentage ownership
interests.
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5.1.2 Opinion of Domestic Borrowers' Counsel.
The Administrative Agent shall have received the favorable
opinion of counsel (including the validity and binding transfer of the Assigned
Local Currency Receivables) for the Domestic Borrowers addressed to the
Administrative Agent and the Lenders in form satisfactory to the Administrative
Agent.
5.1.3 Opinion of Local Currency Borrowers' Counsel.
The Administrative Agent shall have received the favorable
opinion of Local Currency Borrowers' counsel with respect to the validity and
binding transfer of the Assigned Local Currency Receivables and other related
matters addressed to the Administrative Agent and the Lenders in form
satisfactory to the Administrative Agent.
5.1.4 Consents, Licenses, Approvals, Etc.
The Administrative Agent shall have received copies of all
consents, licenses and approvals, required in connection with the execution,
delivery, performance, validity and enforceability of the Financing Documents,
and such consents, licenses and approvals shall be in full force and effect.
5.1.5 Notes.
The Administrative Agent shall have received for delivery to
each of the Lenders the Revolving Credit Notes and the Capital Expenditure Line
Notes, each conforming to the requirements hereof and executed by a Responsible
Officer of each Borrower and attested by a duly authorized representative of
each Borrower.
5.1.6 Financing Documents and Collateral.
Each Borrower shall have executed and delivered the
Financing Documents to be executed by it, and shall have delivered original
chattel paper, instruments, Subsidiary Securities, and related Collateral and
all opinions, and other documents contemplated by ARTICLE III (The Collateral).
5.1.7 Additional Financial Matters.
The Parent shall have delivered to the Administrative Agent
the Borrowers' consolidated financial statements for the period ending February
28, 1998, together with such pros formas and projections as the Administrative
Agent may reasonably request.
5.1.8 Solvency Certificate.
The Administrative Agent shall have received a solvency
certificate from the appropriate Responsible Officer of each Borrower, in form
and substance satisfactory to the Administrative Agent.
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5.1.9 Other Financing Documents.
In addition to the Financing Documents to be delivered by
the Borrowers, the Administrative Agent shall have received the Financing
Documents duly executed and delivered by Persons other than the Borrowers.
5.1.10 Other Documents, Etc.
The Administrative Agent shall have received such other
certificates, opinions, documents and instruments confirmatory of or otherwise
relating to the transactions contemplated hereby as may have been reasonably
requested by the Administrative Agent.
5.1.11 Payment of Fees.
The Administrative Agent and the Lenders shall have received
payment of any Fees due on or before the Closing Date.
5.1.12 Collateral Disclosure List.
Each Borrower shall have delivered the Collateral Disclosure
List required under the provisions of Section 3.3 (Collateral Disclosure List)
duly executed by a Responsible Officer of each Borrower.
5.1.13 Recordings and Filings.
Each Borrower shall have: (a) executed and delivered all
Financing Documents (including, without limitation, UCC-1 and UCC-3 statements)
required to be filed, registered or recorded in order to create, in favor of the
Administrative Agent and the Lenders, a perfected Lien in the Collateral
(subject only to the Permitted Liens) in form and in sufficient number for
filing, registration, and recording in each office in each jurisdiction in which
such filings, registrations and recordations are required, and (b) delivered
such evidence as the Administrative Agent may deem satisfactory that all
necessary filing fees and all recording and other similar fees, and all Taxes
and other expenses related to such filings, registrations and recordings will be
or have been paid in full.
5.1.14 Insurance Certificate.
The Administrative Agent shall have received an insurance
certificate in accordance with the provisions of Section 6.1.8 (Insurance) and
Section 6.1.20 (Insurance With Respect to Capital Expenditure Line Equipment and
Inventory).
5.1.15 Landlord's Waivers.
The Administrative Agent shall have received a landlord's
waiver from each landlord of each and every business premise leased by each
Borrower and on which any of the Collateral is or may hereafter be located,
which landlords' waivers must be reasonably acceptable to the Administrative
Agent and its counsel in their sole and absolute discretion.
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5.1.16 Bailee Acknowledgements.
The Administrative Agent shall have received an agreement
acknowledging the Liens of the Administrative Agent and the Lender from each
bailee, warehouseman, consignee or similar third party which has possession of
any of the Collateral, which agreements must be reasonably acceptable to the
Administrative Agent and its counsel in their sole and absolute discretion.
5.1.17 Field Examination.
The Administrative Agent shall have completed a field
examination of each Borrower's business, operations and income, the results of
which field examination shall be in all respects acceptable to the
Administrative Agent in its sole and absolute discretion and shall include
reference discussions with key customers and vendors.
5.1.18 Stock Certificates and Stock Powers.
The Administrative Agent shall have received all of the
original stock certificates of the Domestic Borrowers and the Local Currency
Borrowers (except those certificates which are in the possession of a prior
secured party, which after the application of the proceeds of the initial
advance under this Agreement shall no longer have a Lien) and fully executed
irrevocable stock powers from the holders of all such stock certificates.
5.1.19 Collateral Account Acknowledgments.
The Administrative Agent shall have received the agreement
of the depository banks required by Section 2.1.8(a) with respect to the
Collateral Account.
Section 5.2 Conditions to Advances and Letters of Credit for Local
Currency Borrowers.
The making of the initial advance under the Loans, and the issuance of
the initial Letter of Credit, , to or for the benefit of a Local Currency
Borrower is subject to the fulfillment of the following conditions precedent in
a manner satisfactory in form and substance to the Administrative Agent and its
counsel:
5.2.1 Organizational Documents - Local Currency
Borrowers.
The Administrative Agent shall have received for each Local
Currency Borrower:
(a) a certificate of good standing certified by
the appropriate Governmental Authority of the jurisdiction
of incorporation of such Local Currency Borrower;
(b) a certificate of qualification to do
business for such Local Currency Borrower certified by the
appropriate
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Governmental Authority of each jurisdiction in which such
Local Currency Borrower conducts business;
(c) a certificate dated as of a date not earlier
than thirty (30) days prior to such initial advance or
issuance, as applicable, by the Secretary or an Assistant
Secretary (or other appropriate officer) of such Local
Currency Borrower covering:
(d) true and complete copies of that Local
Currency Borrower's corporate charter, bylaws, and all
amendments thereto;
(e) true and complete copies of the resolutions
of its Board of Directors authorizing (A) the execution,
delivery and performance of the Financing Documents to which
it is a party and (B) the borrowings hereunder;
(f) the incumbency, authority and signatures of
the officers of such Local Currency Borrower authorized to
sign this Agreement and the other Financing Documents to
which such Local Currency Borrower is a party;
(g) the identity of such Local Currency
Borrower's current directors, common stock holders and other
equity holders, as well as their respective percentage
ownership interests; and
(h) a duly executed and delivered Additional
Borrower Joinder Supplement, allonges and such other
Financing Documents as the Administrative Agent may
reasonably request.
5.2.2 Opinion of Local Currency Borrowers' Counsel.
The Administrative Agent shall have received the favorable
opinion of counsel for the Local Currency Borrowers addressed to the
Administrative Agent and the Lenders in form reasonably satisfactory to the
Administrative Agent.
5.2.3 Consents, Licenses, Approvals, Etc.
The Administrative Agent shall have received copies of all
consents, licenses and approvals, required in connection with the execution,
delivery, performance, validity and enforceability of the Financing Documents,
and such consents, licenses and approvals shall be in full force and effect.
Section 5.3 Conditions to Multi-Currency Loans and Multi-Currency
Letters of Credit.
The making of the initial advance under the Multi-Currency Revolving Loan,
and the issuance of the initial Multi-Currency Letter of Credit, are subject to
the appointment by the Administrative Agent of a Multi-Currency Agent, the
acceptance of that appointment by the
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Multi-Currency Agent and the Borrowers, the designation of Multi-Currency
Lenders, the acceptance of that designation by the Multi-Currency Lenders and
the Borrowers, and the establishment of foreign availability amounts,
multi-currency revolving loan sublimits, foreign currency sublimits, and foreign
exchange reserves, all in a manner satisfactory in form and substance to the
Multi-Currency Agent, the Multi-Currency Lenders, the Administrative Agent, the
Borrowers and their respective counsel.
Section 5.4 Conditions to all Extensions of Credit.
The making of all advances under the Loans and the issuance of all Letters of
Credit is subject to the fulfillment of the following conditions precedent in a
manner reasonably satisfactory in form and substance to the Administrative Agent
and its counsel:
5.4.1 Compliance.
Each Borrower shall have complied and shall then be in
compliance with all terms, covenants, conditions and provisions of this
Agreement and the other Financing Documents.
5.4.2 Borrowing Base.
The Borrowers shall have furnished all Borrowing Base
Reports required by Section 2.1.4 (Borrowing Base Report), there shall exist no
Borrowing Base Deficiency, and as evidence thereof, the Borrowers shall have
furnished to the Administrative Agent such reports, schedules, certificates,
records and other papers as may be requested by the Administrative Agent, and
the Borrowers shall be in compliance with the provisions this Agreement both
immediately before and immediately after the making of the advance requested.
5.4.3 Default.
There shall exist no Event of Default or Default hereunder.
5.4.4 Representations and Warranties.
The representations and warranties of each of the Borrowers
contained among the provisions of this Agreement shall be true and with the same
effect as though such representations and warranties had been made at the time
of the making of, and of the request for, each advance under the Loans or the
issuance of each Letter of Credit, except that the representations and
warranties which relate to financial statements which are referred to in Section
4.1.11 (Financial Condition), shall also be deemed to cover financial statements
furnished from time to time to the Administrative Agent pursuant to Section
6.1.1 (Financial Statements).
5.4.5 Adverse Change.
No material adverse change shall have occurred in the
condition (financial or otherwise), operations or business of any Borrower that
would, in the good faith judgment of
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the Administrative Agent, materially impair the ability of that Borrower to pay
or perform any of the Obligations.
5.4.6 Legal Matters.
All legal documents incident to each advance under the Loans
and each of the Letters of Credit shall be reasonably satisfactory to counsel
for the Administrative Agent.
ARTICLE V I
COVENANTS OF THE BORROWERS
Section 6.1 Affirmative Covenants.
So long as any of the Obligations (or any the Commitments therefor) or
Letters of Credit shall be outstanding hereunder, the Borrowers agree jointly
and severally with the Administrative Agent and the Lenders as follows:
6.1.1 Financial Statements.
The Borrowers shall furnish to the Administrative Agent and
the Lenders:
(a) Annual Statements and Certificates. The
Borrowers shall furnish to the Administrative Agent and the Lenders as soon as
available, but in no event more than one hundred (120) days after the close of
the Borrowers' fiscal years, (i) a copy of the annual financial statement in
reasonable detail satisfactory to the Administrative Agent relating to the
Borrowers and their Subsidiaries, prepared in accordance with GAAP and examined
and certified by independent certified public accountants reasonably
satisfactory to the Administrative Agent, which financial statement shall
include a consolidated and consolidating balance sheet of the Borrowers and
their Subsidiaries as of the end of such fiscal year and consolidated and
consolidating statements of income and of cash flows and a consolidated
statement of changes in shareholders equity of the Borrowers and their
Subsidiaries for such fiscal year, and (ii) a Compliance Certificate, in
substantially the form attached to this Agreement as EXHIBIT D, containing a
detailed computation of each financial covenant in this Agreement which is
applicable for the period reported, a certification that no change has occurred
to the information contained in the Collateral Disclosure List (except as set
forth on any schedule attached to the certification), and a cash flow projection
report, each prepared by a Responsible Officer of the Borrowers in a format
reasonably acceptable to the Administrative Agent; and shall also furnish to the
Administrative Agent with a sufficient number of copies for all of the Lenders
promptly after receipt, each management letter in the form prepared by the
Borrowers' independent certified public accountants.
(b) Annual Opinion of Accountant. The Borrowers
shall furnish to the Administrative Agent and the Lenders as soon as available,
but in no event more than one hundred (120) days after the close of the
Borrowers' fiscal years, a letter or opinion of the accountant who examined and
certified the annual financial statement relating to the Borrowers and their
Subsidiaries (i) stating whether anything in such accountant's examination has
revealed the occurrence of a Default or an Event of Default hereunder insofar as
they relate
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to accounting matters, and, if so, stating the facts with respect thereto and
(ii) acknowledging that the Administrative Agent and the Lenders will rely on
the statement and that the Borrowers know of the intended reliance by the
Administrative Agent and the Lenders.
(c) Quarterly Statements and Certificates. The
Borrowers shall furnish to the Administrative Agent, with a sufficient number of
copies for all of the Lenders as soon as available, but in no event more than
sixty (60) days after the end of each fiscal quarter of the Borrowers,
consolidated balance sheets of the Borrowers and their Subsidiaries as of the
close of such period, consolidated and consolidating income statements and
statements of cash flows and a consolidated statement of changes in shareholders
equity statements for such period, and a Compliance Certificate, in
substantially the form attached to this Agreement as EXHIBIT D, containing a
detailed computation of each financial covenant in this Agreement which is
applicable for the period reported, and a certification that no change has
occurred to the information contained in the Collateral Disclosure List (except
as set forth on any schedule attached to the certification), each prepared by a
Responsible Officer of or on behalf of each Borrower in a format reasonably
acceptable to the Administrative Agent, and certified by a Responsible Officer
of the Borrowers and accompanied by a certificate of that officer stating
whether any event has occurred which constitutes a Default or an Event of
Default hereunder, and, if so, stating the facts with respect thereto.
(d) Monthly Statements and Certificates. The
Borrowers shall furnish to the Administrative Agent, with a sufficient number of
copies for all of the Lenders as soon as available, but in no event more than
sixty (60) days after the end of each January and February and in no event more
than thirty (30) days after the end of each other month, management prepared
consolidated and consolidating balance sheets of the Borrowers and their
Subsidiaries as of the close of such period, consolidated and consolidating
income statements, consolidated cash flows and changes in shareholders equity
statements for such period, and a certification that no change has occurred to
the information contained in the Collateral Disclosure List (except as set forth
on any schedule attached to the certification), and the exact Dollar allocation
of the amount borrowed as between each of the Borrowers (the "Intercompany
Allocation", which Intercompany Allocation shall include any Loan proceeds
loaned or otherwise advanced by any Borrower to any other Borrower) under the
Revolving Credit Facility, each prepared by a Responsible Officer of or on
behalf of each Borrower in a format reasonably acceptable to the Lender and
certified by a Responsible Officer of the Borrowers and accompanied by a
certificate of that officer stating whether any event has occurred which
constitutes a Default or an Event of Default hereunder, and, if so, stating the
facts with respect thereto.
(e) Monthly reports. The Borrowers shall furnish
to the Administrative Agent, with a sufficient number of copies for all of the
Lenders within (x) thirty (30) days after the end of January and (y) fifteen
(15) days after the end of each fiscal month, a report containing the following
information:
(i) a detailed aging schedule of all
Receivables by Account Debtor and, in the case of Assigned Local Currency
Receivables, by Local Currency Borrower, in such detail, and
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accompanied by such supporting information, as the Administrative Agent may
from time to time reasonably request;
(ii) a detailed aging of all accounts
payable by supplier, in such detail, and accompanied by such supporting
information, as the Administrative Agent may from time to time reasonably
request;
(iii) a listing of all Inventory by
component, category and location, and reconciliations of general ledger
inventory accounts to the perpetual inventory records, all in such detail,
and as accompanied by such supporting information as the Administrative
Agent may from time to time reasonably request; and
(iv) such other information as the
Administrative Agent may reasonably request.
(f) Annual Budget and Projections. The Borrowers
shall furnish to the Administrative Agent, with a sufficient number of copies
for each Lender as soon as available, but in no event later than the 10th day
before the end of each fiscal year:
(i) a consolidated and consolidating budget
and pro forma financial statements on a quarter-to-quarter basis for the
following fiscal year, and
(ii) five (5) year projections.
(g) Additional Reports and Information. The
Borrowers shall furnish to the Administrative Agent and the Lenders promptly,
such additional information, reports or statements as the Administrative Agent
and/or any of the Lenders may from time to time reasonably request.
6.1.2 Reports to SEC and to Stockholders.
The Borrowers will furnish to the Administrative Agent and
the Lenders, promptly upon the filing or making thereof, at least one (l) copy
of all financial statements, reports, notices and proxy statements sent by any
Borrower to its stockholders, and of all regular and other reports filed by any
Borrower with any securities exchange or with the Securities and Exchange
Commission.
6.1.3 Recordkeeping, Rights of Inspection, Field
Examination, Etc.
(a) Each of the Borrowers shall, and shall cause
each of its Subsidiaries to, maintain (i) a standard system of accounting in
accordance with GAAP, and (ii) proper books of record and account in which full,
true and correct entries are made of all dealings and transactions in relation
to its properties, business and activities.
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(b) Each of the Borrowers shall, and shall cause each of its
Subsidiaries to, permit authorized representatives of the Administrative Agent
to visit and inspect the properties of the Borrowers and its Subsidiaries, to
review, audit, check and inspect the Collateral, with notice given during normal
business hours, which inspection shall be conducted during normal business hours
and at other reasonable times, if no Event of Default has occurred and with or
without notice and at any time if an Event of Default has occurred and is
continuing. During such inspection, such representatives also shall be entitled
to make abstracts and photocopies of the books and records of each Borrower, and
to discuss the affairs, finances and accounts of the Borrowers and their
Subsidiaries, with the officers, directors, employees and other representatives
of the Borrowers and their Subsidiaries and their respective accountants. Unless
an Event of Default shall have occurred and be continuing, no such inspection
shall disrupt the normal business operations of any Borrower. All information
obtained during any such inspection shall be subject to the provisions of
Section 9.20.
(c) Each of the Borrowers hereby irrevocably authorizes and
directs all accountants and auditors employed by any of the Borrowers and/or any
of their Subsidiaries at any time prior to the repayment in full of the
Obligations to exhibit and deliver to the Administrative Agent and the Lenders
copies of any and all of the financial statements, trial balances, management
letters, or other accounting records of any nature of any or all of the
Borrowers and/or any or all of their respective Subsidiaries in the accountant's
or auditor's possession, and to disclose to the Administrative Agent and any of
the Lenders any information they may have concerning the financial status and
business operations of any or all of the Borrowers and/or any or all of their
respective Subsidiaries. Further, each of the Borrowers hereby authorizes all
Governmental Authorities to furnish to the Administrative Agent and the Lenders
copies of reports or examinations relating to any and all of the Borrowers
and/or any or all Subsidiaries, whether made by the Borrowers or otherwise.
(d) Any and all costs and expenses incurred by, or on behalf of,
the Administrative Agent in connection with the conduct of any of the foregoing
shall be part of the Enforcement Costs and shall be payable to the
Administrative Agent upon demand. The Borrowers acknowledge and agree that such
expenses may include, but shall not be limited to, any and all out-of-pocket
costs and expenses of the Administrative Agent's employees and agents in, and
when, travelling to any of the Borrowers' facilities. Notwithstanding the
foregoing, provided no Event of Default shall have occurred and the continuing,
Borrowers shall not be required to pay for more than four (4) inspections each
year.
6.1.4 Corporate Existence.
Except as permitted by Section 6.2.1, each of the Borrowers shall
maintain, and cause each of its Subsidiaries to maintain, its corporate
existence in good standing in the jurisdiction in which it is incorporated and
in each other jurisdiction where it is required to register or qualify to do
business if the failure to do so in such other jurisdiction reasonably would be
expected to have a Material Adverse Effect.
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6.1.5 Compliance with Laws.
Each of the Borrowers shall comply, and cause each of its Subsidiaries
to comply, with all applicable Laws and observe the valid requirements of
Governmental Authorities, the noncompliance with or the nonobservance of which
reasonably would be expected to have a Material Adverse Effect.
6.1.6 Preservation of Properties.
Each of the Borrowers will, and will cause each of its Subsidiaries
to, at all times (a) maintain, preserve, protect and keep its properties,
whether owned or leased, in good operating condition, working order and repair
(ordinary wear and tear excepted), and from time to time will make all proper
repairs, maintenance, replacements, additions and improvements thereto needed to
maintain such properties in good operating condition, working order and repair,
unless such property becomes obsolete or is no longer useful in the operation of
the business of the applicable Borrower and (b) do or cause to be done all
things necessary to preserve and to keep in full force and effect its material
franchises, leases of real and personal property, trade names, patents,
trademarks and permits which are necessary for the orderly continuance of its
business.
6.1.7 Line of Business.
Each of the Borrowers will continue to engage substantially only in
the business of the design and manufacture of high precision fuel system
products for the global automotive and outdoor power equipment markets.
6.1.8 Insurance.
Each of the Borrowers will, and will cause each of its Subsidiaries
to, at all times maintain with "A" or better rated insurance companies such
insurance as is required by applicable Laws and such other insurance, in such
amounts, of such types and against such risks, hazards, liabilities, casualties
and contingencies as are usually insured against in the same geographic areas by
business entities engaged in the same or similar business. Without limiting the
generality of the foregoing, each of the Borrowers will, and will cause each of
its Subsidiaries to, keep adequately insured all of its property against loss or
damage resulting from fire or other risks insured against by extended coverage
and maintain public liability insurance against claims for personal injury,
death or property damage occurring upon, in or about any properties occupied or
controlled by it, or arising in any manner out of the businesses carried on by
it. Each of the Borrowers shall deliver to the Administrative Agent on the
Closing Date (and thereafter on each date there is a material change in the
insurance coverage) a certificate of a Responsible Officer of the Borrowers
containing a detailed list of the insurance then in effect and stating the names
of the insurance companies, the types, the amounts and rates of the insurance,
dates of the expiration thereof and the properties and risks covered thereby.
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6.1.9 Taxes.
Except to the extent that the validity or amount thereof is being
contested in good faith and by appropriate proceedings, each of the Borrowers
will, and will cause each of its Subsidiaries, to pay and discharge all Taxes
prior to the date when any interest or penalty would accrue for the nonpayment
thereof. Each of the Borrowers shall furnish to the Administrative Agent at such
times as the Administrative Agent may require proof reasonably satisfactory to
the Administrative Agent of the making of payments or deposits required by
applicable Laws including, without limitation, payments or deposits with respect
to amounts withheld by any of the Borrowers from wages and salaries of employees
and amounts contributed by any of the Borrowers on account of federal and other
income or wage taxes and amounts due under the Federal Insurance Contributions
Act, as amended.
6.1.10 ERISA.
Each of the Domestic Borrowers will, and will cause each of its
Commonly Controlled Entities to, comply with the funding requirements of ERISA
with respect to Plans for its respective employees. No Domestic Borrower will
permit with respect to any Plan (a) any prohibited transaction or transactions
under ERISA or the Internal Revenue Code, which results, or reasonably would be
expected to result, in any material liability of the Domestic Borrower, or (b)
any Reportable Event if, upon termination of the plan or plans with respect to
which one or more such Reportable Events shall have occurred, there is or would
be any material liability of the Domestic Borrower to the PBGC. Upon the request
of the Administrative Agent, the Domestic Borrowers will deliver to the
Administrative Agent a copy of the most recent actuarial report, financial
statements and annual report completed with respect to any Plan.
6.1.11 Notification of Events of Default and Adverse Developments.
Each of the Borrowers shall promptly notify the Administrative Agent
upon obtaining knowledge of the occurrence of:
(a) any Event of Default;
(b) any Default;
(c) any litigation instituted or threatened against any of the
Borrowers or any of their Subsidiaries and of the entry of any judgment or
Lien (other than any Permitted Liens) against any of the assets or
properties of any of the Borrowers or any Subsidiary where the claims
against any Borrower or any Subsidiary exceed One Million Dollars
($1,000,000) and are not covered by insurance;
(d) any event, development or circumstance whereby the
financial statements furnished hereunder fail in any material respect to
present fairly, in all material respects and in accordance with GAAP, the
financial condition and operational results of any of the Borrowers or
any of their respective Subsidiaries;
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(e) any judicial, administrative or arbitral proceeding pending
against any of the Borrowers or any of their respective Subsidiaries and
any judicial or administrative proceeding known by any of the Borrowers to
be threatened against any Borrower or any Subsidiary which, if adversely
decided, reasonably would be expected to have a Material Adverse Effect;
(f) the receipt by any of the Borrowers or any Subsidiary of any
notice, claim or demand from any Governmental Authority which alleges that
any of the Borrowers or any Subsidiary is in violation of any of the terms
of, or has failed to comply with any applicable Laws regulating its
operation and business, including, but not limited to, the Occupational
Safety and Health Act and the Environmental Protection Act, which violation
or failure reasonably would be expected to have a Material Adverse Effect;
and
(g) any other development in the business or affairs of any of
the Borrowers or any of their respective Subsidiaries which reasonably
would be expected to have a Material Adverse Effect;
in each case describing in detail reasonably satisfactory to the
Administrative Agent the nature thereof and the action the Borrowers propose
to take with respect thereto.
6.1.12 Hazardous Materials; Contamination.
Each of the Borrowers agrees to:
(a) give notice to the Administrative Agent immediately upon
acquiring knowledge of the presence of any Hazardous Materials or any
Hazardous Materials Contamination on any property owned, operated or
controlled by any Borrower or for which any Borrower is, or is claimed to
be, responsible (provided that such notice shall not be required for
Hazardous Materials placed or stored on such property in accordance with
applicable Laws in the ordinary course (including, without limitation,
quantity) of a Borrower's line of business expressly described in this
Agreement), with a full description thereof;
(b) promptly comply with any Laws requiring the removal,
treatment or disposal of Hazardous Materials or Hazardous Materials
Contamination and provide the Administrative Agent with satisfactory
evidence of such compliance;
(c) provide the Administrative Agent, within thirty (30) days
after a demand by the Administrative Agent, with a bond, letter of credit
or similar financial assurance evidencing to the Administrative Agent's
satisfaction that the necessary funds are available to pay the cost
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of removing, treating, and disposing of such Hazardous Materials or
Hazardous Materials Contamination and discharging any Lien which has been
established as a result thereof on any property owned, operated or
controlled by any Borrower or for which any Borrower is, or is claimed to
be, responsible; and
(d) as part of the Obligations, defend, indemnify and hold
harmless the Administrative Agent, each of the Lenders and each of their
respective agents, employees, trustees, successors and assigns from any and
all claims which may now or in the future (whether before or after the
termination of this Agreement) be asserted as a result of the presence of
any Hazardous Materials or any Hazardous Materials Contamination on any
property owned, operated or controlled by any Borrower for which any
Borrower is, or is claimed to be, responsible. Each Borrower acknowledges
and agrees that this indemnification shall survive the termination of this
Agreement and the Commitments and the payment and performance of all of the
other Obligations.
6.1.13 Disclosure of Significant Transactions.
Each of the Borrowers shall deliver to the Administrative Agent a
written notice describing in detail each transaction by it involving the
purchase, sale, lease, or other acquisition or loss or casualty to or
disposition of an interest in Fixed or Capital Assets which exceeds One Million
Dollars ($1,000,000), said notices to be delivered to the Administrative Agent
within thirty (30) days of the occurrence of each such transaction.
6.1.14 Financial Covenants.
(a) Fixed Charge Coverage Ratio. The Borrowers will maintain, on
a consolidated basis and tested as of the last day of each of the Borrowers'
fiscal quarters (i) during fiscal year 1998 only, for the period commencing
January 1, 1998 and ending on the last day of the applicable quarter, and (ii)
after fiscal year 1998, for the four (4) quarter period ending on the last day
of the applicable quarter, a EBITDA to Fixed Charges Ratio (i) of not less than
0.75 to 1.0 if the average Unused Availability during such quarter is
$25,000,000 or more or (ii) of not less than 1.0 to 1.0 if the average Unused
Availability during such quarter is less than $25,000,000.
(b) Funded Debt to EBITDA Ratio. The Borrowers will maintain, on
a consolidated basis and tested as of the last day of each of the Borrowers'
fiscal quarters for which the average Unused Availability during such quarter is
more than $25,000,000, for the four (4) quarter period ending on that date, a
ratio of Funded Debt to EBITDA of not more than 2.5 to 1.0.
(c) Capital Expenditures. The Borrowers and their Subsidiaries
will not permit Capital Expenditures to exceed in any fiscal year the following:
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Fiscal Year Limit
1998 $55,000,000
Thereafter per annum $40,000,000
Notwithstanding the foregoing, up to 25% of the unused portion of
the limit set forth above with respect to any fiscal year may be carried forward
and utilized in the immediately succeeding year.
6.1.15 Collection of Receivables.
Until such time that the Administrative Agent shall notify the
Borrowers of the revocation of such privilege, the Borrowers and their
Subsidiaries shall at their own expense have the privilege for the account of,
and in trust for, the Administrative Agent and the Lenders of collecting their
Receivables and receiving in respect thereto all Items of Payment and shall
otherwise completely service all of the Receivables including (a) the billing,
posting and maintaining of complete records applicable thereto, (b) the taking
of such action with respect to the Receivables as the Administrative Agent may
request or in the absence of such request, as each of the Borrowers and each of
the Subsidiaries may deem advisable; and (c) the granting, in the ordinary
course of business, to any Account Debtor, any rebate, refund or adjustment to
which the Account Debtor may be lawfully entitled, and may accept, in connection
therewith, the return of goods, the sale or lease of which shall have given rise
to a Receivable and may take such other actions relating to the settling of any
Account Debtor's claim as may be commercially reasonable. The Administrative
Agent may, at its option, at any time or from time to time after and during the
continuance of an Event of Default hereunder, revoke the collection privilege
given in this Agreement to any one or more of the Borrowers and each of the
Subsidiaries by either giving notice of its assignment of, and Lien on the
Collateral to the Account Debtors or giving notice of such revocation to the
Borrowers. The Administrative Agent shall not have any duty to, and the
Borrowers hereby release the Administrative Agent and the Lenders from all
claims of loss or damage caused by the delay or failure to collect or enforce
any of the Receivables or to preserve any rights against any other party with an
interest in the Collateral. The Administrative Agent shall be entitled at any
time and from time to time to confirm and verify Receivables with the Account
Debtors thereunder; provided, however, that absent an Event of Default, the
Administrative Agent shall effect such verification by a means which does not
identify the Administrative Agent by name.
6.1.16 Assignments of Receivables.
Each Borrower will promptly, upon request, execute and deliver to
the Administrative Agent written assignments, in form and content acceptable to
the Administrative Agent, of specific Receivables or groups of Receivables;
provided, however, the Lien and/or security interest granted to the
Administrative Agent, for the ratable benefit of the Lenders and for the benefit
of the Administrative Agent with respect to the Agents' Obligations, under this
Agreement shall not be limited in any way to or by the inclusion or exclusion of
Receivables within such assignments. Receivables so assigned shall secure
payment of the Obligations and are not sold to the Administrative Agent and/or
the Lenders whether or not any assignment thereof, which is separate from this
Agreement, is in form absolute. The Borrowers agree that neither any assignment
to the Lender nor any other provision contained in this Agreement or any
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of the other Financing Documents shall impose on the Administrative Agent or the
Lenders any obligation or liability of any of the Borrowers with respect to that
which is assigned and the Borrowers hereby agree jointly and severally to
indemnify the Administrative Agent and the Lenders and hold the Administrative
Agent and the Lenders harmless from any and all claims, actions, suits, losses,
damages, costs, expenses, fees, obligations and liabilities which may be
incurred by or imposed upon the Administrative Agent and/or any of the Lenders
by virtue of the assignment of and Lien on any Borrower's rights, title and
interest in, to, and under the Collateral, except for any such claims, actions,
suits, losses, damages, costs, expenses, fees, obligations or liabilities which
are the proximate result of the gross negligence or willful misconduct of the
Administrative Agent or any Lender.
6.1.17 Government Accounts.
The Borrowers will immediately notify the Administrative Agent if
any of the Receivables arise out of contracts with the United States or with any
other Governmental Authority, and, as appropriate, execute any instruments and
take any steps required by the Administrative Agent in order that all moneys due
and to become due under such contracts shall be assigned to the Administrative
Agent, for the ratable benefit of the Lenders and for the benefit of the
Administrative Agent with respect to the Agents' Obligations, and notice thereof
given to the Governmental Authority under the Federal Assignment of Claims Act
or any other applicable Laws.
6.1.18 Notice of Returned Goods, etc.
The Borrowers will promptly notify, and will cause the
Subsidiaries to promptly notify, the Administrative Agent of the return,
rejection or repossession of any goods sold or delivered in respect of any
Receivables, and of any claims made in regard thereto to the extent that the
aggregate purchase price of any such goods in any given calendar month exceeds
in the aggregate One Million Dollars ($1,000,000) for such month.
6.1.19 Inventory.
With respect to the Inventory, the Borrowers and their
Subsidiaries will: (a) as soon as possible upon demand by the Administrative
Agent from time to time, prepare and deliver to the Administrative Agent
designations of Inventory specifying the Borrowers' and Subsidiaries' cost of
Inventory, the retail price thereof, and such other matters and information
relating to the Inventory as the Administrative Agent may reasonably request;
provided; however, that unless an Event of Default shall have occurred and be
continuing such request shall not be made any more than one (1) time each
quarter; (b) keep correct and accurate records itemizing and describing the
kind, type, quality and quantity of Inventory, the Borrowers' and Subsidiaries'
cost therefor and the selling price thereof, all of which, subject to the
provisions of Section 6.1.3 above, records shall be available to the officers,
employees or agents of the Administrative Agent for inspection and copying
thereof; (c) not store any Inventory with a bailee, warehouseman or similar
Person without the Administrative Agent's prior written consent, which consent
may be conditioned on, among other things, delivery by the bailee, warehouseman
or similar Person to the Administrative Agent of warehouse receipts, in form
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acceptable to the Administrative Agent, in the name of the Administrative Agent
evidencing the storage of Inventory and the interests of the Administrative
Agent and the Lenders therein; and (d) permit the Administrative Agent and its
agents or representatives to inspect and examine the Inventory and to check and
test the same as to quality, quantity, value and condition at any time or times
hereafter during the Borrowers' and Subsidiaries' usual business hours or at
other reasonable times. Any such inspection described in this clause (d) shall
be subject to the provisions of Sections 6.1.3(a) and (c). The Borrowers shall
be permitted to sell their Inventory in the ordinary course of business until
the occurrence and during the continuation of an Event of Default.
6.1.20 Insurance With Respect to Capital Expenditure Line
Equipment and Inventory.
The Borrowers will (a) maintain and cause each of their
Subsidiaries to maintain hazard insurance with fire and extended coverage and
naming the Administrative Agent as an additional insured with loss payable to
the Administrative Agent as its respective interest may appear on the Capital
Expenditure Line Equipment and Inventory in an amount at least equal to the
lesser amount of the outstanding principal amount of the Obligations or the fair
market value of the Capital Expenditure Line Equipment and Inventory (but in any
event sufficient to avoid any co-insurance obligations) and with a specific
endorsement to each such insurance policy pursuant to which the insurer agrees
to give the Administrative Agent at least thirty (30) days written notice before
any alteration or cancellation of such insurance policy and that no act or
default of any of the Borrowers shall affect the right of the Administrative
Agent to recover under such policy in the event of loss or damage; and (b) file,
and cause each of their Subsidiaries to file, with the Administrative Agent,
upon its request, a detailed list of the insurance then in effect and stating
the names of the insurance companies, the amounts and rates of the insurance,
dates of the expiration thereof and the properties and risks covered thereby;
provided, however, that unless an Event of Default shall have occurred and be
continuing such request shall not be made any more than one (1) time each
quarter.
6.1.21 Maintenance of the Collateral.
The Borrowers will maintain the Collateral in good working order,
saving and excepting ordinary wear and tear and loss of maintenance due to
obsolescence or the items of Collateral no longer being necessary to the
operation of the business of the Borrowers, and will not permit anything to be
done to the Collateral which reasonably would be expected to materially impair
the value thereof. The Administrative Agent, or an agent designated by the
Administrative Agent, shall be permitted to enter the premises of each of the
Borrowers and their Subsidiaries and examine, audit and inspect the Collateral
at any reasonable time and from time to time in accordance with the provisions
of Sections 6.1.3(a) and (c). The Administrative Agent agrees to act in a
commercially reasonable manner when inspecting the premises of the Borrowers and
their Subsidiaries and when examining, auditing and/or inspecting the
Collateral. The Administrative Agent shall not have any duty to, and the
Borrowers hereby release the Administrative Agent and the Lenders from all
claims of loss or damage caused by the delay or failure to collect or enforce
any of the Receivables or to preserve any rights against any other
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party with an interest in the Collateral which occurs at any time during the
continuation of an Event of Default.
6.1.22 Assigned Local Currency Receivables
Each Local Currency Borrower shall assign its Accounts as
Assigned Local Currency Receivables promptly after such Accounts are created and
the Borrowers shall thereafter maintain the Assigned Local Currency Receivables
in compliance with each component of the definition of that term.
6.1.23 Capital Expenditure Line Equipment.
The Borrowers shall (a) maintain all Capital Expenditure Line
Equipment as personalty, (b) not affix any Capital Expenditure Line Equipment to
any real estate in such manner as to become a fixture or part of such real
estate, and (c) shall hold no Capital Expenditure Line Equipment on a sale on
approval basis. The Borrowers hereby declare their intent that, notwithstanding
the means of attachment, no goods of the Borrowers hereafter attached to any
realty shall be deemed a fixture, which declaration shall be irrevocable,
without the Administrative Agent's consent, until all of the Obligations have
been paid in full and all of the Commitments have been terminated or have
expired. All legal documents incident to each advance under the Loans and each
of the Letters of Credit shall be reasonably satisfactory to counsel for the
Administrative Agent.
6.1.24 Defense of Title and Further Assurances.
At their expense, the Borrowers will defend the title to the
Collateral (and any part thereof), and will promptly execute, acknowledge and
deliver any financing statement, renewal, affidavit, deed, assignment,
continuation statement, security agreement, certificate or other document which
the Administrative Agent in good faith may require in order to perfect,
preserve, maintain, continue, protect and/or extend the Lien or security
interest granted to the Administrative Agent, for the ratable benefit of the
Lenders and for the benefit of the Administrative Agent with respect to the
Agents' Obligations, under this Agreement, under any of the other Financing
Documents and the first priority of that Lien, subject only to the Permitted
Liens. The Borrowers will from time to time do whatever the Administrative Agent
reasonably may require by way of obtaining, executing, delivering, and/or filing
financing statements, landlords' or mortgagees' waivers, notices of assignment
and other notices and amendments and renewals thereof and the Borrowers will
take any and all steps and observe such formalities as the Administrative Agent
reasonably may require, in order to create and maintain a valid Lien upon,
pledge of, or paramount security interest in, the Collateral, subject to the
Permitted Liens. The Borrowers shall pay to the Administrative Agent on demand
all taxes, costs and expenses incurred by the Administrative Agent in connection
with the preparation, execution, recording and filing of any such document or
instrument. To the extent that the proceeds of any of the Accounts or
Receivables of the Borrowers are expected to become subject to the control of,
or in the possession of, a party other than the Borrowers or the Administrative
Agent, the Borrowers shall cause all such parties to execute and deliver on the
Closing Date security documents, financing statements or other documents as
requested by the Administrative Agent and as may be
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necessary to evidence and/or perfect the security interest of the Administrative
Agent, for the ratable benefit of the Lenders and for the benefit of the
Administrative Agent with respect to the Agents' Obligations, in those proceeds.
The Borrowers agree that a copy of a fully executed security agreement and/or
financing statement shall be sufficient to satisfy for all purposes the
requirements of a financing statement as set forth in Article 9 of the
applicable Uniform Commercial Code. Each Borrower hereby irrevocably appoints
the Administrative Agent as the Borrower's attorney-in-fact, with power of
substitution, in the name of the Administrative Agent or in the name of the
Borrower or otherwise, for the use and benefit of the Administrative Agent for
itself and the Lenders, but at the cost and expense of the Borrowers and without
notice to the Borrowers, to execute and deliver any and all of the instruments
and other documents and take any action which the Lender may require pursuant
the foregoing provisions of this Section 6.1.24; provided, however, that unless
the Lenders have a reasonable belief that any Lien securing the Obligations is
impaired or may be impaired by delay, no such filing shall be made unless the
Administrative Agent has requested the Borrowers to make such filing and the
Borrowers have failed to comply with such request within ten (10) Business Days
after such request has been delivered to the Borrowers.
6.1.25 Business Names; Locations.
Each Borrower will notify and cause each of the Subsidiaries to
notify the Administrative Agent not less than thirty (30) days prior to (a) any
change in the name under which the Borrower or the applicable Subsidiary
conducts its business, (b) any change of the location of the chief executive
office of the applicable Borrower or Subsidiary, and (c) the opening of any new
place of business or the closing of any existing place of business, and any
change in the location of the places where the Collateral, or any part thereof,
or the books and records, or any part thereof, are kept.
6.1.26 Subsequent Opinion of Counsel as to Recording
Requirements.
In the event that any Borrower or any Subsidiary shall transfer
its principal place of business or the office where it keeps its records
pertaining to the Collateral, upon the Administrative Agent's request the
Borrowers will provide to the Administrative Agent a subsequent opinion of
counsel as to the filing, recording and other requirements with which the
Borrowers and their Subsidiaries have complied to maintain the Lien and security
interest in favor of the Administrative Agent, for the ratable benefit of the
Lenders and for the benefit of the Administrative Agent with respect to the
Agents' Obligations, in the Collateral.
6.1.27 Use of Premises and Equipment.
The Borrowers agree that until the Obligations are fully paid and
all of the Commitments and the Letters of Credit have been terminated or have
expired, the Administrative Agent (a) after and during the continuance of an
Event of Default, may use any of the Borrowers' owned or leased lifts, hoists,
trucks and other facilities or equipment for handling or removing the
Collateral; and (b) shall have, and is hereby granted, a right of ingress and
egress to the places where the Collateral is located, and may proceed over and
through any of the Borrowers' owned or leased property, subject, however, to the
provisions of Section 6.1.3.
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6.1.28 Protection of Collateral.
The Borrowers agree that the Administrative Agent may at any time
during the continuation of an Event of Default take such steps as the
Administrative Agent deems reasonably necessary to protect the interest of the
Administrative Agent and the Lenders in, and to preserve the Collateral,
including, the hiring of such security guards or the placing of other security
protection measures as the Administrative Agent deems appropriate, may employ
and maintain at any of the Borrowers' premises a custodian who shall have full
authority to do all acts necessary to protect the interests of the
Administrative Agent and the Lenders in the Collateral and may lease warehouse
facilities to which the Administrative Agent may move all or any part of the
Collateral to the extent commercially reasonable. The Borrowers agree to
cooperate fully with the Administrative Agent's efforts to preserve the
Collateral and will take such actions to preserve the Collateral as the
Administrative Agent may reasonably direct. All of the Administrative Agent's
expenses of preserving the Collateral, including any reasonable expenses
relating to the compensation and bonding of a custodian, shall be part of the
Enforcement Costs.
Section 6.2 Negative Covenants.
So long as any of the Obligations or the Commitments or Letters of
Credit therefor shall be outstanding hereunder, the Borrowers agree with the
Administrative Agent and the Lenders that without the prior written consent of
the Administrative Agent:
6.2.1 Mergers, Acquisition or Sale of Assets.
None of the Borrowers will enter into any merger or consolidation
or amalgamation, windup or dissolve themselves (or suffer any liquidation or
dissolution) or acquire all or substantially all the assets of any Person, or
sell, lease or otherwise dispose of any of its assets (except Inventory disposed
of in the ordinary course of business prior to an Event of Default); provided,
however, that any Borrower may merge or consolidate with or sell, lease or
dispose of any of its assets to any other Borrower. Any consent of the
Administrative Agent to the disposition of any assets may be conditioned on a
specified use of the proceeds of disposition.
6.2.2 Subsidiaries.
None of the Borrowers will create or acquire any Subsidiaries
other than the Subsidiaries identified on the Collateral Disclosure List.
6.2.3 Purchase or Redemption of Securities, Dividend
Restrictions.
Except as permitted pursuant to the terms of the Senior Notes and
then only if no Event of Default or failure to maintain the availability
required by the Section 2.1.12(b) shall then exist or result therefrom, none of
the Borrowers will purchase, redeem or otherwise acquire any shares of its
capital stock or warrants now or hereafter outstanding, declare or pay any
dividends thereon (other than stock dividends), apply any of its property or
assets to the purchase, redemption or other retirement of, set apart any sum for
the payment of
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any dividends on, or for the purchase, redemption, or other retirement of, make
any distribution by reduction of capital or otherwise in respect of, any shares
of any class of capital stock of any Borrower, or any warrants, permit any
Subsidiary to purchase or acquire any shares of any class of capital stock of,
or warrants issued by, any Borrower, make any distribution to stockholders or
set aside any funds for any such purpose, and not prepay, purchase or redeem any
Indebtedness for Borrowed Money other than the Obligations.
6.2.4 Indebtedness for Borrowed Money.
None of the Borrowers will create, incur, assume or suffer to
exist any Indebtedness for Borrowed Money or permit any Subsidiary to do so,
except:
(a) the Obligations;
(b) current accounts payable arising in the ordinary course;
(c) the Senior Notes and the guarantees executed in connection
therewith;
(d) Indebtedness for Borrowed Money secured by Permitted Liens;
(e) Subordinated Indebtedness;
(f) Indebtedness for Borrowed Money of the Borrowers existing on
the date hereof and reflected on the financial statements furnished
pursuant to Section 4.1.11 (Financial Condition);
(g) Guarantees by any Borrower of Indebtedness for Borrowed Money
otherwise permitted hereunder of any other Borrower;
(h) Refinancing of any of the amounts listed in clauses (c) and
(d) above and in this clause (h), provided the amount as refinanced does
not exceed the original principal amount (or commitment with respect
thereto) of the Indebtedness for Borrowed Money so refinanced and on terms
not materially less favorable to the applicable Borrowers and do not result
in a Default or Event of Default;
(i) Indebtedness for Borrowed Money represented by Capitalized
Leases otherwise permitted by this Agreement and
(j) other Indebtedness for Borrowed Money in an amount not to
exceed in the aggregate for the Parent and its Subsidiaries at any time
outstanding, the sum of Five Million Dollars ($5,000,000) (or the
equivalent thereof in any other currency, as applicable), which
Indebtedness for Borrowed Money shall not be secured.
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6.2.5 Investments, Loans and Other Transactions.
Except as otherwise provided in this Agreement, none of the
Borrowers will, and will permit any of its Subsidiaries to, (a) make, assume,
acquire or continue to hold any investment in any real property (unless used in
connection with their business and treated as a Fixed or Capital Asset of any
Borrower or any Subsidiary) or any Person, whether by stock purchase, capital
contribution, acquisition of indebtedness of such Person or otherwise
(including, without limitation, investments in any joint venture or
partnership), (b) guaranty or otherwise become contingently liable for the
Liabilities or obligations of any Person, or (c) make any loans or advances, or
otherwise extend credit to any Person, except:
(i) any advance to an officer or employee of any Borrower or any
Subsidiary for travel or other business expenses in the ordinary course of
business, provided that the aggregate amount of all such advances by all of
the Borrowers and their Subsidiaries (taken as a whole) outstanding at any
time shall not exceed One Million Dollars ($1,000,000);
(ii) the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(iii) any investment in Cash Equivalents, which are pledged to
the Administrative Agent, for the ratable benefit of the Lenders and for
the benefit of the Administrative Agent with respect to the Agents'
Obligations, as collateral and security for the Obligations;
(iv) trade credit extended to customers in the ordinary course of
business;
(v) guarantees permitted pursuant to Section 6.2.4;
(vi) investments, loans, advances and guaranties not to exceed
$10,000,000 in the aggregate with respect to the VITEC venture for the
production of fuel storage and delivery systems for General Motors
Corporation and Chrysler Corporation; and
(vii) after January 1, 1999, other investments, loans, advances
and guaranties not to exceed $5,000,000 in the aggregate for any fiscal
year.
6.2.6 Stock of Subsidiaries.
None of the Borrowers will sell or otherwise dispose of any
shares of capital stock of any Subsidiary (except in connection with a merger or
consolidation of a Wholly Owned Subsidiary into any of the Borrowers or another
Wholly Owned Subsidiary of any of the
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Borrowers or with the dissolution of any Subsidiary) or permit any Subsidiary to
issue any additional shares of its capital stock except pro rata to its
stockholders.
6.2.7 Subordinated Indebtedness.
None of the Borrowers will, and will permit any Subsidiary to
make:
(a) any payment of principal of, or interest on, any of the
Subordinated Indebtedness, including, without limitation, the Subordinated
Debt, if a Default or Event of Default then exists hereunder or would
result from such payment;
(b) any payment of the principal or interest due on the
Subordinated Indebtedness as a result of acceleration thereunder or a
mandatory prepayment thereunder; (c) any amendment or modification of or
supplement to the documents evidencing or securing the Subordinated
Indebtedness; and (d) payment of principal or interest on the Subordinated
Indebtedness other than when due (without giving effect to any acceleration
of maturity or mandatory prepayment).
6.2.8 Liens.
Each Borrower agrees that it (a) will not create, incur, assume
or suffer to exist any Lien upon any of its properties or assets, whether now
owned or hereafter acquired, or permit any Subsidiary so to do, except for Liens
securing the Obligations and Permitted Liens, (b) will not agree to, assume or
suffer to exist any provision in any instrument or other document for confession
of judgment, cognovit or other similar right or remedy, (c) except as required
by law for real estate and other property taxes and for mechanic's and similar
liens, will not allow or suffer to exist any Permitted Liens to be superior to
Liens securing the Obligations, (d) will not enter into any contracts for the
consignment of goods, will not execute or suffer the filing of any financing
statements or the posting of any signs giving notice of consignments, and will
not, as a material part of its business, engage in the sale of goods belonging
to others, and (e) will not allow or suffer to exist the failure of any Lien
described in the Security Documents to attach to, and/or remain at all times
perfected on, any of the property described in the Security Documents.
6.2.9 Transactions with Affiliates.
None of the Borrowers nor any of their Subsidiaries will enter
into or participate in any transaction with any Affiliate unless the same is on
fair and reasonable terms consistent with past practice, or, except in the
ordinary course of business, with the officers, directors, employees and other
representatives of any Borrower and/or any Subsidiary.
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6.2.10 Other Businesses.
None of the Borrowers nor any of their Subsidiaries will engage
directly or indirectly in any business other than its current line of business
described elsewhere in this Agreement.
6.2.11 ERISA Compliance.
None of the Domestic Borrowers nor any Commonly Controlled Entity
shall: (a) engage in or permit any "prohibited transaction" (as defined in
ERISA); (b) cause any "accumulated funding deficiency" as defined in ERISA
and/or the Internal Revenue Code; (c) terminate any pension plan in a manner
which reasonably would be expected to result in the imposition of a lien on the
property of any Domestic Borrower pursuant to ERISA; (d) terminate or consent to
the termination of any Multi-employer Plan; or (e) incur a complete or partial
withdrawal with respect to any Multi-employer Plan.
6.2.12 Prohibition on Hazardous Materials.
None of the Borrowers shall place, manufacture or store or permit
to be placed, manufactured or stored any Hazardous Materials on any property
owned, operated or controlled by any Borrower or for which any Borrower is
responsible other than Hazardous Materials placed or stored on such property in
accordance with applicable Laws in the ordinary course of a Borrower's business
expressly described in this Agreement.
6.2.13 Method of Accounting; Fiscal Year.
Each Borrower agrees that:
(a) it shall not change the method of
accounting employed in the preparation of any financial statements
furnished to the Administrative Agent under the provisions of Section
6.1.1 (Financial Statements), unless required to conform to GAAP and on
the condition that the Borrowers' accountants shall furnish such
information as the Administrative Agent reasonably may request to
reconcile the changes with the Borrowers' prior financial statements; and
(b) it will not change its fiscal year
from a year ending on December 31.
6.2.14 Compensation.
None of the Borrowers nor any Subsidiary will pay any bonuses,
fees, compensation, commissions, salaries, drawing accounts, or other payments
(cash and non-cash), whether direct or indirect, to any stockholders of any
Borrower or any Subsidiary, or any Affiliate of any Borrower or any Subsidiary,
other than reasonable compensation for actual services rendered by stockholders
in their capacity as officers or employees.
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6.2.15 Transfer of Collateral.
Except to the extent permitted by and in compliance with the
provisions of this Agreement, none of the Borrowers nor any of their
Subsidiaries will transfer, or permit the transfer, to another location of any
of the Collateral or the books and records related to any of the Collateral.
6.2.16 Sale and Leaseback.
Except for transactions disclosed on Schedule 6.2.16, none of the
Borrowers nor any of the Subsidiaries will directly or indirectly enter into any
arrangement to sell or transfer all or any substantial part of its fixed assets
and thereupon or within one year thereafter rent or lease the assets so sold or
transferred.
6.2.17 Disposition of Collateral.
None of the Borrowers will sell, discount, allow credits or
allowances, transfer, assign, extend the time for payment on, convey, lease,
assign, transfer or otherwise dispose of the Collateral, except, prior to an
Event of Default, dispositions expressly permitted elsewhere in this Agreement,
the sale of Inventory in the ordinary course of business, and the sale of
unnecessary or obsolete equipment, but, in the case of Capital Expenditure Line
Equipment, only if the proceeds of the sale of such Capital Expenditure Line
Equipment are (a) used to purchase similar Capital Expenditure Line Equipment to
replace the unnecessary or obsolete Capital Expenditure Line Equipment or (b)
immediately turned over to the Administrative Agent for application to the
Obligations in accordance with the provisions of this Agreement.
ARTICLE V II
DEFAULT AND RIGHTS AND REMEDIES
Section 7.1 Events of Default.
The occurrence of any one or more of the following events shall
constitute an "Event of Default" under the provisions of this Agreement:
7.1.1 Failure to Pay.
The failure of the Borrowers to pay any of the Obligations as and
when due and payable in accordance with the provisions of this Agreement, the
Notes and/or any of the other Financing Documents and (except in the case of
payment of principal and/or interest) such failure shall have continued for a
period of five (5) days, there being no grace period with respect to a payment
at maturity.
7.1.2 Breach of Representations and Warranties.
Any representation or warranty made in this Agreement or in any
report, statement, schedule, certificate, opinion (including any opinion of
counsel for the Borrowers),
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financial statement or other document furnished in connection with this
Agreement, any of the other Financing Documents, or the Obligations, shall prove
to have been false or misleading when made (or, if applicable, when reaffirmed)
in any material respect.
7.1.3 Failure to Comply with Covenants.
The failure of the Borrowers to perform, observe or comply with
any covenant, condition or agreement contained in this Agreement. and, (i) only
with respect to a failure under Section 6.1.1 (Financial Statement), such
failure continues uncured for a period of five (5) days, or (ii) only with
respect to a failure under Sections 6.1.3(b) (Bookkeeping), 6.1.4 (Corporate
Existence), 6.1.6 (Preservation of Properties), or 6.1.9 (Taxes) which does not
relate to Taxes due or claimed to be due in excess of $250,000 in the aggregate,
if the Borrowers after discovering such failure, fail to diligently and
continuously pursue the cure of such failure or such failure continues uncured
thirty (30) days after discovery
7.1.4 Default Under Other Financing Documents or Obligations.
A default shall occur under any of the other Financing Documents
or under any other Obligations, and such default is not cured within any
applicable grace period provided therein.
7.1.5 Receiver; Bankruptcy.
Any Borrower or any Subsidiary shall (a) apply for or consent to
the appointment of a receiver, trustee or liquidator of itself or any of its
property, (b) admit in writing its inability to pay its debts as they mature,
(c) make a general assignment for the benefit of creditors, (d) be adjudicated a
bankrupt or insolvent, (e) file a voluntary petition in bankruptcy or a petition
or an answer seeking or consenting to reorganization or an arrangement with
creditors or to take advantage of any bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation law or statute, or an answer
admitting the material allegations of a petition filed against it in any
proceeding under any such law, or take corporate action for the purposes of
effecting any of the foregoing, or (f) by any act indicate its consent to,
approval of or acquiescence in any such proceeding or the appointment of any
receiver of or trustee for any of its property, or suffer any such receivership,
trusteeship or proceeding to continue undischarged for a period of sixty (60)
days, or (g) by any act indicate its consent to, approval of or acquiescence in
any order, judgment or decree by any court of competent jurisdiction or any
Governmental Authority enjoining or otherwise prohibiting the operation of a
material portion of any Borrower's or any Subsidiary's business or the use or
disposition of a material portion of any Borrower's or any Subsidiary's assets;
provided, however, that with respect to a Subsidiary which is not a Borrower,
the foregoing shall not be an Event of Default unless a Material Adverse Effect
results.
7.1.6 Involuntary Bankruptcy, etc.
(a) An order for relief shall be entered in any involuntary
case brought against any Borrower or any Subsidiary under the Bankruptcy Code or
any order or filing with a similar effect shall arise under any other Insolvency
Proceedings, or (b) any such
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case shall be commenced against any Borrower or any Subsidiary and shall not be
dismissed within sixty (60) days after the filing of the petition, or (c) an
order, judgment or decree under any other Law is entered by any court of
competent jurisdiction or by any other Governmental Authority on the application
of a Governmental Authority or of a Person other than any Borrower or any
Subsidiary (i) adjudicating any Borrower, or any Subsidiary bankrupt or
insolvent, or (ii) appointing a receiver, trustee or liquidator of any Borrower
or of any Subsidiary, or of a material portion of any Borrower's or any
Subsidiary's assets, or (iii) enjoining, prohibiting or otherwise limiting the
operation of a material portion of any Borrower's or any Subsidiary's business
or the use or disposition of a material portion of any Borrower's or any
Subsidiary's assets, and such order, judgment or decree continues unstayed and
in effect for a period of sixty (60) days from the date entered; provided,
however, that with respect to a Subsidiary which is not a Borrower, the
foregoing shall not be an Event of Default unless a Material Adverse Effect
results.
7.1.7 Judgment.
Unless adequately insured in the opinion of the
Administrative Agent, the entry of a final judgment for the payment of money
involving more than $5,000,000 against any Borrower or any Subsidiary, and the
failure by such Borrower or such Subsidiary to discharge the same, or cause it
to be discharged, within thirty (30) days from the date of the order, decree or
process under which or pursuant to which such judgment was entered, or to secure
a stay of execution pending appeal of such judgment.
7.1.8 Execution; Attachment.
Any execution or attachment shall be levied against the
Collateral, or any part thereof, and such execution or attachment shall not be
set aside, discharged or stayed within thirty (30) days after the same shall
have been levied.
7.1.9 Default Under Other Borrowings.
Default shall be made with respect to any Indebtedness in
excess of $5,000,000 of any of the Borrowers (other than the Loans) if the
effect of such default is to accelerate the maturity of such Indebtedness or to
permit the holder or obligee thereof or other party thereto to cause such
Indebtedness to become due prior to its stated maturity.
7.1.10 Challenge to Agreements.
Any Borrower shall challenge the validity and binding effect
of any provision of any of the Financing Documents or shall state its intention
to make such a challenge of any of the Financing Documents or any of the
Financing Documents shall for any reason (except to the extent permitted by its
express terms) cease to be effective or to create a valid and perfected first
priority Lien (except for Permitted Liens) on, or security interest in, any of
the Collateral purported to be covered thereby.
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7.1.11 Material Adverse Change.
The Administrative Agent, in its sole discretion, determines
in good faith that a material adverse change has occurred in the financial
condition of any of the Borrowers.
7.1.12 Liquidation, Termination, Dissolution, Change in
Control etc.
Any Borrower shall liquidate, dissolve or terminate its
existence or any change occurs in the control of any Borrower without the prior
written consent of the Administrative Agent or unless the same is otherwise
permitted by this Agreement.
7.1.13 Change in Control.
A "Change in Control" shall occur under the Senior Note
Indentures, as the case may be, or the Parent has issued any "Change of Control
Notice" or "Control Change" Notice thereunder.
Section 7.2 Remedies.
Upon the occurrence and during the continuation of any Event of
Default, the Administrative Agent may, in the exercise of its sole and absolute
discretion from time to time, and shall, at the direction of the Requisite
Lenders, at any time thereafter exercise any one or more of the following
rights, powers or remedies.
7.2.1 Acceleration.
The Administrative Agent may declare any or all of the
Obligations to be immediately due and payable, notwithstanding anything
contained in this Agreement or in any of the other Financing Documents to the
contrary, without presentment, demand, protest, notice of protest or of
dishonor, or other notice of any kind, all of which the Borrowers hereby waive.
7.2.2 Further Advances.
The Administrative Agent may from time to time without notice
to the Borrowers suspend, terminate or limit any further advances, loans or
other extensions of credit under the Commitment, under this Agreement and/or
under any of the other Financing Documents. Further, upon the occurrence and
during the continuation of an Event of Default or Default specified in Sections
7.1.5 (Receiver; Bankruptcy) or 7.1.6 (Involuntary Bankruptcy, etc.), the
Revolving Credit Commitments, the Letter of Credit Commitments and any agreement
in any of the Financing Documents to provide additional credit and/or to issue
Letters of Credit shall immediately and automatically terminate and the unpaid
principal amount of the Notes (with accrued interest thereon) and all other
Obligations then outstanding, shall immediately become due and payable without
further action of any kind and without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived by the Borrowers.
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7.2.3 Uniform Commercial Code.
The Administrative Agent shall have all of the rights and
remedies of a secured party under the applicable Uniform Commercial Code and
other applicable Laws. Upon demand by the Administrative Agent, the Borrowers
shall assemble the Collateral and make it available to the Administrative Agent,
at a place reasonably designated in the United States or reasonably designated
elsewhere by the Administrative Agent. The Administrative Agent or its agents
may without notice from time to time enter upon any Borrower's premises to take
possession of the Collateral, to remove it, to render it unusable, to process it
or otherwise prepare it for sale, or to sell or otherwise dispose of it.
Any written notice of the sale, disposition or other intended
action by the Administrative Agent with respect to the Collateral which is sent
by regular mail, postage prepaid, to the Borrowers at the address set forth in
Section 9.1 (Notices), or such other address of the Borrowers which may from
time to time be shown on the Administrative Agent's records, at least ten (10)
days prior to such sale, disposition or other action, shall constitute
commercially reasonable notice to the Borrowers. The Administrative Agent may
alternatively or additionally give such notice in any other commercially
reasonable manner. Nothing in this Agreement shall require the Administrative
Agent to give any notice not required by applicable Laws.
If any consent, approval, or authorization of any state,
municipal or other Governmental Authority or of any other Person or of any
Person having any interest therein, should be necessary to effectuate any sale
or other disposition of the Collateral, the Borrowers agree to execute all such
applications and other instruments, and to take all other action, as reasonably
may be required in connection with securing any such consent, approval or
authorization.
The Borrowers recognize that the Administrative Agent may be
unable to effect a public sale of all or a part of the Collateral consisting of
Subsidiary Securities by reason of certain prohibitions contained in the
Securities Act of 1933, as amended, and other applicable Federal and state Laws.
The Administrative Agent may, therefore, in its discretion, take such steps as
it may deem appropriate to comply with such Laws and may, for example, at any
sale of the Collateral consisting of securities restrict the prospective bidders
or purchasers as to their number, nature of business and investment intention,
including, without limitation, a requirement that the Persons making such
purchases represent and agree to the satisfaction of the Administrative Agent
that they are purchasing such securities for their account, for investment, and
not with a view to the distribution or resale of any thereof. The Borrowers
covenant and agree to do or cause to be done promptly all such acts and things
as the Administrative Agent reasonably may request from time to time and as may
be necessary to offer and/or sell the securities or any part thereof in a manner
which is valid and binding and in conformance with all applicable Laws. Upon any
such sale or disposition, the Administrative Agent shall have the right to
deliver, assign and transfer to the purchaser thereof the Collateral consisting
of securities so sold.
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7.2.4 Specific Rights With Regard to Collateral.
In addition to all other rights and remedies provided
hereunder or as shall exist at law or in equity from time to time, the
Administrative Agent may (but shall be under no obligation to), without notice
to any of the Borrowers, and each Borrower hereby irrevocably appoints the
Administrative Agent as its attorney-in-fact, with power of substitution, in the
name of the Administrative Agent and/or any or all of the Lenders and/or in the
name of any or all of the Borrowers or otherwise, for the use and benefit of the
Administrative Agent and the Lenders, but at the cost and expense of the
Borrowers and without notice to the Borrowers:
(a) request any Account Debtor obligated on any of the Accounts
to make payments thereon directly to the Administrative Agent, with the
Administrative Agent taking control of the cash and non-cash proceeds
thereof;
(b) compromise, extend or renew any of the Collateral or deal
with the same as it may deem advisable;
(c) make exchanges, substitutions or surrenders of all or any
part of the Collateral;
(d) copy, transcribe, or remove from any place of business of any
Borrower all books, records, ledger sheets, correspondence, invoices and
documents, relating to or evidencing any of the Collateral or without cost
or expense to the Administrative Agent or the Lenders, make such use of any
Borrower's place(s) of business as may be reasonably necessary to
administer, control and collect the Collateral;
(e) repair, alter or supply goods if necessary to fulfill in
whole or in part the purchase order of any Account Debtor;
(f) demand, collect, receipt for and give renewals, extensions,
discharges and releases of any of the Collateral;
(g) institute and prosecute legal and equitable proceedings to
enforce collection of, or realize upon, any of the Collateral;
(h) settle, renew, extend, compromise, compound, exchange or
adjust claims in respect of any of the Collateral or any legal proceedings
brought in respect thereof;
(i) endorse or sign the name of any Borrower upon any items of
payment, certificates of title, instruments, securities, stock powers,
documents, documents of title, financing statements, assignments, notices
or other writing relating to or part of the Collateral and on any proof of
claim in bankruptcy against an Account Debtor;
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(j) notify the Post Office authorities to change the address
for the delivery of mail to the Borrowers to such address or Post Office
Box as the Administrative Agent may designate and receive and open all mail
addressed to any of the Borrowers provided; however, that the Borrowers
shall have immediate access to the mail which does not pertain to the
Collateral; and
(k) take any other action necessary or beneficial to realize
upon or dispose of the Collateral or to carry out the terms of this
Agreement.
7.2.5 Application of Proceeds.
Any proceeds of sale or other disposition of the Collateral will
be applied by the Administrative Agent to the payment first of any and all
Agents' Obligations, then to any and all Enforcement Costs, and thereafter (i)
proceeds from Receivables and Inventory shall be applied first to the
Obligations with respect to the Revolving Credit Facility, second to the
Obligations with respect to the Capital Expenditure Line, then to any other
Obligations, (ii) proceeds from the Capital Expenditure Line Equipment which is
the subject of advances under the Capital Expenditure Line, first to the
Obligations with respect to the Capital Expenditure Line, second to the
Obligations with respect to the Revolving Credit Facility, and then to any other
Obligations, and (iii) proceeds from other Collateral shall be applied first to
the Obligations with respect to the Revolving Credit Facility, second to the
Obligations with respect to the Capital Expenditure Line, and then to any other
Obligations. If the sale or other disposition (by foreclosure, liquidation or
otherwise) of the Collateral fails to fully satisfy the Obligations, the
Domestic Borrowers shall remain liable to the Administrative Agent and the
Lenders for any deficiency.
7.2.6 Performance by Administrative Agent.
If the Borrowers shall fail to pay the Obligations or otherwise
fail to perform, observe or comply with any of the conditions, covenants, terms,
stipulations or agreements contained in this Agreement or any of the other
Financing Documents, the Administrative Agent without notice to or demand upon
the Borrowers and without waiving or releasing any of the Obligations or any
Event of Default, may (but shall be under no obligation to) at any time
thereafter make such payment or perform such act for the account and at the
expense of the Borrowers, and may enter upon the premises of the Borrowers for
that purpose and take all such action thereon as the Administrative Agent may
consider necessary or appropriate for such purpose and each of the Borrowers
hereby irrevocably appoints the Administrative Agent as its attorney-in-fact to
do so, with power of substitution, in the name of the Administrative Agent, in
the name of any or all of the Lenders, or in the name of any or all of the
Borrowers or otherwise, for the use and benefit of the Administrative Agent, but
at the cost and expense of the Borrowers and without notice to the Borrowers.
All sums so paid or advanced by the Administrative Agent together with interest
thereon from the date of payment, advance or incurring until paid in full at the
Post-Default Rate and all costs and expenses, shall
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be deemed part of the Enforcement Costs, shall be paid by the Borrowers to the
Administrative Agent on demand, and shall constitute and become a part of the
Agents' Obligations.
7.2.7 Other Remedies.
The Administrative Agent may from time to time proceed to protect
or enforce the rights of the Administrative Agent and/or any of the Lenders by
an action or actions at law or in equity or by any other appropriate proceeding,
whether for the specific performance of any of the covenants contained in this
Agreement or in any of the other Financing Documents, or for an injunction
against the violation of any of the terms of this Agreement or any of the other
Financing Documents, or in aid of the exercise or execution of any right, remedy
or power granted in this Agreement, the Financing Documents, and/or applicable
Laws. The Administrative Agent and each of the Lenders is authorized to offset
and apply to all or any part of the Obligations all moneys, credits and other
property of any nature whatsoever of any or all of the Borrowers now or at any
time hereafter in the possession of, in transit to or from, under the control or
custody of, or on deposit with, the Administrative Agent, any of the Lenders or
any Affiliate of the Administrative Agent or any of the Lenders.
ARTICLE V III
THE AGENT
Section 8.1 Appointment.
Each Lender hereby designates and appoints NationsBank as its agent
under this Agreement and the Financing Documents, and each Lender hereby
irrevocably authorizes the Administrative Agent to take such action or to
refrain from taking such action on its behalf under the provisions of this
Agreement and the Financing Documents and to exercise such powers as are set
forth herein or therein, together with such other powers as are reasonably
incidental thereto. The Administrative Agent agrees to act as such on the
express conditions contained in this ARTICLE VIII. The provisions of this
ARTICLE VIII are solely for the benefit of the Administrative Agent and the
Lenders and neither the Borrowers nor any Person shall have any rights as a
third party beneficiary of any of the provisions hereof. In performing its
functions and duties under this Agreement, the Administrative Agent shall act
solely as an administrative representative of the Lenders and does not assume
and shall not be deemed to have assumed any obligation toward or relationship of
agency or trust with or for the Lenders, the Borrowers or any Person. The
Administrative Agent may perform any of its duties hereunder, or under the
Financing Documents, by or through its agents or employees.
Section 8.2 Nature of Duties.
8.2.1 In General
The Administrative Agent shall have no duties, obligations or
responsibilities except those expressly set forth in this Agreement or in the
Financing Documents. The duties of the Administrative Agent shall be mechanical
and administrative in nature. The Administrative Agent shall not have by reason
of this Agreement a fiduciary
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relationship in respect of any Lender. Each Lender shall make its own
independent investigation of the financial condition and affairs of the
Borrowers in connection with the extension of credit hereunder and shall make
its own appraisal of the creditworthiness of the Borrowers, and the
Administrative Agent shall have no duty or responsibility, either initially or
on a continuing basis, to provide any Lender with any credit or other
information with respect thereto, whether coming into its possession before the
Closing Date or at any time or times thereafter. If the Administrative Agent
seeks the consent or approval of any of the Lenders to the taking or refraining
from taking of any action hereunder, then the Administrative Agent shall send
notice thereof to each Lender. The Administrative Agent shall promptly notify
each Lender any time that the applicable percentage of Lenders has instructed
the Administrative Agent to act or refrain from acting pursuant hereto.
8.2.2 Express Authorization
The Administrative Agent is hereby expressly and irrevocably
authorized by each of the Lenders, as agent on behalf of itself and the other
Lenders:
(a) to receive on behalf of each of the Lenders any payment or
collection on account of the Obligations and to distribute to each Lender
its Pro Rata Share of all such payments and collections so received as
provided in this Agreement;
(b) to receive all documents and items to be furnished to the
Lenders under the Financing Documents (nothing contained herein shall
relieve the Borrowers of any obligation to deliver any item directly to the
Lenders to the extent expressly required by the provisions of this
Agreement);
(c) to act or refrain from acting in this Agreement and in the
other Financing Documents with respect to those matters so designated for
the Administrative Agent;
(d) to act as nominee for and on behalf of the Lenders in and
under this Agreement and the other Financing Documents;
(e) to arrange for the means whereby the funds of the Lenders are
to be made available to the Borrowers;
(f) to distribute promptly to the Lenders, if required by the
terms of this Agreement, all written information, requests, notices, Loan
Notices, payments, Prepayments, documents and other items received from the
Borrowers or other Person;
(g) to amend, modify, or waive any provisions of this Agreement
or the other Financing Documents on behalf of the Lenders subject to the
requirement that certain of the Lenders' consent be obtained in certain
instances as provided in 9.2.2 (Circumstances Where Consent of all of the
Lenders is Required);
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(h) to deliver to the Borrowers and other Persons, all
requests, demands, approvals, notices, and consents received from any of
the Lenders;
(i) to exercise on behalf of each Lender all rights and
remedies of the Lenders upon the occurrence and during the continuation of
any Event of Default and/or Default specified in this Agreement and/or in
any of the other Financing Documents or applicable Laws;
(j) to execute any of the Security Documents and any other
documents on behalf of the Lenders as the secured party for the benefit of
the Administrative Agent and the Lenders; and
(k) to take such other actions as may be requested by the
Requisite Lenders.
Section 8.3 Rights, Exculpation, Etc.
Neither the Administrative Agent nor any of its officers, directors,
employees or agents shall be liable to any Lender for any action taken or
omitted by them hereunder or under any of the Financing Documents, or in
connection herewith or therewith, except that the Administrative Agent shall be
obligated on the terms set forth herein for performance of its express
obligations hereunder, and except that the Administrative Agent shall be liable
with respect to its own gross negligence or willful misconduct. The
Administrative Agent shall not be liable for any apportionment or distribution
of payments made by it in good faith and if any such apportionment or
distribution is subsequently determined to have been made in error the sole
recourse of any Lender to whom payment was due but not made, shall be to recover
from other the Lenders any payment in excess of the amount to which they are
determined to be entitled (and such other Lenders hereby agree to return to such
Lender any such erroneous payments received by them). The Administrative Agent
shall not be responsible to any Lender for any recitals, statements,
representations or warranties herein or for the execution, effectiveness,
genuineness, validity, enforceability, collectible, or sufficiency of this
Agreement or any of the Financing Documents or the transactions contemplated
thereby, or for the financial condition of any Person. The Administrative Agent
shall not be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this Agreement or
any of the Financing Documents or the financial condition of any Person, or the
existence or possible existence of any Default or Event of Default. The
Administrative Agent may at any time request instructions from the Lenders with
respect to any actions or approvals which by the terms of this Agreement or of
any of the Financing Documents the Administrative Agent is permitted or required
to take or to grant, and the Administrative Agent shall be absolutely entitled
to refrain from taking any action or to withhold any approval and shall not be
under any liability whatsoever to any Person for refraining from any action or
withholding any approval under any of the Financing Documents until it shall
have received such instructions from the applicable percentage of the Lenders.
Without limiting the foregoing, no Lender shall have any right of action
whatsoever against the Administrative Agent as a result of the Administrative
Agent acting or refraining from acting under this Agreement or any of the other
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Financing Documents in accordance with the instructions of the applicable
percentage of the Lenders and notwithstanding the instructions of the Lenders,
the Administrative Agent shall have no obligation to take any action if it, in
good faith believes that such action exposes the Administrative Agent to any
liability.
Section 8.4 Reliance.
The Administrative Agent shall be entitled to rely upon any written
notices, statements, certificates, orders or other documents or any telephone
message or other communication (including any writing, telex, telecopy or
telegram) believed by it in good faith to be genuine and correct and to have
been signed, sent or made by the proper Person, and with respect to all matters
pertaining to this Agreement or any of the Financing Documents and its duties
hereunder or thereunder, upon advice of counsel selected by it. The
Administrative Agent may deem and treat the original Lenders as the owners of
the respective Notes for all purposes until receipt by the Administrative Agent
of a written notice of assignment, negotiation or transfer of any interest
therein by the Lenders in accordance with the terms of this Agreement. Any
interest, authority or consent of any holder of any of the Notes shall be
conclusive and binding on any subsequent holder, transferee, or assignee of such
Notes. The Administrative Agent shall be entitled to rely upon the advice of
legal counsel, independent accountants, and other experts selected by the
Administrative Agent in its sole discretion.
Section 8.5 Indemnification.
Each Lender, severally, agrees to reimburse and indemnify the
Administrative Agent for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses, advances
or disbursements including, without limitation, Enforcement Costs, of any kind
or nature whatsoever which may be imposed on, incurred by, or asserted against
the Administrative Agent in any way relating to or arising out of this Agreement
or any of the Financing Documents or any action taken or omitted by the
Administrative Agent under this Agreement for any of the Financing Documents, in
proportion to each Lender's Pro Rata Share, all of the foregoing as they may
arise, be asserted or be imposed from time to time; provided, however, that no
Lender shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, advances or
disbursements resulting from the Administrative Agent's gross negligence or
willful misconduct. The obligations of the Lenders under this Section 8.5 shall
survive the payment in full of the Obligations and the termination of this
Agreement.
Section 8.6 NationsBank Individually.
With respect to its Commitments and the Loans made by it, and the Notes
issued to it, NationsBank shall have and may exercise the same rights and powers
hereunder and is subject to the same obligations and liabilities as and to the
extent set forth herein for any other Lender. The terms "the Lenders" or
"Requisite Lenders" or any similar terms shall, unless the context clearly
otherwise indicates, include NationsBank in its individual capacity as a Lender
or one of the Requisite Lenders. NationsBank and its Affiliates may lend money
to, accept deposits from and generally engage in any kind of banking, trust or
other business with the Borrowers, any Affiliate
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of any Borrower, or any other Person or any of their officers, directors and
employees as if NationsBank were not acting as the Administrative Agent pursuant
hereto and the Administrative Agent may accept fees and other consideration from
the Borrowers, any Affiliate of the Borrowers or any of their officers,
directors and employees (in addition to the Agency Fees or other arrangements
fees heretofore agreed to between the Borrowers and the Administrative Agent)
for services in connection with this Agreement or otherwise without having to
account for or share the same with the Lenders.
Section 8.7 Successor Administrative Agent.
8.7.1 Resignation.
The Administrative Agent may resign from the performance of all
its functions and duties hereunder at any time by giving at least thirty (30)
Business Days' prior written notice to the Borrowers and the Lenders. Such
resignation shall take effect upon the acceptance by a successor Administrative
Agent of appointment pursuant to Section 8.7.2 (Appointment of Successor) or as
otherwise provided below.
8.7.2 Appointment of Successor.
Upon any such notice of resignation pursuant to Section 8.7.1
(Resignation), the Requisite Lenders shall appoint a successor to the
Administrative Agent, provided that if no Event of Default then shall exist,
such successor shall be subject to the consent of the Borrowers, which consent
shall not be unreasonably withheld or delayed. If a successor to the
Administrative Agent shall not have been so appointed within said thirty (30)
Business Day period, the Administrative Agent retiring, upon notice to the
Borrowers, shall then appoint a successor Administrative Agent who shall serve
as the Administrative Agent until such time, as the Requisite Lenders with the
consent of the Borrowers, provided no Event of Default than shall exist, appoint
a successor the Administrative Agent as provided above.
8.7.3 Successor Agents.
(a) Any Agent may resign from the performance of all its
functions and duties hereunder and/or under the other Financing Documents at any
time by giving 20 Business Days' prior written notice to the Borrowers and the
Lenders. Such resignation shall take effect upon the appointment of a successor
Agent pursuant to clauses (b) and (c) below or as otherwise provided below.
(b) Upon any such notice of resignation by any Agent, the
Requisite Lenders shall appoint a successor Agent hereunder who shall be a
commercial bank or trust company reasonably acceptable to the Borrowers.
(c) If a successor Agent shall not have been so appointed
within such 20 Business Day period, such retiring Agent, with the consent of the
Borrowers, which consent shall not be unreasonably withheld, shall then appoint
a successor Agent who shall serve as Agent hereunder until such time, if any, as
the Requisite Lenders appoint a successor Agent as provided in clause (b) above.
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(d) If no successor Agent has been appointed pursuant to
clause (b) or (c) above by the 25th Business Day after the date such notice of
resignation was given by the retiring Agent, the retiring Agent's resignation
shall become effective and the Requisite Lenders shall thereafter perform all
the duties of the retiring Agent hereunder and/or under any other Financing
Document until such time, if any, as the Requisite Lenders appoint a successor
Agent as provided in clause (b) above.
(e) After the resignation of any Agent hereunder, the
provisions of this ARTICLE VIII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was an Agent under this Agreement.
Upon the acceptance of any appointment as the Administrative
Agent under the Financing Documents by a successor Administrative Agent, such
successor to the Administrative Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the Administrative
Agent retiring, and the Administrative Agent retiring shall be discharged from
its duties and obligations under the Financing Documents. After any
Administrative Agent's resignation as the Administrative Agent under the
Financing Documents, the provisions of this ARTICLE VIII shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was the
Administrative Agent under the Financing Documents.
Section 8.8 Collateral Matters.
8.8.1 Release of Collateral, Guaranties.
The Lenders hereby irrevocably authorize the Administrative
Agent, at its option and in its discretion, to release any Lien granted to or
held by the Administrative Agent upon any property covered by this Agreement or
the Financing Documents:
(a) upon termination of the Commitments and payment and
satisfaction of all Obligations;
(b) constituting property being sold or disposed of if the
Borrowers certify to the Administrative Agent that the sale or disposition
is made in compliance with the provisions of this Agreement (and the
Administrative Agent may rely in good faith conclusively on any such
certificate, without further inquiry);
(c) constituting property leased to the Borrowers under a
lease which has expired or been terminated in a transaction permitted under
this Agreement or is about to expire and which has not been, and is not
intended by the Borrowers to be, renewed or extended; or
(d) constituting property covered by Permitted Liens with
lien priority superior to those Liens in favor or for the benefit of the
Lenders.
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In addition during any fiscal year of the Borrowers (x) the
Administrative Agent may release Collateral having a book value of not more than
5% of the book value of all Collateral, (y) the Administrative Agent, with the
consent of Requisite Lenders, may release Collateral having a book value of not
more than 10% of the book value of all Collateral and (z) the Administrative
Agent, with the consent of the Lenders having 90% of (i) the Commitments and
(ii) Loans, may release all the Collateral.
In addition, the Administrative Agent may release any Borrower
from its Guarantee, if such Borrower no longer is to be a Borrower hereunder
pursuant to the provisions of Section 6.2.1 hereof.
8.8.2 Confirmation of Authority, Execution of Releases.
Without in any manner limiting the Administrative Agent's
authority to act without any specific or further authorization or consent by the
Lenders as set forth in Section 8.8.1 (Release of Collateral; Guarantees), each
Lender agrees to confirm in writing, upon request by the Borrowers, the
authority to release any property or guarantees covered by this Agreement or the
Financing Documents conferred upon the Administrative Agent under Section 8.8.1
(Release of Collateral; Guarantees). So long as no Event of Default is then
continuing, upon receipt by the Administrative Agent of confirmation from the
requisite percentage of the Lenders, of its authority to release any particular
item or types of property or guarantees covered by this Agreement or the
Financing Documents, and upon at least five (5) Business Days prior written
request by the Borrowers, the Administrative Agent shall (and is hereby
irrevocably authorized by the Lenders to) execute such documents as may be
necessary to evidence the release of the Liens or guarantees granted to the
Administrative Agent for the benefit of the Lenders herein or pursuant hereto
upon such Collateral; provided, however, that (a) the Administrative Agent shall
not be required to execute any such document on terms which, in the
Administrative Agent's opinion, would expose the Administrative Agent to
liability or create any obligation or entail any consequence other than the
release of such Liens or guarantees without recourse or warranty, and (b) such
release shall not in any manner discharge, affect or impair the Obligations or
any Liens upon (or obligations of any Person in respect of), all interests
retained by any Person, including, without limitation, the proceeds of any sale,
all of which shall continue to constitute part of the property covered by this
Agreement or the Financing Documents.
8.8.3 Absence of Duty.
The Administrative Agent shall have no obligation whatsoever to
any Lender, the Borrowers or any other Person to assure that the property
covered by this Agreement or the Financing Documents exists or is owned by the
Borrowers or is cared for, protected or insured or has been encumbered or that
the Liens granted to the Administrative Agent on behalf of the Lenders herein or
pursuant hereto have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any particular priority, or
to exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to the Administrative Agent in this
Section 8.8.3 or in any of the Financing Documents, it being understood and
agreed that in respect of the property covered by this Agreement or the
Financing Documents or any act,
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omission or event related thereto, the Administrative Agent may act in any
manner it may deem appropriate, in its discretion, given the Administrative
Agent's own interest in property covered by this Agreement or the Financing
Documents as one of the Lenders and that the Administrative Agent shall have no
duty or liability whatsoever to any of the other the Lenders.
Section 8.9 Agency for Perfection.
Each Lender hereby appoints the Administrative Agent and each other
Lender as agent for the purpose of perfecting the Lenders' Liens in Collateral
which, in accordance with Article 9 of the Uniform Commercial Code in any
applicable jurisdiction or otherwise, can be perfected only by possession.
Should any Lender (other than the Administrative Agent) obtain possession of any
such Collateral, such Lender shall notify the Administrative Agent thereof, and,
promptly upon the Administrative Agent's request therefor, shall deliver such
Collateral to the Administrative Agent or in accordance with the Administrative
Agent's instructions.
Section 8.10 Exercise of Remedies.
Each Lender agrees that it will not have any right individually to
enforce or seek to enforce this Agreement or any Financing Document or to
realize upon any collateral security for the Obligations, it being understood
and agreed that such rights and remedies may be exercised only by the
Administrative Agent.
Section 8.11 Consents.
(a) In the event the Administrative Agent requests the
consent of a Lender and does not receive a written denial thereof, or a written
notice from a Lender that due course consideration of the request requires
additional time, in each case, within ten (10) Business Days after such Lender's
receipt of such request, then such Lender will be deemed to have given such
consent.
(b) In the event the Administrative Agent requests the
consent of a Lender and such consent is denied, then NationsBank may, at its
option, require such Lender to assign its interest in the Loans and the other
Obligations to NationsBank for a price equal to the then outstanding principal
amount thereof plus accrued and unpaid interest, fees and costs and expenses due
such Lender under the Financing Documents, which principal, interest, fees and
costs and expenses will be paid on the date of such assignment. In the event
that NationsBank elects to require any Lender to assign its interest to
NationsBank, NationsBank will so notify such Lender in writing within thirty
(30) days following such Lender's denial, and such Lender will assign its
interest to NationsBank no later than five (5) days following receipt of such
notice.
Section 8.12 Dissemination of Information.
The Administrative Agent will provide the Lenders with any information
received by the Administrative Agent from the Borrowers which is required to be
provided to the Administrative Agent or to the Lenders hereunder; provided,
however, that the Administrative Agent shall not
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be liable to any one or more the Lenders for any failure to do so, except to the
extent that such failure is attributable to the Administrative Agent's gross
negligence or willful misconduct.
Section 8.13 Discretionary Advances.
The Administrative Agent may, in its sole discretion, make, for the
account of the Lenders on a pro rata basis, advances under the Revolving Loan of
up to 10% in excess of the Borrowing Base (but not in excess of the limitation
set forth in aggregate Revolving Credit Commitments) for a period of not more
than 30 consecutive days.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices.
All notices, requests and demands to or upon the parties to this
Agreement shall be in writing and shall be deemed to have been given or made
when delivered by hand on a Business Day, or two (2) days after the date when
deposited in the mail, postage prepaid by registered or certified mail, return
receipt requested, or when sent by overnight courier, on the Business Day next
following the day on which the notice is delivered to such overnight courier,
addressed as follows:
Borrowers: c/o Walbro Corporation
1227 Center Road
Auburn Hills, Michigan 48326
Attn: Chief Financial Officer
with a copy to: Susan Schneider, Esquire
Katten Muchen & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Administrative Agent: NationsBank, N.A.
100 South Charles Street
Baltimore, Maryland 21201
Attention: David B. Thayer,
Senior Vice President
with a copy to: Frederick W. Runge, Jr., Esquire
Miles & Stockbridge
10 Light Street
Baltimore, Maryland 21202
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Lenders: NationsBank, N.A.
100 South Charles Street
Baltimore, Maryland 21201
Attention: David B. Thayer,
Senior Vice President
and at the addresses stated after their names
on the signature pages of this Agreement
By written notice, each party to this Agreement may change the address to which
notice is given to that party, provided that such changed notice shall include a
street address to which notices may be delivered by overnight courier in the
ordinary course on any Business Day.
Without implying any limitation of the foregoing paragraph, and with
respect only to those provisions which expressly allow the giving of notice by
telecopy, such telecopy notices shall be given to the Administrative Agent at
410.576.2958, Attention: David B. Thayer, or as the Administrative Agent may
otherwise provide by notice to the applicable party or to the Parent at
517.872.2301, Attention: Michael A. Shope, Chief Financial Officer.
Section 9.2 Amendments; Waivers.
9.2.1 In General.
This Agreement and the other Financing Documents may not
be amended, modified, or changed in any respect except by an agreement in
writing signed by the Administrative Agent, the Requisite Lenders and the
Borrowers, and, to the extent provided in Section 9.2.2 (Circumstances Where
Consent of all of the Lenders is Required), by an agreement in writing signed by
the Administrative Agent, all of the Lenders and the Borrowers. No waiver of any
provision of this Agreement or of any of the other Financing Documents, nor
consent to any departure by the Borrowers therefrom, shall in any event be
effective unless the same shall be in writing signed by the Requisite Lenders.
No course of dealing between the Borrowers and the Administrative Agent and/or
any of the Lenders and no act or failure to act from time to time on the part of
the Administrative Agent and/or any of the Lenders shall constitute a waiver,
amendment or modification of any provision of this Agreement or any of the other
Financing Documents or any right or remedy under this Agreement, under any of
the other Financing Documents or under applicable Laws. Without implying any
limitation on the foregoing, and subject to the provisions of Section 9.2.2
(Circumstances Where Consent of all of the Lenders is Required):
(a) Any waiver or consent shall be effective only
in the specific instance, for the terms and purpose for which given, subject to
such conditions as the Administrative Agent and Lenders may specify in any such
instrument.
(b) No waiver of any Default or Event of Default
shall extend to any subsequent or other Default or Event of Default, or impair
any right consequent thereto.
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(c) No notice to or demand on the Borrowers in
any case shall entitle the Borrowers to any other or further notice or demand in
the same, similar or other circumstance.
(d) No failure or delay by the Lenders to insist
upon the strict performance of any term, condition, covenant or agreement of
this Agreement or of any of the other Financing Documents, or to exercise any
right, power or remedy consequent upon a breach thereof, shall constitute a
waiver, amendment or modification of any such term, condition, covenant or
agreement or of any such breach or preclude the Lenders from exercising any such
right, power or remedy at any time or times.
(e) By accepting payment after the due date of
any amount payable under this Agreement or under any of the other Financing
Documents, the Lenders shall not be deemed to waive the right either to require
prompt payment when due of all other amounts payable under this Agreement or
under any of the other Financing Documents, or to declare a default for failure
to effect such prompt payment of any such other amount.
9.2.2 Circumstances Where Consent of all of the
Lenders is Required.
Notwithstanding anything to the contrary contained
herein, no amendment, modification, change or waiver shall be effective without
the consent of all of the Lenders to:
(a) extend the maturity of the principal of, or
interest on, any Note or of any of the other Obligations;
(b) reduce the principal amount of any Note or of
any of the other Obligations, the rate of interest thereon or the
Fees due to the Lenders, except as expressly permitted therein;
(c) change the aggregate Commitments;
(d) change the date of payment of principal of,
or interest on, any Note or of any of the other Obligations;
(e) change the method of calculation utilized in
connection with the computation of interest and Fees;
(f) change the manner of pro rata application by
the Administrative Agent of payments made by the Borrowers, or any
other payments required hereunder or under the other Financing
Documents;
(g) modify this Section, Section 8.8.1 (Release
of Collateral, Guarantees), Section 8.12 (Dissemination of
Information), or the definition of "Requisite Lenders;" or
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(h) change the definition of "Borrowing Base".
Additionally, no change may be made to the amount of a
Lender's Commitment or to the Lender's percentage of all Commitments without
the prior written consent of that Lender.
Section 9.3 Cumulative Remedies.
The rights, powers and remedies provided in this Agreement and in the other
Financing Documents are cumulative, may be exercised concurrently or separately,
may be exercised from time to time and in such order as the Administrative Agent
shall determine, subject to the provisions of this Agreement, and are in
addition to, and not exclusive of, rights, powers and remedies provided by
existing or future applicable Laws. In order to entitle the Administrative Agent
to exercise any remedy reserved to it in this Agreement, it shall not be
necessary to give any notice, other than such notice as may be expressly
required in this Agreement. Without limiting the generality of the foregoing and
subject to the terms of this Agreement, the Administrative Agent may:
(a) proceed against any one or more of the
Borrowers with or without proceeding against any other Person who
may be liable (by endorsement, guaranty, indemnity or otherwise)
for all or any part of the Obligations;
(b) proceed against any one or more of the
Borrowers with or without proceeding under any of the other
Financing Documents or against any Collateral or other collateral
and security for all or any part of the Obligations;
(c) without reducing or impairing the obligation
of the Borrowers and without notice, release or compromise with
any guarantor or other Person liable for all or any part of the
Obligations under the Financing Documents or otherwise;
(d) without reducing or impairing the obligations
of the Borrowers and without notice thereof:
(i) fail to perfect the Lien in
any or all Collateral or to release any or all the Collateral or
to accept substitute Collateral;
(ii) approve the making of advances
under the Revolving Loan under this Agreement;
(iii) waive any provision of this
Agreement or the other Financing Documents;
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(iv) exercise or fail to exercise
rights of set-off or other rights; or
(v) accept partial payments or
extend from time to time the maturity of all or any part of the
Obligations.
Section 9.4 Severability.
In case one or more provisions, or part thereof, contained in this Agreement
or in the other Financing Documents shall be invalid, illegal or unenforceable
in any respect under any Law, then without need for any further agreement,
notice or action:
(a) the validity, legality and enforceability of the
remaining provisions shall remain effective and binding on the parties
thereto and shall not be affected or impaired thereby;
(b) the obligation to be fulfilled shall be reduced to the
limit of such validity;
(c) if such provision or part thereof pertains to repayment
of the Obligations, then, at the sole and absolute discretion of the
Administrative Agent, all of the Obligations of the Borrowers to the
Administrative Agent and the Lenders shall become immediately due and
payable; and
(d) if the affected provision or part thereof does not
pertain to repayment of the Obligations, but operates or would prospectively
operate to invalidate this Agreement in whole or in part, then such
provision or part thereof only shall be void, and the remainder of this
Agreement shall remain operative and in full force and effect.
Section 9.5 Assignments by Lenders.
Any Lender may, with the prior written consent of the Administrative Agent
and, provided no Event of Default then exists, the Borrowers (which consent
shall not be unreasonably withheld), assign to any Person (each an "Assignee"
and collectively, the "Assignees") all or a portion of such Lender's
Commitments; provided that, after giving effect to such assignment, such Lender
must continue to hold a Pro Rata Share of the Commitments at least equal to Ten
Million Dollars ($10,000,000). Any Lender that elects to make such an assignment
shall pay to the Administrative Agent, for the exclusive benefit of the
Administrative Agent, an administrative fee for processing each such assignment
in the amount of Three Thousand Five Hundred Dollars ($3,500.00). Such Lender
and its Assignee shall notify the Administrative Agent and the Borrowers in
writing of the date on which the assignment is to be effective (the "Adjustment
Date"). On or before the Adjustment Date, the assigning Lender, the
Administrative Agent, the Borrowers and the respective Assignee shall execute
and deliver a
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written assignment agreement in a form acceptable to the Administrative Agent,
which shall constitute an amendment to this Agreement to the extent necessary to
reflect such assignment. Upon the request of any assigning Lender following an
assignment made in accordance with this Section 9.5, the Borrowers shall issue
new Notes to the assigning Lender and its Assignee reflecting such assignment,
in exchange for the existing Notes held by the assigning Lender.
In addition, notwithstanding the foregoing, any Lender may at any time
pledge all or any portion of such Lender's rights under this Agreement, any of
the Commitments or any of the Obligations to a Federal Reserve Bank.
Section 9.6 Participations by Lenders.
Any Lender may at any time sell to one or more financial institutions
participating interests in any of such Lender's Obligations or Commitments;
provided, however, that (a) no such participation shall relieve such Lender from
its obligations under this Agreement or under any of the other Financing
Documents to which it is a party, (b) such Lender shall remain solely
responsible for the performance of its obligations under this Agreement and
under all of the other Financing Documents to which it is a party, and (c) the
Borrowers, the Administrative Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Financing Documents.
Section 9.7 Disclosure of Information by Lenders.
In connection with any sale, transfer, assignment or participation by any
Lender in accordance with Section 9.5 (Assignments by Lenders )or Section 9.6
(Participations by Lenders), each Lender shall have the right to disclose to any
actual or potential purchaser, assignee, transferee or participant all financial
records, information, reports, financial statements and documents obtained in
connection with this Agreement and/or any of the other Financing Documents or
otherwise, provided, however, that such proposed assignee or participant agrees
to be subject to the provisions of Section 9.20 hereof.
Section 9.8 Successors and Assigns.
This Agreement and all other Financing Documents shall be binding upon and
inure to the benefit of the Borrowers, the Administrative Agent, any other
Agents, and the Lenders and their respective heirs, personal representatives,
successors and assigns, except that the Borrowers shall not have the right to
assign their rights hereunder or any interest herein without the prior written
consent of the Administrative Agent and the Requisite Lenders, which consent
shall not unreasonably be withheld or delayed.
Section 9.9 Continuing Agreements.
All covenants, agreements, representations and warranties made by the
Borrowers in this Agreement, in any of the other Financing Documents, and in any
certificate delivered pursuant hereto or thereto shall survive the making by the
Lenders of the Loans, the issuance of Letters of Credit by the Appropriate
Letter of Credit Issuer, and the execution and delivery of the Notes,
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shall be binding upon the Borrowers regardless of how long before or after the
date hereof any of the Obligations were or are incurred, and shall continue in
full force and effect so long as any of the Obligations are outstanding and
unpaid. From time to time upon the Administrative Agent's request, and as a
condition of the release of any one or more of the Security Documents, the
Borrowers and other Persons obligated with respect to the Obligations shall
provide the Administrative Agent with such acknowledgments and agreements as the
Administrative Agent may require to the effect that there exists no defenses,
rights of setoff or recoupment, claims, counterclaims, actions or causes of
action of any kind or nature whatsoever against the Administrative Agent, any or
all of the Lenders, and/or any of its or their agents and others, or to the
extent there are, the same are waived and released.
Section 9.10 Enforcement Costs.
The Borrowers agree to pay to the Administrative Agent on demand all
Enforcement Costs, together with interest thereon from the date incurred or
advanced until paid in full at a per annum rate of interest equal at all times
to the (a) Base Rate, provided, no Event of Default then shall exist or (b) if
an Event of Default then shall exist, at the Post-Default Rate. Enforcement
Costs shall be immediately due and payable at the time advanced or incurred,
whichever is earlier. Without implying any limitation on the foregoing, the
Borrowers agree, as part of the Enforcement Costs, to pay upon demand any and
all stamp and other Taxes and fees payable or determined to be payable in
connection with the execution and delivery of this Agreement and the other
Financing Documents and to save the Administrative Agent and the Lenders
harmless from and against any and all liabilities with respect to or resulting
from any delay by Borrowers in paying or omission by Borrowers to pay any Taxes
or fees referred to in this Section. The provisions of this Section shall
survive the execution and delivery of this Agreement, the repayment of the other
Obligations and shall survive the termination of this Agreement. Without
limiting the foregoing, the Administrative Agent shall at the request of the
Parent provide to the Parent a written description of the Enforcement Costs.
Section 9.11 Applicable Law; Jurisdiction.
9.11.1 Applicable Law.
Borrowers acknowledge and agree that the Financing Documents,
including, this Agreement, shall be governed by the Laws of the State, as if
each of the Financing Documents and this Agreement had each been executed,
delivered, administered and performed solely within the State even though for
the convenience and at the request of the Borrowers, one or more of the
Financing Documents may be executed elsewhere. The Administrative Agent and the
Lenders acknowledge, however, that remedies under certain of the Financing
Documents which relate to property outside the State may be subject to the laws
of the state in which the property is located.
9.11.2 Submission to Jurisdiction.
The Borrowers irrevocably submit to the jurisdiction of any
state or federal court sitting in the State over any suit, action or proceeding
arising out of or relating to
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<PAGE> 136
this Agreement or any of the other Financing Documents. Each of the Borrowers
irrevocably waives, to the fullest extent permitted by law, any objection that
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding brought in any such court and any claim that any such suit, action
or proceeding brought in any such court has been brought in an inconvenient
forum. Final judgment in any such suit, action or proceeding brought in any such
court shall be conclusive and binding upon the Borrowers and may be enforced in
any court in which the Borrowers are subject to jurisdiction, by a suit upon
such judgment, provided that service of process is effected upon the Borrowers
in one of the manners specified in this Section or as otherwise permitted by
applicable Laws.
9.11.3 Appointment of Administrative Agent for Service of
Process.
The Borrowers hereby irrevocably designate and appoint The
Corporation Trust, Incorporated, 32 South Street, Baltimore, Maryland 21202, as
the Borrowers' authorized agent to receive on the Borrowers' behalf service of
any and all process that may be served in any suit, action or proceeding of the
nature referred to in this Section in any state or federal court sitting in the
State. If such agent shall cease so to act, the Borrowers shall irrevocably
designate and appoint without delay another such agent in the State satisfactory
to the Administrative Agent and shall promptly deliver to the Administrative
Agent evidence in writing of such other agent's acceptance of such appointment
and its agreement that such appointment shall be irrevocable.
9.11.4 Service of Process.
Each of the Borrowers hereby consents to process being served
in any suit, action or proceeding of the nature referred to in this Section by
(a) the mailing of a copy thereof by registered or certified mail, postage
prepaid, return receipt requested, to such Borrower at such Borrower's address
designated in or pursuant to Section 9.1 (Notices), and (b) serving a copy
thereof upon the agent, if any, designated and appointed by such Borrower as
such Borrower's agent for service of process by or pursuant to this Section. The
Borrowers irrevocably agree that such service (y) shall be deemed in every
respect effective service of process upon the Borrowers in any such suit, action
or proceeding, and (z) shall, to the fullest extent permitted by law, be taken
and held to be valid personal service upon the Borrowers. Nothing in this
Section shall affect the right of the Administrative Agent to serve process in
any manner otherwise permitted by law or limit the right of the Administrative
Agent otherwise to bring proceedings against the Borrowers in the courts of any
jurisdiction or jurisdictions.
Section 9.12 Duplicate Originals and Counterparts.
This Agreement may be executed in any number of duplicate originals or
counterparts, each of such duplicate originals or counterparts shall be deemed
to be an original and all taken together shall constitute but one and the same
instrument.
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<PAGE> 137
Section 9.13 Headings.
The headings in this Agreement are included herein for convenience only,
shall not constitute a part of this Agreement for any other purpose, and shall
not be deemed to affect the meaning or construction of any of the provisions
hereof.
Section 9.14 No Agency.
Nothing herein contained shall be construed to constitute the Borrowers as
the agent of the Administrative Agent or any of the Lenders for any purpose
whatsoever or to permit the Borrowers to pledge any of the credit of the
Administrative Agent or any of the Lenders. Neither any of the Agents nor any of
the Lenders shall (i) be responsible or liable for any shortage, discrepancy,
damage, loss or destruction of any part of the Collateral wherever the same may
be located and regardless of the cause other than gross negligence or willful
misconduct with respect to Collateral in the possession of the Administrative
Agent or Lender thereof or (ii) by anything herein or in any of the Financing
Documents or otherwise, except as may arise by express, written agreement signed
by the Agents and the Lenders, assume any of the Borrowers' obligations under
any contract or agreement assigned to the Administrative Agent and/or the
Lenders, and neither the Administrative Agent nor any of the Lenders shall be
responsible in any way for the performance by the Borrowers of any of the terms
and conditions thereof.
Section 9.15 Date of Payment.
Should the principal of or interest on the Notes become due and payable on a
day other than a Business Day, the maturity thereof shall be extended to the
next succeeding Business Day and in the case of principal, interest shall be
payable thereon at the rate per annum specified in the Notes during such
extension.
Section 9.16 Entire Agreement.
This Agreement is intended by the Administrative Agent, the Lenders and the
Borrowers to be a complete, exclusive and final expression of the agreements
contained herein. Neither the Administrative Agent, the Lenders nor the
Borrowers shall hereafter have any rights under any prior agreements pertaining
to the matters addressed by this Agreement but shall look solely to this
Agreement for definition and determination of all of their respective rights,
liabilities and responsibilities under this Agreement.
Section 9.17 Waiver of Trial by Jury.
THE BORROWERS, THE AGENT AND THE LENDERS HEREBY JOINTLY AND SEVERALLY
WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWER AND THE
AGENT AND/OR ANY OR ALL OF THE LENDERS MAY BE PARTIES, ARISING OUT OF OR IN ANY
WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE FINANCING DOCUMENTS, OR (C)
THE COLLATERAL. THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL
- 130 -
<PAGE> 138
CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS
AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT.
This waiver is knowingly, willingly and voluntarily made by the Borrowers,
the Administrative Agent and the Lenders, and the Borrowers, the Administrative
Agent and the Lenders hereby represent that no representations of fact or
opinion have been made by any individual to induce this waiver of trial by jury
or to in any way modify or nullify its effect. The Borrowers, the Administrative
Agent and the Lenders further represent that they have been represented in the
signing of this Agreement and in the making of this waiver by independent legal
counsel, selected of their own free will, and that they have had the opportunity
to discuss this waiver with counsel.
Section 9.18 Liability of the Administrative Agent and the Lenders.
The Borrowers hereby agree that neither the Administrative Agent nor any of
the Lenders shall be chargeable for any negligence, mistake, act or omission of
any accountant, examiner, agency or attorney employed by the Administrative
Agent and/or any of the Lenders in making examinations, investigations or
collections, or otherwise in perfecting, maintaining, protecting or realizing
upon any lien or security interest or any other interest in the Collateral or
other security for the Obligations.
By inspecting the Collateral or any other properties of the Borrowers or by
accepting or approving anything required to be observed, performed or fulfilled
by the Borrowers or to be given to the Administrative Agent and/or any of the
Lenders pursuant to this Agreement or any of the other Financing Documents,
neither the Administrative Agent nor any of the Lenders shall be deemed to have
warranted or represented the condition, sufficiency, legality, effectiveness or
legal effect of the same, and such acceptance or approval shall not constitute
any warranty or representation with respect thereto by the Administrative Agent
and/or the Lenders.
Section 9.19 Indemnification.
The Borrowers agrees to indemnify and hold harmless, the Administrative
Agent, the Lenders, the respective parent and Affiliates of the Administrative
Agent and the Lenders and the respective parent's and Affiliates' officers,
directors, shareholders, employees and agents (each an collectively, the
"Indemnified Parties"), from and against any and all claims, liabilities,
losses, damages, costs and expenses (whether or not such Indemnified Party is a
party to any litigation), including without limitation, reasonable attorney's
fees and costs and costs of investigation, document production, attendance at
depositions or other discovery, incurred by any Indemnified Party with respect
to, arising out of or as a consequence of (a) this Agreement or any of the other
Financing Documents, including without limitation, any failure of the Borrowers
to pay when due (at maturity, by acceleration or otherwise) any principal,
interest, fee or any other amount due under this Agreement or the other Loan
documents, or any other Event of Default; (b) the use by the Borrowers of any
proceeds advanced hereunder; (c) the transactions contemplated hereunder; or (d)
any claim, demand, action or cause of action being asserted against (i) the
Borrowers or any of their Affiliates by any other Person, or (ii) any
Indemnified Party by the Borrowers in connection with the transactions
contemplated hereunder.
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<PAGE> 139
Notwithstanding anything herein or elsewhere to the contrary, the Borrowers
shall not be obligated to indemnify or hold harmless any Indemnified Party from
any liability, loss or damage resulting from the gross negligence, willful
misconduct or unlawful actions of such Indemnified Party. Any amount payable to
the Administrative Agent and/or the Lenders under this Section will bear
interest at the (i) Base Rate, provided no Event of Default then shall exist or
(ii) if an Event of Default then shall exist, at the Post-Default Rate from the
due date until paid.
Section 9.20 Confidentiality.
Each Lender agrees that it will use reasonable efforts to keep confidential
any non-public information from time to time supplied to it under any Financing
Document; provided, however, that nothing herein shall prevent the disclosure of
any such information to (a) the extent the Lender believes such disclosure is
required by applicable Laws, (b) the Lender's counsel, accountants, and other
representatives, (c) bank examiners, regulators, auditors or comparable Persons
(whether in the United States or elsewhere), (d) any Affiliate or successor of a
Lender, (e) each Agent, other Lender and other Person to whom such other Lender
may make a disclosure without violating this Section 9.20, (f) any assignee,
transferee or participant, or any potential assignee, transferee or participant,
of all or any portion of any Lender's rights under this Agreement who is
notified of the confidential nature of the information and who agrees, orally or
otherwise, to be bound by the provisions of this Section 9.20, or (g) any other
Person in connection with any litigation to which any one or more of the Lenders
is a party; and, provided further, that no Lender shall have obligations under
this Section 9.20 to the extent any such information becomes available on a
non-confidential basis from a source other than a Borrower or that information
becomes publicly available other than by breach of this Section 9.20.
IN WITNESS WHEREOF, each of the parties hereto have executed and delivered
this Agreement under their respective seals as of the day and year first written
above.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
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<PAGE> 140
WITNESS: NATIONSBANK, N.A., in its capacity as Lender
/s/ Kandace Harries By: /s/ David B. Thayer (Seal)
- ------------------------------ -----------------------------
Kandace Harries David B. Thayer
Senior Vice President
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
NATIONSBANK, N.A.
--------------------------------------------------------------------------
<S> <C> <C>
Credit Facility Committed Amount Pro Rata Share
--------------------------------------------------------------------------
Revolving Credit Facility $125,000,000 100%
--------------------------------------------------------------------------
Capital Expenditure Line $25,000,000 100%
--------------------------------------------------------------------------
</TABLE>
Address:
NationsBank, N.A.
NationsBank Business Credit
100 South Charles Street
Mail Stop MD4-325-04-14
Baltimore, Maryland 21201
Attention: David B. Thayer
WITNESS: NATIONSBANK, N.A.
in its capacity as Administrative Agent
/s/ Kandace Harries By: /s/ David B. Thayer (Seal)
- ----------------------------- -------------------------------
Kandace Harries David B. Thayer
Senior Vice President
[SIGNATURES OF THE BORROWERS BEGIN ON THE FOLLOWING PAGE]
- 133 -
<PAGE> 141
WITNESS: WALBRO CORPORATION
WALBRO AUTOMOTIVE CORPORATION
WALBRO ENGINE MANAGEMENT
CORPORATION
WHITEHEAD ENGINEERED PRODUCTS, INC.
SHARON MANUFACTURING COMPANY
/s/ Kandace Harries By: /s/ Michael A. Shope (Seal)
- ------------------------ ----------------------------
Kandace Harries Michael A. Shope
Treasurer and Chief Financial Officer for
each of the foregoing
- 134 -
<PAGE> 142
LIST OF EXHIBITS
A. Additional Borrower Joinder Supplement
B-1. Revolving Credit Note
B-2 Capital Expenditure Note
B-3 Capital Expenditure Line Payment Schedule
C. Wire Transfer Procedures
D. Form of Compliance Certificate
- 135 -
<PAGE> 143
Exhibit A To Financing And Security Agreement
ADDITIONAL BORROWER JOINDER SUPPLEMENT
THIS ADDITIONAL BORROWER JOINDER SUPPLEMENT (this "Agreement") is made this
____ day of _____, ____, by and among WALBRO CORPORATION, a corporation
organized under the laws of the State of Delaware ("Parent"),
______________________, a _______________ corporation (the "Additional
Borrower") and wholly-owned subsidiary of the Parent, and NATIONSBANK, N.A.,
a national banking association ("NationsBank"), and each other person
which is a party to the Financing Agreement (as that term is defined below)
(collectively, the "Lenders" and individually, a "Lender"); and NATIONSBANK,
N.A., a national banking association, in its capacity as both collateral and
administrative agent for each or the Lenders (the "Administrative Agent")[ and
other Agents].
NOW, THEREFORE, for value received the undersigned agree as follows:
1. Reference is hereby made to the Financing and Security Agreement dated
as of May 29, 1998 (as amended, modified, restated, substituted, extended and
renewed at any time and from time to time, the "Financing Agreement") by and
among Parent, and each other Person which is included in the definition of
"Borrower" (as that term is defined in the Financing Agreement) immediately
prior to the date of this Agreement (together with Parent, the "Existing
Borrowers"), the "Lenders" from time to time parties thereto, the Administrative
Agent and the other "Agents" from time to time parties thereto. Capitalized
terms not otherwise defined in this Agreement shall have the meanings given to
them in the Financing Agreement.
2. (a) The Additional Borrower and the Existing Borrowers hereby
acknowledge, confirm and agree that on and as of the date of this Agreement the
Additional Borrower has become an "Additional Borrower" (as that term is defined
in the Financing Agreement), and, along with the Existing Borrowers, is included
in the definition of "Borrower" under the Financing Agreement and the other
Financing Documents for all purposes thereof, and as such shall be jointly and
severally liable, as provided in the Financing Documents, for all Obligations
thereunder (whether incurred or arising prior to, on, or subsequent to the date
hereof) and otherwise bound by all of the terms, provisions and conditions
thereof. Notwithstanding the foregoing, if the Additional Borrower is a Local
Currency Borrower, its liability shall be limited to that portion of the
Obligations directly attributable to it.
(b) [With respect to Domestic Borrowers: Without in any way implying
any limitation on any of the provisions of this Agreement, the Financing
Agreement, or any of the other Financing Documents, the Additional Borrower
hereby assigns, pledges and grants to the Administrative Agent, for the ratable
benefit of the Lenders as security for the Obligations and for the benefit of
the Agents as security for the Agents' Obligations, and agrees that the Agents
and the Lenders shall have a perfected and continuing security interest in, and
Lien on [describe Collateral]. The Additional Borrower further agrees that the
Administrative Agent, for the ratable benefit of the Lenders and for the benefit
of the Agents as security for the Agents' Obligations, shall have in respect
thereof all of the rights and remedies of a secured party under
1
<PAGE> 144
the Uniform Commercial Code as well as those provided in this Agreement, under
each of the other Financing Documents and under applicable Laws,]
(c) Without in any way implying any limitation on any of the
provisions of this Agreement, the Additional Borrower agrees to execute such
financing statements, instruments, and other documents as the Administrative
Agent may require including, without limitation, an allonge to the Notes.
3. Each of the Borrowers hereby covenants and agrees with the
Administrative Agent and the Lenders as follows:
(a) The Obligations include all present and future indebtedness,
duties, obligations, and liabilities, whether now existing or contemplated or
hereafter arising, of any one or more of the Additional Borrower or the Existing
Borrowers.
(b) Reference in this Agreement, the Financing Agreement and the other
Financing Documents to the "Borrower" or otherwise with respect to any one or
more of the Persons now or hereafter included in the definition of "Borrower"
shall mean each and every such Person and any one or more of such Persons,
jointly and severally, unless the context requires otherwise (by way of example,
and not limitation, if only one such Person is the owner of the real property
which is the subject of a mortgage).
4. (a) Each of the Borrowers hereby represents and warrants to the
Administrative Agent and the Lenders that each of them will derive benefits,
directly and indirectly, from each Letter of Credit and from each Loan, both in
their separate capacity and as a member of the integrated group to which each
such Person belongs and because the successful operation of the integrated group
is dependent upon the continued successful performance of the functions of the
integrated group as a whole, because (i) the terms of the consolidated financing
provided under this Agreement are more favorable than would otherwise would be
obtainable by such Persons individually, and (ii) the additional administrative
and other costs and reduced flexibility associated with individual financing
arrangements which would otherwise be required if obtainable would substantially
reduce the value to such Persons of the financing.
(b) Each of the Borrowers hereby represents and warrants that all of
the representations and warranties contained in the Financing Documents are true
and correct on and as of the date hereof as if made on and as of such date, both
before and after giving effect to this Agreement, and that no Event of Default
or Default has occurred and is continuing or exists or would occur or exist
after giving effect to this Agreement.
5. [Additional requirements]
6. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Maryland, without regard to principles
of choice of law.
2
<PAGE> 145
WITNESS the due execution hereof as of the day and year first written
above.
WITNESS: Additional Borrower:
________________________ By:______________________________(SEAL)
Name:
Title:
WITNESS: [Parent/Other Borrowers]
________________________ By:______________________________(SEAL)
Name:
Title:
WITNESS: NATIONSBANK, N.A.,
in its capacity as Administrative Agent
________________________ By:______________________________(Seal)
Name:
Title:
WITNESS: NATIONSBANK, N.A.
in its capacity as a Lender
________________________ By:______________________________(Seal)
Name:
Title:
WITNESS: [Other Lenders and Agents]
________________________ By:______________________________(Seal)
Name:
Title:
3
<PAGE> 146
EXHIBIT B
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<PAGE> 147
Exhibit B-1 to Financing and Security Agreement
REVOLVING CREDIT NOTE
$125,000,000 Baltimore, Maryland
May 29,1998
FOR VALUE RECEIVED, WALBRO CORPORATION, a corporation organized under the
laws of the State of Delaware, WALBRO AUTOMOTIVE CORPORATION, a corporation
organized under the laws of the State of Delaware, WALBRO ENGINE MANAGEMENT
CORPORATION, a corporation organized under the laws of the State of Delaware,
WHITEHEAD ENGINEERED PRODUCTS, INC., a corporation organized under the laws of
the State of Delaware, and SHARON MANUFACTURING COMPANY, a corporation organized
under the laws of the State of Michigan (each a "Borrower" and collectively the
"Borrowers"), jointly and severally, promise to pay to the order of NATIONSBANK,
N.A., a national banking association (the "Lender"), the principal sum of ONE
HUNDRED TWENTY-FIVE MILLION DOLLARS ($125,000,000) (the "Principal Sum"), or so
much thereof as has been or may be advanced and/or readvanced to or for the
account of any Borrower pursuant to the terms and conditions of the Financing
Agreement (as hereinafter defined), together with interest thereon at the rate
or rates hereinafter provided, in accordance with the following:
1. Interest.
Commencing as of the date hereof and continuing until repayment in full of
all sums due hereunder, the unpaid Principal Sum shall bear interest at the
Applicable Interest Rate or the Post Default Rate in effect from time to time
for the Revolving Loan. The Applicable Interest Rate shall be determined in the
manner provided in the Financing Agreement.
2. Payments and Maturity.
The unpaid Principal Sum, together with interest thereon at the rate or
rates provided above, shall be payable as follows:
(a) Interest only on the unpaid Principal Sum shall be due and payable
on each Interest Payment Date; and
(b) Unless sooner paid, the unpaid Principal Sum, together with
interest accrued and unpaid thereon, shall be due and payable in full on the
Revolving Credit Expiration Date.
The fact that the balance hereunder may be reduced to zero from time to
time pursuant to the Financing Agreement will not affect the continuing validity
of this Note or the Financing Agreement, and the balance may be increased to the
Principal Sum after any such reduction to zero.
3. Default Interest.
<PAGE> 148
Exhibit B-1 to Financing and Security Agreement
Upon the occurrence of an Event of Default (as hereinafter defined), at the
option of the Administrative Agent and upon written notice to the Borrowers, the
unpaid Principal Sum shall bear interest thereafter at the Post-Default Rate
until such Event of Default is cured or waived.
4. Application and Place of Payments.
All payments made on account of this Note shall be applied in the manner
provided in the Financing Agreement. All payments on account of this Note shall
be paid in lawful money of the United States of America in immediately available
funds during regular business hours of the NationsBank, N.A., a national
banking association (the "Administrative Agent" under the Financing Agreement),
at its NationsBank Business Credit office at 100 South Charles Street,
Baltimore, Maryland, or at such other times and other Appropriate Payment
Offices as the Administrative Agent may at any time and from time to time
designate in writing to the Borrowers.
5. Prepayment.
The Borrowers may prepay the Principal Sum at the times and in the manner
provided in the Financing Agreement.
6. Financing Agreement and Other Financing Documents.
This Note is the "Revolving Credit Note" described in a Financing and
Security Agreement of even date herewith by and among the Administrative Agent,
the Lender, the other Lenders under the Financing Agreement, and the Borrowers
(as amended, modified, restated, substituted, extended and renewed at any time
and from time to time, the "Financing Agreement"). The indebtedness evidenced by
this Note is included within the meaning of the term "Obligations" as defined in
the Financing Agreement. The term "Financing Documents" as used in this Note
shall mean collectively this Note, the Financing Agreement and any other
instrument, agreement, or document previously, simultaneously, or hereafter
executed and delivered by any Borrower and/or any other person, singularly or
jointly with any other person, evidencing, securing, guaranteeing, or in
connection with the Principal Sum, this Note and/or the Financing Agreement.
7. Security.
This Note is secured as provided in the Financing Agreement.
The occurrence of any one or more of the following events shall constitute
an event of default (individually, an "Event of Default" and collectively, the
"Events of Default") under the terms of this Note:
(a) The failure of the Borrowers to pay to the Lender when due any and
all amounts payable by the Borrowers to the Lender under the terms of this
Note; or
(b) The occurrence of an event of default (as defined therein) under
the terms and conditions of any of the other Financing Documents.
-2-
<PAGE> 149
Exhibit B-1 to Financing and Security Agreement
9. Remedies.
Upon the occurrence and during the continuation of an Event of Default, at
the option of the Lender, all amounts payable by the Borrowers to the Lender
under the terms of this Note shall immediately become due and payable by the
Borrowers to the Lender without notice to the Borrowers or any other person, and
the Lender shall have all of the rights, powers, and remedies available under
the terms of this Note, any of the other Financing Documents and all applicable
laws. The Borrowers and all endorsers, guarantors, and other parties who may now
or in the future be primarily or secondarily liable for the payment of the
indebtedness evidenced by this Note hereby severally waive presentment, protest
and demand, notice of protest, notice of demand and of dishonor and non-payment
of this Note and expressly agree that this Note or any payment hereunder may be
extended from time to time without in any way affecting the liability of the
Borrowers, guarantors and endorsers.
10. Expenses.
The Borrowers promise to pay to the Lender on demand by the Lender all
reasonable costs and expenses incurred by the Lender in connection with the
collection and enforcement of this Note, including, without limitation,
reasonable attorneys' fees and expenses and all court costs.
11. Notices.
Any notice, request, or demand to or upon the Borrowers or the Lender
shall be deemed to have been properly given or made when delivered in accordance
with Section 9.1 of the Financing Agreement.
12. Miscellaneous.
Each right, power, and remedy of the Lender as provided for in this Note or
any of the other Financing Documents, or now or hereafter existing under any
applicable law or otherwise shall be cumulative and concurrent and shall be in
addition to every other right, power, or remedy provided for in this Note or any
of the other Financing Documents or now or hereafter existing under any
applicable law, and the exercise or beginning of the exercise by the Lender of
any one or more of such rights, powers, or remedies shall not preclude the
simultaneous or later exercise by the Lender of any or all such other rights,
powers, or remedies. No failure or delay by the Lender to insist upon the
strict performance of any term, condition, covenant, or agreement of this Note
or any of the other Financing Documents, or to exercise any right, power, or
remedy consequent upon a breach thereof, shall constitute a waiver of any such
term, condition, covenant, or agreement or of any such breach, or preclude the
Lender from exercising any such right, power, or remedy at a later time or
times. By accepting payment after the due date of any amount payable under the
terms of this Note, the Lender shall not be deemed to waive the right either to
require prompt payment when due of all other amounts payable under the terms of
this Note or to declare an Event of Default for the failure to effect such
prompt payment of any such other amount. No course of dealing or conduct shall
be effective to amend, modify, waive, release, or change any provisions of this
Note.
-3-
<PAGE> 150
Exhibit B-1 to Financing and Security Agreement
13. Partial Invalidity.
In the event any provision of this Note (or any part of any provision) is
hold by a court of competent jurisdiction to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision (or remaining part of the affected
provision) of this Note; but this Note shall be construed as if such invalid,
illegal, or unenforceable provision (or part thereof) had not been contained in
this Note, but only to the extent it is invalid, illegal, or unenforceable.
14. Captions.
The captions herein set forth are for convenience only and shall not be
deemed to define, limit, or describe the scope or intent of this Note.
15. Applicable Law.
The Borrowers acknowledge and agree that this Note shall be governed by the
laws of the State of Maryland, even though for the convenience and at the
request of the Borrowers, this Note may be executed elsewhere.
16. Consent to Jurisdiction.
Each Borrower irrevocably submits to the jurisdiction of any state or
federal court sitting in the State of Maryland over any suit, action, or
proceeding arising out of or relating to this Note or any of the other
Financing Documents. Each Borrower irrevocably waives, to the fullest extent
permitted by law, any objection that the respective Borrower may now or
hereafter have to the laying of venue of any such suit, action, or proceeding
brought in any such court and any claim that any such suit, action, or
proceeding brought in any such court has been brought in an inconvenient forum.
Final judgment in any such suit, action, or proceeding brought in any such court
shall be conclusive and binding upon the respective Borrower and may be enforced
in any court in which such Borrower is subject to jurisdiction by a suit upon
such judgment, provided that service of process is effected upon such Borrower
as provided in this Note or as otherwise permitted by applicable law.
17. Service of Process.
Each Borrower hereby irrevocably designates and appoints CT Corporation
System, 300 East Lombard Street, Baltimore, Maryland, 21202, as the respective
Borrower's authorized agent to receive on such Borrower's behalf service of any
and all process that may be served in any suit, action, or proceeding instituted
in connection with this Note in any state or federal court sitting in the State
of Maryland. If such agent shall cease so to act, each Borrower shall
irrevocably designate and appoint without delay another such agent in the State
of Maryland satisfactory to the Lender and shall promptly deliver to the Lender
evidence in writing of such agent's acceptance of such appointment and its
agreement that such appointment shall be irrevocable.
The Borrowers hereby consent to process being served in any suit, action,
or proceeding instituted in connection with this Note by (a) the mailing of a
copy thereof by certified mail,
-4-
<PAGE> 151
Exhibit B-1 to Financing and Security Agreement
postage prepaid, return receipt requested, to the Borrowers at the address for
notices set forth in Section 9.1 of the Financing Agreement and (b) serving a
copy thereof upon CT Corporation System, the agent hereinabove designated and
appointed by the Borrowers as the Borrowers' agent for service of process. The
Borrowers irrevocably agree that such service shall be deemed in every respect
effective service of process upon the Borrowers in any such suit, action or
proceeding, and shall, to the fullest extent permitted by law, be taken and held
to be valid personal service upon the Borrowers. Nothing in this Section shall
affect the right of the Lender to serve process in any manner otherwise
permitted by law or limit the right of the Lender otherwise to bring proceedings
against any Borrower in the courts of any jurisdiction or jurisdictions.
18. WAIVER OF TRIAL BY JURY.
THE BORROWERS AND THE LENDER HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO WHICH THE BORROWERS AND THE LENDER MAY BE PARTIES, ARISING OUT OF
OR IN ANY WAY PERTAINING TO (A) THIS NOTE OR (B) THE FINANCING DOCUMENTS. IT IS
AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF
ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS
AGAINST PARTIES WHO ARE NOT PARTIES TO THIS NOTE.
THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE BORROWERS
AND THE BORROWERS HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION
HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN
ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE BORROWERS FURTHER REPRESENT THAT THEY
HAVE BEEN REPRESENTED IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS
WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF THEIR OWN FREE WILL, AND THAT
THEY HAVE HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
IN WITNESS W11EREOF, each Borrower has caused this Note to be executed
under seal by its duly authorized officers as of the date first written above.
WITNESS OR ATTEST: WALBRO CORPORATION
WALBRO AUTOMOTIVE CORPORATION
WALBRO ENGINE MANAGEMENT CORPORATION
WHITEHEAD ENGINEERED PRODUCTS, INC.
SHARON MANUFACTURING COMPANY
___________________________ By:______________________________(Seal)
Michael A. Shope
Treasurer and Chief Financial Officer
for each of the foregoing
-5-
<PAGE> 152
Exhibit B-2 to Financing and Security Agreement
CAPITAL EXPENDITURE LINE NOTE
$25,000,000 Baltimore, Maryland
May 29,1998
FOR VALUE RECEIVED, WALBRO CORPORATION, a corporation organized under the
laws of the State of Delaware, WALBRO AUTOMOTIVE CORPORATION, a corporation
organized under the laws of the State of Delaware, WALBRO ENGINE MANAGEMENT
CORPORATION, a corporation organized under the laws of the State of Delaware, AD
ENGINEERED, PRODUCTS, INC., a corporation organized under the laws of the State
of Delaware, and SHARON MANUFACTURING COMPANY, a corporation organized under the
laws of the State of Michigan (each a "Borrower" and collectively the
"Borrowers"), jointly and severally, promise to pay to the order of NATIONSBANK,
N.A., a national banking association (the "Lender"), the principal sum of
TWENTY-FIVE MILLION DOLLARS ($25,000,000) (the "Principal Sum"), or such lesser
amount equal to the Lender's Capital Expenditure Line Pro Rata Share (as that
term is defined in the "Financing Agreement" as that term is defined below) of
the Capital Expenditure Line (as that term is defined in the Financing
Agreement) or so much thereof as has been or may be advanced or readvanced under
the Capital Expenditure Line, to or for the account of the Borrowers pursuant to
the terms and conditions of the Financing Agreement, together with interest
thereon at the rate or rates hereinafter provided, in accordance with the
following:
1. Interest.
Commencing as of the date hereof and continuing until repayment in full of
all sums due hereunder, the unpaid Principal Sum shall bear interest at the
Applicable Interest Rate or the Post Default Rate in effect from time to time
for the Capital Expenditure Line. The Applicable Interest Rate shall be
determined in the manner provided in the Financing Agreement.
2. Payments and Maturity.
The unpaid Principal Sum, together with interest thereon at the rate or
rates provided above, shall be payable as follows:
(a) Interest only on the unpaid Principal Sum shall be due and
payable monthly, commencing July 1, 1998, and on the first day of each month
thereafter to maturity; and
(b) The Borrowers shall pay to the Lender its Capital Expenditure Line
Pro Rata Share of payments made pursuant to the Capital Expenditure Line
Installment Payment Schedule at the times and in the manner set forth in Section
2.4.4 of the Financing Agreement; and
(c) Unless sooner paid, the unpaid Principal Sum, together with
interest accrued and unpaid thereon, shall be due and payable in full on the
earlier of May 31, 2003 or the Revolving Credit Termination Date.
Except on the Capital Expenditure Line Termination Date, the fact that the
balance hereunder may be reduced to zero from time to time pursuant to the
Financing Agreement will
<PAGE> 153
Exhibit B-2 to Financing and Security Agreement
not affect the continuing validity of this Note or the Financing Agreement, and
the balance may be increased to the Principal Sum after any such reduction to
zero.
3. Default Interest.
Following the occurrence and during the continuation of an Event of
Default, at the option of the Administrative Agent and upon written notice to
the Borrowers, the unpaid Principal Sum shall bear interest at the Post-Default
Rate until such Event of Default is cured or waived.
4. Application and Place of Payments.
All payments made on account of this Note shall be applied in the manner
provided in the Financing Agreement. All payments on account of this Note shall
be paid in lawful money of the United States of America in immediately available
funds during regular business hours of the NationsBank N.A., a national banking
association (the "Administrative Agent" under the Financing Agreement), at its
NationsBank Business Credit office at 100 South Charles Street, Baltimore,
Maryland, or at such other times and places as the Administrative Agent may at
any time and from time to time designate in writing to the Borrowers.
5. Prepayment.
The Borrowers may prepay the Principal Sum at the times and in the manner
provided in the Financing Agreement.
6. Financing Agreement and Other Financing Documents.
This Note is a "Capital Expenditure Line Note" described in a Financing and
Security Agreement of even date herewith (as amended, modified, restated,
substituted, extended and renewed at any time and from time to time, the
"Financing Agreement") by and among the Agent, the Lender, the other Lenders
under the Financing Agreement, and the Borrowers. All terms used in this Note
which are not otherwise defined herein shall have the meaning set forth In the
Financing Agreement. The indebtedness evidenced by this Note is included within
the meaning of the term "Obligations" as defined in the Financing Agreement,
7. Security.
This Note is secured as provided in the Financing Agreement.
8. Events of Default.
The occurrence of any one or more of the following events shall constitute
an event of default (individually, an "Event of Default" and collectively, the
"Events of Default") under the terms of this Note-,
(a) The failure of the Borrowers to pay to the Lender when due
any and all amounts payable by the Borrowers to the Lender under the terms of
this Note; or
-2-
<PAGE> 154
Exhibit B-2 to Financing and Security Agreement
(b) The occurrence of an event of default (as defined therein) under
the terms and conditions of any of the other Financing Documents.
9. Waivers.
The Borrowers and all endorsers, guarantors, and other parties who may now
or in the future be primarily or secondarily liable for the payment of the
indebtedness evidenced by this Note hereby severally waive presentment, protest
and demand, notice of protest, notice of demand and of dishonor and non-payment
of this Note and expressly agree that this Note or any payment hereunder may be
extended from time to time without in any way affecting the liability of the
Borrowers, guarantors and endorsers.
10. Notices.
Any notice, request, or demand to or upon the Borrowers or the Lender shall
be deemed to have been properly given or made when delivered in accordance with
Section 9.1 of the Financing Agreement.
11. Partial Invalidity.
In the event any provision of this Note (or any part of any provision) is
held by a court of competent jurisdiction to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision (or remaining part of the affected
provision) of this Note; but this Note shall be construed as if such invalid,
illegal, or unenforceable provision (or part thereof) had not been contained in
this Note, but only to the extent it is invalid, illegal, or unenforceable,
12. Captions.
The captions herein set forth are for convenience only and shall not be
deemed to define, limit, or describe the scope or intent of this Note.
13. Applicable Law.
The Borrowers acknowledge and agree that this Note shall be deemed
delivered in and shall be governed by the laws of the State of Maryland (even
though for the convenience and at the request of the Borrowers, this Note may be
executed elsewhere), all as if this Note had been executed, delivered,
administered and performed solely within the State of Maryland.
14. Consent to Jurisdiction.
Each Borrower irrevocably submits to the jurisdiction of any state or
federal court sitting in the State of Maryland over any suit, action, or
proceeding arising out of or relating to this Note or any of the other Financing
Documents. Each Borrower irrevocably waives, to the fullest extent permitted by
law, any objection that the respective Borrower may now or hereafter have to the
laying of venue of any such suit, action, or proceeding brought in any such
court and any claim that any such suit, action, or proceeding brought in any
such court has been brought in an inconvenient forum. Final judgment in any such
suit, action, or proceeding brought in any such
-3-
<PAGE> 155
Exhibit B-2 to Financing and Security Agreement
court shall be conclusive and binding upon the respective Borrower and may be
enforced in any court in which such Borrower is subject to jurisdiction by a
suit upon such judgment, provided that service of process is effected upon such
Borrower as provided in this Note or as otherwise permitted by applicable law.
15. Service of Process.
Each Borrower hereby irrevocably designates and appoints CT Corporation
System, 300 East Lombard Street, Baltimore, Maryland, 21202, as the respective
Borrower's authorized agent to receive on such Borrower's behalf service of any
and all process that may be served in any suit, action, or proceeding instituted
in connection with this Note in any state or federal court sitting in the State
of Maryland. If such agent shall cease so to act, each Borrower shall
irrevocably designate and appoint without delay another such agent in the State
of Maryland satisfactory to the Lender and shall promptly deliver to the Lender
evidence in writing of such agent's acceptance of such appointment and its
agreement that such appointment shall be irrevocable.
The Borrowers hereby consent to process being served in any suit, action,
or proceeding instituted in connection with this Note by (a) the mailing of a
copy thereof by certified mail, postage prepaid, return receipt requested, to
the Borrowers at the address for notices set forth in Section 9.1 of the
Financing Agreement and (b) serving a copy thereof upon CT Corporation System,
the agent hereinabove designated and appointed by the Borrowers as the
Borrowers' agent for service of process. The Borrowers irrevocably agree that
such service shall be deemed in every respect effective service of process upon
the Borrowers in any such suit, action or proceeding, and shall, to the fullest
extent permitted by law, be taken and held to be valid personal service upon the
Borrowers. Nothing in this Section shall affect the right of the Lender to serve
process in any manner otherwise permitted by law or limit the right of the
Lender otherwise to bring proceedings against any Borrower in the courts of any
jurisdiction or jurisdictions.
IN WITNESS WHEREOF, each of the Borrowers has caused this Note to be
executed under seal by its authorized officer as of the date first written
above.
WITNESS OR ATTEST: WALBRO CORPORATION
WALBRO AUTOMOTIVE CORPORATION
WALBRO ENGINE MANAGEMENT CORPORATION
WHITEHEAD ENGINEERED PRODUCTS, INC.
SHARON MANUFACTURING COMPANY
_________________________ By:______________________________(Seal)
Michael A. Shope
Treasurer and Chief Financial Officer
for each of the foregoing
-4-
<PAGE> 156
Exhibit B-3 to Financing And Security Agreement
CAPITAL EXPENDITURE LINE INSTALLMENT PAYMENT SCHEDULE
THIS CAPITAL EXPENDITURE LINE INSTALLMENT PAYMENT SCHEDULE is furnished as
of ___________, ___________, by WALBRO CORPORATION, a corporation organized
under the laws of the State of Delaware (the "Parent"), to NATIONSBANK, N.A., a
national banking association (the "Administrative Agent"), pursuant to Section
2.4.4 of the Financing and Security Agreement dated May 29, 1998 (as amended,
modified, restated, substituted, extended and renewed at any time and from time
to time, the "Financing Agreement"), by and among the Parent, the parties
identified as the "Borrowers" in the Financing Agreement, the Administrative
Agent, and the parties identified as the "Lenders" and "Agents" in the
Financing Agreement.
I, ___________, hereby certify that I am the _______________ of the Parent
and am a Responsible Officer (as that term is defined in the Financing
Agreement) authorized to certify to the Lender on behalf of the Borrowers as
follows:
1. This Schedule is given to induce the Lenders to make an advance to
________________ in the amount of $______________ under the Capital Expenditure
Line (as that term is defined in the Financing Agreement).
2. Immediately after the advance described in paragraph 1, the aggregate
outstanding principal balance of the Capital Expenditure Line shall be
$________________.
3. Installment payments of principal shall be due and payable on the
advance described in paragraph 1 in the amount of $______________ quarterly,
commencing ______________, ____________ and on the first day of each August,
November, February, and May after the date of such advance.
4. The aggregate of all installment payments of principal due and payable
after the advance described in paragraph 1 on all Capital Expenditure Line
advances shall be $__________ quarterly commencing _____________, _________
and on the first day of each August, November, February, and May after the date
of such advance.
IN WITNESS WHEREOF, the Parent has executed and delivered this Capital
Expenditure Line Payment Schedule on behalf of the Borrowers under seal as of
the day and year first written above.
WITNESS: WALBRO CORPORATION
__________________________ By:______________________________(Seal)
Name:
Title:
<PAGE> 157
Exhibit C to Financing and Security Agreement
NATIONSBANK BUSINESS CREDIT
WIRE TRANSFER PROCEDURES
The transfer of funds by means of wire may be made by NationsBank (lender)
at the request of its customer (borrower). Such wire transfers are categorized
by lender as either repetitive or non-repetitive.
Repetitive:
Repetitive wire transfers may vary in amount, but are consistent in terms
of the payee, the location to which funds are wired, the bank name, account
number and the routing transit number.
Either borrower or lender may initiate a repetitive wire transfer. The
borrower may identify the repetitive nature of transfers and request they be
established as such via the "Repetitive Wire Transfer Authorization Form" (copy
attached). Lender, after observing numerous transfers to the same recipient and
destination, may initiate the repetitive process by faxing or mailing the
"Repetitive Wire Authorization Form" to the borrower for completion and return.
Although a first request for a repetitive wire transfer may be honored from
a faxed copy of the "Repetitive Wire Transfer Authorization Form", a copy of the
form containing an original signature must be received from the borrower. All
transfer authorization forms must be approved by and contain the signature of a
person authorized by the borrower to advance funds from borrower's line of
credit with the lender.
After receipt of the original "Repetitive Wire Transfer Authorization Form"
by the lender, subsequent wire transfers to the recipient named thereon may be
initiated by telephone request, provided the requesting party is identified by
the lender as a person authorized by borrower to advance funds from the
borrower's line of credit with lender.
Non-Repetitive:
Non-Repetitive wire transfers are directed to recipients on a one-time or
infrequent basis or are directed to varied destinations. Non-repetitive wire
transfers require that written notification be provided to lender by borrower,
showing payee, location, account number, routing transit number and name and
location of bank into which funds are to be transferred. Such written
notification may be provided by means of a "Non-Repetitive Wire Transfer
Authorization Form" (copy attached).
Required information may be faxed to lender in order to expedite the
transfer; however, a copy of the transfer authorization form with an original
signature(s) must be received by lender from borrower. The transfer
authorization form must be approved by and contain the signature of a person
authorized by the borrower to advance funds from borrower's line of credit with
the lender.
For any non-repetitive wire transfer, Lender may, at its discretion,
perform a telephone verification with an authorized representative (the original
signer or another authorized representative) of borrower prior to initiating the
transfer.
<PAGE> 158
NATIONSBANK BUSINESS CREDIT
REPETITIVE WIRE TRANSFER AUTHORIZATION
CUSTOMER INFORMATION
Customer Name:_________________________________ Date:___________________________
Name of Person Authorizing Transfer for Customer:_______________________________
Note: Must be Person Authorized
to Advance Funds
Signature of Person Authorizing Transfer for Customer:__________________________
PAYEE
Name of Recipient of Funds:_____________________________________________________
Location:_______________________________________________________________________
Account Number into which Funds are to be Transferred:__________________________
DESTINATION OF FUNDS
Name and Location of Bank Receiving Funds:
Bank Name:______________________________________________________________________
Routing Information (ABA Number):______________________
Bank Location:
City:___________________________________________________________________________
State:__________________________________________________________________________
(for international Wires) Country:______________________________________________
Special Instructions:___________________________________________________________
________________________________________________________________________________
BANK USE ONLY
Business Credit Department
Business Credit Authorization:__________________________________________________
Print name of person at Bank approved to
authorize Wire Transfers
Business Credit Authorization:__________________________________________________
Signature of person at Bank approved to authorize
Wire Transfers
WIRE TRANSFER DEPARTMENT
F.D. Number Assigned:___________________________________________________________
Account Number to Debit:________________________________________________________
<PAGE> 159
NATIONSBANK BUSINESS CREDIT
NON-REPETITIVE WIRE TRANSFER AUTHORIZATION
CUSTOMER INFORMATION
Customer Name:_________________________________ Date:___________________________
Name of Person Authorizing Transfer for Customer:_______________________________
Note: Must be Person Authorized
to Advance Funds
Signature of Person Authorizing Transfer for Customer:__________________________
PAYEE
Name of Recipient of Funds:_____________________________________________________
Location:_______________________________________________________________________
Account Number into which Funds are to be Transferred:__________________________
DESTINATION OF FUNDS
Name and Location of Bank Receiving Funds:
Bank Name:______________________________________________________________________
Routing Information (ABA Number):______________________
Bank Location:
City:___________________________________________________________________________
State:__________________________________________________________________________
(for international Wires) Country:______________________________________________
Special Instructions:___________________________________________________________
________________________________________________________________________________
<PAGE> 160
Exhibit D to Financing And Security Agreement
COMPLIANCE CERTIFICATE
THIS CERTIFICATE is made as of ________________, ________ by
________________, a _______________ organized under the laws of the State of
_________________ (the "Borrower'), NATIONSBANK, N.A., a national banking
association (the "Administrative Agent'), pursuant to Section 2.4.4 of the
Financing and Security Agreement dated May 29, 1998 (as amended, modified,
restated, substituted, extended and renewed at any time and from time to time,
the "Financing Agreement"), by and among the Parent, the parties identified as
the "Borrowers" in the Financing Agreement, the. Administrative Agent, and the
parties identified as the "Lenders" and "Agents" in the Financing Agreement.
I, ________________, hereby certify that I am the _____________ of the
Borrower and am a Responsible Officer (as that is defined in the Financing
Agreement) authorized to certify to the Lender on behalf the Borrower as
follows:
1. This Certificate is given to induce the Lender to make advances to the
Borrower under the Financing Agreement.
2. This Certificate accompanies ______________ the financial statements
for the period ended _____________ (the "Current Financials') which the
Borrower is furnishing to the Lender pursuant to Section 6.1.1(_) of the
Financing Agreement. 'Me Current Financials have been prepared in accordance
with GAAP (as that term is defined in the Financing Agreement).
3. As required by Section 6.1.1(_) of the Financing Agreement, I have set
forth on Schedule 1 to this Certificate a detailed computation, to the extent
applicable, of each financial covenant in the Financing Agreement and a cash
flow projection report.
4. No change has occurred to the information contained in the Collateral
Disclosure List except as set forth on Schedule 2 to this Certificate. By way of
example and not limitation, the Collateral Disclosure List, together with
Schedule 2, contains a listing of all of the Patents, Trademarks, Copyrights of
the Domestic Borrowers (as those terms are defined in the Financing Agreement),
all locations (owned, leased, warehouses or otherwise) where any Collateral (as
that term is defined in the Financing Agreement) is located, and all
Subsidiaries (as that term is defined in the Financing Agreement).
5. As of the date hereof, there exists no Default or Event of Default, as
defined in the Financing Agreement.
6. On the date hereof, the representations and warranties contained in
Article 4 of the Financing Agreement are true with the same effect as though
such representations and warranties had been made on the date hereof.
WITNESS my signature this _____ day of _________, ________.
___________________________
Name:
Title:
<PAGE> 1
EXHIBIT 5
June 3, 1998
Walbro Corporation
6242 Garfield Street
Cass City, Michigan 48726
Re: Registration Statement on Form S-4 - File No. 333-45693
Ladies and Gentlemen:
We have acted as counsel for Walbro Corporation, a Delaware corporation
(the "Company"), in connection with the preparation and filing of a registration
statement on Form S-4, File No. 333-45693 (the "Registration Statement") with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended. The Registration Statement relates to the exchange of up to an
aggregate principal amount of $100,000,000 of its 10 1/8% Senior Notes due 2007,
Series B (the "New Notes") for up to an aggregate principal amount of
$100,000,000 of its outstanding 10 1/8% Senior Notes due 2007, Series A (the
"Old Notes"). Capitalized terms used but not defined herein shall have the
meanings as set forth in the Registration Statement or the Indenture for the New
Notes, as the case may be.
In connection with this opinion, we have relied as to matters of fact,
without investigation, upon certificates of public officials and others and upon
affidavits, certificates and written statements of directors, officers, and
employees of, and the accountants for, the Company. We have also examined
originals or copies, certified or otherwise identified to our satisfaction, of
such instruments, documents, and records as we have deemed relevant and
necessary to examine for the purpose of this opinion, including (a) the
Registration Statement (b) the Restated Certificate of Incorporation of the
Company, (c) the By-laws of the Company, (d) the minutes of meetings of the
Board of Directors of the Company, (e) the Indenture for the Notes, (f) the Form
of New Note, and (g) the Statements on Form T-1 under the Trust Indenture Act of
1939, as amended, relating to the Indenture.
In connection with this opinion, we have assumed the accuracy and
completeness of all documents and records that we have reviewed, the genuineness
of all signatures, the due authority of the parties signing such documents, the
authenticity of the documents submitted to us as originals and the conformity to
authentic original documents of all documents submitted to us as certified,
conformed or reproduced copies. We have further assumed that:
<PAGE> 2
Walbro Corporation
June 3, 1998
Page 2
(i) All natural persons involved in the transactions
contemplated by the Registration Statement (the
"Offering") and the Indenture have sufficient legal
capacity to enter into and perform their respective
obligations under the Indenture and to carry out
their roles in the Offering.
(ii) Each party involved in the Offering other than the
Company (collectively the "Other Parties") has
satisfied all legal requirements that are applicable
to it to the extent necessary to make the Indenture
enforceable against it.
(iii) Each of the Other Parties has complied with all legal
requirements pertaining to its status as such related
to its rights to enforce the Indenture against the
Company.
Based upon and subject to the foregoing, it is our opinion that:
(1) The Company is a corporation duly incorporated and
existing under the laws of the State of Delaware.
(2) The New Notes covered by the Registration Statement,
when executed in the manner set forth in the
Indenture and issued and delivered in the manner set
forth in the Registration Statement, will be legally
issued and will be binding obligations of the Company
under the terms of the Indenture, except (i) as
enforceability may be limited by the effects of
bankruptcy, insolvency, reorganization, receivership,
moratorium and other similar laws affecting the
rights and remedies of creditors generally; (ii) as
enforceability may be limited by the effects of
general principles of equity, whether applied by a
court of law or equity; (iii) as rights to indemnity
or contribution under the same may be limited by
federal or state securities laws or the public policy
underlying such laws; and (iv) that we express no
opinion as to the waiver of the defense of usury.
This opinion is limited to the laws of the States of Delaware and New
York, and the federal securities laws of the United States of America, and is
given as of the date hereof. We do not express any opinion herein concerning any
other law, and we assume no obligation to advise you of changes that may
hereafter be brought to our attention.
<PAGE> 3
Walbro Corporation
June 3, 1998
Page 3
We hereby consent to the reference to our name in the Registration
Statement under the caption "Legal Matters" and further consent to the filing of
this opinion as Exhibit 5 to the Registration Statement.
Very truly yours,
/s/ KATTEN MUCHIN & ZAVIS
----------------------------
KATTEN MUCHIN & ZAVIS
<PAGE> 1
EXHIBIT 10.1
AGREEMENT
THIS AGREEMENT is entered into this 12th day of December, 1986 by and
between MITSUBA ELECTRIC MANUFACTURING COMPANY, LTD., a company organized and
existing under the laws of Japan, ("MITSUBA"), having its principal office at
2681, Hirosawacho 1-chome, Kiryu City, Japan and WALBRO CORPORATION, a company
organized and existing under the laws of the State of Delaware, with its
principal office at 6242 Garfield Street, Cass City, Michigan 48726 USA
("WALBRO").
WITNESSETH
WHEREAS, MITSUBA and WALBRO wish to establish a corporation ("NEWCO")
pursuant to the laws of Japan to engage in the manufacture and sale of
automotive fuel systems components ("PRODUCTS") to Japanese automotive original
equipment) manufacturers and the replacement market on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS
For the purpose of this Agreement, the following terms shall have the
meaning set forth below:
1.1 MITSUBA. Mitsuba Electric Manufacturing Company, Ltd. with its
principal place of business in Kiryu City, Japan.
1.2 WALBRO. Walbro Corporation, a Delaware Corporation, with its
principal place of business in Cass City, Michigan.
<PAGE> 2
1.3 AFFILIATE. A person (a) who directly or indirectly through one or
more intermediaries, controls or is controlled by, or is under common control
with, the Person specified; (b) who beneficially owns or holds twenty-five
percent or more of the voting stock or equity interest of which is beneficially
owned or held by the Person specified; (c) twenty-five percent or more of the
voting stock or equity interest of which is beneficially owned or held by the
Person specified; or (d) who is an officer or director of the Person specified
or an entity in (a), (b) or (c) above. As used in this definition "control"
shall mean the power through equity ownership, contract or otherwise to direct
the affairs of another Person.
1.4 PRODUCTS. WALBRO's gerotor type electric motor driven fuel pump
Series 5000 and all derivatives of such pump. As conditions permit, the parties
intend to expand the scope of the joint venture to include the manufacture and
sale of additional automotive electronic fuel injection system components. This
expansion will be handled on a product by product basis pursuant to future
negotiation of the parties and pursuant to an agreement in writing.
1.5 NEWCO. The stock corporation (Kabushiki Kaisha) to be organized in
accordance with the laws of Japan by MITSUBA and WALBRO in the manner provided
in Paragraph 2.1 hereof.
ARTICLE II. ORGANIZATION AND CAPITALIZATION OF THE JOINT VENTURE
2.1 Organization. In accordance with a schedule proposed by counsel,
which counsel is approved by MITSUBA and WALBRO, the parties shall cause the
organization, under the laws of Japan, of a new corporation ("NEWCO") to be
named "Mitsuba-Walbro, Inc.". The Articles of Incorporation of NEWCO shall be
substantially in the form attached hereto as Exhibit A. It is intended that
NEWCO will have its principal office in Kiryu City, Japan.
<PAGE> 3
2.2 Purpose. The purpose of NEWCO shall be to manufacture and market
(both OEM and aftermarket) the PRODUCTS in Japan under an arrangement whereby
NEWCO will have a nonexclusive license to manufacture, use and sell the PRODUCTS
under the terms and conditions set forth in Exhibit B. MITSUBA shall provide
technical services and personnel to NEWCO to assist engineering, manufacturing
and selling the PRODUCTS under the terms and conditions of Exhibit C. Exhibits
A, B & C are hereby incorporated by reference.
2.3 Logo. The parties agree that a logo shall be designed for NEWCO
which preserves within it the identity of both parties. WALBRO agrees that the
logo for NEWCO includes WALBRO trademark and MITSUBA agrees that the logo for
NEWCO includes MITSUBA trademark.
2.4 Capital. The authorized share capital of NEWCO shall be Four
Hundred Million Yen ((YEN)400,000,000.-), consisting of Eight Thousand (8,000)
common shares with a par value of (YEN)50,000 per share. At the completion of
the closing, NEWCO shall issue share certificates to MITSUBA and WALBRO
representing the shares to be acquired by them pursuant to this Agreement. All
of NEWCO's shares shall be alike in all respects and the holders thereof shall
be entitled to identical rights and privileges including, without limitation of
the foregoing, identical rights and privileges with respect to dividends, voting
power and distribution of assets in the event of any voluntary or involuntary
liquidation or dissolution. It is understood and agreed that MITSUBA and WALBRO
shall each at all times hold 50% of the issued and outstanding share of capital
and voting rights of NEWCO. The initial paid-in capital shall be One Hundred
Million Yen ((YEN)100,000,000.-). MITSUBA and WALBRO shall each contribute 50%
of the initial paid-in capital.
<PAGE> 4
2.5 Additional Equity. Upon a determination by the Board of Directors
of NEWCO that additional shareholders' equity is necessary, the parties shall
take such steps as may be deemed necessary or appropriate by the Board of
Directors of NEWCO to increase the parties' respective equity investments in
NEWCO by purchase of additional shares of capital stock, contributions to
capital, or otherwise. All such increases in equity investments shall be made by
the parties in amounts that are in proportion to their respective shareholdings
in NEWCO, 50% by MITSUBA and 50% by WALBRO, and the requirement that each party
make any additional investment shall be conditioned upon (a) the making of a
proportional additional investment by the other, and (b) the absence of a
material breach by the other of any provisions of this Agreement.
2.6 Indebtedness. Upon determination by the Board of Directors of NEWCO
that it is necessary or desirable for NEWCO to raise additional funds by
incurring indebtedness, NEWCO shall incur such debt on such terms and conditions
as the Board of Directors of NEWCO may deem appropriate.
2.7 Loans. If the Board of Directors of NEWCO shall determine that
additional financing is necessary or desirable, and that such financing can most
advantageously be provided by loans provided or guaranteed (severally and not
jointly) by the parties, such loans or guarantees, as may be requested by the
Board of Directors of NEWCO, shall be provided simultaneously by MITSUBA and
WALBRO, equally.
2.8 Distributions. Distributions from NEWCO to MITSUBA and WALBRO may
be made at such times and in such amounts as may be determined by the Board of
Directors of NEWCO, subject to the resolution of the Ordinary General Meeting of
Shareholders of NEWCO. The distributions shall be made equally.
<PAGE> 5
2.9 Board of Directors of NEWCO. The Board of Directors of NEWCO shall
consist of six (6) individuals, three of whom shall be appointed by MITSUBA and
three of whom shall be appointed by WALBRO. MITSUBA and WALBRO each agree to
vote their respective NEWCO shares in favor of three of the other party's
nominees at each and every meeting of shareholders held for the purpose of
electing Directors in order to assure that each party shall elect one-half of
NEWCO's Directors. In the event that a party shall wish to remove a director who
was nominated by the party, the other party shall vote its shares in favor of
such removal. In the event a Director nominated by a party shall cease to be a
Director for any reason, the other party shall vote its shares in favor of the
individual whom that party shall nominate to fill such vacant position. Each
party agrees that it shall take any and all necessary actions in a timely
fashion in order to obtain the results contemplated by this Paragraph 2.9.
All Directors shall be reimbursed by NEWCO for out-of pocket travel,
lodging, food and incidental expenses incurred in connection with attendance at
Directors' meetings. The presence in person of a majority of the Directors shall
be required to constitute a quorum for the transaction of business.
In all events, the Board of Directors of NEWCO shall use reasonable
efforts to notify MITSUBA and WALBRO of any significant action on behalf of
NEWCO, or its intention in respect of any significant action that it proposes to
take.
No member of the Board of Directors of NEWCO shall be liable to the
parties by reason of his acts as such, except in the case of his gross
negligence or fraudulent or dishonest conduct.
2.10 Auditors. NEWCO shall have two (2) individual auditors, one of
whom shall be appointed by MITSUBA and one of whom shall be appointed by WALBRO.
MITSUBA and
<PAGE> 6
WALBRO each agree to vote their respective NEWCO shares in favor of
one of the other party's nominees at each and every meeting of shareholders held
for the purpose of electing Auditors in order to assure that each party shall
elect one-half of NEWCO's Auditors.
2.11 Representative Directors. NEWCO shall have two (2) representative
directors who shall be elected by the Board of Directors of NEWCO from among the
members of said board. During the period that the proportionate equity interests
between the parties hereto remain 1:1 for MITSUBA and WALBRO, respectively, one
of the representative directors shall be an individual nominated by MITSUBA and
acceptable to WALBRO and the other representative director shall be an
individual nominated by WALBRO and acceptable to MITSUBA. The parties hereto
hereby covenant and agree to cause the directors of NEWCO respectively nominated
by them to cast their votes so as to elect those individuals who qualify under
the foregoing provisions of this Paragraph 2.11. It is agreed between the
parties that MITSUBA's designee shall be the President and WALBRO's designee
shall be the Executive Vice-President for NEWCO's first six years of business.
After the first six years the Board of Directors of NEWCO shall appoint the
President and the Executive Vice President by Board action.
2.12 Employees. The parties acknowledge that it may be necessary for
NEWCO to employ individuals who will remain as employees of MITSUBA or WALBRO or
an AFFILIATE of MITSUBA or WALBRO. In that event NEWCO shall reimburse MITSUBA
or WALBRO, as the case may be, for all costs and expenses incurred by MITSUBA or
WALBRO in connection with furnishing such individuals to NEWCO.
2.13 Shareholder Actions. Actions by the shareholders of NEWCO shall be
taken as provided by laws or by NEWCO's Articles of Incorporation or By-Laws,
provided that in no
<PAGE> 7
event may action be taken with regard to the following matters without the
favorable vote or written consent of all shareholders: (a) amendments of the
Articles of Incorporation or By-Laws which would deprive a party of a right
expressly granted under this Agreement; (b) dissolution; (c) merger or
consolidation with another entity; (d) disposition of all or substantially all
of the assets of NEWCO.
ARTICLE III. RESTRICTIONS ON DISPOSITION OF JOINT VENTURE INTEREST
3.1 Restrictions. Neither MITSUBA nor WALBRO may sell, transfer,
assign, pledge or hypothecate any of its interest in NEWCO, or permit such
interest to become subject to any mortgage, pledge, encumbrance, lien or charge
of any kind except as provided in Article IV.
3.2 Purpose. Each party acknowledges and agrees that the restrictions
on transfer of NEWCO interests herein are reasonable in view of the purpose and
intent of the partners.
ARTICLE IV. TRANSFER OF SHARES
4.1 Provision in The Articles of Incorporation. In implementation of
the undertakings contained in paragraph 3.1 hereof, MITSUBA and WALBRO agree
that at all times the Articles of Incorporation of NEWCO shall contain a
provision that is as follows:
"Any transfer of the shares of this Company shall be subject to
approval by the Board of Directors."
4.2 Right of First Refusal and First Offer. Each party hereto hereby
extends to the other party hereto, the right of first refusal with respect to
shares of NEWCO of which such party wishes to dispose.
Accordingly, if at any time any party hereto desires to dispose of all
or any portion of the shares of NEWCO held by it, such party shall first offer
to sell said shares to the other party at a
<PAGE> 8
purchase price per share and upon other terms of sale to be in accordance with
the provisions of Paragraph 4.4 hereof. Any such first offer shall be made in
writing by registered airmail, postage prepaid, and shall be sent to the last
known address of the other party to whom such first offer is made. Such first
offer shall state that the first offer being made shall remain effective until
whichever of the following events shall first occur.
(1) Dispatch by a party to whom such first offer is made of
written notice of rejection of the first offer so extended; or
(2) The elapse of ninety (90) days after the date of receipt
by the party to whom such first offer is made pursuant to this
Paragraph 4.2.
Acceptance of any first offer which has been made by an offering party
pursuant to this Paragraph 4.2 shall be effective upon dispatch, by the party to
whom such first offer has been made, of written notice of acceptance thereof by
registered airmail, postage prepaid, if such dispatch occurs within ninety (90)
days after the date of receipt by the said party to whom such first offer has
been made pursuant to this Paragraph 4.2.
4.3 Failure or Refusal To Accept First Offer. If the party hereto to
whom a first offer is extended pursuant to Paragraph 4.2 hereof refuses or fails
to acquire all of the shares of NEWCO which the party hereto making such first
offer wishes to dispose of, such offering party shall have the right to offer
such shares which are not acquired to any person, natural or juridical, who is
not a party to this Agreement, if the price of the shares in question to any
such person as aforesaid is equal to or greater than, and the other terms of
sale are not less favorable than, the price and other terms of sale determined
pursuant to Paragraph 4.2 hereof. Further, any transfer of the shares of NEWCO
by any party hereto to a person not a party hereto pursuant to the immediately
<PAGE> 9
preceding sentence of this Paragraph 4.3 shall be conditioned upon the full
assumption by any such third party transferee of all of the obligations of the
transferor provided for in this Agreement.
4.4 Purchase Price Per Share. If any party hereto desires to transfer
all or any portion of the shares of NEWCO held by it, the parties hereto shall
negotiate in good faith (including, but not limited to, acquisition of such
experts' opinions as certified public accountants, research institutes of
securities companies, etc.) to establish the price and other terms and sale of
which said shares shall be offered to the other party hereto pursuant to
Paragraph 4.2 hereof; provided, however, that if the parties hereto are unable
to agree to a price and other terms of sale for the shares in question, said
shares shall be offered at a price and upon other terms of sale determined by
the offering party.
ARTICLE V. TERM AND TERMINATION
5.1 Term. This Agreement shall become effective as of the date of
execution and shall continue in force and effect for an indefinite term
thereafter in so far as each of the parties hereto has a one-half ownership
interest in NEWCO unless this Agreement is sooner terminated pursuant to the
following provisions of Paragraph 5.2 and Paragraph 5.3.
5.2 Bankruptcy or Liquidation. Any of the parties hereto may terminate
this Agreement by written notice to the other party hereto in the event that the
other party hereto shall:
(a) Be declared insolvent or bankrupt, or make an assignment or other
arrangement for the benefit of its creditors;
<PAGE> 10
(b) Be dissolved, liquidated, merged, consolidated or otherwise
reorganized, unless mutual agreement is obtained between both parties in the
event of merger, consolidation or other corporate reorganization.
If any of the parties hereto is involved in any of the events mentioned
in sub-paragraphs (a) and (b), such party shall be obligated immediately to
notify the other party hereto of the occurrence of such event. Further, if any
party hereto shall be involved in any of the events mentioned in sub-paragraphs
(a) and (b), it shall be obligated to offer all its shares in NEWCO to the other
party hereto in accordance with the pertinent provisions of Article IV.
5.3 Default by a Party Hereto. If either party defaults in any of the
provisions of this Agreement and does not cure the default within sixty (60)
days after receipt of a written notice given by the other party requesting it to
cure the default, the other party may terminate this Agreement by giving a
written notice thereof.
5.4 After closing, this Agreement shall terminate automatically upon
dissolution of NEWCO or if one party (other than by transfer of shares to a
Wholly-Owned Subsidiary) ceases to be a shareholder of fifty percent (50%)
ownership interest of NEWCO.
5.5 Upon termination of this Agreement pursuant to this Article V, all
of the rights and obligations under this Agreement shall terminate except (a)
all claims of either party against the other for damages arising out of acts or
omission of the other parties outside the scope of, or in breach of, this
Agreement, which shall survive such termination; or (b) as otherwise
specifically provided by this Agreement.
<PAGE> 11
ARTICLE VI. FISCAL MATTERS
6.1 Fiscal Year. The fiscal year of NEWCO shall be from January 1 until
December 31 every year.
6.2 Books and Records. Proper books and records shall be kept with
reference to NEWCO transactions, and each party shall at all reasonable times
during business hours have access thereto. The books shall be kept in accordance
with Japanese generally accepted accounting principles. The books and records of
NEWCO shall be reviewed annually at the expense of NEWCO by a certified public
accountant who shall prepare and deliver to the parties, for filing, the
appropriate income tax schedules for Japan and as appropriate, the United States
of America.
ARTICLE VII. CLOSING
7.1 Closing. The closing for execution of Exhibit B and Exhibit C will
be held at Kiryu City, Japan on February 2, 1987, or at an earlier date to be
specified by the parties at least ten (10) days in advance thereof, as soon as
practicable after (i) the incorporation of NEWCO based upon this Agreement; (ii)
all actions to be taken hereunder prior to the closing have been completed. All
obligations of the parties hereunder not to be performed at or before the
closing shall be contingent upon and subject to the occurrence of the closing.
7.2 Other Transactions and Arrangements. At the closing, (i) NEWCO will
enter into a non-exclusive license to manufacture the PRODUCTS in Japan in the
form of Exhibit B, and (ii) NEWCO will enter into a Technical Services and
Personnel Assignment with MITSUBA in the form of Exhibit C. At closing, WALBRO
agrees to execute and to deliver to NEWCO the
<PAGE> 12
License Agreement. At closing, MITSUBA agrees to execute and to deliver to NEWCO
the Technical Services and Personnel Assignment Agreement.
ARTICLE VIII. MISCELLANEOUS PROVISIONS
8.1 No Waiver of Rights. No failure or delay on the part of either
party in the exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege. All rights and remedies existing under this Agreement
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.
8.2 Assignment. Neither this Agreement nor any right or obligation
hereunder is assignable in whole or in part by either party without the prior
written consent of the other party except as permitted by Article IV.
8.3 Integration. This document with the annexed Exhibits sets forth the
entire understanding between the parties relating to the subject matter
contained herein and merges all prior discussions between them. No amendment to
this Agreement shall be effective unless in writing and executed by the parties
hereto.
8.4 Severability. If any one or more of the provisions (other than
provisions constituting a material consideration to a party's entering into this
Agreement or such other document) contained in this Agreement or any document
executed in connection herewith shall be invalid, illegal or unenforceable in
any respect under any applicable law, the validity, legality and enforceability
of the remaining provision contained herein shall not in any way be affected or
impaired; provided, however, that in such case the parties oblige themselves to
use their best efforts to achieve the purpose of the invalid provision by a new
legally valid stipulation.
<PAGE> 13
8.5 Notice. Any notice herein required or permitted to be given shall
be in writing and may be personally served or sent by telex or mail and shall be
deemed to have been given as follows: if personally served, when served; if by
telex, on the second business day after transmission thereof on a telex machine
to the proper address and telex number with confirmed answerback; if by
facsimile transmission, when transmission is complete; or if mailed, on the
tenth business day after deposit in the mail with airmail postage prepaid and
properly addressed. For the purposes hereof, the addresses of the parties hereto
(until notice of a change thereof is given as provided in this Paragraph) shall
be the addresses set forth on the first page of this Agreement.
8.6 Confidentiality. Each of the parties hereby covenants that any
information regarding the business, assets, customers, vendors, materials,
prices, profit margins, processes and methods of the other which it may learn in
the course of negotiations for, or carrying out of, this Agreement is treated by
it in strict confidence and shall not make use of such information, unless such
information (a) is known to the party prior to learning of it from the other;
(b) is obtained by such party from a source other than the other party source
which (i) did not require such party to hold such secrets or information in
confidence and (ii) did not limit or restrict such parties use thereof; or (c)
becomes public knowledge otherwise than through the fault of the party seeking
to use or disclose such knowledge. It is agreed by the parties that the subject
of this Paragraph is unique in nature and may be enforced in a court of equity
with an injunction.
8.7 Costs. WALBRO and MITSUBA hereby agree to pay their own respective
costs in connection with the negotiation, execution and closing of this
Agreement.
<PAGE> 14
8.8 Arbitration.
(a) Any and all disputes arising from this Agreement shall be amicably
and promptly settled upon consultation between the parties hereto, but in case
of failure, the matter shall be settled by arbitration in accordance with the
Agreement between the Japan Commercial Arbitration Association and the American
Arbitration Association to Facilitate the Use of Commercial Arbitration in Trade
between Japan and the United States of America dated September 16, 1952 and the
award shall be final and binding upon both parties.
(b) Unless otherwise agreed, in the event arbitration is demanded by
MITSUBA, arbitration shall be held in Detroit, USA or if demanded by WALBRO, in
Tokyo, Japan.
8.9 Exhibits. The Exhibits hereto are an integral part of this
Agreement and all references herein to this Agreement shall encompass such
Exhibits.
8.10 Independence. MITSUBA and WALBRO shall each carry out their
respective obligations under this Agreement independently and not as agents for
each other.
8.11 Counterparts. This Agreement may be executed simultaneously in any
number of counter parts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
8.12 Controlling Language and Applicable Law. This Agreement has been
signed and delivered in English which shall be the controlling language. This
Agreement shall be governed, interpreted and its performance determined by the
substantive laws of the State of Michigan of the United States to the extent
that the laws of the State of Michigan are not preempted by the applicable laws
of the United States of America and Japan.
<PAGE> 15
8.13 Headings. The inserted headings are for convenient reference only
and shall not be used to construe or interpret this Agreement.
ARTICLE IX. FUTURE OPPORTUNITIES IN NORTH AMERICA
In the event Honda, North America in the future decides to purchase the
PRODUCTS locally from WALBRO, WALBRO covenants that it will appoint MITSUBA's
United States subsidiary (to be formed) exclusive sales agent for purposes of
the sale of the PRODUCTS to Honda, North America. The fee to which MITSUBA shall
be entitled for the sales agency shall be negotiated at the time the sales
opportunity arises.
IN WITNESS WHEREOF the parties have caused this Agreement to be
executed by their officers duly authorized thereto in duplicate on the day and
year first above written and each retain one copy.
Attest: MITSUBA ELECTRIC MANUFACTURING COMPANY, LTD.
/s/ /s/
- --------------------------- --------------------------------------------
Toshifumi Kohno Noboru Hino
Executive Vice President
Attest: Walbro Corporation
/s/ /s/
- --------------------------- --------------------------------------------
Tatsuo Yagi Robert H. Walpole
Executive Vice President
<PAGE> 1
EXHIBIT 10.2
WALBRO CORPORATION
EQUITY BASED LONG TERM INCENTIVE PLAN
(AS AMENDED AND RESTATED EFFECTIVE JUNE 20, 1994)
SECTION 1. Purposes; Definitions.
This Equity Based Long Term Incentive Plan was adopted by the Board of
Directors on February 6, 1991 and approved by the Shareholders on April 23,
1991. The Board of Directors of the Company has determined to amend and restate
the Plan, effective June 20, 1994 to permit certain awards in respect of
non-employee directors, and effective as of the date of the executive hereof, to
permit certain other modifications the Board of Directors deems appropriate,
subject to the approval of the Company's shareholders. The purpose of the Plan
as amended and restated is to enable officers, key employees and directors of
the Company and its Affiliates, its subsidiaries and affiliates to participate
in the Company's future and to enable the Company to attract and retain such
persons by offering them proprietary interests in the Company. The Plan also
provides a means through which the Company can attract and retain such key
persons of merit.
For purposes of the Plan, the following terms are defined as set forth
below:
(a) "Account" means the record of an interest in this Plan with respect
to a Director's Deferred Retainer represented by his or her:
(1) "Cash Account" which means an interest in this Plan
composed of Deferred Retainers posted with a cash value to the credit
of the Director, plus all income and gains credited to and minus all
losses charged to such account, and minus all distributions charged to
such account.
(2) "Stock Account" which means an interest in this Plan
composed of Deferred Retainers posted with shares of Common Stock to
the credit of the Director, plus all income and gains credited to and
minus all losses charged to such account, and minus all distributions
charged to such account.
The value of an Account at any time, other than on a Valuation Date, shall be
the Account accrued as of the immediately preceding Valuation Date increased by
the amount credited to the Account since the previous Valuation Date, and
reduced by the value of any distributions from the Account. On the Valuation
Date, the value shall be that as determined under the preceding sentence
increased by the value of any income and gains and decreased by the value of all
losses for that Valuation Date. Each Account represents an unfunded commitment
of the Company to pay in the future the amounts credited thereunder, subject to
all of the terms and conditions of this Plan. The Committee may establish more
than one Account with respect to a Director, and the Plan shall apply separately
with respect to each Account.
-1-
<PAGE> 2
(b) "Affiliate" means a corporation or other entity controlled by the
Company and designated by the Committee as such.
(c) "Award" means a Stock Appreciate Right, Stock Option, Deferred
Option, Restricted Stock or Deferred Stock.
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" means an act or acts of dishonesty by the optionee
constituting a felony under applicable law and resulting or intending to result
directly or indirectly in gain to or personal enrichment of the optionee at the
Company's expense. Notwithstanding the foregoing, the optionee shall not be
deemed to have been terminated for Cause unless and until there shall have been
delivered to him a copy of a resolution, duly adopted by the affirmative vote of
not less than a majority of the entire membership of the Board at a meeting of
the Board called and held for that purpose (after reasonable notice to him has
been given or has been made and an opportunity for him, together with his
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board the optionee was guilty of conduct set forth above in the first
sentence of this Section 2(e) and specifying the particulars thereof in detail.
(f) "Change in Control" and "Change in Control Price" have the meanings
set forth in Sections 15(b) and (c), respectively.
(g) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
(h) "Commission" means the Securities and Exchange Commission or any
successor agency.
(i) "Committee" means the Committee referred to in Section 3.
(j) "Common Stock" means common stock, par value $0.50 per share, of
the Company.
(k) "Company" means Walbro Corporation, a Delaware corporation.
(l) "Conversion Election" means a non-binding election, on such form as
may be required by the Committee, by a Director to change the method of
measuring the investment return on all or some specified portion of the
Director's Cash Account.
(m) "Director's Grant Date" means (1) with respect to a person who was
a Director on such date, June 20, 1994, and (2) with respect to a Director who
was not a Director on June 20, 1994, the first business day of the initial term
for which the Director is elected; and (3) with respect to a Deferred Option,
the date the Retainer would have been paid in cash if not deferred pursuant to
an Election.
-2-
<PAGE> 3
(n) "Deferred Stock" means a award made pursuant to Section 8.
(o) "Deferral Election" or "Election" means an election by a Director
to (a) either receive all of his or her Retainer on a current basis or to reduce
his or her Retainer for a Retainer Year by an amount or percentage specified in
the Election; and (b) to select whether the Deferred Retainer for that Retainer
Year will be posted to the Cash Account, the Stock Account, converted to
Deferred Options or a combination of the foregoing. With respect to any period
or Election for which Rule 16b-3 as in effect on April 30, 1991 is in effect or
applies, the Election shall be a one-time, irrevocable Election and shall apply
to each and every Retainer during the period such Rule 16b-3 applies to the Plan
(or any later period if designated by the Committee), and with respect to any
period or Election for which Rule 16b-3 as promulgated in Securities and
Exchange Commission Release 34-28869 (including any amendment or successor
thereto) applies, the Deferral Election shall be effective only if received on a
Notice Date that is at least six months prior to the transaction to which the
Election relates and is irrevocable with respect to any Retainer Year that has
commenced.
(p) "Deferred Retainer" means the amount of the Retainer posted to the
Account from time to time based upon the Director's Deferral Election to defer
some or all of his or her Retainer.
(q) "Director" means each and any director who serves on the Board and
who is not an officer or employee of the Company or any of its Affiliates.
(r) "Deferred Option" means an Option granted to the Director pursuant
to a Deferral Election.
(s) "Disability" means a permanent and total disability as determined
under procedures established by the Committee for purposes of the Plan.
(t) "Disinterested Person" shall have the meaning set forth in Rule
16(b)-(3), or any successor definition adopted by the Commission and shall mean
a person who is also an "outside director" under Section 162(m) of the Code.
(u) "Early Retirement" means retirement from active employment with the
Company or an Affiliate on or after attainment of age 55.
(v) "Earnings Factor" means the product of (1) the prime interest rate
as of the first business day within the accounting period as established by the
Company's principal bank, or such other interest rate as may be designated from
time to time by the Committee and (2) a fraction, the numerator of which is the
number of full calendar months in the accounting period and the denominator of
which is 12. If the accounting period is other than one or more full calendar
months, the Committee shall appropriately modify the fraction calculated under
the preceding sentence.
-3-
<PAGE> 4
(w) "Effective Date" means the date specified by the Board at the time
the Plan is approved by the Board.
(x) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.
(y) "Fair Market Value" means, except as otherwise provided in this
Plan, the mean, as of any given date, between the highest and lowest reported
sales prices of the Common Stock on the New York Stock Exchange Composite Tape
or, if not listed on such exchange, any other national exchange on which the
Common Stock is listed or on NASDAQ. If there is no regular public trading
market for such stock, the Fair Market Value of the Common Stock shall be
determined by the Committee in good faith.
(z) "Investment Election" means an election, on such form as may be
required by the Committee, by the Director to direct the method of measuring the
investment return of his or her Cash Account.
(aa) "Investment Fund" means one or more of the investment alternatives
(other than Common Stock) which are available and designated by the Committee,
and which are used as a measurement of investment return on Cash Accounts.
(bb) "Notice Date" means the date established by the Committee as the
deadline for it to receive a Deferral Election or any other notification with
respect to an administrative matter in order to be effective under this Plan.
(cc) "Normal Retirement" means retirement from active employment with
the Company or an Affiliate at or after age sixty-five (65).
(dd) "Payment Date" means, with respect to an Account, the first day of
the month coincident with or next following the earlier of (1) the date of the
Director's Termination of Directorship and (2) the date of a Change in Control.
(ee) "Plan" means the Walbro Corporation Equity Based Long Term
Incentive Plan, as set forth herein and as hereinafter amended from time to
time.
(ff) "Restricted Stock" means an award under Section 9.
(gg) "Retainer" means the retainer provided to a Director for services
rendered as a Director, including attendance at meetings, but not the
reimbursement of expenses, in his or her capacity as a Director.
(hh) "Retainer Year" means the calendar year.
(ii) "Retirement" means Normal or Early Retirement.
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(jj) "Rule 16b-3" means Rule 16b-3, as promulgated by the
Commission under Section 16(b) of the Exchange Act, as amended from time to
time.
(kk) "Settlement Date" means the date on which financial
transactions from a Trade Date are considered to be settled.
(ll) "Stock Appreciation Right" means a right granted under
Section 8.
(mm) "Stock Option" or "Option" means an option granted under
Section 6.
(nn) "Sweep Date" means the date established by the Committee as
the cutoff date and time for the Committee to receive notification with
respect to a financial transaction in order to be processed with respect to a
Trade Date.
(oo) "Termination of Employment" means the termination of the
participant's employment with the Company or any Affiliate. A participant
employed by an Affiliate of the Company shall also be deemed to incur a
termination of employment if the Affiliate ceases to be an Affiliate and the
participant does not immediately thereafter become an employee of the Company or
another Affiliate.
(pp) "Termination of Directorship" means the occurrence of any
act or event that actually or effectively causes or results in the person's
ceasing, for whatever reason, to be a Director of the Company, including,
without limitation, death, Disability, removal, severance at the election of
the Director, retirement, failure to be elected or stand for election as a
Director, or severance as a result of the discontinuance, liquidation, sale or
transfer by the Company or its Affiliates of all businesses owned or operated
by the Company or its Affiliates.
(qq) "Trade Date" means the date as of which a financial
transaction is considered by this Plan to have occurred.
(rr) "Trust" means the Walbro Corporation 1994 Director's Stock
Incentive Trust.
(ss) "Valuation Date" means the dates established by the
Committee.
In addition, certain other terms used herein have definitions given to
them in the first place on which they are used.
SECTION 2. Plan Awards.
To carry out the purpose of the Plan, the Company and its Subsidiaries
will from time to time enter into various arrangements with persons eligible to
participate in the Plan and confer various benefits upon them. If their terms
and conditions and the benefits conferred by them are not inconsistent with the
provisions of the Plan, such arrangements are authorized under the Awards. The
authorized categories of benefits for which Awards may be granted, which are
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more fully described elsewhere in this Plan, are Stock Options, Deferred
Options, Stock Appreciation Rights, Restricted Stock and any other benefits
granted under the Plan that are not among those listed above, but which (a) by
their terms will or might involve the issuance or sale of Common Stock, (b) are
measured, in whole or in part, by the value, appreciation, dividend yield or
other features attributable to a specified number of shares of Common Stock, or
(c) may result in a cash payment.
An Award may confer one such benefit or two or more of them in tandem
or in the alternative. Subject to the provisions of the Plan, any Award granted
pursuant to the Plan shall contain such additional terms and provisions as those
administering the Plan for the Company may consider appropriate. Among other
things, any such Award may, but need not, also provide for the satisfaction of
any applicable tax withholding obligation by the retention of shares to which
the grantee would otherwise be entitled or by the grantee's delivery of
previously owned shares or other property.
SECTION 3. Administration.
The Plan shall be administered by the Compensation Committee of the
Board or such other committee of the Board, composed of such number of
Disinterested Persons as is required for an application of Rule 16b-3, each of
whom shall be appointed by and serve at the pleasure of the Board. If at any
time no Committee shall be in office, the functions of the Committee specified
in the Plan shall be exercised by the members of the Board who are Disinterested
Persons.
The Committee shall have plenary authority to grant Awards to officers,
key employees and Directors of the Company and its Affiliates.
Among other things, the Committee shall have the authority, subject to
the terms of the Plan:
(a) to select the officers and key employees to whom Awards
may from time to time be granted;
(b) to determine whether and to what extent Stock Options,
Deferred Options, Stock Appreciation Rights, Restricted Stock and Deferred
Stock or any combination thereof are to be granted hereunder;
(c) to determine the number of shares of Common Stock to be
covered by each Award granted hereunder;
(d) to determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the share price, any vesting
restriction or limitation and any vesting acceleration or forfeiture waiver
regarding any Award and the shares of Common Stock relating thereto, based on
such factors as the Committee shall determine);
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(e) to adjust the terms and conditions, at any time or from
time to time, of any Awards, including with respect to performance goals and
measurements applicable to performance-based awards pursuant to the terms of the
Plan;
(f) to determine under what circumstances an Award may be
settled in cash or Common Stock under the terms of the Plan;
(g) to determine to what extent and under what circumstances
Common Stock and other amounts payable with respect to an Award shall be
deferred;
(h) to establish, maintain and adjust Accounts;
(i) to administer Deferral Elections, and to determine whether
to permit and administer Investment Elections and Conversion Elections;
(j) to establish and determine the Earnings Factor, if any;
(k) to establish and determine the Investment Funds, if any,
to be applied under the Plan;
(l) to direct and implement the payment of Accounts as of the
Payment Date; and
(m) to interpret and make final determination with respect to
the number of shares of common stock remaining available.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any agreement relating thereto)
and to otherwise supervise the administration of the Plan.
The Committee may act only by a majority of its members then in office,
except that the members thereof may authorize any one (1) or more of their
number or any officer of the Company to execute and deliver documents on behalf
of the Committee.
Any determination made by the Committee pursuant to the provisions of
the Plan with respect to any Award shall be made in its sole discretion at the
time of the grant of the Award or, unless in contravention of any express term
of the Plan, at any time thereafter. All decisions made by the Committee
pursuant to the provisions shall be final and binding on all persons, including
the Company and the Plan participants.
SECTION 4. Common Stock Subject to the Plan.
The total number of shares of Common Stock reserved and available for
distribution pursuant to Awards under the Plan shall be equal to ten percent
(10%) of the number of shares of Common Stock outstanding on the date the
amendment and restatement of the Plan is
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approved by the Stockholders of the Company. Such shares may consist, in whole
or in part, of authorized and unissued shares or treasury shares.
Subject to Section 8(b)(iv), if any shares of Stock that have been
optioned cease to be subject to a Stock Option, if any shares of Stock that are
subject to any Award are forfeited, if any Award otherwise terminates without a
payment being made to the participant in the form of Stock or if any shares of
Common Stock that were previously issued under the Plan are received in
connection with the exercise of an Award, such shares shall again be available
for distribution in connection with Awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, spin-off, stock dividend, stock split, extraordinary
distribution with respect to the Common Stock or other similar change in
corporate structure affecting the Common Stock, such substitution or adjustments
shall be made in the aggregate number of shares reserved for issuance under the
Plan, in the number and Option price of shares subject to outstanding Stock
Options and Stock Appreciation Rights, and in the number of shares subject to
other outstanding Awards granted under the Plan as may be determined to be
appropriate by the Board, in its sole discretion; provided, however, that the
number of shares subject to any Award shall always be a whole number. Such
adjusted Option price shall also be used to determine the amount payable by the
Company upon the exercise of any Stock Appreciation Right associated with any
Stock Option.
SECTION 5. Eligibility.
Officers and key employees of the Company and its Affiliates (but
excluding members of the Committee) who are responsible for or contribute to the
management, growth and profitability of the business of the Company and its
Affiliates are eligible to be granted Awards under the Plan. Each Director shall
be eligible to be granted Stock Options to purchase shares of Common Stock in
accordance with Section 7 and shall be eligible to make a Deferral Election as
provided in the Plan. The Committee may designate any person as not eligible to
participate in the Plan even if such person would be otherwise eligible to
participate in the Plan, and members of the Committee are not eligible to
participate to the extent inconsistent with such persons intended status as a
Disinterested Person.
SECTION 6. Stock Options.
(a) Administration. Stock Options may be granted either alone or in
addition to other Awards granted under the Plan. The Committee shall determine
the officers and key employees to whom, and the time or times at which grants of
Stock Options will be made, the number of shares of Common Stock with respect to
which Stock Options will be granted, the time or times within which such Stock
Options will be subject to forfeiture, and any other terms and conditions of the
Stock Options, in addition to those contained in Section 6(c). Any Stock Option
granted under the Plan shall be in such form as the Committee may from time to
time approve and the Committee shall have the authority to grant any optionee
Stock Options. However, no Stock Options within the meaning of Section 422 of
the Code may be granted under the Plan, and no Stock Option shall be granted
under this Section 6 to a Director. During any three-calendar-year period, Stock
Options for no more than 150,000 shares of Common Stock shall be granted to any
person.
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<PAGE> 9
(b) Option Agreements. Stock Options shall be evidenced by Option
agreements, the terms and provisions of which need not be the same with respect
to each such Optionee. The grant of a Stock Option shall occur on the date the
Committee by resolution selects an individual as a participant in any grant of
Stock Options, determines the number of shares of Common Stock to be subject to
such Stock Option to be granted to such individual and specifies the terms and
provisions of the Option agreement. The Company shall notify a participant of
any grant of a Stock Option, and a written Option agreement or agreements shall
be duly executed and delivered by the Company to the participant. Such agreement
or agreements shall become effective upon execution by the participant.
(c) Terms and Conditions. Options granted under the Plan shall be
subject to the following terms and conditions and the relevant Option agreements
shall contain such additional terms and conditions as the Committee shall deem
desirable:
(i) Option Price. The Option price per share of Common Stock
purchasable under a Stock Option shall be set forth in the Option
agreement and shall be equal to the Fair Market Value of the Common
Stock subject to the Stock Option on the date of grant.
(ii) Option Term. The term of each Stock Option shall be fixed by
the Committee, but no Stock Option shall be exercisable more than the
ten (10) years and one (1) day after the date the Stock Option was
granted.
(iii) Exercisability. Subject to Section 6(c)(i) and 15(a)(i),
Stock Options shall be exercisable at such time or times and subject to
such terms and conditions as shall be determined by the Committee. If
the Committee provides that any Stock Option is exercisable only in
installments, the Committee may at any time waive such installment
exercise provisions, in whole or in part, based on such factors as the
Committee may determine.
In addition, the Committee may at any time accelerate the
exercisability of any Stock Option.
(d) Method of Exercise. Subject to the provisions of this Section 6,
Stock Options may be exercised, in whole or in part, at any time during the
option period by giving written notice of exercise to the Company specifying the
number of shares of Common Stock subject to the Stock Option to be purchased.
Such notice shall be accompanied by payment in full of the purchase
price by certified or bank check or such other instrument as the Company may
accept. If approved by the Committee, payment in full or in part may also be
made (i) by delivering Common Stock already owned by the optionee having a total
Fair Market Value on the date of such delivery equal to the Option price; (ii)
by authorizing the Company to retain shares of Common Stock which would
otherwise be issuable upon exercise of the Option having a total Fair Market
Value as of the date of delivery equal to the Option price; (iii) by delivery of
cash or the extension of credit by a broker-dealer to whom the optionee has
submitted a notice of exercise (in accordance
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with Part 220, Chapter II, Title 12 of the Code of Federal Regulations,
so-called "cashless" exercise); or (iv) any combination of the foregoing.
If payment of the option exercise price of a Non-Qualified Stock Option
is made in whole or in part in the form of Restricted Stock or Deferred Stock,
the number of shares of Stock to be received upon such exercise equal to the
number of shares of Restricted Stock or Deferred Stock used for payment of the
option exercise price shall be subject to the same forfeiture restrictions or
deferral limitations to which such Restricted Stock or Deferred Stock was
subject, unless otherwise determined by the Committee.
No shares of Common Stock shall be issued until full payment therefor
has been made. Subject to any forfeiture restrictions or deferral limitations
that may apply if a Stock Option is exercised using Restricted Stock or Deferred
Stock, an optionee shall have all of the rights of a stockholder of the Company
holding the class or series of Common Stock that is subject to such Stock Option
(including, if applicable, the right to vote the shares and the right to receive
dividends), when the optionee has given written notice of exercise, has paid in
full for such shares, has given, if requested, the representation described in
Section 18(a) and such shares have been recorded on the Company's official
stockholder records as having been issued or transferred. No adjustment shall be
made for cash dividends or other rights for which the record date is prior to
the date such shares are recorded on the Company's official stockholder records
as having been issued or transferred, except as provided in Section 4.
(e) Non-transferability of Options. Except as provided in an Option
agreement, no Stock Option shall be transferable by the optionee other than by
will or by the laws of descent and distribution, and all Stock Options shall be
exercisable, during the optionee's lifetime, only by the optionee or by the
guardian or legal representative of the optionee. Notwithstanding the foregoing,
if and to extent transferability is permitted and exempt under Rule 16b-3 and
except as otherwise provided in an Agreement, every Stock Option shall be freely
transferable. The terms "holder" and "optionee" include the guardian and legal
representative of the optionee named in the Option agreement and any person to
whom an Option is transferred.
(f) Effect of Termination of Employment on Option.
(i) By Reason of Death. If an optionee's employment terminates by
reason of death, any Stock Option held by such optionee may thereafter
be exercised, to the extent then exercisable or on such accelerated
basis as the Committee may determine, for a period of five (5) years
(or such other period as the Committee may specify in the relevant
Option agreement) from the date of such death or until the expiration
of the stated term of such Stock Option, whichever period is the
shorter.
(ii) By Reason of Disability. If an optionee's employment
terminates by reason of Disability, any Stock Option held by such
optionee may thereafter be exercised by the optionee, to the extent
then exercisable or on such accelerated basis as the Committee may
determine, for a period of six (6) years (or such other period as the
Committee may specify in the relevant Option agreement) from the date
of such Disability or until the expiration of the stated term of such
Stock Option, whichever period is shorter; provided, however, that if
the optionee dies within such six (6) year period (or such shorter
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period), an unexercised Stock Option held by such optionee shall,
notwithstanding the expiration of such six (6) year (or shorter)
period, continue to be exercisable to the extent to which it was
exercisable at the time of death for a period of twelve (12) months
from the date of such death or until the expiration of the stated terms
of such Stock Option, or whichever period is the shorter.
(iii) By Reason of Retirement. If an optionee's employment
terminates by reason of Retirement, any Stock Option held by such
optionee may thereafter be exercised by the optionee, to the extent it
was exercisable at the time of such Retirement or on such accelerated
basis as the Committee may determine, for a period of six (6) years (or
such shorter period as the Committee may specify in the relevant Option
agreement) from the date of such termination of employment or until the
expiration of the stated term of such Stock Option, whichever period is
the shorter; provided, however, that if the optionee dies within such
six (6) year (or such shorter) period any unexercised Stock Option held
by such optionee shall, notwithstanding the expiration of such six (6)
year (or such shorter) period, continue to exercisable to the extent to
which it was exercisable at the time of death for a period of twelve
(12) months from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the shorter.
(iv) Other Termination. Unless otherwise determined by the
Committee and set forth in the relevant Option agreement, if an
optionee incurs a Termination of Employment for any reason other than
death, Disability or Retirement, any Stock Option held by such Optionee
shall thereupon terminate, except that such Stock Option, to the extent
then exercisable, may be exercised for the lesser of three (3) months
from the date of such Termination of Employment or the balance of such
Stock Option's term if such Termination of Employment of the optionee
is involuntary and without Cause. Notwithstanding the foregoing, if an
optionee incurs a Termination of Employment at or after a Change in
Control, other than by reason of death, Disability or Retirement, any
Stock Option held by such optionee shall be exercisable for the lesser
of (x) six (6) months and one (1) day from the date of such Termination
of Employment, and (y) the balance of such Stock Option's term.
(g) Cashing Out of Option; Settlement of Spread Value in Stock. On
receipt of written notice of exercise, the Committee may elect to cash out all
or part of the portion of any Stock Option to be exercised by paying the
optionee an amount in cash or Common Stock, equal to the excess of the Fair
Market Value of the Common Stock that is the subject of the Option over the
Option price times the number of shares of Common Stock subject to the Option on
the effective date of such cash out. Cash outs relating to Options held by
optionees who are actually or potentially subject to Section 16(b) of the
Exchange Act shall comply with the "window period" provisions of Rule 16b-3, to
the extent applicable, and the Committee may determine Fair Market Value based
on the highest mean sales price of the Common Stock on any exchange on which the
Common Stock is listed (or NASDAQ) on any day during such "window period" under
the pricing rules set forth in Section 8(b)(ii)(2).
(h) Change in Control. Notwithstanding any other provision of the Plan,
upon a Change in Control, in the case of Stock Options other than Stock Options
held by an officer or
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director of the Company (within the meaning of Section 16 of the Exchange Act)
which were granted less than six (6) months prior to the Change in Control
(which will be governed by the proviso to this sentence) during the sixty (60)
day period from and after a Change in Control (the "Exercise Period"), unless
the Committee shall determine otherwise at the time of grant, an optionee shall
have the right, whether or not the Stock Option is fully exercisable, in lieu of
the payment of the exercise price of the shares of Common Stock being purchased
under the Stock Option and by giving notice to the Company, to elect (within the
Exercise Period) to surrender all or part of the Stock Option to the Company and
to receive cash, within thirty (30) days of such notice, in an amount equal to
the amount by which the Change in Control Price per share of Common Stock on the
date of such election shall exceed the exercise price per share of the Common
Stock under the Stock Option (the "Aggregate Spread") multiplied by the number
of shares of Common Stock granted under the Stock Option as to which the right
granted under this Section 6 shall have been exercised; provided, however, that
if the end of such sixty (60) day period from and after a Change in Control is
within six (6) months of the date of grant of a Stock Option held by an optionee
who is an officer or director of the Company (within the meaning of Section
16(b) of the Exchange Act), such Stock Option shall be cancelled in exchange for
a cash payment to the optionee at the time of optionee's termination of
employment equal to the Aggregate Spread multiplied by the number of shares of
common Stock granted under said Stock Option, plus interest on such amount at
the prime rate as reported in the Wall Street Journal, compounded annually and
determined from time to time.
SECTION 7. Director Option Grants.
(a) Eligibility. Each Director shall be eligible to be granted Stock
Options or Deferred Options to purchase shares of Common Stock as provided in
this Section.
(b) Grant and Exercise. Each Director who is a Director on June 20,
1994 shall be granted a Stock Option on such date to purchase 10,000 shares of
Common Stock without further action by the Board of Directors or the Committee.
Each Director whose initial term as a member of the Board commences after June
20, 1994 shall be granted a Stock Option (other than a Deferred Option) on the
Director Grant Date to purchase 10,000 shares of Common Stock without further
action by the Board of Directors or the Committee. A Director shall be granted
Deferred Options if elected by the Director in a Deferral Election on the
Director Grant Date applicable to that Election. The number of Deferred Options
to be granted for any Retainer Year shall equal the quotient obtained by
dividing the amount of the Deferred Retainer by 75% of the Fair Market Value per
share of the Common Stock on the relevant date. If the number of shares of
Common Stock available to grant under the Plan on a scheduled date of grant is
insufficient to make all automatic grants required to be made pursuant to the
Plan on such date, then each eligible Director shall receive an Option to
purchase a pro rata number of the remaining shares of Common Stock available
under the Plan; provided further, however, that if such proration results in
fractional shares of Common Stock, then such Option shall be rounded down to the
nearest number of whole shares of Common Stock. The Option price of all Deferred
Options shall be 25% of the Fair Market Value per share on the Director's Grant
Date.
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(c) Terms and Conditions. Options shall be subject to such terms and
conditions as shall be determined by the Committee and unless otherwise provided
in an Agreement shall include the following:
(d) Option Period. The Option Period of each Option shall be ten (10)
years.
(e) Exercisability. Subject to Section 15(a), Options shall be
exercisable upon the earliest of the date of the Director's death or Disability
and the date that is the six-month anniversary of the Director's Grant Date. If
the Committee provides that any Option is exercisable only in installments, the
Committee may at any time waive such installment exercise provisions, in whole
or in part. In addition, the Committee may at any time accelerate the
exercisability of any Option. An Award, including any Options not yet exercised
and the value of the Account not yet distributed shall be forfeited if the
Director incurs a Termination of Directorship due to Cause.
(f) Method of Exercise. A Director desiring to exercise an Option, in
whole or in part, at any time during the Option period must give written notice
of exercise on a form provided by the Committee (if available) to the Company
specifying the number of shares of Common Stock subject to the Option to be
purchased. Such notice shall be accompanied by payment in full of the purchase
price by cash or check or such other form of payment as the Company may accept.
If approved by the Committee, payment in full or in part may also be made (i) by
delivering Common Stock already owned by the Director having a total Fair Market
Value on the date of such delivery equal to the Option price; (ii) by
authorizing the Company to retain shares of Common Stock which would otherwise
be issuable upon exercise of the Option having a total Fair Market Value on the
date of delivery equal to the Option price; (iii) by the delivery of cash or the
extension of credit by a broker-dealer to whom the Director has submitted a
notice of exercise (in accordance with Part 220, Chapter II, Title 12 of the
Code of Federal Regulations, so-called "cashless" exercise); or (iv) by any
combination of the foregoing. No shares of Common Stock shall be issued until
full payment therefor has been made.
(g) Non-transferability of Options. Except as provided in an Option
agreement, no Stock Option shall be transferable by the optionee other than by
will or by the laws of descent and distribution, and all Stock Options shall be
exercisable, during the optionee's lifetime, only by the optionee or by the
guardian or legal representative of the optionee. Notwithstanding the foregoing,
if and to extent transferability is permitted and exempt under Rule 16b-3 and
except as otherwise provided in an agreement, every Stock Option shall be freely
transferable. The terms "holder" and "optionee" include the guardian and legal
representative of the optionee named in the Option agreement and any person to
whom an Option is transferred.
(h) Application of Other Sections. Section 6(g) and 6(h) shall apply to
Options granted to Director under this Section 7, to the extent permitted by
applicable law.
SECTION 8. Stock Appreciation Rights.
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option (other than a Stock Option
granted to a Director) granted under the Plan. Such rights may be granted either
at or after the time of grant of such Stock
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Option, but may not be granted to a Director. A Stock Appreciation Right shall
terminate and no longer be exercisable upon the termination or exercise of the
related Stock Option.
A Stock Appreciation Right may be exercised by an optionee in
accordance with Section 6(b) by surrendering the applicable portion of the
related Stock Option in accordance with procedures established by the Committee.
Upon such exercise and surrender, the optionee shall be entitled to receive an
amount determined in the manner prescribed in Section 8(b). Stock Options which
have been so surrendered shall no longer be exercisable to the extent the
related Stock Appreciation Rights have been exercised. During any
three-calendar-year period, Stock Appreciation Rights for no more than 150,000
Stock Appreciation Rights shall be granted to any person.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions as shall be determined by the Committee, including the
following:
(i) Stock Appreciation Rights shall be exercisable only at such
time or times and to the extent that the Stock Options to which they
relate are exercisable in accordance with the provisions of Section 6
and this Section 8; provided, however, that a Stock Appreciation Right
shall not be exercisable during the first six months of its term by an
optionee who is actually or potentially subject to Section 16(b) of the
Exchange Act, except that this limitation shall not apply in the event
of death or Disability of the optionee prior to the expiration of the
six month period.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee
shall be entitled to receive an amount in cash, shares of Common Stock
or both equal in value to the excess of the Fair Market Value of one
share of Common Stock over the Option price per share specified in the
related Stock Option multiplied by the number of shares in respect of
which the Stock Appreciation Right shall have been exercised, with the
Committee having the right to determine the form of payment.
In the case of Stock Appreciation Rights relating to Stock Options held
by optionees who are actually or potentially subject to Section 16(b) of the
Exchange Act, the Committee:
(1) may require that such Stock Appreciation Rights be exercised only
in accordance with the applicable "window period" provisions of Rule 16b-3; and
(2) may provide that the amount to be paid upon exercise of such Stock
Appreciation Rights during a rule 16b-3 "window period" shall be based on the
highest mean sales price of the Stock on the New York Stock Exchange on any day
during such "window period".
(iii) Stock Appreciation Rights shall be transferable only when and
to the extent that the underlying Stock Option would be transferable
under Section 6(e).
(iv) To the extent required by Rule 16b-3, upon the exercise of a
Stock Appreciation Right, the Stock Option or part thereof to which
such Stock Appreciation Right is related shall be deemed to have been
exercised for the purpose of the limitation set forth in Section 4 on
the number of shares of Stock to be issued under the Plan, but
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only to the extent of the number of shares covered by the Stock
Appreciation Right at the time of exercise based on the value of the
Stock Appreciation Right at such time.
SECTION 9. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be awarded either
alone or in addition to other awards granted under the Plan, but may not be
awarded to a Director. The Committee shall determine the officers and key
employees to whom and the time or times at which grants of Restricted Stock will
be awarded, the number of shares to be awarded to any participant, the time or
times within which such Awards may be subject to forfeiture and any other terms
and conditions of the Awards, in addition to those contained in Section 9(c).
The Committee may condition the grant of Restricted Stock upon the
attainment of specified performance goals of the participant or of the Company
or subsidiary, division or department of the Company for or within which the
participant is primarily employed or such other factors or criteria as the
Committee shall determine. The provisions of Restricted Stock Awards need not be
the same with respect to each recipient.
(b) Awards and Certificates. Each participant receiving an Award of
Restricted Stock shall be issued a certificate in respect of such shares of
Restricted Stock. Such certificate shall be registered in the name of such
participant and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Award, substantially in the
following form:
"The transferability of this certificate and shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the Walbro Corporation Equity Based Long Term Incentive
Plan and a Restricted Stock Agreement. Copies of such Plan and
Agreement are on file at the offices of Walbro Corporation, 6242
Garfield Street, Cass City, Michigan 48726."
The Committee may require that the certificates evidencing such shares be held
in custody by the Company until the restrictions thereon shall have lapsed and
that, as a condition of any Award of Restricted Stock, the participant shall
have delivered a stock power, endorsed in blank, relating to the stock covered
by such award.
(c) Terms and Conditions. Shares of Restricted Stock shall be subject
to the following terms and conditions:
(i) Restrictions. Subject to the provisions of the Plan and the
Restricted Stock Agreement referred to in Section 9(c)(vi), during a
period set by the Committee, commencing with the date of such Award
(the "Restriction Period"), the participant shall not be permitted to
sell, assign, transfer, pledge or otherwise encumber shares of
Restricted Stock. Within these limits, the Committee may provide for
the lapse of such restrictions in installments and may accelerate or
waive such restrictions, in whole or in part, based on service,
performance of the participant or of the Company or the subsidiary,
division or department for which the participant is employed or such
other factors or criteria as the Committee may determine.
-15-
<PAGE> 16
(ii) Rights as Shareholder. Except as provided in this paragraph
(ii) and Section 9(c)(i), the participant shall have, with respect to
the shares of Restricted Stock, all of the rights of a stockholder of
the Company holding the class or series of Stock that is the subject of
the Restricted Stock, including, if applicable, the right to vote the
shares and the right to receive any cash dividends. Unless otherwise
determined by the Committee and subject to Section 18(f) of the Plan,
(i) cash dividends on the class or series of Common Stock that is the
subject of the Restricted Stock shall be automatically deferred and
reinvested in additional Restricted Stock, and (ii) non-cash dividends
on the class or series of Common Stock that is the subject of the
Restricted Stock payable in Common Stock shall be paid in the form of
Restricted Stock of the same class as the Common Stock on which such
dividend was paid.
(iii) Forfeiture of Restricted Stock. Except to the extent
otherwise provided in the applicable Restricted Stock Agreement
(referred to in Section 9(c)(vi)) and Sections 9(c)(i), 9(c)(iv) and
15(a)(ii), upon a participant's Termination of Employment for any
reason during the Restriction Period, all shares still subject to
restriction shall be forfeited by the participant.
(iv) Waiver of Restrictions. In the event of hardship or other
special circumstances of a participant whose employment is
involuntarily terminated (other than for Cause), the Committee shall
have the discretion to waive in whole or in part any or all remaining
restrictions with respect to such participant's shares of Restricted
Stock.
(v) Expiration of Restriction Period. If and when the Restriction
Period expires without a prior forfeiture of the Restricted Stock
subject to such Restriction Period, unlegended certificates for such
shares shall be delivered to the participant.
(vi) Each Award shall be confirmed by, and be subject to the terms
of, a Restricted Stock Agreement.
SECTION 10. Deferred Stock.
(a) Administration. Deferred Stock may be awarded either alone or in
addition to other Awards granted under the Plan. The Committee shall determine
the officers and key employees to whom and the time or times at which Deferred
Stock shall be awarded, the number of shares of Deferred Stock to be awarded to
any participant, the duration of the period (the "Deferral Period") during
which, and the conditions under which, receipt of the Common Stock will be
deferred and any other terms and conditions of the Award, in addition to those
contained in Section 10(b). Directors shall not be awarded Deferred Stock.
The Committee may condition the grant of Deferred Stock upon the
attainment of specified performance goals of the participant or of the Company
or subsidiary, division or department of the Company for or within which the
participant is primarily employed or upon such other factors or criteria the
Committee shall determine. The provisions of Deferred Stock Awards need not be
the same with respect to each recipient.
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<PAGE> 17
(b) Terms and Conditions. Deferred Stock Awards shall be subject to the
following terms and conditions:
(i) Subject to the provisions of the Plan and the Deferred Stock
Agreement referred to in Section 10(b)(vii), Deferred Stock Awards may
not be sold, assigned, transferred, pledged or otherwise encumbered
during the Deferral Period. At the expiration of the Deferral Period
(or Elective Deferral Period as defined in Section 10(b)(vi), where
applicable), the Committee my elect to deliver (1) Stock or (2) cash
equal to the Fair Market Value of such Stock to the participant for the
shares covered by the Deferred Stock Award.
(ii) Unless otherwise determined by the Committee and subject to
Section 18(f) of the Plan, amounts equal to any dividends declared
during the Deferral Period on the class or series of Stock covered by
the Deferred Stock Award, with respect to the number of shares covered
by a Deferred Stock Award, will be awarded, automatically deferred and
deemed to be reinvested in additional Deferred Stock.
(iii) Except to the extent otherwise provided in the applicable
Deferred Stock Agreement and Sections (10)(b)(iv), 10(b)(v) and
15(a)(ii), upon a participant's Termination of Employment for any
reason during the Deferral Period, the rights to shares still covered
by the Deferred Stock Award shall be forfeited by the participant.
(iv) Based on service, performance of the participant or of the
Company or the subsidiary, division or department for which the
participant is employed or such other factors or criteria as the
Committee may determine, the Committee may provide for the lapse of
deferral limitations in installments and may accelerate the vesting of
all or any part of any Deferred Stock Award and waive the deferral
limitations for all or any part of such Award.
(v) Except to the extent otherwise provided in Section 15(a)(ii),
in the event that a participant's employment is involuntarily
terminated (other than for Cause), the Committee shall have the
discretion to waive in whole or in part any or all remaining deferral
limitations with respect to any or all of such participant's Deferred
Stock.
(vi) A participant may elect to further defer receipt of the
Deferred Stock payable under an Award (or an installment of an Award)
for a specified period or until a specified event, subject in each case
to the Committee's approval and to such terms as are determined by the
Committee. Subject to any exceptions adopted by the Committee, such
election must generally be made at least 12 months prior to completion
of the Deferral Period for the Award (or for such installment of an
Award).
(vii) Each Award shall be confirmed by, and be subject to the terms
of a Deferred Stock Agreement.
SECTION 11. Director Deferrals
(a) Deferred Retainer
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<PAGE> 18
A Director who desires to have a Deferred Retainer credited to an
Account on his or her behalf shall file a Deferral Election pursuant to the
procedures of the Committee specifying and authorizing an amount or percentage
of his or her Retainer otherwise payable to be reduced and to be
(1) posted to the Cash Account; or
(2) posted to the Stock Account; or
(3) replaced by Deferred Options; or
(4) a combination of any of the foregoing.
If a Director's Deferral Election is, in whole or in part, the election to
receive a Deferred Option, the terms and conditions regarding such Deferred
Option shall be determined under Section 7 and unless otherwise specified shall
be the same as any other Stock Options granted to Directors under the Plan. A
Director who does not elect a Deferred Retainer shall be deemed to have made an
Election to receive all the Retainer on a current basis.
(b) Election Procedures. If properly executed and received by the
Committee, a Deferral Election shall be effective only with respect to a
Retainer paid in a Retainer Year to which the Deferral Election applies and only
with respect to a Retainer paid after the Notice Date for the Deferral Election.
Consistent with the above, the Committee may establish rules and procedures
governing when a Deferral Election will be effective and what Retainer will be
deferred by the Deferral Election; provided such rules and procedures are not
more permissive than the terms and provisions of this Plan.
(c) Posting. For each Retainer Year for which a Deferral Election is in
effect, the Company shall
(1) post to the Cash Account the amount reflected in the Deferral
Election to be so posted;
(2) post to the Stock Account the number of shares of Common Stock
equal to the amount of the Deferred Retainer to be posted to
the Stock Account divided by the Fair Market Value per share of
the Common Stock on the posting date;
(3) distribute to the Participant Deferred Options; or
(4) a combination of the foregoing.
(d) Fully Vested Deferral Accounts. A Director shall be fully vested
and have a nonforfeitable right to his or her Account at all times.
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<PAGE> 19
(e) Distribution. A Director shall receive the value of the Account in
cash in a single sum on the Payment Date (in the case of a Payment Date other
than due to the death of the Director).
(f) Payment to a Representative. Upon the death of a Director, the
balance in his or her Accounts shall be paid to the Director's beneficiary in a
single sum as soon as administratively possible after the Director's Payment
Date (which is due to the death of the Director).
SECTION 12. Accounting for Directors' Accounts and for Investment Funds.
(a) Individual Accounting.
(1) Account Maintenance. The Committee shall cause the Accounts for
each Director to reflect transactions involving amounts posted to the
Accounts and the measurement of investment returns on Accounts in
accordance with this Plan. Investment returns during or with respect to
an accounting period shall be accounted for at the individual account
level by "posting" such returns to each of the appropriate Accounts of
each affected Director. Account values shall be maintained in shares,
units or dollars. Cash dividends credited to the Director's Stock
Account shall be deemed to be invested in additional shares of Common
Stock.
(2) Trade Date Accounting and Investment Cycle. For any financial
transaction involving a change in the measurement of investment
returns, or distributions to be processed as of a Trade Date, the
Committee must receive instructions by the Sweep Date and such
instructions shall apply only to amounts posted to the Accounts as of
the Trade Date. Such financial transactions in an Investment Fund shall
be posted to a Director's Accounts as of the Trade Date and based upon
the Trade Date values. All such transactions shall be effected on the
Settlement Date (or as soon as is administratively feasible) relating
to the Trade Date as of which the transaction occurs.
(3) Suspension of Transactions. Whenever the Committee considers
such action to be appropriate, the Committee, in its discretion, may
suspend from time to time the Trade Date.
(4) Error Correction. The Committee may correct any errors or
omissions in the administration of this Plan by restoring or charging
any Account with the amount that would be credited or charged to the
Account had no error or omission been made.
(b) Accounting for Investment Funds. The investment returns of each
Investment Fund shall be tracked in the manner directed by the Committee.
Investment income, earnings, and losses charged against the Accounts shall be
based solely upon the actual performance of each of the Investment Funds for the
period of time all or some portion of each of the Accounts has been designated
to use such Investment Fund as a measurement of investment returns.
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<PAGE> 20
SECTION 13. Investment Funds and Elections
(a) General. The Committee may provide in its sole discretion for the
application of Investment Funds under the Plan. If so, a separate Investment
Election and Conversion Election must be made with respect to the Deferred
Retainer and Accounts; provided however, if no Investment Election or Conversion
Election is received from a Director, such Director will be deemed to have
submitted a Conversion Election with respect to his or her Accounts, which
designates that such Account will have its investment returns measured by the
Earnings Factor. If Investment Funds are not applied by the Committee,
investment returns shall be measured by the Earning Factor.
(b) Investment of Deferred Retainer.
(1) Investment Election. Subject to Section 13(a), each Director
may, by submission to the Committee of a completed Investment Election
form provided for that purpose by the Committee, request the Committee
to use a measurement of investment returns for Deferred Retainers
posted to his or her Cash Account in one or more Investment Funds.
(2) Effective Date of Investment Election; Change of Investment
Election. A Director's initial Investment Election will be effective
with respect to a Fund on the Trade Date which relates to the Sweep
Date on which or prior to which the Investment Election is received
pursuant to procedures specified by the Committee. Any Investment
Election which has not been properly completed will be deemed not to
have been received. A Director's Investment Election will continue in
effect notwithstanding any change in the Retainer until the effective
date of a new Investment Election. A change in Investment Election
shall be effective with respect to a Fund on the Trade Date which
relates to the Sweep Date on which or prior to which the Committee
receives the Director's new Investment Election.
(c) Investment of Cash Accounts.
(1) Conversion Election. Notwithstanding a Director's Investment
Election, if the Committee permits the application of Investment Funds,
a Director may request the Committee, by submission of a completed
Conversion Election provided for that purpose to the Committee, to
change the measurement of investment returns of his or her Cash
Account.
(2) Effective Date of Conversion Election. A Conversion Election to
change a Participant's measurement of investment returns of his or her
Cash Accounts in one Investment Fund to another Investment Fund shall
be effective with respect to such Investment Funds on and after the
Trade Date which relates to the Sweep Date on which or prior to which
the Conversion Election is received pursuant to procedures specified by
the Committee. Notwithstanding the foregoing, to the extent required by
any provisions of an Investment Fund, the effective date of any
Conversion Election may be delayed or the amount of any permissible
Conversion
-20-
<PAGE> 21
Election may be reduced. Any Investment Election which has not been
properly completed will be deemed not to have been received.
SECTION 14. FUNDING.
(a) Satisfaction of Obligation. The Company's obligation to a Director
with respect to an Account shall be satisfied by payments made to the Director
from the Trust or from the Company in its sole discretion.
(b) Trust. The Company may establish the Trust on or about the date
this Agreement is adopted. The Trust may be revocable or irrevocable.
(c) Letter of Credit. Within thirty (30) days of the Effective Date,
the Company may place in the Trust a standing letter of credit for an amount
sufficient to pay estimated accruals under this Agreement. Within the first
thirty (30) days of commencement of each Fiscal Year, the Company may adjust the
amount of the letter of credit to equal the sum of all Directors' Accounts as of
the last Valuation Date in the prior fiscal year of the Company plus a good
faith estimate of accruals for the current fiscal year. The letter of credit may
be irrevocable.
(d) Notice to Trustee. If a payment required under the terms of this
Agreement has not been made to a Director or Representative, the Director or
Representative must notify the Trustee in writing of the amount owed to him
pursuant to this Agreement and the date such amount was due and payable.
SECTION 15. Change in Control Provisions.
(a) Impact of Event. Notwithstanding any other provision of the Plan to
the contrary, in the event of a Change in Control (as defined in Section 15(b)):
(i) Any Stock Appreciation Rights, Stock Options and Deferred Stock
Options outstanding as of the date such Change in Control is determined
to have occurred and not then exercisable and vested shall become fully
exercisable and vested in the full extent of the original grant;
provided, however, that, in the case of the holder of Stock
Appreciation Rights who is actually subject to Section 16(b) of the
Exchange Act, such Stock Appreciation Rights shall have been
outstanding for at least six months at the date such Change in Control
is determined to have occurred.
(ii) The restrictions and deferral limitations applicable to any
Restricted Stock and Deferred Stock shall lapse, and such Restricted
Stock and Deferred Stock shall become free of all restrictions and
become fully vested and transferable to the full extent of the original
grant.
(b) Definition of Change in Control. For purposes of the Plan, a
"Change in Control" shall mean the happening of any of the following events:
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<PAGE> 22
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of thirty percent (30%) or more of
either (1) the then outstanding shares of Common Stock of the Company
or (2) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors; provided, however, that the following acquisitions shall not
constitute a Change in Control: (1) any acquisition directly from the
Company; (2) any acquisition by the Company; (3) any acquisition by a
Person including the participant or with whom or with which the
participant is affiliated; (4) any acquisition by a Person or Persons
one or more of which is a member of the Board or an officer of the
Company or an affiliate of any of the foregoing on the Effective Date,
(5) any acquisition by any employee benefit Plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by
the Company; or (6) any acquisition by any corporation pursuant to a
transaction described in clauses (A), (B) and (C) of paragraph (iii) of
this Section 15(b); or
(ii) During any period of twenty-four (24) consecutive months,
individuals who, as of the beginning of such period, constituted the
entire Board cease for any reason to constitute at least a majority of
the Board, unless the election, or nomination for election, by the
Company's stockholders, of each new director was approved by a vote of
at least two-thirds (2/3) of the Continuing Directors, as hereinafter
defined, in office on the date of such election or nomination for
election for the new director. For purposes hereof, "Continuing
Director" shall mean:
(a) any member of the Board at the close of business on the
Effective Date; or
(b) any member of the Board who succeeded any Continuing
Director described in clause (1) above if such successor's
election, or nomination for election, by the Company's
stockholders, was approved by a vote of at least two-thirds (2/3)
of the Continuing Directors then still in office. The term
"Continuing Director" shall not, however, include any individual
whose initial assumption of office occurs as a result of either an
actual or threatened election contest (as such term is used in Rule
14a-11 of Regulation 14A of the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a
person other than the Board.
(iii) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, unless following
such reorganization, merger or consolidation, (A) more than 60% of the
then outstanding securities having the right to vote in the election of
directors of the corporation resulting from such reorganization, merger
or consolidation is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who where the
beneficial owners of the outstanding securities having the right to
vote in the election of directors of the Company immediately prior to
such reorganization, merger or consolidation, (B) no Person (excluding
the Company, any employee benefit Plan (or related trust) of the
Company or such corporation resulting from such reorganization, merger
or consolidation and any
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<PAGE> 23
Person beneficially owning, immediately prior to such reorganization,
merger or consolidation, directly or indirectly, 30% or more of the
then outstanding securities having the right to vote in the election of
directors of the Company) beneficially owns, directly or indirectly,
30% or more of the then outstanding securities having the right to vote
in the election of the corporation resulting from such reorganization,
merger or consolidation, and (C) at least a majority of the members of
the board of directors of the corporation resulting from such
reorganization, merger are Continuing Directors at the time of the
execution of the initial agreement providing for such reorganization,
merger or consolidation; or
(iv) Approval by the stockholders of the Company of (A) complete
liquidation or dissolution of the Company or (B) the sale or other
disposition of all or substantially all of the assets of the Company,
other than to a corporation, with respect to which following such sale
or other disposition, (1) more than 60% of the then outstanding
securities having the right to vote in the election of directors of
such corporation is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the
beneficial owners of the outstanding securities having the right to
vote in the election of directors of the Company immediately prior to
such sale or other disposition of such outstanding securities, (2) no
Person (excluding the Company and any employee benefit Plan (or related
trust) of the Company or such corporation and any Person beneficially
owning, immediately prior to such sale or other disposition, directly
or indirectly, 30% or more of the outstanding securities having the
right to vote in the election of directors of the Company) beneficially
owns, directly or indirectly, 30% or more of the then outstanding
securities having the right to vote in the election of directors of
such corporation and (3) at least a majority of the members of the
board of directors of such corporation are Continuing Directors at the
time of the execution of the initial agreement or action of the Board
providing for such sale or other disposition assets of the Company.
(c) Change in Control Price. For purposes of the Plan, "Change in
Control Price" means the highest price per share (i) paid in any transaction
reported on the New York Stock Exchange Composite or other national exchange on
which such shares are listed or on NASDAQ, or (ii) paid or offered in any bona
fide transaction related to a potential or actual Change in Control of the
Company at any time during the preceding sixty (60) day period as determined by
the Committee.
SECTION 16. Amendments and Termination.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would (i) impair the rights of
an optionee under a Stock Option or a Deferred Option or a recipient of a Stock
Appreciation Right, Restricted Stock Award and Deferred Stock Award theretofore
granted without the optionee's or recipient's consent, except such an amendment
made to cause the Plan to qualify for the exemption provided by Rule 16b-3 or
(ii) disqualify the Plan from the exemption provided by Rule 16b-3. In addition,
no such amendment shall be made without the approval of the Company's
stockholders to the extent such approval is required by law, agreement or the
rules of any exchange upon which the Common Stock is listed or NASDAQ.
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<PAGE> 24
The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any holder without the holder's consent except such an amendment made to cause
the Plan or Award to qualify for the exemption provided by Rule 16b-3, and no
amendment shall reduce the Option price.
Subject to the above provisions, the Board shall have the authority to
amend the Plan to take into account changes in law and tax and accounting rules,
as well as other factors necessary to administer the Plan in accordance with the
intentions of the Company in establishing the Plan and to grant Awards which
qualify for beneficial treatment under such rules without shareholder approval.
SECTION 17. Unfunded Status of Plan.
It is presently intended that the Plan constitute an "unfunded" Plan
for incentive and deferred compensation. The Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or make payments; provided, however, that unless the
Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.
SECTION 18. General Provisions.
(a) The Committee may require each person purchasing or receiving
shares pursuant to an Award to represent to and agree with the Company in
writing that such person is acquiring the shares without a view to the
distribution thereof. The certificates for such shares may include any legend
which the Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Common Stock or other securities
delivered under the Plan shall be subject to such stock transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the Commission, any stock exchange upon
which the Common Stock is then listed (or NASDAQ) and any applicable Federal or
state securities law, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate reference to such restrictions.
(b) Nothing contained in the Plan shall prevent the Company or an
Affiliate from adopting other or additional compensation arrangements for its
employees.
(c) The adoption of the Plan shall not confer upon any employee any
right to continued employment or service as a Director nor shall it interfere in
any way with the right of the Company or an Affiliate to terminate the
employment of any employee at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for Federal income tax
purposes with respect to any Award under the Plan, the participant shall pay to
the Company, or make arrangements satisfactory to the Company regarding the
payment of, any Federal, state, local or foreign taxes of any kind required by
law to be withheld with respect to such amount. Unless otherwise determined by
the Company, withholding obligations may be settled with Common Stock, including
Common
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<PAGE> 25
Stock that is part of the Award that gives rise to the withholding requirement.
The obligations of the Company under the Plan shall be conditional on such
payment or arrangements, and the Company and its Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment
otherwise due to the participant.
(e) At the time of grant, the Committee may provide in connection with
any grant made under the Plan that the shares of Common Stock received as a
result of such grant shall be subject to a right of first refusal pursuant to
which the participant shall be required to offer to the Company any shares that
the participant wishes to sell at the then Fair Market Value of the Common
Stock, subject to such other terms and conditions as the Committee may specify
at the time of grant.
(f) The reinvestment of cash dividends in additional Restricted Stock
or Deferred Stock at the time of any dividend payment shall only be permissible
if sufficient shares of Common Stock are available under Section 4 for such
reinvestment (taking into account then outstanding Stock Options and other Plan
Awards).
(g) The Committee shall establish such procedures as it deems
appropriate for a participant to designate a beneficiary to whom any amounts
payable in the event of the participant's death are to be paid.
(h) The Plan and all Awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware.
(i) In addition to such other rights of indemnification as they may
have as members of the Board and to the extent permitted by law, the members of
the Committee or the Committee shall be indemnified and held harmless by the
Company against the reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or any failure to act under or
in connection with the Plan or any Option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by legal counsel selected by the Company) as paid by them in satisfaction of a
judgment in any action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such
Committee or Committee Member is liable for gross negligence or gross misconduct
in the performance of its or his duties; provided that, within 60 days after
institution of any such action, suit or proceeding, the Committee or the
Committee member shall offer the Company, in writing, the opportunity at its own
expense, to handle and defend the action, suit or proceeding.
(j) This Plan shall inure to the benefit of and be binding upon the
Company and its successors and permitted assigns.
(k) A grant of any Award pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes in its capital or business structures or to merge,
consolidate, dissolve, liquidate, sell or transfer all or part of its business
or its assets.
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<PAGE> 1
EXHIBIT 10.3
EXTRACTED FROM MINUTES OF BOARD OF DIRECTORS MEETING
OF WALBRO CORPORATION ON FEBRUARY 23, 1988
WALBRO CORPORATION BOARD OF DIRECTORS RETIREMENT POLICY
Subject to exceptions voted upon by a majority of the Board, a member
of the Board of Directors is not expected to serve beyond the first term of
office which expires following his or her 72nd birthday. Current members of the
Board of Directors are exempted from this policy.
Upon retirement all "Eligible Directors" shall be entitled to an annual
retirement benefit as defined below. For purposes of this policy "Eligible
Directors" are those Walbro Corporation Directors who have served on its Board
for five or more years, are at least sixty years of age and were not employees
of the Company. A director who is not at least sixty years of age upon
retirement shall be entitled to begin receiving the benefit upon reaching sixty
years of age.
The benefit shall be in the form of an annuity for life equal to the
annual retainer paid to the outside directors of Walbro Corporation as
periodically modified, subject to the following vesting schedule related to the
years of service to the Company:
<TABLE>
<CAPTION>
Years of Service as a Director Percentage Vested
------------------------------ -----------------
<S> <C>
5 50%
6 60%
7 70%
8 80%
9 90%
10 or more 100%
</TABLE>
If upon death a Director is survived by a widow, she shall be entitled
to receive an annuity for her life equal to 50% of the annuity that would be
payable to her husband under this policy if he was still living.
This policy shall be effective immediately, apply to currently serving
Directors and past service shall be taken into account when computing the
benefit for current directors upon their retirement."
The Compensation Committee reported on its deliberations concerning the
proposed Long Term Incentive Plan. The Committee recommended approval of the
amended Plan subject to approval by the Stockholders. Mr. Bacon moved, Mr.
Tuttle seconded and a majority of the Board adopted the following Resolution
with Mr. Althaver and Mr. Walpole abstaining from the vote:
<PAGE> 1
EXHIBIT 10.4
WALBRO CORPORATION
---------------------------
WALBRO
CORPORATION
EMPLOYEE STOCK
OWNERSHIP PLAN
---------------------------
AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1997
<PAGE> 2
WALBRO CORPORATION EMPLOYEE STOCK
OWNERSHIP PLAN
- --------------------------------------------------------------------------------
WALBRO CORPORATION established the WALBRO CORPORATION EMPLOYEE STOCK OWNERSHIP
PLAN for the benefit of eligible employees of the Company and its participating
affiliates. The provisions of this Plan relating to the borrowing of funds to
acquire common stock of the Company, the establishment of an Unallocated
Inventory of such stock as collateral for such loan, the allocation to Accounts
of such stock acquired (from the Unallocated Inventory or otherwise) with
Employer Contributions, and distributions thereof, are intended to constitute a
leveraged "employee stock ownership plan" under the Code and ERISA and, in that
regard, are further intended to constitute a qualified stock bonus plan, as
described in Section 401(a) of the Code.
The Plan constitutes an amendment and restatement of the WALBRO CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN which was originally established effective as of
January 1, 1988.
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ARTICLE I
DEFINITIONS................................................................. 1
1.1 "Accounting Period"............................................. 1
1.2 "Account"....................................................... 1
1.3 "Accrued Benefit"............................................... 1
1.4 "Acquisition Loan".............................................. 1
1.5 "Appendix"...................................................... 1
1.6 "Authorized Leave of Absence"................................... 1
1.7 "Beneficiary"................................................... 2
1.8 "Board of Directors"............................................ 2
1.9 "Committee"..................................................... 2
1.10 "Commonly Controlled Entity".................................... 2
1.11 "Company"....................................................... 2
1.12 "Company Stock"................................................. 2
1.13 "Compensation".................................................. 3
1.14 "Continuous Service"............................................ 4
1.15 "Contributions"................................................. 4
1.16 "Custodial Agreement"........................................... 4
1.17 "Custodian"..................................................... 4
1.18 "Direct Rollover"............................................... 4
1.19 "Distributee"................................................... 4
1.20 "Effective Date"................................................ 4
1.21 "Eligible Employee"............................................. 5
1.22 "Eligible Retirement Plan"...................................... 5
1.23 "Eligible Rollover Distribution"................................ 6
1.24 "Employee"...................................................... 6
1.25 "Employer"...................................................... 6
1.26 "Employment Date"............................................... 6
1.27 "ERISA"......................................................... 6
1.28 "Fair Market Value"............................................. 7
1.29 "Financed Shares"............................................... 7
1.30 "Forfeiture".................................................... 7
1.31 "Forfeiture Account"............................................ 7
1.32 "Fund".......................................................... 7
1.33 "Highly Compensated Eligible Employee" or "HCE"................. 7
1.34 "Hour of Service"............................................... 9
1.35 "Internal Revenue Code" or "Code"............................... 10
1.36 "Maternity/Paternity Absence"................................... 10
1.37 "Named Fiduciary"............................................... 10
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1.38 "Net Repayment Fund"............................................ 10
1.39 "Non-Highly Compensated Employee" or "NHCE"..................... 10
1.40 "Normal Retirement Date"........................................ 10
1.41 "Participant"................................................... 10
1.42 "Payment Date".................................................. 10
1.43 "Period of Severance"........................................... 11
1.44 "Plan".......................................................... 11
1.45 "Plan Year"..................................................... 11
1.46 "QDRO".......................................................... 11
1.47 "Qualified Election Period"..................................... 11
1.48 "Qualified Participant"......................................... 11
1.49 "Related Plan".................................................. 11
1.50 "Settlement Date"............................................... 11
1.51 "Spousal Consent"............................................... 11
1.52 "Spouse"........................................................ 12
1.53 "Sweep Date".................................................... 12
1.54 "Termination of Employment"..................................... 12
1.55 "Trade Date".................................................... 12
1.56 "Trust"......................................................... 12
1.57 "Trust Agreement"............................................... 12
1.58 "Trust Fund".................................................... 12
1.59 "Trustee"....................................................... 13
1.60 "Trustee Transfer".............................................. 13
1.61 "Unallocated Inventory"......................................... 13
1.62 "Valuation Date"................................................ 13
1.63 "Vesting Service"............................................... 13
ARTICLE II
PARTICIPATION............................................................... 14
2.1 Eligibility..................................................... 14
2.2 Reemployment.................................................... 14
2.3 Participation Upon Change of Job Status......................... 14
ARTICLE III
EMPLOYER CONTRIBUTIONS AND ALLOCATIONS...................................... 15
3.1 Employer Contributions.......................................... 15
3.2 Miscellaneous................................................... 15
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ARTICLE IV
ACCOUNTING FOR PARTICIPANTS' ACCOUNTS....................................... 17
4.1 Individual Participant Accounting............................... 17
4.2 Accounting for Trust Funds...................................... 17
4.3 Accounts for QDRO Beneficiaries................................. 19
4.4 Adjustments to Accounts for Release from Unallocated
Inventory....................................................... 19
4.5 Election to Diversify Portion of Account with Respect to
Qualification Election Period................................... 20
ARTICLE V
VESTING AND FORFEITURES..................................................... 22
5.1 Full Vesting Upon Attainment of Event........................... 22
5.2 Vesting Schedule and Forfeitures................................ 22
5.3 Forfeitures..................................................... 23
5.4 Forfeiture Account.............................................. 24
ARTICLE VI
DISTRIBUTIONS ON AND AFTER
TERMINATION OF EMPLOYMENT................................................... 25
6.1 Request for Distribution of Benefits............................ 25
6.2 Deadline for Distribution....................................... 25
6.3 Payment Form and Medium......................................... 26
6.4 Small Amounts Paid Immediately.................................. 27
6.5 Payment Within Life Expectancy.................................. 28
6.6 Incidental Benefit Rule......................................... 28
6.7 Dividend Distributions.......................................... 28
6.8 Direct Rollover................................................. 28
ARTICLE VII
DISTRIBUTION OF ACCRUED BENEFITS ON DEATH................................... 29
7.1 Payment to Beneficiary.......................................... 29
7.2 Beneficiary Designation......................................... 29
7.3 Benefit Election................................................ 29
7.4 Payment Form.................................................... 30
7.5 Time Limit for Payment to Beneficiary........................... 30
7.6 Direct Rollover................................................. 30
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ARTICLE VIII
MAXIMUM CONTRIBUTIONS....................................................... 31
8.1 Definitions..................................................... 31
8.2 Avoiding an Annual Excess....................................... 32
8.3 Correcting an Annual Excess..................................... 32
8.4 Correcting a Multiple Plan Excess............................... 33
8.5 Two-Plan Limit.................................................. 33
8.6 Short Plan Year................................................. 34
8.7 Grandfathering of Applicable Limitations........................ 34
ARTICLE IX
CUSTODIAL ARRANGEMENTS...................................................... 35
9.1 Custodial Agreement............................................. 35
9.2 Selection of Custodian.......................................... 35
9.3 Custodian's Duties.............................................. 35
9.4 Separate Entity................................................. 35
9.5 Plan Asset Valuation............................................ 36
9.6 Right of Employers to Plan Assets............................... 36
ARTICLE X
ADMINISTRATION AND INVESTMENT MANAGEMENT.................................... 39
10.1 Authority and Responsibility of the Board of Directors.......... 39
10.2 Committee Membership............................................ 39
10.3 Committee Structure............................................. 39
10.4 Committee Actions............................................... 39
10.5 Compensation.................................................... 40
10.6 Responsibility and Authority of the Committee Regarding
Administration of the Plan...................................... 40
10.7 Allocations and Delegations of Responsibility................... 41
10.8 Committee Bonding............................................... 41
10.9 Information to be Supplied by Employer.......................... 41
10.10 Records......................................................... 41
10.11 Plan Expenses................................................... 42
10.12 Fiduciary Capacity.............................................. 42
10.13 Employer's Agent................................................ 42
10.14 Plan Administrator.............................................. 42
10.15 Appointment of Record-Keeper.................................... 42
10.16 Plan Administrator Duties and Authority......................... 42
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10.17 Committee Decisions Final....................................... 44
ARTICLE XI
CLAIMS PROCEDURE............................................................ 45
11.1 Initial Claim for Benefits...................................... 45
11.2 Review of Claim Denial.......................................... 45
ARTICLE XII
ADOPTION AND WITHDRAWAL FROM PLAN........................................... 47
12.1 Procedure for Adoption.......................................... 47
12.2 Procedure for Withdrawal........................................ 47
ARTICLE XIII
AMENDMENT, TERMINATION AND MERGER........................................... 48
13.1 Amendments...................................................... 48
13.2 Plan Termination................................................ 49
13.3 Plan Merger..................................................... 50
ARTICLE XIV
SPECIAL TOP-HEAVY RULES..................................................... 51
14.1 Application..................................................... 51
14.2 Special Terms................................................... 51
14.3 Minimum Contribution............................................ 54
14.4 Maximum Benefit Accrual......................................... 55
14.5 Special Vesting................................................. 55
ARTICLE XV
MISCELLANEOUS PROVISIONS.................................................... 57
15.1 Assignment and Alienation....................................... 57
15.2 Protected Benefits.............................................. 57
15.3 Plan Does Not Affect Employment Rights.......................... 57
15.4 Deduction of Taxes from Amounts Payable......................... 57
15.5 Facility of Payment............................................. 57
15.6 Source of Benefits.............................................. 57
15.7 Indemnification................................................. 58
15.8 Reduction for Overpayment....................................... 58
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15.9 Limitation on Liability......................................... 58
15.10 Company Merger.................................................. 58
15.11 Employees' Trust................................................ 58
15.12 Gender and Number............................................... 58
15.13 Invalidity of Certain Provisions................................ 59
15.14 Headings........................................................ 59
15.15 Uniform and Nondiscriminatory Treatment......................... 59
15.16 Law Governing................................................... 59
15.17 Notice and Information Requirements............................. 59
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ARTICLE I
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DEFINITIONS
The following sections of this Article I provide basic definitions of
terms used throughout the Plan, and whenever used herein in a capitalized form,
except as otherwise expressly provided, the terms shall be deemed to have the
following meanings:
1.1 "Accounting Period" means the Plan Year.
1.2 "Account" means the record of a Participant's interest in the
Plan's assets represented by his or her Contributions allocated on or after
January 1, 1997 to the Participant under the Plan, the amount allocated under
the Plan, as of January 1, 1997, if any (as identified by the Committee), plus
all income and gains credited to, and minus all losses, expenses, withdrawals
and distributions charged to, such Account.
1.3 "Accrued Benefit" means the shares held in or posted to an Account
on the Settlement Date.
1.4 "Acquisition Loan" means a loan (or other extension of credit) used
by the Trust to finance the acquisition of Company Stock, or a refinancing of
such a loan, which loan or loans may constitute an extension of credit to the
Trust from a party-in-interest (as defined in ERISA) or a disqualified person
(as defined in the Code) with respect to the Plan.
1.5 "Appendix" means a written supplement attached to this Plan and
made a part hereof which has been added in accordance with the provisions of the
Plan.
1.6 "Authorized Leave of Absence" means an absence, with or without
Compensation, authorized on a nondiscriminatory basis by a Commonly Controlled
Entity under its standard personnel practices applicable to the Employee,
including any period of time during which such person is covered by a short-term
disability plan of his or her Employer. An Employee who leaves the service of a
Commonly Controlled Entity to enter the Armed Forces of the United States of
America and who reenters the service of the Commonly Controlled Entity with
reemployment rights under any statute granting reemployment rights to persons in
the Armed Forces shall be deemed to have been on an Authorized Leave of Absence.
The date that an Employee's Authorized Leave of Absence ends shall be determined
in accordance with the personnel policies of such Commonly Controlled Entity,
which ending date shall be no earlier than the date that the Authorized Leave of
Absence is scheduled to end, unless the Employee communicates to such Commonly
Controlled Entity that he or she is to have a Termination of Employment as of an
earlier date.
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1.7 "Beneficiary" means any person designated by a Participant to
receive any benefits which shall be payable with respect to the death of a
Participant under the Plan or as a result of a QDRO.
1.8 "Board of Directors" means the board of directors of the Company.
1.9 "Committee" means the committee appointed pursuant to the terms of
the Plan to manage and control the operation and administration of the Plan.
1.10 "Commonly Controlled Entity" means (1) an Employer and any
corporation, trade or business, but only for so long as it and the Employer are
members of a controlled group of corporations as defined in Section 414(b) of
the Code or under common control as defined in Section 414(c) of the Code;
provided, however, that solely for purposes of the limitations of Code Section
415, the standard of control under Sections 414(b) and 414(c) of the Code shall
be deemed to be "more than 50%" rather than "at least 80%," (2) an Employer and
an organization, but only for so long as it and the Employer are, on and after
the Effective Date, members of an affiliated service group as defined in Section
414(m) of the Code, (3) an Employer and an organization, but only for so long as
the employees of it and the Employer are required to be aggregated, on and after
the Effective Date, under Section 414(o) of the Code, or (4) any other
organization designated as such by the Committee.
1.11 "Company" means WALBRO CORPORATION or any successor corporation by
merger, consolidation, purchase, or otherwise, which elects to adopt the Plan
and the Trust.
1.12 "Company Stock" means common stock issued by the Company (or any
Commonly Controlled Entity) having a combination of voting power and dividend
rates equal to or in excess of:
(a) that class of common stock of the Company (or of the Commonly
Controlled Entity) having the greatest voting power, and
(b) that class of common stock of the Company (or of the Commonly
Controlled Entity) having the greatest dividend rights.
Non-callable preferred stock shall be treated as Company Stock if such stock is
convertible at any time into stock which meets the requirements of (a) and (b)
above and if such conversion is at a conversion price which (as of the date of
the acquisition by the Plan) is reasonable. For purposes of the prior sentence,
preferred stock shall be treated as non-callable if, after the call, there will
be a reasonable opportunity for a conversion which meets the requirements of the
prior sentence.
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1.13 "Compensation" means:
(a) for purposes of applicable Code provisions other than
Section 415:
(1) for Plan Years beginning prior to January 1, 1997, base
remuneration paid to an Employee while an Employee by all
Employers on a cash basis during the Plan Year for personal
services, including salary reduction contributions to the Walbro
Corporation Advantage Plan and excluding bonuses, overtime pay,
relocation allowances, the imputed value of group life insurance,
reimbursement of medical expenses, premiums on insurance policies,
tuition refunds, living allowances, expense allowances, any
Employer Contributions (other than salary reduction contributions)
allocable under this Plan and any other Related Plan, income
attributable to stock options, stock appreciation rights,
performance award rights, fringe benefits which receive special
tax benefit, severance pay, and all other extraordinary
compensation; provided that in no event shall the annual
compensation of any Employee taken into account under the Plan
(other than for Code Section 415 purposes) for any Plan Year
exceed two hundred thousand dollars ($200,000) (adjusted at the
same time and manner as under Section 415(d) of the Code, prorated
for any Plan Year of less than twelve (12) months, and increased
for family members as provided in Section 401(a)(17) of the Code);
and
(2) for Plan Years beginning on and after January 1, 1997,
wages within the meaning of Section 3401(a) of the Code and all
other payments to an Employee by an Employer for which the
Employer is required to furnish the Employee a written statement
under Sections 6041(d) and 6051(a)(3) of the Code, and including
elective amounts excludible from gross income under Code Sections
125 and 402(a)(8), but excluding amounts paid or reimbursed by the
Employer for moving expenses incurred by the Employee (to the
extent it is reasonable to believe such payments are deductible by
the Employee under Section 217 of the Code).
(b) for purposes of applying Section 415 of the Code to the Plan
and its Participants for any limitation year, such compensation as
determined by the Committee and satisfying the definition of
compensation under Section 415 of the Code.
For Plan Years beginning on or after January 1, 1994, any reference in
the Plan to the limitation under Section 401(a)(17) of the Code shall
mean the OBRA '93 annual Compensation limit set forth in this
provision.
If Compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the current
Plan Year, the Compensation for that prior determination period is
subject to the OBRA '93
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<PAGE> 12
annual Compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before
the first day of the first Plan Year beginning on or after January 1,
1994, the OBRA '93 annual compensation limit is $150,000.
In determining the compensation of a participant for purposes of this
limitation, the rules of section 414(q)(6) of the Code shall apply,
except in applying such rules, the term `family' shall include only the
spouse of the participant and any lineal descendants of the participant
who have not attained age 19 before the close of the year. If, as a
result of the application of such rules the adjusted annual
compensation limitation is exceeded, then the limitation shall be
prorated among the affected individuals in proportion to each such
individual's compensation as determined under this section prior to the
application of this limitation."
1.14 "Continuous Service" means the years (and fractions of years) of
an Employee's periods of employment with a Commonly Controlled Entity, measured
from his Employment Date to his date of Termination of Employment, provided that
if an Employee has a Period of Severance of less than twelve (12) consecutive
months after a Termination of Employment, such Termination of Employment shall
be disregarded and such Employee's Continuous Service shall include such period
when he is not employed by a Commonly Controlled Entity.
1.15 "Contributions" means an amount contributed by the Employer and
allocated on a pay based formula to eligible Participant's Accounts.
1.16 "Custodial Agreement" means the Trust Agreement or an insurance
contract to provide for the holding of the assets of the Plan.
1.17 "Custodian" means the Trustee or an insurance company if the
contract issued by such company is not held by the Trustee.
1.18 "Direct Rollover" means a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
1.19 "Distributee" includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving Spouse and the
Employee's or former Employee's Spouse or former Spouse who is the alternate
payee under a QDRO are Distributees with regard to the interest of the Spouse or
former Spouse.
1.20 "Effective Date" means January 1, 1997, the date upon which the
provisions of this document become effective. In general, the provisions of this
document only apply to Participants who are Employees on or after the Effective
Date. However, investment and distribution provisions apply to all Participants
with Account balances to be invested or distributed after the Effective Date.
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1.21 "Eligible Employee" means, effective January 1, 1992, any Employee
(including an Employee on an Authorized Leave of Absence) of an Employer on and
after the Effective Date of the adoption of this Plan by the Employer, excluding
any Employee:
(a) who is a member of a group of Employees represented by a
collective bargaining representative, unless a currently effective
collective bargaining agreement between his or her Employer and the
collective bargaining representative of the group of Employees of which
he or she is a member provides for coverage by the Plan;
(b) who is considered an Employee solely because of the
application of Section 414(n) of the Code;
(c) who is a nonresident alien who receives no earned income,
within the meaning of Code Section 911(d)(2), from sources within the
United States within the meaning of Code Section 861(a)(3);
(d) who is employed as a cooperative student while attending a
secondary educational institution or college;
(e) who is attending high school or is on a summer break between
high school classes;
(f) who is a participant in either the Walbro Engine Management
Corporation Incentive Compensation Plan or Walbro Corporation Equity
Based Long Term Incentive Plan, or effective January 1, 1997, the
Walbro Corporation Executive Plan;
(g) who is an employee at the Caro, Auburn Hills or Troy location
of Walbro Automotive Corporation on December 31 of the applicable Plan
Year, provided such person was not hired on or prior to July 1, 1992 by
Walbro Corporation or Walbro Automotive Corporation;
(h) who is an officer of an Employer; or
(i) who is scheduled in an Appendix.
1.22 "Eligible Retirement Plan" means an individual retirement account
described in section 408(a) of the Code, an individual retirement annuity
described in section 408(b) of the Code, an annuity plan described in section
403(a) of the Code, or a qualified trust described in section 401(a) of the
Code, that accepts the Distributee's Eligible Rollover Distribution. However, in
the case of an Eligible Rollover Distribution to the surviving Spouse, an
Eligible Retirement Plan is an individual retirement account or individual
retirement annuity.
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1.23 "Eligible Rollover Distribution" means any distribution of all or
any portion of the balance to the credit of the Distributee, except that an
eligible rollover distribution does not include any distribution that is one of
a series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the Distributee or the joint
lives (or joint life expectancies) of the Distributee and the Distributee's
designated Beneficiary, or for a specified period of ten years or more; any
distribution to the extent such distribution is required under section 401(a)(9)
of the Code; and the portion any distribution that is not includible in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
1.24 "Employee" means any person who rendered services as a common law
employee to a Commonly Controlled Entity or is on an Authorized Leave of
Absence, including the period of time before which the trade or business became
a Commonly Controlled Entity, but excluding the period of time after which it
ceases to be a Commonly Controlled Entity. A Leased Employee shall be deemed
employed by the Commonly Controlled Entity for which the individual performed
services. The term `Leased Employee' means any person (other than an employee of
the recipient) who pursuant to an agreement between the recipient and any other
person (`leasing organization') has performed services for the recipient (or for
the recipient and related persons determined in accordance with section
414(n)(6) of the Code) on a substantially full time basis for a period of at
least one year, and such services are of a type historically performed by
employees in the business field of the recipient employer. Contributions or
benefits provided a leased employee by the leasing organization which are
attributable to services performed for the recipient employer shall be treated
as provided by the recipient employer.
1.25 "Employer" means the Company and any Commonly Controlled Entity
which has adopted the Plan; provided, that an entity will cease to be an
Employer when it ceases to be a Commonly Controlled Entity.
1.26 "Employment Date" means the day an Employee first earns an Hour of
Service; provided however, where such person loses his Vesting Service, it shall
mean, only with respect to Vesting Service, the day such person first earns an
Hour of Service following the Period of Severance.
1.27 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended. Reference to any specific section shall include such section, any
valid regulation promulgated thereunder, and any comparable provision of any
future legislation amending, supplementing or superseding such section.
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1.28 "Fair Market Value" means:
(a) with respect to a security for which there is a generally
recognized market, the price of the security prevailing on a national
securities exchange which is registered under Section 6 of the
Securities Act of 1934;
(b) unless determined otherwise by the Committee, with respect to
any guaranteed income contract, the value reported by the issuing
company or bank; and
(c) for any other asset, the fair market value of the asset, as
determined in good faith by the Trustee or the Committee in accordance
with regulations promulgated under Section 3(18) of ERISA.
1.29 "Financed Shares" means the shares of Company Stock acquired by
the Trust with the proceeds of an Acquisition Loan.
1.30 "Forfeiture" means the portion of the Participant's Accrued
Benefit which is forfeited pursuant to the terms of the Plan. If interests in
more than one class of Company Stock shall have been allocated to a
Participant's Account, any Forfeiture of such Participant's Accrued Benefit must
result in the Participant forfeiting the same proportion of each such class. If
only a portion of a Participant's Account is forfeited, that portion of a
Participant's Account constituting Company Stock released from Unallocated
Inventory shall be forfeited only after other assets.
1.31 "Forfeiture Account" means an account holding amounts forfeited by
Participants.
1.32 "Fund" means the assets of the Trust Fund, specifically excluding
assets held in Unallocated Inventory.
1.33 "Highly Compensated Eligible Employee" or "HCE" means a highly
compensated active employee or a highly compensated former employee.
A highly compensated active employee includes any Employee who performs
service for the Employer during the determination year and who, during the
look-back year: (i) received Compensation from the Employer in excess of $75,000
(as adjusted pursuant to Section 415(d) of the Code); (ii) received Compensation
from the Employer in excess of $50,000 (as adjusted pursuant to Section 415(d)
of the Code) and was a member of the top-paid group for such year; or (iii) was
an officer of the Employer and received Compensation during such year that is
greater than 50 percent of the dollar limitation in effect under Section
415(b)(1)(A) of the Code. The term highly compensated active employee also
includes: (i) Employees who are both described in the preceding sentence if the
term "determination year" is substituted for the term "look-back year" and the
Employee is one of the 100 Employees who received the most Compensation from the
Employer during the determination year; and
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(ii) Employees who are 5-percent owners at any time during the look-back year or
determination year.
If no officer has satisfied the Compensation requirement of (iii) above
during either a determination year or look-back year, the highest paid officer
for such year shall be treated as a highly compensated active employee.
For this purpose, the determination year shall be the Plan Year. The
look-back year shall be the twelve-month period immediately preceding the
determination year. Pursuant to Code Section 414(q), the Committee may elect for
the look-back year to be the calendar year ending with or within the applicable
Plan Year determination year.
If the Employer at all times during the Plan Year maintains significant
business activities (and employs Employees in such activities) in at least two
significantly separate geographic areas and satisfies such other conditions as
the Secretary of the Treasury may prescribe, the Committee may elect to apply a
simplified definition of Highly Compensated Employee under the Plan by
substituting "$50,000" for "$75,000" in paragraph (i) above, and disregarding
paragraph (ii) above.
An Employee who performs services for the Employer any time during the
year is in the top-paid group of Employees for any year if such Employee is in
the group consisting of the top 20% of the Employees when ranked on the basis of
Compensation paid during such year. For purposes of determining the number of
Employees in the top-paid group (but not for identifying the particular
Employees in the top-paid group), the following Employees shall be excluded:
(i) Employees who have not completed six (6) months of
service;
(ii) Employees who normally work less than seventeen and
one-half (17 1/2) Hours of Service;
(iii) Employees who normally work not more than six (6)
months during any year;
(iv) Employees who have not attained age twenty-one (21);
(v) Employees who are included in a unit of Employees
covered by a bona fide collective bargaining agreement with the
Employer; and
(vi) Employees who are nonresident aliens and who receive
no earned income (within the meaning of Section 911(d)(2) of the Code)
from the Employer which constitutes income from sources within the
United States (within the meaning of Section 861(a)(3) of the Code).
The Committee may elect to apply paragraph (i), (ii) or (iv) of this Section by
substituting a shorter period of service, smaller number of hours or months, or
lower age for that specified in such subparagraphs.
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A highly compensated former employee includes any Employee who
separated from service (or was deemed to have separated) prior to the
determination year, performs no service for the Employer during the
determination year, and was a Highly Compensated Employee for either the
separation year or any determination year ending on or after the Employee's 55th
birthday. If a former Employee separated from service with the Employer prior to
January 1, 1987, and the Committee irrevocably elects to apply this special
rule, he is a Highly Compensated Employee only if he or she was described in any
one or more of the following groups during either the Employee's separation year
(or the year preceding such separation year) or any year ending on or after such
individual's 55th birthday (or the last year ending before such Employee's 55th
birthday):
(i) 5-percent owner. The Employee was a 5-percent owner of
the Employer at any time during the year.
(ii) Compensation amount. The Employee received
Compensation in excess of $50,000 during the year.
The determination of who is a Highly Compensated Employee, including
the determination of the number and identity of Employees in the top-paid group,
the top 100 Employees, the number of Employees treated as officers and the
Compensation that is considered, will be made in accordance with Section 414(q)
of the Code and the regulations thereunder.
1.34 "Hour of Service" means each hour for which an Employee is
entitled to:
(a) payment for the performance of duties for any Commonly
Controlled Entity;
(b) payment from any Commonly Controlled Entity for any period
during which no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation, holiday,
sickness, incapacity (including disability), layoff, leave of absence,
jury duty or military service;
(c) back pay, irrespective of mitigation of damages, by award or
agreement with any Commonly Controlled Company (and these hours shall
be credited to the period to which the agreement pertains); or
(d) no payment, but is on an Authorized Leave of Absence (and
these hours shall be based upon his or her normally scheduled hours per
week or a 40 hour week if there is no regular schedule).
The crediting of hours shall be made in accordance with Department of Labor
regulation section 2530.200b-2 and 3. Actual hours shall be used whenever an
accurate record of hours are maintained for an Employee.
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<PAGE> 18
1.35 "Internal Revenue Code" or "Code" means the Internal Revenue Code
of 1986, as amended, any subsequent Internal Revenue Code and final Treasury
Regulations. If there is a subsequent Internal Revenue Code, any references
herein to Internal Revenue Code sections shall be deemed to refer to comparable
sections of any subsequent Internal Revenue Code.
1.36 "Maternity/Paternity Absence" means a paid or unpaid and
unapproved absence from employment with a Commonly Controlled Entity (1) by
reason of the pregnancy of the Employee; (2) by reason of the birth of a child
of the Employee; (3) by reason of the placement of a child under age eighteen
(18) in connection with the adoption of such child by the Employee (including a
trial period prior to adoption); and (4) for the purpose of caring for a child
of the Employee immediately following the birth or adoption of such child. The
Employee must prove to the satisfaction of the Committee or its agent that the
absence meets the above requirements and must supply information concerning the
length of the absence unless the Committee has access to relevant information
without the Employee submitting it.
1.37 "Named Fiduciary" means:
(a) with respect to Plan administration, the Board of Directors,
the Committee and the Plan Administrator;
(b) with respect to investment, the Board of Directors, the
Committee and the Trustee.
1.38 "Net Repayment Fund" means the total amount paid under the Plan
towards an Acquisition Loan, subtracted from the sum of (1) all Contributions
and any other contributions (other than contributions of Company Stock) made to
the Plan to meet the Acquisition Loan, (2) all earnings attributable to such
contributions, and (3) the total amount of all earnings attributable to any
Financed Shares.
1.39 "Non-Highly Compensated Employee" or "NHCE" means an Employee who
is neither an HCE nor a Family Member.
1.40 "Normal Retirement Date" means the date a Participant attains
sixty-five (65) years of age.
1.41 "Participant" means an Eligible Employee who begins to participate
in the Plan after completing the eligibility requirements. A Participant's
participation continues until his or her Termination of Employment and his or
her Accrued Benefit is distributed or forfeited.
1.42 "Payment Date" means the date on or after the Settlement Date on
which a Participant's Accrued Benefit is distributed or commences to be
distributed, which date shall be at least the minimum number of days required by
law, if any, after the date the Participant has received any notice required by
law, if any.
- 10 -
<PAGE> 19
If a distribution is one to which Sections 401(a)(11) and 417 of
the Internal Revenue Code do not apply, such distribution may commence less than
thirty (30) days after the notice required under Section 1.411(a)-11(c) of the
Income Tax Regulations is given, provided that:
(a) the plan administrator clearly informs the Participant that
the Participant has a right to a period of at least thirty (30) days
after receiving the notice to consider the decision of whether or not
to elect a distribution (and, if applicable, a particular distribution
option), and
(b) the Participant, after receiving the notice, affirmatively
elects a distribution.
1.43 "Period of Severance" means the period of time measured from the
later of (1) an Employee's Termination of Employment and (2) the conclusion of a
Maternity/Paternity Absence of no longer than twenty-four (24) consecutive
months, to the date he first earns an Hour of Service following his Termination
of Employment.
1.44 "Plan" means the WALBRO CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN,
as set forth herein and as hereafter may be amended from time to time.
1.45 "Plan Year" means the annual accounting period of the Plan and
Trust which ends on each December 31.
1.46 "QDRO" means a domestic relations order which the Committee has
determined to be a qualified domestic relations order within the meaning of
Section 414(p) of the Code.
1.47 "Qualified Election Period" means the six (6) consecutive Plan
Year period beginning with the first Plan Year in which the Participant first
becomes a Qualified Participant.
1.48 "Qualified Participant" means a Participant who has attained age
fifty-five (55) and who has completed at least ten (10) years of participation
under this Plan.
1.49 "Related Plan" means with respect to Section 415 of the Code, any
other defined contribution plan or a defined benefit plan (as defined in Section
415(k) of the Code) maintained by a Commonly Controlled Entity, respectively
called a "Related Defined Contribution Plan" and a "Related Defined Benefit
Plan".
1.50 "Settlement Date" means the date on which the transactions from
the most recent Trade Date are settled.
1.51 "Spousal Consent" means the written consent given by a Spouse to a
Participant's election (or waiver) of a specified form of benefit or Beneficiary
designation. The Spouse's consent must acknowledge the effect on the Spouse of
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<PAGE> 20
the Participant's election, waiver or designation and be duly witnessed by a
Plan representative or notary public. Spousal Consent shall be valid only with
respect to the spouse who signs the Spousal Consent and only for the particular
choice made by the Participant which requires Spousal Consent. A Participant may
revoke (without Spousal Consent) a prior election, waiver or designation that
required Spousal Consent at any time before the Sweep Date associated with the
Settlement Date upon which payments will begin. Spousal Consent also means a
determination by the Administrator that there is no Spouse, the Spouse cannot be
located or such other circumstances as may be established by applicable law.
1.52 "Spouse" means a person who, as of the earlier of a Participant's
Payment Date and death, is alive and married to the Participant within the
meaning of the laws of the State of the Participant's residence as evidenced by
a valid marriage certificate or other proof acceptable to the Committee. A
spouse who was the Spouse on the Payment Date but who is divorced from the
Participant at the Participant's death shall still be the Spouse at the date of
the Participant's death, except as otherwise provided in a QDRO.
1.53 "Sweep Date" means the date established by the Committee as the
cutoff date and time for the responsible Named Fiduciary to receive notification
with respect to a financial transaction for an Accounting Period in order to be
processed with respect to a Trade Date designated by the Committee.
1.54 "Termination of Employment" occurs when a person ceases to be an
Employee, as determined by the personnel policies of the Commonly Controlled
Entity to whom he or she rendered services; provided, however, where a Commonly
Controlled Entity ceases to be such with respect to an Employee as a result of
either an asset sale or stock sale, an Employee of the Commonly Controlled
Entity shall be deemed not to have incurred a Termination of Employment if the
Committee shall make a Trustee Transfer of his or her Accrued Benefit. Transfer
of employment from one Commonly Controlled Entity to another Commonly Controlled
Entity shall not constitute a Termination of Employment for purposes of the
Plan.
1.55 "Trade Date" means the date as of which a financial transaction
occurs, however.
1.56 "Trust" means the legal entity resulting from the agreement
between the Company and the Trustee and all amendments thereto, in which some or
all of the assets of this Plan will be received, held, invested and distributed
to or for the benefit of Participants and Beneficiaries.
1.57 "Trust Agreement" means the agreement between the Company and the
Trustee establishing the Trust, and any amendments thereto.
1.58 "Trust Fund" means any property, real or personal, received by and
held by the Trustee, plus all income and gains and minus all losses, expenses,
withdrawals and distributions chargeable thereto.
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<PAGE> 21
1.59 "Trustee" means any corporation, individual or individuals
designated in the Trust Agreement who shall accept the appointment as Trustee to
execute the duties of the Trustee as set forth in the Trust Agreement.
1.60 "Trustee Transfer" means (a) a transfer to the Custodian of an
amount by the custodian of a retirement plan qualified for tax-favored treatment
under Section 401(a) of the Code or by the trustee(s) of a trust forming part of
such a plan, which plan provides for such transfer; or (b) a Direct Rollover
within the meaning of Section 402(c)(8)(B) of the Code; provided that with
respect to any withdrawal or distribution from the Plan, a Participant may elect
a transfer to only one eligible retirement plan, except as may otherwise be
determined by the Committee, in a uniform and nondiscriminatory manner.
1.61 "Unallocated Inventory" means all Financed Shares and any earnings
or distributions thereon held by the Trustee as collateral on an Acquisition
Loan.
1.62 "Valuation Date" means the last business day of each Plan Year.
Effective June 1, 1994, Valuation Date shall mean the last business day of June
and such other special date as the Committee shall designate in the interests of
Participants and Beneficiaries.
1.63 "Vesting Service" means the sum of the Employee's years (and
fractional years) of Continuous Service excluding:
(a) for purposes of determining a Participant's vested percentage
in the portion of the Participant's Account accrued before a Period of Severance
of five (5) or more years, Vesting Service earned after such Period of
Severance; and
(b) with respect to an Employee who has no nonforfeitable interest
under the Plan and who incurs a Period of Severance of five (5) or more years,
Vesting Service earned prior to such Period of Severance if the number of years
of the Period of Severance equals or exceeds the years of Vesting Service earned
prior to the Period of Severance.
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<PAGE> 22
ARTICLE II
- --------------------------------------------------------------------------------
PARTICIPATION
2.1 Eligibility. On or after the Effective Date, as to each Employer:
(a) Participant on January 1, 1997. Each person who has an Accrued
Benefit on January 1, 1997 shall become a Participant as of January 1,
1997.
(b) Other Eligible Employee. Each other Eligible Employee shall
become a Participant on the first day of the Plan Year coincident with
or next following the date on which such Employee first earns an Hour
of Service, provided he is an Eligible Employee on such date.
2.2 Reemployment.
(a) Eligible Employee Was Previously a Participant. An Eligible
Employee who previously was a Participant prior to his or her
Termination of Employment shall become a Participant on the first day
he or she earns an Hour of Service.
(b) Eligible Employee Had a Termination. An Eligible Employee who
had a Termination of Employment before he or she became a Participant
shall be eligible to become a Participant on the later of (1) the date
he or she would have become a Participant but for his or her
Termination of Employment, or (2) the date he or she again performs an
Hour of Service.
2.3 Participation Upon Change of Job Status. An Employee who is not an
Eligible Employee shall become a Participant on the later of (1) the date he or
she would have become a Participant had he or she always been an Eligible
Employee, or (2) the date he or she becomes an Eligible Employee.
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<PAGE> 23
ARTICLE III
- --------------------------------------------------------------------------------
EMPLOYER CONTRIBUTIONS AND ALLOCATIONS
3.1 Employer Contributions.
(a) Frequency and Eligibility. Subject to the limits of the Plan,
for each Plan Year, the Employer may make a Contribution in an amount
determined by the Board of Directors on behalf of each Participant who
was an Eligible Employee on the last day of the Plan Year.
(b) Allocation Method. The Employer Contribution for each period
shall be allocated, along with any Forfeitures, among eligible
Participants in direct proportion to their Compensation.
(c) Timing, Medium and Posting. The Employer shall make each
period's Contribution in cash or Company Stock as soon as is feasible,
and not later than the Employer's federal tax filing date, including
extensions, for deducting such Contribution. The Committee shall post
such amount to each Participant's Account once the total Contribution
received by the Custodian has been balanced against the specific amount
to be credited to each Participant's Account.
(d) Minimum Aggregate Amount. Subject to Article XIII, the
aggregate amount of Employer Contributions in cash (or proceeds in cash
thereof) shall not be less than is required to pay each installment of
principal and interest on all Acquisition Loans payable by the Trust
entered into to acquire Financed Shares on or before the date such
installment is due and to meet the obligations of the Trustee under
such loan whether or not any tax benefit to the Employers results from
such contribution.
(e) Compensation. Compensation shall be measured by the period
(not to exceed the Plan Year) for which the Contribution is being made.
3.2 Miscellaneous.
(a) Deduction Limits. Subject to Section 3.1(d), in no event shall
the Employer Contributions for a Plan Year exceed the maximum the
Company estimates will be deductible (or which would be deductible if
the Employers had taxable income) by any Employer or Commonly
Controlled Entity under Section 404 of the Code ("Deductible Amount")
and any amount in excess of the Deductible Amount shall not be
contributed.
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<PAGE> 24
(b) Stock Bonus Plan. Notwithstanding anything herein to the
contrary, the Plan shall constitute a stock bonus plan for all purposes
of the Code.
(c) Employee Stock Ownership Plan. Notwithstanding anything herein
to the contrary, the Plan shall constitute an employee stock ownership
plan within the meaning of Code Section 4975(e)(7) and, as such, is
designed to invest primarily in Company Stock in accordance with the
terms of the Trust Agreement.
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<PAGE> 25
ARTICLE IV
- --------------------------------------------------------------------------------
ACCOUNTING FOR PARTICIPANTS' ACCOUNTS
4.1 Individual Participant Accounting.
(a) Account Maintenance. The Committee shall cause the Account for
each Participant to reflect transactions involving assets of the
Account in accordance with this Article. Financial transactions during
or with respect to an Accounting Period shall be accounted for at the
individual Account level by "posting" each transaction to the
appropriate Account of each affected Participant. Participant Account
values shall be maintained in shares. At any point in time, the value
of a Participant's Accrued Benefit shall be equal to the net Fair
Market Value of his or her Account determined by using the most recent
Trade Date values provided by the Custodian.
(b) Trade Date Accounting and Investment Cycle. For any
transaction to be processed as of a Trade Date, the Committee must
receive instructions by the Sweep Date and such instructions shall
apply only to amounts held in or posted to the Accounts as of the Trade
Date. Financial transactions in the Trust Fund shall be posted to a
Participant's Account as of the Trade Date and based upon the Trade
Date values provided by the Custodian. All transactions shall be
effected on the Settlement Date relating to the Trade Date (or as soon
as is administratively feasible).
(c) Suspension of Transactions. Whenever the Committee considers
such action to be in the best interest of the Participants, the
Committee in its discretion may suspend from time to time the Trade
Date.
(d) How Fees and Expenses are Charged to Participants. Account
maintenance fees shall be charged to each Participant's Account,
provided that no fee shall reduce a Participant's Account balance below
zero. Transaction type fees shall be charged to the Accounts involved
in the transaction.
(e) Error Correction. The Committee may correct any errors or
omissions in the administration of the Plan by restoring or charging
any Participant's Accrued Benefit with the amount that would be
credited or charged to the Account had no error or omission been made.
Funds necessary for any such restoration shall be provided through
payment made by the Employer.
4.2 Accounting for Trust Funds.
(a) Share Accounting. The investments in the Investment Fund shall
be maintained in full and fractional shares of Company Stock. The
Committee
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<PAGE> 26
is responsible for determining the number of full and fractional shares
of Company Stock.
(b) Accounting for Company Stock. The following additional rules
shall apply to Company Stock:
(1) Voting Rights. All Company Stock in an Account shall be
voted by the Trustee pursuant to the procedures of the
Trust Agreement.
(2) Tender Offer. If a tender offer is commenced for Company
Stock, the provisions of the Trust Agreement regarding
the response to such tender offer, the holding and
investment of proceeds derived from such tender offer
and the substitution of new securities for such proceeds
shall be followed.
(3) Dividends and Income.
(i) The Fund. The Trustee shall use cash dividends
received by the Trustee in respect of Financed
Shares held in the Account of each Participant on
the dividend record date (other than (A) dividends
paid to the Trust prior to June 30, 1989, and (B)
dividends paid on the Account of a former Employee
where the dividend record date would result in
payment of such dividend to the Trust in the next
Plan Year) to be applied toward the repayment of
any outstanding balance of an Acquisition Loan.
The Committee shall cause any other income on
Company Stock held in such Account since the last
Valuation Date to be credited to such Account as
of the coincident or next following Valuation
Date. Stock or other noncash dividends received by
the Trustee in respect of Company Stock held in
each Participant's Account on the dividend record
date shall be credited thereto and the average
cost of Company Stock held in the Account shall be
appropriately adjusted. After payment of each
outstanding Acquisition Loan, any cash dividends
on Company Stock held in such Account on such
dividend record date shall be distributed pursuant
to the provisions of Section 6.7.
(ii) Unallocated Inventory. Cash dividends paid on
Financed Shares held in Unallocated Inventory and
any other income received on the assets in
Unallocated Inventory during a Plan Year shall
first be applied
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<PAGE> 27
toward repayment of any outstanding balance of an
Acquisition Loan. Stock dividends paid on Financed
Shares held in Unallocated Inventory shall be
credited to Unallocated Inventory and the average
cost basis of Company Stock held in Unallocated
Inventory shall be appropriately adjusted.
(4) Transaction Costs. Any brokerage commissions, transfer
taxes, transaction charges, and other charges and
expenses in connection with the purchase or sale of
Company Stock shall be added to the cost thereof in the
case of a purchase or deducted from the proceeds thereof
in the case of a sale; provided, however, where the
purchase or sale of Company Stock is with a
"disqualified person" as defined in Section 4975(e)(2)
of the Code or a "party in interest" as defined in
Section 3(14) of ERISA, no commissions may be charged
with respect thereto.
4.3 Accounts for QDRO Beneficiaries. A separate Account shall be established
for a Beneficiary entitled to any portion of a Participant's Account under a
QDRO as of the date and in accordance with the directions specified in the QDRO.
Such Account shall be valued and accounted for in the same manner as any other
Account. A QDRO Beneficiary shall be entitled to payment as provided in the QDRO
and permissible under the otherwise applicable terms of this Plan, regardless of
whether the Participant is an Employee, and to name a Beneficiary as specified
in the QDRO.
4.4 Adjustments to Accounts for Release from Unallocated Inventory. The
Committee or its delegate shall adjust the Account of each Participant as
provided herein as of the Valuation Date in the following manner:
(a) First - Allocable Amount and Repayment of Acquisition Loan. As of
each December (effective on and after June 1, 1994, only each June)
Valuation Date, the Committee shall charge each Participant's Account with
his share of the Contribution used to repay an Acquisition Loan for the Plan
Year in an amount equal to the product of (1) the "Nondividend Debt
Payments" for the Plan Year, and (2) the "Participant's Percentage" (both as
hereinafter defined). At the same time, the Committee shall credit to such
Participant's Account a number of full and fractional shares of Company
Stock ("ESOP Shares") equal to the product of (1) and (2), where (1) is
equal to the product of (i) a fraction, the numerator of which is that
portion of the Contribution used to repay an Acquisition Loan for the Plan
Year ("Nondividend Debt Payments"), and the denominator of which is the
aggregate amount of all payments made in satisfaction of the Acquisition
Loan for a Plan Year ("Debt Payments"), and (ii) the number of Financed
Shares released from Unallocated Inventory for that Plan Year; and (2) is
equal to a Participant's Percentage. Each Participant's Percentage is a
fraction determined for such Participant where the numerator is such
Participant's share of the Contribution for the Plan Year and the
denominator of which is the Contribution ("Participant's Percentage").
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<PAGE> 28
(b) Second - Dividends Used to Repay Acquisition Loan. As of the
Valuation Date, the Committee shall charge each Participant's Account with
the cash dividends allocated to his Account with respect to such Plan Year
that are available (under Section 4.2(b)(3)) to repay an Acquisition Loan
for that Plan Year ("Participant's Dividend"). At the same time, the
Committee shall credit to each Participant's Account a number of full and
fractional shares of Company Stock ("Dividend Shares") equal to the sum of
the following:
(1) the quotient of (i) divided by (ii), where (i) is equal to the
Participant's Dividend, and (ii) is equal to the Fair Market Value of a
share of Company Stock as of the Valuation Date; and
(2) the product of (i) and (ii), where (i) is equal to the number of
Financed Shares released from Unallocated Inventory for that Plan Year,
less the aggregate number of ESOP shares determined in Section 4.4(a)
and the aggregate number of shares determined in paragraph (1) hereof,
and (ii) is equal to the Participant's Percentage;
provided however, if the aggregate Fair Market Value of the difference in
the number of Financed Shares released from Unallocated Inventory for the
Plan Year, less the aggregate number of ESOP shares, is less than the
aggregate of each Participant's Dividend for the Plan Year then, in lieu of
(1) and (2) above, the Dividend Shares credited to each Participant's
Account for such Plan Year shall be equal to a number of shares which will
have a Fair Market Value on the Valuation Date equal to the Participant's
Dividend, and provided further, if additional shares of Company Stock are
needed to satisfy this requirement, the Company and all other Employers
shall contribute shares of Company Stock or its cash equivalent to the Trust
to satisfy this shortfall for each Participant.
4.5 Election to Diversify Portion of Account with Respect to Qualification
Election Period.
(a) Within ninety (90) days after the last day of each Plan Year during
a Participant's Qualified Election Period, such Qualified Participant shall
be permitted to elect, subject to Paragraph (e) hereof, to transfer to the
Walbro Corporation Advantage Plan the portion of his Account described in
Paragraph (b) hereof.
(b) Subject to the amount of a Qualified Participant's Account as of the
relevant recent Valuation Date, the portion of a Participant's Account which
a Qualified Participant can elect to transfer is no greater than:
(1) In the case of a distribution with respect to the first Plan
Year of the Qualified Election Period, twenty-five percent (25%) of the
total number of shares of Company Stock that have ever been allocated to
the Qualified Participant's Contribution Account on or before the
Valuation Date
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<PAGE> 29
in such Plan Year, as determined in accordance with applicable law
("Company Stock Subject to Diversification");
(2) In the case of a distribution with respect to the second, third,
fourth and fifth Plan Year of the Qualified Election Period for a
Participant who has not elected to receive a distribution, twenty-five
percent (25%) of the Company Stock Subject to Diversification;
(3) In the case of a distribution with respect to the second, third,
fourth and fifth Plan Year of the Qualified Election Period for a
Participant who has elected to receive a distribution, an amount equal
to twenty-five percent (25%) of the Company Stock Subject to
Diversification, reduced by the number of shares distributed in prior
Plan Years;
(4) In the case of a distribution with respect to the last Plan Year
of the Qualification Election Period for a Participant who has not
elected to receive a distribution, fifty percent (50%) of the Company
Stock Subject to Diversification; and
(5) In the case of a distribution with respect to the last Plan Year
of the Qualified Election Period for a Participant who has elected to
receive a distribution, an amount equal to fifty percent (50%) of the
Company Stock Subject to Diversification, reduced by the number of
shares distributed in prior Plan Years.
(c) An election by a Qualified Participant shall be in writing and
delivered to the Committee on a form provided by the Committee for that
purpose.
(d) A transfer pursuant to a Qualified Participant's election shall
be made by the Trustee no later than one hundred and eighty (180) days
after the last day of the Plan Year to which the election relates in a
single sum in cash in an amount equal to the Fair Market Value thereof.
(e) Notwithstanding the provisions of Paragraph (2) hereof, if the
Fair Market Value as of the Valuation Date immediately preceding the
first day on which a Qualified Participant could otherwise make an
election pursuant to this Section, of the Company Stock acquired by or
contributed to the Plan (and acquired by or contributed to, after
December 31, 1986, any other employee stock ownership plan or tax credit
employee stock ownership plan maintained by a Commonly Controlled
Entity) and allocated to a Qualified Participant's accounts is less than
five hundred dollars ($500), such Qualified Participant shall not be
entitled to make an election under this Section, except to the extent
determined by the Committee in a uniform and nondiscriminatory manner.
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<PAGE> 30
ARTICLE V
- --------------------------------------------------------------------------------
VESTING AND FORFEITURES
5.1 Full Vesting Upon Attainment of Event. A Participant's Accrued Benefit
shall be fully vested and nonforfeitable upon the occurrence of any one or more
of the following events:
(a) completion of at least the minimum number of years of Vesting
Service in the vesting schedule which applies to such Participant for a 100%
nonforfeitable percentage;
(b) attainment of Normal Retirement Date; or
(c) he or she dies while an Employee.
5.2 Vesting Schedule and Forfeitures.
(a) Vesting. If a Participant has a Termination of Employment, the
Participant shall be vested and have a nonforfeitable right to his or her
Accrued Benefit in his or her Account, determined in accordance with the
following vesting schedule:
Years of Vesting Service Nonforfeitable Percentage
------------------------ -------------------------
Less than 3 years 0%
3 years but less than 4 years 20%
4 years but less than 5 years 40%
5 years but less than 6 years 60%
6 years but less than 7 years 80%
7 years or more 100%
Notwithstanding the above, with respect to each Participant who is an Eligible
Employee on December 31, 1992, and who is employed by Orbital-Walbro, Inc. on
that date, the vested portion of the Participant's Accrued Benefit is the vested
percentage of the Participant's Account determined in accordance with the
following table:
Years of Vesting Service Nonforfeitable Percentage
------------------------ -------------------------
Less than 3 years 50%
3 years but less than 4 years 60%
4 years but less than 5 years 70%
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<PAGE> 31
5 years but less than 6 years 80%
6 years but less than 7 years 90%
7 years or more 100%
5.3 Forfeitures.
(a) Forfeiture Where Payment Commences After a Period of
Severance. If no Payment Date of a Participant's nonforfeitable Accrued
Benefit occurs after the Participant incurs a Period of Severance of
sixty (60) consecutive months, that portion of the Participant's
Accrued Benefit (which is Employer-derived) which is forfeitable as of
his or her Termination of Employment shall be forfeited as of the
Valuation Date coincident with or next following the completion of a
Period of Severance of sixty (60) consecutive months. If the
Participant is reemployed as an Employee prior to having incurred a
Period of Severance of sixty (60) consecutive months, the Forfeiture
shall not occur. If the Participant is reemployed as an Employee after
incurring a Period of Severance of sixty (60) consecutive months, the
Participant shall be fully vested and have a nonforfeitable interest in
that portion of his or her Accounts accrued prior to the Period of
Severance of sixty (60) consecutive months and not forfeited as a
result of such Period of Severance. A Participant who incurs a
Termination of Employment with a zero vested interest in his or her
Accrued Benefit (which is Employer-derived) shall be deemed to have a
Payment Date and a Forfeiture of his or her Accrued Benefit as of such
Termination of Employment.
(b) Forfeiture Where Payment Commences Prior to a Period of
Severance. If the Payment Date of a Participant's nonforfeitable
percentage of his or her Accrued Benefit occurs prior to having
incurred a Period of Severance of sixty (60) consecutive months, that
portion of his or her Accrued Benefit which is forfeitable shall be
forfeited as of the Payment Date. Thereafter, if such person is rehired
as an Employee prior to incurring a Period of Severance of sixty (60)
consecutive months, he or she shall be entitled to make repayment to
the Plan of the full amount distributed to him or her on or after the
Payment Date no later than (1) the date he or she incurs a Period of
Severance of sixty (60) consecutive months, and (2) the last day of the
sixty (60) consecutive month period commencing on or after his or her
date of reemployment. Upon making repayment in a single payment of the
Fair Market Value (determined as of the Payment Date) of the aggregate
Accrued Benefit distributed to him or her, the Fair Market Value of the
Accrued Benefit which was forfeited and repaid shall be reinstated to
his Account as of the coincident or next following Valuation Date. The
amount required to restore such Participant's Accounts shall be charged
against the Plan's Forfeitures, and if insufficient, be made up from
additional Contributions. Where a Participant has been deemed to have a
Payment Date because he or she had a zero vested interest in his or her
Accrued Benefit, he or she will be deemed to have made the repayment
required by this subparagraph on his or her date of hire.
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<PAGE> 32
If the Employee makes the above-described repayment, such
repayment shall be considered to be the "investment in the contract"
for purposes of Sections 72(c)(1)(A), 72(f) and 402(e)(4)(D)(i) of the
Code in relation to the amount reinstated in his Employer Contribution
Account on account of the repayment.
5.4 Forfeiture Account.
A Forfeiture will be posted, no later than the end of the Plan Year in
which the Forfeiture arises, to the Forfeiture Account on the Settlement Date
for the Trade Date on which the Custodian, at the direction of the Committee,
has converted the Forfeiture to cash. The Forfeiture Account shall be invested
in interest bearing deposits of the Custodian or short term money market
instruments. No later than the end of each Plan Year, the Forfeiture Account
shall be used to reduce Contributions, as determined by the Committee, or pay
expenses of the Plan.
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ARTICLE VI
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DISTRIBUTIONS ON AND AFTER
TERMINATION OF EMPLOYMENT
6.1 Request for Distribution of Benefits.
(a) Request for Distribution. Subject to the other requirements of
this Article, a Participant may elect to have his or her vested Accrued
Benefit paid to him or her beginning upon any Settlement Date following
his or her Termination of Employment by submitting a completed
distribution election in accordance with a procedure established by the
Committee. Such election form shall include or be accompanied by a
notice which provides the Participant with information regarding all
optional times and forms of payment available. The election must be
submitted to the Committee by the Sweep Date that relates to the
Payment Date.
(b) Failure to Request Distribution. If a Participant has a
Termination of Employment and fails to submit a distribution request in
accordance with a procedure established by the Committee by the last
Payment Date permitted under this Article, his or her vested Accrued
Benefit shall be valued as of the Valuation Date which immediately
precedes such latest date of distribution (called the "Default
Valuation Date") and a notice of such deemed distribution shall be
issued to his or her last known address as soon as administratively
possible. If the Participant does not respond to the notice or cannot
be located, his or her vested Accrued Benefit determined on the Default
Valuation Date shall be treated as a Forfeiture. If the Participant
subsequently files a claim, the amount forfeited (unadjusted for gains
and losses) shall be reinstated to his or her Accounts and distributed
as soon as administratively feasible, and such payment shall be
accounted for by charging it against the Forfeiture Account or by a
contribution from the Employer of the affected Participant.
6.2 Deadline for Distribution.
(a) General. In addition to any other Plan requirements and unless the
Participant elects otherwise, or cannot be located, the Payment Date of a
Participant's vested Accrued Benefit shall be not later than sixty (60) days
after the latest of the close of the Plan Year in which (i) the Participant
attains the earlier of age sixty-five (65) or his or her Normal Retirement Date,
(ii) occurs the tenth (10th) anniversary of the Plan Year in which the
Participant commenced participation, or (iii) the Participant had a Termination
of Employment. However, if the amount of the payment or the location of the
Participant (after a reasonable search) cannot be ascertained by that deadline,
payment shall be made no later than sixty (60) days after the earliest date on
which such amount or location is ascertained. In any case, the Payment Date of a
Participant's vested Accrued Benefit shall not be later than April 1 following
the
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<PAGE> 34
calendar year in which the Participant attains age seventy and one-half (70 1/2)
and each December 31 thereafter and shall comply with the requirements of
Section 401(a)(9) of the Code and the Treasury Regulations promulgated
thereunder.
(b) Special Benefit Commencement Dates. In addition to any other Plan
requirements, the Payment Date of a Participant's vested Accrued Benefit held in
his or her Account shall be not later than the following applicable date:
(1) In the case of a Participant who has reached his Normal
Retirement Date, is Disabled, or who has died, and who has elected
distribution of his vested Accrued Benefit, the Payment Date shall
be no later than one year after the end of the Plan Year during
which the Participant incurred a Termination of Employment.
(2) In the case of a Participant who has incurred a
Termination of Employment for reasons other than in (1), the
Payment Date shall be no later than one year after the end of the
fifth Plan Year following the Plan Year in which the Participant
incurred a Termination of Employment unless the Participant is
reemployed as an Employee before that Payment Date.
For purposes of this paragraph, a Participant's Account shall not include any
portion of such Account attributable to Financed Shares acquired with the
proceeds of an Acquisition Loan until the end of the Plan Year in which the
Acquisition Loan is repaid in full.
6.3 Payment Form and Medium.
(a) Form of Payment of Benefits. A Participant's Accrued Benefit
shall be paid in the form of a lump sum or in annual installments.
(b) Right to Demand Company Stock. A Participant's Accrued Benefit
payable under the Plan will be distributed in cash, shares of Company
Stock, or a combination of both, as determined by the Trustee; provided
however, that each Participant shall be notified of his right to demand
distribution of his Accrued Benefit entirely in whole shares of Company
Stock with the value of any fractional share paid in cash.
(c) Rights, Options and Restrictions on Company Stock. Except as
otherwise provided herein, no shares of Company Stock held or
distributed by the Trustee may be subject to a put, call or other
option, or buy-sell or similar arrangement. The provisions of this
Section shall continue to be applicable to Company Stock even if the
Plan ceases to be an employee stock ownership plan under Section
4975(e)(7) of the Code.
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<PAGE> 35
(1) Right of First Refusal. Any shares of Company Stock
distributed by the Trust, if neither listed on a national securities
exchange registered under Section 6 of the Securities Exchange Act of
1934 or quoted on a system sponsored by a national securities
association, registered under Section 15A(b) of the Securities Exchange
Act, shall be subject to a "right of first refusal." The right of first
refusal shall provide that, prior to any subsequent transfer of such
shares, the shares must first be offered for purchase in writing to the
Company, and then to the Trust, at the then fair market value. A bona
fide written offer from an independent prospective buyer shall be
deemed to be the fair market value of such Company Stock for this
purpose. The Company and the Trustee shall have a total of fourteen
(14) days to exercise the right of first refusal on the same terms
offered by a prospective buyer. The Company may require that a
Participant entitled to a distribution of Company Stock execute an
appropriate stock transfer agreement (evidencing the right of first
refusal prior to receiving a certificate for Company Stock).
(2) Put Option. The Company shall issue a "put option" to any
Participant who receives a distribution from the Trust of Company Stock
which is not readily tradable on an established market. The put option
shall permit the Participant to sell such Company Stock to the Company
at any time during two option periods, at the Fair Market Value of such
shares. The first put option period shall be for at least sixty (60)
days beginning on the date of distribution. The second put option
period shall be for at least sixty (60) days beginning after notice to
the Participant in the following Plan Year. The Company may allow the
Trustee to purchase shares of Company Stock tendered to the Company
under a put option. The payment for any Company Stock sold under a put
option shall be made in a single sum or adequately secured and made in
substantially equal, annual installments over a period not exceeding
five (5) years, with interest payable at a reasonable rate on any
unpaid installment balance (as determined by the Company or the
Trustee). The first installment shall be paid within thirty (30) days
after the Participant exercises the put option. In the event the
Trustee purchases Company Stock by installment payments, such shares
shall be held in an Unallocated Inventory account with respect to such
Acquisition Loan.
(3) Investment Legend. Shares of Company Stock held or distributed
by the Trustee may include such legend restrictions on transferability
as the Company may reasonably require in order to assure compliance
with applicable Federal and state securities laws.
6.4 Small Amounts Paid Immediately. If a Participant has a Termination of
Employment and the Participant's Vested Accrued Benefit does not exceed and has
never exceeded $3,500 at the time of any prior distribution, the Participant's
Accrued
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<PAGE> 36
Benefit shall be paid as a single sum as soon as administratively feasible after
his or her Termination of Employment.
6.5 Payment Within Life Expectancy. The Participant's payment election must
be consistent with the requirement of Code section 401(a)(9) that all payments
are to be completed within a period not to exceed the lives or the joint and
last survivor life expectancy of the Participant or his or her Beneficiary. The
life expectancies of a Participant and his or her spouse may be recomputed
annually.
6.6 Incidental Benefit Rule. The Participant's payment election must be
consistent with the requirement that, if the Participant's Spouse is not his or
her sole primary Beneficiary, the minimum annual distribution for each calendar
year, beginning with the year in which he or she attains age seventy and
one-half (70 1/2), shall not be less than the quotient obtained by dividing (a)
the Participant's vested Accrued Benefit as of the last Trade Date of the
preceding year by (b) the applicable divisor as determined under the incidental
benefit requirements of Code Section 401(a)(9).
6.7 Dividend Distributions. Any cash dividends on Company Stock allocated
to the Account of a Participant may be paid currently (or within ninety (90)
days after the end of the Plan Year in which the dividends are paid to the
Trust) in cash to such Participant on a nondiscriminatory basis, as determined
by the Committee. Such distribution (if any) of cash dividends to a Participant
may be limited to a Participant who is still an Employee, may be limited to
dividends on shares of Company Stock which are then vested or may be applicable
to dividends on all shares allocated to Accounts. The decision as to whether
cash dividends on Company Stock will be distributed to Participants or held in
the Trust shall be made in the sole discretion of the Committee, and the
Committee may request the Company to pay such dividends directly to
Participants.
6.8 Direct Rollover. With respect to any payment in excess of $200
hereunder which constitutes an Eligible Rollover Distribution, a Distributee may
direct the Committee to have such payment paid in the form of a Trustee
Transfer, in accordance with procedures established by the Committee, provided
the Committee receives written Notice of such direction with specific
instructions as to the Eligible Retirement Plan on or prior to the applicable
Sweep Date for payment. If the Participant does not transfer all of such
payment, the minimum amount which can be transferred is $500.
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ARTICLE VII
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DISTRIBUTION OF ACCRUED BENEFITS ON DEATH
7.1 Payment to Beneficiary. On the death of a Participant prior to his
or her Payment Date, his or her vested Accrued Benefit shall be paid to the
Beneficiary or Beneficiaries designated by the Participant in accordance with
the procedure established by the Committee. Death of a Participant on or after
his or her Payment Date shall result in payment to his or her Beneficiary of
whatever death benefit is provided by the form of payment in effect on his or
her Payment Date.
7.2 Beneficiary Designation. Each Participant shall complete a
beneficiary designation indicating the Beneficiary who is to receive the
Participant's remaining Plan interest at the time of his or her death. The
Participant may change such designation of Beneficiary from time to time by
filing a new beneficiary designation with the Committee. No designation of
Beneficiary or change of Beneficiary shall be effective until properly filed
with the Committee. Notwithstanding any designation to the contrary, the
Participant's Beneficiary shall be the Participant's Spouse to whom the
Participant is legally married under the laws of the State of the Participant's
residence on the date of the Participant's death and surviving him or her on
such date, unless such designation includes Spousal Consent. If the Participant
dies leaving no Spouse and either (1) the Participant shall have failed to file
a valid beneficiary designation, or (2) all persons designated on the
beneficiary designation shall have predeceased the Participant, the Committee
shall have the Custodian distribute such Participant's Accrued Benefit in a
single sum to his or her estate.
7.3 Benefit Election.
(a) Request for Distribution. In the event of a Participant's
death prior to his or her Payment Date, a Beneficiary may elect to have
the vested Accrued Benefit of a deceased Participant paid to him or her
beginning upon any Settlement Date following the Participant's date of
death by submitting a completed distribution election in accordance
with the procedure established by the Committee. The election must be
submitted to the Committee by the Sweep Date that relates to the
Settlement Date upon which payments are to begin.
(b) Failure to Request Distribution. In the event a Beneficiary
fails to submit a timely distribution request, his or her vested
Accrued Benefit shall be valued as of the Valuation Date which
immediately precedes such latest date of distribution (called the
"Default Valuation Date") and a notice of such deemed distribution
shall be issued to his or her last known address as soon as
administratively possible. If the Beneficiary does not respond to the
notice or cannot be located, his or her vested Accrued Benefit
determined on the Default Valuation Date shall be treated as a
Forfeiture. If the Beneficiary subsequently
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<PAGE> 38
files a claim, the amount forfeited (unadjusted for gains and losses)
shall be reinstated to his or her Accounts and distributed as soon as
administratively feasible, and such payment shall be accounted for by
charging it against the Forfeiture or by a Contribution from the
Employer of the affected Beneficiary.
7.4 Payment Form. In the event of a Participant's death prior to his
or her Payment Date, a Beneficiary shall be limited to the same form of payment
as the Participant was limited.
7.5 Time Limit for Payment to Beneficiary. Payment to a Beneficiary
must either:
(a) be completed within five (5) years of the Participant's death;
or
(b) begin within one year of his or her death and be completed
within the period of the Beneficiary's lifetime, except that:
(1) If the Participant dies after the April 1 immediately
following the end of the calendar year in which he or
she attains age seventy and one-half (70 1/2), payment
to his or her Beneficiary must be made at least as
rapidly as provided in the Participant's distribution
election;
(2) If the surviving Spouse is the Beneficiary, payments
need not begin until the date on which the Participant
would have attained age seventy and one-half (70 1/2)
and must be completed within the Spouse's lifetime;
and
(3) If the Participant and the surviving Spouse who is the
Beneficiary die (A) before the April 1 immediately
following the end of the calendar year in which the
Participant would have attained age seventy and
one-half (70 1/2); and (B) before payments have begun
to the Spouse, the Spouse will be treated as the
Participant in applying these rules.
7.6 Direct Rollover. With respect to any payment in excess of $200
hereunder which constitutes an Eligible Rollover Distribution, a Distributee may
direct the Committee to have such payment paid in the form of a Trustee
Transfer, in accordance with the procedure established by the Committee,
provided the Committee receives written Notice of such direction with specific
instructions as to the Eligible Retirement Plan on or prior to the applicable
Sweep Date for payment. If the Participant does not transfer all of such
payment, the minimum amount which can be transferred is $500.
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ARTICLE VIII
- --------------------------------------------------------------------------------
MAXIMUM CONTRIBUTIONS
8.1 Definitions.
(a) "Annual Additions" means with respect to a Participant for any
Plan Year the sum of:
(1) Contributions and Forfeitures (and any earnings
thereon) allocated as of a date within the Plan Year;
(2) All contributions, forfeitures and suspended amounts
(and income thereon) for such Plan Year, allocated to
such Participant's account(s) under any Related
Defined Contribution Plan as of a date within such
Plan Year;
(3) The sum of all after-tax contributions of the
Participant to Related Plans for the Plan Year and
allocated to such Participant's accounts under such
Related Plans as of a date within such Plan Year
("Aggregate Employee Contributions");
(4) Solely for purposes of this Section, all contributions
to any "separate account" (as defined in Section
419A(d) of the Code) allocated to such Participant as
of a date within the Plan Year if such Participant is
a "Key Employee" within the meaning of Code Section
416(i); and
(5) Solely for purposes of this Section, all amounts
allocated, after March 31, 1984, to an individual
medical account, as defined in section 415(l)(2) of
the Code, which is part of a pension or annuity plan
maintained by the Company.
Notwithstanding the above, Annual Additions shall not include any
Forfeitures of Company Stock acquired with an Acquisition Loan
allocated to such Participant's Account as of a date within such Plan
Year, and such portion of Contributions applied by the Plan to the
repayment of interest on an Acquisition Loan and charged against the
Participant's Account as of a date within such Plan Year.
(b) "Maximum Annual Additions" of a Participant for a Plan Year
means the lesser of:
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<PAGE> 40
(1) twenty-five percent (25%) of the Participant's
Compensation, or
(2) the greater of thirty thousand dollars ($30,000) or
one-quarter of the dollar limitation in Code Section
415(b)(1)(A) as adjusted for cost of living increases
(determined in accordance with regulations prescribed
by the Secretary of the Treasury or his or her
delegate pursuant to the provisions of Section 415(d)
of the Code).
(c) "Annual Excess" means, for each Participant affected, the
amount by which the allocable Annual Additions for such Participant
exceeds or would exceed the Maximum Annual Addition for such
Participant.
8.2 Avoiding an Annual Excess. Notwithstanding any other provision of
this Plan, a Participant's "Annual Additions" for any Plan Year, which is hereby
designated as the "limitation year" for the Plan, as that term is used in
Section 415 of the Code, shall not exceed his or her "Maximum Annual Additions."
If, at any time during a Plan Year, the allocation of additional Contributions
for a Plan Year would produce an Annual Excess, the affected Participant shall
receive the Maximum Annual Addition from Contributions, and, at the direction of
the Committee, for the remainder of the Plan Year Contributions will be reduced,
if possible, to the amount needed for each affected Participant to receive the
Maximum Annual Addition. Notwithstanding the foregoing, with respect to any Plan
Year for which Annual Additions (without application of the last sentence
thereof) would exceed Maximum Annual Additions, then no more than one-third
(1/3) of the Contributions for such Plan Year which are deductible under Section
404(a)(9) of the Code may be allocated to HCEs. Any amount in excess of
one-third (1/3) of the Contributions for such Plan Year which are deductible
under Section 404(a)(9) of the Code and which would (without regard to the
preceding sentence) otherwise be allocable to HCEs shall be, with respect to
such Plan Year, allocated to the Accounts of any Participants who are not HCEs
in the same manner as Contributions are allocated.
8.3 Correcting an Annual Excess. If for any Plan Year as a result of a
reasonable error in estimating a person's Compensation, or such other facts and
circumstances which the Internal Revenue Service will permit, a Participant's
Annual Excess shall be treated in the following manner:
(a) Aggregate Employee Contributions allocable under a Related
Plan shall be distributed to the Participant, if permitted, by the
amount of the Annual Excess.
(b) If any Annual Excess (adjusted for investment gains and
losses) remains, Contributions shall be a Forfeiture for such
Participant from Contributions.
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<PAGE> 41
(c) Any Forfeiture of a Participant's allocations of Contributions
under subparagraph above shall be held in the Forfeiture Account and
shall be used for the Plan Year to reduce Contributions. If any such
amount remains in the Forfeiture Account, it shall again be held in
suspense in the Forfeiture Account and be utilized to reduce future
Contributions for succeeding Plan Years.
(d) Any amounts held in suspense in the Forfeiture Account
pursuant to Paragraph above remaining upon Plan termination shall be
returned to the Employers in such proportions as shall be determined by
the Committee.
8.4 Correcting a Multiple Plan Excess. If a Participant's Accounts have
or would have an Annual Excess, the Annual Excess shall be corrected by reducing
the Annual Addition to this Plan before reductions have been made to other
Related Defined Contribution Plans.
8.5 Two-Plan Limit. If a Participant participates in any Related
Defined Benefit Plan, the sum of the "Defined Benefit Plan Fraction" (as defined
below) and the "Defined Contribution Plan Fraction" (as defined below) for such
Participant shall not exceed one (called the "Combined Fraction").
(a) "Defined Benefit Plan Fraction" means, for any Plan Year, a
fraction, the numerator of which is the projected benefit payable
pursuant to Code Section 415(e)(2)(A) under all Related Defined Benefit
Plans and the denominator of which is the lesser of: (i) the product of
1.25 and the dollar limit in effect for the Plan Year under Code
Section 415(b)(1)(A), and (ii) the product of 1.4 and one hundred
percent (100%) of the Participant's average Compensation for his or her
high three (3) years.
(b) "Defined Contribution Plan Fraction" means, for any Plan Year,
a fraction, the numerator of which is the sum of the Annual Additions
(as determined pursuant to Section 415(c) of the Code in effect for
such Plan Year) to a Participant's Accounts as of the end of the Plan
Year under the Plan or any Related Defined Contribution Plan, and the
denominator of which is the lesser of:
(1) The sum of the products of 1.25 and the dollar limit
under Code Section 415(c)(1)(A) for such Plan Year and
for each prior year of service with a Commonly
Controlled Entity and its predecessor, and
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<PAGE> 42
(2) the sum of the products of 1.4 and twenty-five percent
(25%) of the Participant's Compensation for such Plan
Year and for each prior year of service with a
Commonly Controlled Entity and its predecessor.
If the Combined Fraction of such Participant exceeds one and if the
Related Defined Benefit Plan permits it, the Participant's Defined
Benefit Plan Fraction shall be reduced by limiting the Participant's
annual benefits payable from the Related Defined Benefit Plan in which
he or she participates to the extent necessary to reduce the Combined
Fraction of such Participant to one.
8.6 Short Plan Year. With respect to any change of the Plan Year (and
co-existent limitation year), the dollar limitation of the Maximum Annual
Addition for such Plan Year shall be determined by multiplying such dollar
amount by a fraction, the numerator of which is the number of months (including
fractional parts of a month) in the short Plan Year, and the denominator of
which is twelve (12).
8.7 Grandfathering of Applicable Limitations. The Plan shall recognize
and apply any grandfathering of applicable benefits and contributions
limitations which are permitted under ERISA, the Tax Equity and Fiscal
Responsibility Act of 1982 and the Tax Reform Act of 1986.
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<PAGE> 43
ARTICLE IX
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CUSTODIAL ARRANGEMENTS
9.1 Custodial Agreement. The Committee may enter into one or more
Custodial Agreements to provide for the holding, investment and payment of Plan
assets, or direct by execution of an insurance contract that all or a specified
portion of the Plan's assets be held, invested and paid under such a contract.
All Custodial Agreements, as from time to time amended, shall continue in force
and shall be deemed to form a part of the Plan. Subject to the requirements of
the Code and ERISA, the Committee may cause assets of the Plan which are
securities to be held in the name of a nominee or in street name provided such
securities are held on behalf of the Plan by:
(a) a bank or trust company that is subject to supervision by the
United States or a State, or a nominee of such bank or trust company;
(b) a broker or dealer registered under the Securities Exchange
Act of 1934, or a nominee of such broker or dealer; or
(c) a "clearing agency" as defined in Section 3(a)(23) of the
Securities Exchange Act of 1934, or its nominee.
9.2 Selection of Custodian. The Committee shall select, remove or
replace the Custodian in accordance with the Custodial Agreement. The subsequent
resignation or removal of a Custodian and the approval of its accounts shall all
be accomplished in the manner provided in the Custodial Agreement.
9.3 Custodian's Duties. Except as provided in ERISA, the powers, duties
and responsibilities of the Custodian shall be as stated in the Custodial
Agreement, and unless expressly stated or delegated to the Custodian (with the
Custodian's acceptance), nothing contained in this Plan shall be deemed by
implication to impose any additional powers, duties or responsibilities upon the
Custodian. All Contributions shall be paid into the Trust, and all benefits
payable under the Plan shall be paid from the Trust, except to the extent such
amounts are paid to a Custodian other than the Trustee. An Employer shall have
no rights or claims of any nature in or to the assets of the Plan except the
right to require the Custodian to hold, use, apply and pay such assets in its
hands, in accordance with the directions of the Committee, for the exclusive
benefit of the Participants and their Beneficiaries, except as hereinafter
provided.
9.4 Separate Entity. The Custodial Agreement under this Plan from its
inception shall be a separate entity aside and apart from Employers or their
assets, and the corpus and income thereof shall in no event and in no manner
whatsoever be subject to the rights or claims of any creditor of any Employer.
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9.5 Plan Asset Valuation. As of each Valuation Date, the Fair Market
Value of the Plan's assets held or posted to the Trust Fund shall be determined
by the Committee or the Custodian, as appropriate.
9.6 Right of Employers to Plan Assets. The Employers shall have no
right or claim of any nature in or to the assets of the Plan except the right to
require the Custodian to hold, use, apply, and pay such assets in its possession
in accordance with the Plan for the exclusive benefit of the Participants or
their Beneficiaries and for defraying the reasonable expenses of administering
the Plan; provided, that:
(a) if the Plan receives an adverse determination with respect to
its initial qualification under Section 401(a) of the Code,
Contributions conditioned upon the qualification of the Plan shall be
returned to the appropriate Employer within one (1) year of such denial
of qualification; provided, that the application for determination of
initial qualification is made by the time prescribed by law for filing
the respective Employer's return for the taxable year in which the Plan
is adopted, or by such later date as is prescribed by the Secretary of
the Treasury under Section 403(c)(2)(B) of ERISA;
(b) if, and to the extent that, deduction for a Contribution under
Section 404 of the Code is disallowed, Contributions conditioned upon
deductibility shall be returned to the appropriate Employer within one
(1) year after the disallowance of the deduction;
(c) if, and to the extent that, a Contribution is made through
mistake of fact, such Contribution shall be returned to the appropriate
Employer within one year of the payment of the Contribution;
(d) any amounts held suspended pursuant to the limitations of Code
Section 415 shall be returned to the Employers upon termination of the
Plan; and
(e) Financed Shares held in Unallocated Inventory with respect to
any Acquisition Loan, and the outstanding balance of the Net Repayment
Fund to the extent of a default of an Acquisition Loan between the
Trust and an Employer, but only upon (and to the extent of) the failure
of the Plan to meet the payment schedule of such Acquisition Loan.
All Contributions made hereunder are conditioned upon the Plan being
qualified under Sections 401(a) or of the Code and a deduction being
allowed for such contributions under Section 404 of the Code. If these
provisions result in the return of Contributions after such amounts
have been allocated to Accounts, such Accounts shall be reduced by the
amount of the allocation attributable to such amount, adjusted for any
losses or expenses.
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<PAGE> 45
9.7 Authority to Borrow.
(a) Terms of Loan. At the direction of the Committee, the Trustee
may incur Acquisition Loans from time to time to finance or refinance
the acquisition of Company Stock in accordance with the terms of the
Trust Agreement. An installment obligation incurred in connection with
the purchase of Company Stock shall constitute an Acquisition Loan. An
Acquisition Loan shall be for a specific term, shall bear a reasonable
rate of interest and shall not be payable on demand except in the event
of default. An Acquisition Loan may be secured by a pledge of the
Financed Shares so acquired or so refinanced. No other Trust assets may
be pledged as collateral for an Acquisition Loan, and no lender shall
have recourse against Trust assets other than any Financed Shares
remaining subject to pledge. If the lender is a party in interest (as
defined in ERISA), Financed Shares may be transferred to the lender
only upon and to the extent of the failure of the Plan to meet the
payment schedule of the loan. Any pledge of Financed Shares must
provide for the release of the shares so pledged in accordance with
this Section as payments on the Acquisition Loan are made by the
Trustee. The Committee shall not direct the Trust to make payments of
principal and, if applicable, interest on any Acquisition Loan in an
amount greater than the Net Repayment Fund plus any cash dividend
available on allocated shares of Company Stock.
(b) Release from Encumbrance. The number of Financed Shares to be
released from Unallocated Inventory for each Plan Year shall be
consistently determined with respect to any Acquisition Loan by the
Committee as follows. The number of Financed Shares held in Unallocated
Inventory immediately before the release for the current Plan Year
shall be multiplied by a fraction. The numerator of the fraction shall
be the amount of principal and interest paid on the Acquisition Loan
for that Plan Year. The denominator of the fraction shall be the sum of
the numerator plus the total payments of principal and interest on that
Acquisition Loan projected to be paid for all future Plan Years. For
this purpose, the interest to be paid in future years is to be computed
by using the interest rate in effect as of the Valuation Date. For this
purpose, Contributions used to repay an Acquisition Loan for a Plan
Year shall be determined with reference to the taxable year of the
Company ending with or within such Plan Year for which the Company
claimed a deduction under Code Section 404(a) for such Contribution,
and dividends used to repay an Acquisition Loan for a Plan Year shall
be determined with reference to the taxable year of the Company ending
with or within such Plan Year for which the Company claimed a deduction
under Code Section 404(k) for such dividend.
Notwithstanding the foregoing, the Committee may elect (at the time an
Acquisition Loan is incurred), or the provisions of the Acquisition
Loan may provide, for the release of Financed Shares from Unallocated
Inventory based solely on a fraction, the numerator of which is the
principal paid on the Acquisition Loan for that Plan Year and the
denominator of which is the sum of the numerator plus the total
payments of principal on the Acquisition Loan to
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be paid for all Plan Years after the Plan Year for which payment is
made. This method may be used only to the extent that: (1) the
Acquisition Loan provides for annual payments of principal and interest
at a cumulative rate that is not less rapid at any time than level
annual payments of such amounts for ten (10) years; (2) interest
included in any payment on the Acquisition Loan is disregarded only to
the extent that it would be determined to be interest under standard
loan amortization tables; and (3) the entire duration of the
Acquisition Loan repayment period does not exceed ten (10) years, even
in the event of a renewal, extension or refinancing of the Acquisition
Loan.
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<PAGE> 47
ARTICLE X
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ADMINISTRATION AND INVESTMENT MANAGEMENT
10.1 Authority and Responsibility of the Board of Directors. The Board
of Directors shall have overall responsibility for the establishment, amendment
and termination of the Plan and for the establishment of a funding policy for
the Plan. There is hereby delegated to the Committee, as set forth in this Plan
and the Custodial Agreement, such responsibilities as are designated in each
document.
10.2 Committee Membership. The Committee shall consist of not less than
two (2) persons, who shall be appointed by the Board of Directors of the
Company. In the absence of such appointment of the Committee, the Company will
be the Committee. Committee members shall remain in office at the will of the
Board of Directors and the Board of Directors may from time to time remove any
of said members with or without cause and shall appoint their successors.
10.3 Committee Structure. Any individual may be a member of the
Committee. Any member of the Committee may resign by delivering his or her
written resignation to the Board of Directors, and such resignation shall become
effective upon the date specified therein. A member who is an Employee shall
automatically cease to be a member upon his or her Termination of Employment. In
the event of a vacancy in membership, the remaining members shall constitute the
Committee in question with full power to act until said vacancy is filled.
10.4 Committee Actions. The Committee may act as follows:
(a) The members of the Committee may act at a meeting (including a
meeting at different locations by telephone conference) or in writing
without a meeting (through the use of a single document or concurrent
document).
(b) Any Committee member by writing may delegate any or all of his
or her rights, powers, duties and discretions to any other member with
the consent of such other member.
(c) The Committee shall act by majority decision, which action
shall be effective as if such action had been taken by all members of
the Committee; provided that by majority action one or more Committee
members or other persons may be authorized to act with respect to
particular matters on behalf of all Committee members.
(d) Subject to applicable law, no member of the Committee shall be
liable for an act or omission of the other Committee members in which
the former had not concurred.
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<PAGE> 48
(e) Any action by the Committee under this Plan shall be treated
as an action of a Named Fiduciary under this Plan; provided that, where
reference is made in this Plan (or where the Committee designates in
writing) that the action is on behalf of the Employer, the Committee
shall be acting as an agent of the Employer, pursuant to authority
granted by the Employer.
10.5 Compensation. The members of the Committee shall serve without
compensation for their services as such.
10.6 Responsibility and Authority of the Committee Regarding
Administration of the Plan. The Committee on behalf of the Participants will
enforce the Plan in accordance with its respective terms and maintain the Plan
in the form of a written document as required by law and to maintain its
tax-exempt status under the Code. Unless otherwise specifically provided in the
Plan, the Committee shall have full and complete authority, responsibility and
control over the management, administration, and operation of the Plan,
including, but not limited to, the authority and discretion to:
(a) Formulate, adopt, issue and apply procedures and rules and
change, alter or amend such procedures and rules in accordance with law
and as may be consistent with the terms of the Plan;
(b) Exercise such discretion as may be required to construe and
apply the provisions of the Plan, subject only to the terms and
conditions of the Plan;
(c) Appoint and compensate such agents and other specialists
(including attorneys, actuaries and accountants) to aid it in the
administration of the Plan, and arrange for such clerical, accounting,
legal or other services, as the Committee considers necessary or
appropriate in carrying out the provisions of the Plan;
(d) To appoint and compensate an independent outside accountant to
conduct such audits of the financial statements of the Plan as the
Committee considers necessary or appropriate;
(e) Delegate to the Custodian any tax withholding or tax reporting
obligations it may have under law;
(f) Be the agent for service of legal process;
(g) Determine the Accounting Periods and Sweep Date for various
transactions; and
(h) Take all necessary and proper acts as are required for the
Committee to fulfill its duties and obligations under the Plan.
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<PAGE> 49
10.7 Allocations and Delegations of Responsibility.
(a) Delegations. Each Named Fiduciary, respectively, shall have
the authority to delegate, from time to time, all or any part of its
responsibilities under the Plan to such person or persons as it may
deem advisable and to revoke any such delegation of responsibility. Any
action of the delegate in the exercise of such delegated
responsibilities shall have the same force and effect for all purposes
hereunder as if such action had been taken by the Named Fiduciary. Any
Named Fiduciary shall not be liable for any acts or omissions of any
such delegate. The delegate shall report periodically to the Named
Fiduciary, as applicable, concerning the discharge of the delegated
responsibilities.
(b) Allocations. Each Named Fiduciary, respectively, shall have
the authority to allocate, from time to time, all or any part of its
responsibilities under the Plan to one or more of its members as it may
deem advisable, and to revoke such allocation of responsibilities. Any
action of the member to whom responsibilities are allocated in the
exercise of such allocated responsibilities shall have the same force
and effect for all purposes hereunder as if such action had been taken
by the Named Fiduciary. Any Named Fiduciary shall not be liable for any
acts or omissions of such member. The member to whom responsibilities
have been allocated shall report periodically to the Named Fiduciary,
as applicable, concerning the discharge of the allocated
responsibilities.
(c) Limit on Liability. Fiduciary duties and responsibilities
which have been allocated or delegated pursuant to the terms of the
Plan or the Trust, are intended to limit the liability of each Named
Fiduciary, as appropriate, in accordance with the provisions of Section
405(c)(2) of ERISA.
10.8 Committee Bonding. The members of the Committee shall serve
without bond (except as otherwise required by federal law).
10.9 Information to be Supplied by Employer. Each Employer shall supply
to the Committee, within a reasonable time of its request, the names of all
Employees, their age, their date of hire, and the amount of Compensation paid to
each Employee, the names and dates of all Employees who incurred a Termination
of Employment during the Plan Year, and the Hours of Service earned by each
Employee during the Plan Year. Each Employer shall provide to the Committee or
its delegate such other information as it shall from time to time need in the
discharge of its duties. The Committee may rely conclusively on the information
certified to it by an Employer.
10.10 Records. The regularly kept records of the Committee (or, where
applicable, the Custodian) and any Employer shall be conclusive evidence of the
Accrued Benefit of a Participant, his or her Compensation, his or her age, his
or her status as an Eligible Employee, and all other matters contained therein
applicable to this Plan; provided that a Participant may request a correction in
the record of his or
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<PAGE> 50
her age at any time prior to retirement, and such correction shall be made if
within ninety (90) days after such request he or she furnishes in support
thereof a birth certificate, baptismal certificate, or other documentary proof
of age satisfactory to the Committee.
10.11 Plan Expenses. All expenses of the Plan shall be paid by the
Trust except to the extent paid by the Employers, and if paid by the Employers
such Employers may seek reimbursement of such expenses from the Trust and the
Trust shall reimburse the Employers if not prohibited by ERISA. If borne by the
Employers, expenses of administering the Plan shall be borne by the Employers in
such proportions as the Committee shall determine.
10.12 Fiduciary Capacity. Any person or group of persons may serve in
more than one fiduciary capacity with respect to the Plan.
10.13 Employer's Agent. The Committee shall act as agent for each
Employer in the administration of the Plan and the investment of the Plan's
assets and the Company shall act as agent for each Employer in amending or
terminating the Plan.
10.14 Plan Administrator. The Committee may appoint a plan
administrator who may (but need not) be a member of the Committee; and in the
absence of such appointment, the Committee shall be the plan administrator.
10.15 Appointment of Record-Keeper. The plan administrator has
responsibility for the maintenance of the records of the Participants' Accounts
in accordance with the terms of the Plan. Such records shall include
year-to-date and life-to-date Contributions under the Plan (adjusted for gains,
losses and distributions) allocated to each Participant's Accounts and such
other information, including such information as the Committee or plan
administrator require to satisfy their reporting and disclosure obligations
under ERISA and the Code. The plan administrator also has responsibility for
preparation and issuance of any and all reports required by the Code with
respect to distributions under the Plan and the responsibility with respect to
the withholding of any amounts required by the Code to be withheld at the source
and to transmit funds withheld and any and all necessary reports with respect to
such withholding to the Internal Revenue Service.
10.16 Plan Administrator Duties and Authority. Except to the extent
that certain responsibilities may be reserved by the Committee to itself or
delegated to other fiduciaries, the plan administrator shall perform all such
duties as are necessary to operate, administer and manage the Plan in accordance
with the terms thereof, including but not limited to the following:
(a) to determine all questions relating to a Participant's
eligibility for participation and benefits under the Plan and to
finally resolve, in the exercise of its full and complete discretionary
authority, any issues presented through the Plan claims procedure (and
any final determination of the Committee shall
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<PAGE> 51
not be subject to de novo review if challenged in court and shall not
be overturned unless proven to be arbitrary and capricious upon the
evidence considered by the Committee at the time of its decision);
(b) to provide each Participant with a summary plan description no
later than 90 days after he or she has become a Participant (or such
other period permitted under ERISA Section 104(b)(1)), as well as
informing each Participant of any material modification to the Plan in
a timely manner;
(c) to make appropriate determinations as to allocations of
Contributions and the application of Forfeitures;
(d) to interpret and construe the provisions of the Plan, to make
regulations and settle disputes within limits which are not
inconsistent with the terms thereof;
(e) to adopt and prescribe procedures for giving instructions to
the Committee, a Named Fiduciary or the Trustee;
(f) to prepare and file reports, notices, and any other documents
relating to the Plan which may be required by the Secretary of Labor,
the Secretary of the Treasury or any other governmental department or
agency, including, without limitation, those relating to a
Participant's service, accrued benefits, the percentage of such
benefits which are nonforfeitable, the date after which benefits are
nonforfeitable even if the Participant dies and annual registrations;
(g) to prepare and distribute to Participants all communication
materials required by ERISA;
(h) to compute and certify to the Custodian the amount and kind of
benefits payable to or withdrawn from Participants and Beneficiaries
and the date of payment, including withdrawals; and to prescribe
procedures to be followed by Participants and Beneficiaries in claiming
benefits;
(i) to keep records relating to Participants and other matters
applicable to this Plan, provided that the Committee and the Custodian
may, by a separate written agreement, require that the Custodian keep
such records;
(j) to respond to a QDRO;
(k) to make available for inspection and to provide upon request
at such charge as may be permitted and determined by the Committee,
documents and instruments required to be disclosed by ERISA;
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<PAGE> 52
(l) to take such actions as are necessary to establish and
maintain in full and timely compliance with any law or regulation
having pertinence to this Plan; and
(m) to have reasonable powers necessary or appropriate to
accomplish its duties as plan administrator, including delegation to,
employment of, or contracting for the services of others to assist in
performing its duties.
10.17 Committee Decisions Final. The decision of the Committee in
matters within its jurisdiction shall be final, binding, and conclusive upon the
Employers and the Custodian and upon each Employee, Participant, Spouse,
Beneficiary, and every other person or party interested or concerned.
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<PAGE> 53
ARTICLE XI
- --------------------------------------------------------------------------------
CLAIMS PROCEDURE
11.1 Initial Claim for Benefits. Each person entitled to benefits under
this Plan (a "Claimant") must sign and submit his or her claim for benefits to
the Committee or its agent in writing in such form as is provided or approved by
such Committee. A Claimant shall have no right to seek review of a denial of
benefits, or to bring any action in any court to enforce a claim for benefits
prior to his or her filing a claim for benefits and exhausting his or her rights
under this Section. When a claim for benefits has been filed properly, such
claim for benefits shall be evaluated and the Claimant shall be notified by the
Committee or agent of its approval or denial within ninety (90) days after the
receipt of such claim unless special circumstances require an extension of time
for processing the claim. If such an extension of time for processing is
required, written notice of the extension shall be furnished to the Claimant by
the Committee or agent prior to the termination of the initial ninety (90) day
period which shall specify the special circumstances requiring an extension and
the date by which a final decision will be reached (which date shall not be
later than one hundred eighty (180) days after the date on which the claim was
filed). A Claimant shall be given a written notice in which the Claimant shall
be advised as to whether the claim is granted or denied, in whole or in part. If
a claim is denied, in whole or in part, the Claimant shall be given written
notice which shall contain (1) the specific reasons for the denial, (2)
references to pertinent Plan provisions upon which the denial is based, (3) a
description of any additional material or information necessary to perfect the
claim and an explanation of why such material or information is necessary, and
(4) the Claimant's rights to seek review of the denial.
11.2 Review of Claim Denial. If a claim is denied, in whole or in part
(or if within the time periods prescribed for in the initial claim, the
Committee or agent has not furnished the Claimant with a denial and the claim is
therefore deemed denied), the Claimant shall have the right to request that the
Committee review the denial, provided that the Claimant files a written request
for review with the Committee within sixty (60) days after the date on which the
Claimant received written notification of the denial. A Claimant (or his or her
duly authorized representative) may review pertinent documents and submit issues
and comments in writing to the Committee. Within sixty (60) days after a request
for review is received, the review shall be made and the Claimant shall be
advised in writing by the Committee of the decision on review, unless special
circumstances require an extension of time for processing the review, in which
case the Claimant shall be given a written notification by the Committee within
such initial sixty (60) day period specifying the reasons for the extension and
when such review shall be completed (provided that such review shall be
completed within one hundred and twenty (120) days after the date on which the
request for review was filed). The decision on review shall be forwarded to the
Claimant by the Committee in writing and shall include specific reasons for the
decision and references to Plan provisions upon which the decision is based. A
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<PAGE> 54
decision on review shall be final and binding on all persons for all purposes.
If a Claimant shall fail to file a request for review in accordance with the
procedures described in this Section, such Claimant shall have no right to
review and shall have no right to bring action in any court and the denial of
the claim shall become final and binding on all persons for all purposes.
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<PAGE> 55
ARTICLE XII
- --------------------------------------------------------------------------------
ADOPTION AND WITHDRAWAL FROM PLAN
12.1 Procedure for Adoption. Any Commonly Controlled Entity may by
resolution of such Commonly Controlled Entity's board of directors adopt the
Plan for the benefit of its employees as of the date specified in the board
resolution. No such adoption shall be effective until such adoption has been
approved by the Committee.
12.2 Procedure for Withdrawal. Any Employer (other than the Company)
may, by resolution of the board of directors of such Employer, with the consent
of the Committee and subject to such conditions as may be imposed by the
Committee, terminate its adoption of the Plan. Notwithstanding the foregoing, an
Employer will be deemed to have terminated its adoption of the Plan when it
ceases to be a Commonly Controlled Entity. With respect to any Participant whose
Employer is deemed to have withdrawn from the Plan because it ceases to be a
Commonly Controlled Entity, such Participant's Account shall be fully vested.
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ARTICLE XIII
- --------------------------------------------------------------------------------
AMENDMENT, TERMINATION AND MERGER
13.1 Amendments.
(a) Power to Amend. The Board of Directors on behalf of all
Employers or the board of directors of an Employer, may amend, modify,
change, revise or discontinue this Plan by amendment at any time;
provided, however, that no amendment shall:
(1) increase the duties or liabilities of the
Custodian or the Committee without its written
consent;
(2) have the effect of vesting in any Employer any
interest in any funds, securities or other
property, subject to the terms of this Plan and
the Custodial Agreement;
(3) authorize or permit at any time any part of the
corpus or income of the Plan's assets to be used
or diverted to purposes other than for the
exclusive benefit of Participants and
Beneficiaries;
(4) except to the extent permissible under ERISA and
the Code, make it possible for any portion of the
Trust assets to revert to an Employer to be used
for, or diverted to, any purpose other than for
the exclusive benefit of Participants and
Beneficiaries entitled to Plan benefits and to
defray reasonable expenses of administering the
Plan;
(5) amend the provisions of this Plan which either (1)
state the amount and price of Company Stock to be
awarded to designated officers or categories of
officers and, specifically, the timing of such
awards, or (2) set forth a formula that determines
the amount, price and timing of such awards, shall
not be amended more than once every six (6)
months, other than to comport with changes in the
Code, ERISA or the rules thereunder; and
(6) have any retroactive effect as to deprive any such
person of any benefit already accrued, except that
no amendment made in order to conform the Plan as
a plan described in Section 401(a) of the Code of
which amendments are permitted by the Code or are
required or permitted by any other statute
relating to employees' trusts, or any official
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regulations or ruling issued pursuant thereto,
shall be considered prejudicial to the rights of
any such person.
(b) Restriction on Amendment. No amendment to the Plan shall
deprive a Participant of his or her nonforfeitable rights to benefits
accrued to the date of the amendment. Further, if the vesting schedule
of the Plan is amended, each Participant with at least three (3) years
of Vesting Service with the Employer may elect, within a reasonable
period after the adoption of the amendment, to have his or her
nonforfeitable percentage computed under the Plan without regard to
such amendment. The period during which the election may be made shall
commence with the date the amendment is adopted and shall end on the
latest of:
(1) sixty (60) days after the amendment is adopted;
(2) sixty (60) days after the amendment becomes
effective; or
(3) sixty (60) days after the Participant is issued
written notice of the amendment by the Employer or
the Committee.
The preceding language concerning an amendment to the Plan's vesting
schedule shall also apply when a Plan with a different vesting schedule
is merged into this Plan. In addition to the foregoing, the Plan shall
not be amended so as to eliminate an optional form of payment of an
Accrued Benefit attributable to employment prior to the date of the
amendment. The foregoing limitations do not apply to benefit accrual
occurring after the date of the amendment.
13.2 Plan Termination. It is the expectation of the Company that it
will continue the Plan and the payment of Contributions hereunder indefinitely,
but the continuation of the Plan and the payment of Contributions hereunder is
not assumed as a contractual obligation of the Company or any other Employer.
The right is reserved by the Company to terminate the Plan at any time, and the
right is reserved by the Company and any other Employer at any time to reduce,
suspend or discontinue its Contributions hereunder, provided, however, that the
Contributions for any Plan Year accrued or determined prior to the end of said
year shall not after the end of said year be retroactively reduced, suspended or
discontinued except as may be permitted by law. Upon termination of the Plan or
complete discontinuance of Contributions hereunder (other than for the reason
that the Employer has had no net profits or accumulated net profits), each
Participant's Accrued Benefit shall be fully vested. Upon termination of the
Plan or a complete discontinuance of Contributions, unclaimed amounts shall be
applied as Forfeitures and any unallocated amounts shall be allocated to
Participants who are Eligible Employees as of the date of such termination or
discontinuance on the basis of Compensation for the Plan Year (or short Plan
Year). Upon a partial termination of the Plan, the Accrued Benefit of each
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affected Participant shall be fully vested. In the event of termination of the
Plan, the Committee shall direct the Custodian to distribute to each Participant
the entire amount of his or her Accrued Benefit as soon as administratively
possible, but not earlier than would be permitted in order to retain the Plan's
qualified status under Section 401(a) of the Code, as if all Participants who
are Employees had incurred a Termination of Employment on the Plan's termination
date. If the Plan is terminated and neither the Company nor any Related Entity
maintains another defined contribution plan (other than an employee stock
ownership plan as defined in section 4975(e)(7) of the Code), the Committee may,
pursuant to Section 411 of the Code, direct the Custodian to distribute a
Participant's Accrued Benefit without the Participant's consent. If the Company
or a Related Entity does at that time maintain another defined contribution
plan, then the Committee may direct the Custodian to transfer the Participant's
Accrued Benefit to that defined contribution plan without the Participant's
consent if the Participant does not consent to an immediate distribution of his
Accrued Benefit from this Plan.
13.3 Plan Merger. The Plan shall not merge or consolidate with, or
transfer any assets or liabilities to any other plan, unless each person
entitled to benefits would receive a benefit immediately after the merger,
consolidation or transfer (if the Plan were then terminated) which is equal to
or greater than the benefit he or she would have been entitled to immediately
before the merger, consolidation or transfer (if the Plan were then terminated).
The Committee shall amend or take such other action as is necessary to amend the
Plan in order to satisfy the requirements applicable to any merger,
consolidation or transfer of assets and liabilities.
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ARTICLE XIV
- --------------------------------------------------------------------------------
SPECIAL TOP-HEAVY RULES
14.1 Application. Notwithstanding any provisions of this Plan to the
contrary, the provisions of this Article shall apply and be effective for any
Plan Year for which the Plan shall be determined to be a "Top-Heavy Plan" as
provided and defined herein.
14.2 Special Terms. For purposes of this Article, the following terms
shall have the following meanings:
(a) "Aggregate Benefit" means the sum of:
(1) the present value of the accrued benefit under each and
all defined benefit plans in the Aggregation Group
determined on each plan's individual Determination Date
as if there were a termination of employment on the
most recent date the plan is valued by an actuary for
purposes of computing plan costs under Section 412 of
the Code within the twelve (12) month period ending on
the Determination Date of each such plan, but with
respect to the first plan year of any such plan
determined by taking into account the estimated accrued
benefit as of the Determination Date; provided (A) the
method of accrual used for the purpose of this
Paragraph (1) shall be the same as that used under all
plans maintained by all Employers and Commonly
Controlled Entities if a single method is used by all
stock plans or, otherwise, the slowest accrual method
permitted under Section 411(b)(1)(C) of the Code, and
(B) the actuarial assumptions to be applied for
purposes of this Paragraph (1) shall be the same
assumptions as those applied for purposes of
determining the actuarial equivalents of optional
benefits under the particular plan, except that the
interest rate assumption shall be five percent (5%);
(2) the present value of the accrued benefit (i.e., account
balances) under each and all defined contribution plans
in the Aggregation Group, valued as of the valuation
date coinciding with or immediately preceding the
Determination Date of each such plan, including (A)
contributions made after the valuation date but on or
prior to the Determination Date, (B) with respect to
the first plan year of any plan, any contribution made
subsequent
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<PAGE> 60
to the Determination Date but allocable as of any date
in the first plan year, or (C) with respect to any
defined contribution plan subject to Section 412 of the
Code, any contribution made after the Determination
Date that is allocable as of a date on or prior to the
Determination Date; and
(3) the sum of each and all amounts distributed (other than
a rollover or plan-to-plan transfer) from any
Aggregation Group Plan, plus a rollover or plan-to-plan
transfer initiated by the Employee and made to a plan
which is not an Aggregation Group Plan within the
Current Plan Year or within the preceding four (4) plan
years of any such plan, provided such amounts are not
already included in the present value of the accrued
benefits as of the valuation date coincident with or
immediately preceding the Determination Date.
The Aggregate Benefit shall not include the value of any rollover or
plan-to-plan transfer to an Aggregation Group Plan, which rollover or
transfer was initiated by a Participant, was from a plan which was not
maintained by an Employer or a Commonly Controlled Entity, and was made
after December 31, 1983, nor shall the Aggregate Benefit include the
value of employee contributions which are deductible pursuant to
Section 219 of the Code.
(b) "Aggregation Group" means the Plan and one or more plans
(including plans that terminated) which is described in Section 401(a)
of the Code, is an annuity contract described in Section 403(a) of the
Code or is a simplified employee pension described in Section 408(k) of
the Code maintained or adopted by an Employer or a Commonly Controlled
Entity in the Current Plan Year or one of the four preceding Plan Years
which is either a "Required Aggregation Group" or a "Permissive
Aggregation Group".
(1) A "Required Aggregation Group" means all Aggregation
Group Plans in which either (1) a Key Employee
participates or (2) which enables any Aggregation Group
Plan in which a Key Employee participates to satisfy
the requirements of Sections 401(a)(4) and 410 of the
Code.
(2) A "Permissive Aggregation Group" means Aggregation
Group Plans included in the Required Aggregation Group,
plus one or more other Aggregation Group Plans, as
designated by the Committee in its sole discretion,
which satisfy the requirements of Sections 401(a)(4)
and 410 of the Code, when considered with the other
component plans of the Required Aggregation Group.
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<PAGE> 61
(c) "Aggregation Group Plan" means the Plan and each other plan in
the Aggregation Group.
(d) "Current Plan Year" means (1) with respect to the Plan, the
Plan Year in which the Determination Date occurs, and (2) with respect
to each other Aggregation Group Plan, the plan year of such other plan
in which occurs the Determination Date of such other plan.
(e) "Determination Date" means (1) with respect to the Plan and
its Plan Year, the last day of the preceding Plan Year; or (2) with
respect to any other Aggregation Group Plan in any calendar year during
which the Plan is not the only component plan of an Aggregation Group,
the determination date of each plan in such Aggregation Group to occur
during the calendar year as determined under the provisions of each
such plan.
(f) "Former Key Employee" means an Employee (including a
terminated Employee) who is not a Key Employee but who was a Key
Employee.
(g) "Key Employee" means an Employee (or a terminated Employee)
who at any time during the Current Plan Year or at any time during the
four preceding Plan Years is:
(1) an officer of a Commonly Controlled Entity whose
compensation from a Commonly Controlled Entity during
the Plan Year is greater than fifty percent (50%) of
the amount specified in Section 415(b)(1)(A) of the
Code (as adjusted for cost-of-living increases by the
Secretary of the Treasury) for the calendar year in
which the Plan Year ends; provided, however, that no
more than the lesser of (A) fifty (50) Employees, or
(B) the greater of (i) three (3) Employees or (ii) ten
percent (10%) (rounded to the next whole integer) of
the greatest number of Employees during the Current
Plan Year or any of the preceding four Plan Years shall
be considered as officers for this purpose. Such
officers considered will be those with the greatest
annual compensation as an officer during the five (5)
year period ending on the Determination Date;
(2) One of the ten employees who owns (or is considered to
own within the meaning of Section 318 of the Code) more
than a one half percent (1/2%) interest in value and
the largest percentage ownership interest in value in a
Commonly Controlled Entity and whose total annual
compensation from a Commonly Controlled Entity is not
less than the amount specified in Section 415(b)(1)(A)
of the Code (as adjusted for cost-of-living increases
by the
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<PAGE> 62
Secretary of the Treasury) for the calendar year in
which the Plan Year ends;
(3) A person who owns more than five percent (5%) of the
value of the outstanding stock of any Commonly
Controlled Entity or more than five percent (5%) of the
total combined voting power of all stock of any
Commonly Controlled Entity (considered separately) or;
(4) A person who owns more than one percent (1%) of the
value of the outstanding stock of a Commonly Controlled
Entity or more than one percent (1%) of the total
combined voting power of all stock of a Commonly
Controlled Entity (considered separately) and whose
total annual compensation (as defined in section
1.415-2(d) of the Treasury Regulations) from the
Employer or a Commonly Controlled Entity is in excess
of one hundred and fifty thousand dollars ($150,000).
The rules of Section 416 (i)(1)(B) and (C) of the Code shall be applied
for purposes of determining an Employee's ownership interest in a
Commonly Controlled Entity for purposes of Paragraphs (3) and (4)
herein. A Beneficiary (who would not otherwise be considered a Key
Employee) of a deceased Key Employee shall be deemed to be a Key
Employee in substitution for such deceased Key Employee. Any person who
is a Key Employee under more than one of the four Paragraphs of this
Section shall have his or her Aggregate Benefit under the Aggregation
Group Plans counted only once with respect to computing the Aggregate
Benefit of Key Employees as of any Determination Date. Any Employee who
is not a Key Employee shall be a Non-Key Employee.
(h) "Top-Heavy Plan" means the Plan with respect to any Plan Year
if the Aggregate Benefit of all Key Employees or the Beneficiaries of
Key Employees determined on the Determination Date is an amount in
excess of sixty percent (60%) of the Aggregate Benefit of all persons
who are Employees within the Current Plan Year; provided, that if an
individual has not performed services for an Employer or a Commonly
Controlled Entity at any time during the five (5) year period ending on
the Determination Date, the individuals's Accrued Benefit shall not be
taken into account. With respect to any calendar year during which the
Plan is not the only Aggregation Group Plan, the ratio determined under
the preceding sentence shall be computed based on the sum of the
Aggregate Benefits of each Aggregation Group Plan totaled as of the
last Determination Date of any Aggregation Group Plan to occur during
the calendar year.
14.3 Minimum Contribution. For any Plan Year that the Plan shall be a
Top-Heavy Plan, each Participant who is an Eligible Employee but who is neither
a Key Employee nor a Former Key Employee on the last day of the Plan Year shall
have
- 54 -
<PAGE> 63
allocated to his or her Account on the last day of the Plan Year a Contribution
in an amount equal to the lesser of (1) 3 percent (3%) of such Participant's
Compensation or (2) the amount which bears the same ratio or percentage to such
Participant's Compensation for the Plan Year that the Contributions and
Forfeitures allocated to the Account of a Key Employee bears to such Key
Employee's Compensation, but taking into account only the Key Employee who has
the highest such ratio or percentage for the Plan Year; provided, however, in no
event shall such contribution on behalf of such Participant be less than five
percent (5%) of such Compensation if any Aggregation Group Plan is a defined
benefit plan which does not satisfy the minimum benefit requirements with
respect to such Participant. The amount of Contributions required to be
allocated under this Section for any Plan Year shall be reduced by the amount of
Employer Contributions and Forfeitures allocated under this Plan on behalf of
the Participant and employer contributions and forfeitures allocated on behalf
of the Participant under any other defined contribution plan in the Aggregation
Group for the Plan Year. Elective Deferrals to any Aggregation Group Plan made
on behalf of a Participant in Plan Years beginning after December 31, 1984 but
before January 1, 1989 shall be deemed to be Employer Contributions for the
purpose of this Section. Elective Deferrals and matching contributions to
Aggregation Group Plans in Plan Years beginning on or after January 1, 1989
shall not be used to meet the minimum contribution requirements of this Section.
Where Employer Contributions and Forfeitures allocated on behalf of a
Participant are insufficient to satisfy the minimum contribution otherwise
required by this Section, an additional Contribution shall be made and allocated
to the Account of such Participant.
14.4 Maximum Benefit Accrual. For any Plan Year that the Plan is a
Top-Heavy Plan, the denominator of the "defined benefit plan fraction" and the
denominator of the "defined contribution plan fraction" shall be determined by
substituting "1.0" for "1.25"; provided, however, this limit shall not apply
with respect to an Employee for any Plan Year during which he or she accrues no
benefit under any plan of the Aggregation Group. The preceding sentence shall
not apply if, within this Article, there is substituted "four percent (4%)" for
"three percent (3%)" and "seven and one-half percent (7.5%)" for "five percent
(5%)" and "ninety percent (90%)" for "sixty percent (60%)."
14.5 Special Vesting. If the Plan becomes a Top-Heavy Plan after the
Effective Date, vesting for all Employees shall thereafter be accelerated to the
extent the following vesting schedule produces a greater vested percentage for
the Employee than the normal vesting schedule at any relevant time:
- 55 -
<PAGE> 64
Years of Vesting Service Vested Percentage
------------------------ -----------------
Less than 2 years 0%
2 years but less than 3 years 20%
3 years but less than 4 years 40%
4 years but less than 5 years 60%
5 years but less than 6 years 80%
6 years or more 100%
- 56 -
<PAGE> 65
ARTICLE XV
- --------------------------------------------------------------------------------
MISCELLANEOUS PROVISIONS
15.1 Assignment and Alienation. As provided by Code Section 401(a)(13)
and to the extent not otherwise required by law, no benefit provided by the Plan
may be anticipated, assigned or alienated, except to create, assign or recognize
a right to any benefit with respect to a Participant pursuant to a QDRO.
15.2 Protected Benefits. All benefits which are protected by the terms
of Code Section 411(d)(6) and ERISA Section 204(g), which cannot be eliminated
without adversely affecting the qualified status of the Plan on and after
January 1, 1997, shall be provided under this Plan to Participants for whom such
benefits are protected. The Committee shall cause such benefits to be determined
and the terms and provisions of the Plan immediately prior to January 1, 1997
are incorporated herein by reference and made a part hereof, but only to the
extent such terms and provisions are so protected. Otherwise, they shall operate
within the terms and provisions of this Plan, as determined by the Committee.
15.3 Plan Does Not Affect Employment Rights. The Plan does not provide
any employment rights to any Employee. The Employer expressly reserves the right
to discharge an Employee at any time, with or without Cause, without regard to
the effect such discharge would have upon the Employee's interest in the Plan.
15.4 Deduction of Taxes from Amounts Payable. The Custodian shall
deduct from the amount to be distributed such amount as the Custodian, in its
sole discretion, deems proper to protect the Custodian and the Plan's assets
held under the Custodial Agreement against liability for the payment of death,
succession, inheritance, income, or other taxes, and out of money so deducted,
the Custodian may discharge any such liability and pay the amount remaining to
the Participant, the Beneficiary or the deceased Participant's estate, as the
case may be.
15.5 Facility of Payment. If a Participant or Beneficiary is declared
an incompetent or is a minor and a conservator, guardian, or other person
legally charged with his or her care has been appointed, any benefits to which
such Participant or Beneficiary is entitled shall be payable to such
conservator, guardian, or other person legally charged with his or her care. The
decision of the Committee in such matters shall be final, binding, and
conclusive upon the Employer and the Custodian and upon each Employee,
Participant, Beneficiary, and every other person or party interested or
concerned. An Employer, the Custodian and the Committee shall not be under any
duty to see to the proper application of such payments.
15.6 Source of Benefits. All benefits payable under the Plan shall be
paid or provided for solely from the Plan's assets held under the Custodial
Agreement and the Employers assume no liability or responsibility therefor.
- 57 -
<PAGE> 66
15.7 Indemnification. To the extent permitted by law each Employer
shall indemnify and hold harmless each member (and former member) of the Board
of Directors, each member (and former member) of the Committee, and each officer
and employee (and each former officer and employee) of an Employer to whom are
(or were) delegated duties, responsibilities, and authority with respect to the
Plan against all claims, liabilities, fines and penalties, and all expenses
reasonably incurred by or imposed upon him or her (including but not limited to
reasonable attorney fees and amounts paid in any settlement relating to the
Plan) by reason of his or her service under the Plan if he or she did not act
dishonestly, with gross negligence, or otherwise in knowing violation of the law
under which such liability, loss, cost or expense arises. This indemnity shall
not preclude such other indemnities as may be available under insurance
purchased or provided by an Employer under any by-law, agreement, or otherwise,
to the extent permitted by law. Payments of any indemnity, expenses or fees
under this Section shall be made solely from assets of the Employer and shall
not be made directly or indirectly from the assets of the Plan.
15.8 Reduction for Overpayment. The Committee shall, whenever it
determines that a person has received benefit payments under this Plan in excess
of the amount to which the person is entitled under the terms of the Plan, make
two reasonable attempts to collect such overpayment from the person.
15.9 Limitation on Liability. No Employer nor any agent or
representative of any Employer who is an employee, officer, or director of an
Employer in any manner guarantees the assets of the Plan against loss or
depreciation, and to the extent not prohibited by federal law, none of them
shall be liable (except for his or her own gross negligence or willful
misconduct), for any act or failure to act, done or omitted in good faith, with
respect to the Plan. No Employer shall be responsible for any act or failure to
act of any Custodian appointed to administer the assets of the Plan.
15.10 Company Merger. In the event any successor corporation to the
Company, by merger, consolidation, purchase or otherwise, shall elect to adopt
the Plan, such successor corporation shall be substituted hereunder for the
Company upon filing in writing with the Custodian its election so to do.
15.11 Employees' Trust. The Plan and Custodial Agreement are created
for the exclusive purpose of providing benefits to the Participants in the Plan
and their Beneficiaries and defraying reasonable expenses of administering the
Plan, and the Plan and Custodial Agreement shall be interpreted in a manner
consistent with their being, respectively, a Plan described in Section 401(a) of
the Code and Custodial Agreements exempt under Section 501(a) of the Code. At no
time shall the assets of the Plan be diverted from the above purpose.
15.12 Gender and Number. Except when the context indicates to the
contrary, when used herein, masculine terms shall be deemed to include the
feminine, and singular the plural.
- 58 -
<PAGE> 67
15.13 Invalidity of Certain Provisions. If any provision of this Plan
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions hereof and the Plan shall be construed and
enforced as if such provisions, to the extent invalid or unenforceable, had not
been included.
15.14 Headings. The headings or articles are included solely for
convenience of reference, and if there is any conflict between such headings and
the text of this Plan, the text shall control.
15.15 Uniform and Nondiscriminatory Treatment. Any discretion
exercisable hereunder by an Employer or the Committee shall be exercised in a
uniform and nondiscriminatory manner.
15.16 Law Governing. The Plan shall be construed and enforced according
to the laws of the state in which the Trust is located, to the extent not
preempted by ERISA.
15.17 Notice and Information Requirements. Except as otherwise provided
in this Plan or in the Custodial Agreement or as otherwise required by law, the
Employer shall have no duty or obligation to affirmatively disclose to any
Participant or Beneficiary, nor shall any Participant or Beneficiary have any
right to be advised of, any material information regarding the Employer, at any
time prior to, upon or in connection with the Employer's purchase, or any other
distribution or transfer (or decision to defer any such distribution) of any
Company Stock or any other stock held under the Plan.
Executed this ____ day of __________, 1997, but effective as of the
Effective Date.
WALBRO CORPORATION
By:________________________________
Title:_____________________________
- 59 -
<PAGE> 1
EXHIBIT 10.5
EXHIBIT B
WALBRO ENGINE MANAGEMENT CORPORATION
I. Corporate Structure
A. Puts structure in place for future sale, spin-off etc. of Walbro
Engine Management Corporation if appropriate.
B. Allows management to earn ownership in WEMC.
C. Structure defines WEMC asset base and allows management to focus on
maximizing cash flow.
D. Structure allows clearer financial reporting and control.
E. Structure clarifies to financial public Walbro's two businesses.
F. Walbro has two separate businesses each in different stages of product
life cycle. Automotive is in growth cycle, Engine Management is in a
mature market with a forecasted down turn. It is time to reap the cash
flow benefits from Engine Management. Therefore, cash generation is
the appropriate measurement criteria for management.
II. Valuation of WEMC
A. Independent appraisal using a combination of the following:
1. Discounted cash flow
2. Book value
3. Liquidation value
B. Valuation amount is the basis for incentive plan.
January 11, 1991
<PAGE> 2
WALBRO ENGINE MANAGEMENT CORPORATION
MANAGEMENT EQUITY EARN OUT
1. The management of Walbro Engine Management (WEMC) will be given an
opportunity to earn up to 15% equity in WEMC by generating operating cash
flow sufficient to service $50,000,000 debt as illustrated in the debt
service schedule. The threshold cumulative total payment needed to earn
equity is all interest on the unpaid principal balance due plus 70% of
original principal balance on a pro rata basis.
If 70% of original principal is paid 0%
If 80% of original principal is paid 5%
If 90% of original principal is paid 10%
If 100% of original principal is paid 15%
VALUATION SCHEDULE
Walbro Engine Management Corporation has an estimated value of $50,000,000 plus.
Per the 11/30/90 balance sheet, book value of total assets over current
liabilities is $51,443,000. Based on a net operating profit return of 18%, cash
flow would support $50,000,000 debt and leave 2,664,000 for capital
expenditures.
Debt Service Schedule
10%
Payment Interest Principal Balance
Beginning 50,000,000
1st year 10,300,000 5,000,000 5,300,000 44,700,000
2nd year 10,300,000 4,470,000 5,830,000 38,870,000
3rd year 10,300,000 3,887,000 6,413,000 32,457,000
4th year 10,300,000 3,246,000 7,054,000 25,403,000
5th year 10,300,000 2,540,000 7,760,000 17,643,000
6th year 10,300,000 1,764,000 8,536,000 9,107,000
7th year 10,300,000 1,193,000 9,107,000 0
<PAGE> 3
WALBRO ENGINE MANAGEMENT CORPORATION
DEBT SERVICE CAPACITY SCHEDULE
WEMC Income Statement
1991
<TABLE>
<S> <C>
Net Operating Profit 7,153
Interest Expense 5,000
------
Net Operating Profit After Interest 2,153
Taxes 818
------
Net Income 1,335
------
</TABLE>
WEMC Cash Flow Statement
1991
<TABLE>
<S> <C>
Net Income 1,335
Depreciation & Amortization 4,000
------
Cash Flow From Operations 5,335
Interest Expense 5,000
------
Available for Debt Service
and Capital Expenditures 10,335
Debt Service Per Year 10,300
------
Available for Capital Expenditures 35
</TABLE>
------
<PAGE> 4
WALBRO ENGINE MANAGEMENT CORPORATION
Balance Sheet
11/30/90
<TABLE>
<CAPTION>
WCC WFE WSP WMX Total
GmbH WEMC
Assets
<S> <C> <C> <C> <C> <C>
Cash 14 70 298 382
Acct. Rec. 11,066 2,197 100 13,363
Inventory 8,513 1,166 1,484 11,163
Prepaids 3,070 486 364 3,920
Fixed Asset (Net) 21,317 3,107 5,928 1,975 32,327
Deferred Tools 1,343 1,343
Patents 451 451
Other 34 765
------ ----- ----- ----- ------
Total Assets 45,808 7,727 8,074 2,075 63,684
====== ===== ===== ===== ======
Liabilities
Accounts Payable 3,370 2,703 203 6,276
Accrued Expense 3,346 1,174 348 4,868
Long-term Liab. 836 261 1,097
Long-term Debt 4,928 3,986 1,340 10,254
----- ----- ----- ----- ------
Total Liabilities 6,716 9,641 4,798 1,340 22,495
Equity 41,189
------
Total Liabilities & Equity 63,684
======
</TABLE>
<PAGE> 5
WALBRO ENGINE MANAGEMENT CORPORATION
TARGETED NET OPERATING PROFIT
<TABLE>
<CAPTION>
14% 16% 18%
<S> <C> <C> <C>
Sales 68,994 68,994 68,994
NOP 9,659 11,039 12,419
R & D 812 812 812
-------- --------- --------
NOP Before Int. 8,847 10,227 11,607
Interest 5,000 5,000 5,000
------- ------- -------
Net Inc Before Taxes 3,847 5,227 6,607
Taxes 1,539 2,090 2,643
------- ------- -------
Net Income 2,308 3,137 3,964
======= ======= =======
</TABLE>
TARGETED CASH FLOW AND DEBT SERVICE
<TABLE>
<CAPTION>
14% 16% 18%
<S> <C> <C> <C>
Net Income 2,308 3,137 3,964
Depreciation 4,000 4,000 4,000
Interest Expense 5,000 5,000 5,000
------ ------ ------
Available for
Debt Service 11,308 12,137 12,964
Debt Service 10,300 10,300 10,300
Available for
Corporate Exp. 1,008 1,837 2,664
====== ====== ======
</TABLE>
<PAGE> 6
WALBRO ENGINE MANAGEMENT CORPORATION
ADMINISTRATION OF INCENTIVE PLAN
1. Committee of five individuals will administer the incentive plan. Membership
as follows:
A. Chairman Walbro Holding
B. WEMC President
C. WEMC Director of Operations
D. Two Participants elected each year from the incentive pool.
2. Committee determines who will participate in the incentive program yearly
in advance (estimate 10 people will participate).
3. Committee allocates 100 points each year to the individuals who are
participating.
4. Based on the total equity earned over the five year period, each employee
receives a percentage of it based on the number of points he has
accumulated over the five year period divided by 500.
<PAGE> 7
WALBRO ENGINE MANAGEMENT CORPORATION
EARNED EQUITY ALLOCATION
Example 1.
Assumptions:
Number of employees included in incentive program 10
--
Five equal payments of $10,300,000 per year
Each employee has constant number of points allocated to him/her
2 Employees 150 points
4 Employees 200 points
4 Employees 150 points
---
500 points
Because management met the payment schedule necessary to pay off
$50,000,000 the following distribution of equity would occur.
2 Employees receive 15% of 15% = 2.25% each
4 Employees receive 10% of 15% = 1.5% each
4 Employees receive 7.5% of 15%= 1.125% each
Example 2.
Assumptions:
Number of employees 10 1st and 2nd year
13 3rd, 4th and 5th year
Payments $ 9,300,000 in 1st, 2nd and 3rd year
$10,300,000 in 4th and 5th
Points
1st and 2nd years Five employees 15 points each
Five employees 5 points each
3rd, 4th and 5th years Five employees 12 points each
Eight employees 5 points each
Because management underpaid it's payment by $1,000,000 in each of the first
three years, they were paying at the 90% rate or earning equity at the 10% rate
instead of the 15% rate. Therefore, in the first three years there is 2% equity
to allocate for each year.
Five employees earned 66 points each 330 points
Five employees earned 25 points each 125 points
Three employees earned 15 points each 45 points
---
500 points
<PAGE> 8
Equity to be Distributed
(3years x 2% + 2years x 3%) = 12%
Five employees earned (66/500 x 12%) = 1.58% each
Five employees earned (25/500 x 12%) = .6% each
Three employees earned (15/500 x 12%) = .36% each
<PAGE> 1
EXHIBIT 10.7
JOINT VENTURE AGREEMENT
This Joint Venture Agreement (the "Agreement") is made and entered into
as of the day of January 1, 1993, between WALBRO AUTOMOTIVE CORPORATION, a
Delaware corporation whose registered office is located at Auburn Hills,
Michigan 48326 USA, ("Walbro"), and JAEGER S.A., a company incorporated under
the laws of France with share capital of FRF 156,000,000, whose registered
office is located at 19 rue Lavoisier, 9200 Nanterre France and registered at
the Company and Commercial Registry of Nanterre number B552150195, represented
by Frederic Girardot ("Jaeger"). Jaeger is an indirect, majority-controlled
subsidiary of Magneti Marelli S.p.A., a company incorporated under the laws of
Italy ("Marelli"). Walbro and Jaeger are hereinafter collectively referred to as
"the parties".
R E C I T A L S:
A. Walbro designs and manufactures fuel delivery subsystems as
original equipment for application on automotive electronic fuel injection
systems.
B. The parties believe, based on their extensive experience in
different aspects of fuel delivery systems, that the market for fuel delivery
systems will develop so as to offer important opportunities for suppliers that
have the ability to design and manufacture integrated fuel delivery systems,
which generally include a fuel pump, module, level sensor, bracket, tubes and
flanges, connectors and filter (collectively, an "FDS").
C. Jaeger designs and manufactures, inter alia, various fuel level
sensors, brackets and other ancillary components for applications in fuel
delivery subsystems.
D. Walbro has advanced technology with respect to automotive
electronic fuel injection system components, making particular technological
advancements in the design and manufacture of electric fuel pumps and other
delivery system-related technology.
E. In light of the foregoing and the parties' objective to compete
effectively in the South American markets, the parties desire to utilize their
respective strengths by establishing a Joint Venture (the "JV"), to be jointly
owned by Walbro and Jaeger, to develop, manufacture and market integrated FDS
and their component elements for sale to designated markets, as further
described below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and undertakings provided herein, the parties agree as follows:
ARTICLE I
FORMATION OF THE JV
1.1 INCORPORATION. The parties will cause the incorporation and
registration of the JV as sociedade por quotas de responsabilidade limitada
("Limitada") organized under the laws of Brazil. The Contrato Social of the JV
("Charter") shall be substantially in the form of EXHIBIT 1.1 attached hereto.
<PAGE> 2
1.2 OWNERSHIP. The equity interest in the JV will be owned by the
parties based on their percentage share of capital contributions of 51% for
Jaeger and 49% for Walbro, as set forth in SECTION 2.1, as may be adjusted from
time to time ("Capital Percentages"). Such ownership may be through direct or
indirect wholly-owned subsidiaries or Controlled Affiliates (as defined in
Section 6.1) of either or both parties.
1.3 PURPOSE. The purpose of the JV will be to develop, manufacture and
market FDS and component elements thereof to the JV Territory as described in
SECTION 1.4 below. An FDS includes a fuel pump, module, level sensor, brackets,
tubes and flanges, connectors, filters and related components and subassemblies.
Except as expressly provided in SECTION 4.3, the JV will be the exclusive
vehicle through which each of the parties develops, manufactures and markets FDS
and component elements thereof in the JV Territory for both automotive original
equipment manufacturers and aftermarket customers.
1.4 TERRITORY. The designated market for the JV (the "JV Territory")
will be Colombia, Venezuela, Brazil, Guyana, Suriname, French Guiana, Ecuador,
Peru, Bolivia, Chile, Argentina, Paraguay and Uruguay and any new nation created
by the merger or separation of any of the above countries and all territories in
the South regions controlled by any of the above countries. The territory shall
not include Mexico.
1.5 NAME. The parties agree that the JV shall operate under the name
Marwal do Brasil Ltda.
ARTICLE II
CAPITALIZATION AND FUNDING OF THE JV
2.1 CAPITAL CONTRIBUTIONS. The JV will be formed and capitalized as
follows:
(a) The initial capitalization of the JV shall be $3,000,000 of
equity. The above amounts shall be contributed to the JV by the parties in
proportion to their respective Capital Percentages.
(b) The equity contributions constituting the initial
capitalization shall be made at such times as requested by the Board.
2.2 OPERATING DEFICITS. Operating deficits of the JV beyond those
provided for in the initial capitalization described above or needs for
additional working capital will be funded by outside borrowings to the maximum
extent available. If guarantees are required to secure outside borrowings, the
parties shall render such guarantees in proportion to their Capital Percentages.
Such guarantees shall be several except if and to the extent a bank requires the
guarantees to be joint and several, in which event each party shall have a right
of contribution from the other party. Any additional operating deficits or
working capital needs will be funded by the parties in proportion to their
respective Capital Percentages. Unless otherwise agreed at the time of funding,
such deficits will be funded by loans from the parties.
2.3 SUBSEQUENT CAPITAL OR LOANS. Additional capital requirements
contemplated by the Business Plan will be made by the parties in proportion to
their respective Capital Percentages. No additional capital contributions or
loans other than those contemplated by the Business Plan will be
<PAGE> 3
required unless approved by both parties; if so approved, they will also be made
in proportion to their respective Capital Percentages.
ARTICLE III
GOVERNANCE OF THE JV
The parties agree that the JV will be governed substantially as set
forth below, and the parties agree and acknowledge that these governance
provisions have been agreed to for the direct benefit of the JV and its
business. The parties further agree: (a) that the JV will be structured to
reflect this governance to the fullest extent permitted under applicable law;
and (b) that, in the event of a conflict between the Charter and the following
provisions, the following provisions will prevail to the extent such a result is
not directly contrary to applicable public policy.
3.1 MANAGEMENT TEAM. The day-to-day operations of the JV will be
conducted by two managers and their staff appointed by Walbro and Jaeger.
3.2 CONSULTATIVE BOARD.
3.2.1 COMPOSITION. The JV will have a Consultative Board or
similar governing body (the "Board") comprised of four persons which shall
function at the shareholder level. Jaeger will designate two members (the
"Jaeger Members"), and Walbro will designate two members (the "Walbro Members").
The Board will elect the Chairman from among the members. The Chairman will be a
designee of Jaeger. The Board will also elect a Vice Chairman from among the
members, who will be a designee of Walbro. Members of the Board shall be
designated by Notice and will serve until replaced by the party so designating.
3.2.2 ROUTINE DECISIONS BY THE BOARD. For all matters other than
those set forth in SECTION 3.2.3:
(a) each member shall be given 7 days' written notice (with
acknowledgment of receipt) of any meeting, annual or special, of the Board;
(b) attendance in person at such a meeting, without written
objection to lack of sufficient notice, waives this notice requirement;
(c) three members shall constitute a quorum;
(d) the vote of a majority of all members present in person shall
be decisive;
(e) the vote of the Chairman will be decisive in a tie vote; and
(f) whenever necessary under Brazilian law, decisions of the Board
shall be confirmed by a general shareholder meeting.
<PAGE> 4
3.2.3 SPECIAL MATTERS. With respect to each of the following
situations, the Board will not have the power to act unless the requisite
majority voting in favor of a resolution includes at least one Walbro Member and
one Jaeger Member or in the alternative there is unanimous approval by one
Walbro Member and one Jaeger Member; and whenever necessary under Brazilian law,
decisions of the Board shall be confirmed by a general shareholder meeting.
(a) payment of a dividend other than from current year's earnings;
(b) approval, ratification or substantial change of the operating
budget of the JV, including without limitation, the capital expenditures,
additions or improvements for the year;
(c) approval, ratification or substantial change of the Business
Plan;
(d) sale of a substantial portion of the assets of the JV;
(e) authorization or approval of a merger, consolidation or change
in the capital structure of the JV;
(f) creation or incurrence of indebtedness for borrowed money if,
after giving effect to the creation of such indebtedness, the total amount of
the JV's indebtedness for borrowed money will exceed $2,000,000, except
unsecured current liabilities incurred in the ordinary course of business;
(g) creation or incurrence of any mortgage, pledge, lien, charge
or encumbrance upon any property or assets now owned or hereinafter acquired by
the JV except for (i) mortgages, pledges, liens, charges or encumbrances on, and
incurred at the time of and in connection with the acquisition of property
acquired in the ordinary course of business, (ii) minor liens and encumbrances,
and (iii) other liens and encumbrances for amounts not exceeding $2,000,000 in
the aggregate at any one time outstanding;
(h) making, ratifying or causing the JV to become a party to a
contract or commitment, or to renew, extend or modify any contract or commitment
between JV the and one of its equity holders or an "affiliate" of an equity
holder which requires payment of an aggregate amount in excess of $250,000. For
purposes of this subsection, an "affiliate" will mean:
i. a company, domestic or foreign, of which an equity holder in
the JV owns or controls, directly or indirectly, at least
25 % of the assets, voting stock or capital;
ii. a company, domestic or foreign, which owns or controls,
directly or indirectly, at least 25% of the assets, voting
stock or capital of an equity holder of the JV; or
iii. a company, domestic or foreign, under common control with an
equity holder through direct or indirect ownership of at
least 25 % of the assets, voting stock or capital of that
company.
(i) material agreement or commitment to any matter required of the
JV pursuant to a contract or agreement, including Ancillary Documents, with
Jaeger, Walbro or an affiliate (as that term is
<PAGE> 5
defined in subsection (h) above) of Jaeger or Walbro, including the modification
or termination of any existing contract;
(j) agreement or commitment to purchase services, from Walbro,
Jaeger or their affiliates (as that term is defined in subsection (h) above);
and
(k) approval of the licensing or sublicensing of any FDS
technology, fuel pump or other component embodying FDS technology, by the JV.
(1) any amendment to the Charter.
In case of a deadlock over one or more of these issues, the provisions set forth
in SECTION 3.2.4 below will control.
3.2.4 DEADLOCK. The following sets forth the parties' agreement
with respect to a deadlock situation. In the event that:
(a) either of Jaeger or Walbro (in this subsection called "the
First Party") gives written notice to the other party (in this subsection called
"the Second Party") specifying as subject to this subsection a resolution
requiring the affirmative vote of a majority of the Board, including at least
one Walbro Member and one Jaeger Member or the unanimous approval of the
shareholders, which resolution was previously put to and not passed by a general
or special meeting of the Board or shareholders, as applicable, because the
Second Party or its designee Members present did not vote in favor of the
resolution or voted against the resolution, or the Second Party or its designee
Members were not present for the vote; and
(b) such resolution is again put at another such meeting called
within 30 days of the original meeting and the First Party or its designee
Members present, as the case may be, votes for the resolution but the Second
Party or its designee Members, as the case may be, does not vote or votes
against the resolution, or the Second Party or its designee Members, as the case
may be, are not present for the vote, then a deadlock situation will be deemed
to have arisen. Within seven days of such event arising, Walbro and Jaeger will
prepare and circulate to the other a memorandum or other form of statement
setting out its position on the matter in dispute and its reasons for adopting
such position. Each such memorandum or statement will be considered by the Chief
Executive Officers of Jaeger and of Walbro who will respectively use their
reasonable efforts to resolve such dispute.
If the parties agree upon a resolution of the dispute, they will
jointly sign a statement setting forth the terms of such resolution and Walbro
and Jaeger will exercise all voting rights and other powers of control available
to them in relation to the JV to procure that such resolution is fully and
promptly carried into effect.
If a resolution of the dispute is not agreed upon within 30 days
after delivery of the memorandum or statements mentioned above or such longer
period as Walbro and Jaeger may agree in writing, the JV will automatically
terminate as prescribed in ARTICLE VII.
<PAGE> 6
If a resolution is agreed upon by the parties but is not
implemented by the JV within 60 days after such agreement, or such longer period
as Walbro and Jaeger may agree in writing, the JV will automatically terminate
as prescribed in ARTICLE VII.
ARTICLE IV
CONDUCT OF THE JV
4.1 BUSINESS PLAN. A five-year business plan (the "Business Plan") in
the form attached as EXHIBIT 4.1 will be approved by the Board in accordance
with SECTION 3.2.3 and will be implemented by the management of the JV. The
Business Plan will include initial and subsequent funding requirements. The
Business Plan will be revised and updated on an annual basis by the Board in
accordance with Section 3.2.3.
4.2 MANUFACTURING. Components to be incorporated into the FDS products
will be selected based on "best in class" for quality, performance and cost. The
JV will provide customer application engineering and manufacturing technology
with substantial support from Walbro under the Engineering Support Agreement.
The parties acknowledge that certain products will be manufactured by the JV
initially, that fuel pumps will be manufactured by Walbro and sold to the JV and
that certain level sensors will be manufactured by Jaeger and sold to the JV.
The JV may purchase fuel pumps and other components from Walbro and level
sensors and other components from Jaeger at prices to be agreed upon.
4.3 MARKETING. The JV will be responsible for the marketing of all FDS
products in the JV Territory. Distribution and marketing of FDS products to
aftermarket customers in the JV territory will be handled by the JV through the
Marelli or JV network as mutually agreed upon by the parties. Walbro shall not
sell FDS products in the JV Territory, except that Walbro may continue its
current practice of selling to U.S. aftermarket customers who export to the JV
Territory independent of the Marelli network.
4.4 ENGINEERING SUPPORT FROM WALBRO. The Business Plan provides for
certain engineering services to be provided to the JV by Walbro. Walbro will
provide such services to the JV on the basis provided under, and which services
will be governed by, the Walbro Engineering Support Agreement in substantially
the form attached as EXHIBIT 4.4. If and when necessary, simplified versions of
this agreement shall be prepared for filing with the INPI (Brazilian patent
office) or other governmental bodies. As between the parties, the terms of the
Engineering Support Agreement, as per Exhibit 4.4 shall prevail in any conflict
with the terms of the agreements filed with the INPI or any other governmental
body.
ARTICLE V
LICENSES
5.1 JAEGER TECHNOLOGY LICENSE. Jaeger will provide all of its current
FDS component (other than fuel pump) technology to the JV via a fully paid-up
license (the "Jaeger License"), in the form of EXHIBIT 5.1, which is exclusive
in the JV Territory. The Jaeger License will provide Jaeger with all
modifications and improvements made by the JV to the level sensor technology
licensed thereby via a grant-back of such rights.
<PAGE> 7
5.2 WALBRO TECHNOLOGY LICENSE. Walbro will provide all of its FDS
technology to the JV via a license (the "Walbro License"), substantially in the
form of EXHIBIT 5.2, which will be exclusive in the JV Territory (except for the
Ford Motor Company and General Motor Corporation licenses to produce for their
own use, as such licenses may be renewed or extended from time to time). The
Walbro License shall provide that the sale of "Future Licensed Products" will be
on a royalty-bearing basis. The Walbro License will provide Walbro with all
modifications and improvements to the fuel pump technology licensed thereby via
a grant-back of such rights.
5.3 BRAZILIAN LICENSES FOR FILING. If and when necessary, simplified
versions of the licenses in Sections 5.1 and 5.2 shall be prepared for filing
with the INPI (Brazilian patent office). These simplified licenses shall comply
with the requirements of the INPI and will be constructed to protect the
parties' property rights in their patents, trademarks, logos, know-how and the
like. As between the parties, the terms of the licenses under Sections 5.1 and
5.2 shall prevail in any conflict with the terms in the licenses filed with the
INPI.
5.4 FUTURE JV TECHNOLOGY. The JV may develop future FDS technology for
use in its operations and will be the owner of any such technology except as
provided by grant-back in Sections 5.1 and 5.2. The JV will grant to Walbro a
non-exclusive license to use all new FDS technology owned by the JV in areas
other than the JV Territory via a royalty-bearing license to be agreed upon by
the parties, unless said technology is in any significant manner a modification
or improvement of the technology licensed pursuant to the Walbro License which
was not the subject of a "grant-back", in which case the license will be
royalty-free. The parties further agree that, in negotiating the royalty to be
paid under such license agreement, they will take into account the relative
contributions of technology supplied by Walbro, supplied by Jaeger, and
developed by the JV itself to the products covered by such license.
5.5 CONSEQUENCES OF JV TERMINATION ON WALBRO LICENSE.
5.5.1 TERMINATION GENERALLY. If the JV terminates under ARTICLE
VII for any reason other than those described in SECTIONS 5.5.2 and 5.5.3 below,
Walbro agrees to enter into a new license agreement with the JV or Jaeger, as
the case may be, provided that the Walbro License has not been terminated by
Walbro due to a material breach by the JV thereof. The terms of the new license
shall be substantially identical to the terms of the Walbro License, except
that: (a) the royalty rate to be paid with respect to Licensed Products (as
defined in the Walbro License) shall be revised to a reasonable royalty rate
which is agreed upon by the parties hereto or is determined by an appropriate
expert appointed by the parties (or, if the parties cannot agree on such
appointment, the expert shall be appointed through the arbitration process set
forth in SECTION 9.6); and (b) certain of the other terms of the Walbro License
shall be changed as set forth in EXHIBIT 5.5.1. Walbro's obligation hereunder
shall be void and no license shall be granted unless all of the terms of the
above license are approved by the appropriate Brazilian governmental
authorities.
5.5.2 CERTAIN WALBRO BREACHES. If the JV terminates under SECTION
7.1.6, then the Walbro License shall continue in full force and effect
regardless of termination of the JV, and the Walbro License may be assignable to
Jaeger at that time.
<PAGE> 8
5.5.3 CERTAIN JAEGER BREACHES. If the JV terminates under Section
7.1.5, then Walbro shall have no further obligation to enter into a new license
with either the JV or Jaeger.
ARTICLE VI
RESTRICTIONS ON TRANSFER OF INTERESTS IN THE JV
6.1 NO TRANSFER WITHOUT APPROVAL. Neither Walbro nor Jaeger may
transfer any of its equity interests in the JV to any third party (other than
direct or indirect Controlled Affiliates) without the prior written approval of
the other party. It is the intention of the parties that there be only two
owners of the JV; consequently, any attempted transfer of equity interests in
the JV must encompass the entire equity interest of the transferring party.
For purposes of this Agreement, a "Controlled Affiliate" of a party
means any person which controls, is controlled by or is under common control
with, such party; "control" means the ownership of a majority of both the voting
power of, and the equity interests in, a person.
6.2 RIGHT OF FIRST REFUSAL. If for any reason a transfer of equity
interest in the JV cannot be restricted as provided in SECTION 6.1, then a
transfer by either party of any of its shares of capital stock of the JV to any
third party (other than to a direct or indirect Controlled Affiliate), shall be
subject to a right of first refusal by the other party to acquire such interests
as set forth below.
6.2.1 FIRST OFFER. If either of Walbro or Jaeger receives from a
third party (the "Outsider") a bona fide written offer (a "Bona Fide Offer") to
purchase all of its shares of capital stock of the JV (the "Equity Interest"),
such party (the "Selling Party") agrees that prior to effecting any sale
pursuant to such Bona Fide Offer, it will first make a written offer (the
"Offer") upon the terms and conditions provided herein to sell its Equity
Interest to the other party (the "Offeree Party").
6.2.2 NOTICE OF OFFER. The Offer will set forth the following:
(a) the Selling Party's intention to sell its Equity Interest;
(b) a photostatic copy of the Bona Fide Offer of the Outsider, and
all written communications relating to the proposed sale and purchase of the
Equity Interest;
(c) a written offer to sell to the Offeree Party the Equity
Interest of the Selling Party upon the same terms and conditions and for the
same price as the Bona Fide Offer; and
(d) the U.S. dollar equivalent of the price.
6.2.3 OFFEREE PARTY ACCEPTANCE. The Offeree Party may accept such
Offer for all, but not less than all, of the offered Equity Interest by giving
written notice within 30 days after receipt of the Offer to the Selling Party.
If the sale to the Offeree Party is not consummated within 45 days after the
expiration of this 30-day notice period (which 45-day period will be tolled by
any waiting period or suspension of the transaction imposed or required by
applicable law or any unnecessary delay caused by the Selling Party) or
<PAGE> 9
as provided in the Bona Fide Offer, the Selling Party will have the right to
sell its interest to the Outsider as provided in SECTION 6.2.5 below.
6.2.4 PURCHASE BY THE OFFEREE PARTY. Any purchase by the Offeree
Party pursuant to this ARTICLE VI will be consummated upon the same terms and
conditions and for the U.S. dollar equivalent price as the Bona Fide Offer for
the Equity Interest. Any terms and conditions not specified in the Bona Fide
Offer will be mutually agreed upon by the Offeree Party and the Selling Party.
6.2.5 PURCHASE BY OUTSIDER. If the Offeree Party fails to accept
the Offer pursuant to SECTION 6.2.3, the Selling Party will then have the right
to sell its Equity Interest to such Outsider on the same terms and conditions as
contained in the notice described in SECTION 6.2.2; provided that (i) the sale
to the Outsider is consummated within 45 days after the expiration of the 30-day
option period described in SECTION 6.2.3 (which 45-day period will be tolled by
any waiting period or suspension of the transaction imposed or required by
applicable law) or as provided in the Bona Fide Offer, and (ii) the Outsider
becomes a party to this Agreement contemporaneous with his purchase of the
Equity Interest. If the Selling Party and the Outsider do not consummate the
sale of the Equity Interest within the time period described in (i) above or
intend to consummate such sale on materially different terms than the Bona Fide
Offer, the Equity Interest may only be sold to said Outsider after again
complying with the terms of this ARTICLE VI.
ARTICLE VII
TERMINATION OF THE JV
7.1 TERM AND TERMINATION OF THE JV. Unless otherwise terminated as
provided below, the JV will be of perpetual duration. The JV will be terminated:
7.1.1 BY MUTUAL CONSENT. At any time by the mutual consent of the
parties;
7.1.2 FOR BREACH. Upon the material breach, which is not cured
within 90 days after notice thereof, by a party of its obligations to the JV or
otherwise under this Agreement, at the option of the non-breaching party
exercised within 10 days after the expiration of the 90-day cure period;
7.1.3 BANKRUPTCY. Automatically upon the filing of a voluntary
petition or answer admitting jurisdiction of the court and the material
allegations, or the consent to, an involuntary petition pursuant to or
purporting to be pursuant to any reorganization or insolvency law of any
jurisdiction, or an assignment for the benefit of creditors, or an application
for or consent to the appointment of a receiver or trustee of a substantial part
of the property of a party hereto;
7.1.4 DEADLOCK. Upon an unresolved deadlock as described in
SECTION 3.2.4;
7.1.5 TERMINATION OF WALBRO LICENSE BY WALBRO. At the option of
Walbro, immediately upon the termination of the Walbro license agreement
pursuant to Section 9.02(F) thereof;
7.1.6 VIOLATION OF CERTAIN PROVISIONS. At the option of Jaeger,
upon the failure or refusal of Walbro or its designees to comply with the
governance provisions set forth in SECTION 3.2.3; or
<PAGE> 10
7.1.7 FORCE MAJEURE. At the option of the non-offending party,
upon the failure of a party to begin fully performing its obligations under this
Agreement within six months after such party declares an inability to perform
due to force majeure as provided in SECTION 9.5.
7.1.8 EXPROPRIATION. Upon the expropriation of a substantial
portion of the JV's property.
7.2 CONSEQUENCES OF TERMINATION.
7.2.1 PURCHASE OPTION. Upon termination of the JV pursuant to
SECTION 7.1 above, either party will have the option, in lieu of proceeding with
the dissolution of the JV, to purchase the other party's Equity Interest by
giving notice within 30 days after the termination of the JV to the other party
that it desires to purchase for cash all of the Equity Interest of the other
party at a stated price. Any offers made under this provision will be submitted
simultaneously on the last day of the 30-day period.
If within the 30-day period only one party gives notice that it
wishes to purchase the other party's Equity Interest, then the other party may
either accept such offer, or give notice within 20 days of the offer that the
price will be equal to the fair market value of the Equity Interest as
determined by an investment banker with recognized standing in the international
finance community and mutually acceptable to the parties. In the event the
parties cannot agree on an investment banker, each party will select one banker
and the two bankers will select a third banker, which third banker will
conclusively determine fair market value. For purposes of this section, "fair
market value" of an Equity Interest will be the value of the JV as if it were
being sold as a whole business and a going concern to one purchaser, multiplied
by the selling party's Capital Percentage at the time of the valuation.
If within the 30-day period both parties give notice that they
wish to purchase the other party's Equity Interest, then the party whose notice
contains the highest stated per share price will purchase the other party's
Equity Interest at that price for cash, or as otherwise mutually agreed to by
the parties.
Notwithstanding anything to the contrary, this purchase option
will not be available to a party whose breach, bankruptcy, insolvency, or
liquidation has given rise to the termination of the JV pursuant to SECTION
7.1.2, SECTION 7.1.3, SECTION 7.1.5 or SECTION 7.1.6.
7.2.2 DISSOLUTION. If the above purchase option is not exercised
by either party, the parties will use their best efforts to dissolve the JV and
wind up its affairs in a manner designed to preserve the interests of both
parties in the JV products and JV Territory, including the granting of
cross-licenses by each party for the use on a non-exclusive basis of all
technology developed and owned by the JV at the time of its dissolution. Nothing
herein shall prejudice the rights of Jaeger to enter into the license agreement
provided by SECTION 5.4.1.
7.2.3 DAMAGES. Nothing herein shall prejudice the rights of a
party, in addition to the exercise of any other remedy hereunder, to recover
money damages for any breach by a party of this Agreement or any Ancillary
Document (as defined).
<PAGE> 11
ARTICLE VIII
REGULATORY MATTERS AND INVALIDITY
8.1 COOPERATION IN MAKING REGISTRATIONS. The parties shall cooperate
fully in making, whenever required or necessary, registrations under National
Institute of Individual Property (INPI) Resolution N-022 with respect to
agreements for the transfer of technology and rendering of technical assistance.
8.2 CONSEQUENCES OF INVALIDITY. If for any reason whatever at any time,
any provision of this Agreement or any of the Ancillary Documents is or becomes
invalid, illegal or unenforceable, or is declared by any court of competent
jurisdiction or any other competent authority to be invalid, illegal or
unenforceable or if such competent authority:
(i) refuses, or formally indicates an intention to refuse
authorization of, or exemption to, any of the provisions of or
arrangements contained in this Agreement or in any of the
Ancillary Documents (in the case of a refusal either by way of
outright refusal or by way of requiring an amendment or deletion
of any provision of this Agreement or of any of the Ancillary
Documents and/or the inclusion of any new provision in this
Agreement or in the Ancillary Documents and/or the giving of
undertakings as to future conduct before such authorization or
exemption can be granted); or
(ii) formally indicates that to continue to operate any provision of
this Agreement or of any of the Ancillary Documents may expose the
parties to sanctions under any order, enactment or regulation, or
requests any party to give undertakings as to future conduct in
order that such party may not be subject to such sanctions; and in
all cases, whether initially or at the end of any earlier period
or periods of exemption (each of which circumstances being
referred to in this ARTICLE VIII as "a Relevant Invalidity"), then
in any such case, at the request of either party by notice or a
series of notices to that effect to the other ("Negotiation
Notice"), the parties will meet to negotiate in good faith to
agree upon valid, binding and enforceable substitute provisions
while at the same time reconsidering the other terms of this
Agreement and of any of the Ancillary Documents not so affected so
as to reestablish an appropriate balance of the commercial
interests of the parties ("Substitute Provisions").
8.3 FAILURE TO AGREE ON SUBSTITUTE PROVISIONS. If and to the extent
that Substitute Provisions are formally agreed in writing within one month of
the service of a Negotiation Notice, or such other period as may be formally
agreed in writing between the parties, then in that respect the matter shall be
deemed to be settled and such substitute provisions shall be deemed part of this
Agreement or of any of the Ancillary Documents. If, however, in respect of any
Relevant Invalidity no Substitute Provisions can be agreed within such period,
then if any party considers on reasonable grounds that its commercial interests
with regard to this Agreement and/or any of the Ancillary Documents is
materially and adversely affected as a consequence of the Relevant Invalidity it
may submit such matter to arbitration pursuant to SECTION 9.8.
8.4 DEFERRAL OF DETERMINATION OF ADVERSE EFFECT. If any party
considers that it is unable to assess the consequence of any Relevant Invalidity
in the light of facts subsisting at the time, that party may
<PAGE> 12
defer commencement of an arbitration in respect of the provision or provisions
affected by such Relevant Invalidity until such time as it considers on
reasonable grounds that its commercial interests with regard to this Agreement
and/or any of the Ancillary Documents are materially and adversely affected in
the light of events occurring subsequent to communication of the finding of
invalidity to the parties. Notwithstanding the foregoing, a party must commence
arbitration pursuant to SECTION 8.3 within 60 days of receipt of the Negotiation
Notice.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 ANCILLARY DOCUMENTS; INTERPRETATION. The parties acknowledge and
agree that, in the event of an inconsistency or disagreement between this
Agreement, on the one hand, and any other agreement or document referred to
herein to be entered into in connection with the JV (each an ("Ancillary
Document" and, collectively, the "Ancillary Documents"), this Agreement shall
prevail.
9.2 PUBLIC ANNOUNCEMENTS AND CONFIDENTIALITY. The parties agree that
all data and information relating to the JV, including but not limited to any
information relating to or provided under any Ancillary Document, the JV's trade
secrets, know-how, inventions, discoveries, improvements, technologies, business
practices and methods, whether or not patented, lists of suppliers, and
information relating to the JV's financial statements, customer identities and
utilization patterns, needs and participation levels, potential customers,
suppliers, products, servicing methods, equipment, programs, analyses, profit
margins and cost data, shall be kept confidential by both parties and shall not,
whether prior to or after the date hereof, be disclosed to any person, firm, or
corporation, except to the extent that such data or information is generally
known to the trade or in the public domain. The parties, however, may provide
the information to third parties (i) for the purpose of assisting in the
evaluation of the JV, its performance, or its operations, (ii) for the purpose
of determining the value of said party's equity interest in the JV, and (iii)
for any other purpose consistent with the activities contemplated by this
Agreement and the Ancillary Documents; provided that in each case the disclosing
party takes reasonable precautions to maintain the confidential nature of the
information. The parties may also make any disclosures necessary to comply with
applicable securities and other disclosure laws. The parties recognize and
acknowledge that any breach by them of the foregoing provisions of this section
may cause irreparable harm to the other party and the JV and, in the event of
any such breach, such other party or the JV shall, in addition to all other
remedies available to it, at law or in equity, be entitled, if it so elects, to
institute and prosecute proceedings in any court of competent jurisdiction to
enjoin such breaching party from doing any act in violation of such provisions,
and that such other party or the JV shall not be required to show actual
monetary damages as a prerequisite to such relief. The above provisions shall
survive any termination of this Agreement and any dissolution of the JV for a
period of two years after such termination or dissolution.
Each party agrees not to make any public disclosure regarding the
existence or the substance of the transactions contemplated hereby without the
prior approval of the other party, except to the extent that either party
reasonably determines that such disclosure is required by applicable law or
regulation.
9.3 ACCOUNTING. The JV's accounting methods will be in accordance with
Brazilian law and Brazilian generally accepted accounting principles and all
accounts shall be maintained in Brazilian
<PAGE> 13
currency units. Indexing or currency conversions shall be the responsibilities
of, and at the expense of the parties.
9.4 INSURANCE. Insurance protection provided for the JV under this
Agreement must apply both to each individual installation of the JV and to all
installations as a whole. The JV's insurance must also provide insurance
coverage for all types of risk related to the construction and operation of the
aforementioned installations, including material and other property losses
caused to fixed assets belonging to the JV, rented by it, or acquired on credit
by it, as well as its civil liability for property or physical damage which may
be caused to third parties in connection with the JV's activity, either by
defects in the goods its produces or by JV workers and employees in connection
with their performance of their job responsibilities.
9.5 FORCE MAJEURE. Where either party is unable, wholly or in part, by
reason of force majeure to carry out its obligations under this Agreement, such
obligations are suspended so far as they are affected by the force majeure
during the continuance thereof; provided that an obligation to pay money is
never excused by force majeure.
The party affected by the force majeure will give notice to the other
party of the particulars of the situation and the probable extent to which it
will be unable to, or delayed in, performing its obligations under this
Agreement, within 10 days after the occurrence of the force majeure.
For purposes of this section, "force majeure" means an act of God,
strike, lockout or other interference with work, war declared or undeclared,
blockade, disturbance, lightning, fire, earthquake, storm, flood or explosion;
governmental or quasi-governmental restraint action, expropriation, prohibition,
intervention, direction or embargo; unavailability or delay in availability of
equipment or transport; inability or delay in obtaining governmental or
quasi-governmental approvals, consents, permits, licenses, authorities or
allocations; and any other cause whether of the kind specifically enumerated
above, or otherwise which is not reasonably within the control of the party
affected.
9.6 EXPENSES. Walbro and Jaeger, and not the JV, will each pay their
own costs and expenses incurred in negotiating and drafting this Agreement and
the Ancillary Documents.
9.7 FURTHER ASSURANCES. Walbro and Jaeger agree to execute and deliver
such other instruments, agreements or documents and take such other action as
may reasonably be necessary or desirable to consummate the transactions
contemplated by this Agreement.
9.8 RESOLUTION OF DISPUTES. Any dispute, controversy or claim arising
out of or relating to this Agreement or any Ancillary Agreement, including,
without limitation, the breach, termination or invalidity thereof, shall be
settled pursuant to and shall be subject to that certain Arbitration Agreement
dated June 17, 1991, attached as Exhibit 9.8, except that for purposes of any
such arbitration, the arbitrators shall apply the substantive law specified in
this Agreement or any Ancillary Documents.
9.9 SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns, but will not be assignable or delegable by any party without
the prior written consent of the other party, except that either party may
assign, in whole or
<PAGE> 14
in part, its rights hereunder, subject to all obligations hereunder, to a
Controlled Affiliate in connection with any transfer of Equity Interests in the
JV permitted pursuant to ARTICLE VI; provided, however, that such assignment
will not relieve that party of any of its obligations or liabilities hereunder.
9.10 AMENDMENTS, SUPPLEMENTS, ETC. This Agreement may be amended or
supplemented at any time by additional written agreements signed by both
parties, as may mutually be determined by the parties to be necessary, desirable
or expedient to further the purposes of this Agreement or to clarify the
intention of the parties.
9.11 NOTICES. All notices and other communications required or
permitted hereunder will be in writing and, unless otherwise provided in this
Agreement, will be deemed to have been duly given when delivered in person or
one business day after having been dispatched by telegram or electronic
facsimile transfer (confirmed in writing by mail simultaneously dispatched with
a copy of the sender's machine printed facsimile confirmation) or three business
days after having been dispatched by an internationally recognized overnight
courier service to the appropriate party at the address specified below.
(a) If to Walbro, to:
Walbro Automotive Corporation
6242 Garfield Street
Cass City, Michigan 48726
Facsimile Number: (517) 872-2301
Attention: Chief Financial Officer
With a copy to:
Katten Muchin & Zavis
525 W. Monroe Street, Suite 1600
Chicago, Illinois 60661-3693
Facsimile Number: (312) 902-1061
Attention: Arnold S. Harrison
Howard S. Lanznar
(b) If to Jaeger, to:
Jaeger S.A.
19 rue Lavoisier
9200 Nanterre France
Attention: Directeur-Generale
With a copy to:
Magneti Marelli S.p.A.
Viale Aldo Borletti
20011 Corbetta Milan, Italy
<PAGE> 15
Facsimile Number: (39) (2) 97200523
Attention: General Counsel
9.12 WAIVER. Waiver by either party of a breach by the other party of
any obligation or requirement contained in, or arising from, this Agreement does
not operate as a waiver of another or continuing breach by the other party of
the same, or any other, obligation or requirement hereunder. Any waiver by
either party must be in writing, signed by the waiving party.
9.13 ENTIRE AGREEMENT. This Agreement and the Ancillary Documents
represent the understanding of the parties with respect to the subject matter
hereof and thereof and supersede any other agreement, whether written or oral,
that may have been made or entered into by Walbro or Jaeger or their affiliates
relating to the matters contemplated hereby.
9.14 NO STRICT CONSTRUCTION. The language used in this Agreement will
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against either
party.
9.15 SEVERABILITY. Subject to the provisions of ARTICLE VIII, if any
provision of this Agreement or the application of any such provision to any
person or circumstance is held invalid, illegal or unenforceable in any respect
by a court of competent jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision hereof.
9.16 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
principles of conflict of laws thereof.
9.17 THIRD PARTIES. Nothing in this Agreement express or implied is
intended to confer any right or remedy under or by reason of this Agreement on
any person other than the parties, their respective heirs, representatives,
successors and permitted assigns, affect or discharge the obligation or
liability of any third persons to any party to this Agreement, or give any third
party any right or subrogation or action over against any party to this
Agreement.
9.18 TITLES AND HEADINGS. Titles and headings to sections herein are
inserted for convenience of reference only, and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
9.19 EXECUTION IN COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same agreement.
9.20 SURVIVAL. The covenants and agreements made in SECTIONS 5.4, 7.2,
9.2, 9.4, 9.6 and 9.14 will survive any termination of this Agreement.
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
WALBRO AUTOMOTIVE CORPORATION
By: /s/ Gary Vollmar
--------------------------------
Its: Treasurer
--------------------------------
JAEGER S.A.
By: /s/ Frederic Girardot
--------------------------------
Its: Director General
--------------------------------
<PAGE> 1
EXHIBIT 10.8
WALBRO CORPORATION
---------------------------
WALBRO
CORPORATION
ADVANTAGE PLAN
---------------------------
As Amended and Restated Effective January 1, 1997
<PAGE> 2
WALBRO CORPORATION ADVANTAGE PLAN
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Walbro Corporation established the Walbro Corporation Advantage Plan for the
benefit of eligible employees of the Company and its participating affiliates.
The Plan is intended to constitute a qualified profit sharing plan, as described
in Code Section 401(a), which includes a qualified cash or deferred arrangement,
as described in Code Section 401(k).
The Plan constitutes an amendment and restatement of the Walbro Corporation
Advantage Plan and the merger of Sharon Manufacturing Company Savings Retirement
Plan prior to January 1, 1997.
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS................................................................. 1
1.1 "Accounting Period"....................................... 1
1.2 "Accounts"................................................ 1
1.3 "Accrued Benefit"......................................... 2
1.4 "Administrative Committee"................................ 2
1.5 "Appendix"................................................ 2
1.6 "Applicable Named Fiduciary".............................. 2
1.7 "Authorized Leave of Absence"............................. 2
1.8 "Beneficiary"............................................. 3
1.9 "Board of Directors"...................................... 3
1.10 "Break in Service"........................................ 3
1.11 "Change Date"............................................. 3
1.12 "Commonly Controlled Entity".............................. 3
1.13 "Company"................................................. 3
1.14 "Company Stock"........................................... 4
1.15 "Compensation"............................................ 4
1.16 "Computation Period"...................................... 4
1.17 "Continuous Service"...................................... 4
1.18 "Contributions"........................................... 5
1.19 "Contribution Dollar Limit"............................... 5
1.20 "Contribution Election" or "Election"..................... 5
1.21 "Contribution Percentage"................................. 5
1.22 "Conversion Election"..................................... 5
1.23 "Custodial Agreement"..................................... 5
1.24 "Custodian"............................................... 6
1.25 "Direct Rollover"......................................... 6
1.26 "Disability or Disabled".................................. 6
1.27 "Distributee"............................................. 6
1.28 "Effective Date".......................................... 6
1.29 "Elective Deferral"....................................... 6
1.30 "Eligible Employee"....................................... 6
1.31 "Eligibility Service"..................................... 7
1.32 "Eligible Retirement Plan"................................ 7
1.33 "Eligible Rollover Distribution".......................... 7
1.34 "Employee"................................................ 7
1.35 "Employer"................................................ 8
1.36 "Employment Date"......................................... 8
1.37 "Entry Date".............................................. 8
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1.38 "ERISA"....................................................... 8
1.39 "Fair Market Value"........................................... 8
1.40 "Forfeiture".................................................. 9
1.41 "Forfeiture Account".......................................... 9
1.42 "Highly Compensated Eligible Employee" or "HCE"............... 9
1.43 "Hour of Service"............................................. 11
1.44 "Internal Revenue Code" or "Code"............................. 11
1.45 "Investment Election"......................................... 11
1.46 "Investment Manager".......................................... 12
1.47 "Investment Fund" or "Fund"................................... 12
1.48 "Limited Deferrals"........................................... 12
1.49 "Maternity/Paternity Absence"................................. 12
1.50 "Non-Highly Compensated Employee" or "NHCE"................... 12
1.51 "Normal Retirement Date"...................................... 12
1.52 "Notice Date"................................................. 12
1.53 "Participant"................................................. 12
1.54 "Payment Date"................................................ 12
1.55 "Period of Severance"......................................... 13
1.56 "Plan"........................................................ 13
1.57 "Plan Year"................................................... 13
1.58 "QDRO"........................................................ 13
1.59 "Qualified Matching Contribution"............................. 13
1.60 "Related Plan"................................................ 13
1.61 "Rollover Contribution"....................................... 13
1.62 "Settlement Date"............................................. 14
1.63 "Spousal Consent"............................................. 14
1.64 "Spouse"...................................................... 14
1.65 "Sweep Account"............................................... 14
1.66 "Sweep Date".................................................. 14
1.67 "Termination of Employment"................................... 14
1.68 "Trade Date".................................................. 15
1.69 "Trust"....................................................... 15
1.70 "Trust Agreement"............................................. 15
1.71 "Trust Fund".................................................. 15
1.72 "Trustee"..................................................... 15
1.73 "Trustee Transfer"............................................ 15
1.74 "Valuation Date".............................................. 16
1.75 "Vesting Service"............................................. 16
1.76 "Year of Service"............................................. 16
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TABLE OF CONTENTS
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ARTICLE II
PARTICIPATION............................................................... 17
2.1 Eligibility.................................................... 17
2.2 Reemployment................................................... 17
2.3 Participation Upon Change of Job Status........................ 17
2.4 Ceasing to be a Participant.................................... 17
ARTICLE III
PARTICIPANT CONTRIBUTIONS................................................... 18
3.1 Pre-Tax Contribution Election.................................. 18
3.2 Election Procedures............................................ 18
3.3 Limitation of Elective Deferrals for all Participants.......... 19
ARTICLE IV
EMPLOYER CONTRIBUTIONS AND ALLOCATIONS...................................... 21
4.1 Pre-Tax Contributions.......................................... 21
4.2 Matching Contributions......................................... 21
4.3 Pay Based Contributions........................................ 22
4.4 Special Contributions.......................................... 22
4.5 Miscellaneous.................................................. 23
ARTICLE V
ROLLOVERS................................................................... 25
5.1 Rollovers....................................................... 25
ARTICLE VI
ACCOUNTING FOR PARTICIPANTS'
ACCOUNTS AND FOR INVESTMENT FUNDS........................................... 26
6.1 Individual Participant Accounting............................... 26
6.2 Accounting for Investment Funds................................. 27
6.3 Accounts for QDRO Beneficiaries................................. 28
6.4 Special Accounting During Conversion Period..................... 29
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ARTICLE VII
INVESTMENT FUNDS AND ELECTIONS.............................................. 30
7.1 Investment Funds........................................... 30
7.2 Investment of Contributions................................ 30
7.3 Investment of Accounts..................................... 31
7.4 Establishment of Investment Funds.......................... 31
7.5 Transition Rules........................................... 32
ARTICLE VIII
VESTING AND FORFEITURES..................................................... 33
8.1 Fully Vested Contribution Accounts......................... 33
8.2 Full Vesting Upon Attainment of Event...................... 33
8.3 Vesting Schedule and Forfeitures........................... 33
8.4 Forfeitures................................................ 34
8.5 Forfeiture Account......................................... 35
ARTICLE IX
PARTICIPANT LOANS........................................................... 36
9.1 Participant Loans Permitted............................... 36
9.2 Loan Funding Limits....................................... 36
9.3 Maximum Number of Loans................................... 36
9.4 Source of Loan Funding.................................... 37
9.5 Interest Rate............................................. 37
9.6 Repayment................................................. 37
9.7 Repayment Hierarchy....................................... 37
9.8 Loan Application, Note and Security....................... 37
9.9 Default, Suspension and Acceleration Feature.............. 38
ARTICLE X
IN-SERVICE WITHDRAWALS...................................................... 39
10.1 Withdrawals for 401(k) Hardship........................... 39
10.2 Withdrawals for Participants over age 59 1/2.............. 40
10.3 Withdrawal Processing..................................... 41
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ARTICLE XI
DISTRIBUTIONS ON AND AFTER
TERMINATION OF EMPLOYMENT................................................. 42
11.1 Request for Distribution of Benefits.......................... 42
11.2 Deadline for Distribution..................................... 42
11.3 Payment Form and Medium....................................... 43
11.4 Small Amounts Paid Immediately................................ 43
11.5 Payment Within Life Expectancy................................ 43
11.6 Incidental Benefit Rule....................................... 44
11.7 QJSA and QPSA Information and Elections....................... 44
11.8 Continued Payment of Amounts in Payment Status on
January 1, 1997............................................... 45
11.9 Direct Rollover............................................... 45
ARTICLE XII
DISTRIBUTION OF ACCRUED BENEFITS ON DEATH................................. 47
12.1 Payment to Beneficiary......................................... 47
12.2 Beneficiary Designation........................................ 47
12.3 Benefit Election............................................... 47
12.4 Payment Form................................................... 48
12.5 Time Limit for Payment to Beneficiary.......................... 48
12.6 QPSA Information and Election.................................. 48
12.7 Direct Rollover................................................ 49
ARTICLE XIII
MAXIMUM CONTRIBUTIONS..................................................... 50
13.1 Definitions.................................................... 50
13.2 Avoiding an Annual Excess...................................... 51
13.3 Correcting an Annual Excess.................................... 51
13.4 Correcting a Multiple Plan Excess.............................. 52
13.5 Two-Plan Limit................................................. 52
13.6 Short Plan Year................................................ 52
13.7 Grandfathering of Applicable Limitations....................... 53
ARTICLE XIV
ADP AND ACP TESTS......................................................... 54
14.1 Contribution Limitation Definitions............................ 54
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14.2 ADP and ACP Tests.......................................... 55
14.3 Correction of ADP and ACP Tests............................ 55
14.4 Method of Calculation...................................... 56
14.5 Multiple Use Test.......................................... 56
14.6 Adjustment for Investment Gain or Loss..................... 57
14.7 Required Records........................................... 58
14.8 Incorporation by Reference................................. 58
14.9 Collectively Bargained Employees........................... 58
14.10 QSLOB...................................................... 58
ARTICLE XV
CUSTODIAL ARRANGEMENTS...................................................... 59
15.1 Custodial Agreement....................................... 59
15.2 Selection of Custodian.................................... 59
15.3 Custodian's Duties........................................ 59
15.4 Separate Entity........................................... 59
15.5 Plan Asset Valuation...................................... 60
15.6 Right of Employers to Plan Assets......................... 60
ARTICLE XVI
ADMINISTRATION AND INVESTMENT MANAGEMENT.................................... 61
16.1 General................................................... 61
16.2 Administrative Committee Acting as Employer............... 61
16.3 Administrative Committee as Applicable Named Fiduciary
for Plan.................................................. 63
16.4 Administrative Committee as Applicable Named Fiduciary
for Trust................................................. 63
16.5 Administrative Committee Membership....................... 64
16.6 Administrative Committee Structure........................ 64
16.7 Administrative Committee Actions.......................... 64
16.8 Procedures for Designation of an Applicable Named
Fiduciary................................................. 65
16.9 Compensation.............................................. 65
16.10 Discretionary Authority of each Applicable Named
Fiduciary................................................. 65
16.11 Responsibility and Powers of the Administrative Committee
Regarding Administration of the Plan...................... 66
16.12 Allocations and Delegations of Responsibility............. 67
16.13 Administrative Committee Bonding.......................... 68
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PAGE
16.14 Information to be Supplied by Employer...................... 68
16.15 Information to be Supplied by Applicable Named Fiduciary.... 68
16.16 Misrepresentations.......................................... 68
16.17 Records..................................................... 69
16.18 Plan Expenses............................................... 69
16.19 Fiduciary Capacity.......................................... 69
16.20 Employer's Agent............................................ 69
16.21 Plan Administrator.......................................... 69
16.22 Plan Administrator Duties and Power......................... 69
16.23 Applicable Named Fiduciary Decisions Final.................. 70
16.24 No Agency................................................... 70
ARTICLE XVII
CLAIMS PROCEDURE............................................................. 71
17.1 Initial Claim for Benefits.................................. 71
17.2 Review of Claim Denial...................................... 71
ARTICLE XVIII
ADOPTION AND WITHDRAWAL FROM PLAN............................................ 73
18.1 Procedure for Adoption...................................... 73
18.2 Procedure for Withdrawal.................................... 73
ARTICLE XIX
AMENDMENT, TERMINATION AND MERGER............................................ 74
19.1 Amendments.................................................. 74
19.2 Plan Termination............................................ 75
19.3 Plan Merger................................................. 76
ARTICLE XX
SPECIAL TOP-HEAVY RULES...................................................... 77
20.1 Application................................................. 77
20.2 Special Terms............................................... 77
20.3 Minimum Contribution........................................ 80
20.4 Maximum Benefit Accrual..................................... 81
20.5 Special Vesting............................................. 81
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ARTICLE XXI
MISCELLANEOUS PROVISIONS.................................................... 82
21.1 Assignment and Alienation................................. 82
21.2 Protected Benefits........................................ 82
21.3 Plan Does Not Affect Employment Rights.................... 82
21.4 Deduction of Taxes from Amounts Payable................... 82
21.5 Facility of Payment....................................... 82
21.6 Source of Benefits........................................ 83
21.7 Indemnification........................................... 83
21.8 Reduction for Overpayment................................. 83
21.9 Limitation on Liability................................... 83
21.10 Company Merger............................................ 83
21.11 Employees' Trust.......................................... 83
21.12 Gender and Number......................................... 84
21.13 Invalidity of Certain Provisions.......................... 84
21.14 Headings.................................................. 84
21.15 Uniform and Nondiscriminatory Treatment................... 84
21.16 Law Governing............................................. 84
21.17 Notice and Information Requirements....................... 84
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ARTICLE I
- --------------------------------------------------------------------------------
DEFINITIONS
The following sections of this Article I provide basic definitions of terms
used throughout the Plan, and whenever used herein in a capitalized form, except
as otherwise expressly provided, the terms shall be deemed to have the following
meanings:
1.1 "Accounting Period" means the periods designated by the
Administrative Committee with respect to each Investment Fund not to exceed one
year in duration.
1.2 "Accounts" means the record of a Participant's interest in the
Plan's assets represented by his or her:
(a) "Matching Account" which means a Participant's interest in the
Plan's assets composed of Matching Contributions allocated on or after
January 1, 1997 to the Participant under the Plan, the amount allocated
under the Plan, as of January 1, 1997, if any (as identified by the
Administrative Committee), amounts allocated from the Sharon Manufacturing
Company Savings Retirement Plan prior to January 1, 1997, if any, which
continue to be accounted for under the Plan (as identified by the
Administrative Committee), plus all income and gains credited to, and minus
all losses, expenses, withdrawals and distributions charged to, such
Account.
(b) "Pre-Tax Account" which means a Participant's interest in the
Plan's assets composed of Pre-Tax Contributions allocated on or after
January 1, 1997 to the Participant under the Plan, the amount allocated
under the Plan, as of January 1, 1997, if any (as identified by the
Administrative Committee), amounts allocated from the Sharon Manufacturing
Company Savings Retirement Plan prior to January 1, 1997, if any, which
continue to be accounted for under the Plan (as identified by the
Administrative Committee), plus all income and gains credited to, and minus
all losses, expenses, withdrawals and distributions charged to, such
Account.
(c) "Retirement Contribution Account" which means a Participant's
interest in the Plan's assets composed of Pay Based Contributions allocated
on or after January 1, 1997 to the Participant under the Plan, the amount
allocated under the Plan, as of January 1, 1997, if any (as identified by
the Administrative Committee), amounts allocated from the Sharon
Manufacturing Company Savings Retirement Plan prior to January 1, 1997, if
any, which continue to be accounted for under the Plan (as identified by
the Administrative Committee), plus all income and gains credited to, and
minus all losses, expenses, withdrawals and distributions charged to, such
Account.
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(d) "Rollover Account" which means a Participant's interest in the
Plan's assets composed of Rollover Contributions allocated on or after
January 1, 1997 to the Participant under the Plan, the amount allocated
under the Plan, as of January 1, 1997, if any (as identified by the
Administrative Committee), plus all income and gains credited to, and minus
all losses, expenses, withdrawals and distributions charged to, such
Account.
(e) "Special Account" which means a Participant's interest in the
Plan's assets composed of Special Contributions allocated on or after
January 1, 1997 to the Participant under the Plan, the amount allocated
under the Plan, as of January 1, 1997, if any (as identified by the
Administrative Committee), plus all income and gains credited to, and minus
all losses, expenses, withdrawals and distributions charged to, such
Account.
1.3 "Accrued Benefit" means the dollars or shares held in or posted to
Accounts on the Settlement Date.
1.4 "Administrative Committee" means the committee appointed pursuant to
the terms of the Plan to manage and control the operation and administration of
the Plan.
1.5 "Appendix" means a written supplement made a part hereof which has been
added in accordance with the provisions of the Plan.
1.6 "Applicable Named Fiduciary" means:
(a) with respect to the authority each has over management and
operation of the Plan's administration and operation or discretionary
authority and control it may have with respect to the Plan, the
Administrative Committee and such other person (other than a person acting
as an Investment Manager or Trustee) who may be designated to be an
Applicable Named Fiduciary pursuant to Article XVI;
(b) with respect to the management and control of the Plan's assets or
the discretionary authority it may have with respect to the Plan's assets,
the Administrative Committee, and other such person (other than a person
acting as an Investment Manager or Trustee) who may be designated to be an
Applicable Named Fiduciary pursuant to Article XVI.
1.7 "Authorized Leave of Absence" means an absence, with or without
Compensation, authorized on a nondiscriminatory basis by a Commonly Controlled
Entity under its standard personnel practices applicable to the Employee,
including any period of time during which such person is covered by a short-term
disability plan of his or her Employer. An Employee who leaves the service of a
Commonly Controlled Entity to enter the Armed Forces of the United States of
America and who reenters the service of the Commonly Controlled Entity with
reemployment rights under any statute granting reemployment rights to persons in
the Armed Forces shall be deemed
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to have been on an Authorized Leave of Absence. The date that an Employee's
Authorized Leave of Absence ends shall be determined in accordance with the
personnel policies of such Commonly Controlled Entity, which ending date shall
be no earlier than the date that the Authorized Leave of Absence is scheduled to
end, unless the Employee communicates to such Commonly Controlled Entity that he
or she is to have a Termination of Employment as of an earlier date.
1.8 "Beneficiary" means any person designated by a Participant to receive
any benefits which shall be payable with respect to the death of a Participant
under the Plan or as a result of a QDRO.
1.9 "Board of Directors" means the board of directors of the
Company.
1.10 "Break in Service" means:
(a) with respect to Continuous Service, the fifth anniversary (or
sixth anniversary if absence from employment was due to a Maternity/Paternity
Absence) of the date of the Participant's termination of employment; and
(b) with respect to Computation Periods, the end of five consecutive
Computation Periods (or six consecutive Computation Periods if absence from
employment was due to a Maternity/Paternity Absence) for which a Participant is
credited with less than 501 Hours of Service.
1.11 "Change Date" means the one or more dates during the Plan Year
designated by the Administrative Committee as the dates available for
implementing or changing a Participant's Contribution Election.
1.12 "Commonly Controlled Entity" means (1) an Employer and any
corporation, trade or business, but only for so long as it and the Employer are
members of a controlled group of corporations as defined in Section 414(b) of
the Code or under common control as defined in Section 414(c) of the Code;
provided, however, that solely for purposes of the limitations of Code Section
415, the standard of control under Sections 414(b) and 414(c) of the Code shall
be deemed to be "more than 50%" rather than "at least 80%," (2) an Employer and
an organization, but only for so long as it and the Employer are, on and after
the Effective Date, members of an affiliated service group as defined in Section
414(m) of the Code, (3) an Employer and an organization, but only for so long as
the employees of it and the Employer are required to be aggregated, on and after
the Effective Date, under Section 414(o) of the Code, or (4) any other
organization designated as such by the Administrative Committee.
1.13 "Company" means WALBRO CORPORATION or any successor corporation by
merger, consolidation, purchase, or otherwise, which elects to adopt the Plan
and the Trust.
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<PAGE> 14
1.14 "Company Stock" means common stock issued by WALBRO CORPORATION.
1.15 "Compensation" means for purposes of allocating Contributions and for
purposes of applying Section 415 of the Code to the Plan and its Participants
for any limitation year, such compensation earned while an Eligible Employee as
determined by the Administrative Committee and satisfying the definition of
compensation under Section 415 of the Code (within the meaning of Treasury
Regulation 1.415-2(d)(11)(ii)) and for any determination period with respect to
an applicable provision of the Code other than Section 415, such compensation as
determined by the Administrative Committee and which satisfies the requirements
of Section 414(s) of the Code. Notwithstanding the foregoing provisions,
Compensation shall include elective amounts excludible from gross income under
Code Sections 125 and 402(e)(3) (other than for Code Section 415 purposes).
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $160,000, as
adjusted by the Commissioner of Internal Revenue for increases in the
cost-of-living in accordance with Section 401(a)(17)(B) of the Code. The
cost-of-living adjustment in effect for a calendar year applies to any period,
not exceeding twelve (12) months, over which Compensation is determined
(determination period) beginning in such calendar year. If a determination
period consists of fewer than twelve (12) months, the OBRA '93 annual
compensation limit will be multiplied by a fraction, the numerator of which is
the number of months in the determination period, and the denominator of which
is twelve (12).
For Plan Years beginning on or after January 1, 1994, any reference in this
Plan to the limitation under Section 401(a)(17) of the Code shall mean the
OBRA '93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into account in
determining an Employee's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
1.16 "Computation Period" means with respect to Eligibility Service, and
any Break in Service with respect to Eligibility Service, the twelve (12)
consecutive month period commencing with an Employee's Employment Date and the
Plan Year which includes the first anniversary of the Employment Date and each
subsequent Plan Year.
1.17 "Continuous Service" means the sum of the years (and fractions of
years) measured from an Employee's Employment Date to his or her date of
Termination of Employment first to occur after his or her Employment Date;
provided, that if an
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<PAGE> 15
Employee has a Period of Severance of less than twelve (12) consecutive months
after a Termination of Employment, such Termination of Employment shall be
disregarded and such Employee's Continuous Service shall include such period
when he or she is not employed by a Commonly Controlled Entity.
1.18 "Contributions" means amounts contributed to the Plan by the Employer
or an Eligible Employee. Specific types of contributions include:
(a) "Matching". An amount contributed by the Employer based upon
the amount contributed by the eligible Participant.
(b) "Pay Based". An amount contributed by the Employer and
allocated on a pay based formula to eligible Participants'
Accounts.
(c) "Pre-Tax". An amount contributed on a pre-tax basis in
conjunction with a Participant's Code Section 401(k) salary
deferral agreement.
(d) "Special". An amount contributed by the Employer to avoid
prohibited discrimination under Section 401(a)(4) of the Code.
1.19 "Contribution Dollar Limit" means the annual limit imposed on each
Participant pursuant to Section 402(g) of the Code, which shall be nine thousand
five hundred dollars ($9,500) per calendar year (as indexed for cost-of-living
adjustments pursuant to Code Section 402(g)(5) and 415(d)).
1.20 "Contribution Election" or "Election" means the election made by a
Participant to reduce his or her Compensation by an amount equal to the product
of his or her Contribution Percentage and such Compensation subject to the
Contribution Election.
1.21 "Contribution Percentage" means the percentage of a Participant's
Compensation which is to be contributed to the Plan by his or her Employer as a
Pre-Tax Contribution.
1.22 "Conversion Election" means an election by a Participant to change the
investment of all or some specified portion of such Participant's Accounts by
voice response to the telephone number provided by the Applicable Named
Fiduciary, or on such form that may be required by the Applicable Named
Fiduciary to whom it is delivered. No Conversion Election shall be deemed to
have been given to the Applicable Named Fiduciary unless it is complete and
delivered in accordance with the procedures established by such Applicable Named
Fiduciary for this purpose.
1.23 "Custodial Agreement" means the Trust Agreement or an insurance
contract to provide for the holding of the assets of the Plan.
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1.24 "Custodian" means the Trustee or an insurance company if the contract
issued by such company is not held by the Trustee.
1.25 "Direct Rollover" means a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
1.26 "Disability or Disabled" means the Participant is disabled for
purposes of the Employer's long term disability plan.
1.27 "Distributee" includes an Employee or former Employee. In addition,
the Employee's or former Employee's surviving Spouse and the Employee's or
former Employee's Spouse or former Spouse who is the alternate payee under a
QDRO are Distributees with regard to the interest of the Spouse or former
Spouse.
1.28 "Effective Date" means January 1, 1997, the date upon which the
provisions of this document become effective. In general, the provisions of this
document only apply to Participants who are Employees on or after the Effective
Date. However, investment and distribution provisions apply to all Participants
with Account balances to be invested or distributed after the Effective Date.
1.29 "Elective Deferral" means amounts subject to the Contribution Dollar
Limit.
1.30 "Eligible Employee" means any Employee (including an Employee on an
Authorized Leave of Absence) of an Employer on and after the Effective Date of
the adoption of this Plan by the Employer, excluding any Employee:
(a) who is a member of a group of Employees represented by a
collective bargaining representative, unless a currently effective
collective bargaining agreement between his or her Employer and the
collective bargaining representative of the group of Employees of which he
or she is a member provides for coverage by the Plan;
(b) who is considered an Employee solely because of the application of
Section 414(n) of the Code;
(c) who is not a U.S. citizen or a resident alien;
(d) who has a Computation Period in which he or she earns less than
501 Hours of Service, prior to the date he or she completes a Year of
Service;
(e) who is employed as a cooperative student while attending a
secondary educational institution or college; or
(f) who is attending high school, is on a summer break between high
school classes, or is on a summer break between high school and college
classes.
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1.31 "Eligibility Service" means the sum of an Employee's Years of Service;
provided, however: if such Years of Service were earned prior to the date the
Employee's Employer became a Commonly Controlled Entity, they are disregarded
unless the Administrative Committee makes such a determination not to apply this
exclusion with respect to each such Employee in a uniform and nondiscriminatory
manner.
1.32 "Eligible Retirement Plan" means an individual retirement account
described in Section 408(a) of the Code, an individual retirement annuity
described in Section 408(b) of the Code, an annuity plan described in Section
403(a) of the Code, or a qualified trust described in Section 401(a) of the
Code, that accepts the Distributee's Eligible Rollover Distribution. However, in
the case of an Eligible Rollover Distribution to the surviving Spouse, an
Eligible Retirement Plan is an individual retirement account or individual
retirement annuity.
1.33 "Eligible Rollover Distribution" means any distribution of all or any
portion of the balance to the credit of the Distributee, except that an Eligible
Rollover Distribution does not include any distribution that is one of a series
of substantially equal periodic payments (not less frequently than annually)
made for the life (or life expectancy) of the Distributee or the joint lives (or
joint life expectancies) of the Distributee and the Distributee's designated
Beneficiary, or for a specified period of ten years or more; any distribution to
the extent such distribution is required under Section 401(a)(9) of the Code;
and the portion of any distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized appreciation with
respect to employer securities).
1.34 "Employee" means any person who renders services as a common law
employee to a Commonly Controlled Entity or is on an Authorized Leave of
Absence, including the period of time before which the trade or business became
a Commonly Controlled Entity, but excluding the period of time after which it
ceases to be a Commonly Controlled Entity. Any individual considered an Employee
of a Commonly Controlled Entity under Section 414(n) of the Code shall be deemed
employed by the Commonly Controlled Entity for which the individual performed
services. No person who was hired through a temporary agency (including but not
limited to any leased Employee) shall be considered an Employee and no person,
the terms of whose services are governed by an independent contractor or
consulting agreement with an Employer, shall be considered an Employee except to
the extent explicitly provided to the contrary in such agreement; provided,
however, any individual who is a citizen of the United States of America and who
is an Employee of a foreign affiliate (as defined in Code Section 3121(e)(8)) of
an Employer which is an American employer, as defined in Code Section 3121(h),
shall be treated as an Employee, and, if an Eligible Employee, shall be entitled
to participate in this Plan and contributions thereto to the same extent,
subject to the same limitations and at the same times as any other Employee who
is an Eligible Employee of such Employer; provided:
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(a) such Employer has entered into an agreement under Code Section
3121(l) which applies to the foreign affiliate of which such individual is
a common law employee; and
(b) contributions under a funded plan of defined compensation are not
provided by any other person with respect to the remuneration paid to such
individual by the foreign affiliate.
1.35 "Employer" means the Company and any Commonly Controlled Entity which
has adopted the Plan; provided, that an entity will cease to be an Employer when
it ceases to be a Commonly Controlled Entity. Notwithstanding the preceding
sentence, the Administrative Committee may permit an affiliate of an Employer to
adopt the Plan.
1.36 "Employment Date" means the day an Employee first earns an Hour of
Service; provided, however, with respect to an Employee who incurs a Period of
Severance of twelve (12) consecutive months or more, the Employment Date for
such Employee shall be adjusted forward in time by a period of days equal to the
number of days in the Period of Severance, and for purposes of becoming an
Eligible Employee, such person shall be considered to have an Employment Date on
the first day he or she earns an Hour of Service as of his or her reemployment
as an Employee.
1.37 "Entry Date" means the first day of January, April, July or October.
1.38 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended. Reference to any specific Section shall include such Section, any valid
regulation promulgated thereunder, and any comparable provision of any future
legislation amending, supplementing or superseding such Section.
1.39 "Fair Market Value" means:
(a) with respect to a security for which there is a generally
recognized market, the price of the security prevailing on a national
securities exchange which is registered under Section 6 of the Securities
Exchange Act of 1934;
(b) unless determined otherwise by the Administrative Committee, with
respect to any guaranteed income contract, the value reported by the
issuing company or bank;
(c) with respect to a Participant loan, the unpaid principal and
accrued interest; and
(d) for any other asset, the fair market value of the asset, as
determined in good faith by the Trustee or the Administrative Committee in
accordance with regulations promulgated under Section 3(18) of ERISA.
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1.40 "Forfeiture" means the portion of the Participant's Accrued Benefit
which is forfeited pursuant to the terms of the Plan.
1.41 "Forfeiture Account" means an account holding amounts forfeited by
Participants.
1.42 "Highly Compensated Eligible Employee" or "HCE" means a highly
compensated active employee or a highly compensated former employee.
A highly compensated active employee includes any Employee who performs
service for the Employer during the determination year and who, during the
look-back year: (i) received Compensation from the Employer in excess of $75,000
(as adjusted pursuant to Section 415(d) of the Code); (ii) received Compensation
from the Employer in excess of $50,000 (as adjusted pursuant to Section 415(d)
of the Code) and was a member of the top-paid group for such year; or (iii) was
an officer of the Employer and received Compensation during such year that is
greater than fifty percent (50%) of the dollar limitation in effect under
Section 415(b)(1)(A) of the Code. The term highly compensated active employee
also includes: (i) Employees who are both described in the preceding sentence if
the term "determination year" is substituted for the term "look-back year" and
the Employee is one of the one hundred (100) Employees who received the most
Compensation from the Employer during the determination year; and (ii) Employees
who are five-percent (5%) owners at any time during the look-back year or
determination year.
If no officer has satisfied the Compensation requirement of (iii) above
during either a determination year or look-back year, the highest paid officer
for such year shall be treated as a highly compensated active employee.
For this purpose, the determination year shall be the Plan Year. The
look-back year shall be the twelve(12)-month period immediately preceding the
determination year. Pursuant to Code Section 414(q), the Administrative
Committee may elect for the look-back year to be the calendar year ending with
or within the applicable Plan Year determination year.
If the Employer at all times during the Plan Year maintains significant
business activities (and employs Employees in such activities) in at least two
significantly separate geographic areas and satisfies such other conditions as
the Secretary of the Treasury may prescribe, the Administrative Committee may
elect to apply a simplified definition of Highly Compensated Employee under the
Plan by substituting "$50,000" for "$75,000" in paragraph (i) above, and
disregarding paragraph (ii) above.
An Employee who performs services for the Employer any time during the year
is in the top-paid group of Employees for any year if such Employee is in the
group consisting of the top twenty percent (20%) of the Employees when ranked on
the basis of Compensation paid during such year. For purposes of determining the
number of Employees in the top-paid group (but not for identifying the
particular Employees in the top-paid group), the following Employees shall be
excluded:
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<PAGE> 20
(i) Employees who have not completed six (6) months of service;
(ii) Employees who normally work less than seventeen and one-half (17
1/2) Hours of Service per week;
(iii) Employees who normally work not more than six (6) months during
any year;
(iv) Employees who have not attained age twenty-one (21);
(v) Employees who are included in a unit of Employees covered by a
bona fide collective bargaining agreement with the Employer; and
(vi) Employees who are nonresident aliens and who receive no earned
income (within the meaning of Section 911(d)(2) of the Code) from the
Employer which constitutes income from sources within the United States
(within the meaning of Section 861(a)(3) of the Code).
The Administrative Committee may elect to apply paragraph (i), (ii) or (iv) of
this Section by substituting a shorter period of service, smaller number of
hours or months, or lower age for that specified in such subparagraphs.
A highly compensated former employee includes any Employee who separated
from service (or was deemed to have separated) prior to the determination year,
performs no service for the Employer during the determination year, and was a
Highly Compensated Employee for either the separation year or any determination
year ending on or after the Employee's 55th birthday. If a former Employee
separated from service with the Employer prior to January 1, 1987, and the
Administrative Committee irrevocably elects to apply this special rule, he is a
Highly Compensated Employee only if he or she was described in any one or more
of the following groups during either the Employee's separation year (or the
year preceding such separation year) or any year ending on or after such
individual's 55th birthday (or the last year ending before such Employee's 55th
birthday):
(i) 5-percent owner. The Employee was a five-percent (5%) owner of the
Employer at any time during the year.
(ii) Compensation amount. The Employee received Compensation in excess
of $50,000 during the year.
The determination of who is a Highly Compensated Employee, including the
determination of the number and identity of Employees in the top-paid group, the
top 100 Employees, the number of Employees treated as officers and the
Compensation that is considered, will be made in accordance with Section 414(q)
of the Code and the regulations thereunder.
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<PAGE> 21
1.43 "Hour of Service" means:
(a) as it applies to Eligibility Service, each hour for which an
Employee is entitled to:
(1) payment for the performance of duties for any Commonly
Controlled Entity;
(2) payment from any Commonly Controlled Entity for any period
during which no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation, holiday,
sickness, incapacity (including disability), layoff, leave of absence,
jury duty or military service;
(3) back pay, irrespective of mitigation of damages, by award or
agreement with any Commonly Controlled Company (and these hours shall
be credited to the period to which the agreement pertains); or
(4) no payment, but is on an Authorized Leave of Absence (and
these hours shall be based upon his or her normally scheduled hours
per week or a 40 hour week if there is no regular schedule).
The crediting of hours shall be made in accordance with Department of Labor
regulation Section 2530.200b-2 and 3, but in no event shall hours be
credited in excess of the minimum number required thereunder for a
Computation Period in order to avoid a Break in Service. An equivalent
number of hours shall be credited for each payroll period in which the
Employee would be credited with at least 1 hour. The payroll period
equivalences are 190 hours monthly.
(b) as it applies to Vesting Service for purposes of determining
Continuous Service, each hour for which an Employee is directly or
indirectly paid or entitled to payment by a Commonly Controlled Entity for
the performance of duties.
1.44 "Internal Revenue Code" or "Code" means the Internal Revenue Code of
1986, as amended, any subsequent Internal Revenue Code and final Treasury
Regulations. If there is a subsequent Internal Revenue Code, any references
herein to Internal Revenue Code Sections shall be deemed to refer to comparable
Sections of any subsequent Internal Revenue Code.
1.45 "Investment Election" means an election by which a Participant directs
the investment of his or her Contributions by voice response to the telephone
number provided by the Applicable Named Fiduciary, or on such form that may be
required by the Applicable Named Fiduciary to whom it is delivered. No
Investment Election shall be deemed to have been given to the Applicable Named
Fiduciary unless it is complete and delivered in accordance with the procedures
established by such Applicable Named Fiduciary for this purpose.
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<PAGE> 22
1.46 "Investment Manager" means a fiduciary who meets the requirements of
Section 3(38) of ERISA and to whom the Administrative Committee has delegated
the responsibility for investment of a portion of the assets of the Trust Fund.
1.47 "Investment Fund" or "Fund" means one or more collective investment
funds, a pool of assets, or deposits with the Custodian, a mutual fund,
insurance contract, or managed pool of assets. The Investment Funds authorized
by the Administrative Committee are listed in an Appendix.
1.48 "Limited Deferrals" means Elective Deferrals subject to the limits of
Code Section 401(a)(30).
1.49 "Maternity/Paternity Absence" means a paid or unpaid and approved
absence from employment with a Commonly Controlled Entity (1) by reason of the
pregnancy of the Employee; (2) by reason of the birth of a child of the
Employee; (3) by reason of the placement of a child under age eighteen (18) in
connection with the adoption of such child by the Employee (including a trial
period prior to adoption); and (4) for the purpose of caring for a child of the
Employee immediately following the birth or adoption of such child. The Employee
must prove to the satisfaction of the Administrative Committee or its agent that
the absence meets the above requirements and must supply information concerning
the length of the absence unless the Administrative Committee has access to
relevant information without the Employee submitting it.
1.50 "Non-Highly Compensated Employee" or "NHCE" means an Employee who is
not an HCE.
1.51 "Normal Retirement Date" means the date a Participant attains
sixty-five (65) years of age.
1.52 "Notice Date" means the date established by the Administrative
Committee as the deadline for it to receive notification with respect to an
administrative matter in order to be processed as of a Change Date designated by
the Administrative Committee.
1.53 "Participant" means an Eligible Employee who begins to participate in
the Plan after completing the eligibility requirements. A Participant's
participation continues until his or her Termination of Employment and his or
her Accrued Benefit is distributed or forfeited.
1.54 "Payment Date" means the date on or after the Settlement Date on which
a Participant's Accrued Benefit is distributed or commences to be distributed,
which date shall be at least the minimum number of days required by law, if any,
after the date the Participant has received any notice required by law, if any.
If a distribution is one to which Sections 401(a)(11) and 417 of the
Internal Revenue Code do not apply, such distribution may commence less than
thirty
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<PAGE> 23
(30) days after the notice required under Section 1.401(a)-11(c) of the Income
Tax Regulations is given, provided that:
(a) the Applicable Named Fiduciary clearly informs the Participant
that the Participant has a right to a period of at least thirty (30) days
after receiving the notice to consider the decision of whether or not to
elect a distribution (and, if applicable, a particular distribution
option), and
(b) the Participant, after receiving the notice, affirmatively elects
a distribution.
1.55 "Period of Severance" means the period of time measured from the later
of (a) an Employee's Termination of Employment, and (b) the conclusion of a
Maternity/Paternity Absence of no longer than twelve (12) consecutive months, to
the date thereafter he or she first earns an Hour of Service.
1.56 "Plan" means the WALBRO CORPORATION ADVANTAGE PLAN, as set forth
herein and as hereafter may be amended from time to time.
1.57 "Plan Year" means the annual Accounting Period of the Plan and Trust
which ends on each December 31.
1.58 "QDRO" means a domestic relations order which the Administrative
Committee has determined to be a qualified domestic relations order within the
meaning of Section 414(p) of the Code.
1.59 "Qualified Matching Contribution" means a Matching Contribution that
is treated as a Pre-Tax Contribution and posted to the Pre-Tax Account.
1.60 "Related Plan" means:
(a) with respect to Section 401(k) and 401(m) of the Code, any plan or
plans maintained by a Commonly Controlled Entity which is treated with this
Plan as a single plan for purposes of Sections 401(a)(4) or 410(b) of the
Code; and
(b) with respect to Section 415 of the Code, any other defined
contribution plan or a defined benefit plan (as defined in Section 415(k)
of the Code) maintained by a Commonly Controlled Entity, respectively
called a "Related Defined Contribution Plan" and a "Related Defined Benefit
Plan".
1.61 "Rollover Contribution" means:
(a) a rollover contribution as described in Section 402(c) of the Code
(or its predecessor); or
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<PAGE> 24
(b) a Trustee Transfer (1) to the Custodian of an amount by the
custodian of a retirement plan qualified for tax-favored treatment under
Code Section 401(a), which plan provides for such transfer; (2) with
respect to which the benefits otherwise protected by Code Section 411 in
such transfer or plan are no longer required by Code Section 411 to be
protected in this Plan; and (3) which does not include amounts subject to
Code Section 401(k).
1.62 "Settlement Date" means the date on which the transactions from the
most recent Trade Date are settled.
1.63 "Spousal Consent" means the written consent given by a Spouse to a
Participant's election (or waiver) of a specified form of benefit or Beneficiary
designation. The Spouse's consent must acknowledge the effect on the Spouse of
the Participant's election, waiver or designation and be duly witnessed by a
Plan representative or notary public. Spousal Consent shall be valid only with
respect to the spouse who signs the Spousal Consent and only for the particular
choice made by the Participant which requires Spousal Consent. A Participant may
revoke (without Spousal Consent) a prior election, waiver or designation that
required Spousal Consent at any time before the Sweep Date associated with the
Settlement Date upon which payments will begin. Spousal Consent also means a
determination by the Administrator that there is no Spouse, the Spouse cannot be
located or such other circumstances as may be established by applicable law.
1.64 "Spouse" means a person who, as of the earlier of a Participant's
Payment Date and death, is alive and married to the Participant within the
meaning of the laws of the State of the Participant's residence as evidenced by
a valid marriage certificate or other proof acceptable to the Administrative
Committee. A spouse who was the Spouse on the Payment Date but who is divorced
from the Participant at the Participant's death shall still be the Spouse at the
date of the Participant's death, except as otherwise provided in a QDRO.
1.65 "Sweep Account" means the subsidiary Account for each Contribution
type within each Participant's Account through which all transactions for such
Contribution type are processed and which is invested in interest bearing
deposits of the Trustee.
1.66 "Sweep Date" means the date established by the Applicable Named
Fiduciary as the cutoff date and time for the Applicable Named Fiduciary to
receive notification with respect to a financial transaction for an Accounting
Period in order to be processed with respect to a Trade Date designated by the
Administrative Committee.
1.67 "Termination of Employment" occurs when a person ceases to be an
Employee or if earlier, the first anniversary of the date his or her Authorized
Leave of Absence commenced, as determined by the personnel policies of the
Commonly Controlled Entity to whom he or she rendered services; provided,
however, where a Commonly Controlled Entity ceases to be such with respect to an
Employee as a result
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<PAGE> 25
of either an asset sale or stock sale an Employee of the Commonly Controlled
Entity shall be deemed not to have incurred a Termination of Employment:
(a) unless the Administrative Committee shall make a determination that the
transaction satisfies Section 401(k) of the Code, or if no such determination is
made, until such Employee ceases to be employed by the successor to the Commonly
Controlled Entity; or (b) if the Administrative Committee shall make a Trustee
Transfer of his or her Accrued Benefit. Transfer of employment from one Commonly
Controlled Entity to another Commonly Controlled Entity shall not constitute a
Termination of Employment for purposes of the Plan.
1.68 "Trade Date" means the date as of which a financial transaction
occurs, however:
(a) with respect to a transaction involving Investment Funds
maintained on a dollar accounting methodology, the transaction shall be
executed based upon the Fair Market Value of a Unit as of the applicable
Valuation Date;
(b) with respect to a transaction involving Investment Funds
maintained on a share accounting methodology, the transaction shall be
executed based upon the daily average of the proceeds or purchase price of
sales and purchases, respectively, of a share.
1.69 "Trust" means the legal entity resulting from the agreement between
the Company and the Trustee and all amendments thereto, in which some or all of
the assets of this Plan will be received, held, invested and distributed to or
for the benefit of Participants and Beneficiaries.
1.70 "Trust Agreement" means the agreement between the Company and the
Trustee establishing the Trust, and any amendments thereto.
1.71 "Trust Fund" means any property, real or personal, received by and
held by the Trustee, plus all income and gains and minus all losses, expenses,
withdrawals and distributions chargeable thereto.
1.72 "Trustee" means any corporation, individual or individuals designated
in the Trust Agreement who shall accept the appointment as Trustee to execute
the duties of the Trustee as set forth in the Trust Agreement.
1.73 "Trustee Transfer" means (a) a transfer to the Custodian of an amount
by the custodian of a retirement plan qualified for tax-favored treatment under
Section 401(a) of the Code or by the trustee(s) of a trust forming part of such
a plan, which plan provides for such transfer; or (b) a Direct Rollover within
the meaning of Section 402(c)(8)(B) of the Code; provided that with respect to
any withdrawal or distribution from the Plan, a Participant may elect a transfer
to only one eligible retirement plan, except as may otherwise be determined by
the Administrative Committee, in a uniform and nondiscriminatory manner.
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<PAGE> 26
1.74 "Valuation Date" means the close of business on each business day.
1.75 "Vesting Service" means the sum of the Years of Service of an
Employee; provided however, Years of Service shall be disregarded:
(a) if the Employee had no vested interest in his or her Contributions
by an Employer, Years of Service earned before the Break in Service; or
(b) if such Years of Service were earned prior to a Period of
Severance of at least twelve (12) months, unless and until the Participant
has completed a Year of Service; or
(c) if such Years of Service were earned after a Break in Service, for
purposes of determining the nonforfeitable percentage of his or her Accrued
Benefit earned before such Break in Service; or
(d) if such Years of Service were earned prior to the date the
Employee's Employer became a Commonly Controlled Entity shall be
disregarded, unless the Administrative Committee makes such a determination
not to apply this exclusion with respect to each such Employee in a uniform
and nondiscriminatory manner.
1.76 "Year of Service" means:
(1) as it applies to Eligibility Service, a Computation Period in
which an Employee is credited with at least 1,000 Hours of Service.
(2) as it applies to Vesting Service, a twelve (12) consecutive month
period of Continuous Service.
An Employee's service with a company, the assets of which are acquired by a
Commonly Controlled Entity, shall only be counted as employment with such
Commonly Controlled Entity in the determination of his or her Years of Service
if (1) the Administrative Committee directs that credit for such service be
granted, or (2) a qualified plan of the acquired company is subsequently
maintained by any Employer or Commonly Controlled Entity.
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<PAGE> 27
ARTICLE II
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PARTICIPATION
2.1 Eligibility. On or after the Effective Date, as to each Employer:
(a) Participant on January 1, 1997. Each person who has an Accrued
Benefit on January 1, 1997 shall become a Participant as of January 1,
1997.
(b) Other Eligible Employee. Each other Eligible Employee shall become
a Participant on the Entry Date on or after the date he or she completes at
least one year of Eligibility Service.
2.2 Reemployment.
(a) Eligible Employee Was Previously a Participant. An Eligible
Employee who previously was a Participant prior to his or her Termination
of Employment shall become a Participant on the first Entry Date on and
after the date he or she earns an Hour of Service.
(b) Eligible Employee Had a Termination. An Eligible Employee who
previously completed the service requirement to become a Participant and
who had a Termination of Employment before he or she became a Participant
shall be eligible to become a Participant on the later of (1) the date he
or she would have become a Participant but for his or her Termination of
Employment, or (2) the date he or she again earns an Hour of Service.
2.3 Participation Upon Change of Job Status. An Employee who is not an
Eligible Employee shall become a Participant on the later of (1) the date he or
she would have become a Participant had he or she always been an Eligible
Employee, or (2) the date he or she becomes an Eligible Employee.
2.4 Ceasing to be a Participant. A Participant will cease to be a
Participant on the later of (1) the date his Accrued Benefit becomes zero,and
(2) his Termination of Employment.
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ARTICLE III
- --------------------------------------------------------------------------------
PARTICIPANT CONTRIBUTIONS
3.1 Pre-Tax Contribution Election.
(a) A Participant who is an Eligible Employee and who desires to have
Pre-Tax Contributions made on his or her behalf by his or her Employer
shall file a Contribution Election pursuant to procedures specified by the
Administrative Committee specifying his or her Contribution Percentage of
not less than one percent (1.00%) nor more than twelve percent (12%)
(stated as a whole integer percentage) and authorizing the Compensation
otherwise payable to him or her to be reduced.
(b) Notwithstanding Subsection (a) hereof, for any Plan Year the
Administrative Committee may determine that the maximum Contribution
Percentage shall be greater or lesser than the percentages set forth in
Subsection (a) hereof. Otherwise, the maximum Contribution Percentage as
provided in Subsection (a) hereof shall apply.
(c) A Participant's Contribution Election shall be effective only with
respect to Compensation not yet paid as of the date the Contribution
Election is effective. A Contribution Election received on or before a
Notice Date shall become initially effective with respect to payroll cycles
ended after the applicable Change Date, or if participants are reemployed,
on the first day of each Plan Year quarter. However, the Administrative
Committee, in its sole discretion, may declare an additional window period
to Participants. Any Contribution Election which has not been properly
completed will be deemed not to have been received and be void.
3.2 Election Procedures. A Participant's Contribution Election shall
continue in effect (with automatic adjustment for any change in his or her
Compensation) until the earliest of the date (1) his or her Contribution
Election is changed in accordance with paragraph (a) hereof; (2) he or she
ceases to be paid as an Eligible Employee; or (3) his or her Contribution
Election is cancelled in accordance with paragraph (b) hereof.
(a) Changing the Election. A Participant may increase or decrease his
or her Contribution Percentage (subject to the percentage limits stated
above) only once each Change Date by making a new Contribution Election,
pursuant to procedures specified by the Administrative Committee, on which
is specified the amount of the Contribution Percentage.
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(1) If such Contribution Election is received by the Notice
Date, the change shall be effective with respect to the
first payroll cycle ended after the Change Date.
(2) However, if the Administrative Committee deems it necessary,
the Administrative Committee may specify an additional
window period to Participants.
(3) The amount of increase or decrease of such Contribution
Percentage shall be effective only with respect to
Compensation not yet paid.
(4) Any Contribution Election which has not been properly
completed or which does not have a valid Investment Election
will be deemed not to have been received and be void.
(b) Canceling the Election. A Participant desiring to cancel his or
her existing Contribution Election and reduce his or her Contribution
Percentage to zero must deliver to the Applicable Named Fiduciary a new
Contribution Election, pursuant to procedures specified by the
Administrative Committee. The Administrative Committee will establish
procedures, to be administered in a uniform and nondiscriminatory manner,
for allowing a Participant to cancel his or her Contribution Election. Any
Contribution Election received by the Applicable Named Fiduciary on or
before a Notice Date shall become effective with respect to the payroll
cycle ended after the next Change Date. A Participant who is an Eligible
Employee and who has cancelled his or her Election may again make a
Contribution Election at any time. If such Contribution Election is
received by the Applicable Named Fiduciary by the Notice Date, it shall
become effective with respect to the first payroll cycle ended after the
next Change Date, provided at least three (3) months have elapsed since the
effective date of the cancellation. Any Participant who has improperly
completed a Contribution Election will be deemed not to have made an
Election.
3.3 Limitation of Elective Deferrals for all Participants. A Participant's
Limited Deferrals for any calendar year shall not exceed the Contribution Dollar
Limit. If a Participant advises the Administrative Committee that he or she has
Elective Deferrals (reduced by Elective Deferrals previously distributed or
which are recharacterized as a result of the application of Code Section
401(k)(3) to such Participant) in excess of the Contribution Dollar Limit
("Excess Deferral"), the Administrative Committee shall return such Excess
Deferrals for the taxable year to the Participant. To the extent the
Participant's Limited Deferrals exceed the Contribution Dollar Limit, the
Employer may notify the Plan on behalf of the Participant (and "Excess Deferral"
shall be calculated by taking into account only Limited Deferrals). If such
advice was received by the Administrative Committee during the taxable year, the
Plan shall distribute the Excess Deferral as soon as administratively feasible.
If such advice was received by the
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<PAGE> 30
Administrative Committee after the taxable year but no later than March 1 (or as
late as April 14, if allowed by the Administrative Committee) following the
close of the taxable year, the Administrative Committee shall cause the Plan to
return such Excess Deferral no later than April 15 immediately following the end
of such taxable year, adjusted by income allocable to that amount.
The net investment gain or loss associated with the Excess Deferral is
calculated as follows:
G
E x --------- x (1 + (10% x M))
(AB-G)
where:
E = the Excess Deferral amount,
G = the net gain or loss for the Plan Year in the Participant's
Pre-Tax Account,
AB = the total value of the Participant's Pre-Tax Account, determined
as of the end of the calendar year being corrected,
M = the number of full months from the calendar year
end to the date the excess amount is paid, plus one
for the month during which payment is to be made if
payment will occur after the 15th of that month.
If the application of the limitations in this Section results in a reduction of
previously contributed Pre-Tax Contributions on behalf of a Participant,
Matching Contributions allocable with respect thereto (prior to such reduction)
which are not distributed under the ACP Test shall be forfeited.
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<PAGE> 31
ARTICLE IV
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EMPLOYER CONTRIBUTIONS AND ALLOCATIONS
4.1 Pre-Tax Contributions.
(a) Frequency and Eligibility. Subject to the limits of the Plan and
to the Administrative Committee's authority to limit Contributions under
the terms of this Plan, for each period for which a Contribution Election
is in effect, the Employer shall contribute to the Plan on behalf of each
Participant an amount equal to the amount designated by the Participant as
a Pre-Tax Contribution on his or her Contribution Election.
(b) Allocation. The Pre-Tax Contribution shall be allocated to the
Pre-Tax Account of the Participant with respect to whom the amount is paid.
(c) Timing, Medium and Posting. Pre-Tax Contributions shall be paid to
the Custodian in cash and posted to each Participant's Pre-Tax Account by
the Applicable Named Fiduciary as soon as such amounts can reasonably be
balanced against the specific amount made on behalf of each Participant.
Pre-Tax Contributions shall be paid to the Custodian not later than the
fifteenth (15th) day of the month next following the month in which amounts
are deducted from the Participant's Compensation.
4.2 Matching Contributions.
(a) Frequency and Eligibility. Subject to the limits of the Plan and
to the Administrative Committee's authority to limit Contributions under
the Plan, for each period with respect to which the Participant makes a
Pre-Tax Contribution, the Employer shall make Matching Contributions as
described in the following Allocation Method paragraph on behalf of each
Participant who contributed during the period and was an Eligible Employee
at any time during each quarter of the Plan Year.
(b) Allocation Method. The Matching Contributions, together with any
available Forfeiture Account amounts to be applied as Matching
Contributions, for each period shall total fifty percent (50%) of each
eligible Participant's Pre-Tax Contributions for the period, provided that
no Matching Contributions and Forfeiture Account amounts shall be made
based upon a Participant's Contributions in excess of three percent (3%) of
his or her Compensation for the period. The Employer may change the fifty
percent (50%) matching rate or the three percent (3%) of considered
Compensation to any other percentages, including zero (0%).
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<PAGE> 32
(c) Timing, Medium and Posting. The Employer shall make each period's
Matching Contribution in cash as of a date determined by the Employer, and
not later than the Employer's federal tax filing date, including
extensions, for deducting such Contribution. The Applicable Named Fiduciary
shall post such amount to each Participant's Matching Account once the
total Contribution received by the Custodian has been balanced against the
specific amount to be credited to each Participant's Matching Account.
(d) Compensation. Compensation shall be measured by the period (not to
exceed the Plan Year) for which the Contribution is being made provided the
Eligible Employee is a Participant during such period.
4.3 Pay Based Contributions.
(a) Frequency and Eligibility. Subject to the limits of the Plan and
to the Administrative Committee's authority to limit Contributions under
the Plan, for each Plan Year, the Employer shall make a Pay Based
Contribution on behalf of each Participant who was an Eligible Employee on
the last day of each Plan Year.
(b) Allocation Method. The Pay Based Contribution, together with any
available Forfeiture Account amount to be applied as a Pay Based
Contribution, for each period shall be equal to three percent (3%) of each
eligible Participant's Compensation.
(c) Timing, Medium and Posting. The Employer shall make each period's
Pay Based Contribution in cash as soon as is feasible, and not later than
the Employer's federal tax filing date, including extensions, for deducting
such Contribution. The Applicable Named Fiduciary shall post such amount to
each Participant's Retirement Contribution Account once the total
Contribution received by the Custodian has been balanced against the
specific amount to be credited to each Participant's Retirement
Contribution Account.
(d) Compensation. Compensation shall be measured by the period (not to
exceed the Plan Year) for which the Contribution is being made provided the
Eligible Employee is a Participant during such period.
4.4 Special Contributions.
(a) Frequency and Eligibility. Subject to the limits of the Plan and
to the Administrative Committee's authority to limit Contributions under
the Plan, for each Plan Year, the Employer may make a Special Contribution
in an amount determined by the Administrative Committee on behalf of each
Non-Highly Compensated Employee Participant who was an Eligible Employee at
any time during the Plan Year.
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<PAGE> 33
(b) Allocation Method. The Special Contribution for each period shall
be allocated among eligible Participants as determined by the
Administrative Committee, subject to a maximum dollar amount which may be
contributed on behalf of any Participant as determined by the
Administrative Committee.
(c) Timing, Medium and Posting. The Employer shall make each period's
Special Contribution in cash as soon as is feasible, but no later than
twelve (12) months after the end of the Plan Year to which it is allocated.
The Applicable Named Fiduciary shall post such amount to each Participant's
Special Account once the total Contribution received by the Custodian has
been balanced against the specific amount to be credited to each
Participant's Special Account.
(d) Compensation. Compensation shall be measured by the period (not to
exceed the Plan Year) for which the Contribution is being made, provided
the Eligible Employee is a Participant during such period.
4.5 Miscellaneous.
(a) Deduction Limits. Employer Contributions for any Plan Year shall
be made from current or accumulated earnings and profits of the Employers;
provided, however, that in the event there are insufficient current or
accumulated earnings or profits to make all Employer Contributions, the
Board of Directors (or the board of directors of any Employer which is not
a Commonly Controlled Entity) shall decide, in its discretion, whether or
not or to what extent such contributions shall be made. In addition, in no
event shall the Employer Contributions for a Plan Year exceed the maximum
the Company estimates will be deductible (or which would be deductible if
the Employers had taxable income) by any Employer or Commonly Controlled
Entity under Section 404 of the Code ("Deductible Amount"). Any amount in
excess of the Deductible Amount shall not be contributed in the following
order of Contribution type, to the extent needed to eliminate the excess:
(1) Each Participant's allocable share of Pre-Tax Contributions
for the Plan Year will be reduced by an amount equal to the
excess of the Participant's Pre-Tax Contributions over an
amount which bears the same ratio to the amount of Pre-Tax
Contributions made to the Plan on behalf of such Participant
during the Plan Year as the Deductible Amount available for
the Plan Year (reduced by the total amount of other types of
Employer Contributions for the Plan Year) bears to the
aggregate Pre-Tax Contributions made to the Plan on behalf
of all Participants subject to such Deductible Amount during
the Plan Year (before the application of this provision).
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<PAGE> 34
(2) If the application of Section (a)(1) would result in a
reduction of a Participant's Pre-Tax Contributions which are
matched by Matching Contributions, the rate at which Pre-Tax
Contributions are reduced shall be offset by a reduction for
each Matching Contribution not made as a result.
(3) Pay Based Contributions.
(b) Profit Sharing Plan. Notwithstanding anything herein to the
contrary, the Plan shall constitute a profit sharing plan for all purposes
of the Code.
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<PAGE> 35
ARTICLE V
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ROLLOVERS
5.1 Rollovers. The Administrative Committee may authorize the Custodian to
accept a Rollover Contribution from an Eligible Employee in cash, even if he or
she is not yet a Participant. The Employee shall furnish satisfactory evidence
to the Administrative Committee that the amount is eligible for rollover
treatment. Such amount shall be posted to the Employee's Rollover Account by the
Applicable Named Fiduciary as of the date received by the Custodian. Such
Eligible Employee shall not be treated as a Participant for purposes of
Articles III and IV until he or she has satisfied the requirements of
Article II.
If it is later determined that an amount transferred pursuant to the
above paragraph did not in fact qualify as a Rollover Contribution, the balance
credited to the Employee's Rollover Account shall immediately be (1) segregated
from all other Plan assets, (2) treated as a non-qualified trust established by
and for the benefit of the Employee, and (3) distributed to the Employee. Any
such nonqualifying rollover shall be deemed never to have been a part of the
Plan.
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<PAGE> 36
ARTICLE VI
- --------------------------------------------------------------------------------
ACCOUNTING FOR PARTICIPANTS'
ACCOUNTS AND FOR INVESTMENT FUNDS
6.1 Individual Participant Accounting.
(a) Account Maintenance. The Applicable Named Fiduciary shall cause
the Accounts for each Participant to reflect transactions involving assets
of the Accounts in accordance with this Article. Financial transactions
during or with respect to an Accounting Period shall be accounted for at
the individual Account level by "posting" each transaction to the
appropriate Account of each affected Participant. Participant Account
values shall be maintained in dollars or shares depending on the Investment
Fund. At any point in time, the value of a Participant's Accrued Benefit
shall be equal to the Fair Market Value of his or her Account determined by
using the most recent Trade Date values provided by the Custodian.
(b) Trade Date Accounting and Investment Cycle. For any transaction to
be processed as of a Trade Date, the Applicable Named Fiduciary must
receive instructions by the Sweep Date and such instructions shall apply
only to amounts held in or posted to the Accounts as of the Trade Date.
Financial transactions in an Investment Fund shall be posted to a
Participant's Account as of the Trade Date and based upon the Trade Date
values provided by the Custodian. All transactions shall be effected on the
Settlement Date relating to the Trade Date (or as soon as is
administratively feasible).
(c) Suspension of Transactions. Whenever the Administrative Committee
considers such action to be in the best interest of the Participants, the
Administrative Committee in its discretion may suspend from time to time
the Trade Date.
(d) Temporary Investment. All transactions related to amounts being
contributed to or distributed from the Trust shall be posted to each
affected Participant's Sweep Account. Any amount held in the Sweep Account
will be credited with interest up until the Settlement Date or the later
date on which it is removed from the Sweep Account.
(e) How Fees and Expenses are Charged to Participants. Account
maintenance fees shall be charged prorata to each Participant's Account on
the basis of each Participant's Accrued Benefit, provided that no fee shall
reduce a Participant's Account balance below zero. Transaction type fees
(such as special asset fees, Conversion Election change fees, etc.) shall
be charged to the Accounts involved in the transaction. Fees and expenses
incurred for the
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<PAGE> 37
management and maintenance of Investment Funds shall be charged at the
Investment Fund level and reflected in the net gain or loss of each Fund.
(f) Error Correction. The Administrative Committee may correct any
errors or omissions in the administration of the Plan by restoring or
charging any Participant's Accrued Benefit with the amount that would be
credited or charged to the Account had no error or omission been made.
Funds necessary for any such restoration shall be provided through payment
made by the Employer.
(g) Accounting for Participant Loans. Participant loans shall be held
in a separate Fund for investment only by such Participant and accounted
for in dollars as an earmarked asset of the borrowing Participant's
Account.
6.2 Accounting for Investment Funds.
(a) Dollar Accounting. Investments in the Investment Fund designated
in the Appendix shall be maintained in dollars. The Applicable Named
Fiduciary is responsible for determining the dollar value of a unit of each
Investment Fund as of each Trade Date. To the extent the Investment Fund is
comprised of a collective investment fund of the Custodian, the net asset
and unit values shall be determined in accordance with the rules governing
such collective investment funds, which are incorporated herein by
reference. Fees and expenses incurred for the management and maintenance of
Investment Funds shall be charged at the Investment Fund level and
reflected in the net gain or loss of each Fund Fees.
(b) Share Accounting. The investments in each Investment Fund
designated in the Appendix shall be maintained in full and fractional
shares. The Applicable Named Fiduciary is responsible for determining the
number of full and fractional shares of each such Fund. To the extent an
Investment Fund is comprised of a collective investment fund of the
Custodian, the net asset and unit values shall be determined in accordance
with the rules governing such collective investment funds, which are
incorporated herein by reference. Fees and expenses incurred for the
management and maintenance of Investment Funds shall be charged at the
Investment Fund level and reflected in the net gain or loss of each Fund.
(c) Accounting for Company Stock. The following additional rules shall
apply to the Company Stock Fund:
(1) Shareholder Rights. Shareholder Rights with respect to all
Company Stock in an Account shall be exercised by the
Trustee in accordance with directions from the Participant
pursuant to the procedures of the Trust Agreement.
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<PAGE> 38
(2) Tender Offer. If a tender offer is commenced for Company
Stock, the provisions of the Trust Agreement regarding the
response to such tender offer, the holding and investment of
proceeds derived from such tender offer and the substitution
of new securities for such proceeds shall be followed.
(3) Dividends and Income. Dividends (whether in cash or in
property) and other income received by the Custodian in
respect of Company Stock shall be reinvested in Company
Stock and shall constitute income and be recognized on an
accrual basis for the Accounting Period in which occurs the
record date with respect to such dividend; provided that,
with respect to any dividend which is reflected in the
market price of the underlying stock, the Administrative
Committee shall direct the Custodian during such trading
period to trade such stock the regular way to reflect the
value of the dividend, and all Fund transfers and cash
distributions shall be transacted accordingly with no
accrual of such dividend, other than as reflected in such
market price.
(4) Transaction Costs. Any brokerage commissions, transfer
taxes, transaction charges, and other charges and expenses
in connection with the purchase or sale of Company Stock
shall be added to the cost thereof in the case of a purchase
or deducted from the proceeds thereof in the case of a sale;
provided, however, where the purchase or sale of Company
Stock is with a "disqualified person" as defined in Section
4975(e)(2) of the Code or a "party in interest" as defined
in Section 3(14) of ERISA, no commissions may be charged
with respect thereto.
6.3 Accounts for QDRO Beneficiaries. A separate Account shall be
established for a Beneficiary entitled to any portion of a Participant's Account
under a QDRO as of the date and in accordance with the directions specified in
the QDRO. Such Account shall be valued and accounted for in the same manner as
any other Account.
(a) Investment Direction. A QDRO Beneficiary may direct the investment
of such Account in the same manner as any other Participant; provided
however, a QDRO Beneficiary may not acquire Company Stock.
(b) Distributions. A QDRO Beneficiary shall be entitled to payment as
provided in the QDRO and permissible under the otherwise applicable terms
of this Plan, regardless of whether the Participant is an Employee, and to
name a Beneficiary as specified in the QDRO.
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<PAGE> 39
(c) Participant Loans. A QDRO Beneficiary shall not be entitled to
borrow from his or her Account. If a QDRO specifies that the QDRO
Beneficiary is entitled to any portion of the Account of a Participant who
has an outstanding loan balance, all outstanding loans shall continue to be
held in the Participant's Account and shall not be divided between the
Participant's and QDRO Beneficiary's Accounts.
6.4 Special Accounting During Conversion Period. The Administrative
Committee and Custodian may use any reasonable accounting methods in performing
their respective duties during the period of converting the prior accounting
system of the Plan and Trust to conform to the individual Participant accounting
system described in this Section. This includes, but is not limited to, the
method for allocating net investment gains or losses and the extent, if any, to
which contributions received by and distributions paid from the Trust during
this period share in such allocation. All or a portion of the Trust assets may
be held, if necessary, in a short term interest bearing vehicle, which may
include deposits of the Trustee, during the conversion period for establishing
such individual Participant Accounts.
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<PAGE> 40
ARTICLE VII
- --------------------------------------------------------------------------------
INVESTMENT FUNDS AND ELECTIONS
7.1 Investment Funds. Except for a Participant's Sweep and loan
Accounts, the Trust shall be maintained in various Investment Funds. The
Administrative Committee may change the number or composition of the Investment
Funds, subject to the terms and conditions agreed to with the Custodian.
7.2 Investment of Contributions.
(a) Investment Election. Each Participant may direct the
Trustee, by submission to the responsible Applicable Named Fiduciary of
a completed Investment Election provided for that purpose by the
responsible Applicable Named Fiduciary, to invest Contributions posted
to his or her Accounts in one or more Investment Funds which shall be
entirely invested in the Investment Fund specified by the
Administrative Committee in the Appendix. If the Administrative
Committee directs, for any Accounting Period, Contributions with
respect to which the Participant has investment control may be invested
separately in Funds. If a Participant does not have a valid Investment
Election on file, his or her Election shall be deemed to be a 100%
election of the Investment Fund designated by the Administrative
Committee as the default option, as indicated in Appendix A. If the
Participant elects to have any such Contributions made on his or her
behalf invested in more than one Investment Fund, he or she must
designate in whole multiples of one percent (1%) what percentage of the
Contribution is to be invested in each such Investment Fund. If the
Administrative Committee directs, for any Accounting Period,
Contributions with respect to which the Participant has investment
control may be invested separately in Funds.
(b) Effective Date of Investment Election; Change of
Investment Election. A Participant's initial Investment Election will
be effective with respect to a Fund on the Trade Date which relates to
the Sweep Date on which or prior to which the Investment Election is
received pursuant to procedures specified by the Administrative
Committee. Any Investment Election which has not been properly
completed will be deemed not to have been received. If a Participant
does not have a valid Investment Election on file, his or her Election
shall be deemed to be a 100% election of the Investment Fund designated
by the Administrative Committee as the default option, as indicated in
Appendix A. A Participant's Investment Election shall continue in
effect, notwithstanding any change in his or her Compensation or his or
her Contribution Percentage, until the earliest of (1) the effective
date of a new Investment Election, or (2) the date he or she ceases to
be paid as an Eligible Employee. A change in Investment Election shall
be effective with respect to a Fund on the Trade Date which relates to
the Sweep Date on which or prior to which the Participant's
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<PAGE> 41
new Investment Election is received pursuant to procedures specified by
the Administrative Committee. Any Investment Election which has not
been properly completed will be deemed not to have been received.
(c) Switching Fees. A reasonable processing fee may be
charged directly to a Participant's Account for Investment Election
changes in excess of a specified number per Plan Year as determined
by the Administrative Committee.
7.3 Investment of Accounts.
(a) Conversion Election. Notwithstanding a Participant's
Investment Election, a Participant or Beneficiary may direct the
Trustee, by completing a Conversion Election in accordance with such
procedures as are adopted by the responsible Applicable Named
Fiduciary, to change the interest his or her Accrued Benefit has in one
or more Investment Funds. If the Participant or Beneficiary elects to
invest his or her Accrued Benefit in more than one (1) Investment Fund,
he or she must designate in whole multiples of one percent (1%) what
percentage of his or her Accounts is to be invested in such Investment
Fund. If the Administrative Committee directs, for any Accounting
Period, Accounts may be invested separately in Funds.
(b) Effective Date of Conversion Election. A Conversion
Election to change a Participant's or Beneficiary's investment of his
or her Accrued Benefit in one Investment Fund to another Fund shall be
effective with respect to such Funds on the Trade Date(s) which relates
to the Sweep Date on which or prior to which the Election is received
pursuant to procedures specified by the Administrative Committee.
Notwithstanding the foregoing, to the extent required by any provisions
of an Investment Fund, the effective date of any Conversion Election
may be delayed or the amount of any permissible Conversion Election may
be reduced. Any Conversion Election which has not been properly
completed will be deemed not to have been received.
(c) Switching Fees. A reasonable processing fee may be
charged directly to a Participant's Account for Conversion Election
changes in excess of a specified number per Plan Year as determined
by the Administrative Committee.
7.4 Establishment of Investment Funds. The Administrative
Committee shall cause to be established one or more Investment Funds set forth
in the Appendix. In addition, the Administrative Committee may, from time to
time, in its discretion:
(a) limit investments in or transfers from an Investment
Fund;
(b) add funding vehicles thereunder;
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<PAGE> 42
(c) liquidate, consolidate or otherwise reorganize an
existing Investment Fund; or
(d) add a new Investment Fund to the Appendix.
7.5 Transition Rules. Effective as of the date any Investment
Fund is added or deleted, each Participant and Beneficiary shall have the
opportunity to submit new Investment Elections and Conversion Elections to the
responsible Applicable Named Fiduciary no later than the applicable Sweep
Date. The Administrative Committee and Custodian may use any reasonable
accounting methods in performing their respective duties during the period of
transition from one Investment Fund to another, including, but not limited to:
(a) designating into which Investment Fund a Participant's
Accrued Benefit will be invested if the Participant fails to submit a
proper Conversion Election;
(b) the method for allocating net investment gains or losses
and the extent, if any, to which amounts received by and distributions
paid from the Trust during this period share in such allocation; or
(c) investing all or a portion of the Trust's assets in a
short-term, interest-bearing Fund during such transition period.
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<PAGE> 43
ARTICLE VIII
- --------------------------------------------------------------------------------
VESTING AND FORFEITURES
8.1 Fully Vested Contribution Accounts.
A Participant shall be fully vested and have a nonforfeitable
right to his or her Accrued Benefit in these Accounts at all times:
Pre-Tax Account
Rollover Account
Special Account.
8.2 Full Vesting Upon Attainment of Event. A Participant's Accrued
Benefit shall be fully vested and nonforfeitable upon the occurrence of any one
or more of the following events:
(a) completion of at least the minimum number of years of
Vesting Service in the Vesting Schedule for a 100% nonforfeitable
percentage;
(b) attainment of Normal Retirement Date;
(c) his or her Termination of Employment for reason of a
Disability; or
(d) he or she dies while an Employee.
8.3 Vesting Schedule and Forfeitures.
(a) Vesting. If a Participant has a Termination of Employment,
the Participant shall be vested and have a nonforfeitable right to his
or her Accrued Benefit in his or her Matching and Retirement
Contribution Accounts, determined in accordance with the following
vesting schedule:
Years of Vesting Service Nonforfeitable Percentage
Less than 3 years 0%
3 years or more 100%
Notwithstanding the preceding sentence, with respect to that portion of
a Participant's Accounts that is attributable to amounts transferred
from the Sharon Manufacturing Company Savings Retirement Plan, the
vested percentage of such Accounts shall be no less than their vested
percentage under the Sharon Manufacturing Company Savings Retirement
Plan as of the transfer's effective date.
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<PAGE> 44
8.4 Forfeitures.
(a) Forfeiture Where Payment Commences After a Break in
Service. If no Payment Date of a Participant's nonforfeitable Accrued
Benefit occurs before having incurred a Break in Service, that portion
of the Participant's Accrued Benefit (which is Employer-derived) which
is forfeitable as of his or her Termination of Employment shall be
forfeited as of the completion of a Break in Service. If the
Participant is reemployed as an Employee prior to having incurred a
Break in Service, the Forfeiture shall not occur. If the Participant is
reemployed as an Employee after incurring a Break in Service, the
Participant shall be fully vested and have a nonforfeitable interest in
that portion of his or her Accounts accrued prior to the Break in
Service and not forfeited as a result of such Break in Service. A
Participant who incurs a Termination of Employment with a zero vested
interest in his or her Accrued Benefit (which is Employer-derived)
shall be deemed to have a Payment Date and a Forfeiture of his or her
Accrued Benefit as of such Termination of Employment.
(b) Forfeiture Where Payment Commences Prior to a Break in
Service. If the Payment Date of a Participant's nonforfeitable
percentage of his or her Accrued Benefit occurs prior to having
incurred a Break in Service, that portion of his or her Accrued Benefit
which is forfeitable shall be forfeited as of the Payment Date.
Thereafter, if such person is rehired as an Employee prior to incurring
a Break in Service, he or she shall be entitled to make repayment to
the Plan of the full amount distributed to him or her on or after the
Payment Date no later than (1) the date he or she incurs a Break in
Service, and (2) the last day of the 5-year period commencing on or
after his or her date of reemployment. Upon making repayment in a
single payment of the amount distributed to him or her, the amount
repaid shall be credited to the Participant's Account from which paid
and the Forfeiture shall be reinstated to his or her Accounts and
invested in the same manner as the Account to which it is posted. The
amount required to restore such Participant's Accounts shall be charged
against the Plan's Forfeitures, and if insufficient, be made up from
additional Employer Contributions. Where a Participant has been deemed
to have a Payment Date because he or she had a zero vested interest in
his or her Accrued Benefit, he or she will be deemed to have made the
repayment required by this subparagraph on his or her date of hire.
If the Employee makes the above-described repayment, such
repayment shall be considered to be the "investment in the contract"
for purposes of Sections 72(c)(1)(A), 72(f) and 402(e)(4)(D)(i) of the
Code in relation to the amount reinstated in his or her Account on
account of the repayment.
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<PAGE> 45
8.5 Forfeiture Account.
A Forfeiture will be posted, no later than the end of the Plan Year in
which the Forfeiture arises, to the Forfeiture Account on the Settlement Date
for the Trade Date on which the Custodian, at the direction of the
Administrative Committee, has converted the Forfeiture to cash. The Forfeiture
Account shall be invested in interest bearing deposits of the Custodian or short
term money market instruments. The Forfeiture Account shall be used to reinstate
Accrued Benefits, to reduce Employer Contributions as determined by the
Administrative Committee, and to pay expenses of the Plan.
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<PAGE> 46
ARTICLE IX
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PARTICIPANT LOANS
9.1 Participant Loans Permitted. The Administrative Committee is
authorized to establish and administer a loan program for a Participant pursuant
to the terms and conditions set forth in this Article. All loan limits are
determined as of the Trade Date the Trustee reserves funds for the loan. The
funds will be disbursed to the Participant as soon as is administratively
feasible after the next following Settlement Date.
9.2 Loan Funding Limits.
The loan amount must meet the following limits:
(a) Plan Minimum Limit. The minimum amount for any loan
is $1,000.00.
(b) Plan Maximum Limit. Subject to the legal limit described
in (c) below, the maximum a Participant may borrow, including the
outstanding balance of existing Plan loans, is fifty percent (50%) of
his or her following Accounts which are fully vested:
Pre-Tax Account
Special Account
Matching Account
Retirement Contribution Account
Rollover Account.
(c) Legal Maximum Limit. The maximum a Participant may borrow,
including the outstanding balance of existing loans, is based upon the
value of his or her vested interest in this Plan and all other
qualified plans maintained by a Commonly Controlled Entity (the "Vested
Interest"). The maximum amount is equal to fifty percent (50%) of his
or her Vested Interest, not to exceed $50,000. However, the $50,000
amount is reduced by the Participant's highest outstanding balance of
all loans from any Commonly Controlled Entity's qualified plans during
the 12-month period ending on the day before the Trade Date on which
the loan is made.
9.3 Maximum Number of Loans. A Participant may have only one loan
outstanding at any given time, and any prior existing loan must be fully repaid
for 12 months before a new loan may be secured.
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<PAGE> 47
9.4 Source of Loan Funding. A loan to a Participant shall be made
solely from the assets of his or her following Accounts which are fully vested:
Pre-Tax Account
Special Account
Matching Account
Retirement Contribution Account
Rollover Account.
The available assets shall be determined first by Contribution Account and then
by investment type within each type of Contribution Account. The hierarchy for
loan funding by type of Contribution Account shall be the order listed in the
preceding Plan Maximum Limit paragraph. Within each Account used for funding,
amounts shall first be taken from the available cash in the Account and then
taken by type of investment in direct proportion to the market value of the
Participant's interest in each Investment Fund as of the Sweep Date on which the
loan is made.
9.5 Interest Rate. The interest rate charged on Participant loans
shall be fixed and equal to the prime rate published in the Wall Street Journal
plus one percentage point (1%). The rate may be determined once for all loans
made in a month, and the maturity may be determined to the nearest year.
9.6 Repayment. Substantially level amortization shall be required
of each loan with payments made at least monthly, through payroll deduction,
provided that payment can be made by check for advance loan payments, or when a
Participant is on an Authorized Leave of Absence or transferred to the employ of
a Commonly Controlled Entity which is not participating in the Plan. Loans may
be prepaid in full at any time. The loan repayment period shall be as mutually
agreed upon by the Participant and Administrative Committee, not to exceed five
(5) years.
9.7 Repayment Hierarchy. Loan principal repayments shall be
credited to the Participant's Contribution Accounts in the inverse of the order
used to fund the loan. Loan interest shall be credited to the Contribution
Accounts in direct proportion to the principal repayment. Loan payments are
credited by investment type based upon the Participant's current Investment
Election for that Account.
9.8 Loan Application, Note and Security. A Participant shall
apply for any loan in accordance with a procedure established by the
Applicable Named Fiduciary. The Applicable Named Fiduciary shall administer
Participant loans and shall specify the time frame for approving loan
applications. All loans shall be evidenced by a promissory note and security
agreement and secured only by a Participant's vested Account balance. The Plan
shall have a lien on a Participant's Account to the extent of any outstanding
loan balance.
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9.9 Default, Suspension and Acceleration Feature.
(a) Default. A loan is treated as a default on the earlier of
(i) the date any scheduled loan payment is more than ninety (90) days
late, provided that the Administrative Committee may agree to a
suspension of loan payments for up to twelve (12) months for a
Participant who is on an Authorized Leave of Absence or (ii) thirty
(30) days from the time the Participant receives written notice of the
note being due and payable and a demand for past due amounts.
(b) Actions upon Default. In the event of default, the
Applicable Named Fiduciary will direct the Trustee to report the
default as a taxable distribution. As soon as a Plan withdrawal or
distribution to such Participant would otherwise be permitted, the
Applicable Named Fiduciary will direct the Trustee to execute upon its
security interest in the Participant's Account by segregating the
unpaid loan balance from the Account, including interest to the date of
default, and to distribute the note to the Participant.
(c) Acceleration. A loan shall become due and payable in full
once the Participant incurs a Termination of Employment.
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ARTICLE X
- -------------------------------------------------------------------------------
IN-SERVICE WITHDRAWALS
10.1 Withdrawals for 401(k) Hardship.
(a) Requirements. A Participant may request the withdrawal
of any amount from the portion of his or her Pre-Tax Account to the
extent vested needed to satisfy a financial need by making a withdrawal
request in accordance with a procedure established by the
Administrative Committee. The Applicable Named Fiduciary shall only
approve those requests for withdrawals (1) on account of a
Participant's "Deemed Financial Need", and (2) which are "Deemed
Necessary" to satisfy the financial need.
(b) "Deemed Financial Need". Financial commitments
relating to:
(1) costs directly related to the purchase or
construction (excluding mortgage payments
or balloon payments) of a Participant's
principal residence;
(2) the payment of expenses for medical care
described in Section 213(d) of the Code
previously incurred by the Participant, the
Participant's Spouse, or any dependents of
the Participant (as defined in Section 152
of the Code) or necessary for those persons
to obtain medical care described in Section
213(d) of the Code;
(3) payment of tuition and related educational
fees and room and board expenses for the
next twelve (12) months of post-secondary
education for the Participant, his or her
Spouse, children or dependents (as defined
in Section 152 of the Code); or
(4) necessary payments to prevent the eviction
of the Participant from his or her
principal residence or the foreclosure on
the mortgage of the Participant's principal
residence.
(c) "Deemed Necessary". A withdrawal is "deemed necessary"
to satisfy the financial need only if all of these conditions are met:
(1) the withdrawal may not exceed the dollar
amount needed to satisfy the Participant's
documented Financial Hardship, plus an
amount necessary to pay federal, state, or
local
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income taxes or penalties reasonably
anticipated to result from such withdrawal;
(2) the Participant must have obtained all
distributions, other than Financial
Hardship distributions, and all nontaxable
loans under all plans maintained by the
Company or any Commonly Controlled Entity;
(3) the Participant will be suspended from
making Pre-Tax Contributions, post-tax
contributions, (or similar contributions
under any other qualified or nonqualified
plan of deferred compensation maintained by
a Commonly Controlled Entity) for at least
twelve (12) months from the date the
withdrawal is received; and
(4) the Contribution Dollar Limit for the
taxable year immediately following the
taxable year in which the Financial
Hardship withdrawal is received shall be
reduced by the Elective Deferrals for the
taxable year in which the Financial
Hardship withdrawal is received.
(d) Account Sources for Withdrawal. The withdrawal amount
shall come only from his or her Pre-Tax Account. The amount that may be
withdrawn from a Participant's Pre-Tax Account shall not include
earnings and Qualified Matching Contributions posted to his or her
Pre-Tax Account after the end of the Plan Year which ends before July
1, 1989.
10.2 Withdrawals for Participants over age 59 1/2.
(a) Requirements. A Participant who is over age 59 1/2 may
withdraw from his or her Accounts to the extent vested listed in
paragraph (b) below.
(b) Account Sources for Withdrawal. The withdrawal amount
shall come only from his or her Accounts, in the following priority
order of Accounts:
Rollover Account
Pre-Tax Account
Special Account
Matching Account
Retirement Contribution Account.
(c) Permitted Frequency. The maximum number of withdrawals
permitted from these Accounts after age 59 1/2 in any three (3) month
period is one (1).
(d) Suspension from Further Contributions. If the
withdrawal is from an Account with respect to which there is a
Matching Contribution,
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<PAGE> 51
Contributions directed by the Participant shall be suspended for a
period of 6 months following the Sweep Date of the withdrawals, unless
the Participant is suffering from a hardship described above.
10.3 Withdrawal Processing.
(a) Minimum Amount. The minimum amount for any type of
withdrawal is $500.00.
(b) Application by Participant. A Participant must submit a
withdrawal request in accordance with a procedure established by the
Applicable Named Fiduciary to the Applicable Named Fiduciary to apply
for any type of withdrawal. Only a Participant who is an Employee may
make a withdrawal request.
(c) Approval by the Applicable Named Fiduciary. The
Applicable Named Fiduciary is responsible for determining that a
withdrawal request conforms to the requirements described in this
Section and notifying the Custodian of any payments to be made in a
timely manner.
(d) Time of Processing. The Custodian shall process all
withdrawal requests which it receives by a Sweep Date, based on the
value as of the Trade Date to which it relates, and fund them on the
next Settlement Date. The Custodian shall then make payment to the
Participant as soon thereafter as is administratively feasible.
(e) Medium and Form of Payment. The medium of payment for
withdrawals is either cash or direct deposit. The form of payment for
withdrawals shall be a single installment.
(f) Investment Fund Sources. Within each Account used for
funding a withdrawal, amounts shall be taken from the Sweep Account and
then taken by type of investment in direct proportion to the market
value of the Participant's interest in each Investment Fund (which
excludes Participant's loans) at the time the withdrawal is made.
(g) Direct Rollover. With respect to any payment hereunder
in excess of $200 which constitutes an Eligible Rollover Distribution,
a Distributee may direct the Applicable Named Fiduciary to have all or
some portion of such payment paid in the form of a Trustee Transfer, in
accordance with procedures established by the Administrative Committee,
provided the Applicable Named Fiduciary receives written notice of such
direction with specific instructions as to the Eligible Retirement Plan
on or prior to the applicable Sweep Date for payment. If the
Participant does not transfer all of such payment, the minimum amount
which can be transferred is $500.
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ARTICLE XI
- -------------------------------------------------------------------------------
DISTRIBUTIONS ON AND AFTER
TERMINATION OF EMPLOYMENT
11.1 Request for Distribution of Benefits.
(a) Request for Distribution. Subject to the other
requirements of this Article, a Participant may elect to have his or
her vested Accrued Benefit paid to him or her beginning upon any
Settlement Date following his or her Termination of Employment by
submitting a completed distribution election in accordance with a
procedure established by the Applicable Named Fiduciary. Such election
form shall include or be accompanied by a notice which provides the
Participant with information regarding all optional times and forms of
payment available. The election must be submitted to the Applicable
Named Fiduciary by the Sweep Date that relates to the Payment Date.
(b) Failure to Request Distribution. If a Participant has a
Termination of Employment and fails to submit a distribution request in
accordance with a procedure established by the Applicable Named
Fiduciary by the last Payment Date permitted under this Article, his or
her vested Accrued Benefit shall be valued as of the Valuation Date
which immediately precedes such latest date of distribution (called the
"Default Valuation Date") and a notice of such deemed distribution
shall be issued to his or her last known address as soon as
administratively possible. If the Participant does not respond to the
notice or cannot be located, his or her vested Accrued Benefit
determined on the Default Valuation Date shall be treated as a
Forfeiture. If the Participant subsequently files a claim, the amount
forfeited (unadjusted for gains and losses) shall be reinstated to his
or her Accounts and distributed as soon as administratively feasible,
and such payment shall be accounted for by charging it against the
Forfeiture Account or by a contribution from the Employer of the
affected Participant.
11.2 Deadline for Distribution. In addition to any other Plan
requirements and unless the Participant elects otherwise, or cannot be located,
the Payment Date of a Participant's vested Accrued Benefit shall be not later
than sixty (60) days after the latest of the close of the Plan Year in which (i)
the Participant attains the earlier of age sixty-five (65) or his or her Normal
Retirement Date, (ii) occurs the tenth (10th) anniversary of the Plan Year in
which the Participant commenced participation, or (iii) the Participant had a
Termination of Employment. However, if the amount of the payment or the location
of the Participant (after a reasonable search) cannot be ascertained by that
deadline, payment shall be made no later than sixty (60) days after the earliest
date on which such amount or location is ascertained. In any case, the Payment
Date of a Participant's vested Accrued Benefit shall not be later than April 1
following the calendar year in which the Participant attains age seventy and
one-half
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<PAGE> 53
(70 1/2) and each December 31 thereafter and shall comply with the requirements
of Section 401(a)(9) of the Code and the Treasury Regulations promulgated
thereunder.
11.3 Payment Form and Medium.
(a) General. A Participant's vested Accrued Benefit shall be paid
in the form of:
(1) a lump sum;
(2) a single or joint life annuity;
(3) installment refund annuity (with a period certain of
five (5), ten (10) or fifteen (15) years);
(4) periodic distributions of at least $500.00, each in an
amount designated by the Participant, but not to exceed
five (5) distributions nor more than one (1) in each
calendar year; or
(5) annual installment distributions over a period of two
(2) to fifteen (15) years payable in an amount equal to
the Participant's Account balance as of the Valuation
Date the units or shares are liquidated or sold,
respectively, divided by the number of years remaining
in the period of payments, including the year of
payment.
(b) Medium of Payment. Payments will generally be made in cash
(generally by check), alternatively, if the Participant elects an in-kind
distribution, a single sum payment will be made in a combination of cash and
whole shares (to the extent his or her Accrued Benefit is invested in the
Company Stock). Any annuity option permitted will be provided through the
purchase of a non-transferable single premium contract from an insurance company
which must conform to the terms of the Plan and Section 401(a)(9) of the Code
and which will be distributed to the Participant or Beneficiary in complete
satisfaction of the benefit due.
11.4 Small Amounts Paid Immediately. If a Participant has a
Termination of Employment and the Participant's vested Accrued Benefit is $3,500
or less, the Participant's Accrued Benefit shall be paid as a single sum as soon
as administratively feasible after his or her Termination of Employment.
11.5 Payment Within Life Expectancy. The Participant's payment
election must be consistent with the requirement of Code Section 401(a)(9) that
all payments are to be completed within a period not to exceed the lives or the
joint and last survivor life expectancy of the Participant and his or her
Beneficiary. The life expectancies of a Participant and his or her spouse may
not be recomputed annually.
11.6 Incidental Benefit Rule. The Participant's payment election
must be consistent with the requirement that, if the Participant's Spouse is not
his or her sole
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<PAGE> 54
primary Beneficiary, the minimum annual distribution for each calendar year,
beginning with the year in which he or she attains age seventy and one-half (70
1/2), shall not be less than the quotient obtained by dividing (a) the
Participant's vested Accrued Benefit as of the last Trade Date of the preceding
year by (b) the applicable divisor as determined under the incidental benefit
requirements of Code Section 401(a)(9).
11.7 QJSA and QPSA Information and Elections. The following
information and election rules will apply to any Participant who elects an
annuity option.
(a) QJSA. A qualified joint and fifty percent (50%)
survivor annuity, meaning a form of benefit payment which is the
actuarial equivalent of the Participant's applicable portion of the
vested Accrued Benefit at the Payment Date, payable to the Participant
in monthly payments for life and providing that, if the Participant's
Spouse survives him or her, monthly payments equal to fifty percent
(50%) of the amount payable to the Participant during his or her
lifetime will be paid to the Spouse for the remainder of such person's
lifetime.
(b) QPSA. A qualified pre-retirement survivor annuity,
meaning that upon the death of a Participant before the Payment Date of
the applicable portion of the his or her vested Accrued Benefit, such
benefit will become payable to the surviving Spouse as an annuity,
unless Spousal Consent has been given to a different Beneficiary or the
surviving Spouse chooses a different form of payment.
(c) QJSA Information to a Participant. No more than ninety
(90) days before the Payment Date, each Participant who has a Spouse
and requests or will receive an annuity form of payment shall be given
a written explanation of (1) the terms and conditions of the QJSA to
his or her annuity; (2) the right to make an election to waive this
form of payment and choose an optional form of payment and the effect
of this election; (3) the right to revoke this election and the effect
of this revocation; and (4) the need for Spousal Consent.
(d) QJSA Election. A Participant may elect (and such
election shall include Spousal Consent if married), at any time within
the ninety (90) day period ending on the Payment Date, to (1) waive the
right to receive the QJSA and elect an optional form of payment; or (2)
revoke or change any such election.
(e) QJSA Spousal Consent to Participant Loans. Spousal
Consent must be obtained for any Participant loan which is funded from
any amount to which the election in paragraph (d) above applies within
the ninety (90) day period ending on the date such loan is secured.
(f) QJSA Spousal Consent to Participant In-Service
Withdrawals. Spousal Consent must be obtained for any Participant
in-service withdrawal which is funded from the applicable portion of
his or her Account or any portion
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<PAGE> 55
of an Account to which the election in paragraph (d) above applies
within the ninety (90) day period ending on the date of such in-service
withdrawal.
(g) QPSA Beneficiary Information to Participant. Each
married Participant who has requested or will receive an annuity form
of payment shall be given written information stating that (1) his or
her death benefit is payable to his or her surviving Spouse; (2) his or
her ability to choose that the benefit be paid to a different
Beneficiary; (3) the right to revoke or change a prior designation and
the effects of such revocation or change; and (4) the need for Spousal
Consent. Such information shall be provided during whichever of the
following periods ends later:
(1) the period that begins one year before the
date on which the Participant requests an
annuity form of payment and that ends one
year after such date; and
(2) the period that begins with the first day
of the Plan Year in which the Participant
attains age thirty-two (32) and that ends
with the close of the Plan Year in which
the Participant attains age thirty-five
(35).
Notwithstanding the foregoing, if the Participant incurs a Termination
of Employment after requesting an annuity form of payment, but before
attaining age thirty-five (35), the information described in the first
sentence of this Subsection shall be provided during the period that
begins one year before the date of the Participant's Termination of
Employment and that ends one year after such date.
(h) QPSA Beneficiary Designation by Participant. A married
Participant may designate (with Spousal Consent) a non-spouse
Beneficiary at any time after the Participant has been given the
information in the QPSA Beneficiary Information to Participant
paragraph above and upon the earlier of (1) the date the Participant
incurs a Termination of Employment, or (2) the beginning of the Plan
Year in which that Participant attains age thirty-five (35).
11.8 Continued Payment of Amounts in Payment Status on January 1,
1997. Any person who became a Participant prior to January 1, 1997 only because
he or she had an Accrued Benefit and who had commenced to receive payments prior
to January 1, 1997 shall continue to receive such payments in the same form and
payment schedule under this Plan.
11.9 Direct Rollover. With respect to any payment in excess of $200
hereunder which constitutes an Eligible Rollover Distribution, a Distributee may
direct the Applicable Named Fiduciary to have such payment paid in the form of a
Trustee Transfer, in accordance with procedures established by the
Administrative Committee, provided the Applicable Named Fiduciary receives
written notice of such direction with specific instructions as to the Eligible
Retirement Plan on or prior to the applicable
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<PAGE> 56
Sweep Date for payment. If the Participant does not transfer all of such
payment, the minimum amount which can be transferred is $500.
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<PAGE> 57
ARTICLE XII
- --------------------------------------------------------------------------------
DISTRIBUTION OF ACCRUED BENEFITS ON DEATH
12.1 Payment to Beneficiary. On the death of a Participant prior
to his or her Payment Date, his or her vested Accrued Benefit shall be paid to
the Beneficiary or Beneficiaries designated by the Participant in accordance
with the procedure established by the Administrative Committee. Death of a
Participant on or after his or her Payment Date shall result in payment to his
or her Beneficiary of whatever death benefit is provided by the form of payment
in effect on his or her Payment Date.
12.2 Beneficiary Designation. Each Participant shall complete a
beneficiary designation indicating the Beneficiary who is to receive the
Participant's remaining Plan interest at the time of his or her death. The
Participant may change such designation of Beneficiary from time to time by
filing a new beneficiary designation with the Applicable Named Fiduciary. No
designation of Beneficiary or change of Beneficiary shall be effective until
properly filed with the Applicable Named Fiduciary. Notwithstanding any
designation to the contrary, the Participant's Beneficiary shall be the
Participant's Spouse to whom the Participant is legally married under the laws
of the State of the Participant's residence on the date of the Participant's
death and surviving him or her on such date, unless such designation includes
Spousal Consent. If the Participant dies leaving no Spouse and either (1) the
Participant shall have failed to file a valid beneficiary designation, or (2)
all persons designated on the beneficiary designation shall have predeceased the
Participant, the Applicable Named Fiduciary shall have the Custodian distribute
such Participant's Accrued Benefit in a single sum to his or her estate.
12.3 Benefit Election.
(a) Request for Distribution. In the event of a Participant's
death prior to his or her Payment Date, a Beneficiary may elect to
have the vested Accrued Benefit of a deceased Participant paid to him
or her beginning upon any Settlement Date following the Participant's
date of death by submitting a completed distribution election in
accordance with the procedure established by the Administrative
Committee. The election must be submitted to the Applicable Named
Fiduciary by the Sweep Date that relates to the Settlement Date upon
which payments are to begin.
(b) Failure to Request Distribution. In the event a Beneficiary
fails to submit a timely distribution request, his or her vested
Accrued Benefit shall be valued as of the Valuation Date which
immediately precedes such latest date of distribution (called the
"Default Valuation Date") and a notice of such deemed distribution
shall be issued to his or her last known address as soon as
administratively possible. If the Beneficiary does not respond to the
notice or cannot be located, his or her vested Accrued Benefit
determined on the Default
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<PAGE> 58
Valuation Date shall be treated as a Forfeiture. If the Beneficiary
subsequently files a claim, the amount forfeited (unadjusted for gains
and losses) shall be reinstated to his or her Accounts and distributed
as soon as administratively feasible, and such payment shall be
accounted for by charging it against the Forfeiture or by a
Contribution from the Employer of the affected Beneficiary.
12.4 Payment Form. In the event of a Participant's death prior to his
or her Payment Date, a Beneficiary shall be limited to the same form of payment
to which the Participant was limited. Payments will generally be made in
cash (by check); alternatively, if the Beneficiary elects an in-kind
distribution, a single sum payment will be made in a combination of cash and
whole shares (to the extent his or her Accrued Benefit is invested in the
Company Stock).
12.5 Time Limit for Payment to Beneficiary. Payment to a Beneficiary
must either:
(a) be completed within five (5) years of the Participant's
death; or
(b) begin within one year of his or her death and be completed
within the period of the Beneficiary's lifetime, except that:
(1) If the Participant dies after the April 1 immediately
following the end of the calendar year in which he or
she attains age seventy and one-half (70 1/2),
payment to his or her Beneficiary must be made
at least as rapidly as provided in the Participant's
distribution election;
(2) If the surviving Spouse is the Beneficiary, payments
need not begin until the date on which the
Participant would have attained age seventy and
one-half (70 1/2) and must be completed within the
Spouse's lifetime; and
(3) If the Participant and the surviving Spouse who is
the Beneficiary die (A) before the April 1
immediately following the end of the calendar year in
which the Participant would have attained age seventy
and one-half (70 1/2); and (B) before payments have
begun to the Spouse, the Spouse will be treated as
the Participant in applying these rules.
12.6 QPSA Information and Election. The following information and
election rules will apply to any Beneficiary of a Participant who dies prior to
his or her Payment Date after having elected a life annuity option.
(a) Form of Payment. The applicable portion of a Participant's
vested Accrued Benefit will be paid in the form of a QPSA.
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<PAGE> 59
(b) QPSA Information to a Surviving Spouse. Each surviving
Spouse who requests an annuity form of payment shall be given a written
explanation of (1) the terms and conditions of being paid his or her
vested Accrued Benefit in the form of a single life annuity, (2) the
right to make an election to waive this form of payment and choose an
optional form of payment and the effect of making this election, and
(3) the right to revoke this election and the effect of this
revocation.
(c) QPSA Election by Surviving Spouse. A surviving Spouse
may elect, at any time up to the Sweep Date associated with the
Settlement Date upon which payments will begin, to (1) waive the single
life annuity and elect an optional form of payment, or (2) revoke or
change any such election.
(d) Small Amounts Paid Immediately. If a Beneficiary's
vested Accrued Benefit is $3,500 or less, the Beneficiary's Accrued
Benefit shall be paid as a single sum as soon as administratively
feasible.
12.7 Direct Rollover. With respect to any payment in excess of $200
hereunder which constitutes an Eligible Rollover Distribution, a Distributee may
direct the Applicable Named Fiduciary to have such payment paid in the form of a
Trustee Transfer, in accordance with the procedure established by the
Administrative Committee, provided the Applicable Named Fiduciary receives
written Notice of such direction with specific instructions as to the Eligible
Retirement Plan on or prior to the applicable Sweep Date for payment. If the
Participant does not transfer all of such payment, the minimum amount which can
be transferred is $500.
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<PAGE> 60
ARTICLE XIII
- -------------------------------------------------------------------------------
MAXIMUM CONTRIBUTIONS
13.1 Definitions.
(a) Annual Additions means with respect to a Participant
for any Plan Year the sum of:
(1) Contributions and Forfeitures (and any earnings
thereon) allocated as of a date within the Plan
Year;
(2) All contributions, forfeitures and suspended
amounts (and income thereon) for such Plan Year,
allocated to such Participant's account(s) under
any Related Defined Contribution Plan as of a date
within such Plan Year;
(3) The sum of all after-tax contributions of the
Participant to Related Plans for the Plan Year and
allocated to such Participant's accounts under
such Related Plan as of a date within such Plan Year
("Aggregate Employee Contributions");
(4) Solely for purposes of this Section, all
contributions to any "separate account" (as defined
in Section 419A(d) of the Code) allocated to such
Participant as of a date within the Plan Year if
such Participant is a "Key Employee" within the
meaning of Code Section 416(i); and
(5) Solely for purposes of this Section, all
contributions to any "individual medical benefit
account" (as defined in Section 415(l) of the Code)
allocated to such Participant as of a date within the
Plan Year.
(b) Maximum Annual Additions of a Participant for a Plan
Year means the lesser of:
(1) twenty-five percent (25%) of the Participant's
Compensation, or
(2) the greater of thirty thousand dollars ($30,000) or
one-quarter of the dollar limitation in Code Section
415(b)(1)(A) as adjusted for cost of living
increases (determined in accordance with regulations
prescribed by
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the Secretary of the Treasury or his or her
delegate pursuant to the provisions of Section
415(d) of the Code).
(c) Annual Excess means, for each Participant affected,
the amount by which the allocable Annual Additions for such Participant
exceeds or would exceed the Maximum Annual Addition for such
Participant.
13.2 Avoiding an Annual Excess. Notwithstanding any other provision
of this Plan, a Participant's "Annual Additions" for any Plan Year, which is
hereby designated as the "limitation year" for the Plan, as that term is used
in Section 415 of the Code, shall not exceed his or her "Maximum Annual
Additions." If, at any time during a Plan Year, the allocation of additional
Contributions for a Plan Year would produce an Annual Excess, the affected
Participant shall receive only the Maximum Annual Addition from Contributions,
and, at the direction of the Applicable Named Fiduciary, for the remainder of
the Plan Year Contributions will be reduced, if possible, to the amount needed
for each affected Participant to receive only the Maximum Annual Addition.
13.3 Correcting an Annual Excess. If for any Plan Year as a result
of a reasonable error in estimating a person's Compensation, Elective Deferrals,
or such other facts and circumstances which the Internal Revenue Service will
permit, a Participant's Annual Excess shall be treated in the following manner:
(a) Aggregate Employee Contributions allocable under a Related
Plan shall be distributed to the Participant, if permitted, by the
amount of the Annual Excess.
(b) If any Annual Excess remains, Pre-Tax Contributions (and
earnings thereon) shall be distributed to such Participant.
(c) If any Annual Excess (adjusted for investment gains and
losses) remains, Contributions shall be a Forfeiture for such
Participant in the following order:
(1) Matching Contributions;
(2) Pay-Based Contributions.
(d) Any Forfeiture of a Participant's allocations of
Contributions under subparagraph above shall be held in the Forfeiture
Account and shall be used for the Plan Year to reduce or applied as
Contributions. If any such amount remains in the Forfeiture Account, it
shall again be held in suspense in the Forfeiture Account and be
utilized to reduce future Contributions for succeeding Plan Years.
(e) Any amounts held in suspense in the Forfeiture Account
pursuant to Paragraph above remaining upon Plan termination shall be
returned
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to the Employers in such proportions as shall be determined by the
Administrative Committee.
13.4 Correcting a Multiple Plan Excess. If a Participant's Accounts
have or would have an Annual Excess, the Annual Excess shall be corrected by
reducing the Annual Addition to this Plan before reductions have been made to
other Related Defined Contribution Plans.
13.5 Two-Plan Limit. If a Participant participates in any Related
Defined Benefit Plan, the sum of the "Defined Benefit Plan Fraction" (as defined
below) and the "Defined Contribution Plan Fraction" (as defined below) for such
Participant shall not exceed one (called the "Combined Fraction").
(a) Defined Benefit Plan Fraction means, for any Plan
Year, a fraction, the numerator of which is the projected benefit
payable pursuant to Code Section 415(e)(2)(A) under all Related Defined
Benefit Plans and the denominator of which is the lesser of: (i) the
product of 1.25 and the dollar limit in effect for the Plan Year under
Code Section 415(b)(1)(A), and (ii) the product of 1.4 and one hundred
percent (100%) of the Participant's average Compensation for his or her
high three (3) years.
(b) Defined Contribution Plan Fraction means, for any Plan
Year, a fraction, the numerator of which is the sum of the Annual
Additions (as determined pursuant to Section 415(c) of the Code in
effect for such Plan Year) to a Participant's Accounts as of the end of
the Plan Year under the Plan or any Related Defined Contribution Plan,
and the denominator of which is the lesser of:
(1) The sum of the products of 1.25 and the
dollar limit under Code Section 415(c)(1)(A)
for such Plan Year and for each prior year of
service with a Commonly Controlled Entity and
its predecessor, and
(2) the sum of the products of 1.4 and twenty-five
percent (25%) of the Participant's Compensation
for such Plan Year and for each prior year of
service with a Commonly Controlled Entity and
its predecessor.
If the Combined Fraction of such Participant exceeds one and if the
Related Defined Benefit Plan permits it, the Participant's Defined
Benefit Plan Fraction shall be reduced by limiting the Participant's
annual benefits payable from the Related Defined Benefit Plan in which
he or she participates to the extent necessary to reduce the Combined
Fraction of such Participant to one.
13.6 Short Plan Year. With respect to any change of the Plan Year
(and co-existent limitation year), the dollar limitation of the Maximum Annual
Addition for such Plan Year shall be determined by multiplying such dollar
amount by a fraction,
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the numerator of which is the number of months (including fractional parts of a
month) in the short Plan Year, and the denominator of which is twelve (12).
13.7 Grandfathering of Applicable Limitations. The Plan shall
recognize and apply any grandfathering of applicable benefits and contributions
limitations which are permitted under ERISA, the Tax Equity and Fiscal
Responsibility Act of 1982 and the Tax Reform Act of 1986.
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ARTICLE XIV
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ADP AND ACP TESTS
14.1 Contribution Limitation Definitions. For purposes of this
Article, the following terms are defined as follows:
(a) Average Contribution Percentage or ACP means, separately,
the average of the Calculated Percentage for Participants within the
HCE Group and the NHCE Group, respectively, for a Plan Year.
(b) Average Deferral Percentage or ADP means, separately, the
average of the Calculated Percentage calculated for Participants within
the HCE Group and the NHCE Group, respectively, for a Plan Year.
(c) Calculated Percentage means the calculated percentage for a
Participant. The calculated percentage refers to either the
K-Contributions (including amounts distributed because they exceeded
the Contribution Dollar Limit) with respect to Compensation which would
have been received by the Participant in the Plan Year but for his or
her Contribution Election, or M-Contributions allocated to the
Participant's Account as of a date within the Plan Year, divided by his
or her Compensation for such Plan Year.
(d) M-Contributions shall include Matching Contributions
(excluding Qualified Matching Contributions). In addition,
M-Contributions may include Pre-Tax Contributions and Special
Contributions treated as Matching Contributions, but only to the extent
that (1) the Administrative Committee elects to use them; and (2) they
meet the requirements of Code Section 401(m) to be regarded as Matching
Contributions. M-Contributions shall not include Matching Contributions
which become a Forfeiture because the Contribution to which it relates
is in excess of the ADP Test, ACP Test or the Contribution Dollar
Limit.
(e) K-Contributions shall include Pre-Tax Contributions
(excluding Pre-Tax Contributions treated as Matching Contributions),
but shall exclude Limited Deferrals to this Plan made on behalf of any
NHCE in excess of the Contribution Dollar Limit. In addition, Deferrals
may include Qualified Matching Contributions and Special Contributions,
but only to the extent that (1) the Administrative Committee elects to
use them and (2) they meet the requirements of Code Section 401(k) to
be regarded as elective contributions.
(f) HCE Group and NHCE Group means, with respect to each
Employer and its Commonly Controlled Entities, the respective group of
HCEs and NHCEs who are eligible to have amounts contributed on their
behalf for the Plan Year, including Employees who would be eligible but
for their election not
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to participate or to contribute, or because their pay is greater than zero
but does not exceed a stated minimum, but subject to the following:
(1) If the Related Plans are subject to the ADP or ACP
Test, and are considered as one plan for purposes of
Code Sections 401(a)(4) or 410(b) (other than
410(b)(2)), all such plans shall be aggregated
and treated as one plan for purposes of meeting the
ADP and ACP Tests provided that, for Plan Years
beginning after December 31, 1989, plans may only be
aggregated if they have the same Plan Year.
(2) If an HCE is covered by more than one cash or deferred
arrangement maintained by the Related Plans, all such
arrangements (other than arrangements in plans that
are not required to be aggregated for this purpose
under Treas. Reg. Sections 1.401(k)-1(g)(l)(ii)(B)) with
respect to the Plan Years ending with or within
the same calendar year shall be aggregated and
treated as one arrangement for purposes of
calculating the separate percentage for the HCE which
is used in the determination of the Average
Percentage.
14.2 ADP and ACP Tests. For each Plan Year, the ADP and ACP for the
HCE Group must meet either the Basic or Alternative Limitation when compared to
the respective ADP and ACP for the NHCE Group:
(a) Basic Limitation. The ADP or ACP for the HCE Group may not
exceed 1.25 times the ADP or ACP, respectively, for the NHCE Group.
(b) Alternative Limitation. The ADP or ACP for the HCE Group is
limited by reference to the ADP or ACP, respectively, for the NHCE
Group as follows:
If the NHCE Group Then the Maximum HCE
Percentage is : Group Percentage is:
Less than 2% 2 times ADP or ACP for the NHCE
Group
2% to 8% ADP or ACP for the NHCE Group plus
2%
More than 8% Basic Limitation applies
14.3 Correction of ADP and ACP Tests.
(a) Reduction of K-Contributions or M-Contributions. If the ADP
or ACP are not met or will not be met, the Administrative Committee
shall
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determine a maximum percentage to be used in place of the Calculated
Percentage for each HCE that would reduce the ADP or ACP of the HCE
Group by a sufficient amount to meet the ADP and ACP Tests.
(b) ADP Correction. Pre-Tax Contributions (including amounts
previously refunded because they exceeded the Contribution Dollar
Limit) shall be refunded to the Participant by the end of the next Plan
Year in an amount equal to the actual K-Contribution minus the product
of the maximum percentage for that HCE and the HCE's Compensation.
Matching Contributions with respect to such distributed Pre-Tax
Contributions shall be forfeited (unless paid to the Participant due to
an ACP Correction).
(c) ACP Correction. Matching Contribution amounts in excess of
the maximum percentage of an HCE's Compensation shall, by the end of
the next Plan Year, be refunded to the Participant to the extent
vested, and forfeited to the extent such amounts were not vested as of
the end of the Plan Year being tested.
(d) Investment Fund Sources. Once the amount of Pre-Tax and
Matching Contributions to be refunded is determined, amounts shall then
be taken by type of investment in direct proportion to the market value
of the Participant's interest in each Investment Fund (which excludes
Participant loans) as of the Trade Date as of which the correction is
processed.
14.4 Method of Calculation. The Applicable Named Fiduciary shall
determine the maximum percentage for each HCE whose Calculated Percentage(s)
is(are) the highest at any one time by reducing his or her Calculated Percentage
in the following manner until the ADP and/or ACP Test is satisfied:
(a) The Calculated Percentage for each HCE under a Related Plan
shall be reduced to the extent permitted under such Related Plan.
(b) If more reduction is needed, the Calculated Percentage of
each HCE whose Calculated Percentage (stated in absolute terms) is the
greatest shall be reduced by one-hundredth (1/100) of one percentage
point.
(c) If more reduction is needed, the Calculated Percentage of
each HCE whose Calculated Percentage (stated in absolute terms) is the
greatest (including the Calculated Percentage of any HCE whose
Calculated Percentage was adjusted under Paragraph (b) shall be reduced
by one-hundredth (1/100) of one percentage point.
(d) If more reduction is needed, the procedures of Paragraph (c)
shall be repeated.
14.5 Multiple Use Test. If the Average Contribution Percentage and the
Average Deferral Percentage for the HCE Group exceeds the Basic Limitation in
both
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<PAGE> 67
the ADP or the ACP Tests (after correction of the ADP and ACP Test), the ADP and
ACP (as corrected) for the HCE Group must also comply with the requirements of
Code Section 401(m)(9), which as of the Effective Date require that the sum of
these two percentages (as determined after any corrections needed to meet the
ADP or ACP Tests have been made) must not exceed the greater of:
(a) the sum of
(1) the larger of the ADP or ACP for the NHCE Group times
1.25; and
(2) the smaller of the ADP or ACP for the NHCE Group,
times two (2) if the NHCE Average Percentage is less
than two percent (2%), or plus two percent (2%) if it
is two percent (2%) or more; or
(b) the sum of
(1) the lesser of the ADP or ACP for the NHCE Group times
1.25; and
(2) the greater of the ADP or ACP for the NHCE Group,
times two (2) if the NHCE Average Percentage is less
than two percent (2%), or plus two percent (2%) if it
is two percent (2%) or more.
If the multiple use limit is exceeded, the Administrative Committee
shall determine a maximum ADP or ACP for the HCE Group and shall reduce
the ADP or ACP for each HCE in the same manner as would be used to
correct to ADP or ACP.
14.6 Adjustment for Investment Gain or Loss. The net investment gain
or loss associated with the K-Contributions and/or M-Contributions to be
distributed shall be distributed or charged against a distribution within two
and one-half (2 1/2) months
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<PAGE> 68
but no later than twelve (12) months following the close of the applicable Plan
Year. Such gain or loss is calculated as follows:
G
E x -------- x (1 + (10% x M))
(AB-G)
where:
E = the total excess Deferrals or Contributions,
G = the net gain or loss for the Plan Year from all of an HCE's
affected Accounts,
AB = the total value of an HCE's affected Accounts, determined
as of the end of the Plan Year being corrected,
M = the number of full months from the Plan Year end to the
date excess amounts are paid, plus one for the month during
which payment is to be made if payment will occur after the
fifteenth (15th) of the month.
14.7 Required Records. The Applicable Named Fiduciary shall maintain
records which are sufficient to demonstrate that the ADP, ACP and Multiple Use
Test has been met for each Plan Year for at least as long as the Employer's
corresponding tax year is open to audit.
14.8 Incorporation by Reference. The provisions of this Section are
intended to satisfy the requirements of Code Sections 401(k)(3), (m)(2), (m)(9)
and Treas. Reg. Sections 1.401(k)-1(b), 1.401(m)-1(b) and 1.401(m)-2 and, to the
extent not otherwise stated in this Section, those Code Sections and Treasury
Regulations are incorporated herein by reference.
14.9 Collectively Bargained Employees. The provisions of this Article
shall apply separately to Participants who are collectively bargained employees
within the meaning of Treas. Reg. Sections 1.410(b)-6(d)(2) and for
Participants who are not collectively bargained employees.
14.10 QSLOB. The Administrative Committee in its sole discretion may
apply the provisions of this Article separately with respect to each qualified
separate line of business, as defined in Section 414(r) of the Code.
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ARTICLE XV
- --------------------------------------------------------------------------------
CUSTODIAL ARRANGEMENTS
15.1 Custodial Agreement. The Administrative Committee may enter into
one or more Custodial Agreements to provide for the holding, investment and
payment of Plan assets, or direct by execution of an insurance contract that all
or a specified portion of the Plan's assets be held, invested and paid under
such a contract. All Custodial Agreements, as from time to time amended, shall
continue in force and shall be deemed to form a part of the Plan. Subject to the
requirements of the Code and ERISA, the Administrative Committee may cause
assets of the Plan which are securities to be held in the name of a nominee or
in street name provided such securities are held on behalf of the Plan by:
(a) a bank or trust company that is subject to supervision by the
United States or a State, or a nominee of such bank or trust company;
(b) a broker or dealer registered under the Securities Exchange
Act of 1934, or a nominee of such broker or dealer; or
(c) a "clearing agency" as defined in Section 3(a)(23) of the
Securities Exchange Act of 1934, or its nominee.
15.2 Selection of Custodian. The Administrative Committee shall
select, remove or replace the Custodian in accordance with the Custodial
Agreement. The subsequent resignation or removal of a Custodian and the approval
of its accounts shall all be accomplished in the manner provided in the
Custodial Agreement.
15.3 Custodian's Duties. Except as provided in ERISA, the powers,
duties and responsibilities of the Custodian shall be as stated in the Custodial
Agreement, and unless expressly stated or delegated to the Custodian (with the
Custodian's acceptance), nothing contained in this Plan shall be deemed by
implication to impose any additional powers, duties or responsibilities upon the
Custodian. All Employer Contributions and Rollover Contributions shall be paid
into the Trust, and all benefits payable under the Plan shall be paid from the
Trust, except to the extent such amounts are paid to a Custodian other than the
Trustee. An Employer shall have no rights or claims of any nature in or to the
assets of the Plan except the right to require the Custodian to hold, use, apply
and pay such assets in its hands, in accordance with the directions of the
Administrative Committee, for the exclusive benefit of the Participants and
their Beneficiaries, except as hereinafter provided.
15.4 Separate Entity. The Custodial Agreement under this Plan from its
inception shall be a separate entity aside and apart from Employers or their
assets, and the corpus and income thereof shall in no event and in no manner
whatsoever be subject to the rights or claims of any creditor of any Employer.
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15.5 Plan Asset Valuation. As of each Valuation Date, the Fair Market
Value of the Plan's assets held or posted to an Investment Fund shall be
determined by the Administrative Committee or the Custodian, as appropriate.
15.6 Right of Employers to Plan Assets. The Employers shall have no
right or claim of any nature in or to the assets of the Plan except the right to
require the Custodian to hold, use, apply, and pay such assets in its possession
in accordance with the Plan for the exclusive benefit of the Participants or
their Beneficiaries and for defraying the reasonable expenses of administering
the Plan; provided, that:
(a) if the Plan receives an adverse determination with respect to
its initial qualification under Sections 401(a), 401(k) and 401(m) of
the Code, Contributions conditioned upon the qualification of the Plan
shall be returned to the appropriate Employer within one (1) year of
such denial of qualification; provided, that the application for
determination of initial qualification is made by the time prescribed
by law for filing the respective Employer's return for the taxable year
in which the Plan is adopted, or by such later date as is prescribed by
the Secretary of the Treasury under Section 403(c)(2)(B) of ERISA;
(b) if, and to the extent that, deduction for a Contribution
under Section 404 of the Code is disallowed, Contributions conditioned
upon deductibility shall be returned to the appropriate Employer within
one (1) year after the disallowance of the deduction;
(c) if, and to the extent that, a Contribution is made through
mistake of fact, such Contribution shall be returned to the appropriate
Employer within one year of the payment of the Contribution; and
(d) any amounts held suspended pursuant to the limitations of
Code Section 415 shall be returned to the Employers upon termination of
the Plan.
All Contributions made hereunder are conditioned upon the Plan being
qualified under Sections 401(a) or 401(k) and 401(m) of the Code and a
deduction being allowed for such contributions under Section 404 of the
Code. Pre-Tax Contributions returned to an Employer pursuant to this
Section shall be paid to the Participant for whom contributed as soon
as administratively convenient. If these provisions result in the
return of Contributions after such amounts have been allocated to
Accounts, such Accounts shall be reduced by the amount of the
allocation attributable to such amount, adjusted for any losses or
expenses.
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ARTICLE XVI
- --------------------------------------------------------------------------------
ADMINISTRATION AND INVESTMENT MANAGEMENT
16.1 General. The Company, through the authority vested in the Board
of Directors, has established, by separate documentation, the Administrative
Committee, and has enabled such committee to have the power and authority to
act, to the extent delegated to each such committee, on behalf of the Company
(and therefore all Employers), with respect to matters which relate to the Plan
and Trust, but not on behalf of the Plan and Trust. Furthermore, the Company has
adopted the Plan and Trust, thereby:
(a) establishing a separate Administrative Committee to have the
power and authority to act, to the extent provided in the Plan or
Trust, on behalf of the Plan or Trust, but not on behalf of the
Company; and
(b) enabling the Administrative Committee to have the power and
authority to act, to the extent provided in and the manner provided in
the Plan or Trust, on behalf of the Company, but not on behalf of the
Plan or Trust.
16.2 Administrative Committee Acting as Employer. The Administrative
Committee has such authority and control as shall be granted to it, from time to
time, to act on behalf of the Company, including but not limited to the power
to:
(a) amend or terminate the Plan in part or completely;
(b) designate which employee groups are eligible to participate
in the Plan;
(c) select, monitor and remove, as necessary, consultants,
actuaries, underwriters, insurance companies, third party
administrators, or other service providers, and to appoint and remove
any such person as an Applicable Named Fiduciary, and determine and
delegate to them their duties and responsibilities, either directly or
by the adoption of Plan provisions which specify such duties and
responsibilities (the provisions of the Plan documents will control in
the case of a conflict);
(d) appoint and consult with legal counsel, independent
consulting or evaluation firms, accountants, actuaries, or other
advisors, as necessary, to perform its functions;
(e) determine what expenses, if any, related to the operation and
administration of the Plan and the investment of Plan assets, may be
paid from Plan assets, subject to applicable law;
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<PAGE> 72
(f) recommend to the Board of Directors all Plan changes
requiring his or her approval;
(g) report to the Board of Directors any Plan matters of
significance to the Company;
(h) review with the Board of Directors any proposals which would
be submitted to the Board of Directors;
(i) establish such policies and make such other delegations or
designations necessary or incidental to the Company's sponsorship of
the Plan; and
(j) take any other actions necessary or incidental to the
performance of the above-stated powers and duties.
(k) adopt, amend or terminate, in part or completely, a Trust
document, provided such action is consistent with the Plan for which
the Trust is established;
(l) appoint and consult with legal counsel, investment advisors,
independent consulting or evaluation firms, accountants, actuaries, or
other advisors, as necessary, to perform its functions;
(m) determine the funding of Plan benefits and related matters;
(n) report to the Board of Directors any Plan funding or
investment policies of significance to the Company;
(o) review with the Board of Directors any proposals which would
be submitted to the Board of Directors;
(p) establish such policies and make such other delegations or
designations necessary or incidental to the Company's sponsorship of
the Plan;
(q) select, monitor and remove, as necessary, consultants,
actuaries, underwriters, insurance companies, third party
administrators, or other service providers, and to appoint and remove
any such person as an Applicable Named Fiduciary, and determine and
delegate to them their duties and responsibilities, either directly or
by the adoption of Plan provisions which specify such duties and
responsibilities (the provisions of the Plan documents will control in
the case of a conflict); and
(r) take any other actions necessary or incidental to the
performance of the above-stated powers and duties.
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16.3 Administrative Committee as Applicable Named Fiduciary for Plan.
(a) The Administrative Committee, acting on behalf of the Plan or
Trust and subject to subparagraph (b) hereof, shall be an Applicable
Named Fiduciary with respect to the authority to manage and control the
administration and operation of the Plan, including without limitation,
the management and control with respect to the operation and
administration of the Plan contained in an agreement with an Applicable
Named Fiduciary but only to the extent it has been specifically
designated in such agreement as being the responsibility of the
Administrative Committee, an Employer, the Company, or any employee,
member or delegate of any of them.
(b) The Administrative Committee shall not be an Applicable Named
Fiduciary whenever it acts on behalf of the Company and,
notwithstanding any other term or provision of the Plan, Trust, or an
agreement with an Applicable Named Fiduciary, the Administrative
Committee shall cease to be an Applicable Named Fiduciary with respect
to some specified portion of the operation and administration of the
Plan or Trust, to the extent that an Applicable Named Fiduciary is
designated pursuant to the procedure in the Plan or Trust to severally
have authority to manage and control such portion of the operation and
administration of the Plan or Trust.
16.4 Administrative Committee as Applicable Named Fiduciary for Trust.
The Administrative Committee, acting on behalf of the Trust and
subject to subparagraph (b) hereof, shall be an Applicable Named
Fiduciary with respect to its authority to manage and control the Trust
or the Trust's assets, but only to the extent not inconsistent with the
Trust, including without limitation, the following:
(a) to appoint and remove the Trustee;
(b) to selectively direct the Trustee as to the investment and
reinvestment of the assets of the Trust Fund;
(c) to appoint an Investment Manager, by written notice in
writing to the Trustee, to manage, acquire or dispose of that portion
of the Trust Fund which is assigned to it by the Administrative
Committee;
(d) to direct the Trustee, by notice in writing to the Trustee,
to enter into an agreement with an Investment Manager; and
(e) to require that the Trustee is subject to the direction of
the Administrative Committee with respect to a portion of the Trust
Fund;
(f) to appoint any other person or entity which handles Trust
assets, including insurance companies and custodians; and
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(g) establish written investment policies as to the Trust and
ensure compliance with such policies and applicable law, including
monitoring the diversification of investments and avoidance of
prohibited transactions, as well as monitoring investment performance.
16.5 Administrative Committee Membership. The Administrative Committee
shall consist of not less than 3 persons, who shall be appointed by the Board of
Directors. Members shall remain in office at the will of the Board of Directors
and the Board of Directors may from time to time remove any of said members with
or without cause and shall appoint their successors.
16.6 Administrative Committee Structure. Any individual may be a
member of the Administrative Committee. Any member may resign by delivering his
or her written resignation to the Board of Directors, and such resignation shall
become effective upon the date specified therein. A member who is an Employee
shall automatically cease to be a member upon his or her Termination of
Employment. In the event of a vacancy in membership, the remaining members shall
constitute the Administrative Committee with full power to act until said
vacancy is filled.
16.7 Administrative Committee Actions. The Administrative Committee
may act, whether as an Applicable Named Fiduciary on behalf of the Plan or on
behalf of the Company, as follows:
(a) The members may act at a meeting (including a meeting at
different locations by telephone conference) or in writing without a
meeting (through the use of a single document or concurrent document).
(b) Any member by writing may delegate any or all of his or her
rights, powers, duties and discretions to any other member with the
consent of such other member.
(c) The Administrative Committee shall act by majority decision,
which action shall be effective as if such action had been taken by all
members; provided that by majority action one or more members or other
persons may be authorized to act with respect to particular matters on
behalf of all members.
(d) Subject to applicable law, no member shall be liable for an
act or omission of the other members of the same committee in which the
former had not concurred.
(e) Any action by the Administrative Committee on behalf of this
Plan or Trust involving its authority to manage and control the
operation and administration of the Plan or Trust or the Plan's assets
shall be treated as an action of an Applicable Named Fiduciary under
this Plan.
(f) Where reference is made in this Plan or Trust (or where the
Administrative Committee designates in writing) that its action is on
behalf of
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the Company, such committee shall be acting only on behalf of the
Company and not as an Applicable Named Fiduciary.
(g) Except as provided in Section 16.24, the Administrative
Committee may, in writing delivered to the Trustee, empower a
representative to act on its behalf and such person shall have the
authority to act within the scope of such empowerment to the full
extent the Administrative Committee could have acted.
16.8 Procedures for Designation of an Applicable Named Fiduciary. The
Administrative Committee, acting on behalf of the Company, may from time to
time, designate a person to be an Applicable Named Fiduciary with respect to
some portion of the authority it may have with respect to management and control
of the operation and administration of the Plan or the management and control of
the Plan's assets. Such designation shall specify the person designated by name
and either (a) specify the management and control authority with respect to
which the person will be an Applicable Named Fiduciary; or (b) incorporate by
reference an agreement with such Applicable Named Fiduciary to provide services
to or on behalf of the Plan or Trust and use such agreement as a means for
specifying the management and control authority with respect to which such
person will be an Applicable Named Fiduciary. No person who is designated as an
Applicable Named Fiduciary hereunder must consent to such designation nor shall
it be necessary for the Administrative Committee to seek such person's
acquiescence. The authority to manage and control, which any person who is
designated to be an Applicable Named Fiduciary hereunder may have, shall be
several and not joint with the Administrative Committee, whichever is
applicable, and shall result in the Administrative Committee no longer being an
Applicable Named Fiduciary with respect to, nor having any longer, such
authority to manage and control. On and after the designation of a person as an
Applicable Named Fiduciary, the Employer, the Administrative Committee, and any
other Applicable Named Fiduciary with respect to the Plan or Trust, shall have
no liability for the acts (or failure to act) of any such Applicable Named
Fiduciary except to the extent of its co-fiduciary duty under ERISA.
16.9 Compensation. The members of Administrative Committee, acting on
behalf of the Plan or Trust, shall serve without compensation for their services
as such.
16.10 Discretionary Authority of each Applicable Named Fiduciary. Each
Applicable Named Fiduciary on behalf of the Plan and Trust will enforce the Plan
and Trust in accordance with their terms. Each Applicable Named Fiduciary shall
have full and complete authority, responsibility and control (unless an
allocation has been made to another Applicable Named Fiduciary in which case
such Applicable Named Fiduciary shall have such authority, responsibility and
control) over that portion of the management, administration, and operation of
the Plan or Trust allocated to such Applicable Named Fiduciary, including, but
not limited to, the authority and discretion to:
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(a) Formulate, adopt, issue and apply procedures and rules and
change, alter or amend such procedures and rules in accordance with law
and as may be consistent with the terms of the Plan or Trust;
(b) Specify the basis upon which payments are to be made under
the Plan and, as the final appeals fiduciary under ERISA Section 503,
to make a final determination, based upon the information known to the
Applicable Named Fiduciary within the scope of its authority and
control as an Applicable Named Fiduciary, based upon determinations
made and such other information made available from an Employer plus
such final determinations made by each other Applicable Named Fiduciary
within the scope of its authority and control, as are determined to be
relevant to the final appeals fiduciary;
(c) Exercise such discretion as may be required to construe and
apply the provisions of the Plan or Trust, subject only to the terms
and conditions of the Plan or Trust; and
(d) Take all necessary and proper acts as are required for such
Applicable Named Fiduciary to fulfill its duties and obligations under
the Plan or Trust.
16.11 Responsibility and Powers of the Administrative Committee
Regarding Administration of the Plan. The Administrative Committee shall have
full and complete authority, responsibility and control (unless an allocation
has been made to another Applicable Named Fiduciary in which case such
Applicable Named Fiduciary shall have such authority, responsibility and control
only if specifically provided) over that portion of the management,
administration, and operation of the Plan or Trust allocated to the
Administrative Committee and the power to act on behalf of the Plan or Trust,
including, but not limited to, the authority and discretion:
(a) to execute contracts on behalf of the Plan or Trust;
(b) to appoint and compensate such specialists (including
attorneys, actuaries and accountants) to aid it in the administration
of the Plan, and arrange for such other services, as the Administrative
Committee considers necessary or appropriate in carrying out the
provisions of the Plan;
(c) to appoint and compensate an independent outside accountant
to conduct such audits of the financial statements of the Trust as the
Administrative Committee considers necessary or appropriate;
(d) to settle or compromise any litigation against the Plan or a
Fiduciary with respect to which the Plan has an indemnity obligation;
(e) to appoint the Plan Administrator to act within the duties
and responsibilities set forth in Section 16.22;
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(f) to create a legal remedy to the Plan with respect to a
Participant or Beneficiary, or to a Participant or Beneficiary, for any
loss incurred (whether restitution or opportunity losses) by the Plan
on behalf of such Participant or Beneficiary, or by such Participant or
Beneficiary, due to a breach of fiduciary duty to the Plan by an
Applicable Named Fiduciary or other error (whether negligent or
willful) which the Administrative Committee determines is a substantial
contributing factor to such loss (or a portion of such loss); and
(g) to take all necessary and proper acts as are required for the
Administrative Committee to fulfill its duties and obligations under
the Plan or Trust.
16.12 Allocations and Delegations of Responsibility.
(a) Delegations. Each Applicable Named Fiduciary may designate
persons (other than an Applicable Named Fiduciary) to carry out
fiduciary responsibilities (other than trustee responsibilities as
described in Section 405(c)(3) of ERISA) it may have with respect to
the Plan or Trust and make a change of delegated responsibilities. Such
delegation shall specify the delegated person by name and either (a)
specify the discretionary authority with respect to which the person
will be a fiduciary; or (b) incorporate by reference an agreement with
such Applicable Named Fiduciary to provide services to the Plan or
Trust on behalf of the delegating Applicable Named Fiduciary as a means
of specifying the discretionary authority with respect to which such
person will be a fiduciary. No person (other than an investment manager
(as defined in Section 3(38) of ERISA) to whom fiduciary responsibility
has been delegated must consent to being a fiduciary nor shall it be
necessary for the Applicable Named Fiduciary to seek such person's
acquiescence; however, where such person has not contractually accepted
the responsibility delegated, he or she must be given notification of
the services to be performed and, in either case, will be deemed to
have accepted such fiduciary responsibility if he or she performs the
services described for thirty (30) days or more without specific
objection thereto. The discretionary authority any person who is
delegated fiduciary responsibilities hereunder may have shall be
several and not joint with the Applicable Named Fiduciary delegating
and each other Named Fiduciaries. A delegation of fiduciary
responsibility to a person which is not implemented in the manner set
forth herein shall not be void; however, whether the delegating
Applicable Named Fiduciary shall have joint liability for acts of such
person shall be determined by applicable law.
(b) Allocations. The Administrative Committee, acting on behalf
of the Company, may allocate fiduciary responsibilities (other than
trustee responsibilities described in Section 405(c)(3) of ERISA) among
Named Fiduciaries when it designates an Applicable Named Fiduciary in
the manner described in Section 16.8, or may reallocate fiduciary
responsibilities among existing Named Fiduciaries by action of such
Administrative Committee in accordance with Sections 16.7 and 16.8;
provided each such Applicable Named
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Fiduciary is given notice of the services, management and control
authority allocated to it either by way of an amendment to the Plan,
Trust or a contract with such person, or by way of correspondence from
the Administrative Committee. Each Applicable Named Fiduciary, by
signing its contract or by accepting such amendment or correspondence
and rendering the services requested without objection for thirty (30)
days, shall be conclusively bound to have assumed such fiduciary
responsibility as an Applicable Named Fiduciary. An allocation of
fiduciary responsibility to a person which is not implemented in the
manner set forth herein shall not be void, however, such person may not
be an Applicable Named Fiduciary with respect to the Plan and Trust.
(c) Limit on Liability. Fiduciary duties and responsibilities
which have been allocated or delegated pursuant to the terms of the
Plan or the Trust, are intended to limit the liability of the Company,
the Administrative Committee, and each Applicable Named Fiduciary, as
appropriate, in accordance with the provisions of Section 405(c) of
ERISA.
16.13 Administrative Committee Bonding. The members of the
Administrative Committee, acting on behalf of the Plan and Trust, shall serve
without bond (except as otherwise required by Federal law).
16.14 Information to be Supplied by Employer. Each Employer shall
supply to the Administrative Committee, acting on behalf of the Plan and Trust,
or a designated Applicable Named Fiduciary, within a reasonable time of its
request, the names of all Employees, their age, their date of hire, the names
and dates of all Employees who incurred a Termination of Employment during the
Plan Year, and such other information in the Employer's possession as the
Administrative Committee shall from time to time need in the discharge of its
duties. The Administrative Committee and each Applicable Named Fiduciary may
rely conclusively on the information certified to it by an Employer.
16.15 Information to be Supplied by Applicable Named Fiduciary.
Whenever a term, definition, standard, protocol or other, basis for determining
whether an Accrued Benefit exists or whether an Accrued Benefit will be paid
under the terms of the Plan, or which has been incorporated by reference into
this Plan, the Applicable Named Fiduciary who has the authority to manage and
control the administration and operation of the Plan with respect to all or any
basis specified for the payment of such Accrued Benefit (including the authority
to establish or amend such term, definition, standard protocol or other basis)
shall provide a copy thereof either (1) to the Administrative Committee, upon
its request, (2) to a Participant or Beneficiary but only to the extent required
by law, or (3) to the extent required in any proceeding involving the Plan or
any Applicable Named Fiduciary with respect to the Plan.
16.16 Misrepresentations. The Administrative Committee, acting on
behalf of the Plan and Trust, may, but shall not be required to, rely upon any
certificate, statement or other representation made to it by an Employee,
Participant, other Applicable Named Fiduciary, or other individual with respect
to any fact regarding any
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of the provisions of the Plan. Any such certificate, statement or other
representation shall be conclusively binding upon such Employee, Participant,
other Applicable Named Fiduciary, or other individual or personal representative
thereof, heir, or assignee (but not upon the Administrative Committee), and any
such person shall thereafter be estopped from disputing the truth of any such
certificate, statement or other representation.
16.17 Records. The regularly kept records of the designated Applicable
Named Fiduciary (or, where applicable, the Trustee) and any Employer shall be
conclusive evidence of a person's age, his or her status as an Eligible
Employee, and all other matters contained therein applicable to this Plan.
16.18 Plan Expenses. All expenses of the Plan which have been approved
by the Administrative Committee, acting on behalf of the Plan and Trust, shall
be paid by the Trust except to the extent paid by the Employers; and if paid by
the Employers, such Employers may, if authorized by the Administrative Committee
acting on behalf of the Company, seek reimbursement of such expenses from the
Trust and the Trust shall reimburse the Employers. If borne by the Employers,
expenses of administering the Plan shall be borne by the Employers in such
proportions as the Administrative Committee, acting on behalf of the Company,
shall determine.
16.19 Fiduciary Capacity. Any person or group of persons may serve in
more than one fiduciary capacity with respect to the Plan.
16.20 Employer's Agent. The Administrative Committee shall act as agent
for the Company when acting on behalf of the Company and the Company shall act
as agent for each Employer.
16.21 Plan Administrator. The Plan Administrator (within the meaning of
Section 3(16)(A)) shall be appointed by the Administrative Committee, acting on
behalf of the Company, and may (but need not) be a member of the Administrative
Committee; and in the absence of such appointment, the Administrative Committee,
acting on behalf of the Plan and Trust, shall be the Plan Administrator.
16.22 Plan Administrator Duties and Power. The Plan Administrator will
have full and complete authority, responsibility and control over the
management, administration and operation of the Plan with respect to the
following:
(a) satisfy all reporting and disclosure requirements applicable
to the Plan, Trust or Plan Administrator under ERISA, the Code or other
applicable law;
(b) provide and deliver all written forms used by Participants
and Beneficiaries, give notices required by law, and seek a favorable
determination letter for the Plan and Trust;
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<PAGE> 80
(c) withhold any amounts required by the Code to be withheld at
the source and to transmit funds withheld and any and all necessary
reports with respect to such withholding to the Internal Revenue
Service;
(d) respond to a QDRO;
(e) make available for inspection and to provide upon request at
such charge as may be permitted and determined by it, documents and
instruments required to be disclosed by ERISA;
(f) take such actions as are necessary to establish and maintain
in full and timely compliance with any law or regulation having
pertinence to this Plan;
(g) whatever responsibilities are delegated to the Plan
Administrator by the Administrative Committee; and
(h) interpret and construe the provisions of the Plan, to make
regulations and settle disputes described above which are not
inconsistent with the terms thereof.
16.23 Applicable Named Fiduciary Decisions Final. The decision of the
Administrative Committee or an Applicable Named Fiduciary in matters within its
jurisdiction shall be final, binding, and conclusive upon the Employers and the
Trustee and upon each Employee, Participant, Spouse, Beneficiary, and every
other person or party interested or concerned.
16.24 No Agency. Each Applicable Named Fiduciary shall perform (or fail
to perform) its responsibilities and duties or discretionary authority with
respect to the Plan and Trust as an independent contractor and not as an agent
of the Company, any Employer, or the Administrative Committee. No agency is
intended to be created nor is the Administrative Committee empowered to create
an agency relationship with an Applicable Named Fiduciary.
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ARTICLE XVII
- --------------------------------------------------------------------------------
CLAIMS PROCEDURE
17.1 Initial Claim for Benefits. Each person entitled to benefits
under this Plan (a "Claimant") must sign and submit his or her claim for
benefits to the Applicable Named Fiduciary or its agent in writing in such form
as is provided or approved by such Applicable Named Fiduciary. A Claimant shall
have no right to seek review of a denial of benefits, or to bring any action in
any court to enforce a claim for benefits prior to his or her filing a claim for
benefits and exhausting his or her rights under this Section. When a claim for
benefits has been filed properly, such claim for benefits shall be evaluated and
the Claimant shall be notified by the Applicable Named Fiduciary or agent of its
approval or denial within ninety (90) days after the receipt of such claim
unless special circumstances require an extension of time for processing the
claim. If such an extension of time for processing is required, written notice
of the extension shall be furnished to the Claimant by the Applicable Named
Fiduciary or agent prior to the termination of the initial ninety (90) day
period which shall specify the special circumstances requiring an extension and
the date by which a final decision will be reached (which date shall not be
later than one hundred eighty (180) days after the date on which the claim was
filed). A Claimant shall be given a written notice in which the Claimant shall
be advised as to whether the claim is granted or denied, in whole or in part. If
a claim is denied, in whole or in part, the Claimant shall be given written
notice which shall contain (1) the specific reasons for the denial, (2)
references to pertinent Plan provisions upon which the denial is based, (3) a
description of any additional material or information necessary to perfect the
claim and an explanation of why such material or information is necessary, and
(4) the Claimant's rights to seek review of the denial.
17.2 Review of Claim Denial. If a claim is denied, in whole or in part
(or if within the time periods prescribed for in the initial claim, the
Applicable Named Fiduciary or agent has not furnished the Claimant with a denial
and the claim is therefore deemed denied), the Claimant shall have the right to
request that the Administrative Committee review the denial, provided that the
Claimant files a written request for review with the Administrative Committee
within sixty (60) days after the date on which the Claimant received written
notification of the denial. A Claimant (or his or her duly authorized
representative) may review pertinent documents and submit issues and comments in
writing to the Administrative Committee. Within sixty (60) days after a request
for review is received, the review shall be made and the Claimant shall be
advised in writing by the Administrative Committee of the decision on review,
unless special circumstances require an extension of time for processing the
review, in which case the Claimant shall be given a written notification by the
Administrative Committee within such initial sixty (60) day period specifying
the reasons for the extension and when such review shall be completed (provided
that such review shall be completed within one hundred and twenty (120) days
after the date on which the request for review was filed). The decision on
review shall be forwarded to the
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Claimant by the Administrative Committee in writing and shall include specific
reasons for the decision and references to Plan provisions upon which the
decision is based. A decision on review shall be final and binding on all
persons for all purposes. If a Claimant shall fail to file a request for review
in accordance with the procedures described in this Section, such Claimant shall
have no right to review and shall have no right to bring action in any court and
the denial of the claim shall become final and binding on all persons for all
purposes.
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ARTICLE XVIII
- --------------------------------------------------------------------------------
ADOPTION AND WITHDRAWAL FROM PLAN
18.1 Procedure for Adoption. Any Commonly Controlled Entity or
affiliate of the Company may by resolution of such Commonly Controlled Entity's
board of directors adopt the Plan for the benefit of its employees as of the
date specified in the board resolution. No such adoption shall be effective
until such adoption has been approved by the Administrative Committee.
18.2 Procedure for Withdrawal. Any Employer (other than the Company)
may, by resolution of the board of directors of such Employer, with the consent
of the Administrative Committee and subject to such conditions as may be imposed
by the Administrative Committee, terminate its adoption of the Plan.
Notwithstanding the foregoing, an Employer will be deemed to have terminated its
adoption of the Plan when it ceases to be a Commonly Controlled Entity. With
respect to any Participant whose Employer is deemed to have withdrawn from the
Plan because it ceases to be a Commonly Controlled Entity, such Participant's
Account shall be fully vested as of the date of such withdrawal, provided there
is no successor plan or trust to which the balance of such Participant's
Accounts may be transferred.
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ARTICLE XIX
- --------------------------------------------------------------------------------
AMENDMENT, TERMINATION AND MERGER
19.1 Amendments.
(a) Power to Amend. The Company, by resolution of the Board of
Directors on behalf of all Employers, or the Administrative Committee
as provided in Subsection (c) below, may amend, modify, change, revise
or discontinue this Plan by amendment at any time; provided, however,
that no amendment shall:
(1) increase the duties or liabilities of the Custodian
or the Administrative Committee without its
written consent;
(2) have the effect of vesting in any Employer any
interest in any funds, securities or other property,
subject to the terms of this Plan and the Custodial
Agreement;
(3) authorize or permit at any time any part of the
corpus or income of the Plan's assets to be used or
diverted to purposes other than for the exclusive
benefit of Participants and Beneficiaries;
(4) except to the extent permissible under ERISA and the
Code, make it possible for any portion of the Trust
assets to revert to an Employer to be used for, or
diverted to, any purpose other than for the exclusive
benefit of Participants and Beneficiaries entitled to
Plan benefits and to defray reasonable expenses of
administering the Plan;
(5) amend the provisions of this Plan which either (1)
state the amount and price of Company Stock to be
awarded to designated officers or categories of
officers and, specifically, the timing of such awards,
or (2) set forth a formula that determines the amount,
price and timing of such awards, shall not be amended
more than once every six (6) months, other than to
comport with changes in the Code, ERISA or the rules
thereunder;
(6) permit an Employee to be paid the balance of his or
her Pre-Tax Account unless the payment would otherwise
be permitted under Code Section 401(k); and
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<PAGE> 85
(7) have any retroactive effect as to deprive any such
person of any benefit already accrued, except that no
amendment made in order to conform the Plan as a plan
described in Section 401(a) of the Code of which
amendments are permitted by the Code or are required
or permitted by any other statute relating to
employees' trusts, or any official regulations or
ruling issued pursuant thereto, shall be considered
prejudicial to the rights of any such person.
(b) Restriction on Amendment. No amendment to the Plan shall
deprive a Participant of his or her nonforfeitable rights to benefits
accrued to the date of the amendment. Further, if the vesting schedule
of the Plan is amended, each Participant with at least three (3) years
of Vesting Service with the Employer may elect, within a reasonable
period after the adoption of the amendment, to have his or her
nonforfeitable percentage computed under the Plan without regard to
such amendment. The period during which the election may be made shall
commence with the date the amendment is adopted and shall end on the
latest of:
(1) sixty (60) days after the amendment is adopted;
(2) sixty (60) days after the amendment becomes effective;
or
(3) sixty (60) days after the Participant is issued
written notice of the amendment by the Employer or the
Administrative Committee.
The preceding language concerning an amendment to the Plan's vesting
schedule shall also apply when a Plan with a different vesting schedule
is merged into this Plan. In addition to the foregoing, the Plan shall
not be amended so as to eliminate an optional form of payment of an
Accrued Benefit attributable to employment prior to the date of the
amendment. The foregoing limitations do not apply to benefit accrual
occurring after the date of the amendment.
(c) The Administrative Committee. The Administrative Committee
may amend, modify, change or revise the Plan by amendment if such
amendment could have been adopted under this Section and it does not
cause a change in the level or type of contributions to be made to the
Plan or otherwise materially increase the duties and obligations of any
or all Employers with respect to the Plans.
19.2 Plan Termination. It is the expectation of the Company that it
will continue the Plan and the payment of Contributions hereunder indefinitely,
but the continuation of the Plan and the payment of Contributions hereunder is
not assumed as a contractual obligation of the Company or any other Employer.
The right is
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<PAGE> 86
reserved by the Company to terminate the Plan at any time, and the right is
reserved by the Company and any other Employer at any time to reduce, suspend or
discontinue its Contributions hereunder, provided, however, that the
Contributions for any Plan Year accrued or determined prior to the end of said
year shall not after the end of said year be retroactively reduced, suspended or
discontinued except as may be permitted by law. Upon termination of the Plan or
complete discontinuance of Contributions hereunder (other than for the reason
that the Employer has had no net profits or accumulated net profits), each
Participant's Accrued Benefit shall be fully vested. Upon termination of the
Plan or a complete discontinuance of Contributions, unclaimed amounts shall be
applied as Forfeitures and any unallocated amounts shall be allocated to
Participants who are Eligible Employees as of the date of such termination or
discontinuance on the basis of Compensation for the Plan Year (or short Plan
Year). Upon a partial termination of the Plan, the Accrued Benefit of each
affected Participant shall be fully vested. In the event of termination of the
Plan, the Administrative Committee shall direct the Custodian to distribute to
each Participant the entire amount of his or her Accrued Benefit as soon as
administratively possible, but not earlier than would be permitted in order to
retain the Plan's qualified status under Sections 401(a), (k) and (m) of the
Code, as if all Participants who are Employees had incurred a Termination of
Employment on the Plan's termination date. Should a Participant or a
Beneficiary) not elect immediate payment of a nonforfeitable Accrued Benefit in
excess of three thousand five hundred dollars ($3,500), the Administrative
Committee shall direct the Custodian to continue the Plan and Custodial
Agreement for the sole purpose of paying to such Participant his or her Accrued
Benefit or death benefit, respectively, unless in the opinion of the
Administrative Committee, to make immediate single sum payments to such
Participant or Beneficiary would not adversely affect the tax qualified status
of the Plan upon termination and would not impose additional liability upon any
Employer or the Custodian.
19.3 Plan Merger. The Plan shall not merge or consolidate with, or
transfer any assets or liabilities to any other plan, unless each person
entitled to benefits would receive a benefit immediately after the merger,
consolidation or transfer (if the Plan were then terminated) which is equal to
or greater than the benefit he or she would have been entitled to immediately
before the merger, consolidation or transfer (if the Plan were then terminated).
The Administrative Committee shall amend or take such other action as is
necessary to amend the Plan in order to satisfy the requirements applicable to
any merger, consolidation or transfer of assets and liabilities.
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ARTICLE XX
- --------------------------------------------------------------------------------
SPECIAL TOP-HEAVY RULES
20.1 Application. Notwithstanding any provisions of this Plan to the
contrary, the provisions of this Article shall apply and be effective for any
Plan Year for which the Plan shall be determined to be a "Top-Heavy Plan" as
provided and defined herein.
20.2 Special Terms. For purposes of this Article, the following
terms shall have the following meanings:
(a) "Aggregate Benefit" means the sum of:
(1) the present value of the accrued benefit issued X and
all defined benefit plans in the Aggregation Group
determined on each plan's individual Determination
Date as if there were a termination of employment on
the most recent date the plan is valued by an actuary
for purposes of computing plan costs under Section 412
of the Code within the twelve (12) month period ending
on the Determination Date of each such plan, but with
respect to the first plan year of any such plan
determined by taking into account the estimated
accrued benefit as of the Determination Date; provided
(A) the method of accrual used for the purpose of this
Paragraph (1) shall be the same as that used under all
plans maintained by all Employers and Commonly
Controlled Entities if a single method is used by all
stock plans or, otherwise, the slowest accrual method
permitted under Section 411(b)(1)(C) of the Code, and
(B) the actuarial assumptions to be applied for
purposes of this Paragraph (1) shall be the same
assumptions as those applied for purposes of
determining the actuarial equivalents of optional
benefits under the particular plan, except that the
interest rate assumption shall be five percent (5%);
(2) the present value of the accrued benefit (i.e.,
account balances) under each and all defined
contribution plans in the Aggregation Group, valued as
of the valuation date coinciding with or immediately
preceding the Determination Date of each such plan,
including (A) contributions made after the valuation
date but on or prior to the Determination Date, (B)
with respect to the first plan year of any plan, any
contribution made subsequent
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to the Determination Date but allocable as of any date
in the first plan year, or (C) with respect to any
defined contribution plan subject to Section 412 of
the Code, any contribution made after the
Determination Date that is allocable as of a date on
or prior to the Determination Date; and
(3) the sum of each and all amounts distributed (other
than a rollover or plan-to-plan transfer) from any
Aggregation Group Plan, plus a rollover or
plan-to-plan transfer initiated by the Employee and
made to a plan which is not an Aggregation Group Plan
within the Current Plan Year or within the preceding
four (4) plan years of any such plan, provided such
amounts are not already included in the present value
of the accrued benefits as of the valuation date
coincident with or immediately preceding the
Determination Date.
The Aggregate Benefit shall not include the value of any rollover or
plan-to-plan transfer to an Aggregation Group Plan, which rollover or
transfer was initiated by a Participant, was from a plan which was not
maintained by an Employer or a Commonly Controlled Entity, and was made
after December 31, 1983, nor shall the Aggregate Benefit include the
value of employee contributions which are deductible pursuant to
Section 219 of the Code.
(b) "Aggregation Group" means the Plan and one or more plans
(including plans that terminated) which is described in Section 401(a)
of the Code, is an annuity contract described in Section 403(a) of the
Code or is a simplified employee pension described in Section 408(k) of
the Code maintained or adopted by an Employer or a Commonly Controlled
Entity in the Current Plan Year or one of the four preceding Plan Years
which is either a "Required Aggregation Group" or a "Permissive
Aggregation Group".
(1) A "Required Aggregation Group" means all Aggregation
Group Plans in which either (1) a Key Employee
participates or (2) which enables any Aggregation
Group Plan in which a Key Employee participates to
satisfy the requirements of Sections 401(a)(4) and 410
of the Code.
(2) A "Permissive Aggregation Group" means Aggregation
Group Plans included in the Required Aggregation
Group, plus one or more other Aggregation Group Plans,
as designated by the Administrative Committee in its
sole discretion, which satisfy the requirements of
Sections 401(a)(4) and 410 of the Code, when
considered with the other component plans of the
Required Aggregation Group.
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<PAGE> 89
(c) "Aggregation Group Plan" means the Plan and each other plan
in the Aggregation Group.
(d) "Current Plan Year" means (1) with respect to the Plan, the
Plan Year in which the Determination Date occurs, and (2) with respect
to each other Aggregation Group Plan, the plan year of such other plan
in which occurs the Determination Date of such other plan.
(e) "Determination Date" means (1) with respect to the Plan and
its Plan Year, the last day of the preceding Plan Year; or (2) with
respect to any other Aggregation Group Plan in any calendar year during
which the Plan is not the only component plan of an Aggregation Group,
the determination date of each plan in such Aggregation Group to occur
during the calendar year as determined under the provisions of each
such plan.
(f) "Former Key Employee" means an Employee (including a
terminated Employee) who is not a Key Employee but who was a Key
Employee.
(g) "Key Employee" means an Employee (or a terminated Employee)
who at any time during the Current Plan Year or at any time during the
four preceding Plan Years is:
(1) an officer of a Commonly Controlled Entity whose
compensation from a Commonly Controlled Entity during
the Plan Year is greater than fifty percent (50%) of
the amount specified in Section 415(b)(1)(A) of the
Code (as adjusted for cost-of-living increases by the
Secretary of the Treasury) for the calendar year in
which the Plan Year ends; provided, however, that no
more than the lesser of (A) fifty (50) Employees, or
(B) the greater of (i) three (3) Employees or (ii) ten
percent (10%) (rounded to the next whole integer) of
the greatest number of Employees during the Current
Plan Year or any of the preceding four Plan Years
shall be considered as officers for this purpose. Such
officers considered will be those with the greatest
annual compensation as an officer during the five (5)
year period ending on the Determination Date;
(2) One of the ten employees who owns (or is considered to
own within the meaning of Section 318 of the Code)
more than a one half percent (1/2%) interest in value
and the largest percentage ownership interest in value
in a Commonly Controlled Entity and whose total annual
compensation from a Commonly Controlled Entity is not
less than the amount specified in Section 415(b)(1)(A)
of the Code (as adjusted for cost-of-living increases
by the
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<PAGE> 90
Secretary of the Treasury) for the calendar year in
which the Plan Year ends;
(3) A person who owns more than five percent (5%) of the
value of the outstanding stock of any Commonly
Controlled Entity or more than five percent (5%) of
the total combined voting power of all stock of any
Commonly Controlled Entity (considered separately) or;
(4) A person who owns more than one percent (1%) of the
value of the outstanding stock of a Commonly
Controlled Entity or more than one percent (1%) of the
total combined voting power of all stock of a Commonly
Controlled Entity (considered separately) and whose
total annual compensation (as defined in Section
1.415-2(d) of the Treasury Regulations) from the
Employer or a Commonly Controlled Entity is in excess
of one hundred and fifty thousand dollars ($150,000).
The rules of Section 416 (i)(1)(B) and (C) of the Code shall be applied
for purposes of determining an Employee's ownership interest in a
Commonly Controlled Entity for purposes of Paragraphs (3) and (4)
herein. A Beneficiary (who would not otherwise be considered a Key
Employee) of a deceased Key Employee shall be deemed to be a Key
Employee in substitution for such deceased Key Employee. Any person who
is a Key Employee under more than one of the four Paragraphs of this
Section shall have his or her Aggregate Benefit under the Aggregation
Group Plans counted only once with respect to computing the Aggregate
Benefit of Key Employees as of any Determination Date. Any Employee who
is not a Key Employee shall be a Non-Key Employee.
(h) "Top-Heavy Plan" means the Plan with respect to any Plan Year
if the Aggregate Benefit of all Key Employees or the Beneficiaries of
Key Employees determined on the Determination Date is an amount in
excess of sixty percent (60%) of the Aggregate Benefit of all persons
who are Employees within the Current Plan Year; provided, that if an
individual has not performed services for an Employer or a Commonly
Controlled Entity at any time during the five (5) year period ending on
the Determination Date, the individuals's Accrued Benefit shall not be
taken into account. With respect to any calendar year during which the
Plan is not the only Aggregation Group Plan, the ratio determined under
the preceding sentence shall be computed based on the sum of the
Aggregate Benefits of each Aggregation Group Plan totaled as of the
last Determination Date of any Aggregation Group Plan to occur during
the calendar year.
20.3 Minimum Contribution. For any Plan Year that the Plan shall be a
Top-Heavy Plan, each Participant who is an Eligible Employee but who is neither
a Key Employee nor a Former Key Employee on the last day of the Plan Year shall
have
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allocated to his or her Matching Account on the last day of the Plan Year a Pay
Based Contribution in an amount equal to three percent (3%) of such
Participant's Compensation; provided, however, in no event shall such
contribution on behalf of such Participant be less than five percent (5%) of
such Compensation if any Aggregation Group Plan is a defined benefit plan which
does not satisfy the minimum benefit requirements with respect to such
Participant. The amount of Pay Based Contributions required to be allocated
under this Section for any Plan Year shall be reduced by the amount of Employer
Contributions and Forfeitures allocated under this Plan on behalf of the
Participant and employer contributions and forfeitures allocated on behalf of
the Participant under any other defined contribution plan in the Aggregation
Group for the Plan Year. Elective Deferrals to any Aggregation Group Plan made
on behalf of a Participant in Plan Years beginning after December 31, 1984 but
before January 1, 1989 shall be deemed to be Employer Contributions for the
purpose of this Section. Elective Deferrals and matching contributions to
Aggregation Group Plans in Plan Years beginning on or after January 1, 1989
shall not be used to meet the minimum contribution requirements of this Section.
Where Employer Contributions and Forfeitures allocated on behalf of a
Participant are insufficient to satisfy the minimum contribution otherwise
required by this Section, an additional employer contribution shall be made and
allocated to the Matching or Retirement Contribution Account of such
Participant.
20.4 Maximum Benefit Accrual. For any Plan Year that the Plan is a
Top-Heavy Plan, the denominator of the "defined benefit plan fraction" and the
denominator of the "defined contribution plan fraction" shall be determined by
substituting "1.0" for "1.25"; provided, however, this limit shall not apply
with respect to an Employee for any Plan Year during which he or she accrues no
benefit under any plan of the Aggregation Group. The preceding sentence shall
not apply if, within this Article, there is substituted "four percent (4%)" for
"three percent (3%)" and "seven and one-half percent (7.5%)" for "five percent
(5%)" and "ninety percent (90%)" for "sixty percent (60%)."
20.5 Special Vesting. If the Plan becomes a Top-Heavy Plan after the
Effective Date, vesting for all Employees shall thereafter be accelerated to the
extent the following vesting schedule produces a greater vested percentage for
the Employee than the normal vesting schedule at any relevant time:
Years of Vesting Service Vested Percentage
------------------------ -----------------
Less than 3 years 0%
3 years or more 100%
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<PAGE> 92
ARTICLE XXI
- --------------------------------------------------------------------------------
MISCELLANEOUS PROVISIONS
21.1 Assignment and Alienation. As provided by Code Section 401(a)(13)
and to the extent not otherwise required by law, no benefit provided by the Plan
may be anticipated, assigned or alienated, except:
(a) to create, assign or recognize a right to any benefit with
respect to a Participant pursuant to a QDRO, or
(b) to use a Participant's vested Account balance as security for
a loan from the Plan which is permitted pursuant to Code Section 4975.
21.2 Protected Benefits. All benefits which are protected by the terms
of Code Section 411(d)(6) and ERISA Section 204(g), which cannot be eliminated
without adversely affecting the qualified status of the Plan on and after
January 1, 1997, shall be provided under this Plan to Participants for whom such
benefits are protected. The Administrative Committee shall cause such benefits
to be determined and the terms and provisions of the Plan immediately prior to
January 1, 1997 are incorporated herein by reference and made a part hereof, but
only to the extent such terms and provisions are so protected. Otherwise, they
shall operate within the terms and provisions of this Plan, as determined by the
Administrative Committee.
21.3 Plan Does Not Affect Employment Rights. The Plan does not provide
any employment rights to any Employee. The Employer expressly reserves the right
to discharge an Employee at any time, with or without Cause, without regard to
the effect such discharge would have upon the Employee's interest in the Plan.
21.4 Deduction of Taxes from Amounts Payable. The Custodian shall
deduct from the amount to be distributed such amount as the Custodian, in its
sole discretion, deems proper to protect the Custodian and the Plan's assets
held under the Custodial Agreement against liability for the payment of death,
succession, inheritance, income, or other taxes, and out of money so deducted,
the Custodian may discharge any such liability and pay the amount remaining to
the Participant, the Beneficiary or the deceased Participant's estate, as the
case may be.
21.5 Facility of Payment. If a Participant or Beneficiary is declared
an incompetent or is a minor and a conservator, guardian, or other person
legally charged with his or her care has been appointed, any benefits to which
such Participant or Beneficiary is entitled shall be payable to such
conservator, guardian, or other person legally charged with his or her care. The
decision of the Administrative Committee in such matters shall be final,
binding, and conclusive upon the Employer and the Custodian and upon each
Employee, Participant, Beneficiary, and every other person or party interested
or concerned. An Employer, the Custodian and the Administrative
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<PAGE> 93
Committee shall not be under any duty to see to the proper application of such
payments.
21.6 Source of Benefits. All benefits payable under the Plan shall be
paid or provided for solely from the Plan's assets held under the Custodial
Agreement and the Employers assume no liability or responsibility therefor.
21.7 Indemnification. To the extent permitted by law each Employer
shall indemnify and hold harmless each member (and former member) of the Board
of Directors, each member (and former member) of the Administrative Committee,
and each officer and employee (and each former officer and employee) of an
Employer to whom are (or were) delegated duties, responsibilities, and authority
with respect to the Plan against all claims, liabilities, fines and penalties,
and all expenses reasonably incurred by or imposed upon him or her (including
but not limited to reasonable attorney fees and amounts paid in any settlement
relating to the Plan) by reason of his or her service under the Plan if he or
she did not act dishonestly, with gross negligence, or otherwise in knowing
violation of the law under which such liability, loss, cost or expense arises.
This indemnity shall not preclude such other indemnities as may be available
under insurance purchased or provided by an Employer under any by-law,
agreement, or otherwise, to the extent permitted by law. Payments of any
indemnity, expenses or fees under this Section shall be made solely from assets
of the Employer and shall not be made directly or indirectly from the assets of
the Plan.
21.8 Reduction for Overpayment. The Administrative Committee shall,
whenever it determines that a person has received benefit payments under this
Plan in excess of the amount to which the person is entitled under the terms of
the Plan, make two reasonable attempts to collect such overpayment from the
person.
21.9 Limitation on Liability. No Employer nor any agent or
representative of any Employer who is an employee, officer, or director of an
Employer in any manner guarantees the assets of the Plan against loss or
depreciation, and to the extent not prohibited by federal law, none of them
shall be liable (except for his or her own gross negligence or willful
misconduct), for any act or failure to act, done or omitted in good faith, with
respect to the Plan. No Employer shall be responsible for any act or failure to
act of any Custodian appointed to administer the assets of the Plan.
21.10 Company Merger. In the event any successor corporation to the
Company, by merger, consolidation, purchase or otherwise, shall elect to adopt
the Plan, such successor corporation shall be substituted hereunder for the
Company upon filing in writing with the Custodian its election so to do.
21.11 Employees' Trust. The Plan and Custodial Agreement are created
for the exclusive purpose of providing benefits to the Participants in the Plan
and their Beneficiaries and defraying reasonable expenses of administering the
Plan, and the Plan and Custodial Agreement shall be interpreted in a manner
consistent with their being, respectively, a Plan described in Sections 401(a),
401(k) and 401(m) of the
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<PAGE> 94
Code and Custodial Agreements exempt under Section 501(a) of the Code. At no
time shall the assets of the Plan be diverted from the above purpose.
21.12 Gender and Number. Except when the context indicates to the
contrary, when used herein, masculine terms shall be deemed to include the
feminine, and singular the plural.
21.13 Invalidity of Certain Provisions. If any provision of this Plan
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions hereof and the Plan shall be construed and
enforced as if such provisions, to the extent invalid or unenforceable, had not
been included.
21.14 Headings. The headings or articles are included solely for
convenience of reference, and if there is any conflict between such headings and
the text of this Plan, the text shall control.
21.15 Uniform and Nondiscriminatory Treatment. Any discretion
exercisable hereunder by an Employer or the Administrative Committee shall be
exercised in a uniform and nondiscriminatory manner.
21.16 Law Governing. The Plan shall be construed and enforced according
to the laws of the state in which the Trust is located, to the extent not
preempted by ERISA.
21.17 Notice and Information Requirements. Except as otherwise provided
in this Plan or in the Custodial Agreement or as otherwise required by law, the
Employer shall have no duty or obligation to affirmatively disclose to any
Participant or Beneficiary, nor shall any Participant or Beneficiary have any
right to be advised of, any material information regarding the Employer, at any
time prior to, upon or in connection with the Employer's purchase, or any other
distribution or transfer (or decision to defer any such distribution) of any
Company Stock or any other stock held under the Plan.
Executed in _______ counterpart originals this ____ day of __________,
1996, but effective as of the Effective Date.
WALBRO CORPORATION
By:________________________________
Title:_____________________________
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<PAGE> 95
APPENDIX A
Investment Funds
The Investment Funds offered to Participants and Beneficiaries as of
January 1, 1997, based upon share accounting, are:
1. American Express Trust Income Fund II
2. IDS Mutual (Y)
3. IDS New Dimensions Fund (Y)
4. American Express Trust Equity Index Fund II
5. Templeton Foreign Fund.
The Investment Funds offered to Participants and Beneficiaries, as of
January 1, 1997, based upon dollar accounting, includes the Walbro Company Stock
Fund.
If investment instructions are not received from any Participant or
Beneficiary, his or her investment instructions shall be assumed to be a
percentage investment in the following funds:
Fund Name Percentage
- --------- ----------
IDS New Dimension Fund (Y) 33%
IDS Mutual (Y) 33%
American Express Trust Equity Index Fund II 34%
<PAGE> 1
EXHIBIT 10.9
SINO-FOREIGN JOINT VENTURE
FUJIAN HUALONG CARBURETOR CO. LTD.
JOINT VENTURE CONTRACT
CHAPTER I GENERAL PROVISIONS
ARTICLE 1
In accordance with "The Law of the People's Republic of China on
Sino-Foreign Joint Ventures" and other relevant Chinese laws and regulations,
adhering to the principle of equality and mutual benefit and through friendly
consultations, it is hereby agreed that Fujian Hualong Carburetor Co. Ltd., a
limited liability company (hereinafter referred to as the "Joint Venture
Company"), shall be set up in Fuding County, Fujian Province. The contract is
worked out hereunder.
CHAPTER II PARTIES TO THE JOINT VENTURE
ARTICLE 2 Parties to the joint venture:
FUJIAN FUDING CARBURETOR FACTORY (hereinafter referred to as
"Party A"), registered in Fuding County, with its legal address at No. 9,
Longahan Industrial District, Fuding County.
Legal representative: Zhou Tixu, position: Chairman cum Factory
Manager, Nationality: Chinese.
TWIN WINNER TRADING CO., LTD. of Hong Kong (hereinafter referred to
as "Party B"), registered in Hong Kong, with its legal address at Shun Tak
Centre 33/F, No. 200, Connaught Road, Central Hong Kong.
Legal representative: Liang Xin Hai, Position: General Manager,
Nationality: Chinese.
WALBRO ENGINE MANAGEMENT CORPORATION (hereinafter referred to as "Party
C"), registered in United States of America, with its legal address at 6242
Garfield Street, Cass City, Michigan 48726-0096 U.S.A.
Legal representative: Robert Wapole, Nationality: American.
<PAGE> 2
CHAPTER III ORGANIZATION OF THE COMPANY AND SCOPE OF BUSINESS
ARTICLE 3
The name of the Joint Venture Company is Fujian Hualong Carburetor Co.
Ltd.
Its name in English is FUJIAN HUALONG CARBURETOR CO. LTD.
ARTICLE 4
The organization form of the Joint Venture Company is a limited
liability company.
ARTICLE 5
The legal address of the Joint Venture Company: No. 9, Longahan
Industrial Zone, Fuding County, Fujian Province.
ARTICLE 6
The purpose of the Joint Venture Company shall be: to strengthen
economic cooperation and technological exchange; to import advanced technology,
equipment and methods of management; to develop carburetors for motorcycles, and
automobiles; to enhance the quality of products and raise the competitiveness of
the enterprise; to devote itself to domestic production of carburetors and at
the same time make its entry into the international market so as to create more
wealth and better economic benefit for the society, thereby achieving
satisfactory economic benefits for each investor.
ARTICLE 7
The business scope of the Joint Venture Company is to produce,
manufacture and develop various types of series of carburetors and other related
spare parts and accessories for motorcycles and automobiles for the domestic and
foreign markets.
ARTICLE 8
All activities of the Joint Venture Company shall be governed by the
laws, decrees and pertinent rules and regulations of the People's Republic of
China.
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<PAGE> 3
CHAPTER IV TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL
ARTICLE 9
The total amount of investment of the Joint Venture Company is
US$2,500,000, which shall be the registered capital of the Joint Venture
Company. Of the said amount:
Party A shall contribute US$750,000, accounting for 30%;
Party B shall contribute US$250,000, accounting for 10%
Party C shall contribute US$1,500,000, accounting for 80%
Party C shall contribute its investment in foreign exchange (calculated
at the foreign exchange swap rate of the Fujian Province Forax Swap Centre on
the date the payment is made).
ARTICLE 10
Each party to the Joint Venture Company is liable to the Joint Venture
Company within the limit of the capital subscribed by it. The profits, risks and
losses of the Joint Venture Company shall be shared by the parties in proportion
to their contributions to the registered capital.
ARTICLE 11
The parties shall contribute the following as their investment:
Party A and Party B: In the form of the existing assets of plant and
machinery, factory, buildings, inventory, etc., confirmed by a valuation agency
to be worth Renminbi 7,500,000 (deemed to be the equivalent of US$850,000), and
any deficit thereof shall be made good with Renminbi 1,320,000 (deemed to be the
equivalent of US$150,000) (calculated at the foreign exchange swap rate of the
Fujian Province Forax Swap Centre on the date the contribution is made).
Party C shall contribute its investment in foreign currency in the sum
of US$1,500,000.
ARTICLE 12
The registered capital of the Joint Venture Company shall be paid in
full into the Joint Venture Company's bank with which it operates an account by
the parties in proportion to their respective contributions within six months
after this Contract takes effect.
ARTICLE 13
The parties to the Joint Venture Company shall pay in full their
respective investments within the time stipulated in this Contract. In the event
of any party failing to make payment
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<PAGE> 4
or failing to pay in full their share of the contribution, any profit made by
the Joint Venture Company shall be shared by the parties in proportion to the
actual investment made.
ARTICLE 14
In case any party intends to assign all or part of the investment
subscribed by it to a fourth party, consent shall be obtained from the other
parties and approval from the examination and approval authority is required.
When one party assigns all or part of its Investment, the other parties
have a preemptive right.
The terms and conditions of assignment by any part to a fourth party
shall not be more favorable than the terms of assignment to the other parties.
CHAPTER V BOARD OF DIRECTORS AND MANAGEMENT ORGANIZATION
ARTICLE 15
The Joint Venture Company shall establish a Board of Directors, which
shall be its highest authority and shall decide all major issues concerning the
Joint Venture Company.
ARTICLE 16
The Board of Directors shall comprise seven Directors. The number of
Directors shall be discussed between and determined by the parties by reference
to the proportion of their capital contribution. Two of the Directors shall be
appointed by Party A, one by Party B and four by Party C. The Chairman of the
Board shall be appointed by Party C, and the Vice-Chairman by Party A. The term
of office for the Chairman, Vice-Chairman and Directors is four years; their
term of office may be renewed if continuously appointed by the relevant party.
ARTICLE 17
The Board of Directors shall convene at least one meeting every year.
The meeting shall be called and presided over by the Chairman of the Board.
Should the Chairman be absent, the Vice-Chairman shall call and preside over the
Board meeting.
The Chairman may convene an interim meeting based on a proposal made by
more than one-third of the total number of Directors. The Board meeting requires
a quorum of over two-thirds of the total number of Directors. Should a Director
be unable to attend the Board meeting, he shall appoint a proxy in written form
to attend and vote on his behalf.
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<PAGE> 5
If the Director of any party neither attends a Board meeting nor
appoints a proxy, and as a result the meeting does not have a sufficient quorum,
the meeting shall be adjourned for 30 days and the Director not in attendance
shall receive a written notice.
In the event that the number of Directors attending an adjourned
meeting shall be less than the quorum of two-thirds, such number in attendance
shall be deemed to be the quorum. And such Directors shall be entitled to pass
resolutions by majority vote on all matters except for the four set out in
Article 18.
ARTICLE 18
Resolutions with respect to the following matters shall require the
unanimous approval of the Directors present at a Board meeting:
(1) Amendment of the Articles of Association of the Joint Venture
Company;
(2) Termination or dissolution of the Joint Venture Company;
(3) Increase in or assignment of the registered capital of the
Joint Venture Company;
(4) Merger of the Joint Venture Company with another economic
organization.
ARTICLE 19
The Chairman of the Board is the legal representative of the Joint
Venture Company. Should the Chairman be unable to exercise his responsibilities
for some reason, he shall authorize the Vice-Chairman or any other Director to
represent the Joint Venture Company temporarily.
ARTICLE 20
The Joint Venture Company shall carry out the system where by the
General Manager assumes the responsibilities under the leadership of the Board
of Directors. He shall be responsible for the day-to-day management of the Joint
Venture Company. The Joint Venture Company shall have one General Manager.
ARTICLE 21
The responsibility of the General Manager is to carry out the decisions
of the Board meeting and organize and conduct the day-to-day management of the
Joint Venture Company. Within the scope authorized by the Board of Directors,
the General Manager shall represent the Joint Venture Company in external
matters and, within the company, appoint and dismiss subordinate personnel and
exercise the other powers conferred upon him by the Board of Directors.
-5-
<PAGE> 6
ARTICLE 22
The General Manager shall be appointed by the Board of Directors, and
his term of office shall be two years. At the invitation of the Board of
Directors, the Chairman, Vice-Chairman or Directors may concurrently be the
General Manager.
The General Manager shall not be involved in other economic
organizations which are in commercial competition with the Joint Venture
Company.
ARTICLE 23
In case of graft or serious dereliction of duty on the part of the
General Manager and other senior personnel, the Board of Directors shall have
the power to dismiss them at any time.
CHAPTER VI EQUIPMENT AND TECHNOLOGY
ARTICLE 24
Apart from the equipment contributed by Party A as its investment, the
main production equipment of the Joint Venture Company may be chosen and
purchased by the Joint Venture Company from the domestic or overseas markets
whenever there is a necessity to import advanced equipment.
ARTICLE 25
When the Joint Venture Company wants to import advanced production
technology, Party C shall be entrusted with the importation thereof. However,
the technology imported by the Joint Venture Company shall be appropriate and
advanced and enable the Joint Venture Company's products to have marked social
benefits domestically or to be competitive in the international market.
ARTICLE 26
Each of the parties agree that Party C shall have the option to license
any technology it owns to the Joint Venture Company subject to the approval of
the PRC Ministry of Foreign Trade and Economic Cooperation (including specifying
a royalty between 3 and 7%). The royalty for such technology shall be agreed by
the parties according to the nature of the technology and the relevant laws and
regulations of China.
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<PAGE> 7
CHAPTER VII PURCHASE OF RAW MATERIALS AND SELLING OF PRODUCTS
ARTICLE 27
In its purchase of required raw materials, fuel, parts, means of
transportation and articles for office use, etc., the Joint Venture Company
shall give first priority to purchase in China where conditions are equal. With
regard to the raw and processed materials, fuels or parts that have to be
imported from abroad, Party B and Party C shall render assistance to the Joint
Venture Company. The purchase price and fees shall be borne by the Joint Venture
Company.
ARTICLE 28
The trademark to be used on the products of the Joint Venture Company
shall be separately studied and determined by the Board of Directors.
ARTICLE 29
The sale of the Joint Venture Company's products on the overseas market
may be entrusted to the sales organization of Party C or its subsidiaries.
CHAPTER VII TAXES, FINANCE AND AUDIT
ARTICLE 30
The Joint Venture Company shall pay taxes in accordance with the
stipulations of Chinese laws and other relevant regulations.
ARTICLE 31
Staff members and workers of the Joint Venture Company shall pay
individual income tax according to the "Individual Income Tax Law of the
People's Income Tax Law of the People's Republic of China."
ARTICLE 32
The Joint Venture Company shall formulate its system of financial
management and accounting in accordance with the relevant provisions of the
laws, decrees of China and provisions concerning systems of financial management
and accounting of foreign investment enterprises, with reference to the
circumstances of the Joint Venture Company.
ARTICLE 33
The fiscal year of the Joint Venture Company shall be the Gregorian
year, commencing on January 1 and ending on December 31.
-7-
<PAGE> 8
ARTICLE 34
The General Manager shall submit to the Board of Directors of the Joint
Venture Company within the first ten days of every month, the profit-loss amount
and balance sheet of the Joint Venture Company of the preceding month and, in
the first three months of each fiscal year, the General Manager shall prepare
the previous year's balance sheet, profit and loss statement and proposal
regarding the disposal of profits, and submit them to the Board of Directors for
examination and approval.
ARTICLE 35
The Joint Venture Company shall adopt the internationally used accrual
basis and debit and credit accounting systems for accounting. All vouchers,
accounts books, statements and financial reports prepared by the Joint Venture
Company must be written in Chinese. In addition, statements, annual balance
sheet and profit and loss statement shall be also written in English.
ARTICLE 36
After paying taxes in accordance with the "Income Tax Law of the
People's Republic of China Concerning Sino-Foreign Joint Ventures," the Joint
Venture Company shall distribute its profits in accordance with the following
principles:
(1) Allocations shall be made for the reserve fund, expansion fund,
bonus and welfare fund for staff and workers, with the ratio for
such allocations to be determined by the Board of Directors;
(2) As for the profits that may be distributed, after allocations of
the three funds as prescribed in paragraph (1) of this Article,
if the Board of Directors decides to make a distribution, it
shall be made according to the ratio of the respective
investments of the parties to the Joint Venture Company.
ARTICLE 37
The Joint Venture Company may not distribute profits until its losses
from previous years have been made up. Undistributed profits from previous years
may be included in the current year's profits for distribution.
ARTICLE 38
Financial checking and examination of the Joint Venture Company shall
be conducted by an auditor registered in China and reports shall be submitted to
the Board of Directors and the General Manager.
-8-
<PAGE> 9
In case Party B or Party C considers it necessary to employ a foreign
auditor registered in another country to undertake annual financial checking and
examination, the other two parties shall give its consent.
All the expenses thereof shall be borne by the party making the request.
CHAPTER IX LABOR MANAGEMENT AND WELFARE INSURANCE
ARTICLE 39
The recruitment, employment, dismissal and resignation, wages, labor
insurance, welfare, rewards, penalty and other matters concerning the staff and
workers of the Joint Venture Company shall be handled in accordance with the
Chinese laws, regulations and "Provisional Regulations of the Fujian Province on
Labor Management in Sino-Foreign Joint Ventures" and based on the circumstances
of the Company.
ARTICLE 40
The amount of salaries, social insurance, welfare and travelling
expenses, etc. of the General Manager and senior management staff shall be
decided by the Board of Directors.
ARTICLE 41
Insurance policies of the Joint Venture Company on various kinds of
risks shall be underwritten with the People's Insurance Company of China. Types,
value and duration of insurance shall be decided by the Board of Directors based
on the actual circumstances in accordance with the stipulations of the People's
Insurance Company of China.
CHAPTER X DURATION, TERMINATION AND LIQUIDATION
ARTICLE 42
The duration of the Joint Venture Company is 50 years. The
establishment of the Joint Venture Company shall start from the date on which
the business license of the Joint Venture Company is issued.
An application for the extension of the duration, proposed by one party
and unanimously approved by the Board of Directors, shall be submitted to the
examination and approval authority six months prior to the expiration date of
the Joint Venture.
After the Joint Venture Company has received approval to extend its
term, it shall carry out procedures for amending its registration in accordance
with the provisions of "the Procedures of the People's Republic of China for the
Registration and Administration of Sino-Foreign Joint Ventures."
-9-
<PAGE> 10
ARTICLE 43
The Joint Venture Company may be dissolved in the following situations:
(1) Expiration of the term of the Joint Venture Company;
(2) Inability to continue operations due to heavy losses of the Joint
Venture Company;
(3) Inability to continue operations due to the failure of one of the
parties to the Joint Venture to fulfill its obligations set forth
in the Contract and Articles of Association of the Joint Venture
Company and such nonfulfillment not having been remedied after
such party has received written notice thereof;
(4) Inability to continue operations due to serious losses arising
from a natural disaster, war or other event of force majeure;
(5) Failure of the Joint Venture Company to achieve its business
objective, coupled with no possibility of future development;
(6) The occurrence of any other event stipulated in this Contract or
Articles of Association of the Joint Venture Company to be
grounds for dissolution.
Should any of Items (2), (3), (4), and (5) of this Article occur, the
Board of Directors shall submit an application for dissolution to the original
examining and approval agency.
Upon occurrence of the situation described in (3) of this Article, the
party which fails to perform the obligations provided in the Contract or
Articles of Association of the Joint Venture Company shall bear the
responsibility for compensating the Joint Venture Company for losses arising
therefrom.
ARTICLE 44
Upon announcement of the Joint Venture Company's dissolution, the Board
of Directors shall propose liquidation procedures and principles and nominate
members for a liquidation committee.
ARTICLE 45
The Joint Venture Company shall apply all of its assets to the
satisfaction of its debts. After all of the Joint Venture Company's debts have
been discharged, any remaining property shall be distributed between the parties
to the Joint Venture Company in accordance with the ratio of their respective
investments.
-10-
<PAGE> 11
ARTICLE 46
After the liquidation of the Joint Venture Company is completed, the
Joint Venture Company shall submit a liquidation report to the original
examining and approval agency and carry out procedures for canceling the Joint
Venture Company's registration at the original agency for registration and
administration.
ARTICLE 47
Following the dissolution of the Joint Venture Company, all of its
account books and documents shall be retained by the original Chinese party.
However, the other parties may make copies of such account books and documents
for their records.
CHAPTER XI LIABILITIES FOR BREACH OF CONTRACT
ARTICLE 48
Should the Joint Venture Company suffer losses due to the failure of
one of the parties to fulfill its obligations under this Contract and the
Articles of Association, or serious breach of the stipulations of this Contract
and Articles of Association, that party shall be liable for the economic losses
thus caused to the Joint Venture Company.
ARTICLE 49
Should all or part of this Contract and its appendices be unable to be
fulfilled owing to the fault of any party, such party in breach shall bear the
responsibilities thus caused according to actual circumstances.
ARTICLE 50
Should any of Party A, Party B or Party C fail to pay on schedule the
contributions in accordance with the provisions defined in Chapter IV of this
Contract, the party in breach shall pay to the other parties not in breach 5% of
the contribution for every month during which the breach continues, starting
from the first month after the expiration of the time limit. Should the party in
breach fail to pay after 3 months after due date, 10% of the contribution shall
be paid by the party in breach to the other parties not in breach, who shall
also have the right to terminate this Contract and to claim damages from the
party in breach in accordance with the stipulation in Article 42 of this
Contract.
-11-
<PAGE> 12
CHAPTER XII SETTLEMENT OF DISPUTES
ARTICLE 51
Any disputes between the parties hereto arising from the explanation,
or implementation of, this Contract, the Articles of Association shall be
settled through friendly consultations between both parties. In case no
settlement can be reached through consultations, the disputes shall be submitted
to the China International Economic & Trade Arbitration Commission of the China
Council for the Promotion of International Trade for arbitration in accordance
with its rules of procedure. The arbitral award is final and binding upon both
parties.
ARTICLE 52
During arbitration, the provisions of this Contact and the Articles of
Association shall continue to be performed by both parties except for matters in
dispute.
CHAPTER XIII, EFFECTIVENESS OF THE CONTRACT AND MISCELLANEOUS
MATTERS
ARTICLE 53
This Contract shall be written in Chinese, with an English translation
for reference.
ARTICLE 54
This Contract and its appendices shall come into force after it has
been signed by the duly authorized representatives of the parties hereto and
approved by the examination and approval authority.
The appendices to this Contract (including the Article of Association)
drawn up in accordance with the principles of this Contract are an integral part
of this Contract.
ARTICLE 55
If any time in the duration of this joint venture there shall be any
changes to the existing Chinese laws, decrees, or regulations which may affect
the purpose of this Contract or that of the Joint Venture Company or the
economic interest of any party, then the parties shall consult together and make
the appropriate changes to this Contract. In the event that the parties are
unable to reach an agreement within 90 days of commencement of such
consultations, the party affected shall be entitled to request the Board for
termination.
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ARTICLE 56
The contents of this Contract and any appendices hereto and related
previous and future documentation and correspondence are to be treated in strict
confidence by the parties hereto. Information contained in such documents may be
disclosed only to persons legally entitled to such information and each party's
lawyers, accountants and other business advisors, and notice of such disclosure
shall first be given to the other parties unless such disclosure is legally
compelled and times does not permit notice to the other parties.
ARTICLE 57
In the event that any matter concerning the joint venture has not been
incorporated in this Contract, the parties hereto shall consult with each other
and execute the necessary supplemental agreements to this Contract.
ARTICLE 58
This Contract is to be signed in 10 copies; Party A, Party B and Party
C will each receive 2 copies and the rest will be retained by the Joint Venture
Company for record except for those copies required to be submitted to the
relevant authorities.
Party A: Legal representative:
FUDING FUJIAN CARBURETOR FACTORY /s/ Zhou Txu
--------------------------------
Party B: Legal representative:
TWIN WINNER TRADING CO., LTD. /s/Liang Xin Hai
--------------------------------
Party C: Legal representative:
WALBRO ENGINE MANAGEMENT CORPORATION /s/Robert H. Walpole
--------------------------------
Signed on: 30th December 1993
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EXHIBIT 10.10
AGREEMENT
This Agreement dated February 7th, 1995 by and among:
1. Walbro Corporation, a Delaware corporation whose registered office is
located at Cass City, Michigan 48726 USA, represented by Mr. Gary L.
Vollmar (Walbro).
2. Walbro Automotive Corporation (Automotive), a Delaware corporation
whose registered office is located at Auburn Hills, Michigan 48326 USA,
represented by Mr. Gary L. Vollmar.
3. Magneti Marelli France S.A., a company incorporated under the laws of
France with share capital of FRF 424,494,000, whose registered office
is located at 19 rue Lavoisier, 9200 Nanterre France and registered at
the Company and Commercial Registry of Nanterre number B652044827,
represented by Mr. Frederic Girardot (MM) which came to the rights of
Jaeger S.A. when it was absorbed by a merger into MM on July 1, 1994.
(collectively the "Parties")
R E C I T A L S
a. Walbro and Jaeger entered into a Joint Venture Agreement dated June
17, 1991 establishing a Joint Venture Company in France (JV France) for the
purpose of developing, manufacturing and marketing integrated TSS and their
component elements for sale to designated markets in Europe (hereinafter the
First Agreement).
b. In addition to the First Agreement Walbro and Jaeger entered into a
number of Ancillary Agreements, the list of which is contained in Appendix B to
this Agreement.
c. Automotive and Jaeger entered into a Joint Venture Agreement dated
as of January 1, 1993 establishing a JV in Brasil (JV Brasil) for the purpose of
developing, manufacturing and marketing integrated FDS and their component
elements for sale to designated markets in South America (hereinafter the Second
Agreement).
d. Together with the Second Agreement, Automotive and Jaeger entered
into a number of Ancillary Agreements the list of which is contained in Appendix
D to this Agreement.
e. The Parties believe that the automotive component market is a
worldwide market in which there are few car manufacturers which select their
suppliers based on the capability of such suppliers to deliver and service on a
worldwide basis. The Parties therefore decided to restructure their cooperation
with the purpose of eliminating any barrier among the existing Joint Ventures
and also with the view of setting up, in the near future, new companies in other
countries.
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f. The Parties also believe that it is necessary for them to strengthen
their cooperation by providing the JV France with the technical capability and
technology necessary to compete independently in the market and to approach on
its own customers around the world.
g. In furtherance of these objectives, the Parties hereby agree to
amend and modify the First Agreement with respect to the products, territory,
structure of JV Group and those other changes as detailed below. Unless
otherwise indicated, terms used in the Agreement shall have the same meanings as
in the First Agreement, and Second Agreement, where applicable.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and
undertakings provided herein, the Parties agree as follows:
GENERAL PROVISIONS
1. The First Agreement is hereby confirmed and remains in effect to the
extent it is not amended or modified by this Agreement.
2. The cooperation among the Parties will take the form of a group of
companies controlled by JV France which shall hereinafter be identified as the
"JV Group".
3. Concurrent with this Agreement the Parties hereto shall cause the
transfer of all of the stock of Marwal do Brasil ("JV Brasil") to JV France, and
shall cancel the Second Agreement effective as of the date of transfer. In
addition the product definition for the JV Brasil shall include fuel tanks.
4. The Parties hereby agree to cause JV France to form a Sociedad
Anonima de Capital Variable ("JV Mexico") as a member of JV Group which will be
owned 95% by JV France and 5% by Automotive. The initial paid up capital of JV
Mexico shall be equivalent to $4,000,000.
JV Mexico shall acquire from Magneti Marelli do Mexico fixed assets valued at
$2,600,000 (as depreciable assets); the capital stock of F.E.S.A. valued at
$150,000 and the stock of the level sensor business valued at market value.
JV Mexico shall not solicit any customer in the United States or Canada;
however, should JV Mexico be approached by any customer purchasing product for
resale in the United States or Canada, it shall immediately inform Automotive
which shall have full responsibility for dealing with such customers.
Furthermore the prices of the products to be sold by JV Mexico within Mexico to
Car Manufacturer controlled by any of Ford General Motors or Chrysler shall be
mutually agreed upon by the Parties.
5. Should Automotive complete the purchase of the plastic fuel tank
division of Dyno Industrier A.S. ("Tank Company") it will cause JV France and
the Tank Company to set up jointly (50/50) a fuel storage and delivery system
technical centre.
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The location, capitalization, management and other aspects with respect to such
Technical Centre shall be determined at the time of the formation of the
Technical Centre.
SPECIFIC AMENDMENTS TO THE FIRST AGREEMENT
The following amendments are effective as of February 7, 1995. Each section
number corresponds to the section of the First Agreement.
1.3 This section is amended to read as follows:
"PURPOSE. The purpose of the JV will be to develop, manufacture
and market Fuel Delivery System (FDS) and components thereof to the JV's
Territories as described in SECTION 1.4 below. A FDS includes a fuel pump,
module, bracket and level sensor.
Except as especially provided in SECTION 4.3, the JV Group will be the exclusive
vehicle through which each of the Parties develop, manufacture, and market FDS
in the Exclusive Territory for both automotive original equipment manufacturers
and aftermarket customers."
Consistent with this new SECTION 1.3, FDS shall be substituted for TSS
throughout the First Agreement.
1.4 This Section is amended to read as follows:
"TERRITORY: The designated market of the JV (the JV
Territory) will be determined as follows:
a) Exclusive Territory: Europe (as defined in the First
Agreement), South America (as defined in the Second Agreement), and Mexico,
except that Walbro will be permitted to sell directly to aftermarket customers
in Mexico.
b) Excluded Territory: The United States, Canada and Korea.
c) Non-Exclusive Territory: All countries not included in the
Exclusive Territory and the Excluded Territory.
The JV Group will take no actions which would cause Walbro to violate its
agreement with Mitsuba-Walbro, Inc. or Mitsuba Electric Manufacturing Company.
ARTICLE III
GOVERNANCE OF THE JV
Except for Section 3.2.4 which is hereby deleted, Article 3 of the First
Agreement remains substantially unchanged. The governance principles laid down
in Article 3 will apply to the governance of the JV Group. More specifically the
Board of Directors and the P.D.G. of JV France shall be responsible for the
management of the JV Group. Subject to local laws, only
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routine decisions shall be delegated to local managers and all special matters,
and strategic issues shall be decided upon by the Board of Directors of JV
France.
3.1 The day-to-day operation of the JV will be conducted by the
Chairman of the Board ("President Directeur General") and its staff. Unless
otherwise agreed, key management personnel of the JV will be provided by the
parties as set forth on Exhibit 3.1 (in which Deputy CEO is cancelled). Walbro
shall have the right to approve the appointment of any new P.D.G. which approval
shall not be unreasonably withheld.
3.2 The last sentence beginning "The Board" and ending "designee of
Walbro" is cancelled.
3.2.3 SPECIAL MATTERS
k) Licensing or sub-licensing to a member of the JV Group shall
not be a special matter.
l) The addition of a new member of the JV Group shall be a special
matter.
m) Liquidation or dissolution of any member of the JV Group shall
be a special matter.
The last sentence of section 3.2.3 shall be deleted and the following
substituted: "Sections 3.2.3 and 3.2.5 shall be suspended and of no force or
effect for a period of three years from the date that any party (other than
current members of management) acquires stock which constitutes greater than 50%
of the total voting power of Walbro Corporation and the JV France by- laws shall
be modified accordingly. After such three year period, the above-mentioned
sections shall be reinstated and in full force and effect.
ARTICLE IV
CONDUCT OF THE JV
4.2 MANUFACTURING. The third sentence of this section which
begins "The parties acknowledge that certain products" shall be deleted. Walbro
and MM will cause JV France to expand its capabilities in design and development
and in customer application for FDS in order for JV France to achieve greater
autonomy.
JV France can sublicense the Walbro technology, the Jaeger technology
and its own technology to members of the JV Group as appropriate. As far as
Walbro technology is concerned, Walbro will receive from JV France the
stipulated royalties on worldwide sales by your members of the JV Group. JV
France will be responsible for providing to members of the JV Group support
engineering and application engineering services.
4.3 MARKETING. This section is modified to be consistent with the
modification to the definition of Territories.
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4.4 This section is deleted.
4.6 This section is deleted.
ARTICLE V
LICENSES TO/FROM THE JV
It is the intent of the Parties that the Walbro License shall be
modified and hereby amended to be consistent with the amendments and purposes of
this Agreement: for example, JV France shall be permitted to sublicense any
technology to any member of the JV Group without consent.
In addition the Parties agree that any technology developed by the JV
Group which is not subject to the grant-back provision of the Walbro License,
shall be offered for license to Walbro and MM as follows:
(1) Walbro shall have the right to an exclusive license in the
Excluded Territory for a royalty payment to be agreed upon by the Parties.
(2) Walbro and MM shall have the right to a nonexclusive license
in the Non-Exclusive Territory for a royalty payment to be agreed upon by the
Parties.
5.2 WALBRO TECHNOLOGY LICENSE. This section is modified to
provide that the Walbro License shall be exclusive in the Exclusive Territory
and nonexclusive in the Non-Exclusive Territory. The License shall only include
technology related to FDS.
5.3 FUTURE JV TECHNOLOGY. This section is modified to provide
that the JV will grant to Walbro and MM a nonexclusive license in the
Non-Exclusive Territory and to Walbro an exclusive license in the Excluded
Territory. The Licenses shall only include technology related to FDS.
5.4 SPECIAL EXTRA-TERRITORIAL LICENSE. This section is modified
to be consistent with the modification to the definition of Territory.
5.5.1 TERMINATION GENERALLY. This section is amended to provide that
the License herein granted shall be a nonexclusive license throughout the world,
except there is no license in the Excluded Territory.
The first sentence of 5.5.1 shall be modified to read as follows: If
the JV Agreement terminates for any reason, Walbro agrees to enter into a new
license agreement with MM provided the Walbro License has not been terminated by
Walbro due to a material breach by the JV thereof.
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ARTICLE VII
TERMINATION OF THE JV
7.1.1 BY MUTUAL CONSENT. Add to the end of the sentence "and subject
to such conditions as agreed between them".
7.1.2 FOR BREACH. The nonbreaching party shall also has the right
to be treated as Noninitiating party under section 7.1.4.
7.1.3 BANKRUPTCY. This section is deleted.
7.1.4 DEADLOCK. This section is deleted and the following is
substituted: 7.1.4 UNILATERAL TERMINATION. At the election of any party
pursuant to the procedures and conditions of section 7.2.
7.1.5 TERMINATION OF THE WALBRO LICENSE BY WALBRO. This section is
deleted.
7.1.6 VIOLATION OF CERTAIN PROVISIONS. This section is deleted.
7.1.7 FORCE MAJEURE. This section is deleted.
7.2 CONSEQUENCES OF TERMINATION. This section is deleted and
replaced by the following section:
7.2 PROCEDURES AND GUIDELINES FOR A UNILATERAL TERMINATION
7.2.1 PROCEDURES. For any reason, one party may give written notice
(the Initiating Party) to the other party (the Non- Initiating Party) that it
elects to cause the termination of the JV Agreement.
Within thirty days of receipt of such notice the Chief Executive
Officers of the Parties hereto will meet and use their reasonable efforts to
determine if such dissolution is in the best interest of the Parties.
If the Parties are unable to agree upon a continuation of the JV
Agreement, then they shall jointly sign a statement to such effect and the
termination of the JV Agreement and the division of the assets and liabilities
of the JV Group ("Business") shall proceed as follows.
7.2.2 GUIDELINES TO THE TERMINATION. The Business shall be divided
among the Parties in any manner and subject to any terms and conditions that
they may agree upon.
If the Parties cannot agree upon terms and conditions for a termination
within three months from the initial receipt of notice from the Initiating
Party, then the following procedures shall apply.
The Parties shall appoint an independent consultant (Consultant) which
shall be a Merchant or Investment Banker with international expertise and
knowledge in the automotive
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industry, to analyze and determine the method for division of the Business under
the guidelines prescribed below.
If the Parties are unable to agree upon the appointment of a
Consultant, each Party shall appoint its own consultant which consultant will
appoint the Consultant for purposes of this termination.
There shall be a professional appraisal of the Business utilizing
standard appraisal procedures for a transaction such as this, and the division
of the Business shall be done in a manner to as closely divide the Business in
equal value shares as possible. In the event that the two parts of the Business
are not equal in value, one Party shall pay the other the difference in cash.
The Business shall also be divided based upon customer relations, and
to the extent possible each Party should get an equal value of potential
customers. Business attributable to any one customer shall not be divided
between the Parties. In addition, the Consultant shall give due consideration to
the likelihood that any Party is more likely to retain any specific customer.
For a period of 12 months after the division, neither Party will sell
FDS to the other Party's customers at a loss.
With respect to the transfer of physical assets of the Business, the
Parties will cooperate with each other for a transition period, in producing
product for the customers. The transition period will last for the shorter of
(i) the time needed for one Party to construct a plant and production lines and
have customer approval of the manufacturing process or (ii) two years. During
the transition period, the Party owning the plant shall manufacture product on a
timely bases with reasonable cost sharing allocations for the other Party.
In addition to the foregoing division of the Business, the Initiating
Party shall pay to the Non-Initiating Party an amount equal to 25% of the total
appraised value of the entire Business.
The Non-Initiating Party shall have the right to require, by written
notice to be delivered not later than thirty days after the receipt of the
Consultant's plan of division, that in lieu of proceeding in such divisions, the
Initiating Party must buy out its interest in the JV Group's Business for 150%
of its appraised value.
Any technology owned by the JV Group which is transferred to one Party
in the division of the Business shall be licensed, on a nonexclusive and royalty
free basis to the other Party. All parties shall have the right of sublicense.
8. The ancillary agreements listed in Appendix B and in Appendix D are
hereby modified to be consistent with the modifications and amendments herein
contained or cancelled if not in use on the date hereof.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement the
day and the year first above written.
MAGNETI MARELLI FRANCE S.A. WALBRO CORPORATION
/s/ Frederic Girardot /s/ Gary L. Vollmar
- -------------------------------- -----------------------------
By: Frederic Girardot By: Gary L. Vollmar
Its: President Its: Vice President
WALBRO AUTOMOTIVE CORPORATION
/s/ Gary L. Vollmar
-----------------------------
By: Gary L. Vollmar
Its: President and COO
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EXHIBIT 10.11
JOINT VENTURE AGREEMENT
This Joint Venture Agreement (the "Agreement") is made and entered into
as of November 30, 1994, between WALBRO AUTOMOTIVE CORPORATION, ("WALBRO") a
Delaware corporation located at Auburn Hills, Michigan 48326 USA, and DAEWOO
PRECISION INDUSTRIES, LTD. ("DPI"), a company incorporated under the laws of The
Republic of Korea ("Korea") located at P.O. Box 25 Kum-Jeong, Pusan, Korea. DPI
is an affiliate of Daewoo Motor Company Limited ("Daewoo"), a company
incorporated under the laws of Korea. Walbro and DPI are hereinafter
collectively referred to as "the parties".
R E C I T A L S:
A. Walbro designs and manufactures fuel delivery subsystems as
original equipment for application on automotive electronic fuel injection
systems.
B. Walbro has advanced technology with respect to automotive
electronic fuel injection system components, making particular technological
advancements in the design and manufacture of electric fuel pumps, modules,
level sensors, brackets, tubes, flanges, electric connectors and filters
(collectively "Sending Units" or "SU").
C. DPI has strong manufacturing capabilities in Korea.
D. In light of the foregoing the parties desire to utilize their
respective strengths by establishing a Joint Venture (the "JV"), to be jointly
owned by Walbro and DPI, to do applications engineering, manufacture and sell
integrated SU and their components.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and undertakings provided herein, the parties agree as follows:
ARTICLE I
FORMATION OF THE JV
1.1 INCORPORATION. As soon as possible after receipt of the
necessary governmental approvals, permits, licenses, consents and waivers
(collectively, the "Governmental Approvals"), the parties will cause the
incorporation and registration of the JV as a limited liability company
organized under the laws of Korea. The Articles of Incorporation of the JV
("Charter") shall be substantially in the form of EXHIBIT 1.1 attached hereto.
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1.2 OWNERSHIP. The equity interests in the JV will initially be
owned 51% by DPI and 49% by Walbro ("Equity Interests"). Such ownership may
subsequently be transferred to direct or indirect wholly-owned subsidiaries or
Controlled Affiliates (as defined in Article VI) of either or both parties.
1.3 PURPOSE. The purpose of the JV will be to do applications
engineering, manufacture and sell SU and component elements thereof to Daewoo,
its Controlled Affiliates and unrelated customers in the JV Territory. An SU
includes a fuel pump, module, level sensor, brackets, tubes and flanges,
connectors and filters. By mutual written agreement of the parties, the scope of
the JV may be expanded to add additional fuel system products.
1.4 TERRITORY. The designated market for the JV (the "JV Territory")
will be such geographic areas as indicated on EXHIBIT 1.4.
1.5 NAME. The parties agree that the JV shall operate under the name
Korea Automotive Fuel Systems Ltd.
1.6 REGISTERED OFFICE. The registered office of the JV shall be
at such place of business as determined by the Board of Directors.
1.7 LIMITED LIABILITY COMPANY. The JV shall be a limited liability
company [Chusik Hoesa], and the creditors of the JV shall look solely to the
assets of the JV for relief. The parties shall not bear any direct or indirect
liability for the debts or obligations of the JV other than each party's
respective obligation to pay in full the amount of its share subscription.
ARTICLE II
CAPITALIZATION AND FUNDING OF THE JV
2.1 CAPITAL CONTRIBUTIONS. The initial capitalization of the JV
shall be 1,600 Million Won of equity which shall be contributed to the JV by
the parties in accordance with their Equity Interests. Additional contributions
shall be made as provided on page 28 of the Business Plan.
2.2 OPERATING DEFICITS . Operating deficits of the JV beyond those
provided for in the initial capitalization described above or needs for
additional working capital will be funded by outside borrowings to the maximum
extent available. If guarantees are required to secure outside borrowings, the
parties shall render such guarantees in proportion to their Equity Interests.
Such guarantees shall be several unless a bank requires the guarantees to be
joint and several, in which event each party shall have a right of contribution
from the other party. Additional operating deficits or working capital needs
which cannot be funded with outside borrowings will be funded by the parties in
proportion to their respective Equity Interest. Unless otherwise agreed at the
time of funding, such deficits will be funded by loans from the parties.
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2.3 SUBSEQUENT CAPITAL CONTRIBUTIONS. If additional capital
requirements are contemplated by the Business Plan, they will be made by the
parties in proportion to their respective Equity Interests. No additional
capital contributions other than those contemplated by the Business Plan will be
required unless approved by both parties.
2.4 PROMOTERS. DPI, Walbro and five individual promoters
designated by DPI shall serve as the promoters of the JV and one invited
individual subscriber designated by DPI shall serve as a non-promoter
subscriber of the JV as required by the Korean Commercial Code ("KCC"). Each
individual promoter designated by DPI shall be deemed a nominee shareholder of
the JV on behalf of the DPI and subscribe for one share each in order that such
promoter can sign the Articles of Incorporation for the sole purpose of forming
the JV in accordance with applicable laws. DPI shall ensure that the individual
promoters shall immediately transfer said shares to DPI on incorporation of the
JV.
ARTICLE III
GOVERNANCE OF THE JV
The parties agree that the JV will be governed substantially as set
forth below, and acknowledge that these governance provisions are for the direct
benefit of the JV and its business. The parties further agree: (a) that the JV
will be structured to reflect this governance to the fullest extent permitted
under applicable law; and (b) that, in the event of a conflict between the
Charter and the following provisions, the following provisions will prevail to
the extent such a result is not directly contrary to applicable public policy.
The parties shall cause the provisions of the Charter to be amended from time to
time as may be required to ensure that they at all times shall conform with the
terms and conditions of this Agreement and any amendments thereto.
3.1 REPRESENTATIVE DIRECTORS. The operations of the JV will be
conducted by two Representative Directors ("RD") elected from the Board of
Directors. Walbro and DPI shall each nominate one RD which election shall be
approved by the Board. The RDs shall operate under a Joint Representative
Directors system whereby the DPI RD will make the day-to-day routine operations
decisions. The Walbro RD will always be kept informed of the activities and
consulted with important decisions on corporate actions.
3.2 BOARD OF DIRECTORS.
3.2.1 COMPOSITION. The JV will have a Board of Directors (the
"Board") comprised of four persons which shall function in accordance with the
provisions of the KCC. DPI will designate in writing two members (the "DPI
Members"), and Walbro will, designate in writing two members (the "Walbro
Members"). The parties agree to exercise their voting rights as shareholders of
the JV so as to effect the election of the persons so nominated. The Board will
elect the Chairman from among the members. The Chairman will be a designee of
DPI. The Board will also elect a Vice Chairman from among the members, who will
be a designee of Walbro. Members of the Board will serve until replaced by the
party so designating. In the event of a vacancy in the position of any
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Director for any reason, the shareholders shall immediately elect a Director
nominated by the party which had the right to nominate the predecessor.
3.2.2 ROUTINE DECISIONS BY THE BOARD. Except as provided
in SECTION 3.2.3:
(a) each member shall be given 7 days' written notice
(with acknowledgement of receipt) of any meeting, annual or special,
of the Board;
(b) attendance in person at such a meeting, without
written objection to lack of sufficient notice, waives this notice
requirement;
(c) three members shall constitute a quorum;
(d) the vote of a majority of all members present in
person shall be decisive except that in the case of a tie vote, the
vote of the Chairman will be decisive; and
(e) whenever necessary under Korean law, decisions of
the Board shall be confirmed by a general shareholder meeting.
3.2.3 SPECIAL MATTERS. The following matters may only be
decided at the Board level and with respect to each of the following situations,
the Board will not have the power to act unless the requisite majority voting in
favor of a resolution includes at least one Walbro Member and one DPI Member:
(a) payment of a dividend other than from current year's
earnings;
(b) approval, ratification or substantial change of the
operating budget of the JV, including without limitation, the capital
expenditures, additions or improvements for the year;
(c) approval, ratification or substantial change of the
Business Plan and the annual budget of the JV;
(d) making of political contributions;
(e) authorization or approval of a merger, consolidation
or change in the capital structure of the JV;
(f) creation or incurrence of indebtedness for borrowed
money if, after giving effect to the creation of such indebtedness,
the total amount of the JV's indebtedness for borrowed money will
exceed $250,000, except unsecured current liabilities incurred in the
ordinary course of business;
(g) giving a guarantee or creation or incurrence of any
mortgage, pledge, lien, charge or encumbrance upon any property or
assets now owned or hereinafter acquired by the JV except for (i)
mortgages, pledges, liens, charges or
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encumbrances on, and incurred at the time of and in connection with the
acquisition of property acquired in the ordinary course of business, (ii)
minor liens and encumbrances, and (iii) other liens and encumbrances for
amounts not exceeding $250,000 in the aggregate at any one time
outstanding;
(h) making, ratifying or causing the JV to become a party to a
contract or commitment, or to renew, extend or modify any contract or
commitment, including, but not limited to pricing of product sales, between
the JV and one of its equity holders, or an "affiliate" of any of them
which requires payment of an aggregate amount in excess of $250,000. For
purposes of this subsection, an "affiliate" will mean:
(i) a company, domestic or foreign, of which an equity holder in the JV
owns or controls, directly or indirectly, at least 10% of the
assets, voting stock or capital;
(ii) a company, domestic or foreign, which owns or controls, directly or
indirectly, at least 10% of the assets, voting stock or capital of
an equity holder of the JV; or
(iii) a company, domestic or foreign, under common control with an equity
holder through direct or indirect ownership of at least 10% of the
assets, voting stock or capital of that company.
(i) material agreement or commitment to any matter required
of the JV pursuant to a contract or agreement, including Ancillary
Documents, with DPI, Walbro or an affiliate (as that term is defined in
subsection (h) above) of DPI or Walbro, including the modification or
termination of any existing contract;
(j) agreement or commitment to purchase services, from Walbro,
DPI or their affiliates (as that term is defined in subsection (h) above);
and
(k) approval of the licensing or sublicensing of any SU
technology.
(l) any amendment to the Charter.
(m) increase or decrease in authorized and/or issued shares
of the JV;
(n) capital expenditures exceeding $250,000 which were not
previously approved in the current annual capital expenditure plan; and
(o) divestitures, including, without limitation, sale,
transfer, or other disposition by the JV of all or substantial part of its
assets, with a value exceeding $250,000.
In case of a deadlock over one or more of these issues, the provisions set forth
in SECTION 3.2.4 below will control.
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3.2.4 DEADLOCK. To facilitate the resolution of disputes, the
following sets forth the parties' agreement with respect to a deadlock
situation. In the event that:
(a) either of DPI or Walbro (in this subsection called "the First
Party") gives written notice to the other party (in this subsection called
"the Second Party") specifying as subject to this subsection a resolution
requiring the affirmative vote of a majority of the Board, including at
least one Walbro Member and one DPI Member or an approval of the
shareholders as provided in SECTION 9.3, which resolution was previously put
to and not passed by a general or special meeting of the Board or
shareholders, as applicable, because the Second Party or its designee
Members present did not vote in favor of the resolution or voted against the
resolution, or the Second Party or its designee Members were not present for
the vote; and
(b) such resolution is again put at another such meeting called within
30 days of the original meeting and the First Party or its designee Members
present, as the case may be, votes for the resolution but the Second Party
or its designee Members, as the case may be, does not vote in favor of or
votes against the resolution, or the Second Party or its designee Members,
as the case may be, are not present for the vote, then a deadlock situation
will be deemed to have arisen. Within seven days of such event arising,
Walbro and DPI will prepare and circulate to the other a memorandum or other
form of statement setting out its position on the matter in dispute and its
reasons for adopting such position. Each such memorandum or statement will
be considered by the Chief Executive Officers of DPI and of Walbro who will
respectively use their reasonable efforts to resolve such dispute.
If the parties agree upon a resolution of the dispute, they will jointly
sign a statement setting forth the terms of such resolution and Walbro and DPI
will exercise all voting rights and other powers of control available to them in
relation to the JV to procure that such resolution is fully and promptly carried
into effect.
If a resolution of the dispute is not agreed upon within 30 days after
delivery of the memorandum or statements mentioned above or such longer period
as Walbro and DPI may agree in writing, the JV will automatically terminate as
prescribed in ARTICLE VII.
If a resolution is agreed upon by the parties but is not implemented by the
JV within 60 days after such agreement, or such longer period as Walbro and DPI
may agree in writing, the JV will automatically terminate as prescribed in
ARTICLE VII.
3.3 OFFICERS. DPI shall designate the President and Walbro shall designate
the Executive Vice President. The President shall appoint the balance of the
organizational staff after consulting with the Executive Vice President. The
organizational staff shall report to the President. The Executive Vice President
shall be kept informed of operational matters on a day-to-day basis by the
organizational staff.
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ARTICLE IV
CONDUCT OF THE JV
4.1 BUSINESS PLAN. The five-year business plan (the "Business Plan")
attached as EXHIBIT 4.1 will be approved by the Board in accordance with SECTION
3.2.3 and will be implemented by the management of the JV. The Business Plan
includes initial and subsequent funding requirements. The Business Plan will be
revised, updated and approved on an annual basis by the Board in accordance with
SECTION 3.2.3.
4.2 MANUFACTURING. Components to be incorporated into the SU products
will be selected based on "best in class" for quality, performance and cost.
Walbro will start the JV with customer application engineering and
manufacturing technology with substantial support from Walbro under the
Engineering Support Agreement attached as EXHIBIT 4.2. The parties acknowledge
that initially, fuel pumps will be manufactured by Walbro and sold to the JV at
full absorption cost ("FAC") plus 5%. FAC includes materials, labor, overhead
plus allocations of selling, administrative, general and research and
development overhead. The parties further agree that the sales price for any
components sold by Walbro to the JV shall be acquisition cost if purchased from
a third party or FAC if manufactured by Walbro plus tooling amortization,
procurement expenses (generally 8-13% of cost), plus 9%. Walbro also encourages
the JV to purchase components directly from Walbro's recommended suppliers at
Walbro's acquisition cost plus tooling, if necessary. Common tooling will be
paid for by Walbro and the JV will reimburse Walbro for tooling cost based on
the JV's pro rata tool use plus 10%. Walbro will be kept informed of the JV's
purchasing activity to insure proper volume allocation. The parties agree to
utilize the Recommended Localization Plan (attached as EXHIBIT 4.2A) for this
purpose. As soon as feasible, such manufacturing shall be done by the JV.
Walbro further agrees to use its best efforts to perform all acts necessary for
the acquisition by the JV of the necessary imported machinery, equipment,
components and raw materials at arm's length fair market value and on the most
favorable terms and conditions acceptable to the JV until such time that these
machinery, equipment, components and raw materials are available from domestic
sources.
4.3 MARKETING. The JV will be responsible for the sale of all SU
products to its customers in the JV Territory. The JV will begin sales to
customers in 1995. Prior to such time the parties may sell SU to customers in
the JV Territory. With respect to the JV Territory, the JV will have the
exclusive right to sell SU in Korea. With respect to all other countries in the
JV Territory, such rights shall be non-exclusive.
4.4 ENGINEERING SUPPORT FROM WALBRO. Walbro will provide engineering
services to the JV as provided in the Engineering Support Agreement.
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ARTICLE V
LICENSES
5.1 MASTER TECHNOLOGY LICENSE AGREEMENT. Walbro will provide its SU
technology to the JV via a license (the "Walbro License") granted under the
Master Technology Agreement attached as EXHIBIT 5.1.
5.2 CONSEQUENCES OF JV TERMINATION ON WALBRO LICENSE. If the JV
terminates for any reason, the Walbro License shall simultaneously terminate.
5.3 COOPERATION. The parties hereto will use their best efforts, in all
relevant capacities, to cause the JV to perform all its obligations under the
Walbro License.
ARTICLE VI
RESTRICTIONS ON TRANSFER OF INTERESTS IN THE JV
Neither Walbro nor DPI may transfer any of its Equity Interests in the JV to
any third party (other than Controlled Affiliates) without the prior written
approval of the other party. It is the intention of the parties that there be
only two equity holders in the JV; consequently, any attempted transfer of
Equity Interests in the JV must encompass the entire Equity Interest of the
transferring party. A designated transferee (whether or not a Controlled
Affiliate) shall issue a written undertaking to the non-transferring party
hereto and the JV agreeing to be bound by all provisions of this Agreement as if
it had executed this Agreement in lieu of the transferring party and assume all
of the transferring party's duties, obligations and liabilities under this
Agreement, the Articles of Incorporation and the Ancillary Documents as defined
in Section 13.1. Any transfer shall be subject to the approval of the Korean
Government, if necessary, and shall not become effective until such approval has
been obtained.
For purposes of this Agreement, a "Controlled Affiliate" of a party means
any person which directly or indirectly controls, is controlled by or is under
common control with, such party; "control" means the ownership of a majority of
both the voting power of, and the equity interests in, a person.
ARTICLE VII
TERMINATION OF THE JV
7.1 TERM AND TERMINATION OF THE JV. Unless otherwise terminated as
provided below, the JV will be of perpetual duration. The JV will be terminated:
7.1.1 BY MUTUAL CONSENT. At any time by the mutual consent of the
parties;
7.1.2 FOR BREACH. Upon the material breach, including a
non-permitted transfer in violation of Article VI, which is not cured within 90
days after notice thereof, by a party of its obligations to the JV or otherwise
under this Agreement, at the option of the
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non-breaching party exercised within 10 days after the expiration of the 90-day
cure period;
7.1.3 BANKRUPTCY. Automatically upon the filing of a voluntary
petition or answer admitting jurisdiction of the court and the material
allegations, or the consent to, an involuntary petition pursuant to or
purporting to be pursuant to any reorganization or insolvency law of any
jurisdiction, or an assignment for the benefit of creditors, or an application
for or consent to the appointment of a receiver or trustee of a substantial
part of the property of a party hereto;
7.1.4 DEADLOCK. Upon an unresolved deadlock as described in
SECTION 3.2.4;
7.1.5 TERMINATION OF WALBRO LICENSE BY WALBRO. At the option of
Walbro, immediately upon the termination of the Walbro License pursuant to
Section 9.02 of the Master Technology License Agreement;
7.1.6 VIOLATION OF CERTAIN PROVISIONS. Upon the failure or refusal
of a party or its designees to comply with the governance provisions set forth
in SECTION 3.2.3 or to comply with the capitalization obligations under ARTICLE
II, the non-offending party may terminate this Agreement, at its option and
without prejudice to any of its other legal and equitable rights and remedies,
by giving not less than 60 days' prior written notice. This clause shall
survive any judicial determination that the restrictions set forth in SECTION
3.2.3 or the requirements set forth in ARTICLE II are unenforceable or void.
7.1.7 FORCE MAJEURE. At the option of the non-offending party, upon
the failure of a party to begin fully performing its obligations under this
Agreement within six months after such party declares an inability to perform
due to force majeure as provided in SECTION 13.5;
7.1.8 EXPROPRIATION. Upon the expropriation of a substantial
portion of the JV's property; or
7.1.9 NO GOVERNMENT APPROVALS. At the option of either party, upon
the failure to obtain any required governmental approvals within six months
from the execution of this Agreement.
7.2 CONSEQUENCES OF TERMINATION.
7.2.1 PURCHASE OPTION. Upon termination of the JV pursuant to SECTION
7.1 above, either party will have the option, in lieu of proceeding with the
dissolution of the JV, to purchase the other party's Equity Interest by giving
notice within 30 days after the termination of the JV to the other party that it
desires to purchase for cash all of the Equity Interest of the other party at a
stated price.
If within the 30-day period only one party gives notice that it wishes to
purchase the other party's Equity Interest, then the other party may either
accept such offer, or give
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notice within 20 days of the offer that the price will be equal to the fair
market value of the Equity Interest as determined by an investment banker with
recognized standing in the international finance community and mutually
acceptable to the parties. In the event the parties cannot agree on an
investment banker, each party will select one banker and the two bankers will
select a third banker, which third banker will conclusively determine fair
market value. For purposes of this section, "fair market value" of an Equity
Interest will be the value of the JV as if it were being sold as a whole
business and a going concern to one purchaser, multiplied by the selling party's
equity percentage at the time of the valuation.
If within the 30-day period both parties give notice that they wish to
purchase the other party's Equity Interest, then the party whose notice contains
the highest stated per share price will purchase the other party's Equity
Interest at that price for cash, or as otherwise mutually agreed to by the
parties.
Notwithstanding anything to the contrary, this purchase option will not be
available to a party whose breach, bankruptcy, insolvency, or liquidation has
given rise to the termination of the JV pursuant to SECTION 7.1.2, SECTION
7.1.3, SECTION 7.1.5 or SECTION 7.1.6.
7.2.2 DISSOLUTION. If the above purchase option is not exercised by
either party, the parties will use their best efforts to dissolve the JV and
wind up its affairs in a manner designed to preserve and maximize the economic
interests of both parties.
7.2.3 DAMAGES. Nothing herein shall prejudice the rights of a party, in
addition to the exercise of any other remedy hereunder, to recover money damages
for any breach by a party of this Agreement or any Ancillary Document. Upon
termination of this Agreement, neither party shall be discharged from any
antecedent obligations or liabilities to the other party or the JV hereunder
unless agreed otherwise in writing.
ARTICLE VIII
REGULATORY MATTERS AND INVALIDITY
8.1 COOPERATION IN MAKING REGISTRATIONS. The parties shall cooperate
fully in making, whenever required or necessary, registrations under Korean law
with respect to agreements for the transfer of technology and rendering of
technical assistance.
8.2 CONSEQUENCES OF INVALIDITY. If for any reason whatever at any
time, any provision of this Agreement or any of the Ancillary Documents is or
becomes invalid, illegal or unenforceable, or is declared by any court of
competent jurisdiction or any other competent authority to be invalid, illegal
or unenforceable (each of which circumstances being referred to in this ARTICLE
VIII as "a Relevant Invalidity") or if such competent authority:
(i) refuses, or formally indicates an intention to refuse authorization of,
or exemption to, any of the provisions of or arrangements contained in
this Agreement or in any of the Ancillary Documents (in the case of a
refusal either by way of outright refusal or by way of requiring an
amendment or deletion of any provision of this
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Agreement or of any of the Ancillary Documents and/or the inclusion
of any new provision in this Agreement or in the Ancillary Documents
and/or the giving of undertakings as to future conduct before such
authorization or exemption can be granted); or
(ii) formally indicates that to continue to operate any provision of this
Agreement or of any of the Ancillary Documents may expose the
parties to sanctions under any order, enactment or regulation, or
requests any party to give undertakings as to future conduct in
order that such party may not be subject to such sanctions; and in
all cases, whether initially or at the end of any earlier period or
periods of exemption, then in any such case, at the request of
either party by notice or a series of notices to that effect to the
other ("Negotiation Notice"), the parties will meet to negotiate in
good faith to agree upon valid, binding and enforceable substitute
provisions while at the same time reconsidering the other terms of
this Agreement and of any of the Ancillary Documents not so affected
so as to reestablish an appropriate balance of the commercial
interests of the parties ("Substitute Provisions").
8.3 FAILURE TO AGREE ON SUBSTITUTE PROVISIONS. If and to the extent that
Substitute Provisions are formally agreed in writing within one month of the
service of a Negotiation Notice, or such other period as may be formally agreed
in writing between the parties, then in that respect the matter shall be deemed
to be settled and such substitute provisions shall be deemed part of this
Agreement or of any of the Ancillary Documents. If, however, in respect of any
Relevant Invalidity no Substitute Provisions can be agreed within such period,
then if any party considers on reasonable grounds that its commercial interests
with regard to this Agreement and/or any of the Ancillary Documents is
materially and adversely affected as a consequence of the Relevant Invalidity it
may submit such matter to arbitration pursuant to SECTION 13.8.
8.4 DEFERRAL OF DETERMINATION OF ADVERSE EFFECT. If any party considers
that it is unable to assess the consequence of any Relevant Invalidity in the
light of facts subsisting at the time, that party may defer commencement of
an arbitration in respect of the provision or provisions affected by such
Relevant Invalidity until such time as it considers on reasonable grounds that
its commercial interests with regard to this Agreement and/or any of the
Ancillary Documents are materially and adversely affected in the light of
events occurring subsequent to communication of the finding of invalidity to
the parties. Notwithstanding the foregoing, a party must commence arbitration
pursuant to SECTION 8.3 within 60 days of receipt of the Negotiation Notice.
ARTICLE IX
GENERAL MEETING OF SHAREHOLDERS
9.1 GENERAL. The JV shall hold an ordinary General Meeting of
Shareholders within three months after the end of each fiscal year, and may
convene at any time an extraordinary General Meeting of Shareholders in
compliance with the resolutions of the Board of Directors and Korean laws;
provided that the first ordinary General Meeting of
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Shareholders shall be held without delay after the shares to be issued at the
time of establishment of the JV are fully paid and subscribed for hereunder.
9.2 TIME, PLACE, QUORUM. The date, time, place and agenda for a General
Meeting of Shareholders shall be determined by the Board of Directors. Notices
for a General Meeting of Shareholders shall be sent to the shareholders and
other persons entitled to receive notice by the chairman of Board of Directors
not later than 30 days before the relevant General Meeting.
A quorum at all General Meetings of Shareholders shall be the
presence of shareholders representing at least 52% of the total number of
issued and outstanding shares entitled to vote thereon. A shareholder shall be
entitled one vote for each share of the JV he owns. All resolutions shall be
passed by the affirmative vote of at least 52% of the total issued and
outstanding shares entitled to vote are present or represented by proxy, except
where a greater majority is required by subsection 9.3 below, by the Articles
of Incorporation or by law.
9.3 MATTERS. The following matters shall be determined by the affirmative
vote of shareholders representing not less than two thirds of the total issued
and outstanding shares entitled to vote are present or represented by proxy:
(i) Amendment of Articles of Incorporation
(ii) Increase or decrease in authorized and/or paid in capital
of the JV;
(iii) Dissolution, reorganization or merger of the JV; (iv) Sale
or transfer of all or substantial portion of assets and
property of the JV; and
(v) Dismissal of a Director or the Auditor of the JV.
9.4 RECORDING. The substance of the proceedings at a General Meeting of
Shareholders and the results thereof shall be recorded in English.
ARTICLE X
AUDITOR
The JV shall have two statutory auditors one of whom shall be nominated
by DPI and one of whom shall be nominated by Walbro. They shall be elected at
the General Meeting of the Shareholders.
ARTICLE XI
ACCOUNTING
The fiscal year of the JV shall be the calendar year.
The JV shall keep true and accurate accounting records of all operations
in Korean currency units in accordance with generally accepted accounting
principles, and such
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records shall be open to inspection by the parties hereto or by their duly
authorized representatives at all reasonable times.
The JV's financial books shall be audited annually at the expense of the
JV by an internationally recognized firm or association of certified public
accountants. The financial statements for the JV shall be prepared promptly
following each fiscal year of the JV and copies of all such financial statements
shall be provided promptly to each shareholder and Director of the JV.
ARTICLE XII
REPRESENTATIONS AND WARRANTIES
Each party hereby warrants and represents to the other party and to the
JV that the following warranties and representations are true as of the date
hereof (except for matters disclosed in writing prior to such date) and will be
true (without exception) on the date the parties first subscribe for the shares
of the JV:
(i) It is a corporation duly organized and validly existing under the
laws of the jurisdiction of incorporation, and it has all requisite
legal and corporate power and authority to own and operate its
properties and to carry on its business;
(ii) Its execution, delivery and performance of this Agreement has been
duly authorized by all requisite corporate action, and this
Agreement constitutes the valid, legal and binding obligation of
such party, enforceable in accordance with the terms hereof; and
(iii) It does not have any outstanding commitments or obligations,
contractual or otherwise, which would in any way conflict with or
impede its ability and right to enter into this Agreement and
fulfill its duties and obligations hereunder;
Each party shall indemnify and hold harmless the other party and the JV
from and against any and all liabilities (direct or indirect), losses, costs,
damages, claims, commissions and expenses (including attorneys' fees and other
legal fees) which the other party or the JV may sustain by reason of a material
breach of, or material inaccuracy with respect to, any representation or
warranty made by such party herein or pursuant hereto.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 ANCILLARY DOCUMENTS; INTERPRETATION. The parties acknowledge and
agree that, in the event of an inconsistency or disagreement between this
Agreement, on the one hand, and the Master Technology License Agreement,
Charter, Engineering Support Agreement and any other agreement or document
referred to herein to be entered into in connection with the JV (each an
"Ancillary Document" and, collectively, the "Ancillary Documents"), this
Agreement shall prevail.
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13.2 PUBLIC ANNOUNCEMENTS AND CONFIDENTIALITY. The parties agree that all
data and information relating to the JV, including but not limited to any
information relating to or provided under any Ancillary Document, the JV's trade
secrets, know-how, inventions, discoveries, improvements, technologies, business
practices and methods, whether or not patented, lists of suppliers, and
information relating to the JV's financial statements, customer identities and
utilization patterns, needs and participation levels, potential customers,
suppliers, products, servicing methods, equipment, programs, analyses, profit
margins and cost data, shall be kept confidential by both parties and shall not,
whether prior to or after the date hereof, be disclosed to any person, firm, or
corporation, except to the extent that such data or information is generally
known to the trade or in the public domain. The parties, however, may provide
the information to third parties (i) for the purpose of assisting in the
evaluation of the JV, its performance, or its operations, (ii) for the purpose
of determining the value of said party's equity interest in the JV, (iii) with
the written consent of the other party to the JV and (iv) for any other purpose
consistent with the activities contemplated by this Agreement and the Ancillary
Documents; provided that in each case the disclosing party takes reasonable
precautions to maintain the confidential nature of the information. The parties
may also make any disclosures necessary to comply with applicable securities and
other disclosure laws. The parties recognize and acknowledge that any breach by
them of the foregoing provisions of this section may cause irreparable harm to
the other party and the JV and, in the event of any such breach, such other
party or the JV shall, in addition to all other remedies available to it, at law
or in equity, be entitled, if it so elects, to institute and prosecute
proceedings in any court of competent jurisdiction to enjoin such breaching
party from doing any act in violation of such provisions, and that such other
party or the JV shall not be required to show actual monetary damages as a
prerequisite to such relief. The above provisions shall survive any termination
of this Agreement and any dissolution of the JV for a period of five years after
such termination or dissolution.
Each party agrees not to make any public disclosure regarding the existence
or the substance of the transactions contemplated hereby without the prior
approval of the other party, except to the extent that either party reasonably
determines that such disclosure is required by applicable law or regulation.
13.3 EFFECTIVENESS. The effective date of this Agreement shall be the
date on which the later of the following events occurs: (i) the execution of
this Agreement by the parties hereto, (ii) November 30, 1994 or (iii) the
issuance of the necessary Governmental Approvals in form satisfactory to both
parties hereto.
13.4 INSURANCE. Insurance protection provided for the JV under this
Agreement must apply both to each individual installation of the JV and to all
installations as a whole. The JV's insurance must also provide insurance
coverage for all types of risk related to the construction and operation of the
aforementioned installations, including material and other property losses
caused to fixed assets belonging to the JV, rented by it, or acquired on credit
by it, as well as its civil liability for property or physical damage which may
be caused to third parties in connection with the JV's activity, either by
defects in the goods its produces or by JV workers and employees in connection
with their performance of their job responsibilities.
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13.5 FORCE MAJEURE. Where either party is unable, wholly or in part, by
reason of force majeure to carry out its obligations under this Agreement, such
obligations are suspended so far as they are affected by the force majeure
during the continuance thereof; provided that an obligation to pay money is
never excused by force majeure.
The party affected by the force majeure will give notice to the other party
of the particulars of the situation and the probable extent to which it will be
unable to, or delayed in, performing its obligations under this Agreement,
within 10 days after the occurrence of the force majeure.
For purposes of this section, "force majeure" means an act of God, strike,
lockout or other interference with work, war declared or undeclared, blockade,
lightning, fire, earthquake, storm, flood or explosion; governmental or
quasi-governmental restraint action, expropriation, prohibition, intervention,
direction or embargo; unavailability or delay in availability of equipment or
transport; inability or delay in obtaining governmental or quasi-governmental
approvals, consents, permits, licenses, authorities or allocations; and any
other cause whether of the kind specifically enumerated above, or otherwise
which is not reasonably within the control of the party affected.
13.6 EXPENSES. Walbro and DPI will each pay its own costs and expenses
incurred in the negotiation and drafting of this Agreement and the Ancillary
Documents.
13.7 FURTHER ASSURANCES. Walbro and DPI agree to execute and deliver such
other instruments, agreements or documents and take such other action as may
reasonably be necessary or desirable to consummate the transactions contemplated
by this Agreement.
13.8 RESOLUTION OF DISPUTES - ARBITRATION. Any dispute, controversy or
claim ("Dispute") arising out of or relating to this Agreement or any Ancillary
Document, including, without limitation, the breach, termination or invalidity
thereof, shall be settled pursuant to this section.
(a) Any Dispute shall before commencement of any arbitration procedure, be
put before the Chairman of Walbro and the President of DPI for an
amicable solution. If such a solution cannot be achieved within 15 days
of written notice of such Dispute by either party to the other party
then arbitration shall commence pursuant to this section.
(b) The arbitration shall be conducted in Paris, France in accordance with
the Rules of Arbitration and Conciliation of the International Chamber
of Commerce then in effect.
(c) Each party shall appoint one arbitrator within 15 days after receipt of
a demand for arbitration. The two arbitrators thus appointed shall,
within 30 days after both shall have been appointed, appoint a third
arbitrator, who shall not be a national of Korea nor of the U.S.A. and
who shall preside over the arbitration proceedings. If any appointment
required herein shall not be made within the
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prescribed time, then such appointment may be made by the President of
the International Chamber of Commerce.
(d) The proceedings shall be conducted in English, and all arbitrators shall
be conversant in and have a thorough command of the English language.
(e) Both parties shall be bound by the award rendered by the arbitrators and
judgment thereon may be entered in any court of competent jurisdiction.
(f) Notwithstanding any other provision of this Agreement, either party
shall be entitled to seek preliminary injunctive relief from any court
of competent jurisdiction pending the final decision or award of the
arbitrators.
13.9 SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns, but will not be assignable or delegable by any party without
the prior written consent of the other party, except that either party may
assign, in whole or in part, its rights hereunder, subject to all obligations
hereunder, to a Controlled Affiliate in connection with any transfer of Equity
Interests in the JV permitted pursuant to ARTICLE VI; provided, however, that
such assignment will not relieve that party of any of its obligations or
liabilities hereunder.
13.10 AMENDMENTS, SUPPLEMENTS, ETC. This Agreement may be amended or
supplemented at any time by additional written agreements signed by both
parties, as may mutually be determined by the parties to be necessary, desirable
or expedient to further the purposes of this Agreement or to clarify the
intention of the parties.
13.11 NOTICES. All notices and other communications required or permitted
hereunder will be in writing and, unless otherwise provided in this Agreement,
will be deemed to have been duly given when delivered in person or one business
day after having been dispatched by telegram or electronic facsimile transfer
(confirmed in writing by mail simultaneously dispatched with a copy of the
sender's machine printed facsimile confirmation) or three business days after
having been dispatched by an internationally recognized overnight courier
service to the appropriate party at the address specified below.
(a) If to Walbro, to:
Walbro Automotive Corporation
1227 Centre Road
P.O. Box 215257
Auburn Hills, MI 48326
Facsimile Number: (313) 377-1660
Attention: President; Director of International Operations
With a copy to:
Katten Muchin & Zavis
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525 W. Monroe Street, Suite 1600
Chicago, Illinois 60661-3693
Facsimile Number: (312) 902-1061
Attention: Arnold S. Harrison
(b) If to DPI, to:
Daewoo Precision Industries, Ltd.
P.O. Box 25 Kum-Jeong
Pusan, Korea
Facsimile Number: 82-51-508-3339
With a copy to:
President
13.12 WAIVER. Waiver by either party of a breach by the other party of
any obligation or requirement contained in, or arising from, this Agreement
does not operate as a waiver of another or continuing breach by the other party
of the same, or any other, obligation or requirement hereunder. Any waiver by
either party must be in writing, signed by the waiving party.
13.13 DISCLAIMER OF AGENCY. This Agreement does not constitute either
party as the legal representative or agent of the other party for any purpose
whatsoever. Neither party shall have any right or authority to assume, create
or incur any liability or obligation of any kind, express or implied, against,
in the name of or on behalf of the other party except in accordance with this
Agreement or as may otherwise be agreed in writing by the parties.
13.14 SEVERABILITY. Subject to the provisions of ARTICLE VIII, if any
provision of this Agreement or the application of any such provision to any
person or circumstance is held invalid, illegal or unenforceable in any respect
by a court of competent jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision hereof.
13.15 GOVERNING LAW. This Agreement will be governed by and construed
in accordance with the laws of Korea.
13.16 THIRD PARTIES. Nothing in this Agreement express or implied is
intended to confer any right or remedy under or by reason of this Agreement on
any person other than the parties, their respective heirs, representatives,
successors and permitted assigns, nor to affect or discharge the obligation or
liability of any third persons to any party to this Agreement, or give any third
party any right or subrogation or action over against any party to this
Agreement.
13.17 TITLES AND HEADINGS. Titles and headings to sections herein are
inserted for convenience of reference only, and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
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13.18 EXECUTION IN COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same agreement.
13.19 SURVIVAL. The covenants and agreements made in SECTIONS 7.2, 13.2,
13.4, 13.6 and 13.13 will survive any termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
WALBRO AUTOMOTIVE CORPORATION
By: LAMBERT E. ALTHAVER
Sharon M. Reyerk Its: CHAIRMAN
SHARON M. REYERK
Notary Public, Oakland County, MI
My Commission Expires Jan. 21, 1997
DAEWOO PRECISION INDUSTRIES, LTD.
By: OH-JOON KWON
Its: PRESIDENT
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EXHIBIT 10.14
GENERAL PARTNERSHIP AGREEMENT
OF
TUCSON PRECISION PRODUCTS
THIS GENERAL PARTNERSHIP AGREEMENT is entered into this 18th day of
August, 1995, by and between Iwaki Diecast U.S.A., Inc., a company organized and
existing under the laws of Arizona ("IDC") and Walbro Tucson Corp., a company
organized and existing under the laws of the State of Delaware ("Walbro") (each
of the parties hereto are hereinafter referred to, individually, as a "Partner,"
and collectively as the "Partners").
ARTICLE I
FORMATION OF PARTNERSHIP
The parties hereby enter into a general partnership (the "Partnership")
under the provisions of the Uniform Partnership Act of the State of Delaware
(the "Act") and, except as herein otherwise expressly provided, the rights and
liabilities of the Partners shall be as provided in that Act.
ARTICLE II
NAME
The business of the Partnership shall be conducted under the name
"Tucson Precision Products". The parties shall promptly comply with all laws
regarding the use of such name as an assumed name by the Partnership, if
necessary.
ARTICLE III
DEFINITIONS
3.1 "Agreement" means this Partnership Agreement, as amended,
modified or supplemented from time to time.
3.2 "Capital Account" shall mean, with respect to any Partner, the
separate "book" account which the Partnership shall establish and maintain for
such Partner in accordance with Section 704(b) of the Code.
3.3 "Code" shall mean the Internal Revenue Code of 1986, as amended
and in effect from time to time. Any reference herein to a specific section of
the Code shall be deemed to include a reference to any corresponding provision
of succeeding laws.
<PAGE> 2
3.4 "Management Committee" shall mean a five-member committee,
three of which shall be appointed by Walbro, in its sole discretion and two of
which shall be appointed by IDC, in its sole discretion.
3.5 "Participating Percentage" means, with respect to any Partner,
subject to adjustment in accordance with this Agreement, the percentage
indicated on Schedule A, attached hereto which initially represents each
Partner's interest received in exchange for its capital contribution.
ARTICLE IV
PURPOSE
The purpose of the Partnership is to (i) engage in the manufacture and
sale of certain die cast parts and assemblies (described in greater detail on
Exhibit 4) in North America (Canada, Mexico and the United States), both as
original equipment and replacement parts and (ii) engage in any and all
operations, activities and businesses which are in the unanimous judgment of the
Management Committee, convenient, necessary or incidental to the accomplishment
of the foregoing Partnership purpose, including any operations, businesses or
activities permitted under the Act and any other applicable law or regulation.
ARTICLE V
NAMES AND BUSINESS ADDRESSES OF PARTNERS
The names and business addresses of the Partners are as set forth in
Schedule A attached hereto and made a part hereof.
ARTICLE VI
TERM
The Partnership shall continue until December 31, 2015, unless sooner
terminated as hereinafter provided.
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ARTICLE VII
PRINCIPAL PLACE OF BUSINESS
The principal place of business of the Partnership shall be 6601 South
Renaissance Drive, Tucson, Arizona 85746-6042 (USA) or such other place or
places as the Partners may designate.
ARTICLE VIII
CAPITAL AND CONTRIBUTIONS
8.1 The initial capital of the Partnership is as set forth on
Schedule A attached hereto, and, simultaneous with the execution hereof, each
of the Partners shall contribute to the capital of the Partnership the amount
of cash indicated on said Schedule A.
8.2 No Partner shall be obligated to make any additional capital
contributions unless the Management Committee unanimously shall determine that
such is required for the operation of the Partnership's business. In the event
additional capital is contributed by the Partners pursuant to this SECTION 8.2,
the Partners shall be obligated to contribute their pro rata portion (as
determined by their respective Participating Percentage at the time of such
contribution) of such additional capital requirement. No Partner shall be
allowed to make any voluntary capital contributions without the prior written
consent of the other Partner.
8.3 No withdrawal of capital shall be made by any Partner except with
the unanimous approval of all of the members of the Management Committee, and no
interest shall be paid on the capital contributed by any Partner.
8.4 If the Management Committee shall unanimously determine that
additional financing is necessary or desirable, and that such financing can most
advantageously be provided by loans from or guaranteed by the Partners, such
loans or guarantees, as may be requested by the unanimous vote of the Management
Committee, shall be provided simultaneously by each of the Partners in amounts
that are in proportion to their respective Participating Percentages. The
Partnership shall not accept any voluntary loans from any Partners without the
prior written consent of every other non-lending Partner.
ARTICLE IX
DISTRIBUTIONS
9.1 Subject to the provisions of SECTION 9.2 below, when, in the
discretion of all of the members of the Management Committee, the Partnership
has cash available for distribution ("Distributions"), such funds shall be
distributed among the Partners in accordance with their
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respective Partnership Percentages at the time of such Distribution. The
Partnership shall comply with any federal, state, local or foreign tax
withholding requirements in making such distributions.
9.2 Prior to making any annual Distributions, if any, the Partnership
shall, for each taxable year in which the Partnership reports net taxable
income, distribute to each Partner, no later than seventy-five days after the
end of such taxable year, an amount equal to the sum of (i) the product of such
Partner's taxable income as shown on its Schedule K-1 for such taxable year
(such taxable income to be reduced, but not below zero, by the excess, if any,
of the cumulative allocations of taxable deduction and loss pursuant to ARTICLE
X to such Partner for all prior taxable years over the cumulative allocations of
taxable income pursuant to ARTICLE X to such Partner for all prior taxable
years), multiplied by the maximum marginal federal income tax rate in effect for
such taxable year for non-S status corporations, plus (ii) an amount (which
shall be proportionate as to all Partners based upon Participating Percentages)
which is intended to approximate, as nearly as possible, such Partner's pro rata
share (based on the taxable income shown on the Partners' Schedule K-1's) of any
applicable state taxes (assuming maximum applicable tax rates for non-S status
corporations) for which the Partners are responsible based on the income of the
Partnership, all as determined in good faith by the unanimous determination of
the Management Committee, whose determination shall be final and binding.
Distributions pursuant to this SECTION 9.2 shall be treated as Distributions to
each Partner for the purposes of determining the aggregate amount of available
cash distributed to each Partner under SECTION 9.1 and SECTION 17.2.
ARTICLE X
ALLOCATIONS OF PROFITS AND LOSSES
Except as otherwise required by Section 704(b) of the Code, each item
of the Partnership's income, gain, loss, deduction or credit from operations
shall be allocated to the Partners in accordance with their Participating
Percentages.
ARTICLE XI
BOOKS OF ACCOUNT AND RECORDS
Proper and complete records and books of account shall be kept by the
Management Committee in which shall be entered fully and accurately all
transactions and other matters relative to the Partnership's business as usually
entered into records and books of account maintained by persons engaged in
business of a like character. The Partnership books and records shall be kept on
an accrual basis. The books and records shall at all times be open to the
reasonable inspection and examination by the Partners or their duly authorized
representatives during reasonable business hours. The Management Committee shall
deliver to
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<PAGE> 5
each Partner (i) audited financial statements for each fiscal year of the
Partnership as soon as such audited statements are available, (ii) unaudited
financial statements for each completed quarterly period of the Partnership and
(iii) federal and state Schedule K-1's and any other tax information necessary
for the preparation and timely filing of their respective federal and state
income tax returns. All of the members of the Management Committee shall
approve, in writing, the selection of an independent public accounting firm to
render the necessary accounting and auditing services.
ARTICLE XII
FISCAL YEAR
The fiscal year of the Partnership shall be the calendar year.
ARTICLE XIII
PARTNERSHIP FUNDS
The funds of the Partnership shall be deposited in such bank account or
accounts, or invested in such interest-bearing or non-interest- bearing
investments, as shall be designated by the Partnership. All withdrawals from any
such bank accounts shall be made by the authorized agent or agents of the
Partnership. Partnership funds shall be separately identifiable from those of
any other person or entity.
ARTICLE XIV
MANAGEMENT OF THE PARTNERSHIP
14.1 The Management Committee shall have exclusive authority to manage
the operations and affairs of the Partnership and to make all decisions
regarding the business of the Partnership. Pursuant to the foregoing, it is
hereby agreed that the Management Committee shall have all of the rights and
powers of a general partner as provided in the Act and as otherwise provided by
law and any action taken by the Management Committee shall constitute the act of
and serve to bind the Partnership. In dealing with the Management Committee
acting on behalf of the Partnership, no person shall be required to inquire into
the authority of the Management Committee to bind the Partnership. Persons
dealing with the Partnership are entitled to rely conclusively on the power and
authority of the Management Committee as set forth in this Agreement.
Notwithstanding the foregoing or anything that may be contrary herein, Walbro
shall, in its sole discretion, determine the products to be manufactured and
sold by the Partnership, subject to prior consultation with IDC representatives;
provided, however, in the event Walbro requires that any products be
manufactured which represents a new product that
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<PAGE> 6
is substantially different than any of the products set forth on Exhibit 4 and
such new product requires significant capital expenditures by the Partnership,
the Management Committee must unanimously determine that it is in the best
interests of the Partnership to manufacture such new products. Subject to the
foregoing, the unanimous approval of the Management Committee shall be required
for (i) approval of any business plans, marketing plans and operating
projections, (ii) any material change in the business of the Partnership, (iii)
any borrowings by the Partnership in excess of $250,000 in principal amount,
(iv) any material transactions between the Partnership and any Partner (or
affiliate of any Partner). Furthermore, the written consent of both Partners
shall be required for the consummation of (a) the admission of any additional
partners, (b) any amendments to this Agreement, (c) any investment by the
Partnership in another entity, (d) the sale of all or substantially all of the
assets of the Partnership, (e) dissolution of the Partnership and (f) any
sublicense of the technology which is the subject of the License Agreement (as
defined below) by the Partnership to an unaffiliated third party. Any
disagreement between the members of the Management Committee shall be submitted
to all of the Partners for resolution; which resolution shall be approved by
both Partners.
14.2 Subject to the foregoing, the Management Committee is hereby
granted the right, power and authority to do on behalf of the Partnership all
things which, in its sole judgment, are necessary, proper or desirable to carry
out the aforementioned duties and responsibilities, including but not limited
to the right, power and authority to lease, sell, exchange, refinance or grant
an option for the sale of all or any portion of the property of the Partnership
at such rental, price or amount, for cash, securities or other consideration
and upon such other terms as the Management Committee in its sole discretion
deems proper.
14.3 The Management Committee shall have the authority to delegate its
day-to-day managerial authority to such officers, employees or agents of the
Partnership, and to give such employees or agents such titles, as the Management
Committee shall from time to time designate, and to revoke or change such
managerial authority and change or eliminate such titles in the sole discretion
of the Management Committee. Initially, the officers of the Partnership shall
consist of a General Manager, Business Manager, and Engineering Manager. Walbro
shall have the right to appoint the General Manager and the Business Manager and
IDC shall have the right to appoint the Engineering Manager. Each of Walbro and
IDC agree to consult with the other in connection with their respective
appointments of such officer positions. As of the formation of the Partnership,
the officers shall be as follows:
General Manager Kuniaki Hohzawa
Business Manager Wayne Heckman
Engineering Manager Hiroto Yokoyama
The authority of such officers shall be limited to the operations of the
Partnership which occur in the normal and ordinary course of business. Any
matters which arise in connection with the operations of the Partnership which
are outside of the normal and ordinary course of business of the Partnership
shall immediately be submitted to the Management Committee for
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<PAGE> 7
approval, in accordance with the terms hereof. Upon such approval, the officers
shall have the authority to bind the Partnership with respect to such matters.
14.4 The "Tax Matters Partner" of the Partnership shall be designated
by the Management Committee.
14.5 Neither the Management Committee, any member or agent of the
Management Committee or any officer of the Partnership shall be liable,
responsible or accountable in damages or otherwise to the Partnership or any
Partner for any action taken or failure to act on behalf of the Partnership
within the scope of the authority conferred on the Management Committee or any
such officer by this Agreement or by law unless such action or omission was
performed or omitted fraudulently or in bad faith or constituted gross
negligence.
The Partners specifically acknowledge, without limiting the general
applicability of this SECTION 14.5, that the Management Committee and the
officers of the Partnership shall not be liable, responsible or accountable in
damages or otherwise to the Partnership or any Partner with respect to any
action taken by the Management Committee or any such officer in conjunction with
an audit of the Partnership for income tax or other purposes.
14.6 The Management Committee shall not be required to manage the
Partnership as its sole and exclusive function and may have other business
interests and may engage in other activities in addition to those relating to
the Partnership. Neither the Partnership nor any Partner shall have any right by
virtue of this Agreement or the partnership relationship created hereby in or to
such other ventures or activities or to the income or proceeds derived
therefrom, and the pursuit of such ventures and activities, even if competitive
with the business of the Partnership, shall not be deemed wrongful or improper.
All expenses of the Management Committee incurred in the performance of its
duties hereunder shall be borne by the Partnership.
14.7 No Partner shall have the authority to act for or bind the
Partnership except with the approval of the Management Committee.
14.8 The Partnership shall indemnify and hold harmless all members of
the Management Committee and all officers of the Partnership, from and against
any loss, expense, damage or injury suffered or sustained either by reason of
any acts, omissions or alleged acts or omissions arising out of their
activities on behalf of the Partnership, including, but not limited to, any
judgment, award, settlement, reasonable attorneys' fees and other costs or
expenses incurred in connection with the defense of any actual or threatened
action, proceeding or claim, if the acts, omissions or alleged acts or
omissions upon which such actual or threatened action, proceeding or claim is
based were for a purpose reasonably believed to be in the best interests of the
Partnership and were not performed or omitted fraudulently or in bad faith. Any
such indemnification shall only be from the assets of the Partnership.
14.9 Unless otherwise expressly provided herein, all decisions
requiring the consent of the Partners shall be made by the affirmative vote of
each Partner then entitled to vote.
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Unless otherwise expressly provided for herein, all decisions requiring the
approval of the Management Committee shall require the unanimous consent of all
of the members of the Management Committee.
ARTICLE XV
WITHDRAWALS AND TRANSFERS
15.1 Any Partner may withdraw from the Partnership upon one year's
prior written notice to the Partnership. If a Partner withdraws, an "Event of
Default" (as defined below) will be deemed to have occurred on the date such
withdrawal notice is delivered, and the provisions set forth in ARTICLE XVI
shall apply.
15.2 Each Partner agrees not to sell, transfer, assign, hypothecate,
pledge or encumber all or any portion of such Partner's interest hereunder
without the prior consent of all of the Partners. Notwithstanding the foregoing
sentence, a Partner may sell, assign or transfer all, or a part of, its interest
in the Partnership to any person or entity that is an affiliate of such Partner;
provided, however, such transfer must not result in a deemed termination of the
Partnership under Section 708(b)(1)(B) of the Code which results in adverse tax
consequences to the Partnership or any other non-transferring Partner. The
Partners agree that any transfer of a Partnership interest by any Partner to an
affiliate pursuant to this SECTION 15.2 shall be conditioned upon the full
assumption by such party of all of the obligations of the transferring party
provided in this Agreement and the Basic Agreements (as defined below).
ARTICLE XVI
DEFAULTS
16.1 In the case of an "Event of Default" (as defined herein) by any
Partner, then the defaulting party (the "Defaulting Partner") shall immediately
have suspended any all of its rights as a Partner, including, without
limitation, the right to vote and consent or otherwise approve or disapprove of
any actions taken by the Partnership (including in connection with such
Defaulting Partner's rights (or its designee) as a Management Committee member),
except that such Defaulting Partner shall maintain the right to its economic
interest in the Partnership. Unless otherwise specified herein, if an Event of
Default occurs, then the non-defaulting party (the "Non-Defaulting Partner") may
exercise any of the following remedies:
(1) causing the Partnership to be dissolved or liquidated
according to the terms set forth herein and all applicable laws, or
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(2) purchasing for cash all of the equity interest in the
Partnership then held by the Defaulting Partner at a purchase price
equal to the book value of such equity interest determined using
generally accepted accounting practices, consistently applied.
16.2 In the event that an Event of Default occurs as a result of a
material breach under any term of (i) the License and Technical Assistance
Agreement (the "License Agreement") between the Partnership and Iwaki Diecast
Co. Ltd., an affiliate of IDC, or (ii) the Walbro Sale Assistance and
Administrative Service Agreement (the "Sales Agreement") between the Partnership
and Walbro Engine Management Corporation, an affiliate of Walbro (together, the
"Basic Agreements"), and such breach is not remedied within a period of thirty
(30) days after receiving written notice of such breach, then the Non-Defaulting
Partner may exercise any of the following remedies:
(1) purchasing for cash all of the equity interest in the
Partnership then held by the Defaulting Partner, at a purchase price
equal to the book value of such equity interest determined using
generally accepted accounting practices, consistently applied.
(2) require that the Defaulting Partner purchase for cash
all of the equity of the Partnership then held by the Non-Defaulting
Partner, at a purchase price determined pursuant to SECTION 16.5 below.
16.3 The rights provided in this Agreement shall be in addition to and
not in substitution of any other remedies that may be available to the
Partnership or the Non-Defaulting Partner (including those set forth herein
and/or as may be available by law), and any exercise of such rights shall not
relieve the Defaulting Partner from any accrued obligation or any liability or
damages which are incurred by the Partnership or the Non-Defaulting Partner as a
result of the occurrence of an Event of Default.
16.4 For purposes of this Agreement, an "Event of Default" shall be
deemed to have occurred upon any one of the following occurrences: (i) the
failure by any Partner to make a required capital contribution which is not made
within five (5) days of a delivery of written notice to such Partner of its
failure to remit the required capital contribution, (ii) a Partner (or the
holder of a majority of the equity interest of such Partner) being the subject
of a voluntary or involuntary petition in bankruptcy or insolvency, or of a
petition for relief or reorganization under any bankruptcy or insolvency law,
(iii) breach by a Partner (or an affiliate of any Partner) of any of the terms
of this Agreement or the Basic Agreements which is not cured pursuant to SECTION
16.2 above or (iv) the withdrawal of a Partner for any reason.
16.5 If an Event of Default occurs and the Non-Defaulting Partner
wishes to require the Defaulting Partner to purchase its Partnership interest,
pursuant to its rights under this ARTICLE XVI, the purchase price for such
Partnership interest shall be equal to its fair market value, as determined by
an independent nationally recognized appraiser, selected by each of the
Defaulting Partner and Non- Defaulting Partner. In the event the Partners can
not agree on an appraiser, each Partner shall choose an appraiser and the two
appraisers shall agree on a third
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appraiser. The determination of such third appraiser and its appraisal shall
be final and binding on the Partners.
16.6 If an Event of Default occurs as a result of a Partner being the
subject of a voluntary or involuntary petition in bankruptcy or insolvency, or
of a petition for relief or reorganization under any bankruptcy or insolvency
law, and the Non-Defaulting Partner does not wish to exercise its remedies set
forth in SECTION 16.1, then the Partnership shall continue in full force and
effect; provided, however, that any successor of a dissolved, insolvent or
bankrupt Partner, as the case may be, shall not become a substituted Partner in
the Partnership. Such successor shall not have any of the rights of a Partner,
except that such successor shall only be entitled to receive the share of
profits and losses of the Partnership, the return of such capital contributions
and any other payments to which such bankrupt Partner would have been entitled
on the date of such Event of Default.
ARTICLE XVII
DISSOLUTION AND TERMINATION OF THE PARTNERSHIP
17.1 The Partnership shall dissolve upon the first to occur of the
following:
(a) expiration of the stated term of the Partnership on
December 31, 2015, as provided in ARTICLE VI hereof;
(b) the withdrawal of a Partner or Partners causing only
one other Partner to remain in the Partnership;
(c) the unanimous written consent or affirmative vote by
the Partners, then entitled to vote, to dissolve the Partnership;
(d) the disposition of all of the Partnership's interest
in its property, including notes received in connection with the sale
thereof; or
(e) by the election of a Non-Defaulting Partner's
pursuant to the terms set forth in ARTICLE XVI.
17.2 In the event of the dissolution of the Partnership, the
Partnership shall terminate, be wound up and liquidated as herein provided.
During such period, the Partners shall continue to share income and losses
during the period of liquidation in the same proportion as immediately prior
thereto, subject to the terms of this Agreement. The proceeds of the
liquidation (after payment of all costs and expenses thereof and the
establishment of reasonable reserves for contingent liabilities) shall be
applied in order of priority as follows:
(a) To the repayment of debts of the Partnership other
than to Partners;
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(b) To the repayment of debts of the Partnership to the
Partners pro rata according to the amount of the Partnership's
indebtedness to each Partner;
(c) To the Partners, to the extent of their respective Capital
Accounts or (if the remaining assets are insufficient for such
purposes), pro rata on the basis of the relative amounts of their
respective Capital Accounts; and
(d) To the Partners, to the extent of any balance remaining,
based on their respective Participating Percentages at the time of such
dissolution.
17.3 Each Partner shall look solely to the assets of the
Partnership for all distributions with respect to the Partnership and such
Partner's capital contributions thereto and shall have no recourse therefor
against the other Partners. No Partner shall have any right to demand or
receive property other than cash upon dissolution and termination of the
Partnership or to demand the return of its capital contributions to the
Partnership prior to dissolution and termination of the Partnership.
ARTICLE XVIII
NOTICES
All notices and demands required or permitted under this Agreement
shall be in writing and may be sent by U.S. mail, first class mail, postage
prepaid, overnight air courier or personal delivery to the Partners at their
addresses as shown from time to time on the records of the Partnership. Any
Partner may specify a different address by notifying the other Partners in
writing of such different address.
ARTICLE XIX
AMENDMENT OF PARTNERSHIP AGREEMENT
This Agreement may be amended only upon the unanimous consent or
affirmative vote of each Partner then entitled to vote.
ARTICLE XX
INDEMNIFICATION OF PARTNERS AND REIMBURSEMENT
20.1 The Partnership shall indemnify and hold harmless all
Partners, from and against any loss, expense, damage or injury suffered or
sustained by either by reason of any acts, omissions or alleged acts or
omissions arising out of their activities on behalf of the Partnership,
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including, but not limited to, any judgment, award, settlement, reasonable
attorneys' fees and other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim, if the acts,
omissions or alleged acts or omissions upon which such actual or threatened
action, proceeding or claim is based were for a purpose reasonably believed to
be in the best interests of the Partnership and were not performed or omitted
fraudulently or in bad faith. Any such indemnification shall only be from the
assets of the Partnership.
20.2 In the event any Partner pays any costs or expenses on behalf
of the Partnership which relate directly to the operations of the Partnership,
such Partner shall submit reasonable supporting documentation evidencing such
payment to the Management Committee. Upon receipt of such supporting
documentation and unanimous approval of the Management Committee, the
Partnership shall promptly reimburse such Partner for such costs and expenses
incurred.
ARTICLE XXI
MISCELLANEOUS
21.1 This Agreement constitutes the entire agreement among the
parties. It supersedes any prior agreement or understandings among them, and it
may not be modified or amended in any manner other than as set forth herein.
21.2 This Agreement and the rights of the parties hereunder shall be
governed by and interpreted in accordance with the laws of the State of
Delaware, without giving effect to provisions thereof regarding conflicts of
laws.
21.3 If any controversy or claim between the Partners arise out of
this Agreement, except as otherwise specifically provided in this Agreement:
(a) Such disagreement or dispute shall be discussed in good
faith during a ten-day period following the occurrence of such dispute.
If the dispute or disagreement cannot be resolved by the parties after
good faith discussion, it shall be submitted to binding arbitration in
Tucson, Arizona, under the Commercial Arbitration Rules of the American
Arbitration Association.
(b) Three arbitrators shall be appointed under the Commercial
Arbitration Rules of the American Arbitration Association. As soon as
the panel has been convened, a hearing date shall be set within 45 days
thereafter. Written submittals shall be presented and exchanged by both
parties 15 days before the hearing date, including reports prepared by
experts upon whom either party intends to rely. At such time the
parties shall also exchange copies of all documentary evidence upon
which they will rely at the arbitration hearing and a list of the
witnesses whom they intend to call to testify at the hearing. Each
party shall also make its respective experts available for deposition
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by the other party prior to the hearing date. The arbitrators shall
make their award as promptly as practicable after conclusion of the
hearing.
(c) The arbitrators shall not be bound by the rules of evidence
or civil procedure, but rather may consider such writings and oral
presentations as reasonable businessmen would use in the conduct of
their day-to-day affairs, and may require the parties to submit some or
all of their presentation orally or in written form as the arbitrators
may deem appropriate. It is the intention of the parties to limit live
testimony and cross-examination to the extent necessary to insure a
fair hearing to the parties on the matters submitted to arbitration,
and to provide neither party more than five (5) complete business days
to present its position. The parties have included the foregoing
provisions limiting the scope and extent of the arbitration with the
intention of providing for prompt, economic and fair resolution of any
dispute submitted to arbitration.
(d) The arbitrators shall have the discretion to award the
costs of arbitration, arbitrators' fees and the respective attorneys'
fees of each party to the party who the arbitrators determine, in their
sole discretion, to have prevailed in the dispute. Judgment upon the
award entered by the arbitrators may be entered in any court having
jurisdiction thereof. The arbitrators shall make their award in
accordance with applicable law and based on the evidence presented by
the parties, and at the request of either party at the start of the
arbitration shall include in their award findings of fact and
conclusions of law both in law and equity which would be available in a
court having jurisdiction over the parties and over the subject matter
of the dispute. Such powers shall include, but not be limited to, the
power to require specific performance.
(e) The arbitration agreement set forth herein shall not limit
a court from granting a temporary restraining order or preliminary
injunction in order to preserve the status quo of the parties pending
arbitration. Further the arbitrator(s) shall have power to enter such
orders by way of interim award, and they shall be enforceable in court.
21.3 Except as herein otherwise specifically provided, this
Agreement shall be binding upon and inure to the benefit of the parties and
their legal representatives, heirs, administrators, executors, successors and
assigns.
21.4 Wherever from the context it appears appropriate, each term
stated in either the singular or the plural shall include the singular and the
plural, and pronouns stated in either the masculine, the feminine or the neuter
gender shall include the masculine, feminine and neuter.
21.5 Captions contained in the Agreement are inserted only as a
matter of convenience and in no way define, limit or extend the scope or intent
of this Agreement or any provisions thereto.
21.6 If any provision of this Agreement, or the application of such
provision to any person or circumstance, shall be held invalid, the remainder of
this Agreement, or the
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application of such provision to persons or circumstances other than those to
which it is held invalid, shall not be affected hereby.
21.7 This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same instrument.
21.8 This Agreement may be translated from English to Japanese. In the
event any conflict or ambiguity exists as a result of, or in connection with,
such translation, the original English version shall govern.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
this 18th day of August, 1995.
WALBRO TUCSON CORP.
By:
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Its:
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IWAKI DIECAST USA, INC.
By:
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Its:
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SCHEDULE A
TO GENERAL PARTNERSHIP AGREEMENT
OF
TUCSON PRECISION PRODUCTS
<TABLE>
<CAPTION>
CAPITAL PARTICIPATING
PARTNERS CONTRIBUTION PERCENTAGE
- - ------------------------------------------------------ -------------- ---------------
<S> <C> <C>
Walbro Tucson Corp. $450,000 60%
6242 Garfield
Cass City, Michigan 48726
U.S.A.
Iwaki Diecast U.S.A., Inc. $300,000 40%
6601 South Renaissance Drive
Tucson, Arizona 85746-6042
</TABLE>
A-1
<PAGE> 1
EXHIBIT 10.28
WALBRO CORPORATION
SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN
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EFFECTIVE JANUARY 1, 1997
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TABLE OF CONTENTS
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PAGE
ARTICLE I
DEFINITIONS .................................................... 1
1.1 "Actuarial Equivalent"................................. 1
1.2 "Appendix"............................................. 1
1.3 "Base Salary".......................................... 1
1.4 "Beneficiary".......................................... 1
1.5 "Benefit Trust Committee".............................. 1
1.6 "Board of Directors"................................... 1
1.7 "Change of Control".................................... 1
1.8 "Company".............................................. 1
1.9 "Compensation Committee"............................... 2
1.10 "Credited Service"..................................... 2
1.11 "Death Benefit"........................................ 2
1.12 "Effective Date"....................................... 2
1.13 "Eligible Employee".................................... 2
1.14 "Employee"............................................. 2
1.15 "Employment Agreement"................................. 2
1.16 "ERISA"................................................ 2
1.17 "Final Average Earnings"............................... 2
1.18 "Installment Period"................................... 2
1.19 "Internal Revenue Code" or "Code"...................... 2
1.20 "Normal Retirement Date"............................... 3
1.21 "Notice Date".......................................... 3
1.22 "Participant".......................................... 3
1.23 "Payment Date"......................................... 3
1.24 "Plan"................................................. 3
1.25 "Plan Year"............................................ 3
1.26 "Retirement Benefit"................................... 3
1.28 "Termination Agreement"................................ 3
1.30 "Termination of Employment"............................ 3
1.31 "Trust"................................................ 4
ARTICLE II
PARTICIPATION................................................... 5
2.1 Eligibility............................................ 5
2.2 Beneficiary Election................................... 5
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TABLE OF CONTENTS
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PAGE
ARTICLE III
BENEFITS........................................................ 6
3.1 Retirement Benefit.................................... 6
3.2 Death Benefit Prior to Payment Date................... 6
3.3 Death Benefit On and After Payment Date............... 7
ARTICLE IV
VESTING AND FORFEITURES......................................... 8
4.1 Fully Vested Retirement Benefit....................... 8
ARTICLE V
DISTRIBUTIONS................................................... 9
5.1 Retirement Benefit Prior to a Change or Control....... 9
5.2 Death Benefit Prior to Payment Date................... 9
5.3 Payment of Retirement Benefit and Death Benefit Due
to a Change of Control................................ 10
5.4 Claim Procedures...................................... 10
ARTICLE VI
AMENDMENT....................................................... 12
6.1 Prior to a Change of Control.......................... 12
6.2 After a Change of Control............................. 12
ARTICLE VII
TERMINATION..................................................... 13
ARTICLE VIII
MISCELLANEOUS PROVISIONS........................................ 14
8.1 Administration........................................ 14
8.2 Finality of Determination............................. 14
8.3 Expenses.............................................. 14
8.4 Indemnification and Exculpation....................... 14
8.5 Funding............................................... 14
8.6 Corporate Action...................................... 15
8.7 Interests not Transferable............................ 15
8.8 Effect on Other Benefit Plans......................... 15
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TABLE OF CONTENTS
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PAGE
8.9 Legal Fees and Expenses............................... 15
8.10 Deduction of Taxes from Amounts Payable............... 15
8.11 Facility of Payment................................... 15
8.12 Merger................................................ 15
8.13 Gender and Number..................................... 16
8.14 Invalidity of Certain Provisions...................... 16
8.15 Headings.............................................. 16
8.16 Notice and Information Requirements................... 16
8.17 Governing Law......................................... 16
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<PAGE> 5
WALBRO CORPORATION SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN
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WALBRO CORPORATION establishes, effective as of January 1, 1997, an unfunded,
deferred compensation plan on behalf of certain designated management or highly
compensated employees of Walbro Corporation. This document defines the
provisions of such plan and shall be known as the "Walbro Corporation
Supplemental Employee Retirement Plan."
This plan is intended in part to be an unfunded, deferred compensation plan for
a select group of management or highly compensated employees, as described in
sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement Income
Security Act of 1974 ("ERISA") and in part to be an excess benefit plan
described in section 3(36) of ERISA.
<PAGE> 6
ARTICLE I
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DEFINITIONS
The following sections of this Article I provide basic definitions of
terms used throughout this Plan, and whenever used herein in a capitalized
form, except as otherwise expressly provided, the terms shall be deemed to have
the following meanings:
1.1 "Actuarial Equivalent" means an amount equal in value to the benefit
replaced based on an interest rate discount assumption of 9.2% per annum.
1.2 "Appendix" means a written supplement attached to this Plan and made a
part hereof which has been added in accordance with the provisions of this
Plan.
1.3 "Base Salary" has the meaning given to it in the Participant's
Employment Agreement, or if applicable, Termination Agreement.
1.4 "Beneficiary" means with respect to the Death Benefit payable upon the
death of a Participant, any person designated by the Participant on his or her
most recent Beneficiary election form approved by the Benefit Trust Committee;
provided that if a Participant fails to designate a Beneficiary on a
Beneficiary election form or if all such designated persons predecease the
Participant without the Participant completing a new, approved Beneficiary
election form, then Beneficiary means the Participant's Spouse, or if no
surviving Spouse, then the Participant's estate.
An individual who is entitled to receive a Death Benefit on and after the
death of a Participant will remain a Beneficiary until the receipt of such
Beneficiary's Death Benefit, if any, is completed (or made in a single sum).
1.5 "Benefit Trust Committee" means the Benefit Trust Committee appointed
pursuant to the terms of the Trust which will have the power to manage and
control the operation and administration of this Plan; or if none is appointed,
the Committee appointed for the Walbro Corporation Advantage Plan.
1.6 "Board of Directors" means the board of directors of the Company.
1.7 "Change of Control" shall have the same meaning as set forth in the
Participant's Termination Agreement.
1.8 "Company" means WALBRO CORPORATION or any successor entity by
operation of law or any successor entity which affirmatively adopts the Plan,
the Trust and the obligations of Walbro Corporation with respect to the Plan
and the Trust.
1
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1.9 "Compensation Committee" means the Compensation Committee of the Board
of Directors.
1.10 "Credited Service" means only the uninterrupted, continuous period of
employment as an Employee, and shall be given on the basis of full years and
calendar months. Credited Service shall also include periods granted to a
particular Participant under the terms of his or her Employment Agreement, or
if applicable, Termination Agreement.
1.11 "Death Benefit" means a monthly (or single sum) benefit payable to a
Beneficiary and determined in accordance with this Plan.
1.12 "Effective Date" means January 1, 1997.
1.13 "Eligible Employee" means each Employee who is entitled to
participate in this Plan under the terms of his or her Employment Agreement, or
if applicable, Termination Agreement.
1.14 "Employee" means any person who renders services as a common law
employee to the Company. Walbro Automotive Corporation or Engine Management
Corporation.
1.15 "Employment Agreement" means the current version of the Employment
Agreement between the Participant and the Company.
1.16 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.17 "Final Average Earnings" shall mean the average of the Base Salary of
the Participant for the three (3) highest consecutive years of employment as an
Employee, or if such period of the Participant's employment is less than
three (3) years, the period of such Participant's employment as an Employee,
annualized if the Participant is employed as an Employee for less than a full
year.
1.18 "Installment Period" means a period commencing with an annual
installment on the Payment Date and ending with an annual installment on the
earlier of (1) the ninth anniversary of the Payment Date or (2) the anniversary
of the Payment Date on or immediately preceding the death of the Participant;
or if a Beneficiary survives the Participant, the date of such Beneficiary's
death.
1.19 "Internal Revenue Code" or "Code" means the Internal Revenue Code of
1986, as amended, any subsequent Internal Revenue Code and final Treasury
Regulations. If there is a subsequent Internal Revenue Code, any references
herein to Internal Revenue Code sections shall be deemed to refer to comparable
sections of any subsequent Internal Revenue Code.
2
<PAGE> 8
1.20 "Normal Retirement Date" shall mean the first day of the month next
following a Participant's 65th birthday or such other date set forth in a
Participant's Employment Agreement.
1.21 "Notice Date" means the date established by the Benefit Trust
Committee as the deadline for it to receive any notification with respect to an
administrative matter in order to be effective under this Plan.
1.22 "Participant" means an Eligible Employee who begins to participate in
this Plan after completing the eligibility requirements. An individual will
remain a Participant until the payment of his or her Retirement Benefit, if
any, is completed (or made in a single sum).
1.23 "Payment Date" means the date a Participant's Retirement Benefit, or
if payments of a Retirement Benefit have not commenced on the Participant's
date of death, the Beneficiary's Death Benefit, is distributed or commences to
be distributed as described in Article V.
1.24 "Plan" means the Walbro Corporation Supplemental Employee Retirement
Plan, as it may be validly amended from time to time.
1.25 "Plan Year" means the annual accounting period of this Plan which
ends on each December 31.
1.26 "Retirement Benefit" means a monthly (or single sum) pension benefit
payable to a Participant and determined in accordance with this Plan.
1.27 "Spouse" means the person to whom a Participant is validly married
under the laws of the State of the Participant's primary residence; provided
however, if the Participant is legally separated from a person who would
otherwise be such Participant's Spouse (but for this proviso), then such person
shall cease to be such Participant's Spouse. For this purpose a common law
spouse is a Spouse only if the Participant resides in a State that legally
recognizes common law marriages; a person to whom a Participant was formerly
married is not a Spouse; and if a Participant could possibly be married to more
than one person under the laws of a State, only one such person may be
designated as the Participant's Spouse during any Plan year.
1.28 "Termination Agreement" means the current version of the Termination
and Change of Control Agreement between the Participant and the Company.
1.29 "Lump Sum" means a Retirement Benefit or Death Benefit payable in a
single sum payment which is Actuarially Equivalent to the form of payment it
replaces.
1.30 "Termination of Employment" occurs when a person ceases to be an
Employee as determined by the personnel policies of the Company; provided
however, transfer of employment from the Company, or from one affiliate of the
Company, to
3
<PAGE> 9
another affiliate of the Company shall not constitute a Termination of
Employment for purposes of this Plan.
1.31 "Trust" means the trust created by the Walbro Corporation Benefit
Trust Agreement as it may be validly amended from time to time.
4
<PAGE> 10
ARTICLE II
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PARTICIPATION
2.1 Eligibility. On or after the Effective Date, each Eligible Employee
shall become a Participant as of the date he or she became an Eligible
Employee.
2.2 Beneficiary Election. Each person first eligible to become a
Participant shall complete, sign and return a Beneficiary election form
provided for that purpose by the Benefit Trust Committee, to the Benefit Trust
Committee no later than the designated Notice Date.
5
<PAGE> 11
ARTICLE III
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BENEFITS
3.1 Retirement Benefit.
(a) General. A Participant who has a nonforfeitable right to a
Retirement Benefit and has a Termination of Employment will begin
receiving his or her Normal Retirement Benefit commencing on the Payment
Date. The payment and form of payment of the Retirement Benefit
determined hereunder shall be governed by the provisions of Article V.
(b) Amount. A Participant's Retirement Benefit shall be an annual
amount for the Installment Period commencing on the Payment Date equal
to one and one-half percent (1 1/2%) of the Participant's Final Average
Earnings multiplied times the number of years and months of the
Participant's Credited Service. Notwithstanding the above,
(1) if the Participant is the Chief Executive Officer of the
Company with forty (40) or more years of Credited Service, his or
her Normal Retirement Benefit shall be based on the annual accrual
rate of one percent (1%) instead of one and one-half percent (1
1/2%) as described above; and
(2) if the Participant's Employment Agreement, or if
applicable, Termination Agreement, provides for a different annual
accrual rate other than one and one-half percent (1 1/2%), such
Participant's Retirement Benefit shall be based on the accrual rate
specified in such Employment Agreement, or if applicable,
Termination Agreement.
3.2 Death Benefit Prior to Payment Date.
(a) General. A Participant who has a nonforfeitable right to a
Retirement Benefit and dies prior to the Payment Date of his or her
Retirement Benefit will have a Death Benefit paid to his or her
Beneficiary. The payment and form of payment of the Death Benefit
determined hereunder shall be governed by the provisions of Article V.
(b) Amount. The amount of the Death Benefit payable to a deceased
Participant's Beneficiary shall be an annual amount for the Installment
Period commencing on the Payment Date equal to fifty percent (50%) of the
amount of Retirement Benefit payments which would have been paid to the
deceased Participant had the Retirement Benefit commenced to be paid to
the Participant the day before the Participant died.
6
<PAGE> 12
3.3 Death Benefit On and After Payment Date.
(a) General. A Participant who has a nonforfeitable right to a
Retirement Benefit, who dies on or after the the Payment Date of his or
her Retirement Benefit and who did not receive a Lump Sum payment of the
Retirement Benefit, will have a Death Benefit paid to his or her
Beneficiary. The date of payment and form of payment of the Death
Benefit determined hereunder shall be the same as the deceased
Participant's.
(b) Amount. The amount of the Death Benefit payable to a deceased
Participant's Beneficiary shall be an annual amount for the remainder of
the Participant's Installment Period which is equal to fifty percent
(50%) of the amount of annual Retirement Benefit payments which would
have been paid to the deceased Participant had the Participant not died.
7
<PAGE> 13
ARTICLE IV
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VESTING AND FORFEITURES
4.1 Fully Vested Retirement Benefit.
A Participant shall be fully vested in, and have a nonforfeitable right
to, his or her Retirement Benefit upon the earliest to occur of the following:
(a) attainment of age 60 and completion of at least five (5) years
of Credited Service;
(b) upon such other earlier date as specifically provided for such
Participant in his or her Employment Agreement; or if applicable
Termination Agreement; or
(c) upon the occurrence of a Change of Control.
4.2 A Participant who incurs a Termination of Employment and who does not
have a fully vested and nonforfeitable right to his or her Retirement Benefit
shall forfeit all right and interest in such Retirement Benefit and any other
benefit provided under this Plan. The Beneficiaries of such Participant shall
also forfeit any right or interest to any Death Benefit under this Plan.
8
<PAGE> 14
ARTICLE V
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DISTRIBUTIONS
Benefits payable under this Plan shall be paid in the form and time
prescribed below.
5.1 Retirement Benefit Prior to a Change or Control. A Participant shall
receive a Retirement Benefit in the following form of payment and as of the
following Payment Date:
(a) Form of Payment. The form of payment of the Retirement Benefit
shall be annual payments for the Installment Period. Notwithstanding the
preceding sentence, the form of payment shall be a Lump Sum if: (1) the
Compensation Committee, in its discretion, determines to cash out
Participant's Retirement Benefit because it is too small to maintain on
the Company's records or because of the health and short life expectancy
of the Participant on his or her Payment Date; (2) such Participant's
last election in writing, on a form delivered to the Benefit Trust
Committee at least two years on or prior to the earlier of (i) his or her
Termination of Employment or (ii) his or her Payment Date, is to convert
the Retirement Benefit payable under this Plan into an Actuarial
Equivalent Lump Sum form of payment and the Participant has attained at
least age sixty (60) on or prior to his or her date of Termination of
Employment; or (3) the Company incurs a Change of Control.
(b) Payment Date. If the Participant's form of payment is
installment payments, the Payment Date shall be the first day of the
month next following the later of (i) the attainment of the Participant's
Normal Retirement Date or (ii) the Participant's Termination of
Employment. If the Participant's form of payment is a Lump Sum, the
Payment Date shall be the first day of the month following his or her
Termination of Employment. Notwithstanding the preceding sentence, if
payment is made in a Lump Sum (other than under Section 5.3) and will
result in any portion of the payment (or any other amount paid to such
Participant during the same Plan Year) not being deductible by reason of
Code section 162(m), the Benefit Trust Committee may defer such Actuarial
Equivalent single sum payment to a later Payment Date designated by it.
5.2 Death Benefit Prior to Payment Date. A Beneficiary of a Participant
who dies prior to the Participant's Payment Date shall receive a Death Benefit
in the following form of payment and as of the following Payment Date.
(a) Form of Payment. The form of payment of a Beneficiary's Death
Benefit shall be in annual installments for the Installment Period;
provided, however, the Compensation Committee in its discretion, or
such Participant by electing in writing on a form delivered to the
Benefit Trust Committee prior to
9
<PAGE> 15
his or her death, may convert the Death Benefit payable under this Plan
into a Lump Sum form of payment.
(b) Time of Payment. A Beneficiary's Death Benefit shall commence
to be paid as of the earliest date on or after the Participant's death as
is administratively possible but no later than ninety days; provided
however, if payment is made in a Lump Sum and will result in any portion
of the payment (or any other amount paid to such Beneficiary during the
same Plan Year) not being deductible by reason of Code section 162(m),
the Benefit Trust Committee may defer such Actuarial Equivalent single
sum payment to a later Payment Date designated by it.
5.3 Payment of Retirement Benefit and Death Benefit Due to a Change of
Control. On and after a Change of Control and notwithstanding Sections 5.1 or
5.2, the following shall apply:
(a) Retirement Benefit. Upon Termination of Employment (other than
for reason of death) of a Participant within three (3) years following a
Change of Control, a Lump Sum payment shall be made immediately to such
Participant; provided that for this purpose the calculation of the
Participant's Retirement Benefit will be based upon any assumptions
regarding this Plan set forth in the Participant's Employment Agreement
and Termination Agreement.
(b) Death Benefit. A Beneficiary who is receiving, or would within
three (3) years following the date of the Company's Change of Control
otherwise be eligible to commence to receive, a Death Benefit shall be
paid immediately a Lump Sum payment of such unpaid Death Benefit on the
date of the Company's Change of Control or on the Participant's date of
death, respectively.
5.4 Claim Procedures.
(a) Initial Claim for Benefits. Each person entitled to benefits
under this Plan (a "Claimant") must sign and submit his or her claim for
benefits to the Benefit Trust Committee or its agent in writing in such
form as is provided or approved by such Benefit Trust Committee. A
Claimant shall have no right to seek review of a denial of benefits, or
to bring any action in any court to enforce a claim for benefits prior to
his or her filing a claim for benefits and exhausting his or her rights
under this Section. When a claim for benefits has been filed properly,
such claim for benefits shall be evaluated and the Claimant shall be
notified by the Benefit Trust Committee or agent of its approval or
denial within ninety (90) days after the receipt of such claim unless
special circumstances require an extension of time for processing the
claim. If such an extension of time for processing is required, written
notice of the extension shall be furnished to the Claimant by the Benefit
Trust Committee or agent prior to the termination of the initial ninety
(90) day period which shall specify the special circumstances requiring
an extension and the date by which a final
10
<PAGE> 16
decision will be reached (which date shall not be later than one hundred
eighty (180) days after the date on which the claim was filed). A
Claimant shall be given a written notice in which the Claimant shall be
advised as to whether the claim is granted or denied, in whole or in
part. If a claim is denied, in whole or in part, the Claimant shall be
given written notice which shall contain (1) the specific reasons for the
denial, (2) references to pertinent Plan provisions upon which the denial
is based, (3) a description of any additional material or information
necessary to perfect the claim and an explanation of why such material or
information is necessary, and (4) the Claimant's rights to seek review of
the denial.
(b) Review of Claim Denial. If a claim is denied, in whole or in
part (or if within the time periods prescribed for in the initial claim,
the Benefit Trust Committee or agent has not furnished the Claimant with
a denial and the claim is therefore deemed denied), the Claimant shall
have the right to request that the Benefit Trust Committee review the
denial, provided that the Claimant files a written request for review
with the Benefit Trust Committee within sixty (60) days after the date on
which the Claimant received written notification of the denial. A
Claimant (or his or her duly authorized representative) may review
pertinent documents and submit issues and comments in writing to the
Benefit Trust Committee. Within sixty (60) days after a request for
review is received, the review shall be made and the Claimant shall be
advised in writing by the Benefit Trust Committee of the decision on
review, unless special circumstances require an extension of time for
processing the review, in which case the Claimant shall be given a
written notification by the Benefit Trust Committee within such initial
sixty (60) day period specifying the reasons for the extension and when
such review shall be completed (provided that such review shall be
completed within one hundred and twenty (120) days after the date on
which the request for review was filed). The decision on review shall be
forwarded to the Claimant by the Benefit Trust Committee in writing and
shall include specific reasons for the decision and references to Plan
provisions upon which the decision is based. A decision on review shall
be final and binding on all persons for all purposes. If a Claimant
shall fail to file a request for review in accordance with the procedures
described in this Section, such Claimant shall have no right to review
and shall have no right to bring action in any court and the denial of
the claim shall become final and binding on all persons for all purposes.
11
<PAGE> 17
ARTICLE VI
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AMENDMENT
6.1 Prior to a Change of Control. The Company reserves the right to amend
this Plan from time to time by action of the Board of Directors, but without
the written consent of each Participant and Beneficiary of a deceased
Participant, no such action may relieve the Company of any obligation or reduce
such obligation with respect to any Retirement Benefit or Death Benefit accrued
under this Plan by such Participant or Beneficiary, respectively, as of the
date of such amendment, except to the extent such amendment is required by
written opinion of counsel to the Company to avoid more likely than not the
recognition of income by a Participant or Beneficiary subject to federal income
taxation.
6.2 After a Change of Control. After a Change of Control of the Company,
the Company, by action of its Board of Directors, may amend this Plan solely
for the purpose of freezing benefit accruals, provided such freeze does not
change the definition of Actuarial Equivalent nor the ability to elect timing
and optional forms of payment or a Beneficiary on or after such Change of
Control date.
12
<PAGE> 18
ARTICLE VII
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TERMINATION
The Company, by action of the Board of Directors, reserves the right to
terminate this Plan, provided the Company pays to each Participant and
Beneficiary, on such date of termination of this Plan, the Lump Sum value of a
Participant's unpaid Retirement Benefit, or if a Beneficiary is receiving the
Death Benefit, the Beneficiary's unpaid Death Benefit; provided however, for
this purpose the calculation of a Participant's Retirement Benefit will be
based upon any assumption regarding this Plan set forth in the Participant's
Employment Agreement or Termination Agreement.
13
<PAGE> 19
ARTICLE VIII
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MISCELLANEOUS PROVISIONS
8.1 Administration. This Plan shall be administered by the Benefit Trust
Committee. The Benefit Trust Committee shall have the full discretionary
authority to interpret and manage this Plan.
8.2 Finality of Determination. The determination of the Benefit Trust
Committee as to any disputed questions arising under this Plan, including
questions of construction and interpretation shall be final, binding, and
conclusive upon all persons.
8.3 Expenses. The expenses of administering this Plan shall be borne by
the Company.
8.4 Indemnification and Exculpation. The members of the Benefit Trust
Committee, its agents and officers, directors and employees of the Company
shall be indemnified and held harmless by the Company against and from any and
all loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by them in connection with or resulting from any claim, action, suit,
or proceeding to which they may be a party or in which they may be involved by
reason of any action taken or failure to act under this Plan and against and
from any and all amounts paid by them in settlement (with the Company's written
approval) or paid by them in satisfaction of a judgment in any such action,
suit, or proceeding. The foregoing provision shall not be applicable to any
person if the loss, cost, liability, or expense is due to such person's gross
negligence or willful misconduct.
8.5 Funding. While all benefits payable under this Plan constitute
general corporate obligations, the Company may establish a separate irrevocable
grantor trust for the benefit of all Participants, which trust shall be
subject to the claims of the general creditors of the Company in the event of
such corporation's insolvency, to be used as a reserve for the discharge of the
Company's obligations under this Plan to such Participants. Any payments made
to a Participant under the separate trust for his benefit shall reduce dollar
for dollar the amount payable to the Participant from the general assets of the
Company. The amounts payable under this Plan shall be reflected on the
accounting records of the Company but shall not be construed to create or
require the creation of a trust, custodial, or escrow account, except as
described above in this section. No Participant (or Beneficiary of a
Participant) shall have any right, title, or interest whatever in or to any
investment reserves, accounts, or funds that the Company may purchase,
establish, or accumulate to aid in providing benefits under this Plan. Nothing
contained in this Plan, and no action taken pursuant to its provisions, shall
create a trust or fiduciary relationship of any kind between the Company, or
Compensation Committee and a Participant, Beneficiary or any other
14
<PAGE> 20
person. Neither a Participant nor any shall acquire any interest greater than
that of an unsecured, general creditor.
8.6 Corporate Action. Any action required of or permitted by the Company
under this Plan shall be by resolution of its Board of Directors, the
Compensation Committee or any person or persons authorized by resolution of
such Compensation Committee.
8.7 Interests not Transferable. The interests of the Participants and
their Beneficiaries under this Plan are not subject to the claims of their
creditors and may not be voluntarily or involuntarily transferred, assigned,
alienated, or encumbered by them.
8.8 Effect on Other Benefit Plans. Amounts credited or paid under this
Plan shall not be considered to be compensation for the purposes of a qualified
pension plan maintained by the Company. The treatment of such amounts under
other employee benefits plans shall be determined pursuant to the provisions of
such plans.
8.9 Legal Fees and Expenses. After a Change of Control, the Company shall
pay all reasonable legal fees and expenses which the Participant or a
Beneficiary may incur as a result of the Company's contesting the validity,
enforceability or the Participant's interpretation of, or determinations made
under, this Plan or the Trust.
8.10 Deduction of Taxes from Amounts Payable. The Company may withhold
whatever taxes (including FICA, state or federal taxes) it, in its sole
discretion, deems proper to protect the Company against liability for the
payment of such withholding taxes and out of the money so deducted, the Company
may discharge any such liability. Withholding for this purpose may come from
any wages due to the Participant, or if none, from the Participant's Account
hereunder.
8.11 Facility of Payment. If a Participant or Beneficiary is declared an
incompetent or is a minor and a conservator, guardian, or other person legally
charged with his or her care has been appointed, any benefits to which such
Participant or Beneficiary is entitled shall be payable to such conservator,
guardian, or other person legally charged with his or her care. The decision
of the Benefit Trust Committee in such matters shall be final, binding, and
conclusive upon the Company and upon each Participant, Beneficiary, and every
other person or party interested or concerned. The Company and the Benefit
Trust Committee shall not be under any duty to see to the proper application of
such payments.
8.12 Merger. This Plan shall be binding and enforceable with respect to
the obligation of the Company against any successor to the Company by operation
of law or by express assumption of the Plan, and such successor shall be
substituted hereunder for the Company.
15
<PAGE> 21
8.13 Gender and Number. Except when the context indicates to the
contrary, when used herein, masculine terms shall be deemed to include the
feminine, and singular the plural.
8.14 Invalidity of Certain Provisions. If any provision of this Plan
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions hereof and this Plan shall be construed
and enforced as if such provisions, to the extent invalid or unenforceable, had
not been included.
8.15 Headings. The headings or articles are included solely for
convenience of reference, and if there is any conflict between such headings
and the text of this Plan, the text shall control.
8.16 Notice and Information Requirements. Except as otherwise provided in
this Plan or as otherwise required by law, the Company shall have no duty or
obligation to affirmatively disclose to any Participant or Beneficiary, nor
shall any Participant or Beneficiary have any right to be advised of, any
material information regarding the Company, or at any time prior to, upon or in
connection with the Company's purchase, or any other distribution or transfer
(or decision to defer any such distribution) of any Company Stock or any other
stock held under this Plan.
8.17 Governing Law. This Plan shall be governed by the laws of the State
of Delaware.
Adopted on the ______ day of _______________ by the Board of Directors of
the Company as to its obligations.
By:______________________________
Title:___________________________
16
<PAGE> 1
EXHIBIT 10.29
SEPARATION AGREEMENT AND GENERAL RELEASE
Walbro Corporation ("Walbro" or the "Company") and Lambert E. Althaver
(the "Executive") hereby enter into this Separation Agreement ("Agreement") this
20th day of May, 1998:
WHEREAS, Executive has been employed as Chief Executive Officer of
Walbro and been an officer and director with various entities affiliated with
Walbro, including without limitation, Walbro Corporation; Walbro Netherlands
B.V.; Auburn Die Cast; U.S. Coexcell, Inc.; Walbro Automotive Japan, Inc.;
Walbro Korea, Ltd.; Walbro Automotive S.A. - France; Walbro Automotive AS -
Norway; Walbro Automotive Limited - United Kingdom; Walbro Automotive FSC, Inc.;
CME, Marwal Systems, SNC; Mitsuba-Walbro, Inc.; and Whitehead Engineered
Products, Inc. (collectively, the "Affiliates"); and
WHEREAS, Walbro and Executive are parties to a certain Employment
Agreement dated August 16, 1996 and a certain Termination and Change of Control
Agreement dated August 16, 1996 (collectively the "Prior Agreements") and wish
to terminate the Prior Agreements and sever their employment relationship and
fully settle all claims which either party has or may have; and
WHEREAS, Executive has concluded it is in his best interest to retire
and resign his position with the Company and the Affiliates, subject to the
terms and conditions provided in this Agreement, and the Company has agreed to
accept Executive's resignation;.
WHEREAS, both parties desire to part on the terms and conditions
contained in this Agreement.
NOW, THEREFORE, Walbro and Executive agree as follows:
1. Effective as of the close of business on April 15, 1998 ("Separation
Date"), Executive resigns his employment and the office of Chief Executive
Officer, and effective as of the close of business on May 20, 1998, Executive
resigns directorships Executive may hold with Walbro and any of its Affiliates
and his position as Chairman of the board of directors of Walbro. Executive and
Walbro shall implement the resignation in a manner designed to ensure the least
disruption to the operations and business of Walbro and its Affiliates, while
continuing the good standing in which Executive is held in the industry and his
community. After the Separation Date, except as described in this Agreement,
neither Executive nor Walbro shall have any further obligation under the Prior
Agreements.
2. No provision of the Prior Agreements shall survive this Agreement,
except subsections (a) and (b) of Section 11 of the Termination and Change of
Control Agreement
<PAGE> 2
entered into by and between Executive and Walbro on August 16, 1996
("Termination and Change of Control Agreement") as provided above in Section 9
of this Agreement.
3. In consideration for the agreements and in full and final settlement
of all of Executive's stated and unstated claims, Walbro agrees:
(a) Walbro shall continue to pay Executive his Annual Base Salary
at the rate in effect (Four Hundred and Fifty Thousand Dollars
($450,000.00) per annum) through August 15, 1998, less all
appropriate deductions and withholdings required by law.
(b) Within seven days following the Effective Date, Walbro shall
pay Executive Fifty-One Thousand Five Hundred Sixty-Two and
50/100 Dollars ($51,562.50), less all appropriate deductions
and withholdings required by law, as Executive's Annual
Incentive Compensation for the fiscal year ending 1998 (such
amount determined by multiplying the average of Executive's
fiscal year 1995, 1996, and 1997 bonuses by a fraction, the
numerator of which is 227, the number of days in 1998 through
August 15, and the denominator of which is 365).
(c) Stock Options granted under the Walbro Corporation Equity
Based Long Term Incentive Plan (as identified in an
interoffice memorandum from D. L. Hittler to L. E. Althaver
dated March 16, 1998) shall be fully exercisable on and after
the Separation Date for the lesser of six (6) years after the
Separation Date or ten (10) years from date of grant.
(d) One Thousand Seventy (1,070) Phantom Stock certificates shall
be converted to stock certificates (or, alternatively, to cash
at fair market value) on the date of notice provided by
Executive; provided that such notice must be provided not
later than August 29, 1998.
(e) As of the date of this Agreement, Executive shall cease to
accrue benefits under the Company's supplemental employee
retirement plan ("SERP"); provided, however, Walbro shall pay
to Executive ten (10) annual installments with the initial
payment on September 1, 1998 under the SERP, less appropriate
deductions and withholdings required by law. Each installment
payment shall be One Hundred Ninety Six Thousand Six Hundred
Ninety Five Dollars ($196,695).
(f) Walbro shall provide office facilities through August 15,
1999, at a location to be chosen by Walbro.
(g) Walbro will reimburse Executive for the monthly lease cost of
his assigned vehicle (1998 Cadillac Seville) and shall provide
insurance coverage for such vehicle from the Separation Date
to August 15, 1999. Executive shall be responsible for
operating, maintenance and repair costs.
2
<PAGE> 3
(h) All other fringe benefits shall terminate on May 20, 1998.
4. In consideration for agreement and in full settlement of all claims:
(a) Executive agrees to repay the One Hundred Thousand Dollars
($100,000) outstanding loan not later than August 15, 1998.
(b) Executive agrees that, as a part of his responsibilities, he
shall (i) return all Company property (including customer
lists, data, software, etc.) in his possession and (ii) use
reasonable efforts to assure a smooth transition of his duties
and responsibilities to the management executives or other
individuals designated by Walbro and shall provide the details
concerning corporate opportunities which have not resulted in
agreements with third parties in which he is and was involved
and be available for consultation regarding general business
matters for a period of one year following the Separation
Date. Executive further agrees to cooperate with Walbro in the
truthful and honest prosecution and/or defense of any claim in
which the Released Parties (as hereinafter defined) may have
an interest (subject to reasonable limitations concerning time
and place), which may include without limitation making
himself available to participate in any proceeding involving
any of the Released Parties, allowing himself to be
interviewed by representatives of Walbro, appearing for
depositions and testimony without requiring a subpoena, and
producing and/or providing any documents or names of other
persons with relevant information; provided that Walbro shall
provide Executive reasonable compensation for the time
actually expended in such endeavors and shall pay Executive's
reasonable expenses incurred at Walbro's request.
5. Except for a claim based upon a breach of this Agreement, Executive
hereby releases Walbro, its Affiliates, directors, officers and employees of any
and all claims, suits, demands, actions or causes of action of any kind of
nature whatsoever, whether the underlying facts are known or unknown, which
Executive has or now claims, or might have a claim, pertaining to or arising out
of Executive's employment by Walbro, his resignation therefrom, the Prior
Agreements, or any other agreement or benefit plan of Walbro. This release
covers all claims, actions or liability under (i) Title VII of the Civil Rights
Act of 1964, the Civil Rights Act of 1991, the Civil Rights Act of 1866 (42
U.S.C. Section 1981), the Age Discrimination in Employment Act, the Americans
With Disabilities Act, the Fair Labor Standards Act, the National Labor
Relations Act, the Employee Retirement Income Security Act, the Family and
Medical Leave Act, the Worker Adjustment and Retraining Notification Act, the
Elliott Larsen Civil Rights Law, the Michigan Handicappers Civil Rights Act,
and Michigan wage laws; (ii) any other federal, state or local statute,
ordinance, or regulation regarding employment, compensation, employee benefits,
termination of employment, or discrimination in employment; and (iii) the
common law of any state relating to employment contracts, wrongful discharge,
defamation, or any other matter. This release shall run to and be for the
benefit of Walbro and each of its Affiliates or related entities, and all
predecessors, successors and assigns thereof and each of their trustees,
shareholders, directors, officers, Executives, agents and attorneys, past or
present, and all predecessors, successors, heirs and assigns thereof
(collectively "Released
3
<PAGE> 4
Parties"). This release shall run to and be binding upon Executive and his heirs
and assigns. The Executive waives any reinstatement or future employment with
the Company, and agrees never to apply for employment or otherwise seek to be
hired, rehired, employed or reemployed by the Company or its Affiliates.
The following provisions are applicable to and made a part of this
Agreement and the foregoing general release and waiver:
(a) Executive does not release or waive any right or claim which
he may have under the Age Discrimination in Employment Act, as
amended by the Older Workers Benefits Protection Act, which
arises after the date of execution of this Agreement; provided
that Executive acknowledges and agrees that any claim under
the Age Discrimination in Employment Act relating to his
separation from employment with Walbro has arisen prior to the
execution of this Agreement;
(b) In exchange for this general release and waiver hereunder,
Executive hereby acknowledges that he has received separate
consideration beyond that which he is otherwise entitled to
under the Prior Agreements, Walbro policy or applicable law;
(c) Walbro hereby expressly advises Executive to consult with an
attorney of his choosing prior to executing this Agreement,
which contains a general release and waiver;
(d) Executive has twenty-one (21) days from the date of
presentment to consider whether or not to execute this
Agreement. In the event of such execution, Executive has a
further period of seven (7) days from the date of execution in
which to revoke said execution by an unequivocal and written
notice to Daniel L. Hittler, Secretary and Chief
Administrative Officer, Walbro Automotive Corporation that
shall be effective when actually received by Mr. Hittler if
received by 5:00 p.m. on the seventh day after the signing of
the Agreement, and this Agreement shall not become effective
or enforceable until the expiration of such revocation period
("Effective Date"); and
(e) Prior to pursuing any claim that requires the Court to
disregard or invalidate this Agreement, Executive shall return
to Walbro the consideration described in paragraph 3 above.
6. Walbro and its Affiliates hereby remise, release and forever
discharge and covenant not to sue and shall be deemed to have remised, released
and forever discharged Executive of and from any and all causes and causes of
action, suits, sums of money, debts, duties, accounts and accounting, breaches
or defaults, damages, judgments and liabilities, by reason of any agreement, act
or occurrence, fact or circumstance, conduct or misconduct, contractual or
otherwise, general and special, contingent, known or unknown, liquidated or
unliquidated, or matter, cause or thing whatsoever, from the beginning of time
to the date
4
<PAGE> 5
hereof, including but not limited to Executive's employment with Walbro,
provided, however, that nothing herein contained shall be deemed to release
Executive from his obligations under this Agreement.
7. Walbro shall indemnify Executive and advance expenses in accordance
with its practices for former senior executive officers and directors. In
addition, Walbro hereby agrees to indemnify and hold harmless Executive and any
of his heirs, successors and assigns, and each of them, from and against any and
all losses, damages, fines, assessments, claims, judgments, proceedings,
expenses or liabilities (including, without limitation, reasonable attorneys'
fees) arising out of, attributable to or which result from any claim by any of
Walbro or Walbro's affiliates or by any third party against Executive based upon
or related to (i) Executive's position as an officer and/or director of any of
the Walbro or Walbro's affiliates; and (ii) Executive's function as a trustee of
any Company-sponsored plans; except to the extent any such claim, as a matter of
law, constitutes a claim for which Walbro is not permitted to indemnify
Executive or arises out of enforcement of this Agreement.
8. To the maximum extent permitted by law, (1) Executive covenants not
to sue or to institute or cause to be instituted any action in any federal,
state or local agency or court against Walbro or any Released Party regarding
the matters covered by the release contained in paragraph 5 above, except to
enforce the terms of this Agreement; and (2) Walbro covenants not to sue or to
institute or cause to be instituted any action in any federal, state or local
agency or court against Executive or any Released Party regarding the matters
covered by the release contained in paragraph 6 above, except to enforce the
terms of this Agreement.
9. Executive agrees to continue be bound by the provisions of
subsections (a) and (b) of Section 11 "Non-Competition and Non-Disclosure;
Executive Cooperation" of the Termination and Change of Control Agreement, such
restrictions to continue to be in effect until August 15, 1999.
10. This Agreement comprises the entire agreement between the parties
with regard to the subject matter hereof. No modification of this Agreement
shall be valid unless signed by the authorized representative of the party
against whom such modification is sought to be enforced.
11. Executive agrees that any breach by Executive of Section 9 of this
Agreement will cause Walbro great injury which will be difficult, if not
impossible, to measure and that such injury will be immediate and irreparable
for which Walbro will have no adequate remedy at law. Consequently, Executive
and Walbro agree that any material breach thereof by Executive shall entitle
Walbro to the non-exclusive remedy of injunctive relief. Executive agrees that,
in the event of a breach by Executive of this Agreement, Walbro would be more
harmed by the denial of an injunction or other equitable relief than Executive
would be harmed by the issuance of an injunction or other equitable relief and
that the public interest would be furthered by the issuance of an injunction or
other equitable relief to prevent further or additional breach of Section 9
hereof.
5
<PAGE> 6
12. Executive agrees that neither this Agreement or performance
hereunder constitutes an admission by Walbro of any violation of any federal,
state or local law, regulation, common law, of any breach of any contract or any
other wrongdoing of any type.
13. If any provision, section, subsection or other portion of this
Agreement shall be determined by any court of competent jurisdiction to be
invalid, illegal or unenforceable in whole or in part, and such determination
shall become final, such provision or portion shall be deemed to be severed or
limited, but only to the extent required to render the remaining provisions and
portions of Section 11 of the Termination and Change of Control Agreement
enforceable. This Agreement or Section 11 of the Termination and Change of
Control Agreement, as amended, shall be enforced so as to give effect of the
intention of the parties insofar as that is possible; provided, however, that
upon any finding by a court of competent jurisdiction that a release or waiver
of claims or rights or a covenant provided by Section 11 of the Termination and
Change of Control Agreement is illegal, void or unenforceable, the Executive
agrees to execute promptly a release, waiver and/or covenant that is legal and
enforceable. In addition, the parties hereby expressly empower a court of
component jurisdiction to modify any term or provision of Section 11 of the
Termination and Change of Control Agreement, as amended, to the extent necessary
to comply with existing law and to enforce Section 11 of the Termination and
Change of Control Agreement, as amended.
14. This Agreement and Section 11 of the Termination and Change of
Control Agreement shall be construed in accordance with the laws of the State of
Michigan without regard to its choice of law rules, and the parties hereto
consent to the exclusive jurisdiction of the State of Michigan courts, except as
to the enforcement or execution of the judgement of any such court and as to
either party seeking injunctive relief in any jurisdiction in which such party
believes that a breach hereof may have occurred.
15. Executive acknowledges that he has carefully read and fully
understands the terms and provisions of this Agreement and all of his rights and
obligations thereunder, has had an opportunity to be represented by legal
counsel of his choosing, and that his execution of this Agreement is voluntary.
16. Neither this Agreement nor any term or provision herein shall
create any rights on the part of any person or entity as a third-party
beneficiary.
17. Walbro and Executive agree that neither will (without the prior
written consent of the other) disclose, publish, indicate or, in any manner
communicate, the terms and provisions of this Agreement to any other person or
entity except: (a) as may be specifically required by law; (b) to his accountant
and/or financial advisor to the extent necessary to prepare his tax returns; (c)
to his attorney; and (d) to his spouse; and as may be otherwise publicly
available. The Executive further agrees that prior to any such authorized
disclosure, he will inform each such person to whom disclosure is to be made
that the terms of the Agreement are confidential and he will secure the
agreement of each such person to maintain the confidentiality of the terms and
provisions of the Agreement. Walbro and Executive further agree that neither
will disparage the other, the Affiliates or any of the Released Parties. The
Executive agrees to refer any request for a reference to the attention of Mr.
Daniel L. Hittler.
6
<PAGE> 7
18. The Executive acknowledges that the Company hereby advises him in
writing to consult with an attorney before signing this Agreement, that he was
given a period of twenty-one (21) days within which to consider this Agreement,
that he had an adequate opportunity to review this Agreement with an attorney,
that he fully understands its terms, that her was not coerced into signing it,
and that he has signed it knowingly and voluntarily. The Executive understands
that by signing this Agreement, he is waiving each and every claim he has, had,
or may have regarding his employment by, or termination of employment with, the
Company.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first written above.
WALBRO CORPORATION
By: /s/ DANIEL L. HITTLER By: /s/ LAMBERT E. ALTHAVER
----------------------------- -----------------------------
Daniel L. Hittler Lambert E. Althaver
7
<PAGE> 1
EXHIBIT 12
COMPUTATIONS OF RATIO OF EARNINGS TO FIXED CHARGES
(in thousands, except for ratios)
<TABLE>
<CAPTION>
Three months ended
Year Ended December 31, March 31,
-------------------------------------------------------- ----------------
1997 1996 1995 1994 1993 1992 1996 1997
-------- ------- ------- ------ ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FIXED CHARGES:
Interest on debt $ 25,410 $ 20,535 $ 12,420 $ 3,970 $ 2,688 $ 4,439 $ 7,665 $ 6,023
Dividends on convertible trust preferred securities 5,029 -- -- -- -- -- 1,380 874
Interest element of rentals (1) 2,059 2,567 1,587 1,108 885 936 670 487
Capitalized interest 1,207 3,683 518 -- -- -- 204 299
-------- -------- -------- ------- ------- ------- ------- -------
$ 33,705 $ 26,785 $ 14,525 $ 5,078 $ 3,573 $ 5,375 $ 9,919 $ 7,683
======== ======== ======== ======== ======= ======= ======= =======
EARNINGS:
Net income $(36,627) 11,229 $ 13,830 $ 14,595 $ 9,667 $12,526 $ 572 $11,704
Provision for national income taxes (10,131) 3,075 1,258 5,824 4,574 4,664 752 1,380
Cumulative effect of accounting change -- -- -- -- 4,394 -- -- --
Fixed charges 33,705 26,785 14,525 5,078 3,573 5,375 9,919 7,683
Capitalized interest (1,207) (3,683) (518) -- -- -- (204) (299)
Minority interest in income 6 285 472 92 -- -- (11) (110)
Equity in (income)losses of joint ventures (3,113) (4,187) (3,877) (2,609) 89 (179) (474) (801)
-------- -------- -------- -------- ------- ------- ------- -------
$(17,367) $ 33,504 $ 25,690 $ 22,980 $22,297 $22,386 $10,554 $19,557
======== ======== ======== ======== ======= ======= ======= =======
RATI0 OF EARNINGS TO FIXED CHARGES -0.5 1.3 1.8 4.5 6.2 4.2 1.1 2.5
FIXED CHARGES IN EXCESS OF EARNINGS $ 51,072 $ -- $ -- $ -- $ -- $ -- $ -- $ --
</TABLE>
(1) Deemed to be approximately one-third of rental expenses.
<PAGE> 1
EXHIBIT 23.1
[ARTHUR ANDERSEN LLP LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
included in this Registration Statement File No. 333-45693 on Form S-4 and to
the incorporation by reference in this Registration Statement of our report
dated February 11, 1998 (except with respect to the matters discussed in
Notes 6 and 21, as to which the date is April 13, 1998) included in Walbro
Corporation and Subsidiaries' Form 10-K for the year ended December 31, 1997
and to all references to our Firm included in this Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Detroit, Michigan,
June 1, 1998.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement No. 333-45693 on Form S-4 of our
reports dated February 26, 1996, March 7, 1997 and March 6, 1998 with respect to
the balance sheets of Marwal Systems as of December 31, 1995, 1996 and 1997 and
the related statements of income for the years then ended, which reports are
included or incorporated by reference in the Registration Statement on Form S-4
and related Prospectus of Walbro Corporation for the registration of Exchange
Notes and to the reference to our firm under the caption "Independent Public
Accountants" included therein.
ERNST & YOUNG AUDIT
Paris, France /s/ Gilles Meyer
June 1, 1998 Gilles Meyer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 17,090
<SECURITIES> 0
<RECEIVABLES> 160,761
<ALLOWANCES> 0
<INVENTORY> 58,504
<CURRENT-ASSETS> 263,258
<PP&E> 394,761
<DEPRECIATION> 123,962
<TOTAL-ASSETS> 629,506
<CURRENT-LIABILITIES> 183,943
<BONDS> 293,804
69,000
0
<COMMON> 4,341
<OTHER-SE> 62,846
<TOTAL-LIABILITY-AND-EQUITY> 629,506
<SALES> 169,292
<TOTAL-REVENUES> 169,292
<CGS> 144,058
<TOTAL-COSTS> 161,016
<OTHER-EXPENSES> (1,468)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,503
<INCOME-PRETAX> 2,241
<INCOME-TAX> 752
<INCOME-CONTINUING> 572
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 572
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
