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As filed with the Securities and Exchange Commission on February 5, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
WALBRO CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 3714 38-1358966
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) 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)
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LAMBERT E. ALTHAVER
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
WALBRO CORPORATION
6242 GARFIELD STREET
CASS CITY, MICHIGAN 48726, (517) 872-2131
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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: [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED
AMOUNT PROPOSED MAXIMUM MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE INITIAL OFFERING PRICE INITIAL OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
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10 1/8% Senior Notes Due 2007, Series B . . . . . . $100,000,000 100% $100,000,000 $29,500
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Subsidiary Guarantees(2) . . . . . . . . . . . . . (3) (3) (3) (3)
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 of Regulation C under the Securities Act of 1933,
as amended.
(2) The Company's principal wholly-owned domestic subsidiaries, Walbro
Automotive Corporation and Walbro Engine Management Corporation, and the
wholly-owned domestic subsidiaries of Walbro Automotive Corporation,
Sharon Manufacturing Company and Whitehead Engineered Products, Inc.
(collectively, the "Guarantors"), have guaranteed on a senior unsecured
basis, jointly and severally, the payment of the principal of, premium, if
any, and interest on the 10 1/8% Senior Notes, Series B being registered
hereby (the "Subsidiary Guarantees"). The Guarantors are registering the
Subsidiary Guarantees. Pursuant to Rule 457(n) under the Securities Act
of 1933, as amended, no registration fee is required with respect to the
Subsidiary Guarantees.
(3) Not applicable.
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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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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED FEBRUARY 5, 1998
PRELIMINARY PROSPECTUS
[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
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 , 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 , 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 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 September 30, 1997, after giving effect to the
Initial Offering and $5.5 million of additional borrowings under the Credit
Facilities (as defined herein) at December 15, 1997, the Company and its
subsidiaries would have had approximately $64.7 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
September 30, 1997, after giving effect to the Initial Offering and $5.5
million of additional borrowings under the Credit Facilities at December 15,
1997, would have totalled approximately $100.1 million (excluding intercompany
liabilities).
(Cover continued on next page)
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SEE "RISK FACTORS" BEGINNING ON PAGE 16 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 SECU-
RITIES 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 , 1998.
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(Continued from Cover)
Interest on the Exchange Notes will accrue from the date of issuance
thereof 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 June 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. 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 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
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 of 1934, as
amended (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, 1996, together with Amendment No. 1
thereto;
(2) The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, June 30 and September 30, 1997; and
(3) The Company's Current Reports on Form 8-K dated January 23 and
December 12, 1997.
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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 date on which the Exchange Offer is consummated 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).
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 concerning
certain aspects of the business of the Company. These forward-looking
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those contemplated in such forward-looking
statements, including, without limitation, changes in demand for automobiles
and light trucks, relationships with significant customers, price pressures,
the timing and structure of future acquisitions or dispositions, the impact of
environmental regulations, continued availability of adequate funding sources,
currency and other risks inherent in international sales, and general economic
and business conditions. See "Risk Factors" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." 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 systems and products for automotive and small engine markets
worldwide. The Company manufactures fuel pumps, fuel modules, fuel level
sensors, plastic fuel tanks and plastic fuel rails 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 1991 to 1996, the
Company increased net sales and the sum of operating income (minus foreign
currency exchange losses and other expenses, net) and depreciation and
amortization expenses ("EBITDA") at the compound rates of approximately 24% and
24% per year, respectively. 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 $585.4 million and $454.4 million in 1996
and the first nine months of 1997, respectively, and EBITDA of $57.3 million
and $46.1 million in 1996 and the first nine months of 1997, respectively.
WALBRO AUTOMOTIVE
Approximately 75% of the Company's net sales for 1996 were generated
by Walbro Automotive. Through Walbro Automotive, the Company designs, develops
and manufactures fuel storage and delivery systems and components for a broad
range of U.S. and foreign manufacturers of passenger automobiles and light
trucks (including minivans). The Company and its joint ventures hold a strong
market position in North America, Europe and South America and a growing market
presence in Asia. In July 1995, the Company substantially expanded its
European automotive business by acquiring the fuel systems business of Dyno
Industrier A.S ("Dyno"), of Oslo, Norway (the "Dyno Acquisition"). In 1996,
management estimates that the Company supplied Chrysler with approximately
three-quarters of its fuel pump and fuel module requirements, including all
requirements for Chrysler's passenger cars and minivans and approximately 46%
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 has recently been awarded
significant new contracts that include new fuel tank business for a variety of
General Motors platforms, including Saturn, Monte Carlo/Impala, Sonoma truck,
the Suburban, Yukon/Tahoe and Blazer/Jimmy sport utility vehicles, fuel tanks
for the redesigned Mercedes-Benz C Class, and a complete fuel tank system for
the Dodge Durango sport utility vehicle. In addition, the Company has been
awarded contracts for the first time with Honda, Toyota and Ssangyong.
The Company's growth strategy is to position itself as a global
supplier to the automotive industry through the design, development and
manufacture of technologically advanced fuel systems and components which are
delivered worldwide. Due to the increasing demand by OEMs for the supply of
integrated automotive systems, Walbro is supplying OEMs with an increasing
number of fuel storage and delivery components with the ultimate goal of being
responsible for the complete fuel storage and delivery systems ("FSDS") which
would integrate all of the components necessary for fuel delivery. By assuming
responsibility for the development of complete systems, the Company allows its
OEM customers to reduce their internal engineering costs, use fewer suppliers
and assemble systems rather than components. Once an OEM designates the
Company to supply FSDS components for a new vehicle program, the OEM usually
will continue to
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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.
WALBRO ENGINE MANAGEMENT
Approximately 20% of the Company's net sales for 1996 were generated
by Walbro Engine Management. Through Walbro Engine Management, the Company
designs, develops and manufactures diaphragm carburetors for portable engines
(such as those used in chain saws and weed trimmers), float feed carburetors
for ground supported engines (such as those used in lawn mowers and marine
engines) and ignition systems and other components for a variety of small
engine products. The Company believes that it is the world's largest
independent manufacturer of small engine carburetors, with an approximate 75%
share of the global diaphragm carburetor market including sales to such leading
chain saw and weed trimmer manufacturers as Poulan/Weedeater, Deere and Company
(Homelite), Stihl Incorporated, McCulloch Corporation, Ryobi Ltd. and Kioritz
(Echo) Corporation. The Company believes it has an approximate 10% share of
the global float feed carburetor market, including sales to Briggs & Stratton
Corporation, the world's largest small engine manufacturer, Kohler Company,
Tecumseh Products Co., and Mercury Marine, a major manufacturer of outboard
marine engines. The Company 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 5% of the Company's net sales for 1996 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 DEVELOPMENTS
On November 20, 1997, the Company announced a plan for restructuring
its operations (the "Restructuring"). The Company believes that the
Restructuring will allow it to eliminate underperforming operations, lower its
cost structure and enhance stockholder value, thereby enabling the Company to
take advantage of growth opportunities in its core businesses. The
Restructuring is expected to result in special charges aggregating between $20
and $25 million (pre-tax) in the fourth quarter of 1997, resulting in a loss
for the quarter and for the year.
In connection with the Restructuring, the Company will: (i) divest
itself of its Ligonier, Indiana steel fuel rail production facility (plastic
fuel rails will continue to be produced at the Company's Meriden, Connecticut
facility); (ii) restructure its Asia automotive activities and consolidate its
small engine operations in the Asia region; (iii) restructure its European
automotive fuel tank operations to include a write-down of certain assets; (iv)
dispose of its interest in U.S. Coexcell Inc., a manufacturer of blow-molded
plastic drums in Maumee, Ohio, and Saginaw Plastics, an injection molder in
Saginaw, Michigan; (v) write off obsolete
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equipment and inventory; and (vi) reduce corporate-wide personnel by
approximately 10%, including reductions related to the planned divestitures and
restructuring. The Company estimates that these actions will add to earnings
before interest and taxes by approximately $11 to 14 million per year, with the
full-year benefit to be realized within the next 18 months.
In addition to the special charges relating to the Restructuring, the
Company will take 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 known to the Company in the fourth quarter of 1997.
8
<PAGE> 10
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,
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 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, 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
9
<PAGE> 11
Act to the extent applicable. See
"The Exchange Offer -- Procedures for
Tendering; -- Resale of the Exchange
Notes."
INTEREST ON THE EXCHANGE NOTES . . . The Exchange Notes will 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 June 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. 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 ,
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
10
<PAGE> 12
date.
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."
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 the transfer
thereof. 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
June 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 September 30,
1997, after giving effect to the
Initial Offering and $5.5 million of
additional borrowings under the Credit
Facilities at December 15, 1997, the
Company and its subsidiaries would have
had approximately $64.7 million
of secured indebtedness outstanding,
including $3.7 million of aggregate
indebtedness expected to remain
outstanding under the Company's credit
facility (the "Credit Facility"), which
amount includes $2.9 million
outstanding under a purchase money
facility issued by the same bank group
(the "Purchase Money Facility"), and
the $45 million aggregate principal
amount of the Company's 7.68% Senior
Notes due 2004 (the "2004 Notes"). All
of such indebtedness 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 the Company's
wholly-owned foreign subsidiaries. In
addition, the Purchase Money Facility
is secured by certain equipment
11
<PAGE> 13
purchased with borrowings thereunder.
Amounts outstanding under the Purchase
Money Facility reduce availability
under the Credit Facility on a
dollar-for-dollar basis (the Credit
Facility and the Purchase Money
Facility are referred to collectively
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 September
30, 1997, after giving effect to the
Initial Offering and $5.5 million of
additional borrowings under the Credit
Facilities at December 15, 1997, would
have totalled approximately $100.1
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 19 of
the Notes to the Company's Consolidated
Financial Statements for the year ended
December 31, 1996, and Note 6 of the
Notes to the Company's (unaudited)
Consolidated Financial Statements for
the nine months ended September 30,
1997, 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."
12
<PAGE> 14
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.
13
<PAGE> 15
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 nine-month periods ended September 30 was derived
from the unaudited consolidated financial statements of the Company which, in
the opinion of the Company's management, reflect all adjustments necessary for
a fair presentation of the financial position and results of operations for the
periods. The information contained in this table reflects the results of Dyno
subsequent to its acquisition in July 1995 and should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the consolidated financial statements of the Company
including the notes thereto, contained elsewhere herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------- --------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales $ 454,384 $ 440,501 $ 585,389 $ 459,272 $325,205 $ 273,463 $ 241,416
Cost of sales 387,169 361,951 488,134 377,755 261,501 216,804 185,712
Gross profit 67,215 78,550 97,255 81,517 63,704 56,659 55,704
Selling, administrative and
other expenses 49,261 53,533 69,869 57,495 39,318 33,043 33,614
Reorganization and
restructuring charges -- -- -- -- -- 1,760 --
Operating income 17,954 25,017 27,386 24,022 24,386 21,856 22,090
Interest expense, net 17,020 14,644 17,117 11,111 3,771 2,559 3,113
Equity in (income) loss of
joint ventures (3,219) (3,969) (4,187) (3,877) (2,609) 89 (179)
Net income(1) 2,360 11,704 11,229 13,830 14,595 9,667 12,526
Net income per share(2) 0.27 1.35 1.30 1.61 1.70 1.13 1.63
Weighted average shares
outstanding 8,684,595 8,642,598 8,649,380 8,609,431 8,602,077 8,537,375 7,675,974
Other Data:
Depreciation and amortization $ 25,741 $ 20,201 $ 29,736 $ 22,451 $ 14,672 $ 11,339 $ 10,339
Capital expenditures 54,383 70,453 99,147 46,240 18,844 20,260 14,681
EBITDA(3) 46,091 45,932 57,255 45,245 36,345 31,128 31,513
Ratio of EBITDA to interest
expense, net(3) 2.7x 3.1x 3.3x 4.1x 9.6x 12.2x 10.1x
Ratio of earnings to fixed
charges 0.9x 1.5x 1.3x 1.8x 4.5x 6.2x 4.2x
BALANCE SHEET DATA:
(at end of period)
Total assets $ 638,878 $ 574,858 $ 589,649 $ 493,473 $ 257,366 $ 215,295 $ 193,020
Total long-term debt, less
current portion 277,249 295,489 291,723 233,389 66,136 52,392 49,638
Total debt 302,782 310,857 314,884 249,396 81,548 58,175 59,349
Company - Obligated
Mandatorily Redeemable
Convertible Preferred
Securities of Walbro
Capital Trust
holding solely
Convertible Debentures 69,000 -- -- -- -- -- --
Total stockholders'
equity(4)(5) 116,946 139,983 137,733 135,427 127,915 114,146 99,910
</TABLE>
(footnotes on following page)
14
<PAGE> 16
__________________
(1) The Company adopted SFAS 106 as of January 1, 1993. As a result, the
Company recorded a one-time after tax charge of $2,900 for the cumulative
effect of this accounting change in the year ended December 31, 1993.
(2) Primary and fully diluted income per share were the same in all periods
presented except the year ended December 31, 1992 when fully diluted income
per share was $1.58 based on weighted average shares outstanding of
8,160,472.
(3) "EBITDA" represents, for any period, the sum of operating income (minus
foreign currency exchange losses and other expenses, net) and depreciation
and amortization. EBITDA is not intended to be a performance measure that
should be regarded as an alternative either to operating income or net
income as an indicator of operating performance or to cash flow as a
measure of liquidity. The Company has included information concerning
EBITDA 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 $2,598, $2,581,
$3,446, $3,429, $3,426, $3,403 and $3,192 in the nine months ended
September 30, 1997 and 1996 and the years ended December 31, 1996, 1995,
1994, 1993 and 1992, 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.
15
<PAGE> 17
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 September
30, 1997, after giving effect to the Initial Offering and $5.5 million of
additional borrowings under the Credit Facilities at December 15, 1997, the
Company would have had $311.3 million of total debt, $69.0 million of
Convertible Trust Preferred Securities and $116.9 million of stockholders'
equity.
Additionally, as of September 30, 1997, after giving effect to the
Initial Offering and $5.5 million of additional borrowings under the Credit
Facilities at December 15, 1997, the Company and its subsidiaries would have
had approximately $64.7 million of secured indebtedness outstanding, including
approximately $3.7 million of borrowings under the Credit Facility and $45.0
million aggregate principal amount of the 2004 Notes. Such secured
indebtedness, though ranking pari passu with the Notes, has a lien on specified
assets of the Company or its subsidiaries, as the case may be. As a result, in
an insolvency proceeding, holders of secured indebtedness would have claims
against the assets of the Company or its subsidiaries, as the case may be,
securing their indebtedness to satisfy their claims, and such assets would be
applied to the payment of such claims before claims of holders of unsecured
senior indebtedness, such as the Notes, would be satisfied. Because the
domestic inventory, accounts receivable and certain intangibles and equipment
of the Company and its domestic subsidiaries have been pledged to the banks
under the Credit Facilities and/or the 2004 Notes 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 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 Credit
Facilities, 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
16
<PAGE> 18
indebtedness by the Company and its subsidiaries. However, this limitation is
subject to a number of important qualifications.
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The indenture relating to the 2005 Notes (the "2005 Notes Indenture")
and the Indenture restricts the ability of the Company and its subsidiaries to,
among other things, incur additional indebtedness, pay dividends or make
certain other restricted payments or investments, consummate certain asset
sales, enter into certain transactions with affiliates, incur liens, or merge
or consolidate with any other person or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of their assets. The 2005
Notes Indenture and the Indenture imposes limitations on the Company's ability
to restrict the ability of its subsidiaries to pay dividends or make certain
payments to the Company or any of its subsidiaries. In addition, the Credit
Facilities contain other and more restrictive covenants. The agreement under
which the 2004 Notes were issued (the "2004 Note Agreement") and the Credit
Facilities require the Company to maintain specified financial ratios and
satisfy certain financial tests. The Company's ability to meet such financial
ratios and tests may be affected by events beyond its control, and there can be
no assurance that the Company will meet such tests. A breach of any of these
covenants could result in an event of default under the 2004 Note Agreement or
the Credit Facilities. In an event of default under the 2004 Note Agreement or
the Credit Facilities, the lenders thereunder could elect to declare all
amounts borrowed, together with accrued interest, to be immediately due and
payable and the lenders under the Credit Facilities 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
17
<PAGE> 19
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.
HOLDING COMPANY STRUCTURE
The Company derives all of its operating income and cash flow from its
subsidiaries. The Company must rely upon cash distributions from its
subsidiaries to generate the funds necessary to meet its obligations, including
the payment of principal and interest on the Notes.
Any right of the holders of the Notes to participate in the assets of
a non-Guarantor subsidiary of the Company upon any liquidation or
reorganization of such subsidiary will be subject to the prior claims of such
subsidiary's creditors, including the lenders under the Credit Facilities,
holders of the 2004 Notes 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 September 30, 1997, after
giving effect to the Initial Offering and $5.5 million of additional borrowings
under the Credit Facilities at December 15, 1997, the non-Guarantor
subsidiaries would have had outstanding indebtedness of approximately $24.5
million and other outstanding liabilities, including trade payables and accrued
expenses, of approximately $75.6 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 will be pledged as collateral to the lenders under the Credit
Facility and the holders of the 2004 Notes. 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 Credit Facility and the
holders of the 2004 Notes are paid in full.
DEPENDENCE ON CUSTOMER RELATIONSHIPS
Sales to Chrysler, the Company's largest customer, accounted for 19%,
20%, 19% and 23% of the Company's consolidated net sales for the nine months
ended September 30, 1997 and the years ended 1996, 1995 and 1994, 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
18
<PAGE> 20
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 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 will take 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
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<PAGE> 21
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 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.
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<PAGE> 22
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 September 30, 1997 and as adjusted to give effect to $5.5 million
in additional borrowings under the Credit Facilities at December 15, 1997, the
Initial Offering, the receipt by the Company of the net proceeds of
approximately $97.0 million therefrom and the application of the estimated net
proceeds as described under "Use of Proceeds." This table should be read in
conjunction with "Selected Financial and Operating Data" and the consolidated
financial statements of the Company and related notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1997
---------------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Total short-term debt, including current
portion of long-term debt (1) $ 25,533 $ 25,533
Long-term debt, less current portion:
Credit Facilities (2) 95,200 3,700
7.680% Senior Notes Due 2004 (3) 45,000 45,000
9.875% Senior Notes Due 2005 109,698 109,698
10.125% Senior Notes Due 2007 -- 100,000
Other long-term debt, net of current portion (1) 27,351 27,351
-------- --------
Total long-term debt, net of current portion 277,249 285,749
Company-Obligated Mandatorily Redeemable
Convertible Preferred Securities of Walbro
Capital Trust holding solely Convertible
Debentures 69,000 69,000
Total stockholders' equity 116,946 116,946
-------- --------
Total capitalization $488,728 $497,228
======== ========
</TABLE>
__________________
(1) Of these amounts, approximately $16.0 million are secured by certain assets
of the Company or its subsidiaries.
(2) As of December 16, 1997, the Credit Facility had a maximum availability of
$30 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 is secured by equipment purchased with borrowings thereunder. At
December 15, 1997, the Company had $100.7 million outstanding under the
Credit Facilities, which amount is used in computing "As Adjusted."
(3) The 2004 Notes are equally and ratably secured with the collateral securing
the Credit Facility.
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<PAGE> 23
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
22
<PAGE> 24
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 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
23
<PAGE> 25
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."
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
, 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 , 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 mail to the
registered holders of Old Notes an announcement thereof, each prior to 9:00
a.m., New York City time, on the next business day after the 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 Exchange Notes will 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 June 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
24
<PAGE> 26
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
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
25
<PAGE> 27
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 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
26
<PAGE> 28
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 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.
27
<PAGE> 29
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 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
28
<PAGE> 30
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:
<TABLE>
<S> <C> <C>
By Mail: By Overnight or Courier: By Hand:
BT Services Tennessee, Inc. BT Services Tennessee, Inc. Bankers Trust Company
Reorganization Unit Corporate Trust & Agency Group Corporate Trust & Agency Group
P.O. Box 292737 Reorganization Unit Attn: Reorganization Department
Nashville, Tennessee 37229-2737 648 Grassmere Park Road Receipt & Delivery Window
Nashville, Tennessee 37211 123 Washington Street, 1st Floor
New York, New York 10006
Facsimile Transmission Number: Confirm by Telephone: Information:
(615) 835-3701 (615) 835-3572 (800) 735-7777
</TABLE>
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
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.
29
<PAGE> 31
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.
30
<PAGE> 32
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 nine months ended September 30 was derived
from the unaudited consolidated financial statements of the Company which, in
the opinion of management, include all adjustments necessary for a fair
presentation of the financial position and results of operations for 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>
NINE MONTHS ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30,
------------------------ --------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ----------
STATEMENT OF INCOME DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 454,384 $ 440,501 $ 585,389 $ 459,272 $ 325,205 $ 273,463 $ 241,416
Cost of sales 387,169 361,951 488,134 377,755 261,501 216,804 185,712
Gross profit 67,215 78,550 97,255 81,517 63,704 56,659 55,704
Selling, administrative
and other expenses 49,261 53,533 69,869 57,495 39,318 33,043 33,614
Reorganization and
restructuring charges -- -- -- -- -- 1,760 --
Operating income 17,954 25,017 27,386 24,022 24,386 21,856 22,090
Interest expense, net 17,020 14,644 17,117 11,111 3,771 2,559 3,113
Equity in (income) loss of
joint ventures (3,219) (3,969) (4,187) (3,877) (2,609) 89 (179)
Net income(1) 2,360 11,704 11,229 13,830 14,595 9,667 12,526
Net income per share (2) 0.27 1.35 1.30 1.61 1.70 1.13 1.63
Weighted average shares
outstanding 8,684,595 8,642,598 8,649,380 8,609,431 8,602,077 8,537,375 7,675,974
Other Data:
Depreciation and
amortization $ 25,741 $ 20,201 $ 29,736 $ 22,451 $ 14,672 $ 11,339 $ 10,339
Capital expenditures 54,383 70,453 99,147 46,240 18,844 20,260 14,681
EBITDA(3) 46,091 45,932 57,255 45,245 36,345 31,128 31,513
Ratio of EBITDA to
interest expense, net(3) 2.7x 3.1x 3.3x 4.1x 9.6x 12.2x 10.1x
Ratio of earnings to fixed
charges 0.9x 1.5x 1.3x 1.8x 4.5x 6.2x 4.2x
BALANCE SHEET DATA:
(at end of period)
Total assets $ 638,878 $ 574,858 $ 589,649 $ 493,473 $ 257,366 $ 215,295 $ 193,020
Total long-term debt, less
current portion 277,249 295,489 291,723 233,389 66,136 52,392 49,638
Total debt 302,782 310,857 314,884 249,396 81,548 58,175 59,349
Company -- Obligated
Mandatorily Redeemable
Convertible Preferred
Securities of Walbro
Capital Trust
holding solely
Convertible Debentures 69,000 -- -- -- -- -- --
Total stockholders'
equity(4)(5) 116,946 139,983 137,733 135,427 127,915 114,146 99,910
(footnotes on following page)
</TABLE>
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<PAGE> 33
__________________
(1) The Company adopted SFAS 106 as of January 1, 1993. As a result, the
Company recorded a one-time after tax charge of $2,900 for the cumulative
effect of this accounting change in the year ended December 31, 1993.
(2) Primary and fully diluted income per share were the same in all periods
presented except the year ended December 31, 1992 when fully diluted income
per share was $1.58 based on weighted average shares outstanding of
8,160,472.
(3) "EBITDA" represents, for any period, the sum of operating income (minus
foreign currency exchange losses and other expenses, net) 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 $2,598, $2,581,
$3,446, $3,429, $3,426, $3,403, and $3,192, in the nine months ended
September 30, 1997 and 1996 and the years ended December 31, 1996, 1995,
1994, 1993 and 1992, 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.
32
<PAGE> 34
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>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
1997 1996 1996 1995 1994
---------- --------- --------- --------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net Sales:
Automotive $331,569 $329,759 $438,597 $318,143 $198,260
Small Engine 95,867 88,730 117,100 112,567 101,513
Aftermarket and Other 26,948 22,012 29,692 28,562 25,432
--------- -------- --------- --------- --------
Total $454,384 $440,501 $585,389 $459,272 $325,205
========= ======== ========= ========= ========
Cost of Sales:
Automotive $286,588 $273,569 $368,142 $264,906 $161,649
Small Engine 80,510 72,087 97,665 91,440 81,473
Aftermarket and Other 20,071 16,295 22,327 21,409 18,379
--------- -------- --------- --------- --------
Total $387,169 $361,951 $488,134 $377,755 $261,501
========= ======== ========= ========= ========
Gross Margin:
Automotive $ 44,981 $ 56,190 $ 70,455 $ 53,237 $ 36,611
Small Engine 15,357 16,643 19,435 21,127 20,040
Aftermarket and Other 6,877 5,717 7,365 7,153 7,053
--------- -------- --------- --------- --------
Total $ 67,215 $ 78,550 $ 97,255 $ 81,517 $ 63,704
========= ======== ========= ========= ========
</TABLE>
RESULTS OF OPERATIONS
Nine months ended September 30, 1997 compared to nine months ended
September 30, 1996
Net Sales. Net sales for the first nine months of 1997 increased 3.2%
to $454.4 million compared to $440.5 million for the same period of 1996.
Almost all of the increased net sales for the first nine months of 1997
compared to the same period of 1996 occurred during the third quarter of 1997
and were primarily due to the launch of new plastic fuel tank programs in the
U.S. and were partially offset by lower sales on a U.S. dollar basis in Europe.
Net sales of automotive products increased 0.5% to $331.6 million for the first
nine months of 1997 compared to $329.8 million for the same period of 1996.
Net sales in Europe declined 5.1% to $149.9 million in 1997 compared to $158.0
million for the first nine months of 1996, with the decline principally due to
foreign currency translations into a strong U.S. dollar.
Net sales of small engine products increased 8.0% to $95.9 million for
the first nine months of 1997 compared to $88.7 million for the same period of
1996. Net sales of all small engine products increased during the period
except for carburetors for two-wheeled vehicles in the People's Republic of
China. Customers in the People's Republic of China reduced production to
control their inventory levels starting in June, 1997 and continued throughout
the third quarter. In the U.S. market, customers increased production levels
compared to the prior year period. Customer demand was down during the second
half of 1996 and the first half of 1997 due to excess customer inventories left
over from the weak spring 1996 selling season for lawn and garden equipment due
to poor weather conditions.
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<PAGE> 35
Net sales to the aftermarket increased 19.7% to $21.9 million for the
first nine months of 1997 compared to $18.3 million for the same period of
1996. Net sales to the aftermarket increased during the period because of
strong demand for automotive aftermarket products and the Company's efforts to
expand its customer base and product lines.
Cost of Sales. Cost of sales for the first nine months of 1997
increased 7.0% to $387.2 million compared to $362.0 million for the same period
of 1996. Gross margin was 14.8% for the first nine months of 1997 compared to
17.8% for the same period of 1996. The lower gross margin for the first nine
months of 1997 resulted from the following: lower automotive product sales
related to in-sourcing of certain components by a major U.S. customer during
the first six months of 1997; the Chrysler strike during the second quarter of
1997; launch costs for four new plastic fuel tank programs (some of which have
lower margins because of the higher level of purchased components); start-up
costs for a new small engine carburetor plant in the People's Republic of
China; and lower fuel module volumes due to lower passenger car sales during
the period.
Selling and Administrative Expenses. Selling and administrative ("S &
A") expenses decreased by 7.0% for the first nine months of 1997 compared to
the same period of 1996. The decrease in S & A expenses for the nine month
period was due to the cost reduction programs implemented in 1997. S&A as a
percent of net sales was 8.2% in the 1997 period as compared to 9.1% during the
1996 period.
Research and Development Expenses. Research and development ("R & D")
expenses decreased by 11.0% for the first nine months of 1997 compared to the
same period of 1996. Most of the decrease in R & D expenses resulted from a
temporary shift of R & D resources to support production start-up of new
plastic tank programs. The level of effort expended to develop new products to
meet U.S. EPA regulations for automotive evaporative emissions and for small
engine exhaust emissions has not changed.
Other Income. Other income was $2.4 million for the first nine months
of 1997 compared to $714 thousand for the same period of 1996. The increased
income was due to higher royalty income from the Company's joint ventures.
Net Interest Expenses. Net interest expense was $17.0 million for the
nine months ended September 30, 1997 as compared to $14.6 million for the 1996
period. Interest expense increased because of increased borrowings required to
support sales growth and capital expenditures.
Income Taxes. The provision for income taxes was 84.4% lower for the
first nine months of 1997 compared to the same period of 1996 because of lower
taxable income.
Joint Venture Income. The equity in income from joint ventures was
$3.2 million for the first nine months of 1997 compared to the 1996 income of
$4.0 million for the same period. All of the decrease occurred in the third
quarter of 1997 because weaker French auto sales and increased royalty expenses
resulted in lower earnings at Marwal Systems (France) and higher earnings from
Marwal Brasil were offset by start-up costs from Marwal Argentina and Korea
Automotive Fuel Systems.
Net Income and Income per Share. Net income for the first nine months
of 1997 was $2.4 million, a decrease of 79.8% compared to net income of $11.7
million for the same period of 1996. The decrease was due to the reasons
described above. Net income per share was $0.27 for the first nine months of
1997 compared to $1.35 for the first nine months of 1996.
Year ended December 31, 1996 compared to 1995, 1995 compared to 1994
Net Sales. The Company reported record sales in 1996 of $585.4
million, an increase of 27.5%. Most of the 1996 sales increase was due to the
inclusion of a full year of Dyno sales ($214.4 million) in
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<PAGE> 36
1996 compared to the inclusion of only five months of Dyno sales ($88.5
million) in 1995. Sales in 1995 were $459.3 million compared to sales of
$325.2 million in 1994, an increase of 41.2% (14.0% increase without Dyno
sales). On a percentage basis, sales to the automotive market increased 37.9%
in 1996 (2.4% decrease without Dyno sales) compared to a 60.5% increase in 1995
(15.8% increase without Dyno sales). Sales to the small engine market
increased 4.0% in 1996 compared to a 10.9% increase in 1995. Aftermarket sales
were flat in both 1996 and 1995. Sales of the Company's original equipment
automotive products were a record $438.6 million in 1996 compared to $318.1
million in 1995 and $198.3 million in 1994. In 1996, all of the automotive
product sales increase was contributed by Dyno sales as other automotive
product sales declined by 2.4%. The Dyno increase was primarily the result of
including a full year of sales in 1996 versus including only five months of
Dyno sales in 1995. U.S. based automotive product sales were lower in 1996
because of increased in-house production of fuel pumps and fuel modules by one
of the Company's largest customers. Overall, sales of fuel pumps declined
16.5% and sales of fuel modules declined 2.9%. The decline in sales of fuel
modules due to in-house production by a customer was mostly offset by increased
sales of fuel modules to the Company's largest customer. Sales of fuel rails
increased by 7.8% due to sales of the Company's new plastic fuel rails. In
1995, the Company was able to increase U.S. based automotive product sales
(representing all automotive sales other than those of Dyno) by $31.4 million
or 15.8% in spite of the U.S. light vehicle market decline of 2.1%. The
Company was able to record a sales increase of its U.S. based automotive
products due to increased sales of fuel modules (up 23.7%) because of increased
use in the light truck market and increased sales with higher dollar content.
The increase in fuel module sales was partially offset by the slower than
scheduled start-up of a customer's major new vehicle line with significant fuel
module product content. Sales of fuel pumps decreased by 3.3% and sales of
fuel rails declined by 14.9% in 1995 compared to 1994 because of the decline in
U.S. passenger car sales during 1995. Sales of component parts in 1996 were
$26.1 million compared to $20.5 million in 1995 and $3.8 million in 1994.
Sales of the Company's small engine products also hit a record level
of $117.1 million in 1996, up from $112.6 million in 1995 and $101.5 million in
1994. Overall sales growth of small engine products was 4.0% in 1996 compared
to 10.9% during 1995. Much of the 1996 increase in small engine product sales
came from increased sales of ignition systems and to a lesser extent float feed
carburetors in the U.S. and float feed carburetors in the People's Republic of
China. Sales of ignition systems were $14.3 million in 1996, an increase of
81.0% compared to $7.9 million in 1995 as customer demand has grown for this
expanding family of products. Sales of float feed carburetors in the U.S.
increased 5.8% to $29.0 million compared to $27.4 million in 1995, while sales
of float feed carburetors in the People's Republic of China increased 23.9% to
$5.7 million compared to $4.6 million in 1995. These increases were partially
offset by a decline in sales of diaphragm carburetors. Sales of diaphragm
carburetors decreased 6.3% to $68.1 million compared to $72.7 million in 1995,
with declines in the U.S. due to reduced demand for handheld power equipment
caused by drought in the Southeast and Southwest U.S. and cold, wet spring
conditions in other parts of the U.S. and declines in Japan because of lower
demand and because of the lower yen-dollar exchange rate.
In 1995, sales of diaphragm carburetors increased 16.1% to $72.7
million compared to $62.6 million in 1994. Part of the 1995 increase reflects
depressed U.S. diaphragm carburetor sales in the second half of 1994 because of
delays in the emission certification by the California Air Resources Board for
customers' engines during that period. Sales of float feed carburetors
decreased 8.7% in 1995 with $27.4 million of sales in 1995 versus $30.0 million
in 1994. During 1995, float feed carburetor sales in the U.S. declined as
heavy rain in the spring and a drought during the summer caused lower sales of
lawn and garden products and outdoor power equipment. Also during 1995, the
weak market for marine engines contributed to lower float feed carburetor
sales. Sales of small engine ignition systems were $7.9 million in 1995
compared to $7.1 million in 1994. In addition, carburetor sales from the
Company's subsidiary in the People's Republic of China, Fujian Hualong
Carburetor, which the Company acquired
35
<PAGE> 37
in January, 1994, were $4.6 million in 1995 compared to $1.9 million in 1994.
Management believes that ignition systems will play a more significant role in
the future as small engines become subject to more stringent emissions
regulations. In 1992, the California Air Resources Board promulgated
comprehensive air quality regulations limiting small engine emissions, which
became effective in August 1995. A more stringent phase is scheduled to become
effective in 1999. In addition, the EPA has imposed similar regulations which
became effective in August 1996, with the more stringent phase expected to
become effective during the 2002 to 2005 period. The Company has successfully
refined existing carburetors to meet the first set of standards and company
engineers are developing new technology to meet the subsequent requirements.
In response to the more stringent regulations, the Company is integrating its
carburetor and ignition technology to develop engine management systems which
will electronically control both fuel delivery and ignition functions to limit
exhaust emissions. These new products are expected to command higher unit
prices. The more stringent regulations could significantly reduce the number
of units the Company sells of its current carburetor models, especially
diaphragm carburetors, as these regulations could force manufacturers to
replace gasoline-powered lawn and garden equipment with electric-powered
equipment.
The Company's aftermarket business includes both automotive and small
engine products. Aftermarket sales were $25.1 million in 1996 compared to
$25.2 million in 1995 and $25.1 million in 1994. Aftermarket sales were flat
in 1996 because of increased in-house production by one of the Company's
Aftermarket customers. Aftermarket sales in 1995 were flat for two significant
reasons. First, the Aftermarket distribution center in Cass City, Michigan was
struck by lightning in August, 1995, causing substantial smoke and water damage
to the building and its contents. Aftermarket operations were shut down for
three weeks in August as a result of the fire and subsequent order levels were
lower because of the reduced inventory available to fill orders. Second, a
major Aftermarket customer began to manufacture more of its requirements
in-house.
Cost of Sales. Cost of sales was $488.1 million in 1996 compared to
$377.8 million in 1995 and $261.5 million in 1994. Cost of sales as a percent
of sales was 83.4% in 1996 compared to 82.3% in 1995 and 80.4% in 1994. Gross
margin declined in 1996 compared to 1995 because of lower margins in both
automotive and small engine products. Higher margins from North American
automotive products were more than offset by new plant start-up costs in Brazil
and from the increased share of sales represented by Dyno plastic tank volume.
Dyno products carry lower margins than the Company's other automotive products
because of the large amount of purchased components included in the Dyno sales.
During 1996, Dyno gross margin was 11.7% compared to 13.1% in 1995 and was
lower primarily because of the new plant start-up costs in Belgium and lower
volume at the United Kingdom plant and the Norway plant. Lower margins in
small engine products resulted primarily from lower volumes of diaphragm
carburetors, the new plant start-up costs in Tianjin, the People's Republic of
China and the weaker yen-dollar exchange rate. Gross margin for U.S. based
automotive products decreased in 1995 because of lower volumes of fuel rails
partially offset by higher volumes of fuel modules and plastic fuel tanks. The
Company's Ligonier, Indiana plant, which makes steel fuel rails, experienced
significantly higher costs in the second half of 1995 because of lower volumes
related to lower passenger car sales. Also contributing to the lower margins
were continuing startup costs at the Company's Ossian, Indiana plastic fuel
tank plant. Margins declined for small engine products in 1995 because of
lower volume of float feed carburetors in the U.S. and lower gross margin at
the Company's Singapore manufacturing facility due to lower production volumes
and the stronger Singapore Dollar versus the U.S. Dollar. These increased
costs were partially offset by higher volume of diaphragm carburetors in Japan
and Mexico and higher volume of float feed carburetors in the People's Republic
of China.
Selling and Administrative Expenses. S & A expenses were $51.5
million in 1996, an increase of 26.3% compared to $40.8 million in 1995. The
full year of Dyno S & A expenses in 1996 caused a large portion of the increase
as the increase excluding Dyno was 10.1%. The remainder of the 1996
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<PAGE> 38
S & A increase came primarily from new plants in Brazil, the People's Republic
of China and the new Tucson Precision Products plant, which produces aluminum
diecastings for carburetors. In 1995, S & A expenses increased by 50.3% (30.7%
without Dyno) compared to $27.1 million in 1994 and they increased because of
increased spending for expansion of the Company's automotive systems center in
Auburn Hills, Michigan and automotive test center in Caro, Michigan and for
general expenses related to adding manufacturing capacity in Meriden,
Connecticut. As a percent of sales, S & A expenses were 8.8% in 1996, 8.9% in
1995 and 8.3% in 1994.
Research and Development Expenses. R & D expenses were $18.4 million
in 1996, an increase of 9.9% compared to $16.7 million in 1995. Dyno R & D
expenses accounted for all of the increase as R & D expenses excluding Dyno
decreased by 1.0%. In 1995, R & D expenses increased by 37.2% (14.4% without
Dyno) compared to $12.2 million in 1994 to support the new product development
efforts required by emission regulations for both automotive and small engine
products.
Loss on Foreign Exchange Transactions. Foreign exchange contracts are
used primarily to manage the exposure to foreign currency losses from
operations in foreign countries, from investments in foreign joint ventures and
from commitments in foreign currencies. The Company entered into forward
foreign exchange contracts to hedge the Company's foreign currency exposure
related to a sales commitment to a foreign customer. The loss on these
contracts was treated as a hedge for accounting purposes and recorded as a
deferred asset, which was amortized as foreign currency exchange loss. In 1994
the Company entered into foreign exchange contracts to hedge the Company's
foreign currency risk from foreign currency commitments which did not qualify
for deferred accounting treatment and the losses were recorded as foreign
currency exchange loss in 1994. The foreign currency exchange gain in 1996 was
negligible compared to a loss of $1.5 million in 1995 and $2.6 million in 1994.
See Note 11 of the Notes to the Consolidated Financial Statements.
Net Interest Expense. Net interest expense was $17.1 million in 1996
compared to $11.1 million in 1995 and $3.8 million in 1994. To finance the
Dyno Acquisition in July 1995, the Company issued $110 million in aggregate
principal amount of its 9.875% Senior Notes and obtained the Credit Facility.
Borrowing levels were higher in 1996 to support the higher level of capital
expenditures for new facilities. The additional borrowings and the shift to a
higher percentage of long-term fixed rate debt raised the average cost of
capital and caused the higher interest expense. The 1995 increased interest
expense compared to 1994 resulted from higher interest rates and increased
borrowings for part of the year. The average cost of borrowing was 8.1% in
1996, 7.4% in 1995 and 5.9% in 1994. See Note 5 of the Notes to Consolidated
Financial Statements for details of the borrowings.
Income Taxes. The provision for income taxes was $3.1 million in 1996
compared to $1.3 million in 1995 and $5.8 million in 1994. The provision was
higher in 1996 because of a lower R & D tax credit of $1.1 million in 1996
compared to $3.0 million in 1995. These tax credits resulted from a change by
the Internal Revenue Service in defining the R & D activities which qualify for
the tax credit. The $3.0 million credit in 1995 and lower taxable income
caused the lower provision for income taxes in 1995 compared to 1994. The R &
D tax credits resulted in an effective tax rate of 29.6% for 1996 and 10.8% for
1995 compared to 32.5% for 1994.
Joint Venture Income. The Company's equity in income of joint
ventures was $4.2 million in 1996 compared to $3.9 million in 1995 and $2.6
million in 1994. The increase in 1996 resulted from increased income at Marwal
Systems (France) partially offset by losses at Korea Automotive Fuel Systems.
The increase in 1995 resulted primarily from increased income at Marwal
Systems.
Net Income and Income per Share. Net income for 1996 was $11.2
million, a decrease of 18.8% compared to $13.8 million in 1995 and $14.6
million in 1994. Net income per share was $1.30 for 1996
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<PAGE> 39
compared with $1.61 for 1995 and $1.70 for 1994. Net income as a percent of
sales was 1.9% in 1996, 3.0% in 1995, and 4.5% in 1994. The decline in net
income as a percent of sales in both 1996 and 1995 was related to the Dyno
acquisition which generated lower profit margins in all of 1996 and part of
1995 and increased interest expense.
INFLATION
Inflation potentially affects the Company in two principal ways.
First, a portion of the Company's debt is tied to prevailing short-term
interest rates which may change as a result of inflation rates, translating
into changes in interest expense. Second, general inflation can impact
material purchases, labor and other costs. In many cases, the Company has
limited ability to pass through inflation-related cost increases due to the
competitive nature of the markets that the Company serves. In the past three
years, however, inflation has not been a significant factor for the Company.
FOREIGN CURRENCY TRANSACTIONS
Approximately 51% of the Company's net sales during the first nine
months of 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 (33% of net sales), Japan
(5% of net sales), South America (2% of net sales) and the People's Republic of
China (1% of net sales) are measured in the local currency of the countries in
which they operate and translated into U.S. dollars. The effects of foreign
currency fluctuations in Europe, Japan and China are somewhat mitigated by the
fact that expenses are generally incurred in the same currencies in which 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 net 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 net 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 Mexican peso.
Approximately 51% of the Company's assets at September 30, 1997 were
based in its foreign operations and were translated into U.S. dollars at
foreign currency exchange rates in effect as of the end of each period.
Accordingly, the Company's consolidated shareholders' equity will fluctuate
depending upon the weakening or strengthening of the U.S. dollar. In addition,
the Company has equity investments in unconsolidated joint ventures in France,
Brazil, Japan, Korea and Mexico. The Company's reported income from these
joint ventures will be higher or lower depending upon a weakening or
strengthening of the U.S. dollar.
The Company's strategy for management of currency risk relies
primarily upon the use of forward currency exchange contracts to manage its
exposure to foreign currency fluctuations related to its operations in foreign
countries, to manage certain of its firm transaction commitments in foreign
currencies and to hedge its equity investment in certain foreign joint
ventures.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997, after giving effect to the Initial Offering
and $5.5 million of additional borrowings under the Credit Facilities at
December 15, 1997, the Company would have had outstanding $25.5 million in
short-term debt, including the current portion of long-term debt, and $285.7
million in long-term debt. After giving effect to the Initial Offering and
$5.5 million of additional borrowings under
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<PAGE> 40
the Credit Facilities at December 15, 1997, the approximate minimum principal
payments required on the Company's long-term debt in the quarter ended December
31, 1997 and the four fiscal years subsequent to December 31, 1997 are $98
thousand in 1997, $7.7 million in 1998, $7.4 million in 1999, $11.2 million in
2000, $7.6 million in 2001 and $252.7 million thereafter.
At September 30, 1997, after giving effect to the Initial Offering and
$5.5 million of additional borrowings under the Credit Facilities at December
15, 1997, the Company would have had available approximately $18.9 million
under its Credit Facility with a group of commercial banks. In February 1997,
the Company completed an offering of 2,760,000 shares or $69.0 million of
Convertible Trust Preferred Securities. The net proceeds were used to pay down
borrowings on the Credit Facility.
The Company's plans for 1997 capital expenditures for facilities,
equipment and tooling to total approximately $60.0 million of which $54.4
million had been spent by September 30, 1997. The Company expects to spend
approximately $50.0 million in capital expenditures in 1998. The Company
intends to finance the capital expenditures with the Credit Facilities and cash
from operations.
Management believes that the Company's long-term cash needs will
continue to be provided principally by operating activities supplemented, to
the extent required, by borrowing under the Company's existing and future
credit facilities. Management expects to replace these credit facilities as
they expire with comparable facilities.
As of September 30, 1997, accounts receivable amounted to $158.5
million, an increase of $17.7 million, compared to $140.8 million at September
30, 1996. The increase was due to longer collection periods due to revised
payment terms with certain customers. The average collection period at
September 30, 1997 was 92.2 days compared to the average collection period at
September 30, 1996 of 89.2 days.
RECENT DEVELOPMENTS
On November 20, 1997, the Company announced the Restructuring. The
Company believes that the Restructuring will allow it to eliminate
underperforming operations, lower its cost structure and enhance stockholder
value, thereby enabling the Company to take advantage of growth opportunities
in its core businesses. The Restructuring is expected to result in special
charges aggregating between $20 and $25 million (pre-tax) in the fourth quarter
of 1997, resulting in a loss for the quarter and for the year.
In connection with the Restructuring, the Company will: (i) divest
itself of its Ligonier, Indiana steel fuel rail production facility (plastic
fuel rails will continue to be produced at the Company's Meriden, Connecticut
facility); (ii) restructure its Asia automotive activities and consolidate its
small engine operations in the Asia region; (iii) restructure its European
automotive fuel tank operations to include a write-down of certain assets; (iv)
dispose of its interest in U.S. Coexcell Inc., a manufacturer of blow-molded
plastic drums in Maumee, Ohio, and Saginaw Plastics, an injection molder in
Saginaw, Michigan; (v) write off obsolete equipment and inventory; and (vi)
reduce corporate-wide personnel by approximately 10%, including reductions
related to the planned divestitures and restructuring. The Company estimates
that these actions will add to earnings before interest and taxes by
approximately $11 to 14 million per year, with the full-year benefit to be
realized within the next 18 months.
In addition to the special charges relating to the Restructuring, the
Company will take 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 known to the Company in the fourth quarter of 1997.
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<PAGE> 41
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 1991 to 1996, the
Company increased net sales at the compound rate of approximately 24% 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 $585.4 million and $454.4 million in 1996 and the first nine months of
1997, respectively, and EBITDA of $57.3 million and $46.1 million in 1996 and
the first nine months of 1997, respectively.
Approximately 75% of the Company's net sales for 1996 were generated
by Walbro Automotive. Through Walbro Automotive, the Company designs, develops
and manufactures fuel storage and delivery systems and components for a broad
range of U.S. and foreign manufacturers of passenger automobiles and light
trucks (including minivans). The Company and its joint ventures hold a strong
market position in North America, Europe and South America and a growing market
presence in Asia. In July 1995, the Company substantially expanded its
European automotive business by acquiring the fuel systems business of Dyno.
In 1996, management estimates that the Company supplied Chrysler with
approximately three-quarters of its fuel pump and fuel module requirements,
including all requirements for Chrysler's passenger cars and minivans and
approximately 46% 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 has
recently been awarded significant new contracts that include new fuel tank
business for a variety of General Motors platforms, including Saturn, Monte
Carlo/Impala, Sonoma truck, the Suburban, Yukon/Tahoe and Blazer/Jimmy sport
utility vehicles, fuel tanks for the redesigned Mercedes-Benz C Class, and a
complete fuel tank system for the Dodge Durango sport utility vehicle. In
addition, the Company has been awarded contracts for the first time with Honda,
Toyota and Ssangyong.
Approximately 20% of the Company's net sales for 1996 were generated
by Walbro Engine Management. Through Walbro Engine Management, the Company
designs, develops and manufactures diaphragm carburetors for portable engines
(such as those used in chain saws and weed trimmers), float feed carburetors
for ground supported engines (such as those used in lawn mowers and marine
engines) and ignition systems and other components for a variety of small
engine products. The Company believes that it is the world's largest
independent manufacturer of small engine carburetors, with an approximate 75%
share of the global diaphragm carburetor market including sales to such leading
chain saw and weed trimmer manufacturers as Poulan/Weedeater, Deere and Company
(Homelite), Stihl Incorporated, McCulloch Corporation, Ryobi Ltd. and Kioritz
(Echo) Corporation. The Company believes it has an approximate 10% share of
the global float feed carburetor market, including sales to Briggs & Stratton
Corporation, the world's largest small engine manufacturer, Kohler Company,
Tecumseh Products Co., and Mercury Marine, a major manufacturer of outboard
marine engines. The Company produces substantial volumes of float feed
carburetors for the Chinese two-wheeled vehicle market.
The remaining 5% of the Company's net sales for 1996 were primarily
related to replacement products for both the automotive and small engine
aftermarkets. The Company has recently begun
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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.
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 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,
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<PAGE> 43
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.
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 $120, compared to a typical 1987 Chrysler vehicle equipped with only $15
of the Company's products. The Company's ability to assume responsibility for
the development of FSDS allows OEMs to reduce internal engineering efforts and
use fewer suppliers through the purchase of systems rather than components.
Global Capabilities. The Company's international manufacturing and
market presence allows the Company to offer its current and future FSDS
technology to the global automotive market. The Company's presence in Europe
provides it with additional resources and marketing contacts to supply
integrated fuel systems to both European and North American OEMs assembling
vehicles in Europe and European OEMs assembling vehicles in the United States.
The Company's international sales for 1996 were 52% of the Company's net sales
(excluding joint ventures) compared to 38% in 1995. The Company's plastic tank
manufacturing capability allows it to pursue its systems strategy in Europe and
serve OEM customers as they confront new environmental and regulatory
challenges worldwide and introduce World Cars designed for sale to the global
automotive market. In addition, the Company has a market presence in Brazil,
South Korea and Japan and it has entered into joint ventures with manufacturers
in Brazil, France, Japan, Mexico, Argentina and South Korea which enable the
Company to access those foreign markets.
Technical and Product Development Capabilities. The Company's
engineers focus their research and development efforts to respond to the
technical challenges facing their customers. The Company has designed its
current line of FSDS products in response to U.S. fuel economy and emission
regulations and changing consumer demands over the past two decades.
Management believes that the Company is well positioned to capitalize on the
emergence of more stringent global emission regulations through the development
of a new generation of products and systems with greater fuel efficiency,
reduced component weight, improved durability, fuel vapor control and flexible
fuel compatibility. An example of these products is the ORVR system which
captures fuel vapors from the fuel system and routes them to a carbon canister
for storage and reuse.
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The Company has made substantial investments in fuel systems
technology, product design and test capability and technical personnel to
advance FSDS technology and respond to customer needs. The Company's
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.
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 69% of cars and light trucks sold by General
Motors, Ford and Chrysler in North America in 1996 used fuel modules. In 1996,
the Company supplied approximately 34% of all of the fuel modules purchased in
North America, principally to Ford and Chrysler.
Approximately 25% of North American vehicles and 70% of European
vehicles produced in 1996 contained plastic fuel tanks. Plastic fuel tanks
offer several advantages over conventional steel tanks, including lighter
weight, greater corrosion resistance to new, cleaner-burning fuels like
methanol and the ability to be produced in unusual shapes to better use
available space. In anticipation of customer demand in North America for more
sophisticated fuel tanks, the Company built a new facility in Ossian, Indiana
in 1993 to produce plastic multi-layer fuel tanks. The Company produced
three-layer plastic fuel tanks during the fourth quarter of 1994, and during
1995 and 1996 for the Ford Windstar. The multi-layer construction of the
Company's new, six-layer plastic tank substantially eliminates fuel permeation,
making this one of the first plastic tanks which complies with the 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.
The Company is currently producing mono-layer plastic fuel tanks,
which include coatings and permeation barriers that meet European emission
requirements, for Audi, Mercedes-Benz, Nedcar, Peugeot, Renault, Rover, Saab,
Volkswagen and Volvo. As these customers require more sophisticated fuel
tanks, the Company will likely supplement a portion of its mono-layer blow
molding machines with multi-layer blow molding machines to provide the
Company's OEM customers in Europe with advanced, plastic fuel tank technology.
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The Company also produces 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.
AUTOMOTIVE MARKETS AND CUSTOMER BASE
The Company currently provides a wide variety of products to a diverse
customer base in a number of geographic areas. The Company has recently been
awarded significant new contracts that include new fuel tank business for a
variety of General Motors platforms, including Saturn, Monte Carlo/Impala,
Sonoma truck, the Suburban, Yukon/Tahoe and Blazer/Jimmy sport utility
vehicles, fuel tanks for the redesigned Mercedes-Benz C Class, and a complete
fuel tank system for the Dodge Durango sport utility vehicle. In addition, the
Company has been awarded new contracts for the first time with Honda, Toyota
and Ssangyong for a variety of platforms. The following table depicts a
summary of the various customers and platforms for which the Company supplies
or expects to supply products during 1997:
<TABLE>
<CAPTION>
Customer Platform Product
- -------------------------------------------- -------------------------------------------- ------------------------------
<S> <C> <C>
Chrysler Cirrus/Stratus, Dodge Dakota, Dodge Fuel Pump/Module Assembly
Durango, Dodge B-Van, Dodge Ram Truck Service Pump/Module
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 Vehicle Service Fuel Pump
Platforms
F-100(1), BE-6(1), CE-14(1) Fuel Module
</TABLE>
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<PAGE> 46
<TABLE>
<CAPTION>
CUSTOMER PLATFORM PRODUCT
- -------------------------------- ------------------------------------------- --------------------------------
<S> <C> <C>
General Motors T600 Truck, Saturn, Yukon/Tahoe, Plastic Fuel Tank
Blazer/Jimmy, Chassis Cab
Corvette Fuel Module
Fiat Tempra(1), Uno(1), 178(1) Dedra(2), Fuel Module
Miero(2), Panda(2), Punto(2), Tempra(2), Fuel Pump, Bracket Assembly
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 Assembly
504(2), 505(2), 605(2) and Level Sensor
Renault Twingo, Safrane, Espace, Spider Plastic Fuel Tank
R-19(1), CL10(1) Fuel Module
R-5(2), R-9/11(2), Twingo(2), X-S4(2), Fuel Pump/Module
X-06(2)
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, Audi V8, Van, Plastic Fuel Tank
GOL
Golf (1), Santana(1) Fuel Sending Unit
Volvo 850, 1150, 940, 960, P80, S-40, P-2X Plastic Fuel Tanks, various other
blow-molded parts and Coolant Reservoir
Heavy Truck Coolant Reservoir
Daewoo J-Car(3), T-Car(3), V-Car(3) Fuel Module
</TABLE>
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<PAGE> 47
<TABLE>
<CAPTION>
CUSTOMER PLATFORM PRODUCT
- ------------------------------------------- -------------------------------------------- -----------------------------
<S> <C> <C>
Honda AWD Fuel Module and Air Ducts
KIA Various Platforms Fuel Pump
S-2 ORVR
Ssangyong FJ(3), KJ(3) Fuel Module
Toyota Carina, Corolla Plastic Fuel Tank
Carina Air Duct
</TABLE>
__________________
(1) South American customers supplied by Marwal do Brasil, Ltda.
(2) European customers supplied by Marwal Systems, S.N.C.
(3) Korean customers supplied through Korean Automotive Fuel Systems, Ltd.
In addition to the customers described above, the Company also
supplies a variety of its products to a number of other customers including,
but not limited to, the following: IBC, Iveco, J.I. Case, Lister Petter, New
Holland, Scandia, VME and Steyr-Puch.
North America. Net sales to Chrysler and Ford for 1996 accounted for
20% and 10% of the Company's consolidated net sales, respectively. Both of
these customers have ongoing supply relationships with the Company which are
subject to continued satisfactory price, quality and delivery. The Company is
the primary outside supplier of fuel pumps, the core of the FSDS, to Chrysler.
In the past, the Company has capitalized on its fuel system components
penetration to supply additional fuel system products, such as fuel modules and
fuel rails, to Chrysler and Ford, and to assume a key role in the development
of new fuel system products, such as ORVR devices. General Motors historically
developed and produced substantially all of its fuel storage and delivery
systems internally but recently has sourced a significant portion of future
plastic fuel tank programs to outside suppliers, including the Company.
The Company has formed a joint venture with two minority business
owners to produce automotive components in Detroit's Empowerment Zone. The
joint venture is expected to manufacture FSDS products (including blow-molded
plastic fuel tanks). 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 70% of 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 will produce plastic fuel tanks accounting
for approximately 19% of the European plastic fuel tank market in
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<PAGE> 48
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. on January
7, 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, 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> 49
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 and
management estimates 1996 production to have been approximately 9.3 million
units. In addition, management believes demand for diaphragm carburetors used
in gasoline-powered portable tools will grow in these developing countries.
The inaccessibility of electrical power distribution and geographic isolation
of many projects, such as the clearing of land and highway construction, hinder
the use of electric-powered equipment.
SMALL ENGINE BUSINESS STRATEGY
To respond to the promulgation of increasingly strict emission
regulations in the small engine industry, the Company is working to develop a
small engine management system which will comply with new emission standards.
As the leading developer of fuel systems technology for portable engines, the
Company is well positioned to draw upon its expertise in carburetor and
ignition system design and development, as well as its experience in responding
to emissions-driven challenges in the automotive sector. The Company's
advanced product design and development facilities in Michigan and Japan, which
are equipped with sophisticated emission measurement instruments, provide the
Company with the facilities necessary to develop more sophisticated small
engine management systems.
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.
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SMALL ENGINE PRODUCTS
The Company was founded as a manufacturer of carburetors for small
engine products such as lawn mowers and marine engines, and later expanded its
customer base to include manufacturers of chain saws, weed trimmers, snow
blowers and two-wheeled vehicles. The Company's carburetor technology has
continually evolved, with the Company now manufacturing diaphragm and float
feed carburetors, ignition systems and other components for small engine
products and aftermarket applications. The Company's diaphragm carburetor,
float feed carburetor and ignition system sales accounted for 58%, 30% and 12%,
respectively, of the Company's 1996 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 90% of its outboard
engine carburetors from the Company.
One of the Company's opportunities for growth in the small engine
industry is the Chinese market. In January 1994, the Company acquired a 60%
interest, increased to 70% in 1995, in Fujian
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<PAGE> 51
Hualong Carburetor Co., Ltd. (Fujian) which manufactures and markets
carburetors for two-wheeled vehicles in the People's Republic of China. In
addition, the Company has built a new manufacturing facility in Tianjin to
provide additional capacity to take advantage of growth in the two-wheeled
vehicle market. This new facility began production in October 1996.
SMALL ENGINE COMPETITION
The Company has several competitors that manufacture diaphragm
carburetors for the global small engine market, including Zama Industries,
Ltd., Tillotson Commercial Motors Ltd. and Dell' Orto, some of which are
divisions of large diversified organizations which have total sales and
financial resources exceeding those of the Company. In the market for float
feed carburetors, the Company has several competitors, including Briggs &
Stratton and Tecumseh Products, both of which have greater sales and financial
resources than the Company. The Company's major 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. Aftermarket sales accounted for $25.1 million in 1996 compared
to $11.3 million in 1990. 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
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the Company has no specific agreements with respect to any new acquisitions or
joint ventures.
MANUFACTURING AND FACILITIES
The Company conducts operations in approximately 2.1 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 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 150 U.S. patents and 600 international
patents in the fuel systems field and has a number of applications pending.
These patents include proprietary ownership of designs for control devices for
engines and engine systems, fuel pumps, fuel rails, fuel regulators, fuel level
sensors, fuel reservoirs and fuel system vapor control devices, carburetors and
throttle bodies, as well as ancillary devices for engine and vehicle
applications.
Although these patents are significant to the Company, management
believes that in many cases the adaptation and use of the technology involved
and the proprietary process technology employed to manufacture these products
are more important. The Company maintains a systems center in Michigan for the
research, design and development of new products. The Company began
construction of its new European engineering center in June 1997. The
Company's engineering departments also engage in design, development and
testing. In 1996, 1995 and 1994, the Company spent approximately $18.4
million, $16.7 million and $12.2 million, respectively, for engineering and
research and product
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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.
REGULATION
The Company's operations are subject to increasingly stringent
environmental laws and regulations governing air emissions, waste water
discharges, the generation, treatment, storage, disposal and remediation of
hazardous substances and wastes, and employee health and safety. Certain of
these laws can impose joint and several liability for releases or threatened
releases of material upon certain statutorily defined parties, including the
Company, regardless of fault or the lawfulness of the original activity or
disposal.
The Company believes it is currently in material compliance with
applicable environmental laws and regulations. The Company's compliance with
environmental laws and regulations has not materially affected the results of
its operations or the conduct of its business; however, the Company cannot
predict the future effects of such laws and regulations.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The directors and principal executive officers of the Company as of
January 31, 1998 are as follows:
<TABLE>
<CAPTION>
Name Age Position with the Company
---- --- -------------------------
<S> <C> <C>
Lambert E. Althaver 66 Chairman of the Board, Chief Executive Officer and Director
Frank E. Bauchiero 62 President, Chief Operating Officer and Director
Robert H. Walpole 57 Vice President and a Director; President, Asia Region
Richard H. Whitehead, III 52 Vice President; 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. Mr. Althaver and Mr. Utley have been elected
to serve for a term expiring in 1998. Messrs. Bacon, Bauchiero and Oechsle
have been elected to serve for a term expiring in 1999. Messrs. Baumgardner,
Tuttle and Walpole have been elected to serve a term expiring in 2000.
Lambert E. Althaver has been Chief Executive Officer of the Company
since 1982, served as President from 1977 until August 1996, and became
Chairman of the Board of the Company in 1987. Mr. Althaver joined the Company
in 1954 and has served as a Director since 1968. Robert H. Walpole is the
brother-in-law of Mr. Althaver.
Frank E. Bauchiero was appointed President and Chief Operating Officer
in August 1996. He became a Director of the Company in 1990. Mr. Bauchiero
served as President-Industrial, North American Operations, Dana Corporation
from December 1990 until July 1996. Mr. Bauchiero was a Dana Group Vice
President from 1987 to 1990. Dana Corporation manufactures automotive product
systems, mobile off-highway equipment and industrial equipment. Mr. Bauchiero
also serves as a director of Regal Beloit Corp., a manufacturer of cutting
tools for metalworking applications; Rockford Products Corp., a manufacturer of
bolts, nuts, rivets and washers, cold form fasteners and components for general
industrial use; Madison-Kipp Corp., a manufacturer of aluminum-zinc alloy and
nonferrous die castings; and M and I Bank of Beloit.
Robert H. Walpole has been a Vice President of the Company since 1983,
President of Walbro Engine Management Corporation between 1991 and 1996, and
President, Asia Region during 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.
Richard H. Whitehead, III became a Vice President of the Company in
1988. From 1988 to 1990, Mr. Whitehead served as the Vice President/General
Manager of the Company's Meriden, Connecticut operations. During 1997, Mr.
Whitehead has served as President, Europe and South America Region. Mr.
Whitehead was the President of Whitehead Engineered Products, Inc. from 1980
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to 1988, prior to its acquisition by the Company.
Daniel L. Hittler has served as Chief Administrative Officer since
1994 and Secretary of the Company since 1993. He was Director of
Administration from 1992 to 1994. He was the Director of Technical Planning
from 1989 to 1992.
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 Chicago Corporation since
1994. Mr. Bacon also served as an Honorary Director of Stifel Financial Corp.
from 1984 to 1994. Prior to that, he was a Managing Partner of Bacon Whipple &
Co., Inc.
J. Dwane Baumgardner, PhD is Chairman, Chief Executive Officer,
President and a Director of Donnelly Corporation, a leading manufacturer of
automotive rearview mirror systems and supplier of automotive modular window
systems, lighting and trim products. 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 Trucks for
Dana Corporation and President of Hayes-Dana, Dana's Canadian subsidiary. Mr.
Oechsle also serves 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.
Robert D. Tuttle became a Director of the Company in 1981. Mr. Tuttle
is also a Director of Woodhead Industries, Inc. and Guardsman Products, Inc.
From before 1989 to 1991, Mr. Tuttle was Chairman and Chief Executive Officer
of SPX Corporation, which produces specialty tools and diagnostic equipment and
distributes automotive components.
John E. Utley became a Director of the Company in 1993. He is Senior
Vice President of LucasVarity, PLC, a supplier of automotive braking systems,
electrical systems and diesel systems. From 1994 until September 1996 he was
Senior Vice President of Varity Corporation. Mr. Utley was the Chairman of the
Board of Kelsey-Hayes Company from 1992 to September 1996 and was Vice Chairman
and Vice President from 1989 to 1992.
During the first quarter of 1997, the Company 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.
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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
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
------------------------------ -----------------------------
SECURITIES
RESTRICTED UNDERLYING ALL OTHER
NAME AND SALARY BONUS STOCK OPTIONS/ LTIP COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) AWARDS (#) SARS(#) PAYOUTS($) ($)(1)
------------------ ---- ------ ----- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lambert E. Althaver, 1997 $450,000 $0 0 0 $1,862 $9,000
Chairman and 1996 450,000 0 0 17,647 204,379 8,870
Chief Executive 1995 375,000 0 0 15,625 0 9,100
Officer
Frank E. Bauchiero, 1997 375,000 0 0 0 0 4,500
President and Chief 1996 141,173 (2) 0 30,000 19,607 0 0
Operating Officer
Robert H. Walpole, 1997 265,000 386,338(3) 0 0 0 9,000
Vice President 1996 265,000 283,070(3) 0 0 0 9,717
1995 254,000 0 0 0 0 8,550
Richard H. Whitehead, 1997 200,000 0 0 0 0 10,500
III,
Vice President 1996 200,000 0 0 7,843 0 10,460
1995 180,000 0 0 10,000 0 6,040
Michael A. Shope, 1997 165,000 22,500 0 0 0 9,090
Treasurer and 1996 150,000 27,000 0 3,529 0 10,035
Chief Financial 1995 135,000 18,750 0 4,500 0 2,025
Officer
- ------------------
</TABLE>
(1) These amounts represent matching and retirement contributions made by the
Company pursuant to its salary savings plan, entitled the "Advantage Plan."
(2) Salary for the period August 16, 1996 to December 31, 1996; executive began
employment on August 16, 1996.
(3) 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.
55
<PAGE> 57
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. 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
therefor there were no grants 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 (1)
AND YEAR-END 1997 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
AT DECEMBER 31, 1997 (#) DECEMBER 31, 1997 ($)(2)
------------------------------ ------------------------------
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) There were no option exercises by the Named Officers in 1997.
(2) 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 has entered into employment agreements with Messrs.
Althaver, Hittler, Shope, Whitehead and Walpole which have terms expiring on
August 16, 1998 and provide them minimum base salaries of $450,000, $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 also entered into an employment agreement with Mr. Bauchiero which
has a term expiring on October 3, 1998 and provides him a base salary of
$375,000, subject to review and increase by the Compensation Committee. In
addition, each is entitled to participate in the Equity Plan.
For each of the Named 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
56
<PAGE> 58
stockholders, to ensure that in the event of a possible change in control of
the Company, the stability and continuity of management will continue
unimpaired, free of distraction incident to any such change in control.
The 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) immediate vesting of exercisable stock options and restricted
stock, (7) outplacement services at the sole discretion of the 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.
57
<PAGE> 59
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial
ownership of Common Stock by owners of more than five percent (5%) of the
Common Stock, each of the Directors, each of the Named Officers and all
Directors and executive officers of the Company as a group as of February 2,
1998:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENTAGE
NAME OWNERSHIP(1) OF CLASS
----------------------------------------------------------------- ---------------- ----------
<S> <C> <C>
Franklin Resources, Inc. . . . . . . . . . . . . . . . . . . . . 1,134,582 (2) 13.1%
David L. Babson & Co., Inc. . . . . . . . . . . . . . . . . . . . 651,900 (3) 7.5%
Caisse de depot et placement du Quebec . . . . . . . . . . . . . 713,900 (4) 8.2%
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
(11 persons) . . . . . . . . . . . . . . . . . . . . . . . . . 828,599 (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 January 24, 1997 filed with the
Commission by Franklin Resources, Inc., Rupert H. Johnson, Jr., Charles B.
Johnson and Templeton Investments 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 1,134,582 shares; Templeton Investment Counsel,
Inc. has sole voting and dispositive power with respect to 428,500 shares;
Templeton Management Limited (including 1,500 shares advised under a
sub-advisor agreement) has sole voting and dispositive power with respect
to 252,500 shares; Templeton Global Advisors Limited has sole voting and
dispositive power with respect to 177,000 shares; Templeton Investment
Management (Australia) Limited has sole voting and dispositive power with
respect to 173,300 shares; Templeton Investment Management Limited has sole
voting and dispositive power with respect to 74,000 shares;
Templeton/Franklin Investment Services Inc. has sole voting and dispositive
power with respect to 29,282 shares. The address of FRI is 777 Mariners
Island Boulevard, San Mateo, California 94404.
(3) As reported on a Schedule 13G dated January 19, 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.
(4) 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.
(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
58
<PAGE> 60
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 9,976 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.
59
<PAGE> 61
CERTAIN TRANSACTIONS
On December 31, 1997, Mr. Althaver was indebted to the Company in the
amount of $100,000, which is the largest aggregate amount of indebtedness
outstanding at any time in 1997. The loan carries interest at the prime rate
in effect from time to time (8.5% on October 15, 1997). The principal amount
of the indebtedness relates to loans made by the Company to Mr. Althaver and
certain other officers, as well as approximately 24 other employees
(collectively, the "Borrowers") to permit them to repay individual bank loans
that came due. The bank loans originated approximately seven years ago to
enable the Borrowers collectively to acquire approximately 84,500 shares of the
Company's common stock from UIS, Inc., which had acquired the shares in 1987 as
part of an unsuccessful tender offer strategy.
DESCRIPTION OF OTHER INDEBTEDNESS
CREDIT FACILITIES
The Credit Facility consists of a multicurrency revolving loan
facility for the Company and certain of its wholly-owned domestic and foreign
subsidiaries. The Company also has the Purchase Money Facility, which is
issued by the same bank group as the Credit Facility. Amounts outstanding
under the Purchase Money Facility reduce availability under the Credit Facility
on a dollar-for-dollar basis. The maximum amount of availability under the
Credit Facility is currently $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 the current $30 million limit in connection with an additional
consent and waiver on December 12, 1997. As of September 30, 1997, after
giving effect to the Initial Offering and $5.5 million of additional borrowings
under the Credit Facilities at December 15, 1997, outstanding under the Credit
Facility would have been $3.7 million in debt and $7.4 million in letters of
credit.
Borrowings under the Credit Facilities bear 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 is also required to pay a quarterly facility fee under the Credit
Facility.
The Credit Facility is 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
secures the 2004 Notes on an equal and ratable basis. In addition, the $2.9
million outstanding under the Purchase Money Facility is 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 contain customary representations and warranties
and events of default and require 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.
60
<PAGE> 62
SENIOR NOTES DUE 2005
In July 1995, the Company sold $110,000,000 in aggregate principal
amount of 9.875% senior notes due 2005. The 2005 Notes 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 pubic 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 any offer to purchase all of the outstanding 2005 Notes at a
redemption price of 101% of the principal amount thereof plus accrued interest
to the date of repurchase. Further, in certain circumstances, the Company will
be required to make an offer to repurchase the 2005 Notes at a price equal to
100% of the principal amount thereof, plus accrued interest to the date of
repurchase, with the net cash proceeds of certain asset sales.
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.
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 require quarterly interest
payments due January 1, April 1, July 1 and October 1. The agreement requires
the Company to maintain consolidated adjusted net worth of $85 million, plus
25% of cumulative net income for each year beginning in 1995, and a funded debt
to total capital ratio not greater than .65 to 1. The agreement also prohibits
the Company from consolidating or merging with another corporation except under
certain circumstances and from disposing of substantially all of its assets.
The 2004 Note Agreement gives the holders of the 2004 Notes the option of
having their 2004 Notes repurchased at the principal amount thereof in the
event of a Change of Control (as defined in the 2004 Note Agreement). In
addition, the 2004 Note Agreement contains events of default including (i) a
default in the payment of interest, (ii) a default in the payment of any
principal or required prepayment or premium, (iii) defaults under certain other
debt instruments, and (iv) certain events of insolvency or bankruptcy of the
Company or its subsidiaries. The 2004 Notes are secured equally and ratably
with the Credit Facility by the Company's and its domestic subsidiaries'
inventory, accounts receivable and certain intangibles and by a pledge of 100%
of the capital stock of wholly-owned domestic subsidiaries and up to 65% of the
capital stock of wholly-owned foreign subsidiaries.
61
<PAGE> 63
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
62
<PAGE> 64
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.
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
63
<PAGE> 65
any Note is to be redeemed in part only, the notice of redemption that relates
to such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in a principal amount equal to the unredeemed portion
thereof will be issued in the name of the holder thereof upon surrender for
cancellation of the original Note. On and after the redemption date, interest
will cease to accrue on Notes or portions thereof called for redemption, unless
the Company defaults in the payment of the redemption price therefor.
THE GUARANTEES
Each of the Guarantors will (so long as they remain Subsidiaries of
the Company) unconditionally guarantee on a joint and several basis all of the
Company's obligations under the Notes, including its obligations to pay
principal, premium, if any, and interest with respect to the Notes. Except as
provided in "-- Certain Covenants" below, the Company is not restricted from
selling or otherwise disposing of any of the Guarantors.
The Indenture provides that each Wholly-Owned Restricted Subsidiary
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
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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 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;
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(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 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
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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% 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
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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 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
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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
may result 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. There can be no assurance that the Company will have adequate
resources to repay or refinance all Indebtedness owing under the 2005 Notes,
the 2004 Note Agreement and the Credit Facilities or to fund the purchase of
the Notes upon a Change of Control.
The Company shall not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements
applicable to a Change of Control Offer made by the Company and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that a Change of Control occurs and
the Company is required to purchase Notes as described above.
Disposition of Proceeds of Asset Sales. The Company will not, and
will not permit any of its Restricted Subsidiaries to, make any Asset Sale
during any period when the Notes are not rated Investment Grade by S&P and
Moody's (or if either S&P or Moody's does not make a rating of the Notes
publicly available, by either S&P or Moody's and an equivalent rating by
another Rating Agency (such period, the "Non-Investment Grade Period")) unless
(a) the Company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the shares or assets sold or otherwise disposed of and (b) at least
75% of such consideration consists of cash or Cash Equivalents. To the extent
the Net Cash Proceeds of any Asset Sale consummated during the Non-Investment
Grade Period are not required (a) to repay any Indebtedness secured by the
assets subject to such Asset Sale pursuant to Liens permitted under the
Indenture, (b) to repay Indebtedness incurred pursuant to clause (j) under "--
Limitation on Indebtedness," (c) to be applied to repay, and permanently reduce
the commitments under, the 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
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Company or such Restricted Subsidiary, as the case may be, may, within 365 days
of such Asset Sale, apply such Net Cash Proceeds to an investment in properties
and assets that replace the properties and assets that were the subject of such
Asset Sale or in properties and assets that will be used in the businesses of
the Company and its Restricted Subsidiaries existing on the Issue Date or in
businesses reasonably related thereto ("Replacement Assets"). Any Net Cash
Proceeds from any Asset Sale consummated during the Non-Investment Grade Period
that are neither used to repay Indebtedness, as specified in the immediately
preceding sentence, nor invested in Replacement Assets within the 365-day
period described above constitute "Excess Proceeds," subject to disposition as
provided below.
When the aggregate amount of Excess Proceeds equals or exceeds
$10,000,000, the Company shall make an offer to purchase (an "Asset Sale
Offer"), from all holders of the Notes, not more than 40 business days
thereafter, an aggregate principal amount of Notes equal to such Excess
Proceeds, at a price in cash equal to 100% of the outstanding principal amount
thereof plus accrued and unpaid interest, if any, to the purchase date. To the
extent that the aggregate principal amount of Notes tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Company may use such
deficiency for general corporate purposes. If the aggregate principal amount
of Notes validly tendered and not withdrawn by holders thereof exceeds the
Excess Proceeds, Notes to be purchased will be selected on a pro rata basis.
Upon completion of such Asset Sale Offer, the amount of Excess Proceeds shall
be reset to zero.
The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that an Asset Sale occurs and the
Company is required to purchase Notes as described above.
Limitation on Issuances and Sale of Preferred Stock by Restricted
Subsidiaries. The Company (a) will not permit any of its Restricted
Subsidiaries to issue any Preferred Stock (other than to the Company or a
Wholly-Owned Restricted Subsidiary) and (b) will not permit any person (other
than the Company or a Wholly-Owned Restricted Subsidiary) to own any Preferred
Stock of any Restricted Subsidiary of the Company; provided, however, that this
covenant shall not prohibit the issuance and sale of (x) all, but not less than
all, of the issued and outstanding Capital Stock of any Restricted Subsidiary
of the Company owned by the Company or any of its Restricted Subsidiaries in
compliance with the other provisions of the Indenture or (y) the issuance or
sale of any Preferred Stock of a Restricted Subsidiary during any period of
time when the Notes are rated Investment Grade by S&P and Moody's (or if either
S&P or Moody's does not make a rating of the Notes publicly available, by
either S&P or Moody's and an equivalent rating by another Rating Agency), so
long as no Default or Event of Default shall have occurred and be continuing.
Limitation on Transactions with Interested Persons. The Company will
not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, enter into or suffer to exist any transaction or series of related
transactions (including, without limitation, the sale, transfer, disposition,
purchase, exchange or lease of assets, property or services) with, or for the
benefit of, any Affiliate of the Company, unless (a) such transaction or series
of related transactions is on terms that are no less favorable to the Company
or such Restricted Subsidiary, as the case may be, than those which could have
been obtained in a comparable transaction at such time from persons who are not
Affiliates of the Company, (b) with respect to a transaction or series of
transactions involving aggregate payments or value equal to or greater than
$5,000,000, the Company has obtained a written opinion from an Independent
Financial Advisor stating that the terms of such transaction or series of
transactions are fair to the Company or such Restricted Subsidiary, as the case
may be, from a financial point of view and (c) with respect to a transaction or
series of transactions involving aggregate payments or value equal to or
greater than $2,500,000, the Company shall have delivered an officers'
certificate to the Trustee certifying that such transaction or series of
transactions complies with the preceding clause (a) and, if applicable,
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certifying that the opinion referred to in the preceding clause (b) has been
delivered and that such transaction or series of transactions has been approved
by a majority of the Board of Directors of the Company; provided, however, that
this covenant will not restrict the Company from (i) paying dividends in
respect of its Capital Stock 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
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Exchange Act. The Company will be required to file with the Trustee and
provide to each holder of Notes within 15 days after it files them with the
Commission (or if any such filing is not permitted under the Exchange Act, 15
days after the Company would have been required to make such filing) copies of
such reports and documents.
MERGER, SALE OF ASSETS, ETC.
Neither the Company nor any Guarantor will, in any transaction or
series of transactions, merge or consolidate with or into, or sell, assign,
convey, transfer, lease or otherwise dispose of all or substantially all of its
properties and assets as an entirety to, any person or persons, and the Company
will not permit any of its Restricted Subsidiaries to enter into any such
transaction or series of transactions if such transaction or series of
transactions, in the aggregate, would result in a sale, assignment, conveyance,
transfer, lease or other disposition of all or substantially all of the
properties and assets of the Company or the Company and its Restricted
Subsidiaries, taken as a whole, to any other person or persons, unless at the
time of and after giving effect thereto (a) either (i) if the transaction or
series of transactions is a merger or consolidation, the Company, the
applicable Guarantor or applicable Restricted Subsidiary shall be the surviving
person of such merger or consolidation, or (ii) the person formed by such
consolidation or into which the Company, such Guarantor or such Restricted
Subsidiary is merged or to which the properties and assets of the Company, such
Guarantor or such Restricted Subsidiary, as the case may be, are transferred
(any such surviving person or transferee person being the "Surviving Entity")
shall be a corporation organized and existing under the laws of the United
States of America, any state thereof or the District of Columbia and shall
expressly assume by a supplemental indenture executed and delivered to the
Trustee, in form reasonably satisfactory to the Trustee, all the obligations of
the Company or such Guarantor, as the case may be, under the Notes or such
Guarantor's Guarantee, as the case may be, and the Indenture, and in each case,
the Indenture shall remain in full force and effect; (b) immediately before and
immediately after giving effect to such transaction or series of transactions
on a pro forma basis (including, without limitation, any Indebtedness incurred
or anticipated to be incurred in connection with or in respect of such
transaction or series of transactions), no Default or Event of Default shall
have occurred and be continuing and the Company or the Surviving Entity, as the
case may be, after giving effect to such transaction or series of transactions
on a pro forma basis (including, without limitation, any Indebtedness incurred
or anticipated to be incurred in connection with or in respect of such
transaction or series of transactions), could incur $1.00 of additional
Indebtedness pursuant to the first paragraph of the covenant described under
"-- Certain Covenants -- Limitation on Indebtedness" above (assuming a market
rate of interest with respect to such additional Indebtedness); and (c)
immediately after giving effect to such transaction or series of transactions
on a pro forma basis (including, without limitation, any Indebtedness incurred
or anticipated to be incurred in connection with or in respect of such
transaction or series of transactions), the Consolidated Net Worth of the
Company or the Surviving Entity, as the case may be, is at least equal to the
Consolidated Net Worth of the Company immediately before such transaction or
series of transactions. The foregoing provisions shall not apply to a
transaction involving the consolidation or merger of a Guarantor with or into
another person, or the sale, lease, conveyance or disposition of all or
substantially all of the assets of such Guarantor that results in such
Guarantor being released from its Guarantee as provided in "-- The Guarantees".
In connection with any consolidation, merger, transfer, lease,
assignment or other disposition contemplated hereby, the Company shall deliver,
or cause to be delivered, to the Trustee, in form and substance reasonably
satisfactory to the Trustee, an officers' certificate and an opinion of
counsel, each stating that such consolidation, merger, transfer, lease,
assignment or other disposition and the supplemental indenture in respect
thereof comply with the requirements under the Indenture.
Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Company in accordance with the foregoing
in which the Company is not the continuing corporation, the
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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 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 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
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of 60 days after written notice of such failure (which notice shall
specify the Default, demand that it be remedied and state that it is a
"Notice of Default") requiring the Guarantor and the Company to remedy
the same shall have been given (x) to the Company by the Trustee or
(y) to the Company and the Trustee by holders of at least 25% in
aggregate principal amount of the Notes then outstanding; or
(viii) certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Significant
Subsidiary of the Company shall have occurred.
If an Event of Default (other than as specified in clause (viii)
above) shall occur and be continuing, the Trustee, by notice to the Company, or
the holders of at least 25% in aggregate principal amount of the Notes then
outstanding, by notice to the Trustee and the Company, may declare the
principal of, premium, if any, and accrued and unpaid interest, if any, on all
of the outstanding Notes due and payable immediately, upon which declaration,
all amounts payable in respect of the Notes shall be immediately due and
payable. If an Event of Default specified in clause (viii) above occurs and is
continuing, then the principal of, premium, if any, and accrued and unpaid
interest, if any, on all of the outstanding Notes shall ipso facto become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any holder of Notes.
After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may
rescind such declaration if (a) the Company has paid or deposited with the
Trustee a sum sufficient to pay (i) all sums paid or advanced by the Trustee
under the Indenture and the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, (ii) all overdue interest
on all Notes, (iii) the principal of and premium, if any, on any Notes which
have become due otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Notes, and (iv) to the extent that payment of
such interest is lawful, interest upon overdue interest and overdue principal
at the rate borne by the Notes which has become due otherwise than by such
declaration of acceleration; (b) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction; and (c) all Events of
Default, other than the non-payment of principal of, premium, if any, and
interest on the Notes that have become due solely by such declaration of
acceleration, have been cured or waived.
The holders of not less than a majority in aggregate principal amount
of the outstanding Notes may on behalf of the holders of all the Notes waive
any past defaults under the Indenture, except a default in the payment of the
principal of, premium, if any, or interest on any Note, or in respect of a
covenant or provision which under the Indenture cannot be modified or amended
without the consent of the holder of each Note outstanding.
No holder of any of the Notes has any right to institute any
proceeding with respect to the Indenture or the Notes or the Guarantees or any
remedy thereunder, unless the holders of at least 25% in aggregate principal
amount of the outstanding Notes have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding as Trustee
under the Notes and the Indenture, the Trustee has failed to institute such
proceeding within 30 days after receipt of such notice and the Trustee, within
such 30-day period, has not received directions inconsistent with such written
request by holders of a majority in aggregate principal amount of the
outstanding Notes. Such limitations do not apply, however, to a suit
instituted by a holder of a Note for the enforcement of the payment of the
principal of, premium, if any, or interest on such Note on or after the
respective due dates expressed in such Note.
During the existence of an Event of Default, the Trustee is required
to exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof
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as a prudent person would exercise under the circumstances in the conduct of
such person's own affairs. Subject to the provisions of the Indenture relating
to the duties of the Trustee, whether or not an Event of Default shall occur
and be continuing, the Trustee under the Indenture is not under any obligation
to exercise any of its rights or powers under the Indenture at the request or
direction of any of the holders unless such holders shall have offered to the
Trustee reasonable security or indemnity. Subject to certain provisions
concerning the rights of the Trustee, the holders of not less than a majority
in aggregate principal amount of the outstanding Notes have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee under the Indenture.
If a Default or an Event of Default occurs and is continuing and is
known to the Trustee, the Trustee shall mail to each holder of the Notes notice
of the Default or Event of Default within 30 days after obtaining knowledge
thereof. Except in the case of a Default or an Event of Default in payment of
principal of, premium, if any, or interest on any Notes, the Trustee may
withhold the notice to the holders of such Notes if a committee of its trust
officers in good faith determines that withholding the notice is in the
interest of the holders of the Notes.
The Company is required to furnish to the Trustee annual and quarterly
statements as to the performance by the Company of its obligations under the
Indenture and as to any default in such performance. The Company is also
required to notify the Trustee within ten days of any event which is, or after
notice or lapse of time or both would become, an Event of Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate the
obligations of the Company and the Guarantors with respect to the outstanding
Notes and Guarantees ("defeasance"). Such defeasance means that the Company
shall be deemed to have paid and discharged the entire Indebtedness represented
by the outstanding Notes, except for (i) the rights of holders of outstanding
Notes to receive payment in respect of the principal of, premium, if any, and
interest on such Notes when such payments are due, (ii) the Company's
obligations to issue temporary Notes, register the transfer or exchange of any
Notes, replace mutilated, destroyed, lost or stolen Notes and maintain an
office or agency for payments in respect of the Notes, (iii) the rights,
powers, trusts, duties and immunities of the Trustee, and (iv) the defeasance
provisions of the Indenture. In addition, the Company may, at its option and
at any time, elect to terminate the obligations of the Company and the
Guarantors with respect to certain covenants that are set forth in the
Indenture, some of which are described under "-- Certain Covenants" above
(including the covenant described under "-- Certain Covenants -- Change of
Control" above) and any subsequent failure to comply with such obligations
shall not constitute a Default or Event of Default with respect to the Notes
("covenant defeasance").
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the holders of the Notes, cash in United States dollars, U.S. government
obligations, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the
outstanding Notes to redemption or maturity (except lost, stolen or destroyed
Notes which have been replaced or paid); (ii) the Company shall have delivered
to the Trustee an opinion of counsel to the effect that the holders of the
outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such defeasance or covenant defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such defeasance or covenant
defeasance had not occurred (in the case of defeasance, such opinion must refer
to and be based upon a ruling of the Internal Revenue Service or a change in
applicable federal income tax laws); (iii) no Default or Event of Default shall
have occurred and be continuing on the date of such deposit; (iv) such
defeasance or covenant defeasance shall not cause
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the Trustee to have a conflicting interest with respect to any securities of
the Company; (v) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement
or instrument to which the Company or any of its Subsidiaries is a party or by
which it is bound; (vi) the Company shall have delivered to the Trustee an
opinion of counsel to the effect that after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; and (vii) the Company shall have delivered to the Trustee an
officers' certificate and an opinion of counsel, each stating that all
conditions precedent under the Indenture to either defeasance or covenant
defeasance, as the case may be, have been complied with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further
effect (except as to surviving rights or registration of transfer or exchange
of the Notes, as expressly provided for in the Indenture) as to all outstanding
Notes when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or repaid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation (except lost, stolen or destroyed Notes which have been replaced
or paid) have been called for redemption pursuant to the terms of the Notes or
have otherwise become due and payable and the Company has irrevocably deposited
or caused to be deposited with the Trustee funds in an amount sufficient to pay
and discharge the entire Indebtedness on the Notes not theretofore delivered to
the Trustee for cancellation, for principal of, premium, if any, and interest
on the Notes to the date of deposit together with irrevocable instructions from
the Company directing the Trustee to apply such funds to the payment thereof at
maturity or redemption, as the case may be; (ii) the Company has paid all other
sums payable under the Indenture by the Company; (iii) there exists no Default
or Event of Default under the Indenture; and (iv) the Company has delivered to
the Trustee an officers' certificate and an opinion of counsel stating that all
conditions precedent under the Indenture relating to the satisfaction and
discharge of the Indenture have been complied with.
AMENDMENTS AND WAIVERS
From time to time, the Company and the Guarantors, when authorized by
a resolution of their respective Boards of Directors, and the Trustee may,
without the consent of the holders of any outstanding Notes, amend, waive or
supplement the Indenture or the Notes or the Guarantees for certain specified
purposes, including, among other things, curing ambiguities, defects or
inconsistencies, qualifying, or maintaining the qualification of, the Indenture
under the Trust Indenture Act of 1939, as amended, or making any other change
that does not adversely affect the rights of any holder of Notes; provided,
however, that the Company has delivered to the Trustee an opinion of counsel
stating that such change does not adversely affect the rights of any holder of
Notes. Other amendments and modifications of the Indenture or the Notes or the
Guarantees may be made by the Company and the Trustee with the consent of the
holders of not less than a majority of the aggregate principal amount of the
outstanding Notes; provided, however, that no such modification or amendment
may, without the consent of the holder of each outstanding Note affected
thereby, (i) reduce the principal amount of, extend the fixed maturity of or
alter the redemption provisions of the Notes, (ii) change the currency in which
any Notes or any premium or the interest thereon is payable or make the
principal of, premium, if any, or interest on any Note payable in money other
than that stated in the Note, (iii) reduce the percentage in principal amount
of outstanding Notes that must consent to an amendment, supplement or waiver or
consent to take any action under the Indenture, any Guarantee or the Notes,
(iv) impair the right to institute suit for the enforcement of any payment on
or with respect to the Notes, (v) waive a default in payment with respect to
the Notes, (v) amend, change or modify the obligations of the Company to make
and consummate a
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Change of Control Offer in the event of a Change of Control or make and
consummate the Asset Sale Offer with respect to any Asset Sale or modify any of
the provisions or definitions with respect thereto, (vii) reduce or change the
rate or time for payment of interest on the Notes, (viii) modify or change any
provision of the Indenture affecting the ranking of the Notes or any Guarantee
in a manner adverse to the holders of the Notes, or (ix) release any Guarantor
from any of its obligations under its Guarantee or the Indenture other than in
compliance with the Indenture.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event
of Default, the Trustee thereunder will perform only such duties as are
specifically set forth in the Indenture. If an Event of Default has occurred
and is continuing, the Trustee will exercise such rights and powers vested in
it under the Indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as
amended, incorporated by reference therein contain limitations on the rights of
the Trustee thereunder, should it become a creditor of the Company, to obtain
payment of claims in certain cases or to realize on certain property received
by it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however, that if it
acquires any conflicting interest (as defined in the Trust Indenture Act of
1939, as amended) it must eliminate such conflict or resign.
GOVERNING LAW
The Indenture, the Notes and the Guarantees are governed by the laws
of the State of New York, without regard to the principles of conflicts of law.
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
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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.
"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
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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 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
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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 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.
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"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).
"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
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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
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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, (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.
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"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.
"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
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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
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
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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.
"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
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or asset of such person which has been or is being sold or transferred by such
person after the acquisition thereof or the completion of construction or
commencement of operation thereof to such lender or investor or to any person
to whom funds have been or are to be advanced by such lender or investor on the
security of such property or asset. The stated maturity of such arrangement
shall be the date of the last payment of rent or any other amount due under
such arrangement prior to the first date on which such arrangement may be
terminated by the lessee without payment of a penalty.
"Securities Act" means the Securities Act of 1933, as amended.
"Significant Subsidiary" shall have the same meaning as in Rule
1.02(v) of Regulation S-X under the Securities Act.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and its successors.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable, and when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness, or any installment of interest
thereon, is due and payable.
"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, "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
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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.
88
<PAGE> 90
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.
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<PAGE> 91
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 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.
90
<PAGE> 92
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.
91
<PAGE> 93
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 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.
92
<PAGE> 94
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
93
<PAGE> 95
of one or more participants to whose account the DTC interests in the Global
Note are credited and only in respect of such portion of the aggregate
principal amount of Notes as to which such participant or participants has or
have given such direction. However, if there is an Event of Default under the
Indenture, DTC will exchange the Global Note for Certificated Securities, which
it will distribute to its participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book entry changes in
accounts of its participants, thereby eliminating the need for physical
movement 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.
94
<PAGE> 96
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 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, 1996 and 1995, and for each of the three years in the periods
ended December 31, 1996, 1995 and 1994, 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, 1996, 1995 and 1994 and for each of the three years in the periods ended
December 31, 1996, 1995 and 1994, 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>
<S> <C>
WALBRO CORPORATION
As of December 31, 1996 and 1995 and for the years ended December
31, 1996, 1995 and 1994
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 September 30, 1997 and for the nine months ended September
30, 1997 and 1996
Consolidated Balance Sheets (Unaudited)................... F-36
Consolidated Statements of Income (Unaudited)............. F-37
Consolidated Statements of Cash Flows (Unaudited)......... F-38
Notes to Consolidated Financial Statements (Unaudited).... F-39
MARWAL SYSTEMS S.N.C. FINANCIAL STATEMENTS
Statutory Auditor's General Report........................ F-47
Balance Sheet as of December 31, 1996..................... F-48
Income Statement for the year ended December 31, 1996..... F-49
Notes to the Financial Statements for 1996................ F-50
Statutory Auditor's General Report........................ F-57
Balance Sheet as of December 31, 1995..................... F-58
Income Statement for the year ended December 31, 1995..... F-59
Notes to the Financial Statements for 1995................ F-60
Statutory Auditor's General Report........................ F-66
Balance Sheet as of December 31, 1994..................... F-67
Income Statement for the year ended December 31, 1994..... F-68
Notes to the Financial Statements for 1994................ F-69
</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, 1996
and 1995 and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Walbro Corporation and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, effective
January 1, 1994, the Company changed its method of accounting for investments in
debt and equity securities.
ARTHUR ANDERSEN LLP
Detroit, Michigan,
February 11, 1997
F-2
<PAGE> 99
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
Current Assets:
Cash...................................................... $ 18,213 $ 19,792
Accounts receivable, net.................................. 126,509 113,346
Inventories............................................... 50,588 50,723
Prepaid expenses and other................................ 11,235 10,966
Deferred and refundable income taxes...................... 4,971 4,877
-------- --------
Total Current Assets.................................... 211,516 199,704
-------- --------
Plant and Equipment, at cost:
Land...................................................... 5,190 3,870
Buildings and improvements................................ 69,741 54,116
Machinery and equipment................................... 285,376 211,707
-------- --------
360,307 269,693
Less -- Accumulated depreciation.......................... 80,420 63,928
-------- --------
Net Plant and Equipment................................. 279,887 205,765
-------- --------
Other Assets:
Funds held for construction............................... 1,140 1,102
Joint ventures............................................ 28,955 23,466
Investments............................................... 5,727 9,224
Goodwill, net............................................. 35,998 33,299
Notes receivable.......................................... 1,268 460
Deferred and refundable income taxes...................... 5,414 2,805
Other..................................................... 19,744 17,648
-------- --------
Total Other Assets...................................... 98,246 88,004
-------- --------
Total Assets............................................ $589,649 $493,473
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt......................... $ 1,089 $ 1,086
Bank and other borrowings................................. 22,072 14,921
Accounts payable.......................................... 77,939 52,774
Accrued liabilities....................................... 41,276 34,352
Dividends payable......................................... 865 858
-------- --------
Total Current Liabilities............................... 143,241 103,991
-------- --------
Long-Term Liabilities:
Long-term debt, less current portion...................... 291,723 233,389
Pension obligations and other............................. 10,718 15,102
Deferred income taxes..................................... 4,914 3,927
Minority interest......................................... 1,320 1,637
-------- --------
Total Long-Term Liabilities............................. 308,675 254,055
-------- --------
Stockholders' Equity:
Common stock, $.50 par value; authorized 25,000,000;
outstanding 8,652,737 in 1996 and 8,579,976 in 1995..... 4,326 4,290
Paid-in capital........................................... 65,674 64,381
Retained earnings......................................... 74,039 66,256
Deferred compensation..................................... (967) (817)
Minimum pension liability adjustment...................... -- (63)
Unrealized gain on securities available for sale.......... 688 827
Cumulative translation adjustments........................ (6,027) 553
-------- --------
Total Stockholders' Equity.............................. 137,733 135,427
-------- --------
Total Liabilities and Stockholders' Equity.............. $589,649 $493,473
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 100
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net Sales................................................... $585,389 $459,272 $325,205
Costs and Expenses:
Cost of sales............................................. 488,134 377,755 261,501
Selling and administrative expenses....................... 51,469 40,753 27,119
Research and development expenses......................... 18,400 16,742 12,199
-------- -------- --------
Operating Income............................................ 27,386 24,022 24,386
Other Expense (Income):
Interest expense, net of capitalized interest of
$3,683,000 in 1996 and $518,000 in 1995................ 19,833 12,071 3,862
Interest income........................................... (2,716) (960) (91)
Foreign currency exchange (gain) loss..................... (70) 1,483 2,602
Other..................................................... (63) (255) 111
-------- -------- --------
Income Before Provision for Income Taxes, Minority
Interest and Equity in Income of Joint Ventures........ 10,402 11,683 17,902
Provision for Income Taxes.................................. 3,075 1,258 5,824
Minority Interest........................................... 285 472 92
Equity in Income of Joint Ventures.......................... (4,187) (3,877) (2,609)
-------- -------- --------
Net Income................................................ $ 11,229 $ 13,830 $ 14,595
======== ======== ========
Net Income Per Share...................................... $ 1.30 $ 1.61 $ 1.70
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 101
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
UNREALIZED
GAIN ON
MINIMUM SECURITIES CUMULATIVE
COMMON PAID-IN RETAINED DEFERRED PENSION AVAILABLE TRANSLATION
STOCK CAPITAL EARNINGS COMPENSATION LIABILITY FOR SALE ADJUSTMENTS
------ ------- -------- ------------ --------- ---------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance --
December 31, 1993............. $4,276 $63,997 $44,686 $(1,634) $(520) $-- $ 3,341
Change in accounting for
securities available for
sale -- January 1, 1994..... -- -- -- -- -- 2,096 --
Exercise of stock options..... 6 224 -- -- -- -- --
ESOP debt payments............ -- -- -- 409 -- -- --
Net income.................... -- -- 14,595 -- -- -- --
Adjust additional minimum
pension liability........... -- -- -- -- 520 -- --
Cash dividends ($.40 per
share)...................... -- -- (3,426) -- -- -- --
Change in market value of
securities available for
sale........................ -- -- -- -- -- (668) --
Translation adjustments....... -- -- -- -- -- -- 13
------ ------- ------- ------- ----- ------ -------
Balance --
December 31, 1994............. 4,282 64,221 55,855 (1,225) -- 1,428 3,354
Exercise of stock options..... 8 160 -- -- -- -- --
ESOP debt payments............ -- -- -- 408 -- -- --
Net income.................... -- -- 13,830 -- -- -- --
Additional minimum pension
liability................... -- -- -- -- (63) -- --
Cash dividends ($.40 per
share)...................... -- -- (3,429) -- -- -- --
Change in market value of
securities available for
sale........................ -- -- -- -- -- (601) --
Translation adjustments....... -- -- -- -- -- -- (2,801)
------ ------- ------- ------- ----- ------ -------
Balance --
December 31, 1995............. 4,290 64,381 66,256 (817) (63) 827 553
Exercise of stock options..... 21 750 -- -- -- -- --
ESOP debt payments............ -- -- -- 408 -- -- --
Restricted stock issued....... 15 543 -- (558) -- -- --
Net income.................... -- -- 11,229 -- -- -- --
Adjust minimum pension
liability................... -- -- -- -- 63 -- --
Cash dividends ($.40 per
share)...................... -- -- (3,446) -- -- -- --
Change in market value of
securities available for
sale........................ -- -- -- -- -- (139) --
Translation adjustments....... -- -- -- -- -- -- (6,580)
------ ------- ------- ------- ----- ------ -------
Balance --
December 31, 1996............. $4,326 $65,674 $74,039 $ (967) $-- $ 688 $(6,027)
====== ======= ======= ======= ===== ====== =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 102
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income.............................................. $ 11,229 $ 13,830 $ 14,595
Adjustments to reconcile net income to net cash provided
by operating activities-
Depreciation and amortization...................... 29,736 22,451 14,672
(Gain) loss on disposition of assets............... 774 (29) 449
Minority interest.................................. (238) 472 92
Equity in income of joint ventures................. (4,187) (3,877) (2,609)
Change in assets and liabilities, net of effects of
acquisitions-
Deferred and refundable income taxes............ (762) 1,721 (681)
Pension obligations and other................... (2,049) 3,327 519
Accounts payable and accrued liabilities........ 25,507 4,870 704
Accounts receivable, net........................ (16,956) (3,236) (18,463)
Inventories..................................... (473) (2,034) (3,752)
Prepaid expenses and other...................... (5,943) (6,607) 4,951
--------- --------- --------
Total adjustments............................. 25,409 17,058 (4,118)
--------- --------- --------
Net cash provided by operating activities.......... 36,638 30,888 10,477
--------- --------- --------
Cash Flows From Investing Activities:
Purchase of plant and equipment......................... (99,147) (46,240) (18,844)
Acquisitions, net of cash acquired...................... (1,018) (116,238) (1,480)
Purchase of other assets................................ (3,434) (7,263) (2,615)
Investment in joint ventures and other.................. (1,451) (2,054) (1,508)
Proceeds from disposal of assets........................ 4,156 4,127 1,463
--------- --------- --------
Net cash used in investing activities.............. (100,894) (167,668) (22,984)
--------- --------- --------
Cash Flows From Financing Activities:
Net borrowings (repayments) under revolving
line-of-credit agreements............................ 65,250 63,797 (27,739)
Debt repayments......................................... (1,104) (13,541) (824)
Proceeds from issuance of long-term debt................ 2,772 110,550 45,000
Proceeds from issuance of common stock and options...... 771 168 230
Financing fees paid..................................... (508) (4,778) --
Cash dividends paid..................................... (3,439) (3,428) (3,424)
--------- --------- --------
Net cash provided by financing activities.......... 63,742 152,768 13,243
--------- --------- --------
Effect of Exchange Rate Changes on Cash................. (1,065) (736) (801)
--------- --------- --------
Net Increase (Decrease) in Cash......................... (1,579) 15,252 (65)
Cash at Beginning of Year............................... 19,792 4,540 4,605
--------- --------- --------
Cash at End of Year..................................... $ 18,213 $ 19,792 $ 4,540
========= ========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 103
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Principles of Consolidation:
The consolidated financial statements include the accounts of Walbro
Corporation and its wholly-owned and majority-owned subsidiaries (the Company).
Investments in joint ventures are accounted for under the equity method (Note
2). Significant transactions and balances among the Company and its subsidiaries
have been eliminated in the consolidated financial statements.
Foreign Currency Translation:
The assets and liabilities of the Company's foreign operations are
generally translated into U.S. dollars at current exchange rates, and revenues
and expenses are translated at average exchange rates for the year. Resulting
translation adjustments are reflected as a separate component of stockholders'
equity.
Transaction gains and losses that arise from exchange rate fluctuations on
transactions denominated in a currency other than the functional currency,
except those transactions which operate as a hedge of an identifiable foreign
currency commitment or as a hedge of a foreign currency investment position, are
included in the results of operations as incurred.
Accounts Receivable:
Accounts receivable are net of allowances for doubtful accounts of $753,000
and $978,000 as of December 31, 1996 and 1995, respectively.
Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or
market. Inventories include raw materials and component parts, work-in-process
and finished products. Work-in-process and finished products inventories include
material, labor and manufacturing overhead costs.
Inventory at December 31 consisted of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
(IN THOUSANDS)
<S> <C> <C>
Raw materials and components......................... $23,964 $29,769
Work-in-process...................................... 10,620 7,666
Finished products.................................... 16,004 13,288
------- -------
$50,588 $50,723
======= =======
</TABLE>
Plant and Equipment:
The Company provides for depreciation of plant and equipment based upon the
acquisition costs and the estimated service lives of depreciable assets. The
straight-line method is the principal method used to compute depreciation for
financial reporting purposes. However, the units-of-production method is used to
compute depreciation of certain equipment. Estimated service lives of
depreciable assets are as follows: buildings and improvements -- 10 to 40 years,
machinery and equipment -- 5 to 15 years.
Investments:
Effective January 1, 1994, the Company changed its method of accounting for
investments in debt and equity securities. The impact of adoption at January 1,
1994 was to increase investments by approximately $3,225,000 and to increase
stockholders' equity by $2,096,000, net of income taxes. The carrying value of
F-7
<PAGE> 104
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
marketable equity securities is market value. The Company classifies investments
in marketable equity securities into three separate categories:
"held-to-maturity", "available-for-sale", and "trading", each with different
accounting treatment.
The Company classifies certain investments in common stock securities as
"available-for-sale", recording these investments at fair market value with the
gross unrealized holding gains and losses, after-tax, included as a separate
component of stockholders' equity. In 1996, the Company sold a portion of its
investments classified as "available-for-sale" for approximately $3,244,000. The
gross realized loss on the sale was approximately $12,000 utilizing a specific
identification methodology. As of December 31, 1996 and 1995, the fair market
value of the Company's investments classified as "available-for-sale" was
approximately $2,071,000 and $5,456,000, respectively, including gross
unrealized holding gains of approximately $1,059,000 ($688,000 after tax) and
$1,272,000 ($827,000 after-tax), respectively.
At December 31, 1996 and 1995, the fair market value of the Company's
investments classified as "trading" was $2,594,000 and $2,641,000, respectively.
The change in net unrealized holding gain included in earnings was not
significant.
Goodwill:
Goodwill consists of purchase price and related acquisition costs in excess
of the fair value of the identifiable net assets acquired. Goodwill is amortized
on a straight-line basis over 15 to 40 years. The Company evaluates the carrying
value of goodwill for potential impairment on an ongoing basis. Such evaluations
compare the undiscounted expected future cash flows of the operations to which
goodwill relates to the carrying value of the goodwill. The Company also
considers future anticipated operating results, trends and other circumstances
in making such evaluations. Goodwill consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
(IN THOUSANDS)
<S> <C> <C>
Goodwill............................................. $40,234 $36,365
Less: Accumulated amortization....................... (4,236) (3,066)
------- -------
$35,998 $33,299
======= =======
</TABLE>
Income Taxes:
Deferred income taxes represent the effect of cumulative temporary
differences between income and expense items reported for financial statement
and tax purposes, and between the bases of various assets and liabilities for
financial statement and tax purposes. Deferred tax assets are reduced by a
valuation allowance if, based on the weight of evidence, it is deemed more
likely than not that the asset will not be realized.
Financial Instruments:
In order to manage exposure to fluctuations in foreign currency exchange
rates, the Company regularly enters into forward currency exchange contracts.
Gains and losses on contracts that hedge specific foreign currency commitments
are deferred and recognized in net income in the period in which the related
transaction is consummated. Gains and losses on contracts that hedge net
investments in foreign joint ventures or subsidiaries are recognized as
cumulative translation adjustments in stockholders' equity. Gains and losses on
forward currency exchange contracts that do not qualify as hedges are recognized
as other income or expense.
F-8
<PAGE> 105
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Per Share Information:
Income per share is based on the weighted average number of shares
outstanding during each period. Shares used in the per share calculations were
8,649,380 in 1996, 8,609,431 in 1995 and 8,602,077 in 1994.
Reclassifications:
Certain amounts in prior years' consolidated financial statements have been
reclassified to conform with the presentation used in 1996.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from these estimates.
NOTE 2. JOINT VENTURES.
The investments in joint ventures as of December 31 are as follows:
<TABLE>
<CAPTION>
PERCENT BENEFICIAL
OWNERSHIP
------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Marwal Systems, S.N.C. (France)..................... 49% 49% 49%
Mitsuba-Walbro, Inc. (Japan)........................ 50% 50% 50%
Marwal do Brasil, Ltda.............................. 49% 49% 49%
Korea Automotive Fuel Systems, Ltd.................. 49% 49% 49%
Marwal de Mexico S.A. de C.V. ...................... 52% -- --
</TABLE>
The above joint ventures are generally involved in the design and
manufacture of precision fuel systems products for the global automotive market.
All of the above investments in joint ventures are accounted for using the
equity method. Certain adjustments are made to the joint ventures' income so
that recorded income is stated in accordance with United States generally
accepted accounting principles. At December 31, 1996 and 1995, the cumulative
effect of these adjustments was to increase the Company's equity in its joint
ventures by approximately $2,631,000 and $2,102,000, respectively. At December
31, 1996, the amount included in retained earnings as undistributed earnings of
foreign joint ventures was approximately $8,567,000.
In 1996, the Company entered into a joint venture (Marwal de Mexico S.A. de
C.V.) with its 49% owned joint venture, Marwal Systems, S.N.C. The Company owns
5% of the venture directly and Marwal Systems S.N.C. owns the remaining 95%.
Marwal de Mexico S.A. de C.V. manufactures fuel pumps and fuel modules for the
Central American and Mexican automotive markets.
In December 1994, the Company entered into a joint venture (Korea
Automotive Fuel Systems, Ltd.) with Daewoo Precision Industries in Korea. Korea
Automotive Fuel Systems, Ltd. manufactures fuel sending units for the Korean
automotive market.
F-9
<PAGE> 106
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Summarized combined financial information for joint ventures accounted for
under the equity method is as follows (unaudited, in thousands):
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1996 1995
---- ----
<S> <C> <C>
Balance sheet data:
Current assets..................................... $54,030 $60,504
Non-current assets................................. 65,088 36,629
Current liabilities................................ 52,038 49,081
Non-current liabilities............................ 9,493 1,657
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income statement data:
Net sales............................. $200,276 $170,902 $137,873
Gross margin.......................... 39,141 20,500 29,283
Income before provision for income
taxes.............................. 15,946 11,641 8,136
Net income............................ 11,770 7,366 5,164
</TABLE>
Dividends from joint ventures of approximately $415,000 and $38,000 were
received by the Company during 1995 and 1994, respectively. No dividends were
received from joint ventures in 1996. The Company had sales to joint ventures of
approximately $42,413,000, $29,280,000 and $20,407,000 for 1996, 1995 and 1994,
respectively. Included in accounts receivable are trade receivables from joint
ventures of approximately $11,967,000 and $9,583,000 for 1996 and 1995,
respectively. The Company had purchases from joint ventures of approximately
$33,149,000, $22,977,000 and $15,329,000 for 1996, 1995 and 1994, respectively.
Included in accounts payable are trade payables to joint ventures of
approximately $5,580,000 and $3,995,000 for 1996 and 1995, respectively.
NOTE 3. DYNO ACQUISITION.
On July 27, 1995, the Company acquired the plastic fuel tank business of
Dyno Industrier A.S (Dyno), Oslo, Norway for $128,774,000 in cash which is
subject to certain subsequent adjustments as defined in the Purchase Agreement.
Dyno is a leading designer, manufacturer and marketer of plastic fuel tank
systems and components to many European vehicle manufacturers and has operations
in Belgium, France, Germany, Norway, Spain and the United Kingdom.
The acquisition was accounted for under the purchase method, and
accordingly, the assets purchased and liabilities assumed in the acquisition are
reflected in the accompanying consolidated balance sheets as of December 31,
1996 and 1995 and the operations since the date of acquisition are included in
the accompanying consolidated statements of income and cash flows for the years
ended December 31, 1996 and
F-10
<PAGE> 107
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 will be required to
relocate certain facilities. The Company anticipates it will incur costs to move
to the new facilities and involuntarily terminate or relocate employees in
addition to other costs directly associated with the acquisition. The Company
recorded a liability of approximately $12,021,000 related to these costs in
purchase accounting and approximately $4,550,000 of costs have been paid and
charged against the liability as of December 31, 1996.
Assuming the acquisition had taken place as of the beginning of 1995 and
1994, the consolidated pro forma results of operations of the Company would have
been as follows, after giving effect to certain adjustments, including
depreciation and amortization adjustments, increased interest expense,
elimination of certain costs assumed by the seller and the related income tax
effects:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1994
---- ----
(UNAUDITED, IN THOUSANDS)
<S> <C> <C>
Net sales......................................... $581,291 $472,352
Net income........................................ $ 12,336 $ 6,297
Net income per common share....................... $ 1.43 $ .73
</TABLE>
The pro forma information above does not purport to be indicative of the
results that actually would have been achieved if the operations were combined
during the periods presented, and is not intended to be a projection of future
results or trends.
NOTE 4. OTHER ACQUISITIONS.
In January 1995, the Company acquired an 80% interest in U.S. CoExcell,
Inc. for $60,000 in cash plus the forgiveness of debt owed to Walbro of
$3,113,000. U.S. CoExcell, Inc. manufactures and markets blow molded plastic
drums. The acquisition was accounted for under the purchase method, and
accordingly, the assets purchased and liabilities assumed in the acquisition
have been reflected in the accompanying consolidated balance sheet as of
December 31, 1996 and 1995 and the operations since the acquisition are included
in the accompanying consolidated statement of income and cash flows for the
years ended December 31, 1996 and 1995. Goodwill resulting from this transaction
is being amortized over 40 years using the straight-line method.
Pro forma results of this acquisition, assuming it had taken place at the
beginning of each year presented, would not be materially different from the
results reported.
F-11
<PAGE> 108
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. LONG-TERM DEBT AND LINES OF CREDIT.
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
(IN THOUSANDS)
<S> <C> <C>
Senior notes due 2005, unsecured, stated interest at 9.875%
(9.92% effective interest rate) net of unamortized
discount of $331,000 and $369,000 at December 31, 1996 and
1995, respectively........................................ $109,669 $109,631
Revolving credit facility, secured, interest at the agent's
base rate plus an additional margin(see below)............ 114,062 57,258
Term loan from the State of Connecticut, secured, interest
at 6% per annum, payable in monthly amounts from 1997 to
2005...................................................... 3,400 800
Senior notes, secured, interest at 7.68%, payable in annual
amounts from 1998 to 2004................................. 45,000 45,000
Industrial revenue bond, issued by Town of Ossian, Indiana,
interest at a variable municipal bond rate, due in 2023... 9,000 9,000
Industrial revenue bond, issued by City of Ligonier,
Indiana, interest at a variable municipal bond rate plus
1%, payable in annual amounts from 2003 to 2007........... 6,300 6,300
ESOP credit agreement, interest rate which approximates 86%
of prime, payable in annual installments of $408,000...... 817 1,225
Capital lease obligations, interest at 7.5%, payable in
monthly amounts through February 2002..................... 3,640 4,195
Term loan, unsecured, interest at 6%, payable in monthly
amounts through 2005...................................... 515 563
Note payable to the City of Maumee, Ohio, interest at 4%,
payable in monthly amounts through 2004................... 271 302
Other....................................................... 138 201
-------- --------
292,812 234,475
Less -- current portion..................................... 1,089 1,086
-------- --------
$291,723 $233,389
======== ========
</TABLE>
In July 1995, the Company sold $110,000,000 in aggregate principal amount
of 9.875% Senior Notes due 2005 (the 2005 Notes). The 2005 Notes are general
unsecured obligations of the Company with interest payable semi-annually. The
2005 Notes are guaranteed on a senior unsecured basis, jointly and severally, by
each of the Company's principal wholly-owned domestic operating subsidiaries and
certain of its indirect wholly-owned subsidiaries. Except as noted below, the
2005 Notes are not redeemable at the Company's option prior to July 15, 2000.
Thereafter, the 2005 Notes will be redeemable, in whole or part, at the option
of the Company at various redemption prices as set forth in the 2005 Note
Indenture, plus accrued and unpaid interest thereon to the redemption date. In
addition, prior to July 15, 1998, the Company may, at its option, redeem up to
an aggregate of 30% of the principal amount of the 2005 Notes originally issued
with the net proceeds from one or more public equity offerings at the redemption
price specified in the 2005 Note Indenture plus accrued interest to the date of
redemption. Also in the event of a change in control, the Company will be
obligated to make an offer to purchase all of the outstanding 2005 Notes at a
redemption price of 101% of the principal amount thereof plus accrued interest
to the date of repurchase. Also, in certain circumstances, the Company will be
required to make an offer to repurchase the 2005 Notes at a price equal to 100%
of the principal amount thereof, plus accrued interest to the date of
repurchase, with the net cash proceeds of certain asset sales.
F-12
<PAGE> 109
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In July 1995, the Company executed a new $135,000,000 multi-currency
revolving credit facility (Credit Facility) for the Company and certain of its
wholly-owned domestic and foreign subsidiaries, including a $5,000,000 swing
line facility and a $17,000,000 letter of credit facility. The Credit Facility
has an initial term of five years, with annual one year extensions of the
revolving credit portion available at the lender's discretion. At any time
within three years after closing of the Credit Facility, the Company may convert
up to $70,000,000 of revolving credit loans under the Credit Facility to term
loans in minimum amounts of $15,000,000 with maturities not exceeding seven
years from the closing of the Credit Facility. Borrowings under the Credit
Facility bear interest at a per annum rate equal to the agent's base rate or the
prevailing interbank offered rate in the applicable offshore currency market,
plus an additional margin ranging from 0.5% to 1.75% based on the specific
financial ratios of the Company. Borrowings under the Credit Facility bore
interest at rates ranging from 8.25% to 8.5% as of December 31, 1996 and 7.5% to
8.5% as of December 31, 1995. The Company is also required to pay a quarterly
unused facility fee of 0.08% to 0.5%, based on the Company's funded debt ratio.
Borrowings under the Credit Facility are secured by first liens on the
inventory, accounts receivable and certain intangibles of the Company and its
wholly-owned domestic subsidiaries and by a pledge of 100% of the stock of
wholly-owned domestic subsidiaries and 65% of the stock of wholly-owned foreign
subsidiaries. Collateral for the Credit Facility secures the 2004 Notes (as
defined below) on an equal and ratable basis. The Company and its wholly-owned
domestic subsidiaries guarantee payment of domestic and foreign borrowings under
the Credit Facility. The Company's wholly-owned foreign subsidiaries guarantee
payment of foreign borrowings under the Credit Facility.
In November 1995, the Company executed with the State of Connecticut, a
ten-year provisional term loan, in the original principal amount of $3,400,000,
to be used exclusively for the purchase of equipment and certain construction
costs. The loan requires payment of interest only for the first two years at a
fixed rate equal to 6% per annum and then repayment in equal monthly
installments of principal and interest over the remaining eight years with a
balloon payment of $1,387,000 at the end of the ten year contractual agreement.
However, if the Company meets certain employment targets and other measures,
some or all of this loan is forgivable during this ten year period.
In October 1994, the Company sold $45,000,000 of 7.68% senior notes (2004
Notes). The 2004 Notes require quarterly interest payments due January 1, April
1, July 1 and October 1. The agreement requires the Company to maintain a funded
debt to total capital ratio not greater than .65 to 1, among other measures.
The Credit Facility contains numerous restrictive covenants including, but
not limited to, the following matters: (i) maintenance of certain financial
ratios and compliance with certain financial tests and limitations which become
increasingly restrictive with the passage of time; (ii) limitations on payment
of dividends, incurrence of additional indebtedness and granting of certain
liens; (iii) restrictions on mergers, acquisitions, asset sales, sales of
subsidiary stock, capital expenditures and investments; (iv) issuance of
preferred stock by subsidiaries and (v) sale and leaseback transactions. The
Company received waivers and amendments to certain financial covenants from its
lenders at December 31, 1996 due to non-compliance with such covenants.
During 1994, the Company entered into an agreement to lease certain
machinery under terms which qualified as a capital lease. As of December 31,
1996 and 1995, assets recorded under this capital lease were approximately
$4,733,000 and $5,032,000, respectively, net of accumulated amortization of
approximately $394,000 and $95,000, respectively.
Aggregate minimum principal payment requirements on long-term debt,
including capital lease obligations, in each of the five years subsequent to
December 31, 1996 are as follows: 1997 -- $1,089,000; 1998 -- $7,671,000; 1999
- -- $7,440,000; 2000 -- $121,573,000; 2001 -- $7,585,000, and thereafter --
$147,454,000.
In addition to long-term debt, the Company and its subsidiaries have line
of credit arrangements with foreign banks for short-term borrowings of
approximately $36,340,000, $17,191,000, and $11,919,000 at December 31, 1996,
1995 and 1994, respectively. The weighted average interest rate on short-term
bank
F-13
<PAGE> 110
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
borrowings outstanding under these arrangements was 3.1%, 6.1% and 6.7% as of
December 31, 1996, 1995 and 1994, respectively.
NOTE 6. COMMITMENTS AND CONTINGENCIES.
The manufacture of automotive components entails the risk that a customer
or governmental authority may require the recall of one of the Company's
products or a product in which one of the Company's products has been installed.
The Company has taken and will continue to take all reasonable precautions to
avoid the risk of exposure to a recall or warranty claim that would have a
material effect on the financial position of the Company. The Company does not
believe that significant insurance coverage is available to protect against
potential product recall/warranty liability. The Company provides for warranty
claims on its products on a specific identification basis.
While there can be no assurance that the Company will not incur substantial
warranty or recall expense in the future, management believes that any liability
resulting from these matters will not have a material impact on the financial
position or future results of operations of the Company.
NOTE 7. INCOME TAXES.
A summary of income before provision for income taxes, minority interest
and equity in income of joint ventures, and components of the provision are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Income before provision for income taxes,
minority interest and equity in income of
joint ventures:
Domestic................................. $ 1,774 $ 4,268 $12,873
Foreign.................................. 8,628 7,415 5,029
------- ------- -------
$10,402 $11,683 $17,902
======= ======= =======
Provision for income taxes:
Currently payable --
Domestic................................. $ 384 $ 843 $ 3,313
Foreign.................................. 2,456 2,977 1,674
Utilization of tax credits............... (2,517) (3,182) (605)
------- ------- -------
323 638 4,382
------- ------- -------
Deferred --
Domestic................................. 988 945 1,067
Foreign.................................. 1,544 (325) (14)
Change in beginning of year valuation
allowance.............................. 220 -- 389
------- ------- -------
2,752 620 1,442
------- ------- -------
$ 3,075 $ 1,258 $ 5,824
======= ======= =======
</TABLE>
F-14
<PAGE> 111
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Reconciliations of the U.S. Federal statutory income tax rates to the
Company's consolidated effective income tax rates applicable to continuing
operations are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
U.S. Federal statutory income tax rate............ 35.0% 35.0% 35.0%
Increase (decrease) in effective income tax rate
resulting from --
Differences between U.S. and foreign income
tax rates.................................. 9.4 2.1 (1.2)
Utilization of tax credits................... (15.9) (27.2) (3.4)
Increase in valuation allowance.............. 2.1 -- 2.2
Goodwill amortization........................ 1.5 1.4 .9
Other, net................................... (2.5) (.5) (1.0)
----- ----- ----
Effective income tax rates........................ 29.6% 10.8% 32.5%
===== ===== ====
</TABLE>
The components of the net deferred income tax (asset) liability at December
31 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
(IN THOUSANDS)
<S> <C> <C>
Deferred income tax liabilities:
Depreciation and basis difference................. $13,311 $ 9,534
Employee benefits................................. -- 57
Basis difference on foreign currency contracts.... -- 193
Unrealized gain on securities available for
sale........................................... 371 416
Other............................................. 181 80
------- --------
13,863 10,280
------- --------
Deferred income tax assets:
Estimated net operating loss carryforwards........ (2,966) (4,231)
Employee benefits................................. (3,380) (3,609)
Foreign tax credit carryforward................... (440) --
Accruals.......................................... (217) (208)
Minimum pension liability adjustment.............. -- (32)
Inventory......................................... (600) (585)
Accounts and notes receivable reserve............. (22) (36)
Write-down of investment.......................... (368) (368)
Loss on joint ventures............................ (1,052) (1,032)
Other............................................. (649) (803)
------- --------
(9,694) (10,904)
Valuation allowance............................... 964 744
------- --------
(8,730) (10,160)
------- --------
Net deferred income tax (asset) liability........... $ 5,133 $ 120
======= ========
</TABLE>
At December 31, 1996, the cumulative amount of undistributed earnings of
foreign subsidiaries was approximately $28,909,000. No deferred U.S. income
taxes have been provided on these earnings as such amounts are deemed to be
permanently reinvested. If such earnings were remitted, the impact of additional
U.S. income taxes or foreign withholding taxes would not be significant.
As of December 31, 1996, the Company has net operating loss carryforwards
of approximately $10,244,000, which expire in varying amounts between 2003 and
2011, available from certain of its
F-15
<PAGE> 112
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
subsidiaries. The Company has recorded a deferred tax asset of $2,966,000
associated with these carryforwards. Realization is dependent on generating
sufficient taxable income in specific countries prior to the expiration of the
loss carryforwards. Although realization is not assured, management believes it
is more likely than not that all of the deferred tax asset will be realized. The
amount of the deferred tax asset considered realizable, however, could be
reduced in the near term if estimates of future taxable income during the
carryforward period are reduced.
Provisions for state income taxes are included in selling and
administrative expenses and amounted to $197,000 in 1996, $1,369,000 in 1995 and
$1,203,000 in 1994.
NOTE 8. STOCK OPTION PLANS AND LONG-TERM INCENTIVE PLANS.
The Company has 18,200 stock options outstanding under the Walbro
Corporation 1983 Incentive Stock Option Plan (1983 Plan) which were granted at
market value on the date of grant. There are no options available for grant
remaining under this plan.
Under the Walbro Corporation Equity Based Long Term Incentive Plan
(Incentive Plan), 856,457 shares of common stock are reserved for issuance to
officers, directors and key employees. Options are granted yearly based on
certain financial performance criteria as compared to the annual business plan
and other factors. In addition, Stock Performance Award Grants (Grants) are
awarded annually when the common stock price appreciates and Grants are
exchanged for common stock at the end of the five-year term. If the Company's
common stock price appreciates at a 17% compounded rate over the term, the
number of Grants awarded, valued at the common stock price, will equal the
dollar amount necessary to exercise the stock options. Participants will receive
a greater or lesser number of Grants based on the actual market performance of
the stock over the term. The number of grants outstanding was 6,754 and 33,294
as of December 31, 1996 and 1995, respectively.
Effective January 1, 1996, the Company adopted SFAS No. 123, "Accounting
for Stock-Based Compensation (SFAS No. 123)." The Company continues to apply
Accounting Principles Board Opinion No. 25 for expense recognition. All stock
options issued by the Company are exercisable at a price equal to the market
price at the date of the grant. Accordingly, no compensation cost has been
recognized for any of the options granted under the Plans.
F-16
<PAGE> 113
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the stock option transactions of the 1983 Plan and the
Incentive Plan for the years ended December 31, 1996, 1995 and 1994 is as
follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
---------------------------- OPTION PRICE
EXERCISABLE OUTSTANDING (PER SHARE)
----------- ----------- ------------
<S> <C> <C> <C>
December 31, 1993...................................... 152,132 203,012 $ 9.25-33.25
Granted.............................................. 88,701 17.00
Exercised............................................ (12,794) 10.88-26.00
Canceled............................................. (5,808) 10.88-33.25
-------
December 31, 1994...................................... 184,410 273,111 9.25-33.25
Granted.............................................. 174,881 18.00-25.25
Exercised............................................ (15,400) 10.88
Canceled............................................. (500) 33.25
-------
December 31, 1995...................................... 321,695 432,092 9.25-33.25
Granted.............................................. 117,385 18.19-21.75
Exercised............................................ (12,279) 9.25-18.00
Canceled............................................. (5,458) 26.00-33.25
-------
December 31, 1996...................................... 418,936 531,740 $ 9.25-33.25
=======
</TABLE>
The weighted-average fair value of options granted during the year is $7.63
and $4.93 for the years ended December 31, 1996 and 1995, respectively.
The following table summarizes information about options outstanding at
December 31, 1996:
<TABLE>
<S> <C> <C> <C> <C>
Options Outstanding:
Range of Exercise Prices.................... $9.25 $15.25-19.75 $20.63-27.13 $33.25
Number Outstanding at 12/31/96.............. 20,825 353,009 139,706 18,200
Weighted-Average:
Remaining Contractual Life (years)....... 5 8.8 7.9 1.1
Exercise Price........................... $9.25 $18.02 $26.17 $33.25
Options Exercisable:
Number Exercisable at 12/31/96.............. 20,825 240,282 139,629 18,200
Weighted Average Exercise Price............. $9.25 $17.33 $26.18 $33.25
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions by year:
<TABLE>
<CAPTION>
ASSUMPTIONS 1996 1995
----------- ---- ----
<S> <C> <C>
Risk-free interest rate................................ 6.4% 5.5%
Expected life.......................................... 10 yrs. 10 yrs.
Expected volatility.................................... 35.2% 36.3%
Expected dividends..................................... 2.0% 2.0%
</TABLE>
F-17
<PAGE> 114
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (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 and earnings per share would
have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C> <C>
Net income.............................. As reported $11,229 $13,830
Pro forma 10,601 13,273
Net income per share.................... As reported 1.30 1.61
Pro forma 1.23 1.55
</TABLE>
The Company cautions that the pro forma net income and per share result in
the initial years of adoption are overstated due to the recognition of pro forma
compensation cost over the vesting period.
During 1996, the Walbro Engine Management Corporation Incentive
Compensation Plan reached the end of its five-year measurement term, and the
first of three annual payments was made. The Company has accrued approximately
$4,472,000 and $5,044,000 as of December 31, 1996 and 1995, respectively, under
this plan. Participants can elect to receive their payments in either cash or
common stock of the Company.
NOTE 9. POSTRETIREMENT HEALTH BENEFITS.
The Company provides postretirement health care, dental benefit and
prescription drug coverage to a limited number of current retirees.
Postretirement benefits are not available for active employees.
The following table reconciles the status of the accrued postretirement
benefit obligation at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation (APBO)... $4,068 $4,587
Plan assets at fair value.............................. -- --
------ ------
APBO in excess of plan assets.......................... 4,068 4,587
Unrecognized net gain (loss)........................... 331 (81)
------ ------
Accrued postretirement benefit obligation.............. $4,399 $4,506
====== ======
</TABLE>
The discount rate used in 1996 and 1995 was 7.25%.
Net periodic postretirement benefit cost consisted of the following for the
years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Interest cost...................................... $319 $350 $378
Amortization of unrecognized net loss.............. -- -- 35
---- ---- ----
$319 $350 $413
==== ==== ====
</TABLE>
For measurement purposes, a 7.63% annual rate of increase was assumed in
per capita cost of covered health and dental care benefits for 1996. The rate
was assumed to gradually decrease to 5% by the year 2003 and remain at that
level thereafter. The health care cost trend rate assumption has a significant
impact on the accumulated postretirement benefit obligation and on future
amounts accrued. A one percentage point increase each year in the assumed health
care cost would increase the accumulated postretirement benefit obligation at
December 31, 1996 by $364,000 and the interest cost component of net periodic
postretirement benefit cost for the year ended December 31, 1996 by $30,000.
F-18
<PAGE> 115
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10. PENSION PLANS.
The Company sponsors pension plans covering substantially all domestic
collectively bargained employees and certain foreign employees. The plan
covering domestic collectively bargained employees provides benefits of stated
amounts for each year of service. Plans covering certain foreign employees
provide payments at termination which are based upon length of service,
compensation rate and whether termination was voluntary or involuntary. The
Company annually contributes to the plans covering domestic employees and
certain foreign employees amounts which are actuarially determined to provide
the plan with sufficient assets to meet future benefit payment requirements. The
plans covering foreign employees in certain countries are not funded.
Total pension expense amounted to $325,000 in 1996, $251,000 in 1995 and
$239,000 in 1994. The Company recognizes currently the amount which would be
payable if employees covered by certain foreign plans terminated voluntarily.
Pension expense for the other plans is comprised of the following:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost.................................... $ 285 $ 136 $ 165
Interest on projected benefit obligation........ 345 263 219
Actual return on assets......................... (324) (240) (182)
Net amortization and deferral................... 19 12 16
----- ----- -----
$ 325 $ 171 $ 218
===== ===== =====
</TABLE>
The following table summarizes the funded status of the Company's defined
benefit pension plans and the related amounts recognized in the Company's
consolidated balance sheets as of December 31:
<TABLE>
<CAPTION>
1996
-------------------
PBO< PBO>
ASSETS ASSETS 1995
------ ------ ----
(IN THOUSANDS)
<S> <C> <C> <C>
Actuarial present value of benefit obligation
Vested..................................... $(5,237) $(511) $(4,022)
Nonvested.................................. (50) -- (767)
------- ----- -------
Accumulated benefit obligation............. (5,287) (511) (4,789)
Effects of salary progression.............. -- (116) --
------- ----- -------
Projected benefit obligation (PBO)......... (5,287) (627) (4,789)
------- ----- -------
Plan assets
Cash equivalents........................... 1,247 -- 270
Equity securities.......................... 4,365 -- 3,435
------- ----- -------
5,612 -- 3,705
------- ----- -------
Projected benefit obligation under (over)
plan assets................................ 325 (627) (1,084)
Unamortized net asset at transition.......... (31) -- (53)
Unamortized net (gain) loss.................. (77) -- 227
Adjustment to recognize minimum liability.... -- -- (1,038)
Unrecognized prior service cost.............. 823 -- 864
------- ----- -------
Pension asset (liability) recorded in the
consolidated balance sheets................ $ 1,040 $(627) $(1,084)
======= ===== =======
</TABLE>
F-19
<PAGE> 116
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The assumptions used in determining the funded status information shown
above were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Discount rate............................................... 6.0-7.5% 7.25-7.5% 8.5%
Long-term rate of return on assets.......................... 6.0-7.25% 8.5% 8.5%
</TABLE>
The Company also sponsors a defined contribution plan for non-union
domestic employees under which the Company will make matching contributions of
50% of each participant's before-tax contribution (up to 6% of the participant's
annual income) and retirement contribution of up to 3% (subject to change on an
annual basis) of a participant's annual income. The cost of defined
contributions charged to earnings during 1996, 1995 and 1994 was approximately
$2,252,000, $2,255,000 and $1,431,000, respectively.
Certain non-union employees, excluding officers, are eligible to
participate in the Walbro Corporation Employee Stock Ownership Plan (ESOP). The
Company will make annual contributions to a trust in the form of either cash or
common stock of the Company. The amount of the annual contribution is
discretionary, except that it must be sufficient to enable the trust to meet its
current obligations. The Company has guaranteed the ESOP's loan and is obligated
to contribute sufficient cash to the trust to repay the loan. Contribution
expense related to the ESOP amounted to $416,000, $515,000 and $365,000 in 1996,
1995 and 1994, respectively. Contribution expense is net of dividends of
$105,000, $105,000 and $210,000 in 1996, 1995 and 1994, respectively. As of
December 31, 1996 and 1995, the following are held by the ESOP: 218,000 and
194,000 allocated shares, respectively, and 28,000 and 56,000 suspense
(unallocated) shares, respectively, which are all committed-to-be-released.
NOTE 11. DISCLOSURES ABOUT DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF
FINANCIAL INSTRUMENTS.
The Company is a party to financial instruments with off-balance sheet risk
in the normal course of business to help meet financing needs and to reduce
exposure to fluctuating foreign currency exchange rates. The Company is exposed
to credit loss in the event of nonperformance by the other parties to the
financial instruments described below. However, the Company does not anticipate
nonperformance by the other parties. The Company does not engage in trading
activities with these financial instruments and does not generally require
collateral or other security to support these financial instruments. The
notional amounts of derivatives summarized below do not represent the amounts
exchanged by the parties and, thus, are not a measure of the exposure of the
Company through its use of derivatives. The amounts exchanged are calculated on
the basis of the notional amounts and the other terms of the derivatives.
Financial Instruments with Off-Balance Sheet Risk
The Company enters into forward currency exchange contracts to manage its
foreign currency exchange risk. As of December 31, 1996, the notional amounts of
contracts outstanding were approximately $5,975,000. There were no contracts
outstanding as of December 31, 1995.
The Company enters into forward currency exchange contracts to manage its
exposure against foreign currency fluctuations related to firm commitments. As
of December 31, 1994, the Company had one forward currency exchange contract
which matured in 1995 and exchanged 86,332,000 French francs. Total losses on
this contract of approximately $1,800,000 were recorded as a deferred asset
during 1994. This asset was recognized based on actual purchases of the related
commitments. The amounts included in the accompanying consolidated statements of
income related to this contract for the years ending December 31, 1996, 1995 and
1994 were approximately $480,000, $720,000 and $600,000, respectively.
The Company enters into forward currency exchange contracts to reduce its
exposure against fluctuations in foreign currency exchange rates. During 1996,
the Company had fifteen forward currency exchange contracts which matured during
1996, which exchanged 939,000,000 Japanese yen and 20,200,000 Deutsche
F-20
<PAGE> 117
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
marks. During 1995, the Company had twenty-one forward currency exchange
contracts which matured during 1995, which exchanged 1,015,000,000 Japanese yen,
and 15,300,000 Singapore dollars. The amounts included in foreign currency
exchange (gain) loss in the accompanying consolidated statements of income
related to these contracts were a gain of approximately $339,000 for the year
ending December 31, 1996 and a gain of approximately $929,000 for the year
ending December 31, 1995.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
Notes Receivable
The fair value is estimated using the expected future cash flows discounted
at current interest rates.
Marketable Equity Securities
The fair value of marketable equity securities is estimated by quoted
market prices when the investment is traded on a public stock exchange. For
investments not publicly traded, a combination of book value and fair market
value of assets is used.
Long-Term Debt
The fair value of the Company's public debt is estimated using quoted
market prices. The fair value of the Company's other long-term debt is estimated
using the expected future cash flows discounted at the current interest rates
offered to the Company for debt of the same remaining maturities.
Forward Currency Exchange Contracts
The fair value of forward currency exchange contracts is estimated by
obtaining quotes from brokers.
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
1996 1995
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- ----- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Notes receivable.................................... $ 1,268 $ 1,268 $ 460 $ 460
Long-term debt...................................... 292,812 293,212 234,475 232,865
Forward currency exchange contracts................. -- (258) (1,200) (1,200)
</TABLE>
NOTE 12. LEASES.
The Company has leased certain of its buildings, equipment and vehicles
under operating leases. The leases involving buildings contain options enabling
the Company to renew the leases at the end of the respective lease terms. Rent
expense was approximately $7,702,000, $4,761,000 and $3,324,000 in 1996, 1995
and 1994, respectively.
F-21
<PAGE> 118
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Aggregate minimum future rentals under noncancellable leases are as
follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
(IN THOUSANDS)
<S> <C> <C>
1997.................................................. $ 850 $ 6,395
1998.................................................. 850 5,499
1999.................................................. 850 5,125
2000.................................................. 850 3,040
2001.................................................. 850 1,446
Thereafter............................................ 142 7,739
------ -------
Total minimum lease payments........................ 4,392 $29,244
=======
Amount representing interest.......................... 752
------
Present value of net future minimum lease
payments......................................... $3,640
======
</TABLE>
NOTE 13. ACCRUED LIABILITIES.
Accrued liabilities consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
(IN THOUSANDS)
<S> <C> <C>
Compensation related................................. $10,336 $ 4,680
Income Taxes......................................... 2,704 6,690
Facilities and employee relocation................... 7,471 7,664
Interest............................................. 7,449 5,352
Other................................................ 13,316 9,966
------- -------
$41,276 $34,352
======= =======
</TABLE>
NOTE 14. STOCKHOLDERS' EQUITY.
The Company has a stock rights plan which entitles the holder of each
right, upon the occurrence of certain events, to purchase one one-hundredth of a
share of a new series of preferred stock for $75. Furthermore, if the Company is
involved in a merger or other business combination at any time after the rights
become exercisable, the rights will entitle the holder to buy the number of
shares of common stock of the acquiring company having a market value of twice
the then current exercise price of each right. Alternatively, if a 15% or more
shareholder acquires the Company by means of a reverse merger in which the
Company and its stock survives, or engages in self-dealing transactions with the
Company, or if any person acquires 50% or more of the Company's common stock,
then each right not owned by a 15% or more shareholder will become exercisable
for the number of shares of common stock of the Company having a market value of
twice the then current exercise price of each right. The rights, which do not
have voting rights, expire in December 1998 and may be redeemed by the Company
at a price of $.01 per right at any time prior to their expiration or the time
they become exercisable.
The Company has authorized 1,000,000 shares of $1.00 par value preferred
stock.
F-22
<PAGE> 119
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15. BUSINESS SEGMENT INFORMATION.
The Company operates through its subsidiaries in the following industry
segments:
1. Automotive, which designs, develops and manufactures fuel storage and
delivery products for a broad range of U.S. and foreign manufacturers of
passenger automobiles and light trucks (including minivans), and
2. Small Engine, which designs, develops and manufactures diaphragm
carburetors for portable engines, float feed carburetors for ground supported
engines and ignition systems and other components for a variety of small engine
products. The Company includes aftermarket operations for both the automotive
and small engine markets within its small engine business segment.
Selected financial information about the Company's business and geographic
segments are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Financial Information by Business
Segment
Net sales to customers:
Automotive............................ $444,239 $324,963 $204,563
Small Engine.......................... 145,299 144,273 134,483
Corporate............................. 5,004 4,430 1,022
-------- -------- --------
594,542 473,666 340,068
Eliminations............................ (9,153) (14,394) (14,863)
-------- -------- --------
Total net sales......................... $585,389 $459,272 $325,205
======== ======== ========
Operating profit (loss):
Automotive............................ $ 30,473 $ 30,076 $ 24,883
Small Engine.......................... 13,727 16,607 18,522
Corporate............................. (29,896) (31,595) (22,986)
-------- -------- --------
Income before provision for income
taxes................................. $ 14,304 $ 15,088 $ 20,419
======== ======== ========
Identifiable assets:
Automotive............................ $463,144 $377,975 $155,006
Small Engine.......................... 82,670 65,485 64,494
Corporate............................. 43,835 50,013 37,866
-------- -------- --------
Total identifiable assets............... $589,649 $493,473 $257,366
======== ======== ========
Depreciation and amortization:
Automotive............................ $ 20,779 $ 12,967 $ 6,320
Small Engine.......................... 6,334 6,090 5,841
Corporate............................. 2,623 3,394 2,511
-------- -------- --------
Total depreciation and amortization..... $ 29,736 $ 22,451 $ 14,672
======== ======== ========
Capital expenditures:
Automotive............................ $ 84,293 $ 35,609 $ 10,101
Small Engine.......................... 11,769 9,692 5,113
Corporate............................. 3,085 939 3,630
-------- -------- --------
Total capital expenditures.............. $ 99,147 $ 46,240 $ 18,844
======== ======== ========
</TABLE>
F-23
<PAGE> 120
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Financial Information by Geographic
Segment
Net sales to customers:
United States......................... $342,883 $314,697 $260,710
Europe................................ 214,400 88,736 --
Far East and Other Foreign............ 28,106 55,839 64,495
-------- -------- --------
585,389 459,272 325,205
Net sales between geographic areas.... 30,034 27,663 31,094
-------- -------- --------
615,423 486,935 356,299
Eliminations............................ (30,034) (27,663) (31,094)
-------- -------- --------
Total net sales......................... $585,389 $459,272 $325,205
======== ======== ========
Operating profit:
United States......................... $ 37,105 $ 35,225 $ 37,040
Europe................................ 5,383 5,352 --
Far East and Other Foreign............ 1,712 6,106 6,365
-------- -------- --------
44,200 46,683 43,405
Corporate, net.......................... (29,896) (31,595) (22,986)
-------- -------- --------
Income before provision for income
taxes................................. $ 14,304 $ 15,088 $ 20,419
======== ======== ========
Identifiable assets:
United States......................... $324,988 $262,020 $224,369
Europe................................ 194,017 193,876 --
Far East and Other Foreign............ 70,644 37,577 32,997
-------- -------- --------
Total identifiable assets............... $589,649 $493,473 $257,366
======== ======== ========
</TABLE>
The Europe geographic segment includes operations in Belgium, France,
Germany, Norway, Spain and the United Kingdom. The Far East and Other Foreign
geographic segment includes operations in Japan, Singapore, Korea, China,
Brazil, Mexico and Canada. Sales between geographic areas are accounted for at
cost plus a margin for profit. Operating profit consists of total sales less
operating expenses excluding general corporate expenses, interest expense and
income taxes. Identifiable assets are those assets used in the operations in
each geographic area. Export sales from domestic locations were approximately
$127,248,000, $78,985,000 and $36,881,000 for 1996, 1995 and 1994, respectively.
A majority of the Company's sales are to automobile manufacturing
companies. Sales to certain major customers which exceeded 10% of consolidated
sales are as follows. Sales to one such customer amounted to 20%, 19% and 23% of
consolidated sales in 1996, 1995 and 1994, respectively. Sales to another such
customer amounted to 10%, 21% and 30% of consolidated sales in 1996, 1995 and
1994, respectively.
Several other factors could have a significant impact on the continuing
operations of the Company. These factors include changes in demand for
automobiles and light trucks, relationships with significant customers, price
pressures, the timing and structure of future acquisitions or dispositions, the
integration of the Dyno acquisition into Walbro's overall business, impact of
environmental regulations, continued availability of adequate funding sources,
currency and other risks inherent in international sales, and general economic
and business conditions.
F-24
<PAGE> 121
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 16. SUPPLEMENTAL CASH FLOW INFORMATION.
In 1996, 1995 and 1994, the Company paid $5,048,000, $3,290,000 and
$6,749,000 for income taxes and $21,674,000, $7,191,000 and $4,122,000 for
interest, respectively.
NOTE 17. QUARTERLY FINANCIAL INFORMATION (UNAUDITED).
Selected quarterly financial information for the years ended December 31,
1996 and 1995 is as follows:
<TABLE>
<CAPTION>
QUARTER
--------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
----- ------ ----- ------ -----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
1996--
Net sales.......................... $152,966 $155,086 $132,545 $144,792 $585,389
Cost of sales...................... 124,178 126,752 111,116 126,088 488,134
-------- -------- -------- -------- --------
Gross profit.................... $ 28,788 $ 28,334 $ 21,429 $ 18,704 $ 97,255
======== ======== ======== ======== ========
Net income......................... $ 4,534 $ 4,824 $ 2,346 $ (475) $ 11,229
======== ======== ======== ======== ========
Net income per share............... $ .53 $ .56 $ .27 $ (.05) $ 1.30
======== ======== ======== ======== ========
1995--
Net sales.......................... $ 98,257 $ 90,034 $124,495 $146,486 $459,272
Cost of sales...................... 77,550 73,036 105,444 121,725 377,755
-------- -------- -------- -------- --------
Gross profit.................... $ 20,707 $ 16,998 $ 19,051 $ 24,761 $ 81,517
======== ======== ======== ======== ========
Net income......................... $ 5,088 $ 3,835 $ 2,289 $ 2,618 $ 13,830
======== ======== ======== ======== ========
Net income per share............... $ .59 $ .45 $ .27 $ .30 $ 1.61
======== ======== ======== ======== ========
</TABLE>
Net income per share and weighted average shares are computed independently
for each of the quarters presented. Therefore, the sum of the quarterly net
income per share may not equal the per share total for the year.
NOTE 18. SUBSEQUENT EVENT.
In February 1997, the Company sold 2,760,000 Convertible Trust Preferred
Securities of Walbro Capital Trust, a wholly-owned subsidiary of the Company, at
a face value of $25 per share and an interest rate of 8% per annum. The
preferred securities are convertible into common stock of the Company at the
option of the security-holder anytime after April 4, 1997. Net proceeds of the
offering were approximately $66,000,000 and were used to repay a portion of the
Company's revolving credit facility.
F-25
<PAGE> 122
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 19. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ --------------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash............................... $ 299 $ 17,779 $ 135 $ -- $ 18,213
Accounts receivable, net........... 67,944 57,823 742 -- 126,509
Accounts receivable,
intercompany..................... (81,610) 115 101,752 (20,257) --
Inventories........................ 25,219 22,884 2,485 -- 50,588
Prepaid expenses and other......... 4,464 5,851 920 -- 11,235
Deferred and refundable income
taxes............................ 509 1,016 3,446 -- 4,971
-------- -------- -------- --------- --------
Total current assets........... 16,825 105,468 109,480 (20,257) 211,516
-------- -------- -------- --------- --------
Plant and Equipment, net............. 121,084 150,699 7,995 109 279,887
-------- -------- -------- --------- --------
Other Assets:
Funds held for construction........ 1,140 -- -- -- 1,140
Joint ventures..................... 10,629 18,326 -- -- 28,955
Investments........................ 118,673 24,723 104,084 (241,753) 5,727
Goodwill, net...................... 23,238 12,877 (117) -- 35,998
Notes receivable................... 1,074 -- 204,884 (204,690) 1,268
Deferred and refundable income
taxes............................ -- 543 4,871 -- 5,414
Other.............................. 8,890 2,926 7,928 -- 19,744
-------- -------- -------- --------- --------
Total other assets............. 163,644 59,395 321,650 (446,443) 98,246
-------- -------- -------- --------- --------
Total assets......................... $301,553 $315,562 $439,125 $(466,591) $589,649
======== ======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term
debt............................. $ 598 $ 82 $ 409 $ -- $ 1,089
Bank and other borrowings.......... -- 22,072 -- -- 22,072
Accounts payable................... 34,690 61,068 8,981 (26,800) 77,939
Accrued liabilities................ 17,046 16,498 10,633 (2,901) 41,276
Dividends payable.................. -- -- 865 -- 865
-------- -------- -------- --------- --------
Total current liabilities...... 52,334 99,720 20,888 (29,701) 143,241
-------- -------- -------- --------- --------
Long-term Liabilities:
Long-term debt, less current
portion.......................... 171,675 83,820 269,141 (232,913) 291,723
Pension obligations and other...... -- 2,826 7,892 -- 10,718
Deferred income taxes.............. -- 1,443 3,471 -- 4,914
Minority interest.................. -- 1,320 -- -- 1,320
-------- -------- -------- --------- --------
Total long-term liabilities.... 171,675 89,409 280,504 (232,913) 308,675
-------- -------- -------- --------- --------
Stockholders' Equity:
Common stock, $.50 par value;
authorized 25,000,000;
outstanding 8,652,737 in 1996.... -- 19,853 4,326 (19,853) 4,326
Paid-in capital.................... -- 74,637 65,674 (74,637) 65,674
Retained earnings.................. 77,524 33,569 74,039 (111,093) 74,039
Deferred compensation.............. -- -- (967) -- (967)
Minimum pension liability
adjustment....................... -- -- -- -- --
Unrealized gain on securities
available for sale............... -- -- 688 -- 688
Cumulative translation
adjustments...................... 20 (1,626) (6,027) 1,606 (6,027)
-------- -------- -------- --------- --------
Total stockholders' equity..... 77,544 126,433 137,733 (203,977) 137,733
-------- -------- -------- --------- --------
Total liabilities and stockholders'
equity............................. $301,553 $315,562 $439,125 $(466,591) $589,649
======== ======== ======== ========= ========
</TABLE>
F-26
<PAGE> 123
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 19. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ --------------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash............................... $ 75 $ 19,219 $ 498 $ -- $ 19,792
Accounts receivable, net........... 59,569 52,837 940 -- 113,346
Accounts receivable,
intercompany..................... (38,971) (1,382) 48,176 (7,823) --
Inventories........................ 24,416 25,342 965 -- 50,723
Prepaid expenses and other......... 8,519 2,264 678 (495) 10,966
Deferred and refundable income
taxes............................ 349 464 4,064 -- 4,877
-------- -------- -------- --------- --------
Total current assets........... 53,957 98,744 55,321 (8,318) 199,704
-------- -------- -------- --------- --------
Plant and Equipment, net............. 85,437 111,190 9,030 108 205,765
-------- -------- -------- --------- --------
Other Assets:
Funds held for construction........ 1,102 -- -- -- 1,102
Joint ventures..................... 10,181 13,285 -- -- 23,466
Investments........................ 144,588 295 101,386 (237,045) 9,224
Goodwill, net...................... 15,254 18,045 -- -- 33,299
Notes receivable................... -- -- 189,134 (188,674) 460
Deferred and refundable income
taxes............................ -- 2,805 -- -- 2,805
Other.............................. 8,352 1,987 7,309 -- 17,648
-------- -------- -------- --------- --------
Total other assets............. 179,477 36,417 297,829 (425,719) 88,004
-------- -------- -------- --------- --------
Total assets......................... $318,871 $246,351 $362,180 $(433,929) $493,473
======== ======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term
debt............................. $ 555 $ 123 $ 408 $ -- $ 1,086
Bank and other borrowings.......... -- 14,921 -- -- 14,921
Accounts payable................... 27,113 36,988 2,057 (13,384) 52,774
Accrued liabilities................ 13,278 15,360 6,029 (315) 34,352
Dividends payable.................. -- -- 858 -- 858
-------- -------- -------- --------- --------
Total current liabilities...... 40,946 67,392 9,352 (13,699) 103,991
-------- -------- -------- --------- --------
Long-term Liabilities:
Long-term debt, less current
portion.......................... 204,435 45,387 205,448 (221,881) 233,389
Pension obligations and other...... 618 4,455 10,029 -- 15,102
Deferred income taxes.............. -- 2,003 1,924 -- 3,927
Minority interest.................. -- 1,637 -- -- 1,637
-------- -------- -------- --------- --------
Total long-term liabilities.... 205,053 53,482 217,401 (221,881) 254,055
-------- -------- -------- --------- --------
Stockholders' Equity:
Common stock, $.50 par value;
authorized 25,000,000;
outstanding 8,579,976 in 1995.... -- 19,392 4,290 (19,392) 4,290
Paid-in capital.................... -- 78,633 64,381 (78,633) 64,381
Retained earnings.................. 72,301 23,993 66,256 (96,294) 66,256
Deferred compensation.............. -- -- (817) -- (817)
Minimum pension liability
adjustment....................... -- -- (63) -- (63)
Unrealized gain on securities
available for sale............... -- -- 827 -- 827
Cumulative translation
adjustments...................... 571 3,459 553 (4,030) 553
-------- -------- -------- --------- --------
Total stockholders' equity..... 72,872 125,477 135,427 (198,349) 135,427
-------- -------- -------- --------- --------
Total liabilities and stockholders'
equity............................. $318,871 $246,351 $362,180 $(433,929) $493,473
======== ======== ======== ========= ========
</TABLE>
F-27
<PAGE> 124
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 19. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ --------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NET SALES........................ $325,547 $284,812 $ 1,671 $(26,641) $585,389
COSTS AND EXPENSES:
Cost of sales.................. 264,824 248,589 1,362 (26,641) 488,134
Selling and administrative
expenses.................... 47,557 22,239 73 -- 69,869
-------- -------- -------- -------- --------
OPERATING INCOME (LOSS).......... 13,166 13,984 236 -- 27,386
OTHER EXPENSE (INCOME):
Interest expense............... 14,824 5,773 21,512 (22,276) 19,833
Interest income................ (5,416) (1,999) (17,577) 22,276 (2,716)
Foreign currency exchange loss
(gain)...................... (309) (131) 370 -- (70)
Other.......................... (4) 158 (217) -- (63)
-------- -------- -------- -------- --------
Income before provision (credit)
for income taxes, minority
interest, equity in (income)
loss of joint ventures and
subsidiaries................... 4,071 10,183 (3,852) -- 10,402
Provision (credit) for income
taxes.......................... 1,240 4,155 (2,320) -- 3,075
Minority interest................ -- 285 -- -- 285
Equity in (income) loss of joint
ventures....................... (552) (3,635) -- -- (4,187)
Equity in (income) of
subsidiaries................... (9,932) (518) (12,761) 23,211 --
-------- -------- -------- -------- --------
Net income....................... $ 13,315 $ 9,896 $ 11,229 $(23,211) $ 11,229
======== ======== ======== ======== ========
</TABLE>
F-28
<PAGE> 125
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 19. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ --------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NET SALES........................ $335,896 $156,280 $ 2,091 $(34,995) $459,272
COSTS AND EXPENSES:
Cost of sales.................. 277,196 134,219 1,335 (34,995) 377,755
Selling and administrative
expenses.................... 39,660 13,467 4,368 -- 57,495
-------- -------- -------- -------- --------
OPERATING INCOME (LOSS).......... 19,040 8,594 (3,612) -- 24,022
OTHER EXPENSE (INCOME):
Interest expense............... 10,387 4,300 10,503 (13,119) 12,071
Interest income................ (2,974) (797) (10,308) 13,119 (960)
Foreign currency exchange loss
(gain)...................... (324) (68) 1,875 -- 1,483
Other.......................... 3 (255) (3) -- (255)
-------- -------- -------- -------- --------
Income before provision (credit)
for income taxes, minority
interest, equity in (income)
loss of joint ventures and
subsidiaries................... 11,948 5,414 (5,679) -- 11,683
Provision (credit) for income
taxes.......................... 1,237 1,958 (1,937) -- 1,258
Minority interest................ -- 472 -- -- 472
Equity in (income) loss of joint
ventures....................... (1,222) (2,655) -- -- (3,877)
Equity in (income) of
subsidiaries................... (6,417) -- (17,572) 23,989 --
-------- -------- -------- -------- --------
Net income....................... $ 18,350 $ 5,639 $ 13,830 $(23,989) $ 13,830
======== ======== ======== ======== ========
</TABLE>
F-29
<PAGE> 126
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 19. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1994
-------------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ --------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NET SALES......................... $296,779 $ 58,903 $ 1,021 $(31,498) $325,205
COSTS AND EXPENSES:
Cost of sales................... 242,155 49,910 934 (31,498) 261,501
Selling and administrative
expenses..................... 26,765 3,576 8,977 -- 39,318
-------- -------- -------- -------- --------
OPERATING INCOME (LOSS)........... 27,859 5,417 (8,890) -- 24,386
OTHER EXPENSE (INCOME):
Interest expense................ 4,911 1,366 2,428 (4,843) 3,862
Interest income................. -- (4) (4,930) 4,843 (91)
Foreign currency exchange loss
(gain)....................... 260 (42) 2,384 -- 2,602
Other........................... (2) 18 95 -- 111
-------- -------- -------- -------- --------
Income before provision (credit)
for income taxes, minority
interest, equity in (income)
loss of joint ventures and
subsidiaries.................... 22,690 4,079 (8,867) -- 17,902
Provision (credit) for income
taxes........................... 7,741 1,213 (3,130) -- 5,824
Minority interest................. -- 92 -- -- 92
Equity in (income) loss of joint
ventures........................ (1,509) (1,491) 391 -- (2,609)
Equity in (income) of
subsidiaries.................... (4,265) -- (20,723) 24,988 --
-------- -------- -------- -------- --------
Net income........................ $ 20,723 $ 4,265 $ 14,595 $(24,988) $ 14,595
======== ======== ======== ======== ========
</TABLE>
F-30
<PAGE> 127
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 19. 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>
F-31
<PAGE> 128
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 19. 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 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>
F-32
<PAGE> 129
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 19. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1994
-------------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ --------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities........... $ 25,141 $ 2,323 $(16,987) $-- $ 10,477
-------- ------- -------- --- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of plant and
equipment................... (12,428) (2,729) (3,687) -- (18,844)
Acquisitions, net of cash
acquired.................... (1,480) -- -- -- (1,480)
Purchase of other assets....... (985) -- (1,630) -- (2,615)
Investment in joint ventures
and other................... (1,508) -- -- -- (1,508)
Proceeds/(payments) of
intercompany note
receivable.................. (8,500) -- 8,500 -- --
Proceeds from disposal of
assets...................... 402 407 654 -- 1,463
-------- ------- -------- --- --------
Net cash provided by (used in)
investing activities........... (24,499) (2,322) 3,837 -- (22,984)
-------- ------- -------- --- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net borrowings (repayments)
under revolving
line-of-credit agreements... -- 1,011 (28,750) -- (27,739)
Debt repayments................ (416) -- (408) -- (824)
Proceeds from issuance of long-
term debt................... -- -- 45,000 -- 45,000
Proceeds from issuance of
common stock and options.... -- -- 230 -- 230
Cash dividends paid............ -- -- (3,424) -- (3,424)
-------- ------- -------- --- --------
Net cash provided by (used in)
financing activities........... (416) 1,011 12,648 -- 13,243
-------- ------- -------- --- --------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH........................ (582) (219) -- -- (801)
-------- ------- -------- --- --------
NET INCREASE (DECREASE) IN
CASH........................... (356) 793 (502) -- (65)
CASH AT BEGINNING OF YEAR........ 431 1,732 2,442 -- 4,605
-------- ------- -------- --- --------
CASH AT END OF YEAR.............. $ 75 $ 2,525 $ 1,940 $-- $ 4,540
======== ======= ======== === ========
</TABLE>
F-33
<PAGE> 130
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 19. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
Basis of Presentation -- In connection with the acquisition (the Dyno
Acquisition) by the Company of the fuel systems business of Dyno Industrier A.S
(Dyno) and the execution of a $135,000,000 credit facility in July 1995, the
Company issued $110,000,000 in aggregate principal amount of Senior Notes due in
2005 (the Notes). The Notes are guaranteed on a senior unsecured basis, jointly
and severally, by each of the Company's principal wholly-owned domestic
operating subsidiaries and certain of its indirect wholly-owned subsidiaries
(the Guarantors). The Guarantors include Walbro Automotive Corporation, Walbro
Engine Management Corporation, Whitehead Engineered Products, Inc. and Sharon
Manufacturing Co. The condensed consolidating financial statements of the
Guarantors are presented on pages 24 through 31 and should be read in connection
with the consolidated financial statements of the Company. Separate financial
statements of the Guarantors are not presented because the Guarantors are
jointly, severally and unconditionally liable under the guarantees, and the
Company believes the condensed consolidating financial statements presented are
more meaningful in understanding the financial position of the Guarantors.
Distributions -- There are no significant restrictions on the ability of
the Guarantors to make distributions to Walbro Corporation.
Selling and Administrative Expenses -- During 1996 and 1995, the Parent
Corporation allocated $10,422,000 and $3,637,000, respectively, of corporate
selling and administrative expenses to its operating subsidiaries. No
allocations were made during 1994.
Long-term debt of the Parent Corporation and the Guarantors consisted of
the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Senior notes due 2005, unsecured, stated interest at 9.875%
(9.92% effective interest rate) net of unamortized
discount of $331 and $369 as of December 31, 1996 and
1995, respectively........................................ $109,669 $109,631
Revolving credit facility, secured, interest at the agent's
base rate plus an additional margin....................... 114,062 50,000
Term loan from the State of Connecticut, secured, interest
at 6% per annum, payable in monthly amounts from 1997 to
2005...................................................... 3,400 800
Senior notes, secured, interest at 7.68%, payable in annual
amounts from 1998 to 2004................................. 45,000 45,000
Industrial revenue bond, issued by Town of Ossian, Indiana,
interest at a variable municipal bond rate, due in 2023... 9,000 9,000
Industrial revenue bond, issued by City of Ligonier,
Indiana, interest at a variable municipal bond rate plus
1%, payable in annual amounts from 2003 to 2007........... 6,300 6,300
ESOP credit agreement, interest rate which approximates 86%
of prime, payable in annual installments of $408.......... 817 1,225
Capital lease obligations, interest at 7.5%, payable in
monthly installments through February 2002................ 3,640 4,195
Other....................................................... 67 82
-------- --------
291,955 226,233
Less -- Current portion..................................... 1,007 963
-------- --------
$290,948 $225,270
======== ========
</TABLE>
For a more detailed description of the above indebtedness, see Note 5 of
Notes to Consolidated Financial Statements.
F-34
<PAGE> 131
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 19. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
Aggregate minimum principal payment requirements on long-term debt,
including capital lease obligations, in each of the five years subsequent to
December 31, 1996 are as follows: 1997 - $1,007,000; 1998 - $7,584,000; 1999 -
$7,348,000; 2000 - $121,476,000; 2001 - $7,484,000 and thereafter -
$147,056,000.
F-35
<PAGE> 132
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
9/30/97 12/31/96
------- --------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash...................................................... $ 12,723 $ 18,213
Accounts receivable, net.................................. 158,545 126,509
Inventories............................................... 59,402 50,588
Other current assets...................................... 16,050 16,206
--------- --------
Total Current Assets................................... 246,720 211,516
--------- --------
Property, Plant and Equipment:
Land, buildings and improvements.......................... 101,036 74,931
Machinery and equipment................................... 293,127 285,376
--------- --------
Subtotal............................................... 394,163 360,307
Less: Accumulated depreciation............................ (103,790) (80,420)
--------- --------
Net Property, Plant and Equipment...................... 290,373 279,887
--------- --------
Other Assets:
Goodwill, net............................................. 34,661 35,998
Joint ventures, investments and other..................... 67,124 62,248
--------- --------
Total Other Assets..................................... 101,785 98,246
--------- --------
Total Assets........................................... $ 638,878 $589,649
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion long-term debt............................ $ 1,020 $ 1,089
Notes payable -- Banks.................................... 24,513 22,072
Accounts payable.......................................... 88,493 77,939
Accrued liabilities....................................... 46,098 42,141
--------- --------
Total Current Liabilities.............................. 160,124 143,241
--------- --------
Long-term debt, net of current.............................. 277,249 291,723
Other long-term liabilities............................... 15,559 16,952
--------- --------
Total Long-Term Liabilities............................ 292,808 308,675
--------- --------
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 8,664,420 in 1997 and 8,652,737 in 1996.... 4,332 4,326
Paid-in capital........................................... 65,844 65,674
Retained earnings......................................... 73,801 74,039
Other stockholders' equity................................ (27,031) (6,306)
--------- --------
Total Stockholders' Equity............................. 116,946 137,733
--------- --------
Total Liabilities and Stockholders' Equity............. $ 638,878 $589,649
========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-36
<PAGE> 133
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------- --------------------
9/30/97 9/30/96 9/30/97 9/30/96
------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net Sales........................................... $146,523 $132,545 $454,384 $440,501
Costs and Expenses:
Cost of sales..................................... 125,911 111,116 387,169 361,951
Selling and administrative expenses............... 12,151 11,461 37,310 40,101
Research and development expenses................. 4,727 4,986 11,951 13,432
-------- -------- -------- --------
Operating Income.................................... 3,734 4,982 17,954 25,017
Other Expense (Income):
Interest expense.................................. 6,029 5,059 17,672 15,652
Interest income................................... (337) (384) (652) (1,008)
Other............................................. (343) (428) (2,396) (714)
-------- -------- -------- --------
Income (Loss) Before Provision for Income Taxes,
Minority Interest and Equity in Income of Joint
Ventures....................................... (1,615) 735 3,330 11,087
Provision for Income Taxes.......................... (1,019) 23 474 3,032
Minority Interest................................... 1,318 110 3,715 320
Equity in (Income) of Joint Ventures................ (728) (1,744) (3,219) (3,969)
-------- -------- -------- --------
Net Income (Loss).............................. $ (1,186) $ 2,346 $ 2,360 $ 11,704
======== ======== ======== ========
Net Income (Loss) Per Share.................... $ (0.14) $ 0.27 $ 0.27 $ 1.35
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-37
<PAGE> 134
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------
9/30/97 9/30/96
------- -------
(UNAUDITED)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income................................................ $ 2,360 $ 11,704
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation and amortization........................ 25,741 20,201
(Gain) loss on disposition of assets................. 1,802 (94)
(Income) of joint ventures........................... (3,219) (3,969)
Minority interest.................................... 148 (234)
Changes in assets and liabilities:
Deferred income taxes............................. 141 175
Deferred pension and other........................ (1,829) (1,498)
Accounts payable and accrued liabilities.......... 21,692 14,027
Accounts receivable, net.......................... (30,831) (28,597)
Inventories....................................... (11,651) (4,548)
Prepaid expenses and other........................ (1,476) (5,894)
-------- --------
Total adjustments............................... 518 (10,431)
-------- --------
Net cash provided by operating activities............ 2,878 1,273
-------- --------
Cash Flows From Investing Activities:
Purchase of fixed assets.................................. (54,383) (70,453)
Purchase of other assets.................................. (1,364) (2,789)
Investment in joint ventures and other.................... (2,450) (259)
Proceeds from disposal of assets.......................... 6,221 3,533
-------- --------
Net cash used in investing activities................ (51,976) (69,968)
-------- --------
Cash Flows From Financing Activities:
Borrowings under lines-of-credit.......................... 124,686 192,410
Repayments under lines-of-credit.......................... (138,462) (122,898)
Debt repayments........................................... (936) (820)
Proceeds from issuance of stock and options............... 69,176 392
Cash dividends paid....................................... (2,596) (2,578)
Financing fees paid....................................... (3,491) (449)
-------- --------
Net cash provided by (used in) financing
activities.......................................... 48,377 66,057
-------- --------
Effect of exchange rate changes on cash................... (4,769) (1,927)
-------- --------
Net decrease in cash...................................... (5,490) (4,565)
Cash beginning balance.................................... 18,213 19,792
-------- --------
Cash ending balance....................................... $ 12,723 $ 15,227
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-38
<PAGE> 135
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. PREFERRED SECURITIES OFFERING
In February 1997, the Company completed an offering of 2,760,000 shares, or
$69 million of Convertible 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. Each share of preferred stock will yield 1.1737 shares of common
stock of the Company upon conversion. Net proceeds of the offering were
approximately $66 million and were used to repay a portion of the Company's
credit facility.
NOTE 2. EARNINGS PER SHARE
During 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share", which 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 to be computed using only weighted average
shares outstanding. Diluted EPS is to be computed using the average share price
for the period when calculating the dilution of options and warrants. This
statement must be adopted by the Company in its December 31, 1997 consolidated
financial statements and early adoption is not permitted. If this statement had
been adopted for the periods presented, the net income and per share amounts
would have been as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------- -----------------------
9/30/97 9/30/96 9/30/97 9/30/96
------- ------- ------- -------
(UNAUDITED; IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net income...................... $(1,186) $2,346 $2,360 $ 11,704
Basic income (loss) per share... $(0.14) $0.27 $0.27 $1.35
Diluted income (loss) per
share......................... $(0.14) $0.27 $0.27 $1.35
</TABLE>
NOTE 3. 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>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and components...................... $32,280 $23,964
Work-in-process................................... 9,201 10,620
Finished products................................. 17,921 16,004
------- -------
Total........................................ $59,402 $50,588
======= =======
</TABLE>
NOTE 4. ACCOUNTING POLICIES FOR FINANCIAL INSTRUMENTS
In order to manage exposure to fluctuations in foreign currency exchange
rates, the Company regularly enters into forward currency exchange contracts.
Gains or 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. A foreign currency commitment qualifies for hedge
accounting treatment when
F-39
<PAGE> 136
the related transaction is firm in nature and non-cancellable by the Company.
Gains or losses on contracts that hedge net investments in foreign joint
ventures or subsidiaries are recognized as cumulative translation adjustments in
stockholders' equity. Gains or losses on forward currency exchange contracts
that do not qualify as hedges are recognized as other income or expense in the
current period.
As of September 30, 1997, there were no contracts outstanding. For the
three months ended September 30, 1997, the Company had no forward currency
exchange contracts.
NOTE 5. RECLASSIFICATIONS
Certain amounts in the 1996 consolidated financial statements have been
reclassified to conform with the presentation used in 1997.
F-40
<PAGE> 137
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ --------------- ------------
(UNAUDITED; IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash..................................... $ (709) $ 12,609 $ 823 $ -- $ 12,723
Accounts receivable, net................. 84,363 73,455 727 -- 158,545
Accounts receivable, intercompany........ (120,068) (26,394) 146,348 114 --
Inventories.............................. 28,308 28,757 2,337 -- 59,402
Prepaid expenses and other............... 3,823 5,427 961 -- 10,211
Deferred and refundable income taxes..... 694 1,699 3,446 -- 5,839
--------- -------- -------- --------- --------
Total current assets................... (3,589) 95,553 154,642 114 246,720
--------- -------- -------- --------- --------
Plant and Equipment, net 134,118 148,843 7,304 108 290,373
--------- -------- -------- --------- --------
Other Assets:
Funds held for construction.............. -- -- -- -- --
Joint ventures........................... 13,233 16,875 -- -- 30,108
Investments.............................. 119,815 24,690 92,397 (231,330) 5,572
Goodwill, net............................ 22,997 11,869 (205) -- 34,661
Notes receivable......................... 1,116 75,446 197,384 (270,672) 3,274
Deferred and refundable income taxes..... -- 1,545 4,871 -- 6,416
Other.................................... 9,230 2,868 9,656 -- 21,754
--------- -------- -------- --------- --------
Total other assets..................... 166,391 133,293 304,103 (502,002) 101,785
--------- -------- -------- --------- --------
Total assets............................... $ 296,920 $377,689 $466,049 $(501,780) $638,878
========= ======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt........ $ 597 $ 14 $ 409 $ -- $ 1,020
Bank and other borrowings................ -- 27,972 -- (3,459) 24,513
Accounts payable......................... 29,201 46,712 12,580 -- 88,493
Accrued liabilities...................... 18,906 27,473 6,974 (9,042) 44,311
Dividends payable........................ -- 920 867 -- 1,787
--------- -------- -------- --------- --------
Total current liabilities.............. 48,704 103,091 20,830 (12,501) 160,124
--------- -------- -------- --------- --------
Long-term Liabilities:
Long-term debt, less current portion..... 171,160 78,291 318,898 (291,100) 277,249
Pension obligations and other............ -- 1,998 6,166 -- 8,164
Deferred income taxes.................... -- 2,941 3,209 -- 6,150
Minority interest........................ -- 1,245 -- -- 1,245
--------- -------- -------- --------- --------
Total long-term liabilities............ 171,160 84,475 328,273 (291,100) 292,808
--------- -------- -------- --------- --------
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 8,664,420 in
1997; 8,652,737 in 1996................ -- 22,036 4,332 (22,036) 4,332
Paid-in capital.......................... -- 70,440 65,844 (70,440) 65,844
Retained earnings........................ 77,308 45,435 73,801 (122,743) 73,801
Deferred compensation.................... -- -- (425) -- (425)
Minimum pension liability adjustment..... -- -- -- -- --
Unrealized gain on securities available
for sale............................... -- -- 202 -- 202
Cumulative translation adjustments....... (252) (16,788) (26,808) 17,040 (26,808)
--------- -------- -------- --------- --------
Total stockholders' equity............. 77,056 121,123 116,946 (198,179) 116,946
--------- -------- -------- --------- --------
Total liabilities and stockholders'
equity............................ $ 296,920 $377,689 $466,049 $(501,780) $638,878
========= ======== ======== ========= ========
</TABLE>
F-41
<PAGE> 138
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. 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>
F-42
<PAGE> 139
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
----------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ --------------- ------------
(UNAUDITED; IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NET SALES............................... $232,577 $238,899 $ 1,594 $(18,686) $454,384
COSTS AND EXPENSES:
Cost of sales......................... 198,273 206,124 1,458 (18,686) 387,169
Selling, administrative & other
expenses........................... 24,930 16,535 7,796 -- 49,261
-------- -------- -------- -------- --------
OPERATING INCOME (LOSS)................. 9,374 16,240 (7,660) -- 17,954
OTHER EXPENSE (INCOME):
Interest expense...................... 12,512 5,916 20,108 (20,864) 17,672
Interest income....................... (3,762) (4,493) (13,261) 20,864 (652)
Foreign currency exchange loss
(gain)............................. (40) 337 26 -- 323
Other................................. (3,193) 461 13 -- (2,719)
-------- -------- -------- -------- --------
Income before provision (credit) for
income taxes, minority interest,
equity in (income) loss of joint
ventures and subsidiaries............. 3,857 14,019 (14,546) -- 3,330
Provision (credit) for income taxes..... 1,373 5,025 (5,924) -- 474
Minority interest....................... 279 3,436 -- -- 3,715
Equity in (income) loss of joint
ventures.............................. (1,084) (2,135) -- -- (3,219)
Equity in (income) of subsidiaries...... (8,097) -- (10,982) 19,079 --
-------- -------- -------- -------- --------
Net income.............................. $ 11,386 $ 7,693 $ 2,360 $(19,079) $ 2,360
======== ======== ======== ======== ========
</TABLE>
F-43
<PAGE> 140
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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.......................... $249,705 $212,287 $ 1,454 $(22,945) $440,501
COSTS AND EXPENSES:
Cost of sales.................... 202,308 181,529 1,059 (22,945) 361,951
Selling, administrative & other
expenses...................... 28,349 17,618 7,566 -- 53,533
-------- -------- -------- -------- --------
OPERATING INCOME (LOSS)............ 19,048 13,140 (7,171) -- 25,017
OTHER EXPENSE (INCOME):
Interest expense................. 11,400 4,321 15,735 (15,804) 15,652
Interest income.................. (3,269) (1,362) (12,181) 15,804 (1,008)
Foreign currency exchange loss
(gain)........................ (113) 37 208 -- 132
Other............................ (1,180) 593 (259) -- (846)
-------- -------- -------- -------- --------
Income (loss) before provision
(credit) for income taxes, equity
in (income) loss of joint
ventures and subsidiaries........ 12,210 9,551 (10,674) -- 11,087
Provision (credit) for income
taxes............................ 3,244 3,559 (3,771) -- 3,032
Minority interest.................. -- 320 -- -- 320
Equity in (income) loss of joint
ventures......................... (632) (3,337) -- -- (3,969)
Equity in income of subsidiaries... (9,411) (336) (18,607) 28,354 --
-------- -------- -------- -------- --------
Net income......................... $ 19,009 $ 9,345 $ 11,704 $(28,354) $ 11,704
======== ======== ======== ======== ========
</TABLE>
F-44
<PAGE> 141
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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 cash provided by (used in) operating
activities.............................. $ 34,727 $ 20,971 $(52,820) $ -- $ 2,878
-------- -------- -------- ---- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment....... (27,638) (26,522) (223) -- (54,383)
Purchase of other assets.............. (545) (762) (57) -- (1,364)
Investment in joint ventures and
other............................... (14,656) 4,109 8,097 -- (2,450)
Proceeds from disposal of assets...... 7,619 (2,862) 1,464 -- 6,221
-------- -------- -------- ---- --------
Net cash provided by (used in) investing
activities.............................. (35,220) (26,037) 9,281 -- (51,976)
-------- -------- -------- ---- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under
revolving line-of-credit
agreements.......................... -- 4,678 (18,454) -- (13,776)
Debt repayments....................... (515) (13) (408) -- (936)
Proceeds from issuance of long-term
debt................................ -- (69,000) 69,000 -- --
Proceeds from issuance of common stock
and options......................... -- 69,000 176 -- 69,176
Financing fees paid................... -- -- (3,491) -- (3,491)
Cash dividends paid................... -- -- (2,596) -- (2,596)
-------- -------- -------- ---- --------
Net cash provided by (used in) financing
activities.............................. (515) 4,665 44,227 -- 48,377
-------- -------- -------- ---- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH... -- (4,769) -- -- (4,769)
-------- -------- -------- ---- --------
NET INCREASE (DECREASE) IN CASH........... (1,008) (5,170) 688 -- (5,490)
CASH AT BEGINNING OF YEAR................. 299 17,779 135 -- 18,213
-------- -------- -------- ---- --------
CASH AT END OF PERIOD..................... $ (709) $ 12,609 $ 823 $ -- $ 12,723
======== ======== ======== ==== ========
</TABLE>
F-45
<PAGE> 142
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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........... $ 38,282 $ 31,010 $(68,019) $-- $ 1,273
-------- -------- -------- --- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of plant and
equipment................. (24,433) (46,412) 392 -- (70,453)
Acquisitions, net of cash
acquired.................. -- -- -- -- --
Purchase of other assets.... (2,301) (438) (50) -- (2,789)
Investment in joint ventures
and other................. (13,744) 3,719 9,766 -- (259)
Proceeds/(payments) of
intercompany note
receivable................ -- -- -- -- --
Proceeds from disposal of
assets.................... -- 385 3,148 -- 3,533
-------- -------- -------- --- --------
Net cash provided by (used in)
investing activities........... (40,478) (42,746) 13,256 -- (69,968)
-------- -------- -------- --- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net borrowings (repayments)
under revolving
line-of-credit
agreements................ 2,585 5,228 61,699 -- 69,512
Debt repayments............. (412) -- (408) -- (820)
Proceeds from issuance of
long-term debt............ -- -- -- -- --
Proceeds from issuance of
common stock and
options................... -- -- 392 -- 392
Financing fees paid......... -- -- (449) -- (449)
Cash dividends paid......... -- -- (2,578) -- (2,578)
-------- -------- -------- --- --------
Net cash provided by (used in)
financing activities........... 2,173 5,228 58,656 -- 66,057
-------- -------- -------- --- --------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH........................ -- (818) (1,109) -- (1,927)
NET INCREASE (DECREASE) IN
CASH........................... (23) (7,326) 2,784 -- (4,565)
CASH AT BEGINNING OF YEAR........ 75 19,219 498 -- 19,792
-------- -------- -------- --- --------
CASH AT END OF PERIOD............ $ 52 $ 11,893 $ 3,282 $-- $ 15,227
======== ======== ======== === ========
</TABLE>
F-46
<PAGE> 143
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.
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, 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
Gilles Meyer
March 7, 1997
F-47
<PAGE> 144
MARWAL SYSTEMS, S.N.C.
BALANCE SHEET AS OF
DECEMBER 31, 1996
(IN FRENCH FRANCS)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------------------------------
ACCUMULATED
DEPRECIATION
AMORTIZATION AND
GROSS ALLOWANCES NET BOOK VALUE
----- ---------------- --------------
<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-48
<PAGE> 145
MARWAL SYSTEMS, S.N.C.
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN FRENCH FRANCS)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------------
<S> <C> <C>
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
3.104.503,48
Exceptional income:
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
6.152.294,71
Exceptional charges:
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-49
<PAGE> 146
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:
<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
5-6 2/3 straight line/declining
Machinery balance
1-5 years straight line/declining
Toolings balance
5-6 2/3 straight line/declining
Leasehold improvements-Mac/Toolings balance
Vehicles 4-5 years straight line
Fixtures and fittings 10 years straight line
4-5 years straight line/declining
Computer hardware 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-50
<PAGE> 147
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 1: ACCOUNTING POLICIES -- (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
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 12/31/96 amounts to KFRF.3,577.
F-51
<PAGE> 148
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4: ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES
At December 31, 1996, accounts receivable can be split by maturity date as
follows:
<TABLE>
<CAPTION>
LESS THAN GREATER THAN
TOTAL 1 YEAR 1 YEAR
----- --------- ------------
<S> <C> <C> <C>
Long term receivables......................... 5029 5026 3
Current assets................................ 130167 130167 --
</TABLE>
NOTE 5: SHORT TERM INVESTMENTS
N/A.
NOTE 6: PREPAYMENTS AND DEFERRED INCOME
<TABLE>
<CAPTION>
12/31/96
--------
<S> <C>
Prepayments
Documentation............................................... 2
Prepaid maintenance......................................... 43
Leasing..................................................... 199
-----
244
Deferred income
Long term contracts (tooling)............................... 1,272
</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......................... 2,005 1,508 497
</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>
F-52
<PAGE> 149
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
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
NOTE 11: INFORMATION ON SUBSIDIARY
(IN THOUSANDS OF PESOS)
<TABLE>
<CAPTION>
EQUITY CAPITAL
OTHER THAN LAST CLOSING
SHARE IN % DETAIL INFORMATION SHARE CAPITAL CAPITAL RESULT
- ---------- ------------------ ------------- -------------- ------------
<C> <S> <C> <C> <C>
95% Marwal de Mexico S.A. de C.V.
Tepotzotplan Estado de Mexico.... 42870 (5075) 1325
</TABLE>
<TABLE>
<CAPTION>
GROSS NET BOOK LOANS GUARANTEE DIVIDENDS
VALUE VALUE GIVEN GIVEN RECEIVED
----- -------- ----- --------- ---------
(IN THOUSANDS OF FRANCS)
<S> <C> <C> <C> <C> <C>
Marwal de Mexico S.A. de C.V........ 22,731 22,731 -- -- --
</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................. 42,640 Trade payables.................... 12,212
Other receivables................. 1,972 Other payables.................... 2,069
Cash and cash equivalent.......... 100,323 Financial debt.................... --
</TABLE>
Interest expenses and financial income with related parties are as follows:
<TABLE>
<S> <C> <C> <C>
Operating income................... 57,100 Operating expenses................. 46,067
Financial income................... 1,972 Interest expenses.................. 3,535
</TABLE>
F-53
<PAGE> 150
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13: ACCRUALS AND INCOME RECEIVABLE RELATING TO DIFFERENT BALANCE SHEET
ACCOUNTS
<TABLE>
<S> <C>
Assets
Trade receivables
-- Customers.............................................. 8,442
-- Suppliers.............................................. --
-- State.................................................. 2,000
Other receivables........................................... --
Liabilities
Trade payables
-- Suppliers.............................................. 14,284
-- Tax and social charges................................. 17,107
-- Other.................................................. 1,896
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>
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
----------------- ----------------- -----------------
NATURE 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.
F-54
<PAGE> 151
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............................ 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>
<CAPTION>
<S> <C> <C>
Discounted trade bills receivable but not matured...... 82132
</TABLE>
NOTE 20: INFORMATION RELATING TO MANAGEMENT
N/A.
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
F-55
<PAGE> 152
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 23: CHANGE IN ACCOUNTING POLICIES
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>
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-56
<PAGE> 153
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
Gilles Meyer
February 26, 1996
F-57
<PAGE> 154
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-58
<PAGE> 155
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-59
<PAGE> 156
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-60
<PAGE> 157
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 1: ACCOUNTING POLICIES (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 12/31/95 amounts to KFRF. 3,805.
F-61
<PAGE> 158
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4: ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES
At December 31, 1995, 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.................. 1011 1008 3
Current assets......................... 126284 126284 --
</TABLE>
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.... 357 357
- - Provision for guarantee................. 1000 2523 1000 2523
- - Provision for loss on foreign exchange.. 3136 433 3136 433
</TABLE>
F-62
<PAGE> 159
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
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 >5
TOTAL 1 YEAR AND 5 YEARS 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: 27,225
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>
<CAPTION>
ASSETS LIABILITIES
------ -----------
<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>
F-63
<PAGE> 160
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
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>
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>
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>
F-64
<PAGE> 161
MARWAL SYSTEMS, S.N.C.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 22: CHANGE IN ACCOUNTING POLICIES
N/A.
NOTE 23: ANALYSIS OF INCOME TAX
The income tax accounted for is that which is calculated for the accounts
to 9/30/95, 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............................................ 41,566 28,083 10,977
Exceptional items........................................... (497) (156) (61)
------ ------ -------
Profit before tax........................................... 41,069 27,927 10,916
Income tax credit 1994...................................... 69
-------
TOTAL INCOME TAX FOR THE COMPANY............................ (10,847)
</TABLE>
F-65
<PAGE> 162
MARWAL SYSTEMS, S.A.
STATUTORY AUDITOR'S GENERAL REPORT
YEAR ENDED DECEMBER 31, 1994
In our capacity as statutory auditor, we present below our report on:
- the accompanying annual accounts of Marwal Systems, S.A.;
- the specific procedures and disclosures prescribed by law, for the
year ended December 31, 1994.
I. OPINION ON THE ANNUAL ACCOUNTS
We have audited the annual accounts in accordance with professional
standards and, accordingly, performed such auditing procedures as we considered
necessary in the circumstances.
In our opinion, the annual accounts present fairly, in conformity with
generally accepted accounting principles in France, the financial position of
the Company at December 31, 1994, 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
Gilles Meyer
March 17, 1995
F-66
<PAGE> 163
MARWAL SYSTEMS, S.A.
BALANCE SHEET AS OF
AS OF DECEMBER 31, 1994
(IN FRENCH FRANCS)
<TABLE>
<CAPTION>
DECEMBER 31, 1994
--------------------------------------------------
ACCUMULATED
DEPRECIATION
AMORTIZATION NET BOOK
GROSS AND ALLOWANCES VALUE
----- -------------- --------
<S> <C> <C> <C>
ASSETS
Fixed assets
Intangible fixed assets.................................. 18.519.155,10 13.658.164,14 4.860.990,96
Tangible fixed assets.................................... 107.067.527,50 52.430.885,19 54.636.642,31
Financial investments.................................... 1.122.471,53 1.122.471,53
-------------- ------------- --------------
Sub-total................................................ 126.709.154,13 66.089.049,33 60.620.104,80
-------------- ------------- --------------
Inventories
- Raw materials........................................ 29.829,924,00 1.591.848,00 28.238.076,00
- Work-in-progress..................................... 3.101.279,00 182.005,00 2.919.274,00
- Finished goods....................................... 12.460.527,00 1.062.465,00 11.398.062,00
-------------- ------------- --------------
Sub-total................................................ 45.391.730,00 2.836.318,00 42.555.412,00
-------------- ------------- --------------
Current assets
Advances and payments on account......................... 1.186.853,59 1.186.853,59
Trade accounts & notes receivable
- Customers and related accounts....................... 108.200.292,33 4.815.370,90 103.384.921,43
- Other................................................ 10.379.297,27 10.379.297,27
Other receivables........................................ 4.465.165,81 4.465.165,81
Cash and cash equivalent................................. 69.076.737,77 69.076.737,77
Payments in advance...................................... 216.943,59 216.943,59
Deferred Charges......................................... 2.430.152,50 2.430.152,50
Foreign exchange translation differences................. 3.136.636,82 3.136.636,82
-------------- ------------- --------------
Sub-total................................................ 199.092.079,68 4.815.370,90 194.276.708,78
-------------- ------------- --------------
TOTAL ASSETS............................................. 371.192.963,81 73.740.738,23 297.452.225,58
-------------- ------------- --------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-----------------
<S> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity
Share Capital............................................... 90.660.000,00
Revaluation reserve......................................... 172.508,46
Retained earnings at January 1st............................ (11.603.376,40)
Result for the year......................................... 15.534.381,07
-----------------
Sub-total................................................... 94.763.513,13
Provisions for contingencies and charges.................... 10.058.014,45
Liabilities
Financial debts:
- -- Amounts owed to financial institutions................... 6.344.656,90
Accounts payable and related accounts....................... 136.837.422,79
Social charges payable...................................... 20.444.348,88
Taxes....................................................... 10.435.846,93
Other....................................................... 13.034.865,71
Other creditors:
- Accounts payable on fixed assets........................ 1.878.106,81
- Group................................................... 689.291,53
- Other................................................... 40.995,22
Deferred income............................................. 2.185.908,10
Foreign exchange translation differences.................... 739.255,13
-----------------
Sub-total................................................... 192.630.698,00
-----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. 297.452.225,58
=================
</TABLE>
F-67
<PAGE> 164
MARWAL SYSTEMS, S.A.
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN FRENCH FRANCS)
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-----------------
<S> <C> <C>
Operating Revenues:......................................... 579.451.349,75
Sale of goods............................................... 535.259.461,85
Sale of services............................................ 30.412.022,43
--------------
Net sales................................................... 565.671.484,28
Movement in finished goods and work-in-progress............. (1.383.971,17)
In-house production......................................... 728.865,00
Grants...................................................... 1.351.306,20
Reversal of provisions and transfer of charges.............. 12.830.704,98
Other income................................................ 252.960,46
--------------
579.451.349,75
Operating expenses:......................................... 544.962.616,72
Purchases of raw materials and other supplies............... 296.647.374,00
Movements in raw materials stock............................ (11.922.463,00)
Other purchases and external charges........................ 89.956.155,98
Taxes and similar expenses.................................. 8.664.895,48
Wages & salaries............................................ 81.428.350,72
Social charges.............................................. 45.200.262,16
Depreciation and amortization expenses and provisions
- Fixed assets............................................ 24.834.071,13
- Current assets.......................................... 4.221.947,14
- Contingencies and charges............................... 5.257.039,66
Other charges............................................... 674.983,45
--------------
544.962.616,72
Operating profit............................................ 34.488.733,03
--------------
Financial income:........................................... 10.022.168,72
From other investments...................................... 942,13
Other interest and similar income........................... 1.624.516,23
Reversal of provisions and transfer of charges.............. 1.884.372,97
Foreign exchange gains...................................... 6.512.337,39
--------------
10.022.168,72
Financial expenses:......................................... 14.971.569,16
Depreciation and provisions................................. 3.136.636,82
Interest and similar charges................................ 4.373.906,83
Foreign exchange losses..................................... 7.461.025,51
--------------
14.971.569,16
Net financial income/(expenses)............................. (4.949.400,44)
Profit (loss) before tax.................................... 29.539.332,59
Exceptional income:......................................... 7.540.565,06
From operating activities................................... 4.284.190,06
From capital transactions...................................
Reversal of provision and transfer of charges............... 3.256.375,00
--------------
7.540.565,06
Exceptional charges:........................................ 12.626.722,58
From operating activities................................... 8.776.657,58
From capital transactions...................................
Depreciation and provisions................................. 3.850.065,00
--------------
12.626.722,58
Exceptional profit.......................................... (5.086.157,52)
Profit before taxation...................................... 24.453.175,07
Profit-Sharing.............................................. 2.745.109,00
Income tax.................................................. 6.173.685,00
Profit after taxation....................................... 15.534.381,07
Total income................................................ 597.014.083,53
Total expenditure........................................... 581.479.702,46
PROFIT (LOSS)............................................... 15.534.381,07
</TABLE>
F-68
<PAGE> 165
MARWAL SYSTEMS, S.A.
NOTES TO THE FINANCIAL STATEMENTS
(IN THOUSANDS OF FRENCH FRANCS)
The accounts of the branch based in Italy have been translated using the
year end rate of exchange. The entire business will be transferred to France
with effect starting in 1995 which will result in the closure of Marwal Italy
during the year.
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
5-6 2/3 straight line/declining
Machinery balance
1-5 years straight line/declining
Toolings balance
5-6 2/3 straight line/declining
Leasehold improvements Mach./Toolings balance
Vehicles 4-5 years straight line
Fixtures and fittings 10 years straight line
4-5 years straight line/declining
Computer hardware balance
</TABLE>
1.3 FINANCIAL INVESTMENTS
N/A.
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.
-- The provision for obsolescence is determined based upon the sales
forecasts.
F-69
<PAGE> 166
MARWAL SYSTEMS, S.A.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 1: ACCOUNTING POLICIES -- (CONTINUED)
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 fund was placed during 1994 with a specialized organisation and
therefore the provision has reversed at 12/31/94.
NOTE 2: FIXED ASSETS
The movements in gross value are as follows:
<TABLE>
<CAPTION>
12/31/93 INCREASE DECREASE 12/31/94
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Intangible fixed assets.................... 18159 360 -- 18519
Tangible fixed assets...................... 89813 17254 -- 107067
Financial investments...................... 4 1118 -- 1122
</TABLE>
The movements in amortisation and depreciation are analysed as follows:
<TABLE>
<CAPTION>
12/31/93 INCREASE DECREASE 12/31/94
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Intangible fixed assets.................... 9875 3783 -- 13658
Tangible fixed assets...................... 31380 21051 -- 52431
Financial investments...................... 0 0 -- 0
</TABLE>
NOTE 3: INVENTORY AND WORK IN PROGRESS
The reserve for obsolescence for raw materials, consumables and finished
goods at 12/31/94 amounts to KFRF. 2,836.
NOTE 4: ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES
At December 31, 1994, accounts receivable can be split by maturity date as
follows:
<TABLE>
<CAPTION>
GREATER THAN
TOTAL LESS THAN 1 YEAR 1 YEAR
----- ---------------- ------------
<S> <C> <C> <C>
Long term receivables....................... 1122 1118 4
Current assets.............................. 124449 124449
</TABLE>
NOTE 5: SHORT TERM INVESTMENTS
N/A.
F-70
<PAGE> 167
MARWAL SYSTEMS, S.A.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6: PREPAYMENTS AND DEFERRED INCOME
<TABLE>
<CAPTION>
12/31/94
--------
<S> <C>
Prepayments
Interest.................................................... 217
</TABLE>
<TABLE>
<CAPTION>
12/31/94
--------
<S> <C>
Deferred income.............................................
Long term contracts (tooling)............................... 2185
</TABLE>
NOTE 7: DEFERRED CHARGES
<TABLE>
<CAPTION>
CHARGED TO
INCOME STATEMENT
TOTAL 1994 12/31/94
----- ---------------- --------
<S> <C> <C> <C>
Deferred charges................................ 3849 1419 2430
</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>
12/31/93 ADDITIONS REVERSALS 12/31/94
-------- --------- --------- --------
<S> <C> <C> <C> <C>
Provisions for contingencies and charges
of which:............................... 12.813 11.353 14.108 10.058
Provision for payments on retirement...... 4.845 3.370 8.215 0
Provision for guarantee................... 1.020 .242 .262 1.000
Provision for loss on foreign exchange.... 1.884 3.136 1.884 3.136
</TABLE>
NOTE 10: CREDITORS
At December 31, 1994, debts, excluding advances and deposits received,
deferred income and foreign exchange differences, can be analysed by maturity
date as follows:
<TABLE>
<CAPTION>
BETWEEN
LESS THAN 1 AND
TOTAL 1 YEAR 5 YEARS > 5 YEARS
----- --------- ------- ---------
<S> <C> <C> <C> <C>
Bank overdrafts........................... 6345 6345
Trade payables and other liabilities*..... 183361 180616 2745
</TABLE>
- -------------------------
* of which trade bills payable: 30585
F-71
<PAGE> 168
MARWAL SYSTEMS, S.A.
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>
Fixed assets................ 1747 Trade payables.............. 20388
Trade receivables........... 22014 Other payables.............. 1656
Other receivables........... 268 Financial debt.............. 6497
Cash and cash equivalent.... 67689
</TABLE>
Interest expenses and financial income with related parties are as follows:
<TABLE>
<S> <C> <C> <C>
Operating income............ 62784 Operating expenses.......... 52309
Financial income............ 51 Interest expenses........... 4331
</TABLE>
NOTE 12: ACCRUALS AND INCOME RECEIVABLE RELATING TO DIFFERENT BALANCE SHEET
ACCOUNTS
<TABLE>
<CAPTION>
ASSETS LIABILITIES
------ -----------
<S> <C> <C> <C>
Trade receivables........... 10768 Trade payables
Other receivables........... 132 - Suppliers................. 22135
- Tax and social charges.... 23730
- Other..................... 5106
</TABLE>
NOTE 13: EXCHANGE DIFFERENCES RELATED TO BALANCE SHEET ACCOUNTS
<TABLE>
<CAPTION>
EXCHANGE DIFFERENCE
-------------------
ASSET LIABILITY
----- ---------
<S> <C> <C>
Assets
Trade receivables.......................................... 2210 64
Liabilities
Trade payables............................................. 927 675
The exchange difference resulting from the translation of the
accounts of Marwal Italy has been included in the revaluation
reserve within shareholders' equity............................. 173
</TABLE>
NOTE 14: SALES TURNOVER ANALYSIS
<TABLE>
<CAPTION>
1993 1994
---- ----
<S> <C> <C>
Sales.................................................... 424023 565671
Sales of goods........................................... 378099 535259
Sales of services........................................ 45924 30412
Split between export/domestic
Domestic................................................. 295213 353114
Export................................................... 128810 212557
Sales.................................................... 424023 565671
</TABLE>
F-72
<PAGE> 169
MARWAL SYSTEMS, S.A.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15: DEFERRED TAX POSITION
<TABLE>
<CAPTION>
12/31/93 MOVEMENTS 12/31/94
------------------- ------------------ ------------------
NATURE ASSET LIABILITY ASSET LIABILITY ASSET LIABILITY
------ ----- --------- ----- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Timing differences
Organic........................ 425 425 559 0 559
</TABLE>
NOTE 16: EMPLOYEE INFORMATION
<TABLE>
<CAPTION>
PERMANENT STAFF TEMPORARY STAFF
--------------- ---------------
<S> <C> <C>
Executive and Management........................... 46
Employees.......................................... 135 2
Labor and production............................... 518 36
Total.............................................. 699 38
</TABLE>
NOTE 17: LEASE COMMITMENTS
None.
NOTE 18: COMMITMENTS UNDERTAKEN AND RECEIVED
<TABLE>
<S> <C>
Discounted trade bills receivable but not matured........... 90,177
</TABLE>
NOTE 19: INFORMATION RELATING TO MANAGEMENT
N/A.
NOTE 20: EXCEPTIONAL INCOME
<TABLE>
<S> <C>
Exceptional income from operating activities................ 4284
Redundancy payments reinvoiced to Jaeger S.A................ 2214
Grant relating to training.................................. 1811
Other....................................................... 259
Exceptional income from capital transactions................ Not significant
Reversal of provisions...................................... 3256
Provision for delocalization................................ 2027
Provision for the starting of pumps......................... 1229
</TABLE>
NOTE 21: EXCEPTIONAL CHARGES
<TABLE>
<S> <C>
Exceptional charges on operating activities................. 8777
Redundancy payments......................................... 4024
Training costs.............................................. 3439
Other....................................................... 1314
Depreciation and provisions................................. 3850
Provision for delocalization................................ 2111
Other....................................................... 1739
</TABLE>
NOTE 22: CHANGE IN ACCOUNTING POLICIES
N/A.
F-73
<PAGE> 170
MARWAL SYSTEMS, S.A.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 23: ANALYSIS OF INCOME TAX
<TABLE>
<CAPTION>
BASE TAX
---- ---
<S> <C> <C>
Operating profit............................................ 29539 10087
Exceptional items........................................... -5086 -1695
----- -----
Profit before tax........................................... 24453 8392
Income tax credit 1993...................................... -2218
-----
TOTAL INCOME TAX FOR THE COMPANY............................ 6174
</TABLE>
F-74
<PAGE> 171
<TABLE>
<S> <C>
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 [WALBRO LOGO]
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 WALBRO CORPORATION
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 OFFER TO EXCHANGE
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 10 1/8% SENIOR NOTES DUE 2007, SERIES B
subsequent to the date hereof. FOR ALL OUTSTANDING
10 1/8% SENIOR NOTES DUE 2007, SERIES A
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . 4
DOCUMENTS INCORPORATED BY REFERENCE . . . . . . . . . . . 4
FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . 5
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . 6
SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA . . . . . 14
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . 16
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . 21
CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . 21 -------------------
THE EXCHANGE OFFER . . . . . . . . . . . . . . . . . . . 22 P R O S P E C T U S
SELECTED FINANCIAL AND OPERATING DATA . . . . . . . . . . 31 -------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . 33
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . 40
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . 53
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . 58
CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . . . . 60
DESCRIPTION OF OTHER INDEBTEDNESS . . . . . . . . . . . . 60
DESCRIPTION OF THE EXCHANGE NOTES . . . . . . . . . . . . 62 , 1998
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>
<PAGE> 172
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.
<TABLE>
<CAPTION>
(a) Exhibits.
<S> <C>
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, filed as Exhibit 3.2 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1989. (2)
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). (1)
4.2 Purchase Agreement dated December 11, 1997 among the Company,
Walbro Automotive Corporation, Walbro Engine Management
Corporation, Sharon Manufacturing Company, Whitehead
EngineeredProducts, Inc. and Salomon Brothers Inc. (1)
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. (1)
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)
</TABLE>
II-1
<PAGE> 173
<TABLE>
<S> <C>
4.7 First Amendment to Rights Agreement dated February 6, 1991, filed
as Exhibit 4.8 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990. (2).
4.8 Loan Agreement between City of Ligonier, Indiana, and Sharon
Manufacturing Company dated as of June 1, 1992, filed as Exhibit
4.12 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992. (2)
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> 174
<TABLE>
<S> <C>
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. (1)
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. (1)
4.23 Purchase Money Loan Agrement dated as of August 27, 1997 among the Company, Comerica Bank, as
agent, and Harris Bank, as co-agent. (1)
4.24 Purchase Money Guaranty dated as of August 27, 1997 by the Company and certain of its
subsidiaries to Comerica Bank, as agent. (1)
4.25 Purchase Money Security Agreement dated as of August 27, 1997 among the Company, certain of its
subsidiaries and Comerica Bank, as agent. (1)
5 Opinion of Katten Muchin & Zavis as to the legality of the securities being registered (including
consent). (3)
10.1 The Company's 1983 Incentive Stock Option Plan, filed as the Exhibit to the Company's
Registration Statement on Form S-8 filed November 15, 1989. (2)(4)
10.2 Joint Venture Agreement between the Company and Mitsuba Electric Manufacturing Company, Ltd.
dated December 12, 1986, filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1986. (2)
10.3 The Company's Equity Based Long-Term Incentive Plan, filed as Exhibit 4.5 to the Company's
Registration Statement on Form S-8 filed June 15, 1992. (2)(4)
10.4 Executive Disability Plan adopted July 8, 1988, filed as Exhibit 10.10 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1988. (2)(4)
10.5 Retirement Income Plan for Directors dated February 9, 1988, filed as Exhibit 10.11 to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1988. (2)(4)
10.6 Equipment Leasing Agreement between the Company and NEMLC Leasing Associates No. 3, without
supplements, dated July 1, 1988, filed as Exhibit 10.13 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1988. (2)
10.7 The Company's Employee Stock Ownership Plan dated August 15, 1989, filed as Exhibit 10.14 to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989. (2)
10.8 Walbro Engine Management Incentive Compensation Plan, filed as Exhibit 10.21 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1990. (2)(4)
10.9 Joint Venture Agreement dated June 17, 1991 between the Company and Jaeger S.A., an indirect,
majority-controlled subsidiary of Magneti Marelli S.p.A., relating to the Marwal Systems S.A.
joint venture, filed as Exhibit 10.23 to the Company's Registration Statement on Form S-2, File
No. 33-41425. (2)
10.10 Joint Venture Agreement between the Company and Jaeger S.A. dated as of January 1, 1993 relating
to the Marwal do Brasil joint venture, filed as Exhibit 10.10 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992. (2)
</TABLE>
II-3
<PAGE> 175
<TABLE>
<S> <C>
10.11 Agreement among AB Svenska Elektromagneter, Opcon AB, Cartona Fastighetsforvaltning K.B., Erling
Edmundson, Four Seasons Venture Capital AB, SEM-Walbro Corporation and the Company, effective as
of January 2, 1991, filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991. (2)
10.12 The Company's Advantage Plan, filed as the Exhibit to the Company's Registration Statement on
Form S-8 filed October 28, 1991. (2)(4)
10.13 Aircraft Lease Agreement between the Company and C.I.T. Leasing Corporation dated as of October
27, 1992, filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992. (2)
10.14 Joint Venture Contract among Walbro Engine Management Corporation, Fujian Fuding Carburetor
Factory and Twin Winner Trading Co., Ltd. dated December 30, 1993 relating to the Fujian Hualong
Carburetor Co. Ltd. joint venture, filed as Exhibit 10.14 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994. (2)
10.15 Agreement among the Company, Walbro Automotive Corporation and Magneti Marelli France S.A. dated
February 7, 1995, filed as Exhibit 10.24 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994. (2)
10.16 Joint Venture Agreement between the Company and Daewoo Precision Industries, Ltd. dated November
30, 1994, filed as Exhibit 10.25 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994. (2)
10.17 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)
10.18 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)
10.19 Joint Venture Agreement between Walbro Automotive Corporation and Mutual Industries Ltd. dated
November 28, 1995 relating to the Mutual Walbro P. Ltd. joint venture, filed as Exhibit 10.30 to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. (2)
10.20 General Partnership Agreement dated August 18, 1995 between Iwaki Diecast U.S.A., Inc. and Walbro
Tucson Corp., filed as Exhibit 10.31 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995. (2)
10.21 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)(4)
10.22 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)(4)
10.23 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)(4)
10.24 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)(4)
10.25 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)(4)
</TABLE>
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<PAGE> 176
<TABLE>
<S> <C>
10.26 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)(4)
10.27 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)(4)
10.28 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)(4)
10.29 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)(4)
10.30 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)(4)
10.31 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)(4)
10.32 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)(4)
10.33 The Company's Broad-Based Long Term Incentive Plan. (1)
12 Computation of ratio of earnings to fixed charges. (1)
21 Subsidiaries of the Company. (1)
23.1 Consent of Arthur Andersen LLP. (1)
23.2 Consent of Ernst & Young Audit. (1)
23.5 Consent of Katten Muchin & Zavis (contained in its opinion to be filed as Exhibit 5).
24 Power of Attorney (see signature page).
25 Statement of eligibility under the Trust Indenture Act of 1939, as amended, on Form T-1 of
Bankers Trust Company, as Trustee under the Indenture. (1)
27 Financial Data Schedule. (1)
99.1 Form of Letter of Transmittal for the Exchange Notes. (1)
99.2 Form of Notice of Guaranteed Delivery for the Exchange Notes. (1)
99.3 Letter to Registered Holders and Depository Trust Company Participants. (1)
99.4 Letter to Clients. (1)
99.5 Instruction to Registered Holder and/or Book Entry Transfer Participant from Beneficial Owner.
(1)
99.6 Guidelines for Certificate of Taxpayer Identification Number on Substitute Form W-9. (1)
- ------------------
</TABLE>
(1) Filed herewith.
(2) Incorporated by reference.
(3) To be filed by amendment.
(4) Management contract or compensatory plan or arrangement.
II-5
<PAGE> 177
(b) Financial Statement Schedules.
(1) VALUATION AND QUALIFYING ACCOUNTS.
Following is a summary of changes in the valuation and qualifying
accounts for the three years ended December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---------- ------------ -----------
<S> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Balance Beginning of Year . . . . . . . . . . . . . . . $ 978 $ 368 $ 413
Additions charged to operations . . . . . . . . . . . 283 352 115
Additions due to acquisition . . . . . . . . . . . . -- 309 --
Deductions for uncollectible accounts written off, net
of recoveries . . . . . . . . . . . . . . . . . . . . (508) (51) (160)
---------- ------------ -----------
Balance End of Year . . . . . . . . . . . . . . . . . . $ 753 $ 978 $ 368
========== =========== ===========
RESERVE FOR INVENTORY VALUATION:
Balance Beginning of Year . . . . . . . . . . . . . . . $ 808 $ 238 $ 482
Additions charged to operations . . . . . . . . . . . 730 194 159
Additions due to acquisition . . . . . . . . . . . . -- 376 --
Deductions for inventory disposal . . . . . . . . . . (870) -- (403)
---------- ----------- -----------
Balance End of Year . . . . . . . . . . . . . . . . . . $ 668 $ 808 $ 238
========== =========== ===========
ALLOWANCE FOR NOTES RECEIVABLE:
Balance Beginning of Year . . . . . . . . . . . . . . . $ -- $ 454 $ 214
Additions charged to operations . . . . . . . . . . . -- -- 240
Deductions . . . . . . . . . . . . . . . . . . . . . -- (454) --
---------- ----------- -----------
Balance End of Year . . . . . . . . . . . . . . . . . . $ -- $ -- $ 454
========== =========== ===========
</TABLE>
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
The financial statement schedule Supplemental Guarantor Condensed
Consolidating Financial Statements is included in the 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
II-6
<PAGE> 178
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.
(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> 179
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Cass City, State of Michigan on February 5, 1998.
WALBRO CORPORATION
By: /s/ LAMBERT E. ALTHAVER
----------------------------
Lambert E. Althaver
Chairman of the Board
and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Lambert E. Althaver, Michael A. Shope, Gary L. Vollmar and Howard S.
Lanznar and each of them his true and lawful attorney-in-fact and agent, with
full power of substitution, to sign on his behalf, individually and in each
capacity stated below, all amendments and post-effective amendments to this
Registration Statement on Form S-4 and to file the same, with all exhibits
thereto and any other documents in connection therewith, with the Commission
under the Securities Act, granting unto said attorneys-in-fact and agents full
power and authority to do and perform each and every act and thing requisite
and necessary to be done in and about the premises, as fully and to all intents
and purposes as each might or could do in person, hereby ratifying and
confirming each act that said attorneys-in-fact and agents may lawfully do or
cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ------------------------------------------------------------ -----------------
<S> <C> <C>
/s/ LAMBERT E. ALTHAVER
----------------------------- Chairman of the Board, Chief Executive Officer and Director February 5, 1998
Lambert E. Althaver (Principal Executive Officer)
----------------------------- President, Chief Operating Officer and Director February 5, 1998
Frank E. Bauchiero
/s/ Robert H. Walpole Vice President and Director February 5, 1998
-----------------------------
Robert H. Walpole
/s/ MICHAEL A. SHOPE Chief Financial Officer and Treasurer (Principal Financial
----------------------------- and Accounting Officer) February 5, 1998
Michael A. Shope
/s/ WILLIAM T. BACON, JR. Director February 5, 1998
-----------------------------
William T. Bacon, Jr.
/s/ J. DWANE BAUMGARDNER
----------------------------- Director February 5, 1998
J. Dwane Baumgardner
/s/ VERNON E. OECHSLE
----------------------------- Director February 5, 1998
Vernon E. Oechsle
/s/ ROBERT D. TUTTLE
----------------------------- Director February 5, 1998
Robert D. Tuttle
/s/ JOHN E. UTLEY
----------------------------- Director February 5, 1998
John E. Utley
</TABLE>
II-8
<PAGE> 180
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO.
<S> <C>
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, filed as Exhibit 3.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1989. (2)
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). (1)
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. (1)
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. (1)
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, filed as Exhibit 4.8 to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990. (2).
4.8 Loan Agreement between City of Ligonier, Indiana, and Sharon Manufacturing Company dated as
of June 1, 1992, filed as Exhibit 4.12 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992. (2)
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)
</TABLE>
<PAGE> 181
<TABLE>
<CAPTION>
EXHIBIT NO.
<S> <C>
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)
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. (1)
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. (1)
4.23 Purchase Money Loan Agrement dated as of August 27, 1997 among the Company, Comerica Bank, as
agent, and Harris Bank, as co-agent. (1)
4.24 Purchase Money Guaranty dated as of August 27, 1997 by the Company and certain of its
subsidiaries to Comerica Bank, as agent. (1)
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. (1)
5 Opinion of Katten Muchin & Zavis as to the legality of the securities being registered
(including consent). (3)
10.1 The Company's 1983 Incentive Stock Option Plan, filed as the Exhibit to the Company's
Registration Statement on Form S-8 filed November 15, 1989. (2)(4)
10.2 Joint Venture Agreement between the Company and Mitsuba Electric Manufacturing Company, Ltd.
dated December 12, 1986, filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1986. (2)
10.3 The Company's Equity Based Long-Term Incentive Plan, filed as Exhibit 4.5 to the Company's
Registration Statement on Form S-8 filed June 15, 1992. (2)(4)
</TABLE>
<PAGE> 182
<TABLE>
<CAPTION>
EXHIBIT NO.
<S> <C>
10.4 Executive Disability Plan adopted July 8, 1988, filed as Exhibit 10.10 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1988. (2)(4)
10.5 Retirement Income Plan for Directors dated February 9, 1988, filed as Exhibit 10.11 to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1988. (2)(4)
10.6 Equipment Leasing Agreement between the Company and NEMLC Leasing Associates No. 3, without
supplements, dated July 1, 1988, filed as Exhibit 10.13 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1988. (2)
10.7 The Company's Employee Stock Ownership Plan dated August 15, 1989, filed as Exhibit 10.14 to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989. (2)
10.8 Walbro Engine Management Incentive Compensation Plan, filed as Exhibit 10.21 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1990. (2)(4)
10.9 Joint Venture Agreement dated June 17, 1991 between the Company and Jaeger S.A., an indirect,
majority-controlled subsidiary of Magneti Marelli S.p.A., relating to the Marwal Systems S.A.
joint venture, filed as Exhibit 10.23 to the Company's Registration Statement on Form S-2,
File No. 33-41425. (2)
10.10 Joint Venture Agreement between the Company and Jaeger S.A. dated as of January 1, 1993
relating to the Marwal do Brasil joint venture, filed as Exhibit 10.10 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1992. (2)
10.11 Agreement among AB Svenska Elektromagneter, Opcon AB, Cartona Fastighetsforvaltning K.B.,
Erling Edmundson, Four Seasons Venture Capital AB, SEM-Walbro Corporation and the Company,
effective as of January 2, 1991, filed as Exhibit 10.20 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991. (2)
10.12 The Company's Advantage Plan, filed as the Exhibit to the Company's Registration Statement on
Form S-8 filed October 28, 1991. (2)(4)
10.13 Aircraft Lease Agreement between the Company and C.I.T. Leasing Corporation dated as of
October 27, 1992, filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992. (2)
10.14 Joint Venture Contract among Walbro Engine Management Corporation, Fujian Fuding Carburetor
Factory and Twin Winner Trading Co., Ltd. dated December 30, 1993 relating to the Fujian
Hualong Carburetor Co. Ltd. joint venture, filed as Exhibit 10.14 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994. (2)
10.15 Agreement among the Company, Walbro Automotive Corporation and Magneti Marelli France S.A.
dated February 7, 1995, filed as Exhibit 10.24 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994. (2)
10.16 Joint Venture Agreement between the Company and Daewoo Precision Industries, Ltd. dated
November 30, 1994, filed as Exhibit 10.25 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994. (2)
10.17 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)
</TABLE>
<PAGE> 183
<TABLE>
<CAPTION>
EXHIBIT NO.
<S> <C>
10.18 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)
10.19 Joint Venture Agreement between Walbro Automotive Corporation and Mutual Industries Ltd.
dated November 28, 1995 relating to the Mutual Walbro P. Ltd. joint venture, filed as Exhibit
10.30 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1995. (2)
10.20 General Partnership Agreement dated August 18, 1995 between Iwaki Diecast U.S.A., Inc. and
Walbro Tucson Corp., filed as Exhibit 10.31 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995. (2)
10.21 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)(4)
10.22 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)(4)
10.23 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)(4)
10.24 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)(4)
10.25 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)(4)
10.26 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)(4)
10.27 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)(4)
10.28 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)(4)
10.29 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)(4)
10.30 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)(4)
10.31 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)(4)
10.32 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)(4)
10.33 The Company's Broad-Based Long Term Incentive Plan. (1)
12 Computation of ratio of earnings to fixed charges. (1)
</TABLE>
<PAGE> 184
<TABLE>
<CAPTION>
EXHIBIT NO.
<S> <C>
21 Subsidiaries of the Company. (1)
23.1 Consent of Arthur Andersen LLP. (1)
23.2 Consent of Ernst & Young Audit. (1)
23.5 Consent of Katten Muchin & Zavis (contained in its opinion to be filed as Exhibit 5).
24 Power of Attorney (see signature page).
25 Statement of eligibility under the Trust Indenture Act of 1939, as amended, on Form T-1 of
Bankers Trust Company, as Trustee under the Indenture. (1)
27 Financial Data Schedule. (1)
99.1 Form of Letter of Transmittal for the Exchange Notes. (1)
99.2 Form of Notice of Guaranteed Delivery for the Exchange Notes. (1)
99.3 Letter to Registered Holders and Depository Trust Company Participants. (1)
99.4 Letter to Clients. (1)
99.5 Instruction to Registered Holder and/or Book Entry Transfer Participant from Beneficial
Owner. (1)
99.6 Guidelines for Certificate of Taxpayer Identification Number on Substitute Form W-9. (1)
- ------------------
</TABLE>
(1) Filed herewith.
(2) Incorporated by reference.
(3) To be filed by amendment.
(4) Management contract or compensatory plan or arrangement.
<PAGE> 1
EXHIBIT 4.1
================================================================================
Indenture
Dated as of December 15, 1997
among
WALBRO CORPORATION,
as Issuer,
WALBRO AUTOMOTIVE CORPORATION,
WALBRO ENGINE MANAGEMENT CORPORATION,
SHARON MANUFACTURING COMPANY,
WHITEHEAD ENGINEERED PRODUCTS, INC.,
as Guarantors,
and
BANKERS TRUST COMPANY,
as Trustee
---------------------
$100,000,000
10 1/8% Senior Notes due 2007, Series A
10 1/8% Senior Notes due 2007, Series B
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<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
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TIA Indenture
Section Section
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310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.03
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06; 11.02
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.08; 4.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.08; 11.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.08
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.05
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05; 11.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05; 7.01(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence) . . . . . . . . . . . . . . . . . . . . . . . . . 2.09
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
</TABLE>
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N.A. means Not Applicable
Note: This Cross-Reference Table shall not, for any purpose, be deemed
to be a part of the Indenture
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TABLE OF CONTENTS
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ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Incorporation by Reference of TIA. . . . . . . . . . . .24
SECTION 1.03. Rules of Construction. . . . . . . . . . . . . . . . . .25
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating. . . . . . . . . . . . . . . . . . . . .26
SECTION 2.02. Execution and Authentication. . . . . . . . . . . . . . .27
SECTION 2.03. Registrar and Paying Agent. . . . . . . . . . . . . . . .28
SECTION 2.04. Paying Agent To Hold Assets in Trust. . . . . . . . . . .28
SECTION 2.05. Securityholder Lists. . . . . . . . . . . . . . . . . . .29
SECTION 2.06. Transfer and Exchange. . . . . . . . . . . . . . . . . .29
SECTION 2.07. Replacement Securities. . . . . . . . . . . . . . . . . .30
SECTION 2.08. Outstanding Securities. . . . . . . . . . . . . . . . . .30
SECTION 2.09. Treasury Securities. . . . . . . . . . . . . . . . . . .31
SECTION 2.10. Temporary Securities. . . . . . . . . . . . . . . . . . .31
SECTION 2.11. Cancellation . . . . . . . . . . . . . . . . . . . .31
SECTION 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . .32
SECTION 2.13. CUSIP Number . . . . . . . . . . . . . . . . . . . .32
SECTION 2.14. Deposit of Moneys. . . . . . . . . . . . . . . . . . . .32
SECTION 2.15. Book-Entry Provisions for Global Securities. . . . . . .32
SECTION 2.16. Registration of Transfers and Exchanges. . . . . . . . .34
SECTION 2.17. Designation . . . . . . . . . . . . . . . . . . . .39
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee. . . . . . . . . . . . . . . . . . . .39
SECTION 3.02. Selection of Securities To Be Redeemed. . . . . . . . . .39
SECTION 3.03. Notice of Redemption. . . . . . . . . . . . . . . . . . .40
SECTION 3.04. Effect of Notice of Redemption. . . . . . . . . . . . . .41
SECTION 3.05. Deposit of Redemption Price. . . . . . . . . . . . . . .41
SECTION 3.06. Securities Redeemed in Part. . . . . . . . . . . . . . .41
</TABLE>
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ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.. . . . . . . . . . . . . . . . . .42
SECTION 4.02. Maintenance of Office or Agency.. . . . . . . . . . . . .42
SECTION 4.03. Limitation on Restricted Payments.. . . . . . . . . . . .42
SECTION 4.04. Limitation on Indebtedness. . . . . . . . . . . . . . . .46
SECTION 4.05. Corporate Existence.. . . . . . . . . . . . . . . . . . .49
SECTION 4.06. Payment of Taxes and Other Claims. . . . . . . . . . . .49
SECTION 4.07. Maintenance of Properties and Insurance.. . . . . . . . .50
SECTION 4.08. Compliance Certificate; Notice of Default.. . . . . . . .51
SECTION 4.09. Compliance with Laws. . . . . . . . . . . . . . . . . . .51
SECTION 4.10. SEC Reports.. . . . . . . . . . . . . . . . . . . . . . .52
SECTION 4.11. Waiver of Stay, Extension or Usury Laws. . . . . . . . .52
SECTION 4.12. Limitation on Transactions with Interested Persons. . . .53
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries. . . . . . . . . . .54
SECTION 4.14. Limitation on Liens.. . . . . . . . . . . . . . . . . . .55
SECTION 4.15. Change of Control.. . . . . . . . . . . . . . . . . . . .55
SECTION 4.16. Disposition of Proceeds of Asset Sales. . . . . . . . . .57
SECTION 4.17. Limitation on Issuance and Sale of Preferred Stock by
Restricted Subsidiaries. . . . . . . . . . . . . . . .61
SECTION 4.18. Limitation on Sale-Leaseback Transactions.. . . . . . . .61
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Consolidations and Sale of Assets. . . . . . . .62
SECTION 5.02. Successor Corporation Substituted.. . . . . . . . . . . .64
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.. . . . . . . . . . . . . . . . . . . .64
SECTION 6.02. Acceleration. . . . . . . . . . . . . . . . . . . . . . .67
SECTION 6.03. Other Remedies. . . . . . . . . . . . . . . . . . . . . .67
SECTION 6.04. Waiver of Past Defaults. . . . . . . . . . . . . . . . .68
SECTION 6.05. Control by Majority.. . . . . . . . . . . . . . . . . . .68
SECTION 6.06. Limitation on Suits.. . . . . . . . . . . . . . . . . . .68
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SECTION 6.07. Rights of Holders To Receive Payment. . . . . . . . . . .69
SECTION 6.08. Collection Suit by Trustee. . . . . . . . . . . . . . . .69
SECTION 6.09. Trustee May File Proofs of Claim. . . . . . . . . . . . .70
SECTION 6.10. Priorities. . . . . . . . . . . . . . . . . . . . . . . .70
SECTION 6.11. Undertaking for Costs. . . . . . . . . . . . . . . . . .71
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.. . . . . . . . . . . . . . . . . . . .71
SECTION 7.02. Rights of Trustee.. . . . . . . . . . . . . . . . . . . .73
SECTION 7.03. Individual Rights of Trustee. . . . . . . . . . . . . . .74
SECTION 7.04. Trustee's Disclaimer. . . . . . . . . . . . . . . . . . .74
SECTION 7.05. Notice of Default.. . . . . . . . . . . . . . . . . . . .74
SECTION 7.06. Reports by Trustee to Holders.. . . . . . . . . . . . . .75
SECTION 7.07. Compensation and Indemnity. . . . . . . . . . . . . . . .75
SECTION 7.08. Replacement of Trustee. . . . . . . . . . . . . . . . . .76
SECTION 7.09. Successor Trustee by Merger, Etc. . . . . . . . . . . . .78
SECTION 7.10. Eligibility; Disqualification.. . . . . . . . . . . . . .78
SECTION 7.11. Preferential Collection of Claims Against Company.. . . .78
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. Legal Defeasance and Covenant Defeasance. . . . . . . . .79
SECTION 8.02. Satisfaction and Discharge. . . . . . . . . . . . . . . .82
SECTION 8.03. Survival of Certain Obligations.. . . . . . . . . . . . .83
SECTION 8.04. Acknowledgment of Discharge by Trustee. . . . . . . . . .84
SECTION 8.05. Application of Trust Assets.. . . . . . . . . . . . . . .84
SECTION 8.06. Repayment to the Company or Guarantors; Unclaimed Money. 84
SECTION 8.07. Reinstatement.. . . . . . . . . . . . . . . . . . . . . .85
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders. . . . . . . . . . . . . . . .85
SECTION 9.02. With Consent of Holders.. . . . . . . . . . . . . . . . .86
SECTION 9.03. Compliance with TIA.. . . . . . . . . . . . . . . . . . .88
SECTION 9.04. Revocation and Effect of Consents.. . . . . . . . . . . .88
SECTION 9.05. Notation on or Exchange of Securities.. . . . . . . . . .89
SECTION 9.06. Trustee To Sign Amendments, Etc.. . . . . . . . . . . . .89
</TABLE>
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ARTICLE TEN
GUARANTEE
SECTION 10.01. Unconditional Guarantee. . . . . . . . . . . . . . . . .89
SECTION 10.02. Severability.. . . . . . . . . . . . . . . . . . . . . .91
SECTION 10.03. Release of a Guarantor.. . . . . . . . . . . . . . . . .91
SECTION 10.04. Limitation of Guarantor's Liability. . . . . . . . . . .91
SECTION 10.05. Guarantors May Consolidate, etc., on Certain Terms. . .92
SECTION 10.06. Contribution.. . . . . . . . . . . . . . . . . . . . . .93
SECTION 10.07. Waiver of Subrogation. . . . . . . . . . . . . . . . . .93
SECTION 10.08. Execution of Guarantee.. . . . . . . . . . . . . . . . .94
SECTION 10.09. Waiver of Stay, Extension or Usury Laws. . . . . . . . .95
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls.. . . . . . . . . . . . . . . . . . . . . .95
SECTION 11.02. Notices. . . . . . . . . . . . . . . . . . . . . . . . .95
SECTION 11.03. Communications by Holders with Other Holders. . . . . .97
SECTION 11.04. Certificate and Opinion as to Conditions Precedent. . .97
SECTION 11.05. Statements Required in Certificate or Opinion. . . . . .97
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar. . . . . . . .98
SECTION 11.07. Legal Holidays.. . . . . . . . . . . . . . . . . . . . .98
SECTION 11.08. Governing Law. . . . . . . . . . . . . . . . . . . . . .98
SECTION 11.09. No Adverse Interpretation of Other Agreements. . . . . .98
SECTION 11.10. No Recourse Against Others.. . . . . . . . . . . . . . .98
SECTION 11.11. Successors.. . . . . . . . . . . . . . . . . . . . . . .99
SECTION 11.12. Duplicate Originals. . . . . . . . . . . . . . . . . . .99
SECTION 11.13. Severability.. . . . . . . . . . . . . . . . . . . . . .99
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
</TABLE>
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<TABLE>
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Exhibit A - Form of Series A Security
Exhibit B - Form of Series B Security
Exhibit C - Form of Legend for Global Securities
Exhibit D - Transfer Certificate
Exhibit E - Transferee Certificate for Institutional Accredited Investors
Exhibit F - Transferee Certificate for Regulation S Transfers
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of the Indenture.
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<PAGE> 8
INDENTURE dated as of December 15, 1997, among WALBRO
CORPORATION, a Delaware corporation (the "Company"), as Issuer, WALBRO
AUTOMOTIVE CORPORATION, a Delaware corporation, WALBRO ENGINE MANAGEMENT
CORPORATION, a Delaware corporation, SHARON MANUFACTURING COMPANY, a Michigan
corporation, WHITEHEAD ENGINEERED PRODUCTS, INC., a Delaware corporation, as
Guarantors, and BANKERS TRUST COMPANY, a New York banking corporation, as
Trustee (the "Trustee").
The Company has duly authorized the creation of an issue of 10
1/8% Senior Notes due 2007, Series A, and 10 1/8% Senior Notes due 2007, Series
B, to be issued in exchange for the 10 1/8% Senior Notes due 2007, Series A,
pursuant to the Registration Rights Agreement and, to provide therefor, the
Company and the Guarantors have duly authorized the execution and delivery of
this Indenture. All things necessary to make the Securities, when duly issued
and executed by the Company and authenticated and delivered hereunder, and the
Guarantees the valid and binding obligations of the Company and the Guarantors,
respectively, and to make this Indenture a valid and binding agreement of the
Company and each of the Guarantors, have been done.
Each party hereto agrees as follows for the benefit of each
other party and for the equal and ratable benefit of the Holders of the
Securities:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Accounts Receivable Subsidiary" means any Restricted
Subsidiary organized 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
<PAGE> 9
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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.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"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 in Section 5.01; (iii) any sale, transfer or
exchange of Capital Stock of any person other than a Restricted Subsidiary to
the
<PAGE> 10
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extent proceeds thereof 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.
"Asset Sale Offer" has the meaning provided in Section 4.16.
"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.
"Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors.
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"Board of Directors" means, with respect to any person, the
Board of Directors of such person or any committee of the Board of Directors of
such person duly authorized, with respect to any particular matter, to exercise
the power of the Board of Directors of such person.
"Board Resolution" means, with respect to any person, a copy
of a resolution certified by the Secretary or an Assistant Secretary of such
person to have been duly adopted by the Board of Directors of such person and
to be in full force and effect on the date of such certification, and delivered
to the Trustee.
"Business Day" means any day other than a Saturday, Sunday or
any other day on which banking institutions in the City of New York are
required or authorized by law or other governmental action to be closed.
"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 this 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, (a) 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); (b) 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; (c) 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
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least an equivalent rating category of another Rating Agency; and (d)
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 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 this 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;
<PAGE> 13
-6-
(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.
"Change of Control Date" has the meaning provided in Section
4.15.
"Change of Control Offer" has the meaning provided in Section
4.15.
"Change of Control Purchase Date" has the meaning provided in
Section 4.15.
"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.
"Company" means the party named as such in this Indenture
until a successor replaces it pursuant to this Indenture and thereafter means
such successor.
"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
<PAGE> 14
-7-
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 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
<PAGE> 15
-8-
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 (a) 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, (i) any amortization of debt discount; (ii) the
net cost under Interest Rate Protection Obligations; (iii) the interest portion
of any deferred payment obligation; (iv) all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; and (v) all accrued interest, and (b) 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, (a) all extraordinary gains or losses; (b) 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; (c) 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; (d) any gain or loss realized upon the termination of any employee
pension benefit plan, on an after-tax basis; (e) gains in respect of any Asset
Sales by such person or one of its Restricted Sub-
<PAGE> 16
-9-
sidiaries; and (f) 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).
"Covenant Defeasance" has the meaning provided in Section
8.01.
"Credit Agreement" means the Credit Agreement dated as of the
1995 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.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.
<PAGE> 17
-10-
"Depository" means, with respect to the Securities issued in
the form of one or more Global Securities, The Depository Trust Company or
another person designated as Depository by the Company, which must be a
clearing agency registered under the Exchange Act.
"Event of Default" has the meaning provided in Section 6.01.
"Excess Proceeds" has the meaning provided in Section 4.16.
"Excess Proceeds Payment Date" has the meaning provided in
Section 4.16.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.
"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 Board Resolution
of the Company delivered to the Trustee.
"Final Maturity Date" means December 15, 2007.
"Four Quarter Period" has the meaning provided in the
definition of "Consolidated Fixed Charge Coverage Ratio" above.
"Funding Guarantor" has the meaning provided in Section 10.06.
"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.
"Global Security" means a security evidencing all or a part of
the Securities issued to the Depository in accordance
<PAGE> 18
-11-
with Section 2.01 and bearing the legend prescribed in Exhibit C.
"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.
"Guarantee" has the meaning provided in Section 10.01.
"Guarantor" means (a) each of Walbro Automotive Corporation, a
Delaware corporation, Walbro Engine Management Corporation, a Delaware
corporation, Sharon Manufacturing Company, a Michigan corporation, and
Whitehead Engineered Products, Inc., a Delaware corporation; (b) 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 (c) any other Subsidiary that guarantees the Securities.
"Holder" or "Securityholder" means a person in whose name a
Security is registered on the Registrar's books.
"incur" has the meaning provided in Section 4.04.
"Indebtedness" means, with respect to any person, without
duplication, (a) all liabilities of such person for borrowed money or for the
deferred purchase price of property or services, excluding any trade payables
and other accrued current liabilities incurred in the ordinary course of
business and which are not overdue by more than 180 days, but including,
without limitation, all obligations, contingent or otherwise, of such person in
connection with any letters of credit, banker's acceptance or other similar
credit transaction; (b) all obligations of such person evidenced by bonds,
notes, debentures or other similar instruments; (c) all indebtedness
<PAGE> 19
-12-
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; (e) all Indebtedness referred to
in the preceding clauses of other persons and all dividends of other persons,
the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon property (including, without limitation, accounts and contract
rights) owned by such person, even though such person has not assumed or become
liable for the payment of such Indebtedness (the amount of such obligation
being deemed to be the lesser of the value of such property or asset or the
amount of the obligation so secured); (f) all guarantees of Indebtedness
referred to in this definition by such person; (g) all Redeemable Capital Stock
of such person valued at the greater of its voluntary or involuntary maximum
fixed repurchase price plus accrued dividends; (h) all obligations under or in
respect of Currency Agreements and Interest Rate Protection Obligations of such
person; and (i) any amendment, supplement, modification, deferral, renewal,
extension or refunding of any liability of the types referred to in clauses (a)
through (h) above. For purposes hereof, the "maximum fixed repurchase price"
of any Redeemable Capital Stock which does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Redeemable Capital
Stock as if such Redeemable Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to this Indenture, and
if such price is based upon, or measured by, the Fair Market Value of such
Redeemable Capital Stock, such Fair Market Value.
"Indenture" means this Indenture, as amended or supplemented
from time to time in accordance with the terms hereof.
"Independent" when used with respect to any specified person
means such a person who (a) is in fact independent; (b) does not have any
direct financial interest or any material indirect financial interest in the
Company or any of its Subsidiaries, or in any Affiliate of the Company or any
of its Subsidiaries; and (c) is not an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar functions
for the Company or any of its Subsidiaries. Whenever it is provided in this
Indenture that any Independent
<PAGE> 20
-13-
person's opinion or certificate shall be furnished to the Trustee, such person
shall be appointed by the Company, and such opinion or certificate shall state
that the signer has read this definition and that the signer is Independent
within the meaning hereof.
"Independent Financial Advisor" means a firm (a) 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 (b) 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.
"Initial Purchaser" means Salomon Brothers Inc.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act.
"Interest Payment Date" means the stated maturity of an
installment of interest on the Securities.
"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
<PAGE> 21
-14-
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 Securities, (a)
in the case of S&P, a rating of at least BBB-; (b) in the case of Moody's, a
rating of at least Baa3; and (c) in the case of a Rating Agency other than S&P
or Moody's, the equivalent rating, or in each case, any successor, replacement
or equivalent definition as promulgated by S&P, Moody's or other Rating Agency,
as the case may be; provided that a rating of BBB-, with respect to S&P, Baa3,
with respect to Moody's, or the equivalent rating of another Rating Agency
other than S&P or Moody's (or any such successor, replacement or equivalent
definition) shall not be Investment Grade if any such Rating Agency shall have
then placed the Securities on credit watch with negative implications.
"Issue Date" means the date of first issuance of the
Securities under this Indenture.
"Legal Defeasance" has the meaning provided in Section 8.01.
"Lien" means any mortgage, charge, pledge, lien (statutory or
other), security interest, hypothecation, assignment for security, claim or
preference or priority or other encumbrance upon or with respect to any
property of any kind. A person shall be deemed to own subject to a Lien any
property which such person has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary of the Company)
net of (a) brokerage commissions and other fees and expenses (including,
without limitation, fees and expenses of legal counsel and investment bankers)
related to such Asset Sale; (b) provisions for all taxes payable as a result of
such
<PAGE> 22
-15-
Asset Sale; (c) 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 (d) 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.
"1995 Notes" means the $110,000,000 aggregate principal amount
of 9-7/8% Senior Notes of the Company issued under the 1995 Notes Indenture.
"1995 Notes Guarantees" means the guarantees of the 1995 Notes
issued pursuant to the 1995 Notes Indenture.
"1995 Notes Indenture" means the Indenture dated as of July
27, 1995 among the Company, the guarantors named therein and Bankers Trust
Company, as trustee.
"1995 Notes Issue Date" means July 27, 1995.
"Non-Investment Grade Period" has the meaning provided in
Section 4.16.
"Note Agreement" means the Note Agreement dated as of October
1, 1994 by and among the Company and the Purchasers named on Schedule I
thereto, relating to the $45,000,000 aggregate principal amount of 7.68% Senior
Notes due October 1, 2004 of the Company.
"Obligations" means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
<PAGE> 23
-16-
"Offering Memorandum" means the Offering Memorandum of the
Company dated December 11, 1997 with respect to the Series A Securities.
"Officer" means, with respect to any person, the Chairman of
the Board, the Chief Executive Officer, the President, any Vice President, the
Chief Financial Officer, the Controller, or the Secretary of such person.
"Officers' Certificate" means a certificate signed by two
Officers of the Company.
"Opinion of Counsel" means a written opinion from legal
counsel which and who are acceptable to the Trustee.
"Participants" has the meaning provided in Section 2.15.
"Paying Agent" has the meaning provided in Section 2.03.
"Permitted Holder" means (i) each of Lambert A. 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: (a)
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; (b)
Investments in Cash Equivalents; (c) Investments in deposits with respect to
leases or utilities provided to third parties in the ordinary course of
business; (d) Investments in the Securities and the 1995 Notes; (e) 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; (f) 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 mov-
<PAGE> 24
-17-
ing expenses) not in excess of $1,000,000 in the aggregate at any one time
outstanding; (g) 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 this Indenture;
(h) 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 (i) other Investments made
after the 1995 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 (a) not delinquent or (b) contested in good faith by
appropriate proceedings and as to which the Company or any of its
Restricted Subsidiaries shall have set aside on its books such
reserves as may be required pursuant to GAAP;
(b) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and
other Liens imposed by law incurred in the ordinary course of
business for sums not yet delinquent or being contested in good
faith, if such reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made in respect thereof;
(c) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, governmental contracts, performance and
return-of-money bonds
<PAGE> 25
-18-
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
constructed, (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
<PAGE> 26
-19-
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.
"Physical Securities" has the meaning provided in Section
2.01.
"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.
"principal" of any Indebtedness (including the Securities)
means the principal amount of such Indebtedness plus the premium, if any, on
such Indebtedness.
"Private Placement Legend" means the legend initially set
forth on the Securities in the form set forth on Exhibit A.
"pro forma" means, with respect to any calculation made or
required to be made pursuant to the terms of this Indenture, a calculation in
accordance with Article 11 of Regulation S-X under the Securities Act as
interpreted by the Company's Board of Directors in consultation with its
independent certified public accountants.
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"Purchase Agreement" means the purchase agreement dated as of
December 11, 1997 by and among the Company, the Guarantors and the Initial
Purchaser of the Securities.
"Qualified Institutional Buyer" or "QIB" shall have the
meaning specified in Rule 144A under the Securities Act.
"Rating Agency" means a nationally recognized securities
rating agency, selected by the Company and satisfactory to the Trustee.
"Record Date" means the Record Dates specified in the
Securities; provided that if any such date is not a Business Day, the Record
Date shall be the first day immediately preceding such specified day that is a
Business Day.
"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 Security 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.
"Redemption Date," when used with respect to any Security to
be redeemed, means the date fixed for such redemption pursuant to this
Indenture and the Securities.
"Redemption Price," when used with respect to any Security to
be redeemed, means the price fixed for such redemption, payable in immediately
available funds, pursuant to this Indenture and the Securities.
"Registered Exchange Offer" means the offer to exchange the
Series B Securities for all of the outstanding Series A Securities in
accordance with the Registration Rights Agreement.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the Registration Rights
Agreement by and among the Company, the Guarantors and the Initial Purchaser,
relating to the Securities and dated as of the Issue Date, as the same may be
amended, supplemented
<PAGE> 28
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or modified from time to time in accordance with the terms thereof.
"Regulation S" means Regulation S under the Securities Act.
"Replacement Assets" has the meaning provided in Section 4.16.
"Responsible Officer" shall mean, when used with respect to
the Trustee, any officer in the corporate trust office of the Trustee including
any managing director, vice president, assistant vice president, assistant
secretary, assistant treasurer, or any other officer of the Trustee who
customarily performs functions similar to those performed by the persons who at
the time shall be such officers, respectively, or to whom any corporate trust
matter is referred because of such officer's knowledge of and familiarity with
the particular subject.
"Restricted Payment" has the meaning provided in Section 4.03.
"Restricted Security" has the meaning set forth in Rule
144(a)(3) under the Securities Act; provided that the Trustee shall be entitled
to request and conclusively rely upon an Opinion of Counsel with respect to
whether any Security is a Restricted Security.
"Restricted Subsidiary" means a Subsidiary of any person which
is not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"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.
"SEC" means the Securities and Exchange Commission.
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"Securities" means the Series A Securities and the Series B
Securities treated as a single class of securities, as amended or supplemented
from time to time in accordance with the terms hereof, that are issued pursuant
to this Indenture.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Series A Securities" means the 10 1/8% Senior Notes due 2007,
Series A, of the Company issued pursuant to this Indenture and sold pursuant to
the Purchase Agreement.
"Series B Securities" means the 10 1/8% Senior Notes due 2007,
Series B, of the Company to be issued in exchange for the Series A Securities
pursuant to the Registered Exchange Offer and the Registration Rights
Agreement.
"Significant Subsidiary" shall have the same meaning as in
Rule 1.02(v) of Regulation S-X under the Securities Act.
"S&P" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., and its successors.
"Stated Maturity" means, when used with respect to any
Security or any installment of interest thereon, the date specified in such
Security as the fixed date on which the principal of such Security 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
Securities or the Guarantee of such Guarantor, as the case may be.
"Subsidiary" means, with respect to any person, (a) 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 (b) any other person
(other than a corporation), including, without limitation, a joint venture, in
which such person, one or more Subsidiaries thereof or such person and one or
more Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, has at least ma-
<PAGE> 30
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jority 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.
"Surviving Entity" has the meaning provided in Section 5.01.
"Unrestricted Subsidiary" means (x) Walbro Capital Trust and
(y) a Subsidiary of the Company (a) none of whose properties or assets were
owned by the Company or any of its Subsidiaries on or prior to the 1995 Notes
Issue Date, other than any such assets as are transferred to such Unrestricted
Subsidiary in accordance with Section 4.03; (b) whose properties and assets, to
the extent that they secure Indebtedness, secure only Non-Recourse
Indebtedness; and (c) which has no Indebtedness other than Non-Recourse
Indebtedness. As used above, "Non-Recourse Indebtedness" means Indebtedness as
to which (i) neither the Company nor any of its Restricted Subsidiaries (1)
provides credit support (including any undertaking, agreement or instrument
which would constitute Indebtedness), (2) guarantees or is otherwise directly
or indirectly liable or (3) constitutes the lender (in each case, other than
pursuant to and in compliance with Section 4.03) 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 Section 4.04 (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 this 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 this
Indenture. A designation of an Unrestricted Subsidiary as a Restricted
Subsidiary may not thereafter be rescinded.
<PAGE> 31
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"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb), as amended, as in effect on the date of the execution
of this Indenture until such time as this Indenture is qualified under the TIA,
and thereafter as in effect on the date on which this Indenture is qualified
under the TIA, except as otherwise provided in Section 9.03.
"Trustee" means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions of this
Indenture and thereafter means such successor.
"U.S. Government Obligations" shall have the meaning provided
in Section 8.01.
"U.S. Legal Tender" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
"U.S. Physical Securities" shall have the meaning set forth in
Section 2.01.
"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.
SECTION 1.02. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
<PAGE> 32
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"indenture securities" means the Securities.
"indenture security holder" means a Holder or a
Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company, any
Guarantor or any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule and
not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words
in the plural include the singular;
(5) provisions apply to successive events and transactions;
and
(6) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision.
<PAGE> 33
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ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
The Series A Securities and the Trustee's certificate of
authentication thereof shall be substantially in the form of Exhibit A annexed
hereto, which is hereby incorporated in and expressly made a part of this
Indenture. The Series B Securities and the Trustee's certificate of
authentication thereof shall be substantially in the form of Exhibit B annexed
hereto, which is hereby incorporated in and expressly made a part of this
Indenture. The Securities may have notations, legends or endorsements
(including notations relating to the Guarantee) required by law, stock exchange
rule or usage. The Company and the Trustee shall approve the form of the
Securities and any notation, legend or endorsement (including notations
relating to the Guarantee) on them. Each Security shall be dated the date of
its issuance and shall show the date of its authentication.
Securities offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more permanent Global Securities in
registered form, substantially in the form set forth in Exhibit A, deposited
with the Trustee, as custodian for the Depository, and shall bear the legend
set forth on Exhibit C. The aggregate principal amount of any Global Security
may from time to time be increased or decreased by adjustments made on the
records of the Trustee, as custodian for the Depository, as hereinafter
provided.
Securities offered and sold in offshore transactions in
reliance on Regulation S shall be issued in the form of certificated Securities
in registered form set forth in Exhibit A (the "Offshore Physical Securities").
Securities offered and sold in reliance on any other exemption from
registration under the Securities Act other than as described in the preceding
paragraph shall be issued, and Securities offered and sold in reliance on Rule
144A may be issued, in the form of certificated Securities in registered form
in substantially the form set forth in Exhibit A (the "U.S. Physical
Securities"). The Offshore Physical Securities and the U.S. Physical
Securities are sometimes collectively herein referred to as the "Physical
Securities."
<PAGE> 34
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SECTION 2.02. Execution and Authentication.
Two Officers, or an Officer and an Assistant Secretary, shall
sign, or one Officer shall sign and one Officer or an Assistant Secretary (each
of whom shall, in each case, have been duly authorized by all requisite
corporate actions) shall attest to, the Securities for the Company by manual or
facsimile signature. The Company's seal shall also be reproduced on the
Securities.
If an Officer or Assistant Secretary whose signature is on a
Security was an Officer or Assistant Secretary at the time of such execution
but no longer holds that office at the time the Trustee authenticates the
Security, the Security shall be valid nevertheless. Each Guarantor shall
execute the Guarantee in the manner set forth in Section 10.08.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate (i) Series A Securities for
original issue in the aggregate principal amount not to exceed $100,000,000 and
(ii) Series B Securities from time to time for issue only in exchange for a
like principal amount of Series A Securities, in each case upon a written order
of the Company in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of Securities to be authenticated, the
series of Securities and the date on which the Securities are to be
authenticated. The aggregate principal amount of Securities outstanding at any
time may not exceed $100,000,000, except as provided in Section 2.07. Upon
receipt of a written order of the Company in the form of an Officers'
Certificate, the Trustee shall authenticate Securities in substitution for
Securities originally issued to reflect any name change of the Company.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate Securities. Unless otherwise
provided in the appointment, an authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company
and Affiliates of the Company.
<PAGE> 35
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The Securities shall be issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency in the Borough
of Manhattan, The City of New York, where (a) Securities may be presented or
surrendered for registration of transfer or for exchange ("Registrar"), (b)
Securities may be presented or surrendered for payment ("Paying Agent") and (c)
notices and demands in respect of the Securities and this Indenture may be
served. The Registrar shall keep a register of the Securities and of their
transfer and exchange. The Company, upon written notice to the Trustee, may
have one or more co-Registrars and one or more additional Paying Agents
reasonably acceptable to the Trustee. The term "Paying Agent" includes any
additional Paying Agent. The Company initially appoints the Trustee as
Registrar and Paying Agent until such time as the Trustee has resigned or a
successor has been appointed. Neither the Company nor any Affiliate of the
Company may act as Paying Agent except as otherwise expressly provided in the
form of the Security.
To the extent the Company makes such payments directly to the
Holders, the Company shall simultaneously notify the Trustee thereof in
writing.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that each Paying Agent shall hold in trust for the
benefit of Holders or the Trustee all assets held by the Paying Agent for the
payment of principal of, or interest on, the Securities, and shall notify the
Trustee in writing of any Default by the Company in making any such payment.
The Company at any time may require a Paying Agent to distribute all assets
held by it to the Trustee and account for any assets disbursed and the Trustee
may at any time, but shall be under no obligation to, during the continuance of
any payment Default, upon written request to a Paying Agent, require such
Paying Agent to distribute all assets held by it to the Trustee and to account
for any assets distributed. Upon distribution to the Trustee of all assets
that shall have been delivered by the Company to the Paying Agent, the Paying
Agent shall have no further liability for such assets.
<PAGE> 36
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SECTION 2.05. Securityholder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Holders. If the Trustee is not the Registrar, the Company shall
furnish to the Trustee before each Record Date and at such other times as the
Trustee may request in writing a list as of such date and in such form as the
Trustee may reasonably require of the names and addresses of Holders, which
list may be conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
Subject to the provisions of Sections 2.15 and 2.16, when
Securities are presented to the Registrar or a co-Registrar with a request to
register the transfer of such Securities or to exchange such Securities for an
equal principal amount of Securities of other authorized denominations of the
same series, the Registrar or co-Registrar shall register the transfer or make
the exchange as requested if its requirements for such transaction are met;
provided, however, that the Securities surrendered for transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Securities at the Registrar's or co-Registrar's
written request. No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or other governmental charge
payable upon exchanges or transfers pursuant to Section 2.02, 2.10, 3.06, 4.15,
4.16 or 9.05). The Registrar or co-Registrar shall not be required to register
the transfer of or exchange of any Security (i) during a period beginning at
the opening of business 15 days before the mailing of a notice of redemption of
Securities and ending at the close of business on the day of such mailing and
(ii) selected for redemption in whole or in part pursuant to Article Three,
except the unredeemed portion of any Security being redeemed in part.
Any Holder of a Global Security shall, by acceptance of such
Global Security, agree that transfers of beneficial interests in such Global
Security may be effected only through a book-entry system maintained by the
Depository (or its agent),
<PAGE> 37
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and that ownership of a beneficial interest in a Global Security shall be
required to be reflected in a book entry system.
SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if
the Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall authenticate
upon written notice from the Company a replacement Security if the Trustee's
requirements are met. If required by the Trustee or the Company, such Holder
must provide an indemnity bond or other indemnity, sufficient in the judgment
of both the Company and the Trustee, to protect the Company, the Trustee and
any Agent from any loss which any of them may suffer if a Security is replaced.
The Company may charge such Holder for its reasonable, out-of-pocket expenses
in replacing a Security, including reasonable fees and expenses of counsel.
Every replacement Security is an additional obligation of the
Company.
SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all the Securities that
have been authenticated by the Trustee except those cancelled by it, those
delivered to it for cancellation and those described in this Section as not
outstanding. Subject to Section 2.09, a Security does not cease to be
outstanding because the Company or any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than
a mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be
outstanding upon surrender of such Security and replacement thereof pursuant to
Section 2.07.
If on a Redemption Date or the Final Maturity Date the Paying
Agent holds U.S. Legal Tender or U.S. Government Obligations sufficient to pay
all of the principal and interest due on the Securities payable on that date,
then on and after that date such Securities cease to be outstanding and
interest on them ceases to accrue.
<PAGE> 38
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SECTION 2.09. Treasury Securities.
In determining whether the Holders of the required principal
amount of Securities have concurred in any direction, waiver or consent,
Securities owned by the Company, the Guarantors or any of their respective
Affiliates shall be disregarded, except that, for the purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities that a Responsible Officer of the Trustee actually
knows are so owned shall be disregarded.
The Trustee may require an Officers' Certificate listing
Securities owned by the Company, a Guarantor or any of their respective
Affiliates.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Securities
upon receipt of a written order of the Company in the form of an Officers'
Certificate. The Officers' Certificate shall specify the amount of temporary
Securities to be authenticated and the date on which the temporary Securities
are to be authenticated. Temporary Securities shall be substantially in the
form of definitive Securities but may have variations that the Company
considers appropriate for temporary Securities. Without unreasonable delay,
the Company shall prepare and the Trustee shall authenticate upon receipt of a
written order of the Company pursuant to Section 2.02 definitive Securities in
exchange for temporary Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee
for cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Securities surrendered to them for transfer, exchange or payment.
The Trustee, or at the direction of the Trustee, the Registrar or the Paying
Agent, and no one else, shall cancel and, at the written direction of the
Company, shall dispose of all Securities surrendered for transfer, exchange,
payment or cancellation. Subject to Section 2.07, the Company may not issue
new Securities to replace Securities that it has paid or delivered to the
Trustee for cancellation. If the Company or any Guarantor shall acquire any of
the Securities, such acquisition shall not operate as a redemption or
satisfaction of the Indebtedness represented by such
<PAGE> 39
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Securities unless and until the same are surrendered to the Trustee for
cancellation pursuant to this Section 2.11.
SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the
Securities, it shall pay interest on overdue principal and on overdue
installments of interest (without grace periods) from time to time on demand at
the rate of 2% per annum in excess of the rate shown on the Security.
SECTION 2.13. CUSIP Number.
The Company in issuing the Securities will use a "CUSIP"
number, and if so, the Trustee shall use the CUSIP number in notices of
redemption or exchange as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed in the notice or on the Securities, and
that reliance may be placed only on the other identification numbers printed on
the Securities.
SECTION 2.14. Deposit of Moneys.
Prior to 11:00 a.m. New York City time on each Interest
Payment Date and the Final Maturity Date, the Company shall have either
delivered by wire transfer or check such interest or principal and interest, as
the case may be to Holders at such Holders registered address or deposited with
the Paying Agent in immediately available funds money sufficient to make cash
payments, if any, due on such Interest Payment Date or the Final Maturity Date,
as the case may be, in a timely manner which permits the Paying Agent to remit
payment to the Holders on such Interest Payment Date or the Final Maturity
Date, as the case may be.
SECTION 2.15. Book-Entry Provisions for Global Securities.
(a) The Global Securities initially shall (i) be
registered in the name of the Depository or the nominee of such Depository,
(ii) be delivered to the Trustee as custodian for such Depository and (iii)
bear legends as set forth in Exhibit C.
Members of, or participants in, the Depository
("Participants") shall have no rights under this Indenture with respect to any
Global Security held on their behalf by the De-
<PAGE> 40
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pository, or the Trustee as its custodian, or under the Global Security, and
the Depository may be treated by the Company, the Trustee and any agent of the
Company or the Trustee as the absolute owner of the Global Security for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee
from giving effect to any written certification, proxy or other authorization
furnished by the Depository or impair, as between the Depository and
Participants, the operation of customary practices governing the exercise of
the rights of a Holder of any Security.
(b) Transfers of Global Securities shall be limited to
transfers in whole, but not in part, to the Depository, its successors or their
respective nominees. Interests of beneficial owners in the Global Securities
may be transferred or exchanged for Physical Securities in accordance with the
rules and procedures of the Depository and the provisions of Section 2.16. In
addition, Physical Securities shall be transferred to all beneficial owners in
exchange for their beneficial interests in Global Securities if (i) the
Depository notifies the Company that it is unwilling or unable to continue as
Depository for any Global Security and a successor depositary is not appointed
by the Company within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a request from the
Depository to issue Physical Securities.
(c) In connection with the transfer of Global Securities as
an entirety to beneficial owners pursuant to paragraph (b) of this Section
2.15, the Global Securities shall be deemed to be surrendered to the Trustee
for cancellation, and the Company shall execute, and the Trustee shall upon
written instructions from the Company authenticate and deliver, to each
beneficial owner identified by the Depository in exchange for its beneficial
interest in the Global Securities, an equal aggregate principal amount of
Physical Securities of authorized denominations.
(d) Any Physical Security constituting a Restricted Security
delivered in exchange for an interest in a Global Security pursuant to
paragraph (b) or (d) of this Section 2.15 shall, except as otherwise provided
by Section 2.16, bear the Private Placement Legend.
(e) The Holder of any Global Security may grant proxies and
otherwise authorize any person, including Participants and persons that may
hold interests through Participants,
<PAGE> 41
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to take any action which a Holder is entitled to take under this Indenture or
the Securities.
SECTION 2.16. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Physical Securities. When
Physical Securities are presented to the Registrar with a request:
(i) to register the transfer of the Physical Securities;
or
(ii) to exchange such Physical Securities for an equal
number of Physical Securities of other authorized
denominations,
the Registrar shall register the transfer or make the exchange as requested if
the requirements under this Indenture as set forth in this Section 2.16 for
such transactions are met; provided, however, that the Physical Securities
presented or surrendered for registration of transfer or exchange:
(I) shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Registrar or
co-Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
(II) in the case of Physical Securities the offer and sale
of which have not been registered under the Securities Act, such
Physical Securities shall be accompanied, in the sole discretion of
the Company, by the following additional information and documents, as
applicable:
(A) if such Physical Security is being delivered to the
Registrar by a holder for registration in the name of
such holder, without transfer, a certification from
such holder to that effect (in substantially the form
of Exhibit D hereto); or
(B) if such Physical Security is being transferred to a
Qualified Institutional Buyer in accordance with Rule
144A under the Securities Act, a certification to
that effect (in substantially the form of Exhibit D
hereto); or
(C) if such Physical Security is being transferred to an
Institutional Accredited Investor, deliv-
<PAGE> 42
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ery of a certification to that effect (in
substantially the form of Exhibit D hereto) and a
Transferee Certificate for Institutional Accredited
Investors in the form of Exhibit E hereto; or
(D) if such Physical Security is being transferred in
reliance on Regulation S, delivery of a certification
to that effect (substantially in the form of Exhibit
D hereto) and a Transferee Certificate for Regulation
S Transfers in the form of Exhibit F hereto and an
Opinion of Counsel reasonably satisfactory to the
Company to the effect that such transfer is in
compliance with the Securities Act; or
(E) if such Physical Security is being transferred in
reliance on Rule 144 under the Securities Act,
delivery of a certification to that effect
(substantially in the form of Exhibit D hereto) and
an Opinion of Counsel reasonably satisfactory to the
Company to the effect that such transfer is in
compliance with the Securities Act; or
(F) if such Physical Security is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification
to that effect (in substantially the form of Exhibit
D hereto) and an Opinion of Counsel reasonably
acceptable to the Company to the effect that such
transfer is in compliance with the Securities Act.
(b) Restrictions on Transfer of a Physical Security for a
Beneficial Interest in a Global Security. A Physical Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the
Registrar of a Physical Security, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Registrar, together with:
(A) certification, substantially in the form of Exhibit D
hereto, that such Physical Security is being
transferred to a Qualified Institutional Buyer; and
<PAGE> 43
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(B) written instructions directing the Registrar to make,
or to direct the Depository to make, an endorsement
on the Global Security to reflect an increase in the
aggregate amount of the Securities represented by the
Global Security,
then the Registrar shall cancel such Physical Security and cause, or direct the
Depository to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Registrar, the number of
Securities represented by the Global Security to be increased accordingly. If
no Global Security is then outstanding, the Company shall issue and the Trustee
shall upon written instructions from the Company authenticate a new Global
Security in the appropriate amount.
(c) Transfer and Exchange of Global Securities. The
transfer and exchange of Global Securities or beneficial interests therein
shall be effected through the Depository, in accordance with this Indenture
(including the restrictions on transfer set forth herein) and the procedures of
the Depository therefor.
(d) Transfer of a Beneficial Interest in a Global
Security for a Physical Security.
(i) Any person having a beneficial interest in a Global
Security may upon request exchange such beneficial
interest for a Physical Security. Upon receipt by
the Registrar of written instructions or such other
form of instructions as is customary for the
Depository from the Depository or its nominee on
behalf of any person having a beneficial interest in
a Global Security and upon receipt by the Trustee of
a written order or such other form of instructions as
is customary for the Depository or the person
designated by the Depository as having such a
beneficial interest containing registration
instructions and, in the case of any such transfer or
exchange of a beneficial interest in Securities the
offer and sale of which have not been registered
under the Securities Act, the following additional
information and documents:
(A) if such beneficial interest is being transferred to
the person designated by the Depository as being the
beneficial owner, a certification from
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such person to that effect (in substantially the form
of Exhibit D hereto); or
(B) if such beneficial interest is being transferred to a
Qualified Institutional Buyer in accordance with Rule
144A under the Securities Act, a certification to
that effect (in substantially the form of Exhibit D
hereto); or
(C) if such beneficial interest is being transferred to
an Institutional Accredited Investor, delivery of a
certification to that effect (substantially in the
form of Exhibit D hereto) and a Certificate for
Institutional Accredited Investors in the form of
Exhibit E hereto; or
(D) if such beneficial interest is being transferred in
reliance on Regulation S, delivery of a certification
to that effect (substantially in the form of Exhibit
D hereto) and a Transferee Certificate for Regulation
S Transfers in the form of Exhibit F hereto and an
Opinion of Counsel reasonably satisfactory to the
Company to the effect that such transfer is in
compliance with the Securities Act; or
(E) if such beneficial interest is being transferred in
reliance on Rule 144 under the Securities Act,
delivery of a certification to that effect
(substantially in the form of Exhibit D hereto) and
an Opinion of Counsel reasonably acceptable to the
Company to the effect that such transfer is in
compliance with the Securities Act; or
(F) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification
to that effect (in substantially the form of Exhibit
D hereto) and an Opinion of Counsel reasonably
acceptable to the Company to the effect that such
transfer is in compliance with the Securities Act,
then the Registrar will cause, in accordance with the standing
instructions and procedures existing between the Depository
and the Registrar, the aggregate amount of the Global Security
to be reduced and, following such reduction, the Company will
execute and,
<PAGE> 45
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upon receipt of an authentication order in the form of an
Officers' Certificate, the Trustee will authenticate and
deliver to the transferee a Physical Security.
(ii) Securities issued in exchange for a beneficial
interest in a Global Security pursuant to this
Section 2.16(d) shall be registered in such names and
in such authorized denominations as the Depository,
pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the
Registrar in writing. The Registrar shall deliver
such Physical Securities to the persons in whose
names such Physical Securities are so registered.
(e) Restrictions on Transfer and Exchange of Global
Securities. Notwithstanding any other provisions of this Indenture, a Global
Security may not be transferred as a whole except by the Depository to a
nominee of the Depository or by a nominee of the Depository to the Depository
or another nominee of the Depository or by the Depository or any such nominee
to a successor Depository or a nominee of such successor Depository.
(f) Private Placement Legend. Upon the transfer,
exchange or replacement of Securities not bearing the Private Placement Legend,
the Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Securities that bear
the Private Placement Legend unless, and the Trustee is hereby authorized to
deliver Securities without the Private Placement Legend if, (i) there is
delivered to the Trustee an Opinion of Counsel reasonably satisfactory to the
Company and the Trustee to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act or (ii) such Security has been sold pursuant
to an effective registration statement under the Securities Act.
(g) General. By its acceptance of any Security bearing
the Private Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and in
the Private Placement Legend and agrees that it will transfer such Security
only as provided in this Indenture.
<PAGE> 46
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The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.15 or this Section
2.16. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon
the giving of reasonable written notice to the Registrar.
SECTION 2.17. Designation.
The Indebtedness evidenced by the Securities is hereby
irrevocably designated as "senior indebtedness" or such other term denoting
seniority for the purposes of any future Indebtedness of the Company which the
Company makes subordinate to any senior indebtedness or such other term
denoting seniority.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Securities pursuant to
Paragraph 5 or 6 of the Securities, it shall notify the Trustee in writing of
the Redemption Date, the Redemption Price and the principal amount of
Securities to be redeemed. The Company shall give notice of redemption to
Trustee at least 45 days but not more than 60 days before the Redemption Date
(unless a shorter notice shall be agreed to by the Trustee in writing),
together with an Officers' Certificate stating that such redemption will comply
with the conditions contained herein.
SECTION 3.02. Selection of Securities To Be Redeemed.
If fewer than all of the Securities are to be redeemed, the
Trustee shall select the Securities to be redeemed in compliance with the
requirements of the principal national securities exchange, if any, on which
the Securities are listed or, if the Securities are not listed on a national
securities exchange, by lot or by such method as the Trustee shall deem fair
and appropriate; provided, however, that if the Securities are redeemed
pursuant to Paragraph 6 of the Securities, the Securities shall be redeemed
solely on a pro rata basis unless the securities exchange, if any, on which the
Securities are listed requires a different method. If the Securities are
<PAGE> 47
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listed on any national securities exchange, the Company shall notify the
Trustee in writing of the requirements of such exchange in respect of any
redemption. The Trustee shall make the selection from the Securities
outstanding and not previously called for redemption and shall promptly notify
the Company in writing of the Securities selected for redemption and, in the
case of any Security selected for partial redemption, the principal amount
thereof to be redeemed. Securities in denominations of less than $1,000 may be
redeemed only in whole. The Trustee may select for redemption portions (equal
to $1,000 or any integral multiple thereof) of the principal of Securities that
have denominations larger than $1,000. Provisions of this Indenture that apply
to Securities called for redemption also apply to portions of Securities called
for redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption
Date, the Company shall mail or cause to be mailed a notice of redemption by
first class mail, postage prepaid, to each Holder whose Securities are to be
redeemed. At the Company's written request, the Trustee shall give the notice
of redemption in the Company's name and at the Company's expense. Each notice
for redemption shall identify the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued
interest, if any, to be paid;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be
surrendered to the Paying Agent to collect the Redemption Price plus
accrued interest, if any;
(5) that, unless the Company defaults in making the
redemption payment, interest on Securities called for redemption
ceases to accrue on and after the Redemption Date, and the only
remaining right of the Holders of such Securities is to receive
payment of the Redemption Price upon surrender to the Paying Agent of
the Securities redeemed;
(6) if any Security is being redeemed in part, the
portion of the principal amount of such Security to be redeemed and
that, after the Redemption Date, and upon sur-
<PAGE> 48
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render of such Security, a new Security or Securities in aggregate
principal amount equal to the unredeemed portion thereof will be
issued;
(7) if fewer than all the Securities are to be redeemed,
the identification of the particular Securities (or portion thereof)
to be redeemed, as well as the aggregate principal amount of
Securities to be redeemed and the aggregate principal amount of
Securities to be outstanding after such partial redemption; and
(8) the Paragraph of the Securities pursuant to which the
Securities are to be redeemed.
SECTION 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section
3.03, Securities called for redemption become due and payable on the Redemption
Date and at the Redemption Price plus accrued interest, if any. Upon surrender
to the Paying Agent, such Securities called for redemption shall be paid at the
Redemption Price (which shall include accrued interest thereon to the
Redemption Date), but installments of interest, the maturity of which is on or
prior to the Redemption Date, shall be payable to Holders of record at the
close of business on the relevant Record Dates.
SECTION 3.05. Deposit of Redemption Price.
On or before the Redemption Date, the Company shall deposit
with the Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price
plus accrued interest, if any, of all Securities to be redeemed on that date.
If the Company complies with the preceding paragraph, then,
unless the Company defaults in the payment of such Redemption Price plus
accrued interest, if any, interest on the Securities to be redeemed will cease
to accrue on and after the applicable Redemption Date, whether or not such
Securities are presented for payment.
SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is to be redeemed in part,
the Trustee shall upon written instruction from the Company authenticate for
the Holder a new Security or Securities equal in principal amount to the
unredeemed portion of the Security surrendered.
<PAGE> 49
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ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
The Company shall pay the principal of and interest on the
Securities in the manner provided in the Securities. An installment of
principal of or interest on the Securities shall be considered paid on the date
it is due if the Trustee or Paying Agent holds on that date U.S. Legal Tender
designated for and sufficient to pay the installment.
The Company shall pay, to the extent such payments are lawful,
interest on overdue principal and it shall pay interest on overdue installments
of interest (without regard to any applicable grace periods) from time to time
on demand at the rate borne by the Securities plus 2% per annum. Interest will
be computed on the basis of a 360- day year comprised of twelve 30-day months.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The
City of New York, the office or agency required under Section 2.03. The
Company shall give prompt written notice to the Trustee of the location, and
any change in the location, of such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 11.02. The Company hereby initially designates
the corporate trust office of the Trustee as its office or agency in the
Borough of Manhattan, The City of New York.
SECTION 4.03. 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 distribu-
<PAGE> 50
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tions 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 Section 4.04
(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 1995 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 1995 Notes Issue Date occurred and
ending on the last day of the fiscal quarter of the Company im-
<PAGE> 51
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mediately preceding the date of such proposed Restricted Payment, which period
shall be treated as a single accounting period (or, if such aggregate
cumulative Consolidated Net Income of the Company for such period shall be a
deficit, minus 100% of such deficit) plus (2) the aggregate net proceeds (the
amount of such proceeds, if other than cash, shall be the Fair Market Value on
the date such proceeds are received by the Company of the asset(s) comprising
such proceeds) received by the Company either (x) as capital contributions to
the Company after the 1995 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 1995 Notes Issue Date plus (3) in the case of the
disposition or repayment of any Investment constituting a Restricted Payment
made after the 1995 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
<PAGE> 52
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clause (C)(2) of the preceding paragraph; (iii) so long as no Default or Event
of Default shall have occurred and be continuing, any redemption, repurchase or
other acquisition or retirement of Subordinated Indebtedness by exchange for,
or out of the net proceeds of, a substantially concurrent (x) capital
contribution to the Company from any person (other than a Subsidiary of the
Company) or (y) issue and sale of (1) Capital Stock (other than Redeemable
Capital Stock) of the Company to any person (other than to a Subsidiary of the
Company); provided, however, that the amount of any such net proceeds that are
utilized for any such redemption, repurchase or other acquisition or retirement
shall be excluded from clause (C)(2) of the preceding paragraph; or (2)
Indebtedness of the Company issued to any person (other than a Subsidiary of
the Company), so long as such Indebtedness is Subordinated Indebtedness which
(x) has no Stated Maturity earlier than the 91st day after the Final Maturity
Date, (y) has an Average Life to Stated Maturity equal to or greater than the
remaining Average Life to Stated Maturity of the Securities and (z) is
subordinated to the Securities 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
Securities 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 Securities 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 Section 4.16; (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 1995 Notes Issue Date. In computing the amount of
Restricted Payments previously made for purposes of clause (C) of the preceding
paragraph, Restricted Payments made under the preceding clauses (i), (iv), (vi)
and (vii) shall be included and clauses (ii), (iii) and (v) shall not be so
included.
<PAGE> 53
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SECTION 4.04. 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 Securities
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 1995
Notes and 1995 Notes Guarantees);
(c) Indebtedness of the Company and any Guarantor under the
Credit Agreement 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 Section 4.04 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;
<PAGE> 54
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(e) Indebtedness of a Wholly-Owned Restricted Subsidiary owed
to and held by the Company or another Wholly-Owned Restricted Subsidiary, in
each case which is not subordinated in right of payment to any Indebtedness of
such Wholly-Owned Restricted Subsidiary, except that (i) any transfer of such
Indebtedness by the Company or a Wholly- Owned Restricted Subsidiary (other
than to the Company or to a Wholly-Owned Restricted Subsidiary) and (ii) the
sale, transfer or other disposition by the Company or any Wholly-Owned
Restricted Subsidiary of Capital Stock of a Wholly- Owned Restricted Subsidiary
which is owed Indebtedness of another Wholly-Owned Restricted Subsidiary such
that it ceases to be a Wholly-Owned Restricted Subsidiary shall, in each case,
be an incurrence of Indebtedness by such Wholly-Owned Restricted Subsidiary
subject to the other provisions of this Section 4.04;
(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
this Indenture and the Securities 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 Section 4.04;
(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
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case may be, in order to provide security for workers' compensation claims,
payment obligations in connection with self- insurance or similar requirements
in the ordinary course of business;
(j) Indebtedness of Restricted Subsidiaries of the Company
which are not Guarantors not to exceed the sum of (x) 90% of the accounts
receivable of any such Restricted Subsidiary, (y) 70% of the inventory of any
such Restricted Subsidiary and (z) 10% of the Net Worth of any such Restricted
Subsidiary; provided that if any such Subsidiary shall sell or otherwise
transfer any of its accounts receivable, the Net Cash Proceeds from any such
sale or transfer shall be used to repay any Indebtedness of such Subsidiary
incurred pursuant to this clause (j);
(k) Indebtedness incurred by the Company or any of its
Restricted Subsidiaries during any period of time when the Securities 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 Securities publicly available, by either S&P or Moody's and an
equivalent rating by another Rating Agency) and no Default or Event of Default
shall have occurred and be continuing;
(l) Indebtedness of the Company or any Guarantor in addition
to that described in clauses (a) through (k) above, in an aggregate principal
amount outstanding at any time not exceeding $20,000,000; and
(m) (i) Indebtedness of the Company the proceeds of which are
used solely to refinance (whether by amendment, renewal, extension or
refunding) Indebtedness of the Company or any of its Restricted Subsidiaries
and (ii) Indebtedness of any Restricted Subsidiary of the Company the proceeds
of which are used solely to refinance (whether by amendment, renewal, extension
or refunding) Indebtedness of such Restricted Subsidiary, in each case other
than the Indebtedness incurred under clause (c), (d), (e), (f), (g), (h), (i),
(j) or (l) of this Section 4.04; provided, however, that (x) the principal
amount of Indebtedness incurred pursuant to this clause (m) (or, if such
Indebtedness provides for an amount less than the principal amount thereof to
be due and payable upon a declaration of acceleration of the maturity thereof,
the original issue price of such Indebtedness) shall not exceed the sum of the
principal amount of Indebtedness so refinanced, plus the amount of any premium
required to be paid in connection with such refinancing pursuant to the terms
of such Indebtedness or the amount of any premium reasonably determined by the
Board of Directors of the
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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 Securities.
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 Securities 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.
SECTION 4.05. Corporate Existence.
Except as otherwise permitted by Article Five, the Company
shall do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence and the corporate, partnership or
other existence of each of its Restricted Subsidiaries in accordance with the
respective organizational documents of each Restricted Subsidiary and the
rights (charter and statutory) and material franchises of the Company and each
of its Restricted Subsidiaries; provided, however, that the Company shall not
be required to preserve any such right or franchise, or the corporate existence
of any Restricted Subsidiary, if the Board of Directors of the Company shall
determine that the preservation thereof is no longer desirable in the conduct
of the business of the Company and its Restricted Subsidiaries, taken as a
whole, and that the loss thereof is not, and will not be, adverse in any
material respect to the Holders.
SECTION 4.06. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent,
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(i) all material taxes, assessments and governmental charges levied or imposed
upon it or any of its Restricted Subsidiaries or upon the income, profits or
property of it or any of its Restricted Subsidiaries and (ii) all lawful claims
for labor, materials and supplies which, in each case, if unpaid, might by law
become a material liability or Lien upon the property of it or any of its
Restricted Subsidiaries; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which appropriate
provision has been made.
SECTION 4.07. Maintenance of Properties and Insurance.
(a) The Company shall cause all material properties owned by
or leased by it or any of its Restricted Subsidiaries used or useful to the
conduct of its business or the business of any of its Restricted Subsidiaries
to be improved or maintained and kept in normal condition, repair and working
order and supplied with all necessary equipment and shall cause to be made all
necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in its judgment may be necessary, so that the business carried
on in connection therewith may be properly and advantageously conducted at all
times; provided, however, that nothing in this Section 4.07 shall prevent the
Company or any of its Restricted Subsidiaries from discontinuing the use,
operation or maintenance of any of such properties, or disposing of any of
them, if such discontinuance or disposal is, in the judgment of the Board of
Directors of the Company or of the Board of Directors of any Restricted
Subsidiary of the Company, or of an officer (or other agent employed by the
Company or of any of its Restricted Subsidiaries) of the Company or any of its
Restricted Subsidiaries having managerial responsibility for any such property,
desirable in the conduct of the business of the Company or any Restricted
Subsidiary of the Company, and if such discontinuance or disposal is not
adverse in any material respect to the Holders.
(b) The Company shall maintain, and shall cause its
Restricted Subsidiaries to maintain, insurance with responsible carriers
against such risks and in such amounts, and with such deductibles, retentions,
self-insured amounts and co-insurance provisions, as are customarily carried by
similar businesses of similar size, including property and casualty loss,
workers' compensation and interruption of business insurance.
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SECTION 4.08. Compliance Certificate; Notice of Default.
(a) The Company shall deliver to the Trustee, within 100 days
after the close of each fiscal year an Officers' Certificate stating that a
review of the activities of the Company has been made under the supervision of
the signing officers with a view to determining whether it has kept, observed,
performed and fulfilled its obligations under this Indenture and further
stating, as to each such Officer signing such certificate, that to the best of
his knowledge the Company during such preceding fiscal year has kept, observed,
performed and fulfilled each and every such covenant and no Default or Event of
Default occurred during such year and at the date of such certificate no
Default or Event of Default has occurred and is continuing or, if such signers
do know of such Default or Event of Default, the certificate shall describe its
status with particularity. The Officers' Certificate shall also notify the
Trustee should the Company elect to change the manner in which it fixes its
fiscal year end.
(b) The annual financial statements delivered pursuant to
Section 4.10 shall be accompanied by a written report of the Company's
independent accountants (who shall be a firm of established national
reputation) that in conducting their audit of such financial statements nothing
has come to their attention that would lead them to believe that the Company
has violated any provisions of Article 4, 5 or 6 of this Indenture insofar as
they relate to accounting matters or, if any such violation has occurred,
specifying the nature and period of existence thereof, it being understood that
such accountants shall not be liable directly or indirectly to any person for
any failure to obtain knowledge of any such violation.
(c) The Company shall deliver to the Trustee, within ten days
of becoming aware of any Default or Event of Default in the performance of any
covenant, agreement or condition contained in this Indenture, an Officers'
Certificate specifying the Default or Event of Default and describing its
status with particularity.
SECTION 4.09. Compliance with Laws.
The Company shall comply, and shall cause each of its
Restricted Subsidiaries to comply, with all applicable statutes, rules,
regulations, orders and restrictions of the United States of America, all
states and municipalities thereof, and of any governmental department,
commission, board, regulatory authority, bureau, agency and instrumentality of
the foregoing,
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in respect of the conduct of their respective businesses and the ownership of
their respective properties, except for such noncompliances as would not in the
aggregate have a material adverse effect on the financial condition or results
of operations of the Company and its Restricted Subsidiaries taken as a whole.
SECTION 4.10. SEC Reports.
(a) The Company will file with the SEC all information
documents and reports to be filed with the SEC pursuant to Section 13 or 15(d)
of the Exchange Act, whether or not the Company is subject to such filing
requirements so long as the SEC will accept such filings. The Company (at its
own expense) will file with the Trustee within 15 days after it files them with
the SEC, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the SEC
may by rules and regulations prescribe) which the Company files with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act. Upon qualification of
this Indenture under the TIA, the Company shall also comply with the provisions
of TIA Section 314(a).
(b) At the Company's expense, regardless of whether the
Company is required to furnish such reports to its stockholders pursuant to the
Exchange Act, the Company shall cause its consolidated financial statements,
comparable to that which would have been required to appear in annual or
quarterly reports, to be delivered to the Trustee and the Holders. The Company
will also make such reports available to prospective purchasers of the
Securities, securities analysts and broker-dealers upon their request.
(c) For so long as any of the Securities remain outstanding
the Company will make available to any prospective purchaser of the Securities
or beneficial owner of the Securities in connection with any sale thereof the
information required by Rule 144A(d)(4) under the Securities Act during any
period when the Company is not subject to Section 13 or 15(d) under the
Exchange Act.
SECTION 4.11. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
or any usury law or other law that would prohibit or forgive the Company from
paying all
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or any portion of the principal of and/or interest on the Securities as
contemplated herein, wherever enacted, now or at any time hereafter in force,
or which may affect the covenants or the performance of this Indenture, and (to
the extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 4.12. Limitation on Transactions with Interested Persons.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into or suffer to
exist any transaction or series of related transactions (including, without
limitation, the sale, transfer, disposition, purchase, exchange or lease of
assets, property or services) with, or for the benefit of, any Affiliate of the
Company, unless (a) such transaction or series of related transactions is on
terms that are no less favorable to the Company or such Restricted Subsidiary,
as the case may be, than those which could have been obtained in a comparable
transaction at such time from persons who are not Affiliates of the Company,
(b) with respect to a transaction or series of transactions involving aggregate
payments or value equal to or greater than $5,000,000, the Company has obtained
a written opinion from an Independent Financial Advisor stating that the terms
of such transaction or series of transactions are fair to the Company or such
Restricted Subsidiary, as the case may be, from a financial point of view and
(c) with respect to a transaction or series of transactions involving aggregate
payments or value equal to or greater than $2,500,000, the Company shall have
delivered an Officers' Certificate to the Trustee certifying that such
transaction or series of transactions complies with the preceding clause (a)
and, if applicable, 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 Section 4.12 will not restrict the
Company from (i) paying dividends in respect of its Capital Stock or making
Investments permitted under Section 4.03, (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
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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.
SECTION 4.13. Limitation on Dividend 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 this Indenture which could not materially adversely affect the Company's
ability to satisfy its obligations under this Indenture and the Securities,
(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 refinancing or replacements
thereof which are no less favorable to the Holders of the Securities than those
contained in the Indebtedness so
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refinanced or replaced and (vii) any Accounts Receivable Subsidiary in
connection with any Accounts Receivable Transaction.
SECTION 4.14. 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 Securities 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 Securities
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 Agreement and the Note Agreement incurred in accordance with this
Indenture; (b) Liens securing the Securities or any Guarantee; (c) Liens
securing the 1995 Notes and the 1995 Notes Guarantees pursuant to the terms of
the 1995 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 this Indenture and which has been incurred in
accordance with the provisions of this 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.
SECTION 4.15. Change of Control.
(a) 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 Securities 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 Change of Control Offer shall
remain open for at least 20 Business Days and until the close of business on
the Change of Control Purchase Date.
(b) Within 30 days following the date upon which the Change
of Control occurred (the "Change of Control Date"), the
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Company shall mail, or cause to be mailed, by first class mail, a notice to
each Holder, with a copy to the Trustee, which notice shall govern the terms of
the Change of Control Offer. The notice to the Holders shall contain all
instructions and materials necessary to enable such Holders to tender
Securities pursuant to the Change of Control Offer. Such notice shall state:
(1) that the Change of Control Offer is being made
pursuant to this Section 4.15 and that all Securities tendered and not
withdrawn will be accepted for payment;
(2) the purchase price (including the amount of accrued
interest) and the Change of Control Purchase Date;
(3) that any Security not tendered will continue to
accrue interest;
(4) that, unless the Company defaults in making payment
therefor, any Security accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of
Control Purchase Date;
(5) that Holders electing to have a Security purchased
pursuant to a Change of Control Offer will be required to surrender
the Security, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Security completed, to the Paying
Agent at the address specified in the notice prior to the close of
business on the Change of Control Purchase Date;
(6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the second
Business Day prior to the Change of Control Purchase Date, a facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Securities the Holder delivered for purchase
and a statement that such Holder is withdrawing his election to have
such Securities purchased;
(7) that Holders whose Securities are purchased only in
part will be issued new Securities in a principal amount equal to the
unpurchased portion of the Securities surrendered; and
(8) the circumstances and relevant facts regarding such
Change of Control.
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On or before the Change of Control Purchase Date, the Company
shall (i) accept for payment Securities or portions thereof tendered pursuant
to the Change of Control Offer, (ii) deposit with the Paying Agent in
accordance with Section 2.14 U.S. Legal Tender sufficient to pay the purchase
price plus accrued interest, if any, of all Securities so tendered and (iii)
deliver to the Trustee Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof being purchased by the
Company. Upon receipt by the Paying Agent of the monies specified in clause
(ii) above and a copy of the Officers' Certificate specified in clause (iii)
above, the Paying Agent shall promptly mail to the Holders of Securities so
accepted payment in an amount equal to the purchase price plus accrued
interest, if any, and the Trustee shall promptly authenticate and mail to such
Holders new Securities equal in principal amount to any unpurchased portion of
the Securities surrendered. Any Securities not so accepted shall be promptly
mailed by the Company to the Holder thereof. For purposes of this Section
4.15, the Trustee shall act as the Paying Agent.
Any amounts remaining after the purchase of all validly
tendered and not validly withdrawn Securities pursuant to a Change of Control
Offer shall be returned by the Trustee to the Company.
The Company shall and shall cause its Subsidiaries to comply
with all tender offer rules under state and Federal securities laws, including,
but not limited to, Section 14(e) under the Exchange Act and Rule 14e-1
thereunder, to the extent applicable to such offer. To the extent that the
provisions of any securities laws or regulations conflict with this Section
4.15, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.15 by virtue thereof.
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 Securities validly tendered and not withdrawn under such Change
of Control Offer.
SECTION 4.16. Disposition of Proceeds of Asset Sales.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, make any Asset Sale during any
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period when the Securities 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 Securities publicly
available, by either S&P or Moody's and an equivalent rating by another Rating
Agency (such period, the "Non-Investment Grade Period")) unless (a) the Company
or such Restricted Subsidiary, as the case may be, receives consideration at
the time of such Asset Sale at least equal to the Fair Market Value of the
shares or assets sold or otherwise disposed of and (b) at least 75% of such
consideration consists of cash or Cash Equivalents. To the extent the Net Cash
Proceeds of any Asset Sale consummated during the Non-Investment Grade Period
are not required (a) to repay any Indebtedness secured by the assets subject to
such Asset Sale pursuant to Liens permitted under this Indenture, (b) to repay
Indebtedness incurred pursuant to clause (j) of Section 4.04, (c) to be applied
to repay, and permanently reduce the commitments under, the Credit Agreement
(as required by the terms thereof) or (d) to repay Indebtedness under the 1995
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 in clause (b) of this Section 4.16.
(b) 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 Securities, not more than 40 Business
Days thereafter (the "Excess Proceeds Payment Date"), an aggregate principal
amount of Securities 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 Excess Proceeds Payment Date. To the extent that the
aggregate principal amount of Securities 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 Securities
validly tendered and not withdrawn by holders thereof exceeds the Excess
Proceeds, Securi-
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ties 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.
(c) Notice of each Asset Sale Offer pursuant to this Section
4.16 shall be mailed or caused to be mailed, by first class mail, by the
Company not less than 30 days prior to the Excess Proceeds Payment Date to all
Holders at their last registered addresses, with a copy to the Trustee. The
notice shall contain all instructions and materials necessary to enable such
Holders to tender Securities pursuant to the Asset Sale Offer and shall state
the following terms:
(1) that the Asset Sale Offer is being made pursuant to
Section 4.16 and that all Securities tendered will be accepted for
payment; provided, however, that if the principal amount of Securities
tendered in an Asset Sale Offer plus accrued interest at the
expiration of such offer exceeds the aggregate amount of the Excess
Proceeds, the Company shall select the Securities to be purchased on a
pro rata basis;
(2) the purchase price (including the amount of accrued
interest, if any) and the Excess Proceeds Payment Date (which shall be
at least 20 Business Days from the date of mailing of notice of such
Asset Sale Offer, or such longer period as required by law);
(3) that any Security not tendered will continue to
accrue interest;
(4) that, unless the Company defaults in making payment
therefor, any Security accepted for payment pursuant to the Asset Sale
Offer shall cease to accrue interest after the Excess Proceeds Payment
Date;
(5) that Holders electing to have a Security purchased
pursuant to an Asset Sale Offer will be required to surrender the
Security, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Security completed, to the Paying Agent at the
address specified in the notice prior to the close of business on the
Excess Proceeds Payment Date;
(6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the second
Business Day prior to the Excess Proceeds Payment Date, a facsimile
transmission or letter setting forth the
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name of the Holder, the principal amount of the Securities the Holder
delivered for purchase and a statement that such Holder is withdrawing
his election to have such Securities purchased; and
(7) that Holders whose Securities are purchased only in
part will be issued new Securities in a principal amount equal to the
unpurchased portion of the Securities surrendered.
On or before the Excess Proceeds Payment Date, the Company
shall (i) accept for payment Securities or portions thereof tendered pursuant
to the Asset Sale Offer which are to be purchased in accordance with item
(c)(1) above, (ii) deposit with the Paying Agent in accordance with Section
2.14 U.S. Legal Tender sufficient to pay the purchase price plus accrued
interest, if any, of all Securities to be purchased and (iii) deliver to the
Trustee Securities so accepted together with an Officers' Certificate stating
the Securities or portions thereof being purchased by the Company. The Paying
Agent shall promptly mail to the Holders of Securities so accepted payment in
an amount equal to the purchase price plus accrued interest, if any. For
purposes of this Section 4.16, the Trustee shall act as the Paying Agent.
The Company shall and shall cause its Subsidiaries to comply
with all tender offer rules under state and Federal securities laws, including,
but not limited to, Section 14(e) under the Exchange Act and Rule 14e-1
thereunder, to the extent applicable to such offer. To the extent that the
provisions of any securities laws or regulations conflict with the foregoing
provisions of this Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the foregoing provisions of this Indenture by virtue thereof.
(d) In the event of the transfer of substantially all
(but not all) of the property and assets of the Company and its Restricted
Subsidiaries as an entirety to a person in a transaction permitted under
Section 5.01 hereof, the successor corporation shall be deemed to have sold the
properties and assets of the Company and its Restricted Subsidiaries not so
transferred for purposes of this Section 4.16, and shall comply with the
provisions of this Section 4.16 with respect to such deemed sale as if it were
an Asset Sale. In addition, the Fair Market Value of such properties and
assets of the Company or its Restricted Subsidiaries deemed to be sold shall be
deemed to be Net Cash Proceeds for purposes of this Section 4.16.
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SECTION 4.17. Limitation on Issuance 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
Section 4.17 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 this Indenture or (y)
the issuance or sale of any Preferred Stock of a Restricted Subsidiary during
any period of time when the Securities 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 Securities
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.
SECTION 4.18. 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 Section 4.04 above (assuming a market rate
of interest with respect to such additional Indebtedness).
<PAGE> 69
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ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Consolidations and Sale of Assets.
(a) The Company shall not, in a single transaction or series
of related transactions, consolidate or merge with or into any person, or sell,
assign, transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary of the Company to sell, assign, transfer, lease, convey
or otherwise dispose of) all or substantially all of the Company's assets
(determined on a consolidated basis for the Company and the Company's
Restricted Subsidiaries) whether as an entirety or substantially as an entirety
to any person unless: (i) either (1) the Company or the applicable Restricted
Subsidiary shall be the surviving or continuing corporation or (2) the person
(if other than the Company or such Restricted Subsidiary) formed by such
consolidation or into which the Company or such Restricted Subsidiary is merged
or the person which acquires by sale, assignment, transfer, lease, conveyance
or other disposition the properties and assets of the Company and of the
Company's Restricted Subsidiaries substantially as an entirety (the "Surviving
Entity") (x) shall be a corporation organized and validly existing under the
laws of the United States or any State thereof or the District of Columbia and
(y) shall expressly assume, by supplemental indenture (in form and substance
satisfactory to the Trustee), executed and delivered to the Trustee, the due
and punctual payment of the principal of, and premium, if any, and interest on
all of the Securities and the performance of every covenant of the Securities,
this Indenture and the Registration Rights Agreement on the part of the Company
to be performed or observed; (ii) immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above on a pro
forma basis (including giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction), the Company or such Surviving Entity, as the case
may be, (1) shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such transaction and
(2) shall be able to incur at least $1.00 of additional Indebtedness pursuant
to the first paragraph of Section 4.04 (assuming a market rate of interest with
respect to such additional Indebtedness) hereof; provided that in determining
the Consolidated Fixed Charge Coverage Ratio of the resulting, transferee or
surviving person, such ratio shall be calculated
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as if the transaction (including the incurrence of any Indebtedness or Acquired
Indebtedness) took place on the first day of the Four Quarter Period; (iii)
immediately before and immediately after giving effect to such transaction and
the assumption contemplated by clause (i)(2)(y) above on a pro forma basis
(including, without limitation, giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred and any Lien granted in
connection with or in respect of the transaction) no Default and no Event of
Default shall have occurred or be continuing; and (iv) the Company or the
Surviving Entity shall have delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger, sale,
assignment, transfer, lease, conveyance or other disposition and, if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture comply with the applicable provisions of this Indenture
and that all conditions precedent in this Indenture relating to such
transaction have been satisfied.
(b) For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties and assets of one
or more Restricted Subsidiaries of the Company, the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
(c) Each Guarantor (other than any Guarantor whose Guarantee
is to be released in accordance with the terms of the Guarantee and this
Indenture in connection with any transaction complying with the provisions of
Section 4.16) will not, and the Company will not cause or permit any Guarantor
to, consolidate with or merge with or into any person other than the Company or
any other Guarantor unless: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Guarantor), or to which sale, lease,
conveyance or other disposition shall have been made, is a corporation
organized and existing under the laws of the United States, any state thereof
or the District of Columbia; (ii) such entity assumes by supplemental indenture
all of the obligations of the Guarantor on the Guarantee; (iii) immediately
after giving effect to such transaction, no Default or Event of Default shall
have occurred and be continuing; and (iv) immediately after giving effect to
such transaction and the use of any net proceeds therefrom on a pro forma
basis, the Company could satisfy the provisions of clause (a)(ii) of this
Section 5.01.
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SECTION 5.02. Successor Corporation Substituted.
Upon any such consolidation, merger, conveyance, lease or
transfer in accordance with the foregoing, the successor person formed by such
consolidation or into which the Company is merged or to which such conveyance,
lease or transfer is made will succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor had been named as the Company therein, and
thereafter (except in the case of a sale, assignment, transfer, lease,
conveyance or other disposition) the predecessor corporation will be relieved
of all further obligations and covenants under this Indenture, the Securities
and the Registration Rights Agreement; provided that solely for purposes of
computing amounts described in subclause (C) of Section 4.03, any such
successor person shall only be deemed to have succeeded to and be substituted
for the Company with respect to periods subsequent to the effective time of
such merger, consolidation or transfer of assets.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" occurs if:
(1) the Company fails to pay interest on any Security
when the same becomes due and payable and such failure continues for a
period of 30 days; or
(2) the Company fails to pay the principal of or premium,
if any, on any Security, when such principal or premium becomes due
and payable, whether at Stated Maturity, upon optional redemption,
required purchase, acceleration, scheduled principal payment or
otherwise (including the failure to make a payment to purchase
Securities tendered pursuant to a Change of Control Offer or an Asset
Sale Offer); or
(3) the Company defaults in the observance or performance
of any other covenant or agreement contained in this Indenture, the
Securities or any Guarantee (other than a default specified in clause
(1) or (2) above) which default continues for a period of 30 days
after (x) the
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Company receives written notice specifying the default and requiring
the Company to remedy the same from the Trustee or (y) the Company and
the Trustee receive such a notice from Holders of at least 25% in
principal amount of outstanding Securities; or
(4) defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidence 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
(5) the Company or any of its Significant Subsidiaries
(A) admits in writing its inability to pay its debts generally as they
become due, (B) commences a voluntary case or proceeding under any
Bankruptcy Law with respect to itself, (C) consents to the entry of a
judgment, decree or order for relief against it in an involuntary case
or proceeding under any Bankruptcy Law, (D) consents to the
appointment of a Custodian of it or for substantially all of its
property, (E) consents to or acquiesces in the institution of a
bankruptcy or an insolvency proceeding against it, (F) makes a general
assignment for the benefit of its creditors, or (G) takes any
corporate action to authorize or effect any of the foregoing; or
(6) a court of competent jurisdiction enters a judgment,
decree or order for relief in respect of the Company or any of its
Significant Subsidiaries in an involuntary case or proceeding under
any Bankruptcy Law, which shall (A) approve as properly filed a
petition seeking reorganization, arrangement, adjustment or
composition in respect of the Company or any of its Significant
Subsidiaries, (B) appoint a Custodian of the Company or any of its
Significant Subsidiaries or for substantially all of any of their
property or (C) order the winding-up or liquidation of its affairs;
and such judgment, decree or order shall remain unstayed and in effect
for a period of 60 consecutive days; or
(7) 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
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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
(8) either (i) the collateral agent under the Credit
Agreement or (ii) any holder of at least $5,000,000 in aggregate
principal amount of Indebtedness of the Company or any of its
Restricted Subsidiaries shall commence judicial proceedings to
foreclose upon assets of the Company or any of its Restricted
Subsidiaries having an aggregate Fair Market Value, individually or in
the aggregate, in excess of $5,000,000 or shall have exercised any
right under applicable law or applicable security documents to take
ownership of any such assets in lieu of foreclosure; or
(9) any of the Guarantees cease to be in full force and
effect, or any of the Guarantees are declared to be null and void and
unenforceable or any of the Guarantees are found to be invalid or any
of the Guarantors denies its liability under its Guarantee (other than
by reason of release of a Guarantor in accordance with the terms of
this 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% of the
aggregate principal amount of the Securities then outstanding.
The Trustee shall, within 30 days after the occurrence of any
Default actually known to a Responsible Officer of the Trustee, give to the
holders of Securities notice of such Default; provided that, except in the case
of a Default in the payment of principal of or interest on any of the
Securities, the Trustee shall be protected in withholding such notice if and so
long as a Responsible Officer of the Trustee in good faith determines that the
withholding of such notice is in the interest of the Holders of Securities.
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SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of Default
specified in clauses (5) or (6) above) occurs and is continuing, then and in
every such case the Trustee, by notice to the Company or the Holders of not
less than 25% in aggregate principal amount of the then outstanding Securities
may declare the unpaid principal of, premium, if any, and accrued and unpaid
interest, if any, on all the Securities then outstanding to be due and payable,
by a notice in writing to the Company (and to the Trustee, if given by Holders)
and upon such declaration such principal amount, premium, if any, and accrued
and unpaid interest will become immediately due and payable. If an Event of
Default specified in clause (5) or (6) above occurs and is continuing, all
unpaid principal of, and premium, if any, and accrued and unpaid interest on,
the Securities then outstanding will ipso facto become due and payable without
any declaration or other act on the part of the Trustee or any Holder. The
Holders of a majority in principal amount of the Securities then outstanding by
written notice to the Trustee may rescind an acceleration and its consequences
if (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 the Securities, (iii) the
principal of and premium, if any, on the Securities which have become due
otherwise than by such declaration of acceleration and interest thereon at the
rate borne by the Securities, 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 Securities which has become due otherwise than by such
declaration of acceleration; (b) all existing Events of Default, other than the
non-payment of the principal of the Securities which has become due solely by
such declaration of acceleration, have been cured or waived, and (c) the
rescission would not conflict with any judgment or decree of a court of
competent jurisdiction.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect
the payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities, this Indenture or the
Guarantees.
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The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Securityholder in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative to the extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
Subject to Sections 6.07 and 9.02, the Holders of not less
than a majority in principal amount of the outstanding Securities by written
notice to the Trustee may waive an existing Default or Event of Default and its
consequences, except a Default in the payment of principal of or interest on
any Security as specified in clauses (1) and (2) of Section 6.01. The Company
shall deliver to the Trustee an Officers' Certificate stating that the
requisite percentage of Holders have consented to such waiver and attaching
copies of such consents upon which the Trustee may conclusively rely. When a
Default or Event of Default is waived, it is cured and ceases.
SECTION 6.05. Control by Majority.
The Holders of not less than a majority in principal amount of
the outstanding Securities may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on it. Subject to Section 7.01, however, the Trustee may
refuse to follow any direction that conflicts with any law or this Indenture,
that the Trustee determines may be unduly prejudicial to the rights of another
Securityholder, or that may involve the Trustee in personal liability; provided
that the Trustee may take any other action deemed proper by the Trustee which
is not inconsistent with such direction.
In the event the Trustee takes any action or follows any
direction pursuant to this Indenture, the Trustee shall be entitled to
indemnification from the Company satisfactory to it in its sole discretion
against any loss, liability, cost or expense caused by taking such action or
following such direction.
SECTION 6.06. Limitation on Suits.
A Securityholder may not pursue any remedy with respect to
this Indenture or the Securities unless:
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(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holder or Holders of at least 25% in principal
amount of the outstanding Securities make a written request to the
Trustee to pursue the remedy;
(3) such Holder or Holders offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(4) the Trustee does not comply with the request within
30 days after receipt of the request and the offer and, if requested,
the provision of indemnity; and
(5) during such 30-day period the Holder or Holders of a
majority in principal amount of the outstanding Securities do not give
the Trustee a direction which, in the opinion of the Trustee, is
inconsistent with the request.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
such other Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder to receive payment of principal of and interest on a
Security, on or after the respective due dates expressed in such Security, or
to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of the
Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest
specified in clause (1) or (2) of Section 6.01 occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company or any other obligor on the Securities for the whole amount
of principal and accrued interest remaining unpaid, together with interest on
overdue principal and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate per
annum borne by the Securities and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
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compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses, legal
fees, disbursements and advances of the Trustee, its agents, nominees,
custodians and counsel) and the Securityholders allowed in any judicial
proceedings relating to the Company, its creditors or its property and shall be
entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceedings is hereby authorized by each
Securityholder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the
Securityholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, legal fees, disbursements and advances of the Trustee,
its agents, nominees, custodians and counsel, and any other amounts due the
Trustee under Section 7.07. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf
of any Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Securityholder in
any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money or property pursuant to this
Article Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: if the Holders are forced to proceed against the
Company, a Guarantor or any other obligor on the Securities directly without
the Trustee, to Holders for their collection costs;
Third: to Holders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or priority
of any kind, according to the amounts due and
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payable on the Securities for principal and interest, respectively; and
Fourth: to the Company or the Guarantors, as their respective
interests may appear.
The Trustee, upon prior notice to the Company, may fix a
record date and payment date for any payment to Securityholders pursuant to
this Section 6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by a Holder or
Holders of more than 10% in principal amount of the outstanding Securities.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default actually known to a Responsible
Officer of the Trustee has occurred and is continuing, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture and use
the same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of his own affairs.
Subject to such provisions, the Trustee shall be under no obligation to
exercise any of its rights or powers under this Indenture at the request of any
of the holders of Securities, unless they shall have offered to the Trustee
security and indemnity satisfactory to it.
(b) Except during the continuance of an Event of Default
actually known to a Responsible Officer of the Trustee:
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(1) The Trustee need perform only those duties as are
specifically set forth herein and no others and no implied covenants
or obligations shall be read into this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee
may conclusively rely and be fully protected, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions and such other documents delivered to it
pursuant to Section 11.04 hereof furnished to the Trustee and
conforming to the requirements of this Indenture. However, the
Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph
(b) of this Section 7.01.
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Trustee,
unless it is proved that the Trustee was negligent in ascertaining the
pertinent facts.
(3) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or to take or omit to take any
action under this Indenture or take any action at the request or direction of
Holders if it shall have reasonable grounds for believing that repayment of
such funds is not assured to it or it does not receive an indemnity
satisfactory to it in its sole discretion against such risk, liability, loss,
fee or expense which might be incurred by it in compliance with such request or
direction.
(e) Every provision of this Indenture that in any way relates
to the Trustee is subject to this Section 7.01.
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(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting on any document believed
by it to be genuine and to have been signed or presented by the proper
person. The Trustee need not investigate any fact or matter stated in
the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate and an Opinion of Counsel, which
shall conform to the provisions of Section 11.05. The Trustee shall
not be liable for any action it takes or omits to take in good faith
in reliance on such certificate or opinion.
(c) The Trustee may act through its attorneys, agents,
custodians and nominees and shall not be responsible for the
misconduct or negligence of any attorney, agent, custodian or nominee
(other than such a person who is an employee of the Trustee) appointed
with due care.
(d) The Trustee shall not be liable for any action it takes
or omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers.
(e) The Trustee may consult with counsel and the advice or
opinion of such counsel as to matters of law shall be full and
complete authorization and protection from liability in respect of any
action taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request,
order or direction of any of the Holders pursuant to the provisions of
this Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity satisfactory to it against
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the costs, expenses and liabilities which may be incurred therein or
thereby.
(g) The Trustee shall not be deemed to have notice or
knowledge of any matter unless a Responsible Officer assigned to and
working in the Trustee's Corporate Trust Office has actual knowledge
thereof or unless written notice thereof is received by the Trustee at
the Corporate Trust Office and such notice references the Securities
generally, the Company or this Indenture.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Securities and may otherwise deal with the Company, its
Subsidiaries, or their respective Affiliates with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. However,
the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the
Securities, it shall not be accountable for the Company's use of the proceeds
from the Securities, and it shall not be responsible for any statement of the
Company in this Indenture or any document issued in connection with the sale of
Securities or any statement in the Securities other than the Trustee's
certificate of authentication. The Trustee makes no representations with
respect to the effectiveness or adequacy of this Indenture. The Trustee shall
not be responsible for independently ascertaining or maintaining such validity,
if any, and shall be fully protected in relying upon certificates and opinions
delivered to it in accordance with the terms of this Indenture.
SECTION 7.05. Notice of Default.
If a Default or an Event of Default occurs and is continuing
and a Responsible Officer of the Trustee receives actual notice of such event,
the Trustee shall mail to each Securityholder, as their names and addresses
appear on the Securityholder list described in Section 2.05, notice of the
uncured Default or Event of Default within 30 days after the Trustee receives
such notice. Except in the case of a Default or an Event of Default in payment
of principal of, or interest on, any Security, including the failure to make
payment on
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(i) the Change of Control Purchase Date pursuant to a Change of Control Offer
or (ii) the Excess Proceeds Payment Date pursuant to an Asset Sale Offer, the
Trustee may withhold the notice if and so long as the board of directors, the
executive committee, or a trust committee of directors, of the Trustee in good
faith determines that withholding the notice is in the interest of the
Securityholders.
SECTION 7.06. Reports by Trustee to Holders.
This Section 7.06 shall not be operative as a part of this
Indenture until this Indenture is qualified under the TIA, and, until such
qualification, this Indenture shall be construed as if this Section 7.06 were
not contained herein.
Within 60 days after each May 15 of each year beginning with
1998, the Trustee shall, to the extent that any of the events described in TIA
Section 313(a) occurred within the previous twelve months, but not otherwise,
mail to each Securityholder a brief report dated as of such date that complies
with TIA Section 313(a). The Trustee also shall comply with TIA Sections
313(b), 313(c) and 313(d).
A copy of each report at the time of its mailing to
Securityholders shall be mailed to the Company and filed with the SEC and each
securities exchange, if any, on which the Securities are listed.
The Company shall notify a Responsible Officer of the Trustee
if the Securities become listed on any securities exchange or of any delisting
thereof.
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time
reasonable compensation for its services hereunder. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Company shall reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances (including reasonable fees and expenses of
counsel) incurred or made by it in addition to the compensation for its
services, except any such disbursements, expenses and advances as may be
attributable to the Trustee's negligence or bad faith. Such expenses shall
include the reasonable compensation, legal fees, disbursements and expenses of
the Trustee's agents, accountants, experts, nominees, custodians and counsel
and any taxes or other expenses incurred by a trust created pursuant to Section
8.01 hereof.
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The Company shall indemnify the Trustee, its directors,
officers, agents and employees and each predecessor trustee for, and hold it
harmless against, any loss, liability or expense incurred by the Trustee
without negligence or bad faith on its part arising out of or in connection
with the administration of this trust and its duties under this Indenture,
including the reasonable expenses and attorneys' fees of defending itself
against any claim of liability arising hereunder. The Trustee shall notify the
Company promptly of any claim asserted against the Trustee for which it may
seek indemnity. However, the failure by the Trustee to so notify the Company
shall not relieve the Company of its obligations hereunder. The Company shall
defend the claim and the Trustee shall cooperate in the defense (and may employ
its own counsel) at the Company's expense. The Company need not pay for any
settlement made without its written consent, which consent shall not be
unreasonably withheld or delayed. The Company need not reimburse any expense
or indemnify against any loss or liability incurred by the Trustee as a result
of the violation of this Indenture by the Trustee if such violation arose from
the Trustee's negligence or bad faith.
To secure the Company's payment obligations in this Section
7.07, the Trustee shall have a senior claim prior to the Securities against all
money or property held or collected by the Trustee, in its capacity as Trustee.
When the Trustee incurs expenses or renders services after an
Event of Default specified in clause (5) or (6) of Section 6.01 occurs, the
expenses (including the reasonable fees and expenses of its agents and counsel)
and the compensation for the services shall be preferred over the status of the
Holders in a proceeding under any Bankruptcy Law and are intended to constitute
expenses of administration under any Bankruptcy Law. The Company's obligations
under this Section 7.07 and any claim arising hereunder shall survive the
resignation or removal of any Trustee, the discharge of the Company's
obligations pursuant to Article Eight and any rejection or termination under
any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Company
in writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Company and the Trustee
in writing and may appoint a successor trustee with the Company's consent. The
Company may remove the Trustee if:
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(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of
the Trustee or its property; or
(4) the Trustee becomes legally incapable of acting with
respect to its duties hereunder.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall notify each Holder of
such event and shall promptly appoint a successor Trustee. Within one year
after the successor Trustee takes office, the Holders of a majority in
principal amount of the Securities may appoint a successor Trustee to replace
the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after
that, the retiring Trustee shall transfer, after payment of all sums then owing
to the Trustee pursuant to Section 7.07, all property held by it as Trustee to
the successor Trustee, subject to the lien provided in Section 7.07, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture; provided, however, that no Trustee under this Indenture
shall be liable for any act or omission of any successor Trustee. A successor
Trustee shall mail notice of its succession to each Securityholder.
If a successor Trustee does not take office within 30 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in principal amount of the outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee and
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the Company shall pay to any such replaced or removed Trustee all amounts owed
under Section 7.07 upon such replacement or removal.
SECTION 7.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee. In case any Securities
shall have been authenticated, but not delivered, by the Trustee then in
office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Securities
so authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA Sections 310(a)(1) and 310(a)(5). The Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which
other securities, or certificates of interest or participation in other
securities, of the Company are outstanding, if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee, in its capacity as Trustee hereunder shall comply
with TIA Section 311(a), excluding any creditor relationship listed in TIA
Section 311(b). A Trustee who has resigned or been removed shall be subject
to TIA Section 311(a) to the extent indicated.
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ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. Legal Defeasance and Covenant Defeasance.
(a) The Company may, at its option by Board Resolution, at
any time, with respect to the Securities, elect to have either paragraph (b) or
paragraph (c) below be applied to the outstanding Securities upon compliance
with the conditions set forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the
option applicable to this paragraph (b), the Company shall be deemed to have
been released and discharged from its obligations with respect to the
outstanding Securities on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Securities, which shall thereafter
be deemed to be "outstanding" only for the purposes of the Sections and matters
under this Indenture referred to in (i) and (ii) below, and to have satisfied
all its other obligations under such Securities and this Indenture insofar as
such Securities are concerned, except for the following, which shall survive
until otherwise terminated or discharged hereunder: (i) the rights of the
Holders of outstanding Securities to receive payment in respect of the
principal of, premium, if any, and interest on such Securities when such
payments are due, (ii) the Company's obligations to issue temporary Securities,
register the transfer or exchange of any Securities, replace mutilated,
destroyed, lost or stolen Securities and maintain an office or agency for
payments in respect of the Securities, (iii) the rights, powers, trusts, duties
and immunities of the Trustee, and (iv) the defeasance provisions of this
Indenture. The Company may exercise its option under this paragraph (b)
notwithstanding the prior exercise of its option under paragraph (c) below with
respect to the Securities.
(c) Upon the Company's exercise under paragraph (a) of the
option applicable to this paragraph (c), the Company shall be released and
discharged from its obligations under any covenant contained in Article 5 and
in Sections 4.03 through 4.18 with respect to the outstanding Securities on and
after the date the conditions set forth below are satisfied (hereinafter,
"Covenant Defeasance"), and the Securities shall
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thereafter be deemed to be not "outstanding" for the purpose of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder. For this purpose, such
Covenant Defeasance means that, with respect to the outstanding Securities, the
Company and any Guarantor may omit to comply with and shall have no liability
in respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Section 6.01(3),
nor shall any event referred to in Section 6.01(4), (7) or (8) thereafter
constitute a Default or an Event of Default thereunder but, except as specified
above, the remainder of this Indenture and such Securities shall be unaffected
thereby.
(d) The following shall be the conditions to application of
either paragraph (b) or paragraph (c) above to the outstanding Securities:
(1) The Company shall have irrevocably deposited in trust
with the Trustee, pursuant to an irrevocable trust and security
agreement in form and substance satisfactory to the Trustee, U.S.
Legal Tender or direct non-callable obligations of, or non-callable
obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of
the United States of America is pledged ("U.S. Government
Obligations") maturing as to principal and interest in such amounts
and at such times as are sufficient, without consideration of the
reinvestment of such interest and after payment of all Federal, state
and local taxes or other charges or assessments in respect thereof
payable by the Trustee, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification
thereof (in form and substance reasonably satisfactory to the Trustee)
delivered to the Trustee, to pay the principal of, premium, if any,
and interest on all the outstanding Securities on the dates on which
any such payments are due and payable in accordance with the terms of
this Indenture and of the Securities;
(2) Such deposits shall not cause the Trustee to have a
conflicting interest as defined in and for purposes of the TIA;
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(3) The Trustee shall have received Officers'
Certificates stating that No Default of Event of Default or event
which with notice or lapse of time or both would become a Default or
an Event of Default with respect to the Securities shall have occurred
and be continuing on the date of such deposit or, insofar as Section
6.01(5) or (6) is concerned, at any time during the period ending on
the 91st day after the date of such deposit (it being understood that
this condition shall not be deemed satisfied until the expiration of
such period);
(4) The Trustee shall have received Officers'
Certificates stating that such deposit will not result in a Default
under this Indenture or a breach or violation of, or constitute a
default under, any other material instrument or agreement to which the
Company or any of its Subsidiaries is a party or by which it or its
property is bound;
(5) (i) In the event the Company elects paragraph (b)
hereof, the Company shall deliver to the Trustee an Opinion of
Counsel, in form and substance reasonably satisfactory to the Trustee
to the effect that (A) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or (B) since
the Issue Date, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel shall state that Holders of the Securities
will not recognize income gain or loss for Federal income tax purposes
as a result of such deposit and the defeasance contemplated hereby and
will be subject to Federal income taxes in the same manner and at the
same times as would have been the case if such deposit and defeasance
had not occurred, or (ii) in the event the Company elects paragraph
(c) hereof, the Company shall deliver to the Trustee an Opinion of
Counsel, in form and substance reasonably satisfactory to the Trustee,
to the effect that, Holders of the Securities will not recognize
income, gain or loss for Federal income tax purposes as a result of
such deposit and the defeasance contemplated hereby and will be
subject to Federal income tax in the same amounts and in the same
manner and at the same times as would have been the case if such
deposit and defeasance had not occurred;
(6) The deposit shall not result in the Company, the
Trustee or the trust becoming or being deemed to be an
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"investment company" under the Investment Company Act of 1940, as
amended;
(7) The Company shall have delivered to the Trustee an
Officers' Certificate, in form and substance reasonably satisfactory
to the Trustee, stating that the deposit under clause (1) was not made
by the Company or any Subsidiary with the intent of defeating,
hindering, delaying or defrauding any other creditors of the Company
or any Subsidiary or others;
(8) The Company shall have delivered to the Trustee an
Opinion of Counsel, in form and substance reasonably satisfactory to
the Trustee, to the effect that, (A) the trust funds will not be
subject to the rights of holders of Indebtedness of the Company or any
Guarantor other than the Securities and (B) assuming no intervening
bankruptcy of the Company between the date of deposit and the 91st day
following the deposit and that no Holder of Securities is an insider
of the Company, after the passage of 90 days following the deposit,
the trust funds will not be subject to any applicable bankruptcy,
insolvency, reorganization or similar law affecting creditors' rights
generally; and
(9) The Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent specified herein relating to the defeasance
contemplated by this Section 8.01 have been complied with; provided,
however, that no deposit under clause (1) above shall be effective to
terminate the obligations of the Company under the Securities or this
Indenture prior to 90 days following any such deposit.
In the event all or any portion of the Securities are to be
redeemed through such irrevocable trust, the Company must make arrangements
satisfactory to the Trustee, at the time of such deposit, for the giving of the
notice of such redemption or redemptions by the Trustee in the name and at the
expense of the Company.
SECTION 8.02. Satisfaction and Discharge.
In addition to the Company's rights under Section 8.01, the
Company may terminate all of its obligations under this Indenture (subject to
Section 8.03) when:
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(1) all Securities theretofore authenticated and
delivered (other than Securities which have been destroyed, lost or
stolen and which have been replaced or paid as provided in Section
2.07) have been delivered to the Trustee for cancellation; or
(2) all Securities not theretofore delivered to the
Trustee for cancellation (except lost, stolen or destroyed Securities
which have been replaced or paid) have been called for redemption
pursuant to the terms of the Securities 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 Securities not theretofore
delivered to the Trustee for cancellation, for principal of, premium,
if any, and interest on the Securities 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; and
(3) the Company has paid or caused to be paid all other
sums payable hereunder and under the Securities by the Company; and
(4) there exists no Default or Event of Default under
this Indenture; and
(5) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent specified herein relating to the satisfaction and
discharge of this Indenture have been complied with.
SECTION 8.03. Survival of Certain Obligations.
Notwithstanding the satisfaction and discharge of this
Indenture and of the Securities referred to in Section 8.01 or 8.02, the
respective obligations of the Company and the Trustee under Sections 2.02,
2.03, 2.04, 2.05, 2.06, 2.07, 2.10, 2.12, 2.13, 4.01, 4.02 and 6.07, Article
Seven and Sections 8.05, 8.06 and 8.07 shall survive until the Securities are
no longer outstanding, and thereafter the obligations of the Company and the
Trustee under Sections 7.07, 8.05, 8.06 and 8.07 shall survive. Nothing
contained in this Article Eight shall abrogate any of the rights, obligations
or duties of the Trustee under this Indenture.
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SECTION 8.04. Acknowledgment of Discharge by Trustee.
Subject to Section 8.07, after (i) the conditions of Section
8.01 or 8.02 have been satisfied, (ii) the Company has paid or caused to be
paid all other sums payable hereunder by the Company and (iii) the Company has
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that all conditions precedent referred to in clause (i) above
relating to the satisfaction and discharge of this Indenture have been complied
with, the Trustee upon written request shall acknowledge in writing the
discharge of the Company's obligations under this Indenture except for those
surviving obligations specified in Section 8.03.
SECTION 8.05. Application of Trust Assets.
The Trustee shall hold any U.S. Legal Tender or U.S.
Government Obligations deposited with it in the irrevocable trust established
pursuant to Section 8.01. The Trustee shall apply the deposited U.S. Legal
Tender or the U.S. Government Obligations, together with earnings thereon,
through the Paying Agent, in accordance with this Indenture and the terms of
the irrevocable trust agreement established pursuant to Section 8.01, to the
payment of principal of and interest on the Securities. The U.S. Legal Tender
or U.S. Government Obligations so held in trust and deposited with the Trustee
in compliance with Section 8.01 shall not be part of the trust estate under
this Indenture, but shall constitute a separate trust fund for the benefit of
all Holders entitled thereto.
SECTION 8.06. Repayment to the Company or Guarantors; Unclaimed
Money.
Subject to Sections 7.07 and 8.01, the Trustee shall promptly
pay to the Company, or if deposited with the Trustee by any Guarantor, to such
Guarantor, upon receipt by the Trustee of an Officers' Certificate, any excess
money, determined in accordance with Section 8.01, held by it at any time. The
Trustee and the Paying Agent shall pay to the Company or any Guarantor, as the
case may be, upon receipt by the Trustee or the Paying Agent, as the case may
be, of an Officers' Certificate, any money held by it for the payment of
principal, premium, if any, or interest that remains unclaimed for two years
after payment to the Holders is required; provided, however, that the Trustee
and the Paying Agent before being required to make any payment may, but need
not, at the expense of the Company cause to be published once in a newspaper of
general circulation in the City of New York or mail to each Holder enti-
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tled to such money notice that such money remains unclaimed and that after a
date specified therein, which shall be at least 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining will
be repaid to the Company. After payment to the Company or any Guarantor, as
the case may be, Security holders entitled to money must look solely to the
Company for payment as general creditors unless an applicable abandoned
property law designates another person, and all liability of the Trustee or
Paying Agent with respect to such money shall thereupon cease.
SECTION 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with this Indenture by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then and only then the Company's and each Guarantor's, if any,
obligations under this Indenture and the Securities shall be revived and
reinstated as though no deposit had been made pursuant to this Indenture until
such time as the Trustee is permitted to apply all such money or U.S.
Government Obligations in accordance with this Indenture; provided, however,
that if the Company or the Guarantors, as the case may be, have made any
payment of principal of, premium, if any, or interest on any Securities because
of the reinstatement of their obligations, the Company or the Guarantors, as
the case may be, shall be subrogated to the rights of the holders of such
Securities to receive such payment from the money or U.S. Government
Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
The Company and the Guarantors (when authorized by Board
Resolutions), and the Trustee, together, may amend or supplement this Indenture
or the Securities without notice to or consent of any Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
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(2) to evidence the succession in accordance with Article
V hereof of another person to the Company or a Guarantor and the
assumption by any such successor of the covenants of the Company or a
Guarantor herein and in the Securities or a Guarantee, as the case may
be;
(3) to provide for uncertificated Securities in addition
to or in place of certificated Securities;
(4) to make any other change that does not materially
adversely affect the rights of any Securityholders hereunder; or
(5) to comply with any requirements of the SEC in
connection with the qualification of this Indenture under the TIA; or
(6) to add or release any Guarantor pursuant to the terms
of this Indenture.
provided that each of the Company and the Guarantors has delivered to the
Trustee an Opinion of Counsel and an Officers' Certificate, each stating that
such amendment or supplement complies with the provisions of this Section 9.01
and that such amendment will not have a material adverse effect on any security
holder.
SECTION 9.02. With Consent of Holders.
Subject to Section 6.07, the Company and the Guarantors (when
authorized by Board Resolutions) and the Trustee, together, with the written
consent of the Holder or Holders of at least a majority in aggregate principal
amount of the outstanding Securities, may amend or supplement this Indenture or
the Securities, without notice to any other Securityholders. Subject to
Section 6.07, the Holder or Holders of a majority in aggregate principal amount
of the outstanding Securities may waive compliance by the Company with any
provision of this Indenture or the Securities without notice to any other
Securityholder. Without the consent of each Securityholder affected, however,
no amendment, supplement or waiver, including a waiver pursuant to Section
6.04, may:
(1) change the principal amount of Securities whose
Holders must consent to an amendment, supplement or waiver of any
provision of this Indenture, the Securities or the Guarantees;
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(2) reduce the rate or change the time for payment of
interest, including default interest, on any Security;
(3) reduce the principal amount of any Security;
(4) change the Final Maturity Date of any Security, or
alter the redemption or repurchase provisions contained in this
Indenture or the Securities in a manner adverse to any Holder;
(5) make any change in provisions of this Indenture
protecting the right of each Holder to receive payment of principal of
and interest on such Security on or after the due date thereof or to
bring suit to enforce such payment, or permitting Holders of a
majority in principal amount of the Securities to waive Defaults or
Events of Default;
(6) make any changes in Section 6.04, 6.07 or this
Section 9.02;
(7) make the principal of, or the interest on any
Security payable in money other than as provided for in this
Indenture, the Securities and the Guarantees as in effect on the date
hereof;
(8) affect the ranking of the Securities or the
Guarantees, in each case in a manner adverse to the Holders;
(9) amend, modify or change the obligation of the Company
to make or consummate a Change of Control Offer an Asset Sale Offer or
waive any default in the performance thereof or modify any of the
provisions or definitions with respect to any such offers; or
(10) release any Guarantor from any of its obligations
under its Guarantee or this Indenture otherwise than in accordance
with the terms of this Indenture.
It shall not be necessary for the consent of the Holders under
this Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
9.02 becomes effective, the Company shall mail to the Holders affected thereby
a notice briefly describing the amendment, supplement or waiver. Any failure
of the Company to mail
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such notice, or any defect therein, shall not, however, in any way impair or
affect the validity of any such supplemental indenture.
SECTION 9.03. Compliance with TIA.
From the date on which this Indenture is qualified under the
TIA, every amendment, waiver or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the
same debt as the consenting Holder's Security, even if notation of the consent
is not made on any Security. However, any such Holder or subsequent Holder may
revoke the consent as to his Security or portion of his Security by notice to
the Trustee or the Company received before the date on which the Trustee
receives an Officers' Certificate certifying that the Holders of the requisite
principal amount of Securities have consented (and not theretofore revoked such
consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver, which record date shall be at least 30 days
prior to the first solicitation of such consent. If a record date is fixed,
then notwithstanding the last sentence of the immediately preceding paragraph,
those persons who were Holders at such record date (or their duly designated
proxies), and only those persons, shall be entitled to revoke any consent
previously given, whether or not such persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Securityholder, unless it makes a change described in any of
clauses (1) through (10) of Section 9.02, in which case, the amendment,
supplement or waiver shall bind only each Holder of a Security who has
consented to it and every subsequent Holder of a Security or portion of a
Security that evidences the same debt as the consenting Holder's Security;
provided that any such waiver shall not impair or affect the right of any
Holder to receive payment of principal of and
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interest on a Security, on or after the respective due dates expressed in such
Security, or to bring suit for the enforcement of any such payment on or after
such respective dates without the consent of such Holder.
SECTION 9.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Trustee. The Trustee may place an appropriate notation on the Security
about the changed terms and return it to the Holder. Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the Security
shall issue and the Trustee shall authenticate a new Security that reflects the
changed terms.
SECTION 9.06. Trustee To Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; provided that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture and constitutes the legal, valid and binding obligations of the
Company enforceable in accordance with its terms. Such Opinion of Counsel
shall be at the expense of the Company, and the Trustee shall have a lien under
Section 7.07 for any such expense.
ARTICLE TEN
GUARANTEE
SECTION 10.01. Unconditional Guarantee.
Each Guarantor hereby unconditionally, jointly and severally,
guarantees (such guarantee to be referred to herein as the "Guarantee") to each
Holder of a Security authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, the Securities or the Obligations of
the Company hereunder or thereunder, that: (i) the principal of and
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interest on the Securities will be promptly paid in full when due, subject to
any applicable grace period, whether at maturity, by acceleration or otherwise
and interest on the overdue principal, if any, and interest on any interest, to
the extent lawful, of the Securities and all other Obligations of the Company
to the Holders or the Trustee hereunder or thereunder will be promptly paid in
full or performed, all in accordance with the terms hereof and thereof; and
(ii) in case of any extension of time of payment or renewal of any Securities
or of any such other Obligations, the same will be promptly paid in full when
due or performed in accordance with the terms of the extension or renewal,
subject to any applicable grace period, whether at stated maturity, by
acceleration or otherwise, subject, however, in the case of clauses (i) and
(ii) above, to the limitations set forth in Section 10.03. Each Guarantor
hereby agrees that its obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Securities or
this Indenture, the absence of any action to enforce the same, any waiver or
consent by any Holder of the Securities with respect to any provisions hereof
or thereof, the recovery of any judgment against the Company, any action to
enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands
whatsoever and covenants that this Guarantee will not be discharged except by
complete performance of the obligations contained in the Securities, this
Indenture and in this Guarantee. If any Securityholder or the Trustee is
required by any court or otherwise to return to the Company, any Guarantor, or
any custodian, trustee, liquidator or other similar official acting in relation
to the Company or any Guarantor, any amount paid by the Company or any
Guarantor to the Trustee or such Securityholder, this Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect. Each
Guarantor further agrees that, as between each Guarantor, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article Six for
the purposes of this Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in Article Six, such obligations (whether or not due and payable)
shall forthwith become due and payable by each Guarantor for the purpose of
this Guarantee.
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SECTION 10.02. Severability.
If any provision of this Guarantee shall be invalid, illegal
or unenforceable, the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 10.03. Release of a Guarantor.
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
Section 4.16, 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.
The Trustee shall deliver an appropriate instrument evidencing
such release upon receipt of a request by the Company accompanied by an
Officers' Certificate and Opinion of Counsel certifying as to the compliance
with this Section 10.03. Any Guarantor not so released remains liable for the
full amount of principal of and interest on the Securities as provided in this
Article Ten.
SECTION 10.04. Limitation of Guarantor's Liability.
Each Guarantor and by its acceptance hereof each Holder hereby
confirms that it is the intention of all such parties that the guarantee by
such Guarantor pursuant to its Guarantee not constitute a fraudulent transfer
or conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any similar Federal or
state law. To effectuate the foregoing intention, the Holders and such
Guarantor hereby irrevocably agree that the obligations of such Guarantor under
the Guarantee shall be limited to the maximum amount as will, after giving
effect to all other contingent and fixed liabilities of such Guarantor and
after giving effect to any collections from or payments made by or on behalf of
any other Guarantor in respect of the obligations of such other Guarantor under
its Guarantee or pursuant to Section 10.05, result in the obligations of such
Guarantor under the Guarantee not constituting such fraudulent transfer or
conveyance.
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SECTION 10.05. Guarantors May Consolidate, etc., on Certain Terms.
(a) Nothing contained in this Indenture or in any of the
Securities shall prevent any consolidation or merger of a Guarantor with or
into the Company or another Guarantor or shall prevent any sale of assets or
conveyance of the property of a Guarantor as an entirety or substantially as an
entirety, to the Company or another Guarantor. Upon any such consolidation,
merger, sale or conveyance, the Guarantee given by such Guarantor shall no
longer have any force or effect.
(b) Except as set forth in Article Four and Article Five
hereof, nothing contained in this Indenture or in any of the Securities shall
prevent any consolidation or merger of a Guarantor with or into a corporation
or corporations other than the Company or another Guarantor (whether or not
affiliated with the Guarantor) or shall prevent any sale of assets or
conveyance of the property of a Guarantor as an entirety or substantially as an
entirety, to a corporation or corporations other than the Company or another
Guarantor (whether or not affiliated with the Guarantor); provided, however,
that, (i) immediately after such transaction, and giving effect thereto such
transaction does not (A) violate any covenants set forth herein or (B) result
in a Default or Event of Default under this Indenture that is continuing, and
(ii) upon any such consolidation, merger, sale or conveyance, the Guarantee set
forth in this Article Ten, and the due and punctual performance and observance
of all of the covenants and conditions of this Indenture to be performed by
such Guarantor, shall be expressly assumed (in the event that the Guarantor is
not the surviving corporation in the merger), by supplemental indenture
satisfactory in form to the Trustee, executed and delivered to the Trustee, by
the corporation formed by such consolidation, or into which the Guarantor shall
have merged, or by the corporation that shall have acquired such property. In
the case of any such consolidation, merger, sale or conveyance and upon the
assumption by the successor corporation, by supplemental indenture executed and
delivered to the Trustee and satisfactory in form to the Trustee of the due and
punctual performance of all of the covenants and conditions of this Indenture
to be performed by the Guarantor, such successor corporation shall succeed to
and be substituted for the Guarantor with the same effect as if it had been
named herein as a Guarantor; provided, however, that solely for purposes of
computing amounts described in subclause (C) of Section 4.03 any such successor
corporation shall only be deemed to have succeeded to and be substituted for
any Guarantor with respect to periods subse-
<PAGE> 100
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quent to the effective time of such merger, consolidation or transfer of
assets.
(c) The Trustee shall deliver an appropriate instrument
evidencing such release upon receipt of a request by the Company accompanied by
an Officers' Certificate and Opinion of Counsel certifying as to the compliance
with this Section 10.04. Any Guarantor not so released remains liable for the
full amount of principal of and interest on the Securities as provided in this
Article Ten.
SECTION 10.06. Contribution.
In order to provide for just and equitable contribution among
the Guarantors, the Guarantors agree, inter se, that in the event any payment
or distribution is made by any Guarantor (a "Funding Guarantor") under the
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a pro rata amount based on the Adjusted Net Assets of each
Guarantor (including the Funding Guarantor) for all payments, damages and
expenses incurred by that Funding Guarantor in discharging the Company's
obligations with respect to the Securities or any other Guarantor's obligations
with respect to the Guarantee. "Adjusted Net Assets" of such Guarantor at any
date shall mean the lesser of the amount by which (x) the fair value of the
property of such Guarantor exceeds the total amount of liabilities, including,
without limitation, contingent liabilities (after giving effect to all other
fixed and contingent liabilities incurred or assumed on such date (other than
liabilities of such Guarantor under Indebtedness Subordinated to such
Guarantor's Guarantee)), but excluding liabilities under the Guarantee, of such
Guarantor at such date and (y) the present fair salable value of the assets of
such Guarantor at such date exceeds the amount that will be required to pay the
probable liability of such Guarantor on its debts (after giving effect to all
other fixed and contingent liabilities incurred or assumed on such date and
after giving effect to any collection from any Subsidiary of such Guarantor in
respect of the obligations of such Subsidiary under the Guarantee), excluding
debt in respect of the Guarantee of such Guarantor, as they become absolute and
matured.
SECTION 10.07. Waiver of Subrogation.
Until all Guarantee Obligations are paid in full each
Guarantor hereby irrevocably waives any claims or other rights which it may now
or hereafter acquire against the Company that arise from the existence,
payment, performance or enforcement
<PAGE> 101
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of such Guarantor's obligations under the Guarantee and this Indenture,
including, without limitation, any right of subrogation, reimbursement,
exoneration, indemnification, and any right to participate in any claim or
remedy of any Holder of Securities against the Company, whether or not such
claim, remedy or right arises in equity, or under contract, statute or common
law, including, without limitation, the right to take or receive from the
Company, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security on account of such claim or other rights.
If any amount shall be paid to any Guarantor in violation of the preceding
sentence and the Securities shall not have been paid in full, such amount shall
have been deemed to have been paid to such Guarantor for the benefit of, and
held in trust for the benefit of, the Holders of the Securities, and shall,
forthwith be paid to the Trustee for the benefit of such Holders to be credited
and applied upon the Securities, whether matured or unmatured, in accordance
with the terms of this Indenture. Each Guarantor acknowledges that it will
receive direct and indirect benefits from the financing arrangements
contemplated by this Indenture and that the waiver set forth in this Section
10.07 is knowingly made in contemplation of such benefits.
SECTION 10.08. Execution of Guarantee.
To evidence their guarantee to the Securityholders set forth
in this Article Ten, the Guarantors hereby agree to execute the Guarantee in
substantially the form included in the Securities, which shall be endorsed on
each Security ordered to be authenticated and delivered by the Trustee. Each
Guarantor hereby agrees that its Guarantee set forth in this Article Ten shall
remain in full force and effect notwithstanding any failure to endorse on each
Security a notation of such Guarantee. Each such Guarantee shall be signed on
behalf of each Guarantor by two Officers, or an Officer and an Assistant
Secretary or one Officer shall sign and one Officer or an Assistant Secretary
(each of whom shall, in each case, have been duly authorized by all requisite
corporate actions) shall attest to such Guarantee prior to the authentication
of the Security on which it is endorsed, and the delivery of such Security by
the Trustee, after the authentication thereof hereunder, shall constitute due
delivery of such Guarantee on behalf of such Guarantor. Such signatures upon
the Guarantee may be by manual or facsimile signature of such officers and may
be imprinted or otherwise reproduced on the Guarantee, and in case any such
officer who shall have signed the Guarantee shall cease to be such officer
before the Security on which such Guarantee is endorsed shall have been
authenticated and delivered by the Trus-
<PAGE> 102
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tee or disposed of by the Company, such Security nevertheless may be
authenticated and delivered or disposed of as though the person who signed the
Guarantee had not ceased to be such officer of the Guarantor.
SECTION 10.09. Waiver of Stay, Extension or Usury Laws.
Each Guarantor covenants (to the extent that it may lawfully
do so) that it will not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
or any usury law or other law that would prohibit or forgive each such
Guarantor from performing its Guarantee as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) each such Guarantor hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law had
been enacted.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls.
If any provision of this Indenture limits, qualifies, or
conflicts with the duties imposed by operation of Section 318(c) of the TIA,
the imposed duties shall control.
SECTION 11.02. Notices.
Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by hand
delivery, by telex, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
<PAGE> 103
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if to the Company:
Walbro Corporation
6242 Garfield Street
Cass City, Michigan 48726
Attention: Chief Executive Officer
Facsimile: (517) 872-2301
Telephone: (517) 872-2131
if to the Trustee:
Bankers Trust Company
Corporate Trust and Agency Group
Four Albany Street
New York, New York 10004
Attention: Corporate Market Services
Facsimile: (212) 250-6392/6961
Telephone: (212) 250-6382
Each of the Company and the Trustee by written notice to each
other such person may designate additional or different addresses for notices
to such person. Any notice or communication to the Company and the Trustee,
shall be deemed to have been given or made as of the date so delivered if
personally delivered; when answered back, if telexed; when receipt is
acknowledged, if telecopied; and five (5) calendar days after mailing if sent
by registered or certified mail, postage prepaid (except that a notice of
change of address shall not be deemed to have been given until actually
received by the addressee).
Any notice or communication mailed to a Securityholder shall
be mailed to him by first class mail or other equivalent means at his address
as it appears on the registration books of the Registrar and shall be
sufficiently given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
<PAGE> 104
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SECTION 11.03. Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section
312(b) with other Securityholders with respect to their rights under this
Indenture, the Securities or the Guarantees. The Company, the Trustee, the
Registrar and any other person shall have the protection of TIA Section
312(c).
SECTION 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee at the request of the Trustee:
(1) an Officers' Certificate, in form and substance
satisfactory to the Trustee, stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of
such counsel, all such conditions precedent have been complied with.
SECTION 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.08, shall include:
(1) a statement that the person making such certificate
or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
<PAGE> 105
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(4) a statement as to whether or not, in the opinion of
each such person, such condition or covenant has been complied with;
provided, however, that with respect to matters of fact an Opinion of
Counsel may rely on an Officers' Certificate or certificates of public
officials.
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee, Paying Agent or Registrar may make reasonable
rules for its functions.
SECTION 11.07. Legal Holidays.
If a payment date is not a Business Day, payment may be made
on the next succeeding day that is a Business Day with the same force and
effect as if made on such payment date.
SECTION 11.08. Governing Law.
THIS INDENTURE, THE SECURITIES AND THE GUARANTEES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. Each of the parties hereto
agrees to submit to the jurisdiction of any federal or state court located in
the Borough of Manhattan, the City of New York in any action or proceeding
arising out of or relating to this Indenture.
SECTION 11.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of any of the Company or any of its Subsidiaries. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 11.10. No Recourse Against Others.
A director, officer, employee, stockholder or incorporator, as
such, of the Company or any of its Subsidiaries shall not have any liability
for any obligations of the Company or the Guarantors under the Securities, this
Indenture or the Guarantees or for any claim based on, in respect of or by
reason of such obligations or their creations. Each Securityholder by
accepting a Security waives and releases all such liability. Such waiver and
release are part of the consideration for the issuance of the Securities.
<PAGE> 106
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SECTION 11.11. Successors.
All agreements of the Company and the Guarantors in this
Indenture, the Securities and the Guarantees shall bind their respective
successors. All agreements of the Trustee in this Indenture shall bind its
successor.
SECTION 11.12. Duplicate Originals.
All parties may sign any number of copies of this Indenture.
Each signed copy or counterpart shall be an original, but all of them together
shall represent the same agreement.
SECTION 11.13. Severability.
In case any one or more of the provisions in this Indenture,
in the Securities or in the Guarantees shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions shall not in any way be affected or impaired thereby, it
being intended that all of the provisions hereof shall be enforceable to the
full extent permitted by law.
<PAGE> 107
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the date first written above.
WALBRO CORPORATION
By: /s/ DANIEL L. HITTLER
-------------------------------------
Name: DANIEL L. HITTLER
Title: SECRETARY
BANKERS TRUST COMPANY
as Trustee
By: /s/ KEVIN WEEKS
-------------------------------------
Name: KEVIN WEEKS
Title: ASSISTANT VICE PRESIDENT
THE GUARANTORS:
WALBRO AUTOMOTIVE CORPORATION
By: /s/ DANIEL L. HITTLER
-------------------------------------
Name: DANIEL L. HITTLER
Title: SECRETARY
WALBRO ENGINE MANAGEMENT CORPORATION
By: /s/ DANIEL L. HITTLER
-------------------------------------
Name: DANIEL L. HITTLER
Title: SECRETARY
<PAGE> 108
-101-
SHARON MANUFACTURING COMPANY
By: /s/ DANIEL L. HITTLER
-------------------------------------
Name: DANIEL L. HITTLER
Title: SECRETARY
WHITEHEAD ENGINEERED PRODUCTS, INC.
By: /s/ DANIEL L. HITTLER
-------------------------------------
Name: DANIEL L. HITTLER
Title: SECRETARY
<PAGE> 109
EXHIBIT A
[FORM OF SERIES A SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND
IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL
NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED
STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED
STATES TO PERSONS OTHER THAN U.S. PERSONS IN OFFSHORE TRANSACTIONS MEETING THE
REQUIREMENTS OF RULE 904 UNDER REGULATION S UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
A-1
<PAGE> 110
WALBRO CORPORATION
10 1/8% Senior Note
due December 15, 2007, Series A
CUSIP No.: 931154AE8
No. $
WALBRO CORPORATION a Delaware corporation (the "Company",
which term includes any successor corporation), for value received promises to
pay to or registered assigns, the principal sum of $ Dollars, on
December 15, 2007.
Interest Payment Dates: June 15 and December 15 commencing
June 15, 1998
Record Dates: June 1 and December 1
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
A-2
<PAGE> 111
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
Dated: December 16, 1997
WALBRO CORPORATION
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
A-3
<PAGE> 112
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 10 1/8% Senior Notes due 2007, Series A,
described in the within-mentioned Indenture.
Dated: December 16, 1997 BANKERS TRUST COMPANY,
as Trustee
By
-----------------------------------
Authorized Signatory
A-4
<PAGE> 113
(REVERSE OF SECURITY)
WALBRO CORPORATION
10 1/8% Senior Note
due December 15, 2007, Series A
1. Interest.
WALBRO CORPORATION, a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above. The Company will pay interest semi-annually on June 15
and December 15 of each year (the "Interest Payment Date"), commencing June 15,
1998. Interest on the Securities will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from December
16, 1997. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
The Company shall pay interest on overdue principal from time
to time on demand at the rate borne by the Securities plus 2% and on overdue
installments of interest (without regard to any applicable grace periods) to
the extent lawful.
2. Method of Payment.
The Company shall pay interest on the Securities (except
defaulted interest) to the persons who are the registered Holders at the close
of business on the Record Date immediately preceding the Interest Payment Date
even if the Securities are cancelled on registration of transfer or
registration of exchange after such Record Date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company shall
pay principal and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts ("U.S. Legal
Tender"). However, the Company may pay principal and interest by wire transfer
of Federal funds, or interest by check payable in such U.S. Legal Tender. The
Company may deliver any such interest payment to the Paying Agent or to a
Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, Bankers Trust Company (the "Trustee") will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-Registrar without notice to the Holders. The Company or any of its
Subsidiaries may, subject to certain exceptions, act as Registrar or
co-Registrar.
A-5
<PAGE> 114
4. Indenture and Guarantees.
The Company issued the Securities under an Indenture, dated as
of December 15, 1997 (the "Indenture"), among the Company, the Guarantors and
the Trustee. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"),
as in effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and the TIA for a statement of them. The
Securities are general unsecured obligations of the Company limited in
aggregate principal amount to $100,000,000. Payment on each Security is
guaranteed on a senior basis, jointly and severally, by the Guarantors pursuant
to Article Ten of the Indenture.
5. Optional Redemption.
The Securities will be redeemable, at the Company's option, in
whole at any time or in part from time to time, on and after December 15, 2002
at the following redemption prices (expressed as percentages of the principal
amount) if redeemed during the twelve-month period commencing on December 15 of
the year set forth below, plus, in each case, accrued interest thereon to the
date of redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2002 . . . . . . . . . . . . . . . . . . . . . 105.063%
2003 . . . . . . . . . . . . . . . . . . . . . 103.375%
2004 . . . . . . . . . . . . . . . . . . . . . 101.688%
2005 and thereafter . . . . . . . . . . . . . . 100.000%
</TABLE>
6. Optional Redemption upon Public Equity Offering.
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 Securities 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 net cash 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.
A-6
<PAGE> 115
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 SEC in accordance with the Securities Act.
7. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not
more than 60 days before the Redemption Date to each Holder of Securities to be
redeemed at such Holder's registered address. Securities in denominations of
$1,000 may be redeemed only in whole. The Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal of
Securities that have denominations larger than $1,000.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Security. On and after the
Redemption Date, interest will cease to accrue on Securities or portions
thereof called for redemption.
8. Change of Control Offer.
Upon the occurrence of a Change of Control, the Company will
be required to offer to purchase all of the outstanding Securities at a
purchase price equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of repurchase.
9. Limitation on Disposition of Assets.
The Company under certain conditions is obligated to make an
offer to purchase Securities at 100% of their principal amount plus accrued and
unpaid interest to the date of repurchase with certain net cash proceeds of
certain sales or other dispositions of assets in accordance with the Indenture.
10. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need
A-7
<PAGE> 116
not register the transfer of or exchange any Securities or portions thereof
selected for redemption, except the unredeemed portion of any security being
redeemed in part.
11. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the
owner of it for all purposes.
12. Unclaimed Funds.
If funds for the payment of principal or interest remain
unclaimed for two years, the Trustee and the Paying Agents will repay the funds
to the Company at its request. After that, all liability of the Trustee and
such Paying Agents with respect to such funds shall cease.
13. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the
Indenture and the Securities except for certain provisions thereof, and may be
discharged from its obligations to comply with certain covenants contained in
the Indenture and the Securities, in each case upon satisfaction of certain
conditions specified in the Indenture.
14. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities
may be amended or supplemented with the written consent of the Holders of at
least a majority in aggregate principal amount of the Securities then
outstanding, and any existing Default or Event of Default or compliance with
any provision may be waived with the consent of the Holders of a majority in
aggregate principal amount of the Securities then outstanding. Without notice
to or consent of any Holder, the parties thereto may amend or supplement the
Indenture or the Securities to, among other things, cure any ambiguity, defect
or inconsistency, provide for uncertificated Securities in addition to or in
place of certificated Securities or comply with any requirements of the SEC in
connection with the qualification of the Indenture under the TIA, or make any
other change that does not materially adversely affect the rights of any Holder
of a Security.
15. Restrictive Covenants.
The Indenture contains certain covenants that, among other
things, limit the ability of the Company and its subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to issue preferred
or other capital stock of sub-
A-8
<PAGE> 117
sidiaries, to sell assets, to permit restrictions on dividends and other
payments by subsidiaries to the Company, to consolidate, merge or sell all or
substantially all of its assets, to engage in transactions with affiliates or
to engage in certain businesses. The limitations are subject to a number of
important qualifications and exceptions. The Company must annually report to
the Trustee on compliance with such limitations.
16. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of
Securities may not enforce the Indenture or the Securities except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Securities then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Securities notice of any continuing Default or Event of Default
(except a Default in payment of principal or interest, including an accelerated
payment) if it determines that withholding notice is in their interest.
17. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Securities and may otherwise
deal with the Company, its Subsidiaries or their respective Affiliates as if it
were not the Trustee.
18. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator,
as such, of the Company shall have any liability for any obligation of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of, such obligations or their creation. Each Holder of
a Security by accepting a Security waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the
Securities.
19. Authentication.
This Security shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on this Security.
A-9
<PAGE> 118
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of
a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
21. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP
numbers to be printed on the Securities as a convenience to the Holders of the
Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
22. Registration Rights.
Pursuant to the Registration Rights Agreement, the Company
will be obligated upon the occurrence of certain events to consummate an
exchange offer pursuant to which the Holder of this Security shall have the
right to exchange this Series A Security for the Company's 10 1/8% Senior Notes
due 2007, Series B (the "Series B Securities"), which have been registered
under the Securities Act, in like principal amount and having terms identical
in all material respects as the Series A Securities. The Holders shall be
entitled to receive certain additional interest payments in the event such
exchange offer is not consummated and upon certain other conditions, all
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
The Company will furnish to any Holder of a Security upon
written request and without charge a copy of the Indenture. Requests may be
made to: Walbro Corporation, 6242 Garfield Street, Cass City, Michigan 48726,
Attn: Chief Executive Officer.
A-10
<PAGE> 119
GUARANTEE
The Guarantors (as defined in the Indenture referred to in the
Security upon which this notation is endorsed and each hereinafter referred to
as a "Guarantor," which term includes any successor person under the Indenture)
have unconditionally guaranteed on a senior basis (such guarantee by each
Guarantor being referred to herein as the "Guarantee") (i) the due and punctual
payment of the principal of and interest on the Securities, whether at
maturity, by acceleration or otherwise, the due and punctual payment of
interest on the overdue principal and interest, if any, on the Securities, to
the extent lawful, and the due and punctual performance of all other
obligations of the Company to the Holders or the Trustee all in accordance with
the terms set forth in Article Ten of the Indenture and (ii) in case of any
extension of time of payment or renewal of any Securities or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise.
No stockholder, officer, director or incorporator, as such,
past, present or future, of any Guarantor shall have any liability under the
Guarantee by reason of his or its status as such stockholder, officer, director
or incorporator.
The Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Securities upon which the
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
GUARANTORS:
WALBRO AUTOMOTIVE CORPORATION
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
A-11
<PAGE> 120
WALBRO ENGINE MANAGEMENT CORPORATION
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
SHARON MANUFACTURING COMPANY
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
WHITEHEAD ENGINEERED PRODUCTS, INC.
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
A-12
<PAGE> 121
ASSIGNMENT FORM
I or we assign and transfer this Security to
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated: Signed:
---------------- -------------------------------------
(Sign exactly as name appears on the
other side of this Security)
Signature Guarantee:
--------------------------------------------
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
A-13
<PAGE> 122
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the
appropriate box:
Section 4.15 [ ] Section 4.16 [ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.15 or Section 4.16 of the
Indenture, state the amount: $______________
Dated: Signed:
---------------- -------------------------------------
(Sign exactly as name appears on the
other side of this Security)
Signature Guarantee:
------------------------------------------------------
A-14
<PAGE> 123
EXHIBIT B
[FORM OF SERIES B SECURITY]
WALBRO CORPORATION
10 1/8% Senior Note
due December 15, 2007, Series B
CUSIP No.: 931154AE8
No. $
WALBRO CORPORATION a Delaware corporation (the "Company",
which term includes any successor corporation), for value received promises to
pay to or registered assigns, the principal sum of $ Dollars, on
December 15, 2007.
Interest Payment Dates: June 15 and December 15 commencing
June 15, 1998
Record Dates: June 1 and December 1
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
B-1
<PAGE> 124
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers. Dated:
December 16, 1997
WALBRO CORPORATION
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
B-2
<PAGE> 125
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 10 1/8% Senior Notes due 2007, Series B,
described in the within-mentioned Indenture.
Dated: December 16, 1997 BANKERS TRUST COMPANY,
as Trustee
By
-------------------------------
Authorized Signatory
B-3
<PAGE> 126
(REVERSE OF SECURITY)
WALBRO CORPORATION
10 1/8% Senior Note
due December 15, 2007, Series B
1. Interest.
WALBRO CORPORATION, a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above. The Company will pay interest semi-annually on June 15
and December 15 of each year (the "Interest Payment Date"), commencing June 15,
1998. Interest on the Securities will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from December
16, 1997. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
The Company shall pay interest on overdue principal from time
to time on demand at the rate borne by the Securities plus 2% and on overdue
installments of interest (without regard to any applicable grace periods) to
the extent lawful.
2. Method of Payment.
The Company shall pay interest on the Securities (except
defaulted interest) to the persons who are the registered Holders at the close
of business on the Record Date immediately preceding the Interest Payment Date
even if the Securities are cancelled on registration of transfer or
registration of exchange after such Record Date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company shall
pay principal and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts ("U.S. Legal
Tender"). However, the Company may pay principal and interest by wire transfer
of Federal funds, or interest by check payable in such U.S. Legal Tender. The
Company may deliver any such interest payment to the Paying Agent or to a
Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, Bankers Trust Company (the "Trustee") will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-Registrar without notice to the Holders. The Company or any of its
Subsidiaries may, subject to certain exceptions, act as Registrar or
co-Registrar.
B-4
<PAGE> 127
4. Indenture and Guarantees.
The Company issued the Securities under an Indenture, dated as
of December 15, 1997 (the "Indenture"), among the Company, the Guarantors and
the Trustee. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"),
as in effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and the TIA for a statement of them. The
Securities are general unsecured obligations of the Company limited in
aggregate principal amount to $100,000,000. Payment on each Security is
guaranteed on a senior basis, jointly and severally, by the Guarantors pursuant
to Article Ten of the Indenture.
5. Optional Redemption.
The Securities will be redeemable, at the Company's option, in
whole at any time or in part from time to time, on and after December 15, 2002
at the following redemption prices (expressed as percentages of the principal
amount) if redeemed during the twelve-month period commencing on December 15 of
the year set forth below, plus, in each case, accrued interest thereon to the
date of redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2001 . . . . . . . . . . . . . . . . . . . . . 105.063%
2002 . . . . . . . . . . . . . . . . . . . . . 103.375%
2003 . . . . . . . . . . . . . . . . . . . . . 101.688%
2004 and thereafter . . . . . . . . . . . . . . 100.000%
</TABLE>
6. Optional Redemption Upon Public Equity Offering.
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 Securities 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 net cash 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.
B-5
<PAGE> 128
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 SEC in accordance with the Securities Act.
7. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not
more than 60 days before the Redemption Date to each Holder of Securities to be
redeemed at such Holder's registered address. Securities in denominations of
$1,000 may be redeemed only in whole. The Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal of
Securities that have denominations larger than $1,000.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Security. On and after the
Redemption Date, interest will cease to accrue on Securities or portions
thereof called for redemption.
8. Change of Control Offer.
Upon the occurrence of a Change of Control, the Company will
be required to offer to purchase all of the outstanding Securities at a
purchase price equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of repurchase.
9. Limitation on Disposition of Assets.
The Company under certain conditions is obligated to make an
offer to purchase Securities at 100% of their principal amount plus accrued and
unpaid interest to the date of repurchase with certain net cash proceeds of
certain sales or other dispositions of assets in accordance with the Indenture.
10. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need
B-6
<PAGE> 129
not register the transfer of or exchange any Securities or portions thereof
selected for redemption, except the unredeemed portion of any security being
redeemed in part.
11. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the
owner of it for all purposes.
12. Unclaimed Funds.
If funds for the payment of principal or interest remain
unclaimed for two years, the Trustee and the Paying Agents will repay the funds
to the Company at its request. After that, all liability of the Trustee and
such Paying Agents with respect to such funds shall cease.
13. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the
Indenture and the Securities except for certain provisions thereof, and may be
discharged from its obligations to comply with certain covenants contained in
the Indenture and the Securities, in each case upon satisfaction of certain
conditions specified in the Indenture.
14. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities
may be amended or supplemented with the written consent of the Holders of at
least a majority in aggregate principal amount of the Securities then
outstanding, and any existing Default or Event of Default or compliance with
any provision may be waived with the consent of the Holders of a majority in
aggregate principal amount of the Securities then outstanding. Without notice
to or consent of any Holder, the parties thereto may amend or supplement the
Indenture or the Securities to, among other things, cure any ambiguity, defect
or inconsistency, provide for uncertificated Securities in addition to or in
place of certificated Securities or comply with any requirements of the SEC in
connection with the qualification of the Indenture under the TIA, or make any
other change that does not materially adversely affect the rights of any Holder
of a Security.
15. Restrictive Covenants.
The Indenture contains certain covenants that, among other
things, limit the ability of the Company and its subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to issue preferred
or other capital stock of sub-
B-7
<PAGE> 130
sidiaries, to sell assets, to permit restrictions on dividends and other
payments by subsidiaries to the Company, to consolidate, merge or sell all or
substantially all of its assets, to engage in transactions with affiliates or
to engage in certain businesses. The limitations are subject to a number of
important qualifications and exceptions. The Company must annually report to
the Trustee on compliance with such limitations.
16. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of
Securities may not enforce the Indenture or the Securities except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Securities then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Securities notice of any continuing Default or Event of Default
(except a Default in payment of principal or interest, including an accelerated
payment) if it determines that withholding notice is in their interest.
17. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Securities and may otherwise
deal with the Company, its Subsidiaries or their respective Affiliates as if it
were not the Trustee.
18. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator,
as such, of the Company shall have any liability for any obligation of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of, such obligations or their creation. Each Holder of
a Security by accepting a Security waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the
Securities.
19. Authentication.
This Security shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on this Security.
B-8
<PAGE> 131
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of
a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
21. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP
numbers to be printed on the Securities as a convenience to the Holders of the
Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
The Company will furnish to any Holder of a Security upon
written request and without charge a copy of the Indenture. Requests may be
made to: Walbro Corporation, 6242 Garfield Street, Cass City, Michigan 48726,
Attn: Chief Executive Officer.
B-9
<PAGE> 132
GUARANTEE
The Guarantors (as defined in the Indenture referred to in the
Security upon which this notation is endorsed and each hereinafter referred to
as a "Guarantor," which term includes any successor person under the Indenture)
have unconditionally guaranteed on a senior basis (such guarantee by each
Guarantor being referred to herein as the "Guarantee") (i) the due and punctual
payment of the principal of and interest on the Securities, whether at
maturity, by acceleration or otherwise, the due and punctual payment of
interest on the overdue principal and interest, if any, on the Securities, to
the extent lawful, and the due and punctual performance of all other
obligations of the Company to the Holders or the Trustee all in accordance with
the terms set forth in Article Ten of the Indenture and (ii) in case of any
extension of time of payment or renewal of any Securities or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise.
No stockholder, officer, director or incorporator, as such,
past, present or future, of any Guarantor shall have any liability under the
Guarantee by reason of his or its status as such stockholder, officer, director
or incorporator.
The Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Securities upon which the
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
GUARANTORS:
WALBRO AUTOMOTIVE CORPORATION
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
B-10
<PAGE> 133
WALBRO ENGINE MANAGEMENT CORPORATION
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
SHARON MANUFACTURING COMPANY
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
WHITEHEAD ENGINEERED PRODUCTS, INC.
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
B-11
<PAGE> 134
ASSIGNMENT FORM
I or we assign and transfer this Security to
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint _______________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated: Signed:
---------------- -------------------------------------
(Sign exactly as name appears on the
other side of this Security)
Signature Guarantee:
--------------------------------------------
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
B-12
<PAGE> 135
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the
appropriate box:
Section 4.15 [ ] Section 4.16 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state
the amount: $_____________
Dated: Signed:
---------------- -------------------------------------
(Sign exactly as name appears on the
other side of this Security)
Signature Guarantee:
------------------------------------------------------
B-13
<PAGE> 136
EXHIBIT C
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security authenticated and delivered hereunder
shall bear a legend (which would be in addition to any other legends required
in the case of a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY.
THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE
NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER
OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY
THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY
BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
C-1
<PAGE> 137
EXHIBIT D
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 10 1/8% Senior Notes due 2007, Series A, and 10 1/8%
Senior Notes due 2007, Series B (the "Securities"),
of Walbro Corporation
This Certificate relates to $_______ principal amount of
Securities held in the form of* ___ a beneficial interest in a Global Security
or* _______ Physical Securities by ______ (the "Transferor").
The Transferor:*
[ ] has requested by written order that the Registrar deliver in
exchange for its beneficial interest in the Global Security held by the
Depositary a Physical Security or Physical Securities in definitive, registered
form of authorized denominations and an aggregate number equal to its
beneficial interest in such Global Security (or the portion thereof indicated
above); or
[ ] has requested the Registrar by written order to exchange or
register the transfer of a Physical Security or Physical Securities.
[ ] In connection with such request and in respect of each such
Security, the Transferor does hereby certify that the Transferor is familiar
with the Indenture relating to the above captioned Securities and the
restrictions on transfers thereof as provided in Section 2.16 of such
Indenture, and that the transfer of this Securities does not require
registration under the Securities Act of 1933, as amended (the "Act") because*:
[ ] Such Security is being acquired for the Transferor's own
account, without transfer (in satisfaction of Section 2.16(a)(II)(A) or Section
2.16(d)(i)(A) of the Indenture).
[ ] Such Security is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the Act), in reliance on
Rule 144A.
[ ] Such Security is being transferred to an institutional
"accredited investor" (within the meaning of subparagraphs (a)(1), (2), (3) or
(7) of Rule 501 under the Act.
D-1
<PAGE> 138
[ ] Such Security is being transferred in reliance on Regulation
S under the Act
[ ] Such Security is being transferred in reliance on Rule 144
under the Act.
[ ] Such Security is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the Act
other than Rule 144A or Rule 144 or Regulation S under the Act to a person
other than an institutional "accredited investor."
----------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
-------------------------------------
[Authorized Signatory]
Date:
---------------------------
*Check applicable box.
D-2
<PAGE> 139
EXHIBIT E
Form of Certificate To Be
Delivered in Connection with
Transfers to Institutional Accredited Investors
____________, ____
Bankers Trust Company
Corporate Trust and Agency Group
Four Albany Street
New York, New York 10004
Re: Walbro Corporation (the "Company") Indenture (the
"Indenture") relating to 10 1/8% Senior Notes due
2007, Series A, or 10 1/8% Senior Notes due 2007,
Series B
Ladies and Gentlemen:
In connection with our proposed purchase of 10 1/8% Senior
Notes due 2007, Series A, or 10 1/8% Series Notes due 2007, Series B (the
"Securities"), of Walbro Corporation (the "Company"), we confirm that:
1. We have received such information as we deem
necessary in order to make our investment decision.
2. We understand that any subsequent transfer of the
Securities is subject to certain restrictions and conditions set forth in the
Indenture and the undersigned agrees to be bound by, and not to resell, pledge
or otherwise transfer the Securities except in compliance with, such
restrictions and conditions and the Securities Act of 1933, as amended (the
"Securities Act").
3. We understand that the offer and sale of the
Securities have not been registered under the Securities Act, and that the
Securities may not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for which
we are acting as hereinafter stated, that if we should sell any Securities, we
will do so only (A) to the Company or any subsidiary thereof, (B) inside the
United States in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as de-
E-1
<PAGE> 140
fined therein), (C) inside the United States to an institutional "accredited
investor" (as defined below) that, prior to such transfer, furnishes (or has
furnished on its behalf by a U.S. broker-dealer) to the Trustee a signed letter
substantially in the form hereof, (D) outside the United States in accordance
with Regulation S under the Securities Act, (E) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available), or
(F) pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any person purchasing Securities from us a
notice advising such purchaser that resales of the Securities are restricted as
stated herein.
4. We understand that, on any proposed resale of
Securities, we will be required to furnish to the Trustee and the Company, such
certification, legal opinions and other information as the Trustee and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Securities
purchased by us will bear a legend to the foregoing effect.
5. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) and have such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of our investment in the
Securities, and we and any accounts for which we are acting are each able to
bear the economic risk of our or their investment, as the case may be.
6. We are acquiring the Securities purchased by us for
our account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[Name of Transferor]
By:
-----------------------------------
[Authorized Signatory]
E-2
<PAGE> 141
EXHIBIT F
Form of Certificate To Be
Delivered in Connection
with Regulation S Transfers
_______________, ____
Bankers Trust Company
Corporate Trust and Agency Group
Four Albany Street New
York, New York 10004
Re: Walbro Corporation (the "Company") 10 1/8% Senior
Notes due 2007, Series A, and 10 1/8% Senior Notes
due 2007, Series B (the "Securities")
Dear Sirs:
In connection with our proposed sale of $____________
aggregate principal amount of the Securities, we confirm that such sale has
been effected pursuant to and in accordance with Regulation S under the
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we
represent that:
(1) the offer of the Securities was not made to a person
in the United States;
(2) either (a) at the time the buy offer was originated,
the transferee was outside the United States or we and any person
acting on our behalf reasonably believed that the transferee was
outside the United States, or (b) the transaction was executed in, on
or through the facilities of a designated off-shore securities market
and neither we nor any person acting on our behalf knows that the
transaction has been pre- arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the
United States in contravention of the requirements of Rule 903(b) or
Rule 904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Securities.
F-1
<PAGE> 142
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Defined terms used herein without
definition have the respective meanings provided in Regulation S.
Very truly yours,
[Name of Transferor]
By:
--------------------------------
[Authorized Signature]
F-2
<PAGE> 1
EXHIBIT 4.2
$100,000,000
WALBRO CORPORATION
10 1/8% SENIOR NOTES DUE 2007
PURCHASE AGREEMENT
December 11, 1997
SALOMON BROTHERS INC
Seven World Trade Center
New York, New York 10048
Dear Sirs:
Walbro Corporation, a Delaware corporation (the "Company"), proposes, upon
the terms and conditions set forth herein, to issue and sell to Salomon
Brothers Inc. (the "Initial Purchaser"), $100,000,000 aggregate principal
amount of its 10 1/8% Senior Notes due 2007 (the "Senior Notes"). The Senior
Notes will be issued pursuant to the provisions of an indenture, to be dated as
of December 15, 1997 (the "Indenture"), among the Company, the Guarantors (as
defined herein) and Bankers Trust Company, as trustee (the "Trustee").
Initially, the Senior Notes will be guaranteed (the "Guarantees" and,
together with the Senior Notes, the "Securities") on a senior unsecured basis
by each of Walbro Automotive Corporation, Walbro Engine Management Corporation,
Sharon Manufacturing Co. and Whitehead Engineering Products, Inc.
(collectively, the "Guarantors" and, together with the Company, the "Issuers").
This Agreement, the Indenture, the Securities and the Registration Rights
Agreement (as defined herein) are herein collectively referred to as the
"Transaction Documents."
The Issuers wish to confirm as follows their agreement with the Initial
Purchaser in connection with the purchase and resale of the Securities.
1. Preliminary Offering Memorandum and Offering Memorandum. The
Securities will be offered and sold to the Initial Purchaser without
registration under the Securities Act of 1933, as amended (the "Act"), in
reliance on an exemption pursuant to Section 4(2) under the Act. The Company
has prepared a preliminary offering memorandum, dated November 24,
<PAGE> 2
-2-
1997 (the "Preliminary Offering Memorandum"), and an offering memorandum, dated
December 11, 1997 (the "Offering Memorandum"), setting forth information
regarding the Issuers and the Securities. Unless stated herein to the
contrary, all references herein to the Offering Memorandum are to the Offering
Memorandum at the date hereof and are not meant to include any supplement or
amendment subsequent thereto. The Company hereby confirms that it has
authorized the use of the Preliminary Offering Memorandum and the Offering
Memorandum in connection with the offering and resale of the Securities by the
Initial Purchaser.
The Issuers understand that the Initial Purchaser proposes to make offers
and sales (the "Exempt Resales") of the Securities purchased by the Initial
Purchaser hereunder only on the terms and in the manner set forth in the
Offering Memorandum and Section 2 hereof, as soon as the Initial Purchaser
deems advisable after this Agreement has been executed and delivered, (i) to
persons in the United States whom the Initial Purchasers reasonably believe to
be qualified institutional buyers ("Qualified Institutional Buyers") as
defined in Rule 144A under the Act, as such rule may be amended from time to
time ("Rule 144A"), in transactions under Rule 144A and (ii) outside the United
States to persons other than U.S. persons in reliance upon Regulation S
("Regulation S") under the Act (such persons specified in clauses (i) and (ii)
being referred to herein as the "Eligible Purchasers"). As used herein the
terms "United States" and "U.S. persons" have the meaning given them in
Regulation S.
It is understood and acknowledged that upon original issuance thereof, and
until such time as the same is no longer required under the applicable
requirements of the Act, each of the Securities (and each security issued in
exchange therefor or in substitution thereof) shall bear the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT
IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY
<PAGE> 3
-3-
RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR
ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES
TO PERSONS OTHER THAN U.S. PERSONS IN OFFSHORE TRANSACTIONS MEETING THE
REQUIREMENTS OF RULE 904 UNDER REGULATION S UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT
WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT.
It is also understood and acknowledged that holders (including subsequent
transferees) of the Securities will have the registration rights set forth in
the registration rights agreement (the "Registration Rights Agreement")
substantially in the form attached hereto as Exhibit A, to be dated the date
hereof by and among the Issuers and the Initial Purchaser.
2. Agreements to Sell, Purchase and Resell.
(a) The Issuers hereby agree, subject to all the terms and conditions set
forth herein, to issue and sell to the Initial Purchaser and, upon the basis of
the representations, warranties and agreements of the Issuers herein contained
and subject to all the terms and conditions set forth herein, the Initial
Purchaser agrees to purchase from the Issuers all of the Senior Notes at a
purchase price of 97.5% of the principal amount thereof.
(b) The Initial Purchaser represents and warrants to the Issuers that it
is a Qualified Institutional Buyer and has advised the Issuers that it proposes
to offer the Securities for sale upon the terms and conditions set forth in
this Agreement and in the Offering Memorandum. The Initial Purchaser hereby
represents and warrants to, and agrees with, the Issuers that the Initial
Purchaser (i) will not solicit offers for, or offer to sell, the Securities by
means of any form of general
<PAGE> 4
-4-
solicitation or general advertising or in any manner involving a public
offering within the meaning of Section 4(2) of the Act (including, but not
limited to, (A) any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio, or (B) any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising; provided, however,
that such limitation shall not preclude the Initial Purchaser from placing any
tombstone announcement with respect to the resale by the Initial Purchaser of
the Securities, provided that such announcement is not prohibited by Regulation
S), and (ii) will solicit offers for the Securities only from, and will
offer, sell or deliver the Securities as part of its initial offering, only to
(A) persons in the United States whom the Initial Purchaser reasonably
believes to be Qualified Institutional Buyers, or if any such person is buying
for one or more institutional accounts for which such person is acting as
fiduciary or agent, only when such person has represented to the Initial
Purchaser that each such account is a Qualified Institutional Buyer, to whom
notice has been given that such sale or delivery is being made in reliance on
Rule 144A, in each case, in transactions under Rule 144A and (B) outside the
United States to persons other than U.S. persons in reliance on Regulation S.
The Initial Purchaser has advised the Issuers that it will offer the Securities
to Eligible Purchasers at a price initially equal to 100% of the principal
amount thereof, plus accrued interest, if any, from the date of issuance of the
Securities.
(c) The Initial Purchaser represents and warrants that (i) it has not
offered or sold, and will not offer or sell, directly or indirectly, any of the
Securities in the United Kingdom by means of any document, other than to
persons whose ordinary business it is to buy or sell shares or debentures
whether as principal or agent (except in circumstances which do not constitute
an offer to the public within the meaning of the Companies Act of 1985), (ii)
it has complied with and will comply with all applicable provisions of the
Financial Services Act of 1986 with respect to anything done by the Initial
Purchaser in relation to the Securities in, from or otherwise involving the
United Kingdom and (iii) it has only issued or passed on and will only issue or
pass on in or from the United Kingdom to any persons any document received by
the Initial Purchaser in connection with the issue of the Securities if the
recipient is of a kind described in Article 9(3) of the Financial Services Act
of 1986 (Investment Advertisements) (Exemptions) Order 1988, as amended.
<PAGE> 5
-5-
(d) The Initial Purchaser represents and warrants that with respect to
Securities offered and sold or to be offered and sold pursuant to Regulation S
it has offered and sold the Securities and agrees that it will offer and sell
the Securities (i) as part of its initial distribution at any time and (ii)
otherwise until 40 days after the later of the commencement of the offering of
the Securities and the Closing Date (as defined herein), only in accordance
with Rule 903 of Regulation S or as otherwise permitted pursuant to paragraph
(c) above. Accordingly, the Initial Purchaser represents and agrees that with
respect to Securities offered and sold or to be offered and sold pursuant to
Regulation S none of the Initial Purchaser, its affiliates or any persons
acting on its behalf or on behalf of its affiliates has engaged or will engage
in any directed selling efforts in the United States with respect to the
Securities, and it and its affiliates have complied and will comply with the
offering restrictions requirements of Regulation S. The Initial Purchaser
agrees that, at or prior to confirmation of any sale of Securities pursuant to
Regulation S, it will have sent to each distributor, dealer or person receiving
a selling concession, fee or other remuneration that purchases such Securities
from the Initial Purchaser during the restricted period a confirmation or
notice to substantially the following effect:
"The Securities covered hereby have not been registered under
the U.S. Securities Act of 1933, as amended (the "Act"), and
may not be offered and sold within the United States or to, or
for the account or benefit of, U.S. persons (i) as part of
their initial distribution at any time or (ii) otherwise until
40 days after the later of the commencement of the offering
and the Closing Date, except in either case in accordance with
Regulation S or Rule 144A under the Act. Terms used above
have the respective meanings given to them in Regulation S
under the Act."
The Initial Purchaser understands that the Issuers and, for the purposes
of the opinions to be delivered to the Initial Purchaser pursuant to Section
7(d) and 7(e) hereof, counsel to the Issuers and counsel to the Initial
Purchaser, will rely upon the accuracy and truth of the foregoing
representations and agreements and the Initial Purchaser hereby consents to
such reliance.
3. Delivery of the Securities and Payment Therefor. Delivery to the
Initial Purchaser of and payment for the Secu-
<PAGE> 6
-6-
rities shall be made at the office of Cahill Gordon & Reindel, at 9:00 A.M.,
New York City time, on December 16, 1997 (the "Closing Date"). The place of
closing for the Securities and the Closing Date may be varied by agreement
between the Initial Purchaser and the Issuers.
The Securities will be delivered to the Initial Purchaser against payment
of the purchase price therefor by federal funds certified check of immediately
available funds payable in accordance with written instructions from the
Company. The Securities will be evidenced by a single global security (the
"Global Security") and/or by additional certificated securities, and will be
registered, in the case of a Global Security, in the name of Cede & Co. as
nominee of The Depository Trust Company ("DTC"), and in the other cases, in
such names and in such denominations as the Initial Purchaser shall request
prior to 1:00 p.m., New York City time, on the third business day preceding the
Closing Date. The Securities to be delivered to the Initial Purchaser shall be
made available to the Initial Purchaser in New York City for inspection and
packaging not later than 9:30 a.m., New York City time, on the business day
next preceding the Closing Date.
4. Agreements of the Issuers. The Issuers agree with the Initial
Purchaser as follows:
(a) Until the completion of the distribution of the Securities by
the Initial Purchaser to Eligible Purchasers, the Issuers will advise the
Initial Purchaser promptly and, if requested by it, will confirm such
advice in writing, of any change in the condition (financial or other),
business, prospects, properties, net worth or results of operations of
the Company and the Subsidiaries (as defined herein), taken as a whole,
or of the happening of any event or the existence of any condition which
requires any amendment or supplement to the Offering Memorandum (as then
amended or supplemented) so that the Offering Memorandum (x) will not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, or (y) will comply with applicable law.
(b) The Issuers will furnish to the Initial Purchaser, without
charge, such number of copies of the Offering Memorandum, as may then be
amended or supplemented, as it may reasonably request.
<PAGE> 7
-7-
(c) The Issuers will not make any amendment or supplement to the
Preliminary Offering Memorandum or to the Offering Memorandum of which
the Initial Purchaser shall not previously have been advised or to which
it shall object after being so advised.
(d) Prior to the execution and delivery of this Agreement, the
Issuers have delivered or will deliver to the Initial Purchaser, without
charge, in such reasonable quantities as the Initial Purchaser shall have
requested or may hereafter request, copies of the Preliminary Offering
Memorandum. The Issuers consent to the use, in accordance with the
securities or Blue Sky laws of the jurisdictions in which the Securities
are offered by the Initial Purchaser and by dealers, prior to the date of
the Offering Memorandum, of each Preliminary Offering Memorandum so
furnished by the Issuers. The Issuers consent to the use of the Offering
Memorandum (and of any amendment or supplement thereto prepared in
accordance with Section 4(c)) in accordance with the securities or Blue
Sky laws of the jurisdictions in which the Securities are offered by the
Initial Purchaser and by all dealers to whom Securities may be sold, in
connection with the offering and sale of the Securities.
(e) If, at any time prior to completion of the distribution of the
Securities by the Initial Purchaser to Eligible Purchasers, any event
shall occur or condition shall exist that in the judgment of the Issuers
or in the opinion of the Initial Purchaser requires any amendment or
supplement to the Offering Memorandum (as then amended or supplemented)
so that the Offering Memorandum (x) will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or (y) will
comply with applicable law, the Issuers will, in each such case subject
to Section 4(c), forthwith prepare an appropriate supplement or amendment
thereto, and will expeditiously furnish to the Initial Purchaser and
dealers that number of copies thereof as they shall reasonably request.
(f) The Issuers will cooperate with the Initial Purchaser and with
its counsel in connection with the qualification of the Securities for
offering and sale by the Initial Pur-
<PAGE> 8
-8-
chaser and by dealers under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchaser may designate and will file such
consents to service of process or other documents necessary or
appropriate in order to effect such qualification; provided that in no
event shall any of the Issuers be obligated to qualify to do business in
any jurisdiction where it is not now so qualified or to take any action
which would subject it to general service of process in any jurisdiction
where it is not now so subject.
(g) So long as any of the Securities are outstanding, the Issuers
will furnish to the Initial Purchaser (i) as soon as available, a copy of
each report of the Issuers mailed to stockholders or filed with the
Securities and Exchange Commission (the "Commission"), and (ii) from time
to time such other information concerning the Issuers as the Initial
Purchaser may reasonably request.
(h) The Issuers will apply the net proceeds from the sale of the
Securities to be sold by them hereunder in accordance with the
description set forth under "Use of Proceeds" in the Offering Memorandum.
(i) Except as stated in this Agreement and in the Offering
Memorandum, the Issuers have not taken, nor will they take, directly or
indirectly, any action designed to or that might reasonably be expected
to cause or result in stabilization or manipulation of the price of the
Securities to facilitate the sale or resale of the Securities. Except as
permitted by the Act, the Issuers will not distribute any offering
material in connection with the Exempt Resales. The Issuers will not
solicit any offers to buy and will not offer to sell the Securities by
means of any form of general solicitation or general advertising (within
the meaning of Regulation D) or by means of any directed selling efforts
(as defined under Regulation S and the Commission's releases related
thereto).
(j) The Issuers will use their best efforts to cause the Securities
to be eligible for trading on The PORTAL Market.
(k) From and after the Closing Date, so long as any of the
Securities are outstanding and are "restricted securities" within the
meaning of Rule 144(a)(3) under the Act or, if earlier, until two years
after the Closing Date, and during any period in which the Company is not
subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Company
<PAGE> 9
-9-
will furnish to holders of the Securities and prospective purchasers of
Securities designated by such holders, upon request of such holders or
such prospective purchasers, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Act to permit compliance with Rule
144A in connection with resales of the Securities.
(l) The Issuers agree not to sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in
the Act) that would be integrated with the sale of the Securities in a
manner that would require the registration under the Act of the sale by
the Issuers to the Initial Purchaser or by the Initial Purchaser to the
Eligible Purchasers of the Securities.
(m) The Issuers agree to comply with all of the terms and
conditions of the Registration Rights Agreement, and all agreements set
forth in the representation letters of the Issuers to DTC relating to the
approval of the Securities by DTC for "book entry" transfer.
(n) The Issuers agree that prior to any registration of the
Securities pursuant to the Registration Rights Agreement, or at such
earlier time as may be so required, the Indenture shall be qualified
under the Trust Indenture Act of 1939 (the "1939 Act") and will cause to
be entered into any necessary supplemental indentures in connection
therewith.
(o) The Issuers shall not, and shall not permit any of their
respective affiliates to, resell any Securities that have been acquired
by any of them.
(p) Prior to the Closing Date, the Issuers will furnish to the
Initial Purchaser, as soon as they have been prepared by the Company, a
copy of any unaudited interim consolidated financial statements of the
Company for any period subsequent to the period covered by the most
recent consolidated financial statements of the Company appearing in the
Offering Memorandum.
5. Representations and Warranties of the Issuers. The Issuers,
jointly and severally, represent and warrant to the Initial Purchaser that:
(a) No order or decree preventing the use of the Preliminary
Offering Memorandum or the Offering Memorandum or any amendment or
supplement thereto, or any order as-
<PAGE> 10
-10-
serting that the transactions contemplated by this Agreement are subject
to the registration requirements of the Act has been issued and no
proceeding for that purpose has commenced or is pending or, to the
knowledge of the Issuers, is contemplated.
(b) The Preliminary Offering Memorandum and the Offering Memorandum
as of their respective dates and the Offering Memorandum as of the
Closing Date, did not or will not at any time contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading,
except that this representation and warranty does not apply to statements
in or omissions from the Preliminary Offering Memorandum and Offering
Memorandum made in reliance upon and in conformity with information
relating to the Initial Purchaser furnished to the Issuers in writing by
or on behalf of the Initial Purchaser expressly for use therein.
(c) [Intentionally Omitted]
(d) The Indenture has been duly and validly authorized by each of
the Issuers and, upon its execution, delivery and performance by each of
the Issuers and assuming due authorization, execution, delivery and
performance by the Trustee, will be a valid and binding agreement of each
of the Issuers, enforceable in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally and
subject to the applicability of general principles of equity; the
Indenture conforms in all material respects to the description thereof in
the Offering Memorandum; and no qualification of the Indenture under the
1939 Act is required in connection with the offer and sale of the
Securities contemplated hereby or in connection with the Exempt Resales.
(e) The Senior Notes and the Guarantees have been duly authorized
by the Company and each of the Guarantors, respectively, and, when
executed by the Company and each of the Guarantors, respectively, and, in
the case of the Senior Notes, authenticated by the Trustee in accordance
with the Indenture and delivered to the Initial Purchaser against payment
therefor in accordance with the terms hereof, will have been validly
issued and delivered, and will constitute valid and binding obligations
of the Company and each of the Guarantors, respectively, entitled to
<PAGE> 11
-11-
the benefits of the Indenture and enforceable in accordance with their
terms, except as enforcement thereof may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors'
rights generally and subject to the applicability of general principles of
equity, and the Securities conform in all material respects to the
description thereof in the Offering Memorandum.
(f) All the outstanding shares of capital stock of the Company have
been duly authorized and validly issued, are fully paid and nonassessable
and are free of any preemptive or similar rights.
(g) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware with full
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Offering Memorandum, and
is duly registered and qualified to conduct its business and is in good
standing in each jurisdiction where the nature of its properties or the
conduct of its business requires such registration or qualification,
except where the failure so to register or qualify would not have a
material adverse effect on the condition (financial or other), business,
prospects, properties, net worth or results of operations of the Company
and the Subsidiaries, taken as a whole (a "Material Adverse Effect").
(h) All of the Company's "significant subsidiaries" (as defined in
the Act) are referred to herein individually as a "Subsidiary" and
collectively as the "Subsidiaries." Each Subsidiary is a corporation or
partnership duly organized, validly existing and in good standing in the
jurisdiction of its incorporation or formation, with full corporate or
partnership power and authority to own, lease and operate its properties
and to conduct its business as described in the Offering Memorandum, and
is duly registered and qualified to conduct its business and is in good
standing in each jurisdiction where the nature of its properties or the
conduct of its business requires such registration or qualification,
except where the failure so to register or qualify or be in good standing
could not have a Material Adverse Effect. All of the outstanding shares
of capital stock or partnership interests of each of the Subsidiaries
have been duly authorized and validly issued, are fully paid and nonas
sessable, and are wholly owned by the Company directly or
<PAGE> 12
-12-
indirectly through one of the other Subsidiaries, free and clear of any
lien, adverse claim, security interest, equity or other encumbrance,
except as described in the Offering Memorandum.
(i) There are no legal or governmental proceedings pending or, to
the knowledge of the Issuers, threatened, against the Company or any of
the Subsidiaries, or to which the Company or any of the Subsidiaries, or
to which any of the respective properties of the Company or any of the
Subsidiaries, is subject, that are not disclosed in the Offering
Memorandum and which, if adversely decided, could cause a Material
Adverse Effect or materially affect the issuance of the Securities or the
consummation of any of the transactions contemplated by the Transaction
Documents. There are no agreements, contracts, indentures, leases or
other instruments of the Company or any of the Subsidiaries that are
material to the Company and the Subsidiaries, taken as a whole, which are
not described in the Offering Memorandum. Neither the Company nor any
Subsidiary is involved in any strike, job action or labor dispute with
any group of employees, and, to the knowledge of the Issuers, no such
action or dispute is threatened.
(j) Neither the Company nor any of the Subsidiaries is (i) in
violation of its certificate or articles of incorporation or by laws or
other organizational documents, or of any law, ordinance, administrative
or governmental rule or regulation applicable to the Company or any of
the Subsidiaries, or of any decree of any court or governmental agency or
body having jurisdiction over the Company or any of the Subsidiaries,
except where any such violation or violations in the aggregate could not
have a Material Adverse Effect or (ii) in default in any material
respect in the performance of any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of
indebtedness or in any material agreement, indenture, lease or other
instrument to which the Company or any of the Subsidiaries is a party or
by which any of the Company and the Subsidiaries or any of their
respective properties may be bound, except as may be disclosed in the
Offering Memorandum and except where any such default or defaults in the
aggregate would not have a Material Adverse Effect.
(k) Neither the issuance, offer, sale or delivery of the
Securities, the execution, delivery or performance of the Transaction
Documents by the Company or the Subsidiar-
<PAGE> 13
-13-
ies a party thereto nor the consummation by the Company and such
Subsidiaries of the transactions contemplated hereby or thereby (i)
requires any consent, approval, authorization or other order of, or
registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency or official (except such as may
have been obtained or may be required in connection with the registration
under the Act of the Securities in accordance with the Registration
Rights Agreement, the qualification of the Indenture under the 1939 Act
and except for compliance with the securities or Blue Sky laws of various
jurisdictions) or conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, the certificate or articles
of incorporation or bylaws, or other organizational documents, of the
Company or any of the Subsidiaries, except any such conflicts and
breaches that in the aggregate would not have a Material Adverse Effect,
or (ii) conflicts or will conflict with or constitutes or will constitute
a breach of, or a default under, in any material respect, any material
agreement, indenture, lease or other instrument to which the Company or
any of the Subsidiaries is a party or by which any of them or any of the
respective properties of the Company or any of the Subsidiaries may be
bound, except any such conflict or conflicts that in the aggregate could
not have a Material Adverse Effect, or (iii) violates or will violate in
any material respect any statute, law, regulation or filing or judgment,
injunction, order or decree applicable to the Company or any of the
Subsidiaries or any of the respective properties of the Company or any of
the Subsidiaries, except any such violation or violations that in the
aggregate could not have a Material Adverse Effect, or (iv) will result
in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of the Subsidiaries pursuant to
the terms of any agreement or instrument to which any of them is a party
or by which any of them may be bound or to which any of the property or
assets of any of them is subject.
(l) Arthur Andersen LLP, who has certified or shall certify the
consolidated financial statements of the Company included as part of the
Offering Memorandum, is an independent public accountant under Rule 101
of the AICPA's Code of Professional Conduct, and its interpretation and
rulings.
<PAGE> 14
-14-
(m) The consolidated financial statements of the Company included
in the Offering Memorandum, together with the related notes thereto,
present fairly the financial position, results of operations and cash
flows of the Company, at the dates and for the periods to which they
relate, and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis ("GAAP").
(n) Each of the Company and the Guarantors has all the requisite
power and authority to execute, deliver and perform its obligations under
this Agreement and the Registration Rights Agreement; the execution and
delivery of, and the performance by each of the Company and the
Guarantors of its obligations under, this Agreement and the Registration
Rights Agreement have been duly and validly authorized by each of the
Company and the Guarantors, and each of this Agreement and the
Registration Rights Agreement has been duly executed and delivered by
each of the Company and the Guarantors and constitutes the valid and
legally binding agreement of each of the Company and the Guarantors,
enforceable against each of the Company and the Guarantors in accordance
with its terms, except as the enforcement hereof and thereof may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and subject to the
applicability of general principles of equity, and except as rights to
indemnity and contribution hereunder and thereunder may be limited by
Federal or state securities laws or principles of public policy.
(o) Except as disclosed in the Offering Memorandum, subsequent to
the date as of which such information is given in the Offering
Memorandum, none of the Company or any of the Subsidiaries has incurred
any liability or obligation, direct or contingent, or entered into any
transaction, not in the ordinary course of business, that is material to
the Company and the Subsidiaries taken as a whole, and there has not been
any material change in the capital stock, or material increase in the
short-term or long-term debt, of the Company or any of the Subsidiaries,
or any material adverse change, or any development involving or which
could reasonably be expected to involve a prospective material adverse
change, in the condition (financial or other), business, properties, net
worth or results of operations of the Company and the Subsidiaries, taken
as a whole.
<PAGE> 15
-15-
(p) The Company and the Subsidiaries have good and marketable title
to all property (real and personal) described in the Offering Memorandum
as being owned by them, free and clear of all material liens, claims,
security interests or other encumbrances except such as are described in
the Offering Memorandum, and all the property described in the Offering
Memorandum as being held under lease by each of the Company and the
Subsidiaries, is held by it under valid, subsisting and enforceable
leases, with only such exceptions as in the aggregate are not materially
burdensome and do not interfere in any material respect with the conduct
of the business of the Company and the Subsidiaries taken as a whole.
(q) Except as permitted by the Act, the Issuers have not
distributed and, prior to the later to occur of the Closing Date and
completion of the distribution of the Securities, will not distribute any
offering material in connection with the offering and sale of the
Securities other than the Offering Memorandum and Offering Memorandum
(and any amendment or supplement thereto in accordance with Section 4(c)
hereof).
(r) The Company and the Subsidiaries have such permits, licenses,
franchises, certificates of need and other approvals or authorizations of
governmental or regulatory authorities ("Permits") as are necessary under
applicable law to own their respective properties and to conduct their
respective businesses in the manner described in the Offering Memorandum
except to the extent that the failure to have such Permits could not have
a Material Adverse Effect; the Company and each of the Subsidiaries have
fulfilled and performed in all material respects, all their respective
material obligations with respect to the Permits, and no event has
occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such Permit, subject in
each case to such qualification as may be set forth in the Offering
Memorandum and except to the extent that any such revocation or
termination would not have a Material Adverse Effect; and, except as
described in the Offering Memorandum, none of the Permits contains any
restriction that is materially burdensome to the Company or any of the
Subsidiaries.
(s) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assur-
<PAGE> 16
-16-
ances that (i) transactions of the Company and the Subsidiaries are
executed in accordance with management's general or specific
authorization; (ii) transactions of the Company and the Subsidiaries are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets of the Company and the
Subsidiaries is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets
of the Company and the Subsidiaries is compared with existing assets of
the Company and the Subsidiaries at reasonable intervals and appropriate
action is taken with respect to any differences.
(t) Neither the Company nor any of the Subsidiaries, nor to the
knowledge of the Issuers, any employee or agent of the Company or any
Subsidiary has made any payment of funds of the Company or any Subsidiary
or received or retained any funds in violation of any law, rule or
regulation, which violation could have a Material Adverse Effect.
(u) Except as disclosed in the Offering Memorandum, the Company and
each of the Subsidiaries have filed all tax returns required to be filed,
which returns are true and correct in all material respects, and neither
the Company nor any Subsidiary is in default in the payment of any taxes
which were payable pursuant to said returns or any assessments with
respect thereto, except where the failure to file such returns and make
such payments could not have a Material Adverse Effect.
(v) No holder of any security of the Issuers (other than holders of
the Securities) has any right to request or demand registration of any
security of the Issuers because of the consummation of the transactions
contemplated by the Transaction Documents. Except as described in the
Offering Memorandum, there are no outstanding options, warrants or other
rights calling for the issuance of, and there are no commitments, plans
or arrangements to issue, any shares of capital stock of the Company or
any of the Subsidiaries or any security convertible into or exchangeable
or exercisable for capital stock of the Company or any of the
Subsidiaries.
(w) The Company and the Subsidiaries own or possess adequate
rights to use all patents, trademarks, trademark
<PAGE> 17
-17-
registrations, service marks, service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets and rights described in
the Offering Memorandum as being owned by any of them or necessary for
the conduct of their respective businesses, and the Issuers are not aware
of any claim to the contrary or any challenge by any other person to the
rights of the Company or the Subsidiaries with respect to the foregoing.
(x) The Issuers are not and, upon sale of the Securities to be
issued and sold thereby in accordance herewith and the application of the
net proceeds to the Issuers of such sale as described in the Offering
Memorandum under the caption "Use of Proceeds," will not be an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
(y) When the Securities are issued and delivered pursuant to this
Agreement, such Securities will not be of the same class (within the
meaning of Rule 144A(d)(3) under the Act) as any security of the Issuers
that is listed on a national securities exchange registered under Section
6 of the Exchange Act or that is quoted in a United States automated
interdealer quotation system.
(z) None of the Issuers nor any of their respective affiliates (as
defined in Rule 501(b) of Regulation D under the Act) has directly, or
through any agent (provided that no representation is made as to the
Initial Purchaser or any person acting on its behalf), (i) sold, offered
for sale, solicited offers to buy or otherwise negotiated in respect of,
any security (as defined in the Act) which is or will be integrated with
the offering and sale of the Securities in a manner that would require
the registration of the Securities under the Act or (ii) engaged in any
form of general solicitation or general advertising (within the meaning
of Regulation D under the Act) in connection with the offering of the
Securities.
(aa) The Issuers are not required to deliver the information
specified in Rule 144A(d)(4) in connection with the offering and resale
of the Securities by the Initial Purchaser.
(bb) Assuming (i) that the representations and warranties of the
Initial Purchaser in Section 2 hereof are true and correct in all
material respects, (ii) the Initial Purchaser complies with the covenants
set forth in
<PAGE> 18
-18-
Section 2 hereof (iii) compliance by the Initial Purchaser with the
offering and transfer procedures and restrictions described in the
Offering Memorandum, (iv) the accuracy of the representations and
warranties made in accordance with this Agreement and the Offering
Memorandum by purchasers to whom the Initial Purchaser initially resells
Securities and (v) purchasers to whom the Initial Purchaser initially
resells Securities receive a copy of the Offering Memorandum prior to
such sale, the purchase and sale of the Securities pursuant hereto
(including the Initial Purchaser's proposed offering of the Securities on
the terms and in the manner set forth in the Offering Memorandum and
Section 2 hereof) do not require registration under the Act.
(cc) The execution and delivery of this Agreement and the other
Transaction Documents and the sale of the Securities to the Initial
Purchaser by the Issuers or by the Initial Purchaser to Eligible
Purchasers will not involve any prohibited transaction within the meaning
of Section 406 of ERISA or Section 4975 of the Internal Revenue Code.
The representations made by the Issuers in the preceding sentence is made
in reliance upon and subject to the accuracy of, and compliance with, the
representations and covenants made or deemed made by the Eligible
Purchasers as set forth in the Offering Memorandum under the section
entitled "Transfer Restrictions."
(dd) The Company and the Subsidiaries will be in compliance with,
and not subject to any liability under, the common law and all applicable
federal, state, local and foreign laws, regulations, rules, codes,
ordinances, directives, and orders relating to pollution or to protection
of public or employee health or safety or to the environment, including,
without limitation, those that relate to any Hazardous Material (as
defined herein) ("Environmental Laws"), except, in each case, where non
compliance or liability, individually or in the aggregate, could not be
have a Material Adverse Effect. The term "Hazardous Material" means any
pollutant, contaminant or waste, or any hazardous, dangerous, or toxic
chemical, material, waste, substance or constituent subject to regulation
under any Environmental Law.
6. Indemnification and Contribution. (a) Each of the Issuers,
jointly and severally, agrees to indemnify and hold harmless the Initial
Purchaser and each person, if any, who controls the Initial Purchaser within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act, from
and
<PAGE> 19
-19-
against any and all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in
the Preliminary Offering Memorandum or Offering Memorandum or in any amendment
or supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except, with respect to the Initial
Purchaser, insofar as such losses, claims, damages, liabilities or expenses
arise out of or are based upon any untrue statement or omission or alleged
untrue statement or omission which has been made therein or omitted therefrom
in reliance upon and in conformity with the information relating to the Initial
Purchaser furnished in writing to the Issuers by or on behalf of the Initial
Purchaser expressly for use in connection therewith; provided, however, that
the indemnification contained in this paragraph (a) with respect to the
Preliminary Offering Memorandum shall not inure to the benefit of the Initial
Purchaser (or to the benefit of person controlling the Initial Purchaser) on
account of any such loss, claim, damage, liability or expense arising from the
sale of the Securities by the Initial Purchaser to any person if the untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact contained in the Preliminary Offering Memorandum was corrected in
the Offering Memorandum and the Initial Purchaser sold Securities to that
person without sending or giving at or prior to the written confirmation of
such sale, a copy of the Offering Memorandum (as then amended or supplemented).
The foregoing indemnity agreement shall be in addition to any liability which
the Issuers may otherwise have.
(b) If any action, suit or proceeding shall be brought against the
Initial Purchaser or any person who controls the Initial Purchaser in respect
of which indemnity may be sought against the Issuers, the Initial Purchaser or
any such person who controls the Initial Purchaser shall promptly notify in
writing the parties against whom indemnification is being sought (the
"indemnifying parties"), and such indemnifying parties shall assume the defense
thereof, including the employment of counsel and payment of all fees and
expenses. The Initial Purchaser or any person who controls the Initial
Purchaser shall have the right to employ separate counsel in any such action,
suit or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of the Initial Purchaser or
any person who controls the Initial Purchaser unless (i) the indemnifying
par-
<PAGE> 20
-20-
ties have agreed in writing to pay such fees and expenses, (ii) the
indemnifying parties have failed to assume the defense and employ counsel on a
timely basis and such failure to assume the defense is reasonably likely to
adversely affect the preparation for or conduct of such action, suit or
proceeding, or (iii) the named parties to any such action, suit or proceeding
(including any impleaded parties) include both the Initial Purchaser or any
such person who controls the Initial Purchaser and any of the indemnifying
parties and the Initial Purchaser or any such person who controls the Initial
Purchaser shall have been advised by its counsel that representation of such
indemnified party and any such indemnifying party by the same counsel would be
inappropriate under applicable standards of professional conduct (whether or
not such representation by the same counsel has been proposed) due to actual or
potential differing interests between them (in which case the indemnifying
party shall not have the right to assume the defense of such action, suit or
proceeding on behalf of the Initial Purchaser or any such person who controls
the Initial Purchaser). It is understood, however, that the indemnifying
parties shall, in connection with any one such action, suit or proceeding or
separate but substantially similar or related actions, suits or proceedings in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and reasonable expenses of
only one separate firm of attorneys (in addition to any local counsel) at any
time for the Initial Purchaser and any such person who controls the Initial
Purchaser not having actual or potential differing interests with such
indemnifying parties, which firm shall be designated in writing by the Initial
Purchaser, and that all such reasonable fees and reasonable expenses shall be
reimbursed on a monthly basis as provided in paragraph (a) hereof. The
indemnifying parties shall not be liable for any settlement of any such action,
suit or proceeding effected without their written consent, but if settled with
such written consent, or if there be a final judgment for the plaintiff in any
such action, suit or proceeding, the indemnifying parties agree to indemnify
and hold harmless the Initial Purchaser, to the extent provided in paragraph
(a), and any person who controls the Initial Purchaser from and against any
loss, claim, damage, liability or expense by reason of such settlement or
judgment.
(c) The Initial Purchaser agrees to indemnify and hold harmless the
Issuers, and their respective directors and officers, and any person who
controls an Issuer within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act to the same extent as the indemnity from an Issuer to the
Initial Purchaser set forth in paragraph (a) hereof, but only
<PAGE> 21
-21-
with respect to information relating to the Initial Purchaser furnished in
writing by or on behalf of the Initial Purchaser expressly for use in the
Preliminary Offering Memorandum or Offering Memorandum or any amendment or
supplement thereto. If any action, suit or proceeding shall be brought against
any of the Issuers, any of their respective directors or officers, or any such
controlling person based on the Preliminary Offering Memorandum or Offering
Memorandum, or any amendment or supplement thereto, and in respect of which
indemnity may be sought against the Initial Purchaser pursuant to this
paragraph (c), the Initial Purchaser shall have the rights and duties given to
the Issuers by paragraph (b) above (except that if the Issuers shall have
assumed the defense thereof the Initial Purchaser shall not be required to do
so, but may employ separate counsel therein and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the Initial
Purchaser's expense), and the Issuers, their respective directors and officers,
and any such controlling person shall have the rights and duties given to the
Initial Purchaser by paragraph (b) above. The foregoing indemnity agreement
shall be in addition to any liability which the Initial Purchaser may otherwise
have.
(d) If the indemnification provided for in this Section 6 is unavailable
to an indemnified party under paragraphs (a) or (c) hereof in respect of any
losses, claims, damages, liabilities or expenses referred to therein, then an
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses (i) in such proportion
as is appropriate to reflect the relative benefits received by the Issuers on
the one hand and the Initial Purchaser on the other hand from the offering of
the Securities, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Issuers on the one hand and the Initial Purchaser on the
other in connection with the statements or omissions that resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Issuers on the
one hand and the Initial Purchaser on the other shall be deemed to be in the
same proportion as the total net proceeds from the offering (before deducting
expenses) received by the Issuers bear to the total discounts and commissions
received by the Initial Purchaser, in each case as set forth in the table on
the cover page of the Offering Memorandum. The relative
<PAGE> 22
-22-
fault of the Issuers on the one hand and the Initial Purchaser on the other
hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Issuers on the one hand or by the Initial Purchaser on the other hand and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
(e) The Issuers and the Initial Purchaser agree that it would not be just
and equitable if contribution pursuant to this Section 6 were determined by a
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in paragraph (d) above
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or depending on any such action, suit
or proceeding. Notwithstanding the provisions of this Section 6, the Initial
Purchaser shall not be required to contribute any amount in excess of the
amount by which the total price of the Securities purchased by it exceeds the
amount of any damages which the Initial Purchaser has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 6 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 6 and the
representations and warranties of the Issuers set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any of the Initial Purchaser or any
person who controls the Initial Purchaser, the Issuers, their respective
directors or officers or any person controlling the Issuers, (ii) acceptance of
any Securities and payment therefor hereunder, and (iii) any termination of
this Agreement. A successor to the Initial Purchaser or any person who
controls the Initial
<PAGE> 23
-23-
Purchaser, or to an Issuer, their respective directors or officers or any
person controlling an Issuer, shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this Section
6.
(g) No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action,
suit or proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such action, suit or proceeding.
7. Conditions of the Initial Purchaser's Obligations. The obligations of
the Initial Purchaser to purchase and pay for the Securities on the Closing
Date hereunder is subject to the fulfillment, in the Initial Purchaser's sole
discretion, of the following conditions:
(a) At the time of execution of this Agreement and on the Closing
Date, no order or decree preventing the use of the Offering Memorandum or
any amendment or supplement thereto, or any order asserting that the
transactions contemplated by this Agreement are subject to the
registration requirements of the Act shall have been issued and no
proceedings for that purpose shall have been commenced or shall be
pending or, to the knowledge of the Issuers, be contemplated. No order
suspending the sale of the Securities in any jurisdiction shall have been
issued and no proceedings for that purpose shall have been commenced or
shall be pending or, to the knowledge of the Issuers, shall be
contemplated.
(b) [Intentionally Omitted]
(c) Subsequent to the date hereof, (i) there shall not have
occurred any change, or any development involving a prospective change,
in or affecting the condition (financial or otherwise), business,
properties, assets, net worth or results of operations of the Company and
the Subsidiaries which, in the opinion of the Initial Purchaser, would
materially adversely affect the market for the Securities, or (ii) the
Offering Memorandum shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the
<PAGE> 24
-24-
light of the circumstances under which they were made, not misleading if
amending or supplementing the Offering Memorandum to correct such
misstatement or omission would, in the sole discretion of the Initial
Purchaser, materially adversely affect the marketability of the
Securities.
(d) The Initial Purchaser shall have received on the Closing Date
an opinion of Katten Muchin & Zavis, counsel for the Issuers, dated the
Closing Date and addressed to the Initial Purchaser, in the form of
Exhibit B hereto.
(e) The Initial Purchaser shall have received on the Closing Date
an opinion of Cahill Gordon & Reindel, counsel for the Initial
Purchaser, dated the Closing Date, and addressed to the Initial
Purchaser, with respect to such matters as the Initial Purchaser may
request.
(f) The Initial Purchaser shall have received letters addressed to
the Initial Purchaser, and dated the date hereof and the Closing Date,
from Arthur Andersen LLP, independent certified public accountants,
substantially in the forms heretofore approved by the Initial Purchaser.
(g) (i) There shall not have been any change in the capital stock
of the Company nor any material increase in the consolidated short-term
or consolidated long-term debt of the Company (other than in the ordinary
course of business) from that set forth or contemplated in the Offering
Memorandum (or any amendment or supplement thereto); (ii) there shall not
have been, since the respective dates as of which information is given in
the Offering Memorandum, except as may otherwise be stated in the
Offering Memorandum, any material adverse change in the condition
(financial or other), business, prospects, properties, net worth or
results of operations of the Company and the Subsidiaries, taken as a
whole; (iii) the Company and the Subsidiaries shall not have any
liabilities or obligations, direct or contingent (whether or not in the
ordinary course of business), that are material to the Company and the
Subsidiaries, taken as a whole, other than those reflected in the
Offering Memorandum; (iv) all the representations and warranties of the
Company contained in this Agreement shall be true and correct in all
material respects on and as of the date hereof and on and as of the
Closing Date as if made on and as of the Closing Date; and (v) the
Initial Purchaser shall have received a certificate, dated the Closing
Date and signed by the chief ex-
<PAGE> 25
-25-
ecutive officer and the chief accounting officer of the Company (or
such other officers as are acceptable to the Initial Purchaser), to the
effect set forth in this Section 7(g) and in Section 7(h) hereof.
(h) The Issuers shall not have failed at or prior to the Closing
Date to have performed or complied with any of their agreements herein
contained and required to be performed or complied with by them hereunder
at or prior to the Closing Date.
(i) There shall not have been any announcement by any "nationally
recognized statistical rating organization," as defined for purposes of
Rule 436(g) under the Act, that (i) it is downgrading its rating
assigned to any class of securities of the Company, or (ii) it is
reviewing its ratings assigned to any class of securities of the Company
with a view to possible downgrading, or with negative implications, or
direction not determined.
(j) The Securities shall have been approved for trading on PORTAL.
(k) The Issuers shall have furnished or caused to be furnished to
the Initial Purchaser such further certificates and documents as the
Initial Purchaser shall have reasonably requested.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Initial Purchaser and counsel for the
Initial Purchaser.
Any certificate or document signed by any officer of an Issuer and
delivered to the Initial Purchaser, or to counsel for the Initial Purchaser,
shall be deemed a representation and warranty by the Issuers to the Initial
Purchaser as to the statements made therein.
8. Expenses. (a) Whether or not the purchase and sale of the
Securities hereunder is consummated or this Agreement is terminated pursuant to
Section 9 hereof, the Issuers agree, jointly and severally, to pay the
following costs and expenses and all other costs and expenses incident to the
performance by them of their obligations hereunder: (i) the preparation,
printing or reproduction of the Preliminary Offering Memorandum and the
Offering Memorandum (including financial statements thereto), and each
amendment or supplement to any of
<PAGE> 26
-26-
them, this Agreement, the Registration Rights Agreement and the Indenture; (ii)
the delivery (including postage, air freight charges and charges for counting
and packaging) of such copies of the Offering Memorandum, the Preliminary
Offering Memorandum and all amendments or supplements as may be reasonably
requested for use in connection with the offering and sale of the Securities;
(iii) the preparation, printing, authentication, issuance and delivery of
certificates for the Securities, including any stamp taxes in connection with
the original issuance and sale of the Securities; (iv) the printing (or
reproduction) and delivery of the preliminary and supplemental Blue Sky
Memoranda and all other agreements and documents printed (or reproduced) and
delivered in connection with the offering of the Securities; (v) the
application for quotation of the Securities on PORTAL; (vi) the qualification
of the Securities for offer and sale under the securities or Blue Sky laws of
the several states as provided in Section 4(f) hereof (including the reasonable
fees, expenses and disbursements of counsel for the Initial Purchaser relating
to the preparation, printing or reproduction, and delivery of the preliminary
and supplemental Blue Sky Memoranda and such qualification); (vii) the
performance by the Issuers of their obligations under the Registration Rights
Agreement; and (viii) the fees and expenses of the Issuers' accountants and the
fees and expenses of counsel (including local and special counsel) for the
Issuers. The Issuers hereby agree that they will pay in full on the Closing
Date the fees and expenses referred to in clause (vi) of this Section 8 by
delivering to counsel for the Initial Purchaser on such date a check payable to
such counsel in the requisite amount.
(b) If the purchase and sale of the Securities hereunder is not
consummated because any condition to the obligations of the Initial Purchaser
set forth in Section 7 hereof is not satisfied, because this Agreement is
terminated pursuant to Section 9 hereof or because of any failure, refusal or
inability on the part of the Issuers to perform all obligations and satisfy all
conditions on their part to be performed or satisfied hereunder other than by
reason of a default by the Initial Purchaser in payment for the Securities on
the Closing Date, the Issuers shall reimburse the Initial Purchaser promptly
upon demand for all out-of-pocket expenses (including fees and disbursements of
counsel) that shall have been incurred by them in connection with the proposed
purchase and sale of the Securities and the other transactions contemplated
hereby.
9. Termination of Agreement. This Agreement shall be subject to
termination in the absolute discretion of the
<PAGE> 27
-27-
Initial Purchaser, without liability on the part of the Initial Purchaser to
the Issuers, by notice to the Issuers, if prior to the Closing Date, (i)
trading in securities generally on the New York Stock Exchange, American Stock
Exchange or the Nasdaq National Market shall have been suspended or materially
limited, (ii) a general moratorium on commercial banking activities in New York
shall have been declared by either Federal or state authorities, or (iii)
there shall have occurred any out break or escalation of hostilities or other
international or domestic calamity, crisis or change in political, financial
or economic conditions, the effect of which on the financial markets of the
United States or the market for the Securities is such as to make it, in the
sole judgment of the Initial Purchaser, impracticable or inadvisable to
commence or continue the offering of the Securities on the terms set forth on
the cover page of the Offering Memorandum or to enforce contracts for the
resale of the Securities by the Initial Purchaser. Notice of such termination
may be given to the Issuers by telegram, telecopy or telephone and shall be
subsequently confirmed by letter.
10. Information Furnished by the Initial Purchaser. The statements set
forth in the stabilization legend on the inside front cover, the last paragraph
on the cover page and in the third paragraph under the caption "Private
Placement" in the Preliminary Offering Memorandum and Offering Memorandum,
constitute the only information furnished by or on behalf of the Initial
Purchaser as such information is referred to in Sections 5(b) and 6 hereof.
11. Miscellaneous. Except as otherwise provided in Sections 4 and 9
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Issuers, at the office of the
Company at 6242 Garfield Street, Cass City, MI 48726-1325 (with a copy to
Howard S. Lanznar, Katten Muchin & Zavis, 525 W. Monroe Street, Chicago, IL
60661), Attention: L.E. Althaver, Chief Executive Officer, or (ii) if to the
Initial Purchaser, to Salomon Brothers Inc, Seven World Trade Center, New York,
New York 10048, Attention: Manager, Investment Banking Division.
This Agreement has been and is made solely for the benefit of the Initial
Purchaser and the Issuers, and their respective directors, officers and the
controlling persons referred to in Section 6 hereof and their respective
successors and assigns, to the extent provided herein, and no other person
shall acquire or have any right under or by virtue of this Agreement. Neither
the term "successor" nor the terms
<PAGE> 28
-28-
"successors and assigns" as used in this Agreement shall include a purchaser
from the Initial Purchaser of any of the Securities in its status as such
purchaser.
12. Applicable Law; Counterparts. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
<PAGE> 29
-29-
Please confirm that the foregoing correctly sets forth the agreement
between the Issuers and the Initial Purchaser.
Very truly yours,
WALBRO CORPORATION
By: /s/ Daniel L. Hittler
-----------------------------
Name: Daniel L. Hittler
Title: Secretary
WALBRO AUTOMOTIVE CORPORATION
By: /s/ Daniel L. Hittler
-----------------------------
Name: Daniel L. Hittler
Title: Secretary
WALBRO ENGINE MANAGEMENT CORPORATION
By: /s/ Daniel L. Hittler
-----------------------------
Name: Daniel L. Hittler
Title: Secretary
SHARON MANUFACTURING CORPORATION
By: /s/ Daniel L. Hittler
-----------------------------
Name: Daniel L. Hittler
Title: Secretary
<PAGE> 30
-30-
WHITEHEAD ENGINEERED PRODUCTS, INC.
By: /s/ Daniel L. Hittler
-----------------------------
Name: Daniel L. Hittler
Title: Secretary
Confirmed as of the date first
above mentioned.
SALOMON BROTHERS INC
By: /s/ Dominic Lepore
-------------------------
Name: Dominic Lepore
Title: Vice President
<PAGE> 1
EXHIBIT 4.3
================================================================================
10 1/8% SENIOR NOTES DUE 2007
REGISTRATION RIGHTS AGREEMENT
Dated December 11, 1997
by and among
WALBRO CORPORATION,
WALBRO AUTOMOTIVE CORPORATION,
WALBRO ENGINE MANAGEMENT CORPORATION,
SHARON MANUFACTURING COMPANY,
WHITEHEAD ENGINEERED PRODUCTS, INC.
and
SALOMON BROTHERS INC
================================================================================
<PAGE> 2
This Registration Rights Agreement is made and entered into this 11th day
of December, 1997, by and among Walbro Corporation, a Delaware corporation (the
"Company"), Walbro Automotive Corporation, a Delaware corporation, Walbro
Engine Management Corporation, a Delaware corporation, Sharon Manufacturing
Company, a Michigan corporation, Whitehead Engineered Products, Inc., a
Delaware corporation (the "Guarantors" and, together with the Company, the
"Issuers"), and Salomon Brothers Inc (the "Initial Purchaser").
This Agreement is made pursuant to the Purchase Agreement, dated December
11, 1997, among the Company, the Guarantors and Initial Purchaser (the
"Purchase Agreement"). In order to induce the Initial Purchaser to enter into
the Purchase Agreement, the Issuers have agreed to provide the registration
rights provided for in this Agreement to the Initial Purchaser and its direct
and indirect transferees. The execution and delivery of this Agreement is a
condition to the closing of the transactions contemplated by the Purchase
Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the following
meanings:
Additional Interest: As defined in Section 4(a) hereof.
Advice: As defined in the last paragraph of Section 5 hereof.
Affiliate: With respect to any specified person, "Affiliate" shall mean
any other person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified person. For the purposes
of this definition, "control," when used with respect to any person, means the
power to direct the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise and the terms "affiliated," controlling" and "controlled" have
meanings correlative to the foregoing.
Agreement: This Registration Rights Agreement, as the same may be
amended, supplemented or modified from time to time in accordance with the
terms hereof.
<PAGE> 3
-2-
Business Day: Any day except a Saturday, a Sunday or a day on which
banking institutions in New York, New York generally are required or authorized
by law or other government action to be closed.
Company: As defined in the preamble hereof.
Consummate or consummate: When used to qualify the term "Exchange Offer"
shall mean validly and lawfully to issue and deliver the Exchange Notes
pursuant to the Exchange Offer for all Notes validly tendered and not validly
withdrawn pursuant thereto in accordance with the terms of this Agreement.
Consummation Date: The date that is 20 Business Days immediately
following the date that the Exchange Registration Statement shall have been
declared effective by the SEC.
Effectiveness Period: As defined in Section 3(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated by the SEC pursuant thereto.
Exchange Date: As defined in Section 2(d) hereof.
Exchange Notes: The 10 1/8% Senior Notes due 2007, Series B, of the
Company, guaranteed on a senior unsecured basis by each of the Guarantors, that
are identical to the Notes in all material respects, except that the provisions
regarding restrictions on transfer shall be modified, as appropriate, and the
issuance thereof pursuant to the Exchange Offer shall have been registered
pursuant to an effective Registration Statement in compliance with the
Securities Act.
Exchange Offer: An offer to issue, in exchange for any and all of the
Notes, a like aggregate principal amount of Exchange Notes, which offer shall
be made by the Company pursuant to Section 2 hereof.
Exchange Registration Statement: As defined in Section 2(a) hereof.
Guarantors: As defined in the preamble hereof.
Indemnified Person: As defined in Section 7(a) hereof.
<PAGE> 4
-3-
Indenture: The Indenture, dated as of December 15, 1997, among the
Issuers and Bankers Trust Company, as trustee thereunder, pursuant to which the
Notes are issued, as amended or supplemented from time to time in accordance
with the terms thereof.
Initial Purchaser: As defined in the preamble hereof.
Issue Date: As defined in Section 2(a).
Issuers: As defined in the preamble hereof.
Notes: The 10 1/8% Senior Notes due 2007, Series A, of the Company,
guaranteed on a senior unsecured basis by each of the Guarantors, issued
pursuant to the Indenture.
Participating Broker-Dealer: As defined in Section 2(e) hereof.
Private Exchange: As defined in Section 2(c) hereof.
Private Exchange Notes: As defined in Section 2(c) hereof.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated pursuant to the Securities
Act), as amended or supplemented by any prospectus supplement, with respect to
the terms of the offering of any portion of the Notes, Exchange Notes or
Private Exchange Notes covered by such Registration Statement, and all other
amendments and supplements to any such prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference, if any, in such prospectus.
Registration Default: As defined in Section 4(a) hereof.
Registration Statement: Any registration statement of the Company and the
Guarantors that covers any of the Notes, Exchange Notes or Private Exchange
Notes pursuant to the provisions of this Agreement, including the Prospectus,
amendments and supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed
<PAGE> 5
-4-
to be incorporated by reference, if any, in such registration statement.
Rule 144: Rule 144 promulgated by the SEC pursuant to the Securities Act,
as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 144A: Rule 144A promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 158: Rule 158 promulgated by the SEC pursuant to the Securities Act,
as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 174: Rule 174 promulgated by the SEC pursuant to the Securities Act,
as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 415: Rule 415 promulgated by the SEC pursuant to the Securities Act,
as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 424: Rule 424 promulgated by the SEC pursuant to the Securities Act,
as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules and
regulations promulgated by the SEC thereunder.
Shelf Registration: As defined in Section 3 hereof.
<PAGE> 6
-5-
Shelf Registration Statement: As defined in Section 3 hereof.
Special Counsel: Cahill Gordon & Reindel, special counsel to the holders
of Transfer Restricted Securities, or such other counsel as shall be agreed
upon by the Issuers and holders of a majority in aggregate principal amount of
Transfer Restricted Securities, the expenses of which holders of Transfer
Restricted Securities will be reimbursed by the Issuers pursuant to Section 6.
TIA: The Trust Indenture Act of 1939, as amended.
Transfer Restricted Securities: The Notes, upon original issuance
thereof, and at all times subsequent thereto, each Exchange Note as to which
Section 3(a)(iii) hereof is applicable upon original issuance and at all times
subsequent thereto and each Private Exchange Note upon original issuance
thereof and at all times subsequent thereto, until in the case of any such
Note, Exchange Note or Private Exchange Note, as the case may be, the earliest
to occur of (i) the date on which any such Note has been exchanged by a person
other than a Participating Broker-Dealer for an Exchange Note (other than with
respect to an Exchange Note as to which Section 3(a)(iii) hereof applies)
pursuant to the Exchange Offer, (ii) with respect to Exchange Notes received by
Participating Broker-Dealers in the Exchange Offer, the earlier of (x) the date
on which such Exchange Note has been sold by such Participating Broker-Dealer
by means of the Prospectus contained in the Exchange Registration Statement and
(y) the date on which the Exchange Registration Statement has been effective
under the Securities Act for a period of 6 months after the Consummation Date,
(iii) a Shelf Registration Statement covering such Note, Exchange Note or
Private Exchange Note has been declared effective by the SEC and such Note,
Exchange Note or Private Exchange Note, as the case may be, has been disposed
of in accordance with such effective Shelf Registration Statement, (iv) the
date on which such Note, Exchange Note or Private Exchange Note, as the case
may be, is distributed to the public pursuant to Rule 144 (or any similar
provisions then in effect) or is saleable pursuant to Rule 144(k) promulgated
by the SEC pursuant to the Securities Act or (v) the date on which such Note,
Exchange Note or Private Exchange Note, as the case may be, ceases to be
outstanding for purposes of the Indenture or any other indenture under which
such Exchange Note or Private Exchange Note was issued.
Trustee: The trustee under the Indenture.
<PAGE> 7
-6-
underwritten registration or underwritten offering: A registration in
connection with which securities are sold to an underwriter for reoffering to
the public pursuant to an effective Registration Statement.
2. Exchange Offer
(a) To the extent not prohibited by any applicable law or applicable
interpretation of the staff of the SEC, the Issuers shall (A) prepare and,
on or prior to 60 days after the date of original issuance of the Notes
(the "Issue Date"), file with the SEC a Registration Statement under the
Securities Act with respect to an offer by the Company to the holders of
the Notes to issue and deliver to such holders, in exchange for Notes, a
like principal amount of Exchange Notes, (B) use their best efforts to
cause the Registration Statement relating to the Exchange Offer to be
declared effective by the SEC under the Securities Act on or prior to 180
days after the Issue Date, and (C) commence the Exchange Offer and use
their best efforts to issue, on or prior to the Consummation Date, the
Exchange Notes. The offer and sale of the Exchange Notes pursuant to the
Exchange Offer shall be registered pursuant to the Securities Act on the
appropriate form (the "Exchange Registration Statement") and duly registered or
qualified under all applicable state securities or Blue Sky laws and will
comply with all applicable tender offer rules and regulations under the
Exchange Act and state securities or Blue Sky laws. The Exchange Offer shall
not be subject to any condition, other than that the Exchange Offer does not
violate any applicable law or interpretation of the staff of the SEC. Upon
consummation of the Exchange Offer in accordance with this Section 2, the
Issuers shall have no further registration obligations other than with respect
to (i) Private Exchange Notes, (ii) Exchange Notes held by Participating
Broker-Dealers and (iii) Notes or Exchange Notes as to which Section 3(a)(iii)
hereof applies. No securities shall be included in the Exchange Registration
Statement other than the Exchange Notes.
(b) The Issuers may require each holder of Notes as a condition to its
participation in the Exchange Offer to represent to the Issuers and their
counsel in writing (which may be contained in the applicable letter of
transmittal) that at the time of the consummation of the Exchange Offer (i)
any Exchange Notes received by such holder will be acquired in the ordinary
course of its business, (ii) such holder will have no arrangement or
understanding with any person to participate in the distribution (within
the mean-
<PAGE> 8
-7-
ing of the Securities Act) of the Exchange Notes and (iii) such holder is not
an Affiliate of an Issuer, or if it is an Affiliate of an Issuer, it will
comply with the registration and prospectus delivery requirements of the
Securities Act, to the extent applicable.
(c) If, prior to consummation of the Exchange Offer, the Initial
Purchaser holds any Notes acquired by it and having, or which are
reasonably likely to be determined to have, the status of an unsold
allotment in the initial distribution, or any other holder of Notes is not
entitled to participate in the Exchange Offer, the Company upon the request
of the Initial Purchaser or any such holder shall, simultaneously with the
delivery of the Exchange Notes in the Exchange Offer, issue and deliver to
the Initial Purchaser and any such holder, in exchange (the "Private
Exchange") for such Notes held by the Initial Purchaser and any such holder, a
like principal amount of debt securities of the Company, guaranteed by each of
the Guarantors on a senior unsecured basis, that are identical in all material
respects to the Exchange Notes (the "Private Exchange Notes") (and which are
issued pursuant to the same indenture as the Exchange Notes). The Private
Exchange Notes shall bear the same CUSIP number as the Exchange Notes.
(d) Unless the Exchange Offer would not be permitted by any applicable
law or interpretation of the staff of the SEC, the Company shall mail the
Exchange Offer Prospectus and appropriate accompanying documents, including
appropriate letters of transmittal, to each holder of Notes providing, in
addition to such other disclosures as are required by applicable law:
(i) that the Exchange Offer is being made pursuant to this
Agreement and that all Notes validly tendered will be accepted
for exchange;
(ii) the date of acceptance for exchange (the "Exchange
Date"), which date shall in no event be later than the
Consummation Date (unless otherwise required by applicable law);
(iii) that holders of Notes electing to have a Note
exchanged pursuant to the Exchange Offer will be required to
surrender such Note, together with the enclosed letters of
transmittal, to the institution and at the address (located in
the Borough of Manhattan, The City of New York) specified in the
<PAGE> 9
-8-
notice prior to the close of business on the Exchange Date; and
(iv) that holders of Notes that do not tender all such
securities pursuant to the Exchange Offer may no longer have any
registration rights hereunder with respect to Notes not tendered.
Promptly after the Exchange Date, the Company shall:
(i) accept for exchange all Notes or portions thereof
validly tendered and not validly withdrawn pursuant to the
Exchange Offer or the Private Exchange; and
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Notes or portions thereof so accepted for
exchange by the Company, and issue, cause the Trustee under the
Indenture (or the indenture pursuant to which the Exchange Notes
are issued) to authenticate, and mail to each holder of Notes,
Exchange Notes equal in principal amount to the principal amount
of the Notes surrendered by such holder.
(e) The Issuers and the Initial Purchaser acknowledge that the staff
of the SEC has taken the position that any broker-dealer that owns Exchange
Notes that were received by such broker-dealer for its own account in the
Exchange Offer (a "Participating Broker-Dealer") may be deemed to be an
"underwriter" within the meaning of the Securities Act and must deliver a
prospectus meeting the requirements of the Securities Act in connection
with any resale of such Exchange Notes (other than a resale of an unsold
allotment resulting from the original offering of the Notes).
The Issuers and the Initial Purchaser also acknowledge that it is the SEC
staff's position that if the Prospectus contained in the Exchange Registration
Statement includes a plan of distribution containing a statement to the above
effect and the means by which Participating Broker-Dealers may resell the
Exchange Notes, without naming the Participating Broker-Dealers or specifying
the amount of Exchange Notes owned by them, such Prospectus may be delivered by
Participating Broker-Dealers to satisfy their prospectus delivery obligations
under the Securities Act in connection with resales of Exchange
<PAGE> 10
-9-
Notes for their own accounts, so long as the Prospectus otherwise meets the
requirements of the Securities Act.
In light of the foregoing, if requested by a Participating Broker-Dealer,
the Issuers agree (x) to use their best efforts to keep the Exchange
Registration Statement continuously effective for a period of up to 6 months or
such earlier date as each Participating Broker-Dealer shall have notified the
Company in writing that such Participating Broker-Dealer has resold all
Exchange Notes acquired in the Exchange Offer, (y) to comply with the
provisions of Section 5 of this Agreement, as they relate to the Exchange Offer
and the Exchange Registration Statement, and (z) to deliver to such
Participating Broker-Dealer a "cold comfort" letter of the independent public
accountants of the Issuers and a legal opinion as to matters reasonably
requested by such Participating Broker-Dealer relating to the Exchange
Registration Statement and the related Prospectus and any amendments or
supplements thereto.
(f) The Initial Purchaser shall have no liability to any Participating
Broker-Dealer with respect to any request made pursuant to Section 2(e).
(g) Interest on the Exchange Notes and the Private Exchange Notes will
accrue from the last interest payment date on which interest was paid on
the Notes surrendered in exchange therefor or, if no interest has been paid
on the Notes, from the date of the original issuance of the Notes.
(h) The Exchange Notes and the Private Exchange Notes may be issued
under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture, which in either event shall provide that the
Exchange Notes shall not be subject to the transfer restrictions set forth
in the Indenture. The Indenture or such indenture shall provide that the
Exchange Notes, the Private Exchange Notes and the Notes shall vote and
consent together on all matters as one class and that neither the Exchange
Notes, the Private Exchange Notes nor the Notes will have the right to vote
or consent as a separate class on any matter.
3. Shelf Registration
(a) If (i) the Company is not permitted to consummate the Exchange
Offer because the Exchange Offer is not permitted by any applicable law or
applicable interpretation
<PAGE> 11
-10-
of the staff of the SEC or (ii) the Company has not consummated the Exchange
Offer within 210 days of the Issue Date or (iii) any holder of a Note notifies
the Company on or prior to the Exchange Date that (A) due to a change in law or
policy it is not entitled to participate in the Exchange Offer, (B) due to a
change in law or policy it may not resell the Exchange Notes acquired by it in
the Exchange Offer to the public without delivering a prospectus and the
Prospectus contained in the Exchange Registration Statement is not appropriate
or available for such resales by such holder or (C) it is a broker-dealer that
owns Notes (including the Initial Purchaser that holds Notes as part of an
unsold allotment from the original offering of the Notes) acquired directly
from an Issuer or an Affiliate of an Issuer or (iv) any holder of Private
Exchange Notes so requests within 120 days after the consummation of the
Private Exchange (each such event referred to in clauses (i) through (iv), a
"Shelf Filing Event"), the Issuers shall cause to be filed with the SEC
pursuant to Rule 415 a shelf registration statement (the "Shelf Registration
Statement") prior to the later of (x) 60 days after the Issue Date and (y) 30
days after the occurrence of such Shelf Filing Event, relating to all Transfer
Restricted Securities (the "Shelf Registration") the holders of which have
provided the information required pursuant to Section 3(b) hereof, and shall
use their best efforts to have the Shelf Registration Statement declared
effective by the SEC on or prior to the later of (i) 180 days after the Issue
Date and (ii) 90 days after the occurrence of such Shelf Filing Event. In such
circumstances, the Issuers shall use their best efforts to keep the Shelf
Registration Statement continuously effective under the Securities Act, until
(A) 24 months following the date on which the Shelf Registration Statement was
initially declared effective (subject to extension pursuant to the last
paragraph of Section 5 hereof) or (B) if sooner, the date immediately following
the date that all Transfer Restricted Securities covered by the Shelf
Registration Statement have been sold pursuant thereto (the "Effectiveness
Period"); provided that the Effectiveness Period shall be extended to the
extent required to permit dealers to comply with the applicable prospectus
delivery requirements of Rule 174 and as otherwise provided herein.
(b) No holder of Transfer Restricted Securities may include any of its
Transfer Restricted Securities in any Shelf Registration Statement pursuant
to this Agreement unless and until such holder furnishes to the Company in
writing, within 30 days after receipt of a request therefor,
<PAGE> 12
-11-
such information as the Company may reasonably request for use in connection
with any Shelf Registration Statement or Prospectus or preliminary
prospectus included therein. No holder of Transfer Restricted Securities
shall be entitled to Additional Interest pursuant to Section 4 hereof
unless and until such holder shall have provided all such reasonably
requested information. Each holder of Transfer Restricted Securities as to
which any Shelf Registration Statement is being effected agrees to furnish
promptly to the Company all information required to be disclosed in order
to make the information previously furnished to the Company by such holder
not materially misleading.
4. Additional Interest
(a) The parties hereto agree that the holders of Transfer Restricted
Securities will suffer damages if the Issuers fail to fulfill their
obligations pursuant to Section 2 or Section 3, as applicable, and that it
would not be feasible to ascertain the extent of such damages.
Accordingly, in the event that (i) the applicable Registration Statement is
not filed with the SEC on or prior to the date specified herein for such
filing, (ii) the applicable Registration Statement has not been declared
effective by the SEC on or prior to the date specified herein for such
effectiveness after such obligation arises, (iii) if the Exchange Offer is
required to be Consummated hereunder, the Company has not exchanged
Exchange Notes for all Notes validly tendered and not validly withdrawn in
accordance with the terms of the Exchange Offer by the Consummation Date or
(iv) the applicable Registration Statement is filed and declared effective but
shall thereafter cease to be effective without being succeeded immediately
by any additional Registration Statement covering the Notes, the Exchange Notes
or the Private Exchange Notes, as the case may be, which has been filed and
declared effective (each such event referred to in clauses (i) through (iv), a
"Registration Default"), then the interest rate on Transfer Restricted
Securities will increase ("Additional Interest"), with respect to the first
90-day period immediately following the occurrence of such Registration
Default, by 0.50% per annum and will increase by an additional 0.50% per annum
with respect to each subsequent 90-day period until such Registration Default
has been cured, up to a maximum amount of 2% per annum with respect to all
Registration Defaults. Following the cure of a Registration Default, the
accrual of Additional Interest with respect to such Registration Default will
cease and upon the
<PAGE> 13
-12-
cure of all Registration Defaults the interest rate will revert to the original
rate.
(b) The Company shall notify the Trustee and paying agent under the
Indenture (or the trustee and paying agent under such other indenture under
which the Transfer Restricted Securities are issued) immediately upon the
happening of each and every Registration Default. The Company shall pay
the Additional Interest due on the Transfer Restricted Securities by
depositing with the paying agent (which shall not be the Company for these
purposes) for the Transfer Restricted Securities, in trust, for the benefit
of the holders thereof, prior to l1:00 A.M. on the next interest payment
date specified by the Indenture (or such other indenture), sums sufficient
to pay the Additional Interest then due. The Additional Interest due shall
be payable on each interest payment date specified by the Indenture (or
such other indenture) to the record holder entitled to receive the interest
payment to be made on such date. Each obligation to pay Additional
Interest shall be deemed to accrue from and including the applicable
Registration Default.
(c) The parties hereto agree that the Additional Interest provided for
in this Section 4 constitutes a reasonable estimate of the damages that
will be suffered by holders of Transfer Restricted Securities by reason of
the happening of any Registration Default.
5. Registration Procedures
In connection with the Issuers' registration obligations hereunder, the
Issuers shall effect such registrations on the appropriate form available for
the sale of the Notes, the Exchange Notes or Private Exchange Notes, as
applicable, to (i) in the case of the Exchange Offer, permit the exchange of
Exchange Notes for Notes in the Exchange Offer and, if applicable, resales of
Exchange Notes by Participating Broker-Dealers and (ii) in the case of a Shelf
Registration, permit the sale of the applicable Transfer Restricted Securities
in accordance with the method or methods of disposition thereof specified by
the holders of such Transfer Restricted Securities, and pursuant thereto the
Issuers shall as expeditiously as possible:
(a) In the case of a Shelf Registration, a reasonable period of
time prior to the initial filing of a Shelf Registration Statement or
Prospectus and a reasonable period of time prior to the filing of any
amendment or supplement thereto (including any document
<PAGE> 14
-13-
that would be incorporated or deemed to be incorporated therein by
reference), furnish to the holders of the Transfer Restricted Securities
included in such Shelf Registration Statement, their Special Counsel and
the managing underwriters, if any, copies of all such documents proposed
to be filed, which documents (other than those incorporated or deemed to
be incorporated by reference) will be subject to the review of such
holders, their Special Counsel and such underwriters, if any, and cause
the officers and directors of the Issuers, counsel to the Issuers and
independent certified public accountants to the Issuers to respond to
such reasonable inquiries as shall be necessary, in the opinion of
respective counsel to such holders and such underwriters, to conduct a
reasonable investigation within the meaning of the Securities Act;
provided that the Issuers shall not be deemed to have kept a Shelf
Registration Statement effective during the applicable period if any of
them voluntarily takes or fails to take any reasonable action that
results in holders of the Transfer Restricted Securities covered thereby
not being able to sell such Transfer Restricted Securities pursuant to
Federal securities laws during that period (and the time period during
which such Shelf Registration Statement is required to remain effective
hereunder shall be extended by the number of days during which such
holders of Transfer Restricted Securities are not able to sell such
Transfer Restricted Securities). The Issuers shall not file any such
Shelf Registration Statement or related Prospectus or any amendments or
supplements thereto which the holders of a majority of the Transfer
Restricted Securities included in such Shelf Registration Statement shall
reasonably object on a timely basis;
(b) Prepare and file with the SEC such amendments, including
post-effective amendments, to each Registration Statement as may be
necessary to keep such Registration Statement continuously effective
for the applicable time period required hereunder; cause the related
Prospectus to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424; and comply
with the provisions of the Securities Act and the Exchange Act with
respect to the disposition of all securities covered by such
Registration Statement during such period in accordance with the
intended methods of disposition by the sellers thereof set forth in
such Registration
<PAGE> 15
-14-
Statement as so amended or in such Prospectus as so supplemented;
(c) Notify the holders of Transfer Restricted Securities to be
sold or, in the case of an Exchange Offer, tendered for, their
Special Counsel and the managing underwriters, if any, promptly, and (if
requested by any such person), confirm such notice in writing, (i)(A)
when a Prospectus or any Prospectus supplement or post-effective
amendment is proposed to be filed, and (B) with respect to a Registration
Statement or any post-effective amendment, when the same has become
effective, (ii) of any request by the SEC or any other Federal or state
governmental authority for amendments or supplements to a Registration
Statement or related Prospectus or for additional information, (iii) of
the issuance by the SEC, any state securities commission, any other
governmental agency or any court of any stop order, order or injunction
suspending or enjoining the use of a Prospectus or the effectiveness of a
Registration Statement or the initiation of any proceedings for that
purpose, (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from
qualification of any of the Notes, Exchange Notes or Private Exchange
Notes for sale in any jurisdiction, or the initiation or threatening of
any proceeding for such purpose, and (v) of the happening of any event or
information becoming known that makes any statement made in a
Registration Statement or related Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any material
respect or that requires the making of any changes in such Registration
Statement, Prospectus or documents so that it will not contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, not
misleading, and that in the case of a Prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(d) Use their best efforts to avoid the issuance of or, if
issued, obtain the withdrawal of any order enjoining or suspending
the use of a Prospectus or the effectiveness of a Registration Statement
or the lift-
<PAGE> 16
-15-
ing of any suspension of the qualification (or exemption from
qualification) of any of the Notes, Exchange Notes or Private Exchange
Notes for sale in any jurisdiction, at the earliest practicable moment;
(e) If a Shelf Registration Statement is filed pursuant to
Section 3 hereof and if requested by the managing underwriters, if
any, or the holders of a majority in aggregate principal amount of
the Transfer Restricted Securities being sold pursuant to such Shelf
Registration Statement, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment such information as the
managing underwriters, if any, and such holders reasonably believe
should be included therein, and (ii) make all required filings of
such Prospectus supplement or such post-effective amendment under the
Securities Act as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment; provided, however, that the
Issuers shall not be required to take any action pursuant to this
Section 5(e) that would, in the opinion of counsel for the Issuers,
violate applicable law;
(f) Upon written request to the Company, furnish to each holder
of Notes, Exchange Notes or Private Exchange Notes to be exchanged or
sold pursuant to a Registration Statement, their Special Counsel and
each managing underwriter, if any, without charge, at least one
conformed copy of such Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and
all exhibits to the extent requested (including those previously
furnished or incorporated by reference) as soon as practicable after
the filing of such documents with the SEC;
(g) Deliver to each holder of Notes, Exchange Notes or Private
Exchange Notes to be exchanged or sold pursuant to a Registration
Statement, their Special Counsel, and the underwriters, if any, without
charge, as many copies of the Prospectus (including each form of
prospectus) and each amendment or supplement thereto as such persons
reasonably request; and the Issuers hereby consent to the use of such
Prospectus and each amendment or supplement thereto by each of the
selling holders of Transfer Restricted Securities and the un-
<PAGE> 17
-16-
derwriters, if any, in connection with the offering and sale of the
Transfer Restricted Securities covered by such Prospectus and any
amendment or supplement thereto;
(h) Prior to any public offering of Notes, Exchange Notes or
Private Exchange Notes, use their best efforts to register or qualify
or cooperate with the holders of Notes, Exchange Notes or Private
Exchange Notes to be sold or tendered for, the underwriters, if any,
and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification)
of such Notes, Exchange Notes or Private Exchange Notes for offer and
sale under the securities or Blue Sky laws of such jurisdictions
within the United States as any such holder or underwriter reasonably
requests in writing; keep each such registration or qualification (or
exemption therefrom) effective during the period such Registration
Statement is required to be kept effective hereunder and do any and
all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Notes, Exchange Notes or
Private Exchange Notes covered by the applicable Registration
Statement; provided, however, that the Issuers shall not be required
to (i) qualify generally to do business in any jurisdiction where
they are not then so qualified or (ii) take any action which would
subject them to general service of process or to taxation in any
jurisdiction where they are not so subject;
(i) In connection with any sale or transfer of Transfer
Restricted Securities that will result in such securities no longer
being Transfer Restricted Securities, cooperate with the holders
thereof and the managing underwriters, if any, to facilitate the
timely preparation and delivery of certificates representing Transfer
Restricted Securities to be sold, which certificates shall not bear
any restrictive legends and shall be in a form eligible for deposit
with The Depository Trust Company and to enable such Transfer
Restricted Securities to be in such denominations and registered in
such names as the managing underwriters, if any, or such holders may
request at least two Business Days prior to any sale of Transfer
Restricted Securities;
<PAGE> 18
-17-
(j) Upon the occurrence of any event contemplated by Section
5(c)(v), as promptly as practicable, prepare a supplement or
amendment, including, if appropriate, a post-effective amendment, to
each Registration Statement or a supplement to the related Prospectus
or any document incorporated or deemed to be incorporated therein by
reference, and file any other required document so that, as
thereafter delivered, such Prospectus will not contain an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading;
(k) Prior to the effective date of the Exchange Registration
Statement, to provide a CUSIP number for the Exchange Notes (and
Private Exchange Notes if applicable);
(l) If a Shelf Registration Statement is filed pursuant to
Section 3 hereof, enter into such agreements (including an
underwriting agreement in form, scope and substance as is customary
in underwritten offerings) and take all such other reasonable actions
in connection therewith (including those reasonably requested by the
managing underwriters, if any, or the holders of a majority in aggregate
principal amount of the Transfer Restricted Securities being sold) in
order to expedite or facilitate the disposition of such Transfer
Restricted Securities, and, whether or not an underwriting agreement is
entered into and whether or not the registration is an underwritten
registration, (i) make such representations and warranties to the holders
of such Transfer Restricted Securities and the underwriters, if any, with
respect to the business of the Company and its subsidiaries (including
with respect to businesses or assets acquired or to be acquired by any of
them), and the Shelf Registration Statement, Prospectus and documents, if
any, incorporated or deemed to be incorporated by reference therein, in
each case, in form, substance and scope as are customarily made by
issuers to underwriters in underwritten offerings, and confirm the same
if and when requested; (ii) obtain opinions of counsel to the Issuers and
updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing underwriters,
if any, and Special Counsel to the holders of the Transfer Restricted
<PAGE> 19
-18-
Securities being sold), addressed to each selling holder of Transfer
Restricted Securities and each of the underwriters, if any, covering the
matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such
Special Counsel and underwriters; (iii) use their best efforts to obtain
customary "cold comfort" letters and updates thereof from the independent
certified public accountants of the Company (and, if necessary, any other
independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements
and financial data is, or is required to be, included in the Shelf
Registration Statement), addressed (where reasonably possible) to each
selling holder of Transfer Restricted Securities and each of the
underwriters, if any, such letters to be in custom ary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings; (iv) if an underwriting agreement
is entered into, the same shall contain indemnification provisions and
procedures no less favorable to the selling holders and the underwriters,
if any, than those set forth in Section 7 hereof (or such other
provisions and procedures acceptable to holders of a majority in
aggregate principal amount of Transfer Restricted Securities covered by
such Shelf Registration Statement and the managing underwriters, if
any); and (v) deliver such documents and certificates as may be
reasonably requested by the holders of a majority in aggregate principal
amount of the Transfer Restricted Securities being sold, their Special
Counsel and the managing underwriters, if any, to evidence the continued
validity of the representations and warranties made pursuant to clause
(i) above and to evidence compliance with any customary conditions
contained in the underwriting agreement or other agreement entered into
by the Issuers;
(m) In the case of a Shelf Registration, make available for
inspection by a representative of the holders of Transfer Restricted
Securities being sold, any underwriter participating in any such
disposition of Transfer Restricted Securities, and any attorney,
consultant or accountant retained by such selling holders or
underwriter, at the offices where normally kept, during reasonable
business hours, all financial and other records, pertinent corporate
documents and prop-
<PAGE> 20
-19-
erties of the Company and its subsidiaries (including with respect to
businesses and assets acquired or to be acquired to the extent that such
information is available to the Company), and cause the officers,
directors, agents and employees of the Company and its subsidiaries
(including with respect to businesses and assets acquired or to be
acquired to the extent that such information is available to the Company)
to supply all information in each case reasonably requested by any such
representative, underwriter, attorney, consultant or accountant in
connection with such Shelf Registration; provided, however, that such
persons shall first agree in writing with the Company that any
information that is reasonably and in good faith designated by the
Company in writing as confidential at the time of delivery of such
information shall be kept confidential by such persons, unless (i)
disclosure of such information is required by court or administrative
order or is necessary to respond to inquiries of regulatory authorities,
(ii) disclosure of such information is required by law (including any
disclosure requirements pursuant to Federal securities laws in connection
with the filing of the Shelf Registration Statement or the use of any
Prospectus), (iii) such information becomes generally available to the
public other than as a result of a disclosure or failure to safeguard
such information by such person or (iv) such information becomes
available to such person from a source other than the Company and its
subsidiaries and such source is not bound by a confidentiality agreement;
and provided, further, that the foregoing inspection and information
gathering shall be coordinated by one counsel designated by and on behalf
of such other persons;
(n) Provide an indenture trustee for the Notes and/or the
Exchange Notes and Private Exchange Notes, as the case may be, and
cause an indenture to be qualified under the TIA not later than the
effective date of the first Registration Statement relating to the
Notes and/or the Exchange Notes and Private Exchange Notes, as the
case may be; and if such indenture shall be the Indenture, in
connection therewith, cooperate with the Trustee and the holders of
the Notes and/or the Exchange Notes and Private Exchange Notes, to
effect such changes to the Indenture as may be required for the
Indenture to be so qualified in accordance with the terms of the TIA;
and execute, and use its reasonable efforts to cause the Trustee to
execute, all customary docu-
<PAGE> 21
-20-
ments as may be required to effect such changes, and all other forms
and documents required to be filed with the SEC to enable the Indenture
to be so qualified in a timely manner;
(o) Comply with all applicable rules and regulations of the SEC
and make generally available to their securityholders earning
statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158, no later than 45 days after the end of
any 12-month period (or 90 days after the end of any 12-month period
if such period is a fiscal year) (i) commencing at the end of any
fiscal quarter in which Transfer Restricted Securities are sold to
underwriters in a firm commitment or reasonable efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter after the
effective date of a Registration Statement, which statement shall
cover said period, consistent with the requirements of Rule 158; and
(p) Cooperate with each seller of Transfer Restricted Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Transfer Restricted
Securities and their respective counsel in connection with any
filings required to be made with the National Association of
Securities Dealers, Inc.
(q) Use their best efforts to cause the Exchange Notes, if
issued, to be listed on the New York Stock Exchange on or prior to
the consummation of the Exchange Offer.
The Issuers may require a holder of Transfer Restricted Securities
to be included in a Registration Statement to furnish to the Issuers such
information regarding the distribution of such Transfer Restricted Securities
as is required by law to be disclosed in such Registration Statement and the
Issuers may exclude from such Registration Statement the Transfer Restricted
Securities of any holder who unreasonably fails to furnish such information
within a reasonable time after receiving such request.
If any such Registration Statement refers to any holder by name or
otherwise as the holder of any securities of an Issuer, then such holder shall
have the right to require (i)
<PAGE> 22
-21-
the insertion therein of language, in form and substance reasonably
satisfactory to such holder, to the effect that the holding by such holder of
such securities is not to be construed as a recommendation by such holder of
the investment quality of the Issuers' securities covered thereby and that such
holding does not imply that such holder will assist in meeting any future
financial requirements of the Issuers, or (ii) in the event that such reference
to such holder by name or otherwise is not required by the Securities Act, the
deletion of the reference to such holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
In the case of a Shelf Registration pursuant to Section 3 hereof, each
holder of Transfer Restricted Securities agrees by acquisition of such Transfer
Restricted Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 5(c)(ii), 5(c)(iii),
5(c)(iv) or 5(c)(v) hereof, such holder will forthwith discontinue disposition
of such Transfer Restricted Securities covered by such Registration Statement
or Prospectus until such holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 5(j) hereof, or until it is advised
in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus. If the Company shall give any
such notice, the Effectiveness Period shall be extended by the number of days
during such period from and including the date of the giving of such notice to
and including the date when each holder of Transfer Restricted Securities
covered by such Registration Statement shall have received (x) the copies of
the supplemented or amended Prospectus contemplated by Section 5(j) hereof or
(y) the Advice, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus.
6. Registration Expenses
All fees and expenses incident to the performance of or compliance with
this Agreement by the Issuers shall be borne by the Issuers whether or not any
Registration Statement is filed or becomes effective and whether or not any
Notes, Exchange Notes or Private Exchange Notes are issued or sold pursuant to
any Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without
<PAGE> 23
-22-
limitation, (i) all registration and filing fees (including, without
limitation, fees and expenses (A) with respect to filings required to be made
with the National Association of Securities Dealers, Inc. and (B) in compliance
with securities or Blue Sky laws), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Notes, Exchange Notes and
Private Exchange Notes in a form eligible for deposit with The Depository Trust
Company and of printing Prospectuses), (iii) reasonable fees and disbursements
of counsel for the Issuers and the Special Counsel, (iv) fees and disbursements
of all independent certified public accountants referred to in Section 2(e) and
Section 5(l)(iii) hereof (including, without limitation, the expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), (v) if required, the reasonable fees and expenses of any
"qualified independent underwriter" and its counsel, and (vi) fees and expenses
of all other persons retained by the Issuers. In addition, the Issuers shall
pay their internal expenses (including, without limitation, all salaries and
expenses of their respective officers and employees performing legal or
accounting duties), the expense of any annual audit, and the fees and expenses
incurred in connection with the listing of the Notes, Exchange Notes or Private
Exchange Notes to be registered on any securities exchange. Notwithstanding
the foregoing or anything in this Agreement to the contrary, each holder of
Transfer Restricted Securities shall pay all underwriting discounts and
commissions of any underwriters with respect to any Notes, Exchange Notes or
Private Exchange Notes sold by it.
7. Indemnification
(a) The Issuers agree, jointly and severally, to indemnify and hold
harmless (i) the Initial Purchaser, each holder of Notes, Exchange Notes
and Private Exchange Notes and each Participating Broker-Dealer, (ii) each
person, if any, who controls (within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act) any of the foregoing (any of the persons
referred to in this clause (ii) being hereinafter referred to as a
"controlling person"), and (iii) the respective officers, directors,
partners, employees, representatives and agents of the Initial Purchasers,
each holder of Notes, Exchange Notes and Private Exchange Notes, each
Participating Broker-Dealer and any controlling person (any person referred
to in clause (i), (ii) or (iii) may hereinafter be referred to as an
"Indemnified Person"), from and against any and all losses, claims,
damages, liabilities and judgments arising out of or relating to any
<PAGE> 24
-23-
untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement, Prospectus or preliminary prospectus or in
any amendment or supplement thereto, or arising out of or relating to any
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein (in the case
of any Prospectus or preliminary prospectus or supplement thereto, in light
of the circumstances under which they were made) not misleading, except
insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement
or omission based upon information relating to any Indemnified Person
furnished in writing to the Issuers by or on behalf of such Indemnified
Person expressly for use therein; provided that the foregoing indemnity
with respect to any preliminary prospectus shall not inure to the benefit
of any Indemnified Person from whom the person asserting such losses,
claims, damages, liabilities and judgments purchased securities if such untrue
statement or omission or alleged untrue statement or omission made in such
preliminary prospectus is eliminated or remedied in the Prospectus and a copy
of the Prospectus shall not have been furnished to such person in a timely
manner due to the wrongful action or wrongful inaction of such Indemnified
Person.
(b) In case any action shall be brought against any Indemnified
Person, based upon any Registration Statement or any such Prospectus or
preliminary prospectus or any amendment or supplement thereto and with
respect to which indemnity may be sought against the Issuers hereunder,
such Indemnified Person shall promptly notify the Issuers in writing and
the Company shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Person and payment of
all fees and expenses. Any Indemnified Person shall have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Person, unless (i) the employment of such counsel shall
have been specifically authorized in writing by the Issuers, (ii) the
Company shall have failed to assume the defense and employ counsel or pay
all such fees and expenses or (iii) the named parties to any such action
(including any impleaded parties) include both such Indemnified Person and
an Issuer and such Indemnified Person shall have been advised by counsel
that there may be one or more legal defenses available to it which are
different from or additional to those available to
<PAGE> 25
-24-
any such Issuer (in which case the Company shall not have the right to assume
the defense of such action on behalf of such Indemnified Person, it being
understood, however, that the Issuers shall not, in connection with any one
such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm
of attorneys (in addition to any local counsel) for all such Indemnified
Persons, which firm shall be designated in writing by such Indemnified Persons,
and that all such reasonable fees and expenses shall be reimbursed as they are
incurred). The Issuers shall not be liable for any settlement of any such
action effected without their written consent but if settled with the written
consent of the Issuers, the Issuers agree, jointly and severally, to indemnify
and hold harmless each Indemnified Person from and against any loss or
liability by reason of such settlement. No Issuer shall, without the prior
written consent of each Indemnified Person, effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Person is
a party and indemnity could have been sought hereunder by such Indemnified
Person, unless such settlement includes an unconditional release of such
Indemnified Person from all liability on claims that are the subject matter of
such proceeding.
(c) In connection with any Registration Statement pursuant to which a
holder of Transfer Restricted Securities offers or sells Transfer
Restricted Securities, such holder agrees, severally and not jointly, to
indemnify and hold harmless the Issuers, their respective directors and
officers and any person controlling an Issuer within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, to the same
extent as the foregoing indemnity from the Issuers to each Indemnified
Person but only with respect to information relating to such holder
furnished in writing by or on behalf of such holder expressly for use in
such Registration Statement. In any such case in which any action shall be
brought against an Issuer, any director or officer of an Issuer or any
person controlling an Issuer based on such Registration Statement and in
respect of which indemnity may be sought against a holder of Transfer
Restricted Securities, such holder shall have the rights and duties given
to the Issuers (except that if an Issuer shall have assumed the defense
thereof, such holder shall not be required to do so, but may employ
separate counsel therein and participate in the defense thereof but the
fees and expenses of such counsel shall be at the expense of such
<PAGE> 26
-25-
holder), and the Issuers, their respective directors and officers and any person
controlling an Issuer shall have the rights and duties given to the Indemnified
Persons by Section 7(b) hereof.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to herein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and judgments (i) in
such proportion as is appropriate to reflect the relative benefits received
by each indemnifying party on the one hand and the indemnified party on the
other hand from the offering of the Notes, the Exchange Notes or the
Private Exchange Notes, as the case may be (it being expressly understood
and agreed that the relative benefits received by the Issuers from the
offering of the Notes, Exchange Notes or Private Exchange Notes, as the
case may be, shall be the amount of the net proceeds received by the
Company from the sale of the Notes to the Initial Purchaser), or (ii) if
the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of
each indemnifying party on the one hand and the indemnified party on the
other hand in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or judgments, as well as any
other relevant equitable considerations. The relative fault of the each
indemnifying party on the one hand the indemnified party on the other hand
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by an indemnifying party or
such indemnified party and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission.
The Issuers and the Initial Purchaser agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the Indemnified Person were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, dam-
<PAGE> 27
-26-
ages, liabilities or judgments referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, no Indemnified Person shall
be required to contribute any amount in excess of the amount by which the net
profits received by it in connection with the sale of the Notes, Exchange Notes
or Private Exchange Notes contemplated by this Agreement exceeds the amount of
any damages which such Indemnified Person has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Indemnified Person's obligations to contribute pursuant to this Section 7(d)
are several in proportion to the respective amount of Notes, Exchange Notes or
Private Exchange Notes included in any such Registration Statement by each
Indemnified Person and not joint.
8. Rules 144 and 144A
Each of Issuers shall use its best efforts to file the reports required to
be filed by it under the Securities Act and the Exchange Act in a timely manner
and, if at any time it is not required to file such reports but in the past had
been required to or did file such reports, it will, upon the request of any
holder of Transfer Restricted Securities, make available other information as
required by, and so long as necessary to permit, sales of its Transfer
Restricted Securities pursuant to Rule 144A. Notwithstanding the foregoing,
nothing in this Section 8 shall be deemed to require an Issuer to register any
of its securities pursuant to the Exchange Act.
9. Underwritten Registrations
If any of the Transfer Restricted Securities covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will administer the offering
will be selected by the holders of a majority in aggregate principal amount of
such Transfer Restricted Securities included in such offering, subject to the
consent of the Company (which will not be unreasonably withheld or delayed).
<PAGE> 28
-27-
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such Transfer Restricted Securities on
the basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
10. Miscellaneous
(a) Remedies. In the event of a breach by an Issuer or by a holder of
Notes, Exchange Notes or Private Exchange Notes of any of its obligations
under this Agreement, each holder of Notes, Exchange Notes or Private
Exchange Notes and each Issuer, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be entitled
to specific performance of its rights under this Agreement. Subject to
Section 4 hereof, the Issuers and each holder of Notes, Exchange Notes and
Private Exchange Notes agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach of any of the
provisions of this Agreement and each hereby further agrees that, in the
event of any action for specific performance in respect of such breach, it
shall waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Issuers will not enter into any
agreement with respect to their securities that is inconsistent with the
rights granted to the holders of Notes, Exchange Notes and Private Exchange
Notes and Indemnified Persons in this Agreement or otherwise conflicts with
the provisions hereof. Without the written consent of the holders of a
majority in aggregate principal amount of the outstanding Transfer
Restricted Securities, the Issuers shall not grant to any person any rights
which conflict with or are inconsistent with the provisions of this
Agreement.
(c) No Piggyback on Registrations. The Issuers shall not grant to any
of their securityholders (other than the holders of Transfer Restricted
Securities in such capacity) the right to include any of their securities
in any Registration Statement other than Transfer Restricted Securities.
(d) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence,
<PAGE> 29
-28-
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, otherwise than with the
prior written consent of the holders of not less than a majority of the then
outstanding aggregate principal amount of Transfer Restricted Securities;
provided, however, that, for the purposes of this Agreement, Transfer
Restricted Securities that are owned, directly or indirectly, by the Issuers or
any of their Affiliates are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of holders of
Transfer Restricted Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other holders of Transfer Restricted Securities may be given by
holders of a majority in aggregate principal amount of the Transfer Restricted
Securities being sold by such holders pursuant to such Registration Statement;
provided, however, that the provisions of this sentence may not be amended,
modified or supplemented except in accordance with the provisions of the
immediately preceding sentence. Notwithstanding the foregoing, no amendment,
modification, supplement, waiver or consent with respect to Section 7 shall be
made or given otherwise than with the prior written consent of each Indemnified
Person affected thereby.
(e) Notices. All notices and other communications provided for herein
shall be made in writing by hand-delivery, next-day air courier, certified
first-class mail, return receipt requested, telex or telecopier:
(i) if to the Issuers, as provided in the Purchase
Agreement,
(ii) if to the Initial Purchaser, as provided in the
Purchase Agreement, or
(iii) if to any other person who is then the registered
holder of Notes, Exchange Notes or Private Exchange Notes, to the
address of such holder as it appears in the register therefor of
the Company.
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; one business day after being timely delivered to a
next-day air courier; five business days after being deposited in the mail,
postage
<PAGE> 30
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prepaid, if mailed; when answered back, if telexed; and when receipt is
acknowledged by the recipient's telecopier machine, if telecopied.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each holder of Notes, Exchange
Notes and Private Exchange Notes. The Issuers may not assign any of their
rights or obligations hereunder without the prior written consent of each
holder of Transfer Restricted Securities and each Indemnified Person.
Notwithstanding the foregoing, no successor or assignee of an Issuer shall
have any of the rights granted under this Agreement until such person shall
acknowledge its rights and obligations hereunder by a signed written statement
of such person's acceptance of such rights and obligations.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and, all of which
taken together shall constitute one and the same Agreement.
(h) Governing Law; Submission to Jurisdiction. THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF
NEW YORK. THE ISSUERS HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY
NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY
OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, AND EACH IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE
AFORESAID COURTS.
(i) Severability. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder
of the terms, provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their reasonable efforts
to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term,
<PAGE> 31
-30-
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be hereafter declared invalid, illegal, void or unenforceable.
(j) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
All references made in this Agreement to "Section" and "paragraph" refer to
such Section or paragraph of this Agreement, unless expressly stated
otherwise.
<PAGE> 32
-31-
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first written above.
WALBRO CORPORATION
By: /s/ Daniel L. Hittler
-------------------------------
Name: Daniel L. Hittler
Title: Secretary
WALBRO AUTOMOTIVE CORPORATION
By: /s/ Daniel L. Hittler
-------------------------------
Name: Daniel L. Hittler
Title: Secretary
WALBRO ENGINE MANAGEMENT
CORPORATION
By: /s/ Daniel L. Hittler
-------------------------------
Name: Daniel L. Hittler
Title: Secretary
SHARON MANUFACTURING COMPANY
By: /s/ Daniel L. Hittler
-------------------------------
Name: Daniel L. Hittler
Title: Secretary
WHITEHEAD ENGINEERED PRODUCTS,
By: /s/ Daniel L. Hittler
-------------------------------
Name: Daniel L. Hittler
Title: Secretary
<PAGE> 33
-32-
SALOMON BROTHERS INC
By: /s/ Dominic Lepore
----------------------------
Name: Dominic Lepore
Title: Vice President
<PAGE> 1
EXHIBIT 4.21
EXECUTION COPY
================================================================================
SECOND AMENDMENT TO
WALBRO CORPORATION
CREDIT AGREEMENT
COMERICA BANK, as AGENT
HARRIS BANK, as CO-AGENT
================================================================================
<PAGE> 2
SECOND AMENDMENT TO WALBRO CREDIT AGREEMENT
THIS SECOND AMENDMENT ("Second Amendment") is made as of this 17th day of
March, 1997 by and among Walbro Corporation, a Delaware corporation ("Company"),
Comerica Bank and the other banks signatory hereto (individually, a "Bank" and
collectively, the "Banks") and Comerica Bank, as agent for the Banks (in such
capacity, "Agent").
RECITALS:
A. Company, Agent and certain of the Banks entered into that certain
Amended and Restated Walbro Corporation $135,000,000 Credit Agreement dated as
of September 22, 1995 (as amended by that First Amendment to Walbro Credit
Agreement dated as of March 8, 1996, the "Credit Agreement") under which such
Banks renewed and extended (or committed to extend) credit to the Company and
the Permitted Borrowers, as set forth therein.
B. At the Company's request, Agent and the Banks have agreed to make
certain amendments to the Credit Agreement to make certain changes as
hereinafter set forth, but only on the terms and conditions set forth in this
Second Amendment .
NOW THEREFORE, Company, Agent and the Banks agree:
1. Section 1 of the Credit Agreement is amended as follows:
(a) Section 1.4 (the definition of "Activation Fee") is hereby deleted and
replaced with the word "[Reserved]."
(b) Section 1.35A is added to the Credit Agreement, immediately following
Section 1.35, as follows:
"1.35B `Convertible Debentures' shall mean the eight percent (8%)
convertible subordinated debentures due 2017, issued by the Company to
the Walbro Capital Trust, all on the terms and conditions set forth in
the Indenture dated as of February 3, 1997 between the Company and
Bankers Trust Company, as trustee, as amended (subject to the terms
hereof) from time to time."
(c) Section 1.35C is added to the Credit Agreement, immediately following
Section 1.35A, as follows:
"1.35B `De Minimis Redemptions' shall mean redemptions from and
after the date of this Agreement in an aggregate amount not to exceed
One Million Dollars ($1,000,000) principal amount of the Convertible
Debentures (and the Preferred Securities), plus accrued interest upon
the principal amount so redeemed (determined in accordance with the
indenture, declaration of trust and other documents governing the
Convertible Debentures and the Preferred
<PAGE> 3
Securities), effected from and after the date hereof in connection
with or necessary to cause a Conversion."
(d) Section 1.35A is added to the Credit Agreement, immediately following
Section 1.39, as follows:
"1.35A `Conversion' shall mean the conversion (subject to the
terms hereof) of the Convertible Debentures (and the Preferred
Securities), subject only to De Minimis Redemptions, into common stock
of the Company pursuant to the terms of the indenture, declarations of
trust and other documents governing the Convertible Debentures and the
Preferred Securities."
(e) Sections 1.41A and 1.41B are added to the Credit Agreement,
immediately following Section 1.41, as follows:
"1.41A `DEZ Guaranty' shall mean any guaranty or other support
provided by the Company or any of its Subsidiaries, for the benefit of
the DEZ Joint Venture, covering Debt in an aggregate principal amount
not to exceed $10,000,000 at any time outstanding."
"1.41B `DEZ Joint Venture' shall mean a Joint Venture
doing business in the Detroit Empowerment Zone."
(f) Section 1.67 (the definition of "Fees") is amended to replace the
words "Revolving Credit Commitment Fee" (beginning in the second line
thereof) with the words "Revolving Credit Facility Fee" and to delete,
in the second line thereof, the words "the Activation Fee,".
(g) Section 1.87 (the definition of "Intercompany Loan") is amended and
restated in its entirety, as follows:
"1.87 `Intercompany Loan' shall mean any loan (or advance in the
nature of a loan) by the Company or any 100% Subsidiary to another
100% Subsidiary; provided, however that each such loan or advance is
subordinated in right of payment and priority to the Indebtedness on
terms and conditions satisfactory to Agent and the Majority Banks; and
provided further however that a 100% Subsidiary may receive loans (or
advances in the nature of loans) from the Company or another 100%
Subsidiary up to an aggregate amount of $250,000 at any time
outstanding which shall not be required to be subordinated according
to the terms hereof, so long as the aggregate amount of all such
unsubordinated loans or advances to 100% Subsidiaries does not exceed
$1,000,000 at any time outstanding.
(h) Section 1.95A is added to the Credit Agreement, immediately following
Section 1.95, as follows:
"1.95A `Joint Venture Guaranties' shall mean, any guaranties or
other support provided by the Company or any
2
<PAGE> 4
of its Subsidiaries, for the benefit of any Joint Venture. For the
purposes of this definition, Joint Venture Guaranties shall not
include the DEZ Guaranty."
(i) Section 1.115A is added to the Credit Agreement, immediately following
Section 1.115, as follows:
"1.115A `Operating Lease Expense' shall mean, with respect to any
Person or any period, the aggregate rental obligations of such Person
payable in respect of such period which do not constitute Capitalized
Lease Obligations, net of income from subleases related thereto, but
including taxes, insurance, maintenance and similar costs incurred
under said leases."
(j) Section 1.128A is added to the Credit Agreement, immediately following
Section 1.128, as follows:
"1.128A `Preferred Securities' shall mean the eight percent (8%)
convertible trust preferred securities issued and sold by Walbro
Capital Trust pursuant to the Amended and Restated Declaration of
Trust of Walbro Capital Trust dated as of February 3, 1997, as amended
(subject to the terms hereof) from time to time."
(k) Section 1.141 (the definition of "Revolving Credit") is amended to
replace the words "Revolving Credit Maximum Amount" (beginning in the
fourth line thereof) with the words "Revolving Credit Aggregate
Commitment".
(l) Section 1.143 (the definition of "Revolving Credit Commitment Fee") is
deleted and replaced in its entirety by the following:
"1.143 `Revolving Credit Facility Fee' shall mean the facility
fee payable to Agent for distribution to the Banks pursuant to Section
2.13 hereof."
(m) Sections 1.144 (the definition of "Revolving Credit Designated Unused
Portion") and 1.146 (the definition of "Revolving Credit Maximum
Amount") are deleted in their entirety and replaced in each case with
the word "[Reserved]".
(n) Section 1.145 (the definition of "Revolving Credit Maturity Date") is
amended to replace the words "Revolving Credit Maximum Amount" (in the
fourth line thereof) with the words "Revolving Credit Aggregate
Commitment".
(o) Section 1.157 (the definition of "Subordinated Debt") is amended and
restated in its entirety, as follows:
"1.157 `Subordinated Debt' shall mean the Preferred Securities
and the Convertible Debentures and any other unsecured Debt which is
subordinated to the prior payment
3
<PAGE> 5
and discharge in full of the Indebtedness, on written terms and
conditions approved by and acceptable to each of the Banks, in their
sole discretion."
(p) Section 1.165 (the definition of "Term Loan Funding Period") is
amended and restated in its entirety to read as follows:
"1.165 `Term Loan Funding Period' shall mean a period
which terminated on March 17, 1997."
(q) Sections 1.182A and 1.182B are added to the Credit Agreement,
immediately following Section 1.182, as follows:
"1.182A `Walbro Capital Trust' shall mean Walbro Capital Trust, a
statutory business trust formed under the laws of the State of
Delaware."
"1.182B `Walbro Capital Trust Guaranty' shall mean the guaranty
by the Company of the payment of distributions out of monies held by
Walbro Capital Trust and of payments on the liquidation of Walbro
Capital Trust or the redemption of the Preferred Securities, all or
terms and conditions set forth in the indenture, the declaration of
trust and the other documents governing the Convertible Debentures and
the Preferred Securities."
2. Section 2 of the Credit Agreement is amended as follows:
(a) Section 2.5(c)(iv) (setting minimum amount of Swing Line Advances) is
amended to change the reference to "Five Hundred Thousand Dollars
($500,000)" wherever it appears therein to "Three Hundred Thousand
Dollars ($300,000)".
(b) Section 2.13 is amended and restated in its entirety, as follows:
"2.13 Revolving Credit Facility Fee. (a) From the date on which
the Second Amendment to this Agreement becomes effective to the
Revolving Credit Maturity Date, the Company shall pay to the Agent,
for distribution to the Banks pro rata, a Revolving Credit Facility
Fee in Dollars equal to the product of the Applicable Fee Percentage
per annum, times the Revolving Credit Aggregate Commitment then in
effect (whether used or unused), calculated on a daily basis. The
Revolving Credit Facility Fee shall be payable quarterly in arrears
commencing April 1, 1997, and on the first day of each calendar
quarter thereafter and at the Revolving Credit Maturity Date, and
shall be computed on the basis of a year of three hundred sixty (360)
days and assessed for the actual number of days elapsed, giving
immediate effect to any changes in the Applicable Fee Percentage.
Whenever any payment of the Revolving Credit Facility Fee shall be due
on a day which is not a Business Day, the date for payment thereof
shall be extended to the
4
<PAGE> 6
next Business Day. Upon receipt of such payment, Agent shall make
prompt payment to each Bank of its share of the Revolving Credit
Facility Fee based upon its respective Percentage. It is expressly
understood that the Revolving Credit Facility Fee shall not be
refundable under any circumstances.
"(b) The required payment of the Revolving Credit Facility Fee due
under subparagraph (a) of this Section 2.13 on April 1, 1997 shall be
accompanied by payment in the amount of the Revolving Credit
Commitment Fee in effect under this Agreement prior to the date on
which the Second Amendment becomes effective (accrued to such date),
for distribution to the Banks pro rata based on the Percentages in
effect prior to the date on which the Second Amendment to this
Agreement becomes effective."
(c) Section 2.15 (Optional Reduction or Termination of Revolving Credit
Maximum Amount) is amended as follows:
i) to change the reference to "Revolving Credit Maximum
Amount" wherever it appears therein (including the heading)
to "Revolving Credit Aggregate Commitment";
ii) to delete the proviso in the first two lines of said Section
(beginning with the words "Provided that" and ending with the words
"zero (0), the", such that Section 2.15 shall begin with the words
"Company may"; and
iii) to change the reference to "Revolving Credit Commitment Fee" (in
the thirteenth line thereof) to "Revolving Credit Facility Fee".
(d) Sections 2.16 and 2.17 are deleted in their entirety and, in each
case, replaced by the word "[Reserved]".
3. Section 8 of the Credit Agreement shall be amended as follows:
(a) Sections 8.3(b), 8.3(c), and 8.3(d) (reporting requirements) are each
amended and restated in their entirety, as follows:
"(b) as soon as available, and in any event within one hundred
twenty (120) days after and as of the end of each of Company's fiscal
years, (i) a detailed Consolidated audit report of Company certified
to by independent certified public accountants satisfactory to Banks,
together with an unaudited Consolidating report of Company and its
Subsidiaries (or, in lieu of such Consolidating report, other
financial reports as to the financial condition, on an individual
basis, of each of the Permitted Borrowers and Guarantors, in form
reasonably acceptable to Agent and the Majority Banks) certified by an
authorized officer of Company as to consistency (with prior financial
5
<PAGE> 7
reports and accounting periods), accuracy and fairness of
presentation; (ii) a Covenant Compliance Report; and (iii) copies of
all reports and management letters prepared with respect to the
Company or any of its Subsidiaries by any independent certified public
accountants in connection with any annual, interim or other audit or
review of the books of the Company or its Subsidiaries, irrespective
of the party requesting such an audit or review;" and
"(c) as soon as available, and in any event within sixty (60)
days after and as of the end of each quarter, excluding the last
quarter of each fiscal year, (i) a Consolidated financial report
consisting of a balance sheet, income statement and statement of cash
flows of Company and its Subsidiaries and a Consolidating financial
report covering such matters as to the Company and its Significant
Subsidiaries, certified in each case by an authorized officer of
Company as to consistency (with prior financial reports and accounting
periods), accuracy and fairness of presentation, and (ii) a Covenant
Compliance Report;" and
"(d) as soon as available, and in any event within thirty (30)
days after the end of each calendar month, excluding those months
ending on the last day of each fiscal quarter, (i) a Consolidated
financial report consisting of a balance sheet, income statement,
statement of cash flows and statement of shareholder's equity of
Company and its Subsidiaries and a Consolidating financial report
covering such matters as to the Company and its Significant
Subsidiaries and (ii) a Capital Expenditures report in connection with
each of the Company's Capital Expenditures (or group or series of
related Capital Expenditures) in excess of $50,000, each such report
to include the proposed budget for such Capital Expenditures, actual
expenditures related thereto, and the budget to completion, in each
case certified by an authorized officer of Company as to consistency
(with prior financial reports and accounting periods), accuracy and
fairness of presentation;"
(b) Section 8.5 (Funded Debt Ratio) is amended and restated in its
entirety, as follows:
"8.5 Funded Debt Ratio. On a Consolidated basis, have
and cause its Subsidiaries to have, as of the end of each
fiscal quarter, a Funded Debt Ratio which will at no time
exceed:
(a) from December 31, 1996 to March 30, 1997, 5.20 to 1.0;
(b) from March 31, 1997 to September 29, 1997, 4.65 to
1.0;
6
<PAGE> 8
\
(c) from September 30, 1997 to December 30, 1997, 4.50 to
1.0;
(d) from December 31, 1997 to March 30, 1998, 3.95 to 1.0;
(e) from March 31, 1998 to June 29, 1998, 3.85 to 1.0;
(f) from June 30, 1998 to September 29, 1998, 3.75 to 1.0;
(g) from September 30, 1998 to December 30, 1998, 3.65 to
1.0;
(h) from December 31, 1998 to December 30, 1999, 3.0 to
1.0; and
(i) from and after December 31, 1999, 2.75 to 1.0.
(c) Section 8.6 (Interest Coverage Ratio) is amended and restated in its
entirety, as follows:
"8.6 Maintain Interest Coverage Ratio. On a Consolidated basis,
have and cause its Subsidiaries to have, as of the end of each
fiscal quarter, an Interest Coverage Ratio of not less than:
(a) as of December 31, 1996, 1.50 to 1.0;
(b) from January 1, 1997 to September 29, 1997, 1.4 to
1.0;
(c) from September 30, 1997 to December 30, 1997, 1.45 to
1.0;
(d) from December 31, 1997 to December 30, 1998, 1.7 to
1.0;
(e) from December 31, 1998 to December 30, 1999, 2.0 to
1.0;
(f) from December 31, 1999 to December 30, 2000, 2.40 to
1.0; and
(g) from and after December 31, 2000, 2.75 to 1.0.
(d) Section 8.17(a) is amended to add the following sentence to the end of
such clause:
"Notwithstanding the foregoing, Walbro Capital Trust shall
not be required to execute and deliver a joinder agreement to
the Domestic Guaranty."
(e) Section 8.17(b) is amended to add the following sentence to the end of
such clause:
7
<PAGE> 9
"Notwithstanding the foregoing, the Company shall not be
required to pledge to the Banks the share capital of Walbro
Capital Trust owned by the Company."
4. Sections 9 and 12 of the Credit Agreement are amended as
follows:
(a) Section 9.1 is amended and restated in its entirety, to read as
follows:
"9.1 Capital Structure and Redemptions. Purchase, acquire or
redeem any of its capital stock or make any material change in its
capital structure; provided however that
(i) the issuance of additional voting common stock or the
distribution (but not redemption) of the Convertible Debentures
to the holders of the Preferred Securities resulting from a
"Special Event" under the indenture, declaration of trust and
other documents governing the Convertible Debentures and the
Preferred Securities shall not be deemed to constitute a material
change in capital structure; and
(ii) with respect to the Significant Subsidiaries (other
than Walbro Capital Trust) owned by Company or any of its
Domestic Subsidiaries, any increase in the share capital (or the
creation of any new share capital) of any of such Significant
Subsidiaries shall be permitted only if, at the time of any such
increase or the creation of any new shares, as the case may be,
such shares are immediately subjected to a pledge and security
interest in favor of the Collateral Agent, for and on behalf of
the Lenders, pursuant to the applicable Collateral Documents (to
the extent required thereunder), and all steps are taken as
necessary under applicable law to perfect each such pledge and
security interest."
(b) Section 9.4 is amended and restated in its entirety, to read as
follows:
"9.4 Guaranties. Guarantee, endorse, or otherwise become liable
for or upon the obligations of others, except by endorsement of cash
items for deposit in the ordinary course of business and except for
(a) the Guaranties, (b) the Permitted Guaranties, (c) the Walbro
Capital Trust Guaranty, (d) the DEZ Guaranty, (e) to the extent
permitted by Section 9.8(h), the Joint Venture Guaranties and (f)
guaranties provided by the Company or any Subsidiary in the ordinary
course of business for the benefit of any 100% Subsidiary covering (i)
workers compensation obligations imposed under applicable law, or (ii)
leases of real or personal property which do not
8
<PAGE> 10
constitute Capitalized Lease Obligations, in each case arising or
entered into by such 100% Subsidiary in the ordinary course of
business and otherwise in compliance with this Agreement."
(c) Section 9.8(e) is amended and restated in its entirety as follows:
"(e) Intercompany Loans, Advances or Investments to Company's
Significant Domestic Subsidiaries, provided that Intercompany Loans,
Advances or Investments to Walbro Capital Trust shall be made only to
the extent necessary for payments of the Subordinated Debt which are
permitted under the terms of this Agreement;"
(d) Section 9.8(h) is amended and restated in its entirety as follows:
"(h) (A) (i) loans, advances or investments in the DEZ Joint
Venture, other than guaranties (without regard to any repayment of
such loans, advances or investments, other than the repayment of
capital or principal), in an aggregate principal amount not to exceed
$10,000,000 at any time outstanding and (ii) the DEZ Guaranty and (B)
loans, advances, or investments, (without regard to any repayment of
such loans, advances or investments, other than the repayment of
capital or principal) to any Joint Venture or Subsidiary which does
not constitute a 100% Subsidiary, expressly excluding for all purposes
of this Section 9.8(h)(B) any loan, advance or investment to or in
U.S. Coexcell or to or in the DEZ Joint Venture, but including without
limitation (i) all other loans, advances or investments permitted
under any other provision of this Agreement and (ii) guaranties
(including any Joint Venture Guaranty) by the Company or any
Subsidiary (valued on the basis of the aggregate amount of the Debt
covered by such guaranty) of third party indebtedness of any such
Joint Ventures or non-100% Subsidiary, in an aggregate amount, for all
such loans, advances, guaranties and investments under clause (B) of
this subsection (h) at any time outstanding not to exceed the greater
of Twenty-Six Million Dollars ($26,000,000) or twenty percent (20%) of
Consolidated Tangible Net Worth;"
(e) Section 9.13 (Prepayment of Debts) is amended to add, in the fifth
line thereof (following the words "the Indebtedness") the words "and,
so long as no Default or Event of Default has occurred and is
continuing, De Minimis Redemptions".
(f) Section 9.15 (Capital Expenditures Limitation) is amended and restated
in its entirety as follows:
9
<PAGE> 11
"9.15 Capital Expenditures Limitation. Incur or make Capital
Expenditures (determined on a Consolidated basis) in aggregate
amounts in any fiscal year greater than:
(a) during its fiscal year ending December 31, 1996, the sum of
One Hundred Million Dollars ($100,000,000);
(b) during its fiscal year ending December 31, 1997, the sum of
Sixty-Five Million Dollars ($65,000,000); and
(c) during its fiscal year ending December 31, 1998, the sum of
Fifty-Five Million Dollars ($55,000,000); and
(d) during each of its fiscal years thereafter, the sum of Forty
Million Dollars ($40,000,000);
in each case on a non-cumulative basis."
(g) Section 9.16 is added to the Credit Agreement (immediately following
Section 9.15), as follows:
"9.16 Limitation on Operating Leases. Permit
Operating Lease Expense for any fiscal year of the Company and
its Subsidiaries to exceed, in the aggregate, Eight Million
Dollars ($8,000,000)."
(h) Section 12.10 (Other Increased Costs) is amended to replace the words
"Revolving Credit Commitment Fee" wherever they appear with the words
"Revolving Credit Facility Fee".
5. This Second Amendment shall become effective (according to the terms
hereof) on the date (the "Effective Date of the Second Amendment") that the
following conditions have been fully satisfied by the Company (the
"Conditions"):
(a) Agent shall have received:
i) counterpart originals of this Second Amendment, duly executed and
delivered by the Company, the Permitted Borrowers and Guarantors, the
Agent and the requisite Banks, and in form satisfactory to Agent and
the requisite Banks,
ii) certified copies of resolutions of the Boards of Directors of each
of the Company, each of the undersigned Permitted Borrowers which is a
Domestic Subsidiary and each of the undersigned Guarantors which is a
Domestic Subsidiary (and powers of attorney, where applicable)
authorizing, as applicable, the execution and delivery of this Second
Amendment, and the performance by the such
10
<PAGE> 12
undersigned parties of each of their respective obligations under the
Amended Credit Agreement; and
iii) a certificate of the Secretary or other authorized officer of
each of the Company, each of the undersigned Permitted Borrowers which
is a Domestic Subsidiary and each of the undersigned Guarantors which
is a Domestic Subsidiary certifying the names of the officer or
officers of such undersigned parties, as the case may be, authorized
to sign this Second Amendment and any other Loan Document including
any Request for Advance or Letter of Credit Agreement together with a
sample of the true signature of each such officer; and
(b) Company shall have paid to Agent, for distribution to the Banks, an
amendment fee in the amount of $313,687, for distribution to the Banks
based on the Percentages;
provided however that, subject to the foregoing, the amendments set forth in
paragraphs 3(b), 3(c), and 4(f) of this Second Amendment shall be given
retroactive effect to December 31, 1996. With respect to the undersigned
Permitted Borrowers and Guarantors which are Foreign Subsidiaries, Company shall
deliver or cause to be delivered to Agent, within thirty (30) days of the
Effective Date of the Second Amendment, corporate authority documents
substantially similar to those identified in subparagraph (a)(ii) and a(iii) of
this Section 5 ratifying the execution and delivery by such partner of this
Second Amendment; provided that until all such documents have been delivered, no
Advances shall be available to any of such Permitted Borrowers.
6. Within ninety (90) days following the Effective Date of this Second
Amendment, Company shall:
(a) execute and deliver (or cause to be executed and delivered)
with respect to Walbro Automotive do Brasil Ltda. ("Walbro Brazil"),
a Joinder Agreement to the Permitted Borrowers Guaranty ("Joinder
Agreement-Guaranty") duly executed and delivered by Walbro Brazil and
a local share pledge (and, if requested by Agent, a joinder agreement
to the Guarantor Stock Pledge and Security Agreement) encumbering 65%
of the share capital of Walbro Brazil, supported by appropriate
authorizing documents in certified form, in each case complying with
the applicable requirements set forth in the Credit Agreement; and
(b) record or file (or cause to be recorded or filed) appropriate
financing statements, registrations, collateral and other
documents covering the Collateral described in the aforesaid local
Brazilian share pledge in such jurisdictions and to take (or cause to
be taken) such other steps as necessary or appropriate to perfect the
security interests, or other liens granted thereby, in each case
complying with the applicable requirements set forth in the Credit
Agreement; and
11
<PAGE> 13
(c) deliver or cause to be delivered legal opinions of Company's U.S. and
Brazilian counsel covering the Joinder Agreement-Guaranty and
the aforesaid Brazilian local share pledge, as applicable,
substantially in the form of the comparable legal opinions previously
delivered by Company's counsel under the Credit Agreement, in each
case complying with the applicable requirements set forth in the
Credit Agreement.
Furthermore, each of the Company and each of the Permitted Borrowers hereby
agrees that, pursuant to Section 14.7 of the Credit Agreement, upon the written
request of the Agent, it will make, execute, acknowledge and deliver or cause to
be made, executed, acknowledged and delivered, all such amendments to the local
share pledges and to the other Collateral Documents as shall be advisable or
required under applicable local law to maintain the perfection of the liens
granted thereunder and proof that any appropriate financing statements,
collateral and other documents covering the Collateral described therein have
been executed and delivered by the appropriate parties and recorded or filed in
such jurisdictions and such other steps have been taken as necessary to maintain
the perfection of the security interests, or other liens granted thereby.
7. New Schedule 5.1 (setting forth the Pricing Matrix) in the form of
Schedule I hereto shall replace existing Schedule 5.1 the Credit Agreement in
its entirety.
8. Each of Company, the undersigned Permitted Borrowers and the undersigned
Guarantors hereby represents and warrants that, after giving effect to the
amendments contained herein, (a) execution and delivery of this Second Amendment
and the performance by each of the Company and the undersigned Permitted
Borrowers of their respective obligations under the Credit Agreement as amended
hereby (herein, as so amended, the "Amended Credit Agreement") are within such
undersigned's corporate powers, have been duly authorized, are not in
contravention of law or the terms of its articles of incorporation or bylaws or
other organic documents of the parties thereto, as applicable, and except as
have been previously obtained (or as referred to in Section 7.15 of the Amended
Credit Agreement) do not require the consent or approval, material to the
amendments contemplated in this Second Amendment or the Amended Credit
Agreement, of any governmental body, agency or authority, and this Second
Amendment, the Amended Credit Agreement, will constitute the valid and binding
obligations of such undersigned parties enforceable in accordance with its
terms, except as enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium, ERISA or similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(whether enforcement is sought in a proceeding in equity or at law), and (b) the
continuing representations and warranties set forth in Sections 7.1 through
7.20, inclusive, of the Amended Credit Agreement are true and correct on and as
of the date hereof, and such representations and warranties are and shall remain
continuing representations and warranties during the entire life of the Amended
Credit Agreement.
12
<PAGE> 14
9. Upon the Effective Date of this Second Amendment, the commitment of the
Banks to make Term Loans under the Credit Agreement is terminated. The Company
and the Banks acknowledge that no Term Loans are outstanding on the Effective
Date of the Second Amendment.
10. Except as specifically set forth above, this Second Amendment shall not
be deemed to amend or alter in any respect the terms and conditions of the
Credit Agreement, or any of the other Loan Documents, or to constitute a waiver
by Banks or Agent of any right or remedy under the Credit Agreement or any of
the other Loan Documents.
11. Unless otherwise defined to the contrary herein, all capitalized terms
used in this Second Amendment shall have the meanings set forth in the Credit
Agreement.
12. This Second Amendment shall be a contract made under and governed by
the internal laws of the State of Michigan, and may be executed in counterpart,
in accordance with Section 14.10 of the Credit Agreement.
* * *
[Signatures follow on succeeding pages]
13
<PAGE> 15
IN WITNESS WHEREOF, Company, the Banks and Agent have each caused this
Second Amendment to be executed by their respective duly authorized officers or
agents, as applicable, all as of the date first set forth above.
COMERICA BANK, WALBRO CORPORATION
as Agent
By: /s/ Mark B. Grover By: /s/ Michael A. Shope
---------------------------- ------------------------------
Its: Vice President Its: Treasurer and CFO
--------------------------- -----------------------------
One Detroit Center 6242 Garfield Street
500 Woodward Avenue Cass City, Michigan 48726
9th Floor MC 3265 Attn: Treasurer
Detroit, Michigan 48226 ----------------------------
Attention: Mark B. Grover
BANKS: COMERICA BANK
By: /s/ Mark B. Grover
------------------------------
Its: Vice President
-----------------------------
One Detroit Center
500 Woodward Avenue, MC 3265
Detroit, Michigan 48226
Attention: Mark B. Grover
Telephone: (313) 222-9030
Facsimile No. (313) 222-3776
HARRIS TRUST & SAVINGS BANK
By: /s/ Peter Dancy
-----------------------------
Its: Vice President
----------------------------
2 West
111 W. Monroe
Chicago, Illinois 60690
Attn: Peter Dancy
Fax No.: (312) 461-2591
14
<PAGE> 16
NATIONAL CITY BANK
By: /s/ Carlton Faison
-------------------------
Its: Vice President
------------------------
1900 East 9th Street
Cleveland, Ohio 44114
Attn: Carlton Faison
Fax No.: (216) 575-9396
THE BANK OF TOKYO-MITSUBISHI BANK,
LIMITED, CHICAGO BRANCH
By: /s/ Erich Friess
-------------------------
Its: Deputy General Manager
------------------------
Suite 2300
227 West Monroe Street
Chicago, Illinois 60606
Attn: Erich Friess
Fax No.: (312) 696-4535
THE BANK OF NEW YORK
By: /s/ Douglas Ober
-------------------------
Its: Vice President
------------------------
22nd Floor
One Wall Street
New York, New York 10286
Attn: William M. Barnum
Fax No.: (212) 635-6434
SOCIETE GENERALE
By: /s/ Joseph A. Philbin
-------------------------
Its: Vice President
------------------------
181 West Madison Street
Suite 3400
Chicago, Illinois 60602
Attn: Joseph A. Philbin
Fax No.: (312) 578-5099
15
<PAGE> 17
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A.
"RABOBANK NEDERLAND", NEW YORK BRANCH
By: /s/ David J. Thompson
---------------------------------
Its: Vice President
--------------------------------
And By: /s/ Michel de Kenkely Thege
-----------------------------
Its: Deputy General Manager
--------------------------------
245 Park Avenue
New York, New York 10167
Attn: Corporate Services
Department
Fax No.: (212) 818-0233
Acknowledged and Agreed by the undersigned (by their respective duly authorized
officers or agents, as applicable), all as of the date first set forth above:
WALBRO AUTOMOTIVE CORPORATION,
a Delaware corporation
By: /s/ Michael A. Shope
--------------------------
Its: Treasurer
-------------------------
SHARON MANUFACTURING COMPANY,
a Michigan corporation
By: /s/ Michael A. Shope
--------------------------
Its: Treasurer
-------------------------
16
<PAGE> 18
WALBRO ENGINE MANAGEMENT CORPORATION,
a Delaware corporation
By: /s/ Michael A. Shope
--------------------------
Its: Treasurer
-------------------------
WHITEHEAD ENGINEERED PRODUCTS, INC.,
a Delaware corporation
By: /s/ Michael A. Shope
--------------------------
Its: Treasurer
-------------------------
WALBRO JAPAN, INC., a Japanese
company
By: /s/ Michael A. Shope
--------------------------
Its: Attorney-In-Fact
-------------------------
WALBRO AUTOMOTIVE GmbH, a German company
By: /s/ Jean Marie Julien
--------------------------
Its: Geschaftsfuhrer
-------------------------
WALBRO NETHERLANDS B.V., a Dutch company
By: /s/ Michael A. Shope
--------------------------
Its: Treasurer
-------------------------
WALBRO AUTOMOTIVE S.A, a French company
By: /s/ Jean Marie Julien
--------------------------
Its: Director
-------------------------
WALBRO AUTOMOTIVE N.V., a Belgian company
17
<PAGE> 19
Belgian Company
By: /s/ Jean Marie Julien
-------------------------
Its: Director
------------------------
WALBRO AUTOMOTIVE A.S., a
Norwegian company
By: /s/ Jean Marie Julien
-------------------------
Its: Director
------------------------
WALBRO AUTOMOTIVE LIMITED, an
English Company
By: /s/ Jean Marie Julien
-------------------------
Its: Director
------------------------
WALBRO AUTOMOTIVE S.A., a
Spanish company
By: /s/ Jean Marie Julien
-------------------------
Its: Director
------------------------
18
<PAGE> 20
SCHEDULE I (WALBRO LOAN AGREEMENT)
Pricing Matrix (Determination of Pricing Levels) [Revised]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
APPLICABLE MARGIN FOR ADVANCES
OF THE REVOLVING CREDIT AND APPLICABLE FEE PERCENTAGE FOR
SWING LINE ADVANCES
- ------------------------------------------------------------------------------------------------------------------------------------
REVOLVING
CREDIT FACILITY
FEE ON
SPECIAL REVOLVING
PURPOSE CREDIT
EUROCURRENCY- LETTERS OF LETTERS OF AGGREGATE
PRIME-BASED RATE BASED RATE CREDIT CREDIT COMMITMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
If Funded Debt Ratio is less than 2.5:1.0 0.00% .4250% .55% 1.25% .20%
If Funded Debt Ratio is greater than or 0.00% .50% .625% 1.25% .25%
equal to 2.5:1.0, but less than 2.75:1.0
If Funded Debt Ratio is greater than or 0.00% .70% .825% 1.25% .30%
equal to 2.75:1.0, but less than 3.0:1.0
If Funded Debt Ratio is greater than or 0.00% .90% 1.025% 1.25% .35%
equal to 3.0:1.0 but less than 3.25:1.0
If Funded Debt Ratio is greater than or 0.00% 1.25% 1.375% 1.25% .50%
equal to 3.25:1.0, but less than 3.70:1:0
If Funded Debt Ratio is greater than or 0.00% 1.75% 1.875% 1.25% .625%
equal to 3.70:1.0
====================================================================================================================================
</TABLE>
19
<PAGE> 21
SCHEDULE II
[OTHER REPLACEMENT SCHEDULES]
20
<PAGE> 1
EXHIBIT 4.22
EXECUTION COPY
================================================================================
THIRD AMENDMENT TO
WALBRO CORPORATION
CREDIT AGREEMENT AND WAIVER
COMERICA BANK, as AGENT
HARRIS BANK, as CO-AGENT
================================================================================
<PAGE> 2
THIRD AMENDMENT TO WALBRO CREDIT AGREEMENT AND WAIVER
THIS THIRD AMENDMENT ("Third Amendment") is made as of this 27th day of
August, 1997 by and among Walbro Corporation, a Delaware corporation
("Company"), Comerica Bank and the other banks signatory hereto (individually, a
"Bank" and collectively, the "Banks") and Comerica Bank, as agent for the Banks
(in such capacity, "Agent").
RECITALS:
A. Company, Agent and certain of the Banks entered into that certain
Amended and Restated Walbro Corporation $135,000,000 Credit Agreement dated as
of September 22, 1995 (as amended by the First Amendment to Walbro Credit
Agreement dated as of March 8, 1996 and the Second Amendment to Walbro Credit
Agreement dated as of March 17, 1997, the "Credit Agreement") under which such
Banks renewed and extended (or committed to extend) credit to the Company and
the Permitted Borrowers, as set forth therein.
B. At the Company's request, Agent and the Banks have agreed to make
certain amendments to the Credit Agreement to make certain changes as
hereinafter set forth, but only on the terms and conditions set forth in this
Third Amendment .
NOW THEREFORE, Company, Agent and the Banks agree:
1. Section 1 of the Credit Agreement is amended as follows:
(a) Section 1.36 (the definition of "Covenant Compliance Report") is
amended to replace the word "and" following the reference to "9.11" with a
comma and to add, following the reference to "9.15", the words "and 9.16,".
(b) Sections 1.50A (the definition of "EBIT") and 1.51 (the definition
of "EBITDA") are amended to add, following the word "taxes" in each such
Section, the words "based on income and foreign withholding taxes."
(c) Section 1.88A (the definition of "Interest Coverage Ratio") is
amended to add, at the end of said Section (following the words
"Consolidated basis"), the words:
"provided, however, that gross interest expense shall include cash
interest paid under the Convertible Debentures, whether or not
classified as interest expense for purposes of GAAP."
(d) Section 1.124 (the definition of "Permitted Investments") is
amended (i) to add in subparagraph (c) thereof, following the words "issued
by" (in the second line thereof), the words "or eurodollar time deposits
placed with", (ii) to delete the word "and" from the
<PAGE> 3
end of subparagraph (d) thereof, (iii) to change the period following
subparagraph (e) to a semicolon and (iv) to add new subparagraph (f), as
follows:
"(f) repurchase agreements entered into with any Bank (or other
commercial banking institution of the stature referred to in clause
(c) above) which (i) mature within one year from the date of
acquisition, (ii) which are fully collateralized by investment
instruments that would otherwise be Permitted Investments under
clauses (a) through (d) above; provided all such repurchase agreements
require physical delivery of the investment instruments securing such
repurchase agreements, except those delivered through the Federal
Reserve Book Entry System."
(e) New Section 1.132A is added to the Credit Agreement, immediately
following Section 1.132, as follows:
"1.132A 'Purchase Money Loan Facility' shall mean that certain
Purchase Money Loan Agreement dated as of the date hereof by and among
Company and certain of its Domestic Subsidiaries, as borrowers, the
Banks and the Agent to fund the purchase of machinery, equipment,
fixtures and other fixed assets according to the terms thereof, as
amended, renewed, replaced, extended or supplemented from time to
time."
(f) New Section 1.132B is added to the Credit Agreement, immediately
following Section 1.132A, as follows:
"Section 1.132B 'Purchase Money Facility Outstandings' shall
mean the aggregate principal amount outstanding from time to time
under the Purchase Money Loan Facility."
(g) New Section 1.136A is added to the Credit Agreement, immediately
following Section 1.136, as follows:
"1.136A 'Refunded Purchase Money Loan Advance' is defined in
Section 2.3(c) hereof."
(h) Section 1.142 (the definition of "Revolving Credit Aggregate
Commitment") is amended and restated in its entirety, as follows:
"Section 1.142 Revolving Credit Aggregate Commitment" shall mean
One Hundred Thirty Five Million Dollars ($135,000,000), subject to
permanent reduction or termination pursuant to Sections 2.15 or 10.2
hereof, minus the aggregate amount of Purchase Money Facility
Outstandings, if any; provided, however, that so long as the maximum
amount of Advances of the Revolving Credit which the Company and the
Permitted Borrowers may request hereunder is subject to the
restrictions set forth
2
<PAGE> 4
in Section 2.3(i) hereof, the Revolving Credit Aggregate Commitment
shall be deemed to be One Hundred Fifteen Million Dollars
($115,000,000), subject to permanent reduction or termination pursuant
to Section 2.15 or 10.2 hereof, minus the aggregate amount of Purchase
Money Facility Outstandings, if any."
2. Section 2 of the Credit Agreement is amended as follows:
(a) Section 2.3(c) is amended to add at the end of said Section
(following the words "Section 2.3(c), but before the semicolon) the
following:
"and provided further that, in the case of any Advance of the
Revolving Credit being applied to reduce outstandings under the
Purchase Money Loan Facility, the aggregate principal amount of such
outstandings to be refunded hereunder ("Refunded Purchase Money Loan
Advance") shall not be included for purposes of calculating the
limitation under this Section 2.3(c)".
(b) New Sections 2.3(h) and 2.3(i) are added to the Credit Agreement,
immediately following Section 2.3(g), as follows:
"(h) At any time following the occurrence of a Default or Event
of Default under the Purchase Money Loan Facility and at all other
times upon three (3) Business Days prior written notice by Agent to
Company, the Agent shall, at the direction or with the concurrence of
the Majority Banks, promptly request on behalf of Company or the
applicable Permitted Borrower (which hereby irrevocably directs the
Agent to act on its behalf), that each Bank make an Advance of the
Revolving Credit in an amount equal to such Bank's Percentage of the
principal amount outstanding under the Purchase Money Loan Facility
(and accrued interest thereon), or such lesser portion thereof as
covered by the applicable direction or concurrence of the Majority
Banks. Each such Refunded Purchase Money Loan Advance shall be a
Prime-based Advance. Each Bank's obligation to make Advances of the
Revolving Credit under this subparagraph (h) shall be absolute and
unconditional and shall not be affected by any circumstances,
including without limitation, (i) any set-off, counterclaim or
recoupment, defense or other right which such Bank may have against
Company, the Permitted Borrowers or any other Person for any reason
whatsoever; (ii) the occurrence or continuance of any Default or Event
of Default; (iii) any adverse change in the condition (financial or
otherwise) of the Company, any Permitted Borrower or any other Person;
(iv) any breach of this Agreement by the Company, any Permitted
Borrower or any other Person; (v) any inability of the Company or the
Permitted Borrowers to satisfy the conditions precedent to borrowing
set forth in this Agreement on the date upon which such Advance is to
be made; or (vi) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing.
3
<PAGE> 5
"(i) Until the Company has delivered the financial statements for
its year ending December 31, 1997 in accordance with Section 8.3(b) of
this Agreement, Company and the Permitted Borrowers agree not to
request Advances of the Revolving Credit which would cause the
aggregate principal amount outstanding under the Revolving Credit
(taking into account all Swing Line Advances, the undrawn amount of
all Letters of Credit issued (or requested but not yet issued), the
unreimbursed amount of any draws under any Letters of Credit at such
time all determined in the manner set forth in Section 2.3(c) hereof,
plus the aggregate Purchase Money Facility Outstandings, to exceed at
any time the sum of One Hundred Fifteen Million Dollars ($115,000,000)
and, in the event of any Request for Advance by Company or the
Permitted Borrowers contrary to this subparagraph (i), the Banks shall
not be required to fund any such requested Advance."
(c) Section 2.13 is amended to add, following the words "Revolving
Credit Aggregate Commitment then in effect (whether used or unused)," (in
the eighth line thereof), the words "without giving effect to any
reductions therein based on the amount of Purchase Money Loan Outstandings,
and without taking into account any reduced availability under Section
2.3(i)".
(d) Section 2.15(v) is amended and restated in its entirety, as
follows:
"(v) no reduction shall reduce the amount of the Revolving Credit
Aggregate Commitment to an amount which is less than the sum of the
aggregate undrawn amount of any Letters of Credit outstanding at such
time, plus the face amount of all Letters of Credit requested, but not
yet issued at such time, plus the unreimbursed amount of any draws
under Letters of Credit at such time, plus the aggregate amount of
Purchase Money Indebtedness and availability under the Purchase Money
Loan Facility from time to time."
3. Section 8 of the Credit Agreement shall be amended as follows:
(a) Section 8.5 (establishing the Funded Debt Ratio) is amended to change
the reference to "4.5" in Section 8.5(c) to "4.75".
(b) Section 8.6 (establishing the Interest Coverage Ratio) is amended to
change the reference to "1.45" in Section 8.6(c) to "1.1", and to amend and
restate Section 8.6(d), in its entirety as follows:
"(d) from December 31, 1997 to March 30, 1998, 1.25 to 1.0; and from
March 31, 1998 to December 30, 1998, 1.70 to 1.0;".
4. Sections 9 and 10 of the Credit Agreement are amended, as follows:
(a) Section 9.5(c) is amended and restated in its entirety, as
follows:
4
<PAGE> 6
"(c) (i) Purchase money debt for fixed assets incurred under the terms
of the Purchase Money Loan Facility, (ii) purchase money debt existing on
the Effective Date of the Third Amendment as shown on Schedule 9.5, and
(iii) other purchase money debt for fixed assets (including capitalized
leases or other non-cancelable leases having a term of 12 months or longer)
not to exceed an aggregate amount, for the Company and its Subsidiaries
incurred while no Default or Event of Default exists under this Agreement
or the other loan documents, of Five Million Dollars ($5,000,000) (or the
equivalent thereof in any other currency, as applicable) at any one time
outstanding;".
(b) Section 10.1(g) of the Credit Agreement is amended to add, in the
fifth line thereof (following the words "Senior Debt Documents") the words ",
the Purchase Money Loan Facility".
5. New Exhibit L (setting forth the form of the Covenant Compliance Report)
in the form of Attachment 1 hereto shall replace existing Exhibit L to the
Credit Agreement in its entirety. Those replacement schedules to the Credit
Agreement set forth on Attachment 2 shall replace in their entirety, the
comparable, existing schedules to the Credit Agreement, as applicable, and new
Schedule 9.5 is added to the Credit Agreement in the form of Attachment 3.
6. In reliance upon the Company's Covenant Compliance Certificate (and
supporting calculations) dated as of August 1, 1997, the Banks hereby waive
compliance by the Company and its Subsidiaries with the Funded Debt Ratio in
effect under Section 8.5 (f) of the Credit Agreement and with the Interest
Coverage Ratio in effect under Section 8.6(b), of the Credit Agreement, in each
case for the Company's fiscal quarter ending as of June 30, 1997, but not
otherwise.
7. This Third Amendment shall become effective (according to the terms
hereof) on the date (the "Effective Date of the Third Amendment") that the
following conditions have been fully satisfied by the Company (the
"Conditions"):
(a) Agent shall have received:
i. counterpart originals of this Third Amendment, duly executed and
delivered by the Company, the Permitted Borrowers and Guarantors,
the Agent and the requisite Banks, and in form satisfactory to
Agent and the requisite Banks,
ii. certified copies of resolutions of the Boards of Directors of
each of the Company, each of the undersigned Permitted Borrowers
which is a Domestic Subsidiary and each of the undersigned
Guarantors which is a Domestic Subsidiary (and powers of
attorney, where applicable) authorizing, as applicable, the
execution and delivery of this Third Amendment, and the
performance by such undersigned parties of each of their
respective obligations under the Amended Credit Agreement (as
defined below); and
5
<PAGE> 7
iii. a certificate of the Secretary or other authorized officer of
each of the Company, each of the undersigned Permitted Borrowers
which is a Domestic Subsidiary and each of the undersigned
Guarantors which is a Domestic Subsidiary certifying the names of
the officer or officers of such undersigned parties, as the case
may be, authorized to sign this Third Amendment and any other
Loan Document including any Request for Advance or Letter of
Credit Agreement together with a sample of the true signature of
each such officer; and
(b) Company shall have paid to Agent, for distribution to the Banks, an
amendment fee in the amount of $135,000, for distribution to the Banks
based on the Percentages;
provided however that, subject to the foregoing, the waiver set forth in
paragraph 6 of this Third Amendment shall be given retroactive effect to June
30, 1997. With respect to the undersigned Permitted Borrowers and Guarantors
which are Foreign Subsidiaries, Company shall deliver or cause to be delivered
to Agent, no later than October 15, 1997, corporate authority documents
substantially similar to those identified in subparagraph (a)(ii) and a(iii) of
this paragraph 7 ratifying the execution and delivery by such party of this
Third Amendment; provided that until all such documents have been delivered, no
Advances shall be available to any of such Permitted Borrowers.
8. The expiration date for completion of the matters identified in (a)
subparagraphs 6(a) through 6(c) of the Second Amendment is hereby extended to
September 30, 1997 and (b) in the proviso to Section 5 of the Second Amendment
is hereby extended to October 15, 1997. Furthermore, Company and each of the
Permitted Borrowers hereby agrees, pursuant to Section 14.7 of the Credit
Agreement, to make, execute, acknowledge and deliver or cause to be made,
executed, acknowledged and delivered, all such amendments to the local share
pledges and to the other Collateral Documents as shall be advisable or required
under applicable local law to maintain the perfection of the liens granted
thereunder and proof that any appropriate financing statements, collateral and
other documents covering the Collateral described therein have been executed and
delivered by the appropriate parties and recorded or filed in such jurisdictions
and such other steps have been taken as necessary to maintain the perfection of
the security interests or other liens granted thereby, all at the written
request, from time to time, of Agent or the Majority Banks, with the applicable
steps to be completed as soon as practicable following each such request, but in
no event later than ninety (90) days thereafter.
9. Each of Company, the undersigned Permitted Borrowers and the undersigned
Guarantors hereby represents and warrants that, after giving effect to the
amendments contained herein, (a) execution and delivery of this Third Amendment
and the performance by each of the Company and the undersigned Permitted
Borrowers of their respective obligations under the Credit Agreement as amended
hereby (herein, as so amended, the "Amended Credit Agreement") are within such
undersigned's corporate powers, have been duly authorized, are not in
contravention of law or the terms of its articles of incorporation or bylaws or
other organic documents of the parties thereto, as applicable, and except as
have been previously obtained (or as referred to in Section 7.15 of the Amended
Credit Agreement) do not require the consent or approval, material to
6
<PAGE> 8
the amendments contemplated in the Amended Credit Agreement, of any governmental
body, agency or authority, and the Amended Credit Agreement, will constitute the
valid and binding obligations of such undersigned parties enforceable in
accordance with its terms, except as enforcement thereof may be limited by
applicable bankruptcy, reorganization, insolvency, moratorium, ERISA or similar
laws affecting the enforcement of creditors' rights generally and by general
principles of equity (whether enforcement is sought in a proceeding in equity or
at law), and (b) the continuing representations and warranties set forth in
Sections 7.1 through 7.20, inclusive, of the Amended Credit Agreement are true
and correct on and as of the date hereof, and such representations and
warranties are and shall remain continuing representations and warranties during
the entire life of the Amended Credit Agreement.
10. Except as specifically set forth above, this Third Amendment shall not
be deemed to amend or alter in any respect the terms and conditions of the
Credit Agreement, or any of the other Loan Documents, or to constitute a waiver
by Banks or Agent of any right or remedy under the Credit Agreement or any of
the other Loan Documents.
11. Unless otherwise defined to the contrary herein, all capitalized terms
used in this Third Amendment shall have the meanings set forth in the Credit
Agreement.
12. This Third Amendment shall be a contract made under and governed by the
internal laws of the State of Michigan, and may be executed in counterpart, in
accordance with Section 14.10 of the Credit Agreement.
* * *
[SIGNATURES FOLLOW ON SUCCEEDING PAGES]
7
<PAGE> 9
IN WITNESS WHEREOF, Company, the Banks and Agent have each caused this
Third Amendment to be executed by their respective duly authorized officers or
agents, as applicable, all as of the date first set forth above.
COMERICA BANK, WALBRO CORPORATION
as Agent
By: /s/ Mark B. Grover
---------------------- By: /s/ Michael A. Shope
---------------------------------------
Its: Vice President Its: Chief Financial Officer and Treasurer
--------------------- --------------------------------------
One Detroit Center 6242 Garfield Street
500 Woodward Avenue Cass City, Michigan 48726
9th Floor MC 3265 Attn: Michael A. Shope
Detroit, Michigan 48226
Attention: Mark B. Grover
BANKS: COMERICA BANK
By: /s/ Mark B. Grover
---------------------------
Its: Vice President
--------------------------
One Detroit Center
HARRIS TRUST AND SAVINGS BANK
By: /s/ Jeffrey C. Nicholson
---------------------------
Its: Vice President
--------------------------
(First Signature Page to Third Amendment)
<PAGE> 10
NATIONAL CITY BANK
By: /s/ Carlton M. Faison
------------------------
Its: Vice President
-----------------------
THE BANK OF TOKYO-MITSUBISHI, LTD.,
CHICAGO BRANCH
By: /s/ Hajime Watanabe
------------------------
Its: Deputy General Manager
------------------------
THE BANK OF NEW YORK
By: /s/ William Barnum
------------------------
Its: Vice President
------------------------
SOCIETE GENERALE
By: /s/ Joseph A. Philbin
------------------------
Its: Vice President
------------------------
(Second Signature Page to Third Amendment)
<PAGE> 11
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A.
"RABOBANK NEDERLAND", NEW YORK
BRANCH
By: /s/ David J. Thompson
----------------------------
Its: Vice President
---------------------------
And By: /s/ W. Pieter C. Kodde
------------------------
Its: Vice President
---------------------------
Acknowledged and Agreed by the undersigned (by their respective duly authorized
officers or agents, as applicable), all as of the date first set forth above:
WALBRO AUTOMOTIVE CORPORATION,
a Delaware corporation
By: /s/ Michael A. Shope
----------------------------
Its: Treasurer
---------------------------
SHARON MANUFACTURING COMPANY,
a Michigan corporation
By: /s/ Michael A. Shope
----------------------------
Its: Treasurer
---------------------------
(Third Signature Page to Third Amendment)
<PAGE> 12
WALBRO ENGINE MANAGEMENT
CORPORATION, a Delaware corporation
By: /s/ Michael A. Shope
---------------------------
Its: Treasurer
--------------------------
WHITEHEAD ENGINEERED PRODUCTS, INC., a
Delaware corporation
By: /s/ Michael A. Shope
---------------------------
Its: Treasurer
--------------------------
WALBRO JAPAN, INC., a Japanese company
By: /s/ Michael A. Shope
---------------------------
Its:
--------------------------
(Fourth Signature Page to Third Amendment)
<PAGE> 13
WALBRO AUTOMOTIVE GmbH, a
German company
By: /s/ Daniel L. Hittler
---------------------------
Its: Secretary
--------------------------
WALBRO NETHERLANDS B.V., a
Dutch company
By: /s/ Daniel L. Hittler
---------------------------
Its: Secretary
--------------------------
WALBRO AUTOMOTIVE S.A, a
French company
By: /s/ Daniel L. Hittler
---------------------------
Its: Secretary
--------------------------
WALBRO AUTOMOTIVE N.V., a
Belgian company
By: /s/ Daniel L. Hittler
---------------------------
Its: Secretary
--------------------------
(Fifth Signature Page to Third Amendment)
<PAGE> 14
WALBRO AUTOMOTIVE A.S., a
Norwegian company
By:/s/ Daniel L. Hittler
----------------------
Its: Secretary
---------------------
WALBRO AUTOMOTIVE LIMITED, an
English Company
By:/s/ Daniel L. Hittler
----------------------
Its: Secretary
---------------------
WALBRO AUTOMOTIVE S.A., a
Spanish company
By:/s/ Daniel L. Hittler
----------------------
Its: Secretary
---------------------
(Sixth Signature Page to Third Amendment)
<PAGE> 15
EXHIBIT L
REPLACEMENT
COVENANT COMPLIANCE REPORT
To: Comerica Bank, as Agent
Re: Amended and Restated Walbro Corporation $135,000,000 Credit Agreement
dated as of September 22, 1995 (as amended or otherwise modified from
time to time, the "Agreement")
This Covenant Compliance Report ("Report") is furnished pursuant to Section
8.3(b) and/or (c) of the Agreement and sets forth various information as of____,
199__ (the "Computation Date").
1. Consolidated Tangible Net Worth (Section 8.4 of the Agreement). On the
Computation Date, the Consolidated Tangible Net Worth, which was required to be
at all times not less than $95,000,000 plus the sum of the Net Income Adjustment
plus the Equity Offering Adjustment, was $_____, as computed in the supporting
documents attached hereto as Schedule 1.
2. Funded Debt Ratio (Section 8.5 of the Agreement). On the Computation
Date, the Company's Funded Debt Ratio, which is required to be less than___, was
_____ as computed pursuant to Section 1.75 of the Agreement in the supporting
documents attached hereto as Schedule 2.
3. Interest Coverage Ratio (Section 8.6 of the Agreement). On the
Computation Date, the Interest Coverage Ratio, which is required to be not less
than_____was_____ as computed pursuant to Section 1.88A of the Agreement in the
supporting documents attached hereto as Schedule 3.
4. Debt (Section 9.5 of the Agreement). On the Computation Date, the Company
and its Subsidiaries were obligated for the following Debt:
(a) purchase money debt for fixed assets, which is required to be less than
an aggregate amount of $5,000,000 at all times, was $______ , as
computed in the supporting documents attached hereto as Schedule 4(a);
and
(b) other Debt for borrowed money, which is required to be less than an
aggregate amount of $5,000,000, was $______ , as computed in the
supporting documents attached hereto as Schedule 4(b).
5. Investments (Section 9.8 of the Agreement). As of the Computation Date,
the Company and its Subsidiaries had made or allowed to remain outstanding the
following Investments, Loans and/or other advances:
<PAGE> 16
(a) loans or advances to any officers or employees of the Company or a
Subsidiary, which are required to less than an aggregate amount of
$2,000,000, was $______ , as set forth in the supporting documents
attached hereto as Schedule 5(a);
(b) Investments in and/or loans or advances to U.S. Coexcell, which is
required to be an aggregate amount not more than $4,000,000, was $___,
as set forth in the supporting documents attached hereto as Schedule
5(b);
(c) Company, which is required to own(directly or indirectly) not less than
80% of the share capital of U.S. Coexcell, owned______%;
(d) Intercompany Loans, Advances or Investments to Company's Significant
Foreign Subsidiaries, which is required to be an aggregate amount not
more than $______, was $______ , as set forth in the supporting
documents attached hereto as Schedule 5(d);
(e) Intercompany Loans, Advances or Investments to Company's Subsidiaries
which are not Significant Subsidiaries, which is required to be an
aggregate amount not more than $5,000,000, was $______, as set forth
in the supporting documents attached hereto as Schedule 5(e);
(f) loans, advances or investments in the DEZ Joint Venture, which is not
permitted to exceed an aggregate amount of $10,000,000, was $______,
as set forth in the supporting documents attached hereto as Schedule
5(f); and
(g) loans, advances or investments in any Joint Venture or any non-100%
Subsidiary (excluding U.S. Coexcell and DEZ Joint Venture), which are
not permitted to exceed an aggregate amount of $______, was $______,
as set forth in the supporting documents attached hereto as Schedule
5(g).
6. Capital Expenditures. As of the Computation Date, the Company and its
Subsidiaries, which were not permitted to have made Capital Expenditures in an
aggregate amount greater than $________, had made Capital Expenditures in the
amount of $______, as set forth in the upporting documents attached hereto as
Schedule 6. [THIS COMPUTATION MADE ONLY IN CONNECTION WITH COVENANT COMPLIANCE
CERTIFICATE DELIVERED IN CONNECTION WITH SECTION 8.3(b)]
7. Operating Leases. As of the Computation Date, the Company and its
Subsidiaries, which were not permitted to have Operating Lease Expense in an
aggregate amount greater than $8,000,000, had Operating Lease Expense in the
amount of $_______, as set forth in the supporting documents attached hereto as
Schedule 7. [THIS COMPUTATION MADE ONLY IN CONNECTION WITH COVENANT COMPLIANCE
CERTIFICATE DELIVERED IN CONNECTION WITH SECTION 8.3(b)]
The undersigned officer of Company, hereby certifies on behalf of Company
that to the best of his knowledge, after due inquiry:
2
<PAGE> 17
A. All of the information set forth in this Report (and in any Schedule
attached hereto) is true and correct in all material respects.
B. As of the Computation Date, the Company and the Permitted Borrower have
observed and performed, in all material respects, other than as set forth above,
all of their covenants contained in Sections 9.5, 9.6 and 9.8 through 9.11, 9.15
and 9.16 of the Agreement.
C. I have reviewed the above provisions of the Agreement on behalf of the
Company, and based on such review this Report is accurate.
D. Except as stated as Schedule D hereto (which shall describe any existing
Event of Default or event which with the passage of time and/or the giving of
notice, would constitute an Event of Default and the notice and period of
existence thereof and any action taken with respect thereto or contemplated to
be taken by Company or Permitted Borrower), no Event of Default, or event which
with the passage of time and/or the giving of notice would constitute an Event
of Default, has occurred and is continuing on the date of this Report.
Capitalized terms used in this Report and in the schedules hereto, unless
specifically defined to the contrary, have the meanings given to them in the
Agreement.
IN WITNESS WHEREOF, Company has caused this Report to be executed and
delivered by its duly authorized officer this _______ day of 199__.
WALBRO CORPORATION
By:________________________________
Its:_______________________________
[This form of Covenant Compliance Report is subject in all respects to the terms
and conditions of the Agreement which shall govern in the event of any
inconsistencies or omissions.]
3
<PAGE> 1
EXHIBIT 4.23
EXECUTION COPY
================================================================================
WALBRO CORPORATION
PURCHASE MONEY LOAN AGREEMENT
DATED AS OF AUGUST 27, 1997
COMERICA BANK, AS AGENT
HARRIS BANK, AS CO-AGENT
================================================================================
<PAGE> 2
TABLE OF CONTENTS
PAGE(S)
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . .1
2. PURCHASE MONEY LOANS . . . . . . . . . . . . . . . . .7
2.1 Commitment . . . . . . . . . . . . . . . . . . . . . .7
2.2 Maturity and Repayment; Accrual of Interest. . . . . .9
2.3 Call Option. . . . . . . . . . . . . . . . . . . . . .9
2.4 Prime-based Interest Payments. . . . . . . . . . . . .9
2.5 Eurocurrency-based Interest Payments.. . . . . . . . 10
2.6 Interest Payments on Conversions.. . . . . . . . . . 10
2.7 Interest on Default. . . . . . . . . . . . . . . . . 10
2.8A Initial Requests for Funding Purchase Money Loans. . 10
2.8B Purchase Money Loan Rate Requests; Refundings and
Conversions of Advances . . . . . . . . . . . . . . 11
2.8C Purchase Money Loan Certifications.. . . . . . . . . 13
2.8D Failure to Refund or Convert . . . . . . . . . . . . 13
2.9 Disbursement of Advances.. . . . . . . . . . . . . . 14
2.10 No Prepayment or Reduction of Commitment by Company. 15
2.11 Termination or Reduction of Commitment by Banks. . . 16
2.12 Purpose. . . . . . . . . . . . . . . . . . . . . . . 16
3. CONDITIONS.. . . . . . . . . . . . . . . . . . . . . 16
3.1 Execution of Purchase Money Notes, this Agreement
and the other Purchase Money Loan Documents . . . . 16
3.2 Corporate Authority. . . . . . . . . . . . . . . . . 16
3.3 Perfection of Liens Under Purchase Money Collateral
Documents. . . . . . . . . . . . . . . . . . . . . . 16
3.4 Representations and Warranties.. . . . . . . . . . . 17
3.5 Compliance with Certain Documents and Agreements.. . 17
3.6 Opinion of Counsel.. . . . . . . . . . . . . . . . . 17
3.7 Company's Certificate. . . . . . . . . . . . . . . . 17
3.8 Payment of Agent's and Other Fees. . . . . . . . . . 17
3.9 Other Documents and Instruments. . . . . . . . . . . 17
3.10 Continuing Conditions. . . . . . . . . . . . . . . . 17
4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . 18
5. INCORPORATION OF COVENANTS OF REVOLVING CREDIT
AGREEMENT; ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . 18
5.1 Incorporation of Covenants in Credit Agreement . . . 18
5.2 Required Appraisals; and Reductions of Purchase Money
Indebtedness . . . . . . . . . . . . . . . . . . . . 19
<PAGE> 3
5.3 Additional Reporting and Indemnification . . . . . . 19
5.4 Joinder of Future Significant Domestic Subsidiaries. 19
5.5 Disposition of Collateral. . . . . . . . . . . . . . 20
6. DEFAULTS . . . . . . . . . . . . . . . . . . . . . . 20
6.1 Events of Default. . . . . . . . . . . . . . . . . . 20
6.2 Exercise of Remedies.. . . . . . . . . . . . . . . . 21
6.3 Rights Cumulative. . . . . . . . . . . . . . . . . . 21
6.4 Waiver by Company and the Designated Borrowers of
Certain Laws; WAIVER OF JURY TRIAL . . . . . . . . . . . . . . 21
6.5 Waiver of Defaults.. . . . . . . . . . . . . . . . . 22
7. PAYMENTS, RECOVERIES AND COLLECTIONS; MARGIN
ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1 Payment Procedure. . . . . . . . . . . . . . . . . . 22
7.2 Pro-rata Recovery. . . . . . . . . . . . . . . . . . 23
7.3 Setoff . . . . . . . . . . . . . . . . . . . . . . . 23
7.4 Margin Adjustments.. . . . . . . . . . . . . . . . . 23
8. CHANGES IN LAW OR CIRCUMSTANCES; INCREASED COSTS.. . 24
8.1 Reimbursement of Prepayment Costs. . . . . . . . . . 24
8.2 Eurocurrency Lending Office. . . . . . . . . . . . . 25
8.3 Circumstances Affecting Eurocurrency-based Rate. . . 25
8.4 Laws Affecting Eurocurrency-based Availability.. . . 25
8.5 Increased Cost of Eurocurrency-based Advances. . . . 26
8.6 Indemnity. . . . . . . . . . . . . . . . . . . . . . 27
8.7 Other Increased Costs. . . . . . . . . . . . . . . . 27
9. AGENT. . . . . . . . . . . . . . . . . . . . . . . . 28
9.1 Appointment of Agent . . . . . . . . . . . . . . . . 28
9.2 Deposit Account with Agent.. . . . . . . . . . . . . 28
9.3 Exculpatory Provisions.. . . . . . . . . . . . . . . 28
9.4 Successor Agents.. . . . . . . . . . . . . . . . . . 29
9.5 Loans by Agent.. . . . . . . . . . . . . . . . . . . 29
9.6 Credit Decisions.. . . . . . . . . . . . . . . . . . 29
9.7 Notices by Agent.. . . . . . . . . . . . . . . . . . 30
9.8 Nature of Agency.. . . . . . . . . . . . . . . . . . 30
9.9 Actions; Confirmation of Agent's Authority to Act in
Event of Default . . . . . . . . . . . . . . . . . . 30
9.10 Authority of Agent to Enforce Purchase Money Notes
and This Agreement . . . . . . . . . . . . . . . . . 30
9.11 Indemnification. . . . . . . . . . . . . . . . . . . 31
9.12 Knowledge of Default.. . . . . . . . . . . . . . . . 31
9.13 Agent's Authorization; Action by Banks.. . . . . . . 31
9.14 Enforcement Actions by the Agent.. . . . . . . . . . 31
9.15 Co-Agent.. . . . . . . . . . . . . . . . . . . . . . 32
ii
<PAGE> 4
10. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . 32
10.1 Accounting Principles. . . . . . . . . . . . . . . . 32
10.2 Consent to Jurisdiction. . . . . . . . . . . . . . . 32
10.3 Law of Michigan. . . . . . . . . . . . . . . . . . . 33
10.4 Interest.. . . . . . . . . . . . . . . . . . . . . . 33
10.5 Closing Costs; Other Costs.. . . . . . . . . . . . . 33
10.6 Notices. . . . . . . . . . . . . . . . . . . . . . . 34
10.7 Further Action.. . . . . . . . . . . . . . . . . . . 34
10.8 Successors and Assigns; Assignments and
Participations . . . . . . . . . . . . . . . . . . . 34
10.9 Indulgence.. . . . . . . . . . . . . . . . . . . . . 37
10.10 Counterparts . . . . . . . . . . . . . . . . . . . . 37
10.11 Amendment and Waiver . . . . . . . . . . . . . . . . 37
10.12 Taxes and Fees . . . . . . . . . . . . . . . . . . . 38
10.13 Confidentiality .. . . . . . . . . . . . . . . . . . 38
10.14 Withholding Taxes .. . . . . . . . . . . . . . . . . 39
10.15 Effective Upon Execution . . . . . . . . . . . . . . 39
10.16 Severability . . . . . . . . . . . . . . . . . . . . 39
10.17 Table of Contents and Headings . . . . . . . . . . . 40
10.18 Construction of Certain Provisions . . . . . . . . . 40
10.19 Independence of Covenants .. . . . . . . . . . . . . 40
10.20 Reliance on and Survival of Various Provisions . . . 40
10.21 Complete Agreement; Amendment and Restatement .. . . 40
iii
<PAGE> 5
List of Schedules and Exhibits:
Schedule 2.1(a) Purchase Money Loans on Effective Date
Schedule 2.1(b) Description of Fixed Assets funded on Effective Date
Exhibit A Form of Purchase Money Loan Initial Request
Exhibit B-1 Form of Purchase Money Note (Company)
Exhibit B-2 Form of Purchase Money Note (Designated Borrower)
Exhibit C Percentages
Exhibit D Form of Purchase Money Rate Request
Exhibit E Form of Call Option Notice
iv
<PAGE> 6
PURCHASE MONEY LOAN AGREEMENT
THIS PURCHASE MONEY LOAN AGREEMENT ("Agreement") is made as of the 27th day
of August, 1997, by and among the Banks signatory hereto (individually, "Bank",
and collectively "Banks"), Comerica Bank, as agent for the Banks (in such
capacity, "Agent"), and Walbro Corporation, a Delaware corporation ("Company").
RECITALS:
A. Company has requested that the Banks extend to it and to the Designated
Borrowers (as defined below), credit to fund purchases of machinery, equipment,
fixtures and other fixed assets on the terms and conditions set forth herein,
and to make other credit accommodations as set forth in the Third Amendment to
Revolving Credit Agreement (as defined below).
B. The Banks are prepared to extend such credit, as aforesaid, but only
upon the terms and conditions set forth in this Agreement.
NOW THEREFORE, COMPANY, AGENT AND THE BANKS AGREE:
1. DEFINITIONS
For the purposes of this Agreement the following terms will have the
following meanings:
"Advance(s)" shall mean, as the context may indicate, a borrowing requested
by Company or by a Designated Borrower, and made by Banks under Section 2.1 of
this Agreement, as the case may be, and shall include, as applicable, a
Eurocurrency-based Advance and a Prime-based Advance.
"Advance Rate" shall mean seventy percent (70%).
"Agent" shall mean Comerica Bank, a Michigan banking corporation, or any
successor appointed in accordance with Section 9.4 hereof.
"Agent's Correspondent" shall mean such bank or banks as Agent may from
time to time designate by written notice to Company, the Designated Borrowers
and the Banks as its correspondent for Advances in eurodollars.
"Alternate Base Rate" shall mean, for any day, an interest rate per annum
equal to the Federal Funds Effective Rate in effect on such day, plus one
percent (1%).
"Applicable Interest Rate" shall mean the Eurocurrency-based Rate or the
Prime-based Rate, as selected by Company or a Designated Borrower from time to
time, subject to the terms and conditions of this Agreement.
<PAGE> 7
"Applicable Margin" shall mean, as of any date of determination thereof,
the applicable interest rate margin, determined (based on the Funded Debt Ratio
established under the Revolving Credit Agreement) by reference to the column
titled "Applicable Margin for Advances of the Revolving Credit and Swing Line
Advances" in the Pricing Matrix attached to the Revolving Credit Agreement as
Schedule 5.1.
"Assignment Agreement" shall have the meaning set forth in Section 10.8(d)
hereof.
"Banks" shall mean Comerica Bank, any other Banks signatory hereto, and any
assignee which becomes a Bank pursuant to Section 10.8(d) hereof.
"Business Day" shall mean any day on which commercial banks are open for
domestic and international business (including dealings in foreign exchange) in
Detroit, London (except with respect to any Prime-based Advances), and New York.
"Call Option" and "Call Option Notice" shall have the respective meanings
set forth in Section 2.3 hereof.
"Co-Agent" shall mean Harris Bank, in its capacity as Co-Agent hereunder.
"Collateral" shall mean all property or rights in which a security
interest, mortgage, lien or other encumbrance for the benefit of the Lenders is
or has been granted or arises or has arisen, under or in connection with this
Agreement, the Purchase Money Collateral Documents, or otherwise.
"Company" is defined in the Preamble.
"Covered Transaction" shall mean the purchase of any machinery, equipment
or fixtures (in a single transaction or series of transactions) with an
aggregate purchase price, net of shipping, installation and similar charges, and
excluding any capitalized interest or finance cost or charges, of Five Hundred
Thousand Dollars ($500,000) or more.
"Default" shall mean any event which, with the giving of notice or the
passage of time, or both, would constitute an Event of Default.
"Designated Borrower(s)" shall mean each of the Company's Significant
Domestic Subsidiaries which issues a Purchase Money Note under Section 2.1(e)
hereof.
"Dollars" and the sign "$" shall mean lawful money of the United States of
America.
"Domestic Advance" shall mean any Advance other than a Eurocurrency-based
Advance.
"Effective Date" shall mean the date on which all conditions precedent set
forth in Sections 3.1 through 3.9 hereof have been satisfied or waived.
2
<PAGE> 8
"Eurocurrency-based Advance" shall mean any Advance which bears interest at
the Eurocurrency-based Rate.
"Eurocurrency-based Rate" shall mean a per annum interest rate which is the
Applicable Margin (subject in each case to adjustment under Section 7.5 hereof)
above the quotient of:
(i) the per annum interest rate at which deposits in the
relevant eurocurrency are offered to Agent's Eurocurrency
Lending Office by other prime banks in the eurocurrency
market in an amount comparable to the relevant
Eurocurrency-based Advance and for a period equal to the
relevant Eurocurrency-Interest Period at approximately 11:00
A.M. Detroit time two (2) Business Days prior to the first
day of such Eurocurrency-Interest Period, divided by
(ii) a percentage equal to 100% minus the maximum rate on such
date at which Agent or any of the Reference Banks is
required to maintain reserves on `Eurocurrency Liabilities'
as defined in and pursuant to Regulation D of the Board of
Governors of the Federal Reserve System or, if such
regulation or definition is modified, and as long as Agent
is required to maintain reserves against a category of
liabilities which includes eurocurrency deposits or includes
a category of assets which includes eurocurrency loans, the
rate at which such reserves are required to be maintained on
such category,
such sum to be rounded upward, if necessary, to the nearest whole multiple of
1/100th of 1%.
"Eurocurrency-Interest Period" shall mean an Interest Period of one month,
two months or three months (or any lesser number of days agreed to in advance by
Company or a Designated Borrower, Agent and the Banks), as selected by Company
or a Designated Borrower, as applicable, for a Eurocurrency-based Advance
pursuant to Section 2.8B hereof.
"Eurocurrency Lending Office" shall mean, (a) with respect to the Agent,
Agent's office located at its Grand Caymans Branch or such other branch of
Agent, domestic or foreign, as it may hereafter designate as its Eurocurrency
Lending Office by notice to Company, the Designated Borrowers and the Banks and
(b) as to each of the Banks, its office, branch or affiliate located at its
address set forth on the signature pages hereof (or identified thereon as its
Eurocurrency Lending Office), or at such other office, branch or affiliate of
such Bank as it may hereafter designate as its Eurocurrency Lending Office by
notice to Company and Agent.
"Event of Default" shall mean each of the Events of Default specified in
Section 6.1 hereof and each of the Events of Default under the Revolving Credit
Agreement.
"Federal Funds Effective Rate" shall mean, for any day, a fluctuating
interest rate per annum equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day (or, if such
3
<PAGE> 9
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for such day on such
transactions received by Agent from three Federal funds brokers of recognized
standing selected by it.
"Guarantor(s)" shall mean the Company (in its capacity as a guarantor under
the Purchase Money Guaranty) and each Significant Domestic Subsidiary of the
Company and each Person otherwise becoming a Significant Domestic Subsidiary of
the Company subsequent to the date hereof or otherwise entering into the
Purchase Money Guaranty (by joinder agreement or otherwise) from time to time.
"Hereof", "hereto", "hereunder" and similar terms shall refer to this
Agreement in its entirety and not to any particular paragraph or provision of
this Agreement.
"Interest Period" shall mean a Eurocurrency-Interest Period commencing on
the day a Eurocurrency-based Advance is made, or on the effective date of an
election of the Eurocurrency-based Rate made under Section 2.8B hereof, provided
that:
(a) any Interest Period which would otherwise end on a day which is
not a Business Day shall be extended to the next succeeding Business Day,
except that as to a Eurocurrency-Interest Period, if the next succeeding
Business Day falls in another calendar month, such Eurocurrency-Interest
Period shall end on the next preceding Business Day, and when a
Eurocurrency-Interest Period begins on a day which has no numerically
corresponding day in the calendar month during which such
Eurocurrency-Interest Period is to end, it shall end on the last Business
Day of such calendar month, and
(b) no Interest Period shall extend beyond the maturity date set
forth in the Purchase Money Note to which such Interest Period is to apply.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated thereunder.
"Joinder Agreement" shall mean a joinder agreement in the form attached as
"Exhibit A" to the form of the Purchase Money Guaranty (Exhibit E to this
Agreement), to be executed and delivered, pursuant to Section 5.4 hereof, by any
Domestic Subsidiary which becomes a Significant Domestic Subsidiary subsequent
to the date hereof.
"Majority Banks" shall mean at any time Banks holding 66-2/3% of the
aggregate principal amount of the Purchase Money Indebtedness then outstanding
under the Purchase Money Notes, or, if no Purchase Money Indebtedness is then
outstanding, Banks holding 66-2/3% of the Percentages.
"Percentage" shall mean, with respect to any Bank, its percentage share, as
set forth on Exhibit C hereto, of the Purchase Money Indebtedness, as such
Exhibit may be revised from time to time by Agent in accordance with Section
10.8(d) hereof.
4
<PAGE> 10
"Person" shall mean an individual, corporation, partnership, trust,
incorporated or unincorporated organization, joint venture, joint stock company,
or a government or any agency or political subdivision thereof or other entity
of any kind.
"Prime-based Advance" shall mean an Advance which bears interest at the
Prime-based Rate.
"Prime-based Rate" shall mean that rate of interest which is the greater of
(i) the Prime Rate or (ii) the Alternate Base Rate.
"Prime Rate" shall mean the per annum interest rate established by Agent as
its prime rate for its borrowers as such rate may vary from time to time, which
rate is not necessarily the lowest rate on loans made by Agent at any such time.
"Purchase Money Collateral Documents" shall mean the Purchase Money
Guaranty, the Purchase Money Security Agreement and all of the other
acknowledgments, certificates, financing statements, instruments and other
security documents executed by the Company or any of the Designated Borrowers or
other Significant Subsidiaries and delivered to the Agent as of the date hereof
or from time to time subsequent hereto in connection with such guaranty or such
security agreement or this Agreement, as such collateral documents may be
amended, restated, supplemented or replaced from time to time.
"Purchase Money Guaranty" shall mean that certain guaranty of all of the
Purchase Money Indebtedness outstanding hereunder, executed and delivered by the
Company, the Designated Borrowers and the other Significant Domestic
Subsidiaries (whether by execution thereof, or by execution of the Joinder
Agreement attached as Exhibit A to the form of such guaranty) to the Agent, on
behalf of the Banks as of the date of this Agreement, as amended, restated,
supplemented or replaced from time to time.
"Purchase Money Indebtedness" shall mean all indebtedness and liabilities,
whether direct or indirect, absolute or contingent, owing by Company or any of
the Designated Borrowers to the Banks (or any of them) or to the Agent, in any
manner and at any time, under this Agreement or the other Purchase Money Loan
Documents, whether evidenced by the Purchase Money Notes, the Purchase Money
Guaranty, or otherwise, due or hereafter to become due, now owing or that may
hereafter be incurred by the Company or any of the Designated Borrowers to, or
acquired by, the Banks or by Agent in connection with transactions contemplated
by the Purchase Money Loan Documents, and any judgments that may hereafter be
rendered on such indebtedness or any part thereof, with interest according to
the rates and terms specified, or as provided by law, and any and all
consolidations, amendments, renewals, replacements or extensions of any of the
foregoing.
"Purchase Money Loan(s)" shall mean the purchase money loan(s) to be
advanced by the Banks to the Company or any of the Designated Borrowers pursuant
to Section 2.1 hereof for the purchase of any machinery, equipment, fixtures or
other fixed assets, in an aggregate amount (based on the original principal
amount thereof) not to exceed the Purchase Money Loan Aggregate
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Commitment, and "Purchase Money Loan" shall mean each or any of the Purchase
Money Loans funded pursuant thereto, as applicable.
"Purchase Money Loan Aggregate Commitment" shall mean Twenty-Five Million
Dollars ($25,000,000), subject to termination in whole (but not in part)
pursuant to Section 2.11(a) hereof.
"Purchase Money Loan Documents" shall mean this Agreement, the Purchase
Money Notes, the Purchase Money Collateral Documents and other documents,
instruments or agreements executed pursuant thereto, as amended, reviewed,
supplemented or replaced from time to time.
"Purchase Money Loan Initial Request" shall mean a request for the initial
funding of a Purchase Money Loan submitted by the Company or the applicable
Designated Borrower to the Agent under Section 2.8A of this Agreement in the
form annexed hereto as Exhibit A.
"Purchase Money Loan Maturity Date" shall mean the Revolving Credit
Maturity Date in effect from time to time under the Revolving Credit Agreement,
subject, in the case of any Purchase Money Loans covered thereby, to the
exercise of a Call Option pursuant to Section 2.3 hereof.
"Purchase Money Loan Rate Request" shall mean a request for the refunding
or conversion of any Advance of a Purchase Money Loan or Loans, submitted by
Company or the applicable Designated Borrower under Section 2.8B of this
Agreement in the form annexed hereto as Exhibit D.
"Purchase Money Loan Request" shall mean a Purchase Money Loan Initial
Request or a Purchase Money Loan Rate Request, or both such requests, as the
context may indicate.
"Purchase Money Notes" shall mean the promissory notes described in Section
2.1 hereof, made or to be made by Company or the Designated Borrowers to each of
the Banks in the form annexed to this Agreement as Exhibit B-1 or B-2, as the
case may be, as such Purchase Money Notes may be amended, renewed, replaced or
extended from time to time.
"Purchase Money Security Agreement" shall mean that certain security
agreement executed and delivered by Company and the Designated Borrowers to the
Agent as of the date of this Agreement or, by execution and delivery of a
joinder agreement in the form attached thereto, from time to time subsequent to
the date of this Agreement, encumbering the specific machinery, equipment,
fixtures or other fixed assets of such debtors acquired or refinanced (subject
to the terms hereof) with the proceeds of a Purchase Money Loan (all as and to
the extent set forth herein), as security for the applicable Purchase Money
Loan, as the same may be amended, restated, supplemented or replaced from time
to time.
"Purchase Price" shall mean the aggregate purchase price paid for any
machinery, equipment fixtures or other fixed assets in a Covered Transaction, as
evidenced by invoice or purchase order, net of any discounts and shipping,
installation and similar charges, and excluding any capitalized interest or
finance cost or charges.
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"Revolving Credit" shall mean the revolving credit loan to be advanced to
the Company and the Permitted Borrowers (as such term is defined in the
Revolving Credit Agreement) by the Banks pursuant to Section 2 of the Revolving
Credit Agreement.
"Revolving Credit Agreement" shall mean that certain Amended and Restated
Walbro Corporation $135,000,000 Credit Agreement dated as of September 22, 1995,
as amended by First Amendment dated as of March 8, 1996, Second Amendment dated
as of March 17, 1997 and Third Amendment and Waiver dated as of August 14, 1997
("Third Amendment"), as amended, modified, restated, or supplemented according
to the terms thereof from time to time.
Unless otherwise defined herein, all capitalized terms used herein shall
have the meanings set forth in the Revolving Credit Agreement.
2. PURCHASE MONEY LOANS
2.1 Commitment. (a) At least twenty (20) days but no more than sixty(60)
days prior to the purchase by Company or any of its Significant Domestic
Subsidiaries of any machinery, equipment, fixtures or other fixed assets in a
Covered Transaction, Company or such Significant Domestic Subsidiary (which
Significant Domestic Subsidiary shall have become a Designated Borrower pursuant
to Section 2.1(e) hereof) shall deliver a Purchase Money Loan Initial Request
(as set forth in Section 2.8(C) hereof), as notice to Agent of its intent to
make such purchase. The Agent shall distribute such Purchase Money Loan Initial
Request to the Banks, promptly upon receipt thereof from Company.
(b) So long as this Agreement remains in effect:
(i) Prior to each such purchase, Company or the applicable
Designated Borrower shall request the funding of a Purchase
Money Loan hereunder for each item (or group of items) of
machinery, equipment, fixtures or other fixed assets to be
purchased in a Covered Transaction in an amount equal to the
product of the Purchase Price of such machinery, equipment,
fixtures or other fixed assets times the Advance Rate and,
if funded by the Banks, Company or the applicable Designated
Borrower shall accept such Purchase Money Loan; and
(ii) Unless Agent has received written objections to the funding
of a specific Purchase Money Loan from Banks whose
Percentages aggregate not less than thirty four percent
(34%) within ten (10) days of Agent's notification to Banks
under Section 2.1(a) hereof, each of the Banks agrees
(severally and for itself alone) from and after the date
hereof to (but not including) the Purchase Money Loan
Maturity Date then in effect hereunder, but subject to the
terms and conditions of this Agreement, to advance to the
Company or to the applicable Designated Borrower which will
own such machinery, equipment, fixtures or other fixed
assets in a single Advance for each such
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Purchase Money Loan in Dollars, sums not to exceed in the
aggregate for each such Bank, an amount equal to such Bank's
respective Percentage of such Purchase Money Loan to be
funded pursuant to this Section 2.1; provided, however, that
the aggregate principal balance of Purchase Money Loans from
time to time outstanding shall not exceed the Purchase Money
Loan Aggregate Commitment then in effect. Upon the Purchase
Money Loan Maturity Date, the Banks' respective commitments
to make additional Purchase Money Loans hereunder shall
expire and be of no further force and effect.
(c) Unless Company or the applicable Designated Borrower has failed to
satisfy the other terms and conditions for borrowings hereunder, if any Purchase
Money Loan requested by Company or a Designated Borrower hereunder is not funded
by the Banks as a result of the receipt by Agent of objections from the Banks
pursuant to Section 2.1(b)(ii) hereof, Company or the applicable Designated
Borrower may purchase the machinery, equipment, fixtures or other fixed asset
which was the subject of such loan request without a borrowing under this
Agreement and without the grant of any security interest or lien hereunder.
(d) Concurrently with the Effective Date of this Agreement, but subject to
the terms and conditions hereof, the Banks shall (i) fund those Purchase Money
Loans identified on Schedule 2.1 hereto (the amount, the applicable borrower and
the specific Collateral for each such Purchase Money Loan being identified on
such exhibit) and (ii) waive the notice requirement and minimum loan and
transaction amounts set forth in Section 2.1(a) hereof with respect to the
particular machinery, equipment, fixtures or other fixed assets identified on
Schedule 2.1 attached hereto.
(e) Each of the Purchase Money Loans funded under this Section 2.1 shall be
evidenced by Purchase Money Notes to be executed and delivered to each of the
Banks by Company and those of its Significant Domestic Subsidiaries which
purchase machinery, equipment, fixtures or other fixed assets with Purchase
Money Loans hereunder, substantially in the form attached hereto as Exhibit B-1
or B-2, as applicable, with appropriate insertions acceptable to Agent and the
Banks in form and substance, and in the face amount of each Bank's Percentage of
the Purchase Money Loan Aggregate Commitment to be funded by the Banks
hereunder. Each such Purchase Money Loan shall be secured by (and only by) the
specific machinery, equipment, fixtures or other fixed assets upon which such
loan was based (and the proceeds thereof), as identified in the applicable
Purchase Money Loan Initial Request delivered to Agent and the Banks pursuant to
Section 2.8A hereof.
A Significant Domestic Subsidiary shall not be entitled to request a
Purchase Money Loan as a Designated Borrower hereunder until it has executed and
delivered to the Banks, as aforesaid, a Purchase Money Note and has become a
party to the Purchase Money Guaranty and the Purchase Money Security Agreement
accompanied in each case by authority documents, legal opinions and other
supporting documents as required under Section 3 hereof.
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(f) Principal reductions of the Purchase Money Loans received by the Banks
in accordance with this Agreement shall, subject to the terms hereof, be
available for readvance and reborrowing hereunder.
(g) So long as any sums are available for borrowing hereunder, neither the
Company nor any of its Significant Domestic Subsidiaries shall purchase any
machinery, equipment, fixtures or other fixed assets in a Covered Transaction,
except in compliance with this Section 2.1.
2.2 Maturity and Repayment; Accrual of Interest. The Purchase Money Loans,
and all principal and interest outstanding thereunder, shall mature (unless
required to be paid prior thereto, whether pursuant to the exercise of any Call
Option or as required under Section 5.2 hereof, by acceleration or otherwise)
and become due and payable in full on the Purchase Money Loan Maturity Date, and
each Advance of Purchase Money Indebtedness evidenced by the Purchase Money
Notes from time to time outstanding hereunder shall, from and after the date of
such Advance, bear interest at its Applicable Interest Rate. The amount and date
of each Advance, its Applicable Interest Rate, its Interest Period, if any, and
the amount and date of any repayment shall be noted on Agent's records, which
records will be rebuttably presumptive evidence thereof, absent demonstrable
error; provided, however, that any failure by the Agent to record any such
information shall not relieve the Company or the applicable Designated Borrower
of its obligation to repay the outstanding principal amount of such Advance, all
interest accrued thereon and any amount payable with respect thereto in
accordance with the terms of this Agreement and the other Purchase Money Loan
Documents.
2.3 Call Option. The Purchase Money Loans shall be subject to the right of
the Majority Banks to exercise a call option ("Call Option") under which all or
any portion of the principal balance of the Purchase Money Indebtedness then
outstanding (as specified in such notice) shall become due and payable within
thirty (30) days following the receipt by the Company of a Call Option Notice in
the form of Exhibit E attached hereto, such notice to be given by Agent, at the
direction or with the concurrence of the Majority Banks to Company and the
Designated Borrowers. All sums received for application against the Purchase
Money Indebtedness in connection with the exercise of a Call Option hereunder
shall be applied to such of the Purchase Money Loans then outstanding as the
Majority Banks shall specify in the applicable Call Option Notice, and otherwise
in such order and manner as the Majority Banks shall elect; provided that if no
Default or Event of Default has occurred and is continuing, such sums will be
held by Agent in a cash collateral account, for application against such
outstanding Purchase Money Loans on the last day of the applicable Interest
Periods, but only to the extent necessary to avoid the imposition of breakage
costs or charges hereunder. It is acknowledged and agreed that, subject to the
terms thereof, Advances under the Revolving Credit Agreement may be used to
repay Purchase Money Indebtedness required to be repaid hereunder.
2.4 Prime-based Interest Payments. Interest on the unpaid balance of each
Purchase Money Loan which is funded or carried as a Prime-based Advance from
time to time shall accrue from the date of such Advance to the Purchase Money
Loan Maturity Date (or until refunded, converted or paid), at a per annum
interest rate equal to the Prime-based Rate, and shall be payable
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<PAGE> 15
in immediately available funds quarterly commencing on the first day of the
calendar quarter immediately following the calendar quarter in which the Advance
under the applicable Purchase Money Loan is made, and continuing on the first
day of each calendar quarter thereafter until the Purchase Money Loan Maturity
Date. Interest accruing at the Prime-based Rate shall be computed on the basis
of a 360-day year and assessed for the actual number of days elapsed, and in
such computation effect shall be given to any change in the interest rate
resulting from a change in the Prime-based Rate on the date of such change in
the Prime-based Rate.
2.5 Eurocurrency-based Interest Payments. Interest on the unpaid balance of
each Purchase Money Loan which is funded or carried as a Eurocurrency-based
Advance from time to time shall accrue at its Applicable Interest Rate and shall
be payable in immediately available funds on the last day of the Interest Period
applicable thereto. Interest accruing at the Eurocurrency-based Rate shall be
computed on the basis of a 360-day year and assessed for the actual number of
days elapsed from the first day of the Interest Period applicable thereto to,
but not including, the last day thereof.
2.6 Interest Payments on Conversions. Notwithstanding anything to the
contrary in the preceding Sections, all accrued and unpaid interest on any
Advance of the Purchase Money Loan converted pursuant to Section 2.8B hereof
shall be due and payable in full on the date such Advance of the Purchase Money
Loan is converted.
2.7 Interest on Default. In the event and so long as any Event of Default
shall exist under any Purchase Money Note or under this Agreement, interest
shall be payable daily on all Advances evidenced by the Purchase Money Notes
from time to time outstanding at a per annum rate equal to the Applicable
Interest Rate, plus two percent (2%) for the remainder of the then existing
Interest Period, if any, and at all other times at the Prime-based Rate, plus
two percent (2%).
2.8A Initial Requests for Funding Purchase Money Loans. Company or the
applicable Designated Borrower may request the funding of a Purchase Money Loan
only upon delivery to the Agent of a Purchase Money Loan Initial Request
executed by an authorized officer of Company or the applicable Designated
Borrower (with the countersignature of the Company) in accordance with Section
2.1(a) hereof, subject to the following conditions:
(a) Each such Purchase Money Loan Initial Request shall set forth the
information required on such form including without limitation:
(i) whether the borrower will be the Company or an
applicable Significant Domestic Subsidiary;
(ii) the Purchase Price for the item or group of items to be
purchased and a certification that the fair market
value of the applicable machinery, equipment, fixtures
or other fixed assets will equal or exceed the Purchase
Price at the time of funding, and the supporting and
other information required under Section 2.1 hereof;
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(iii) the principal amount of the Purchase Money Loan
requested to be funded, which amount shall not be less
than Three Hundred and Fifty Thousand Dollars
($350,000) and the proposed date that the applicable
Purchase Money Loan is to be funded (which must be a
Business Day); and
(iv) the particular machinery, equipment or fixtures or
other fixed assets to be purchased or refunded with the
proceeds of the Purchase Money Loan, including serial
number and other descriptive information (and the real
estate description, ownership information and titlework
pertinent to any property location to which an item or
group of items is to become, or may become, affixed to
such real estate) sufficient for perfection of the
security interest and lien to be granted to the Banks
under the Purchase Money Security Agreement (and as
determined by the Majority Banks in their reasonable
discretion);
and shall be accompanied by appropriate financing statements, financing
statement amendments and/or other documents or instruments required for the
perfection of the security interests and liens to be granted to the Banks
pursuant to the Purchase Money Security Agreement and any Purchase Money Loan
Initial Requests delivered in connection therewith (as reasonably required by
Agent and the Majority Banks);
(b) The principal amount of the Purchase Money Loan requested to be funded,
determined as of the date of funding such loan, plus the principal amount of all
other Purchase Money Loans than outstanding hereunder shall not exceed the then
applicable Purchase Money Loan Aggregate Commitment; and
(c) In connection with the funding of each Purchase Money Loan hereunder,
Company or the applicable Designated Borrower shall deliver to the Agent, no
later than 12:00 noon (Detroit time) three Business Days prior to the proposed
date of Advance, a Purchase Money Loan Rate Request in accordance with Section
2.8B hereof, except in the case of a Prime-based Advance, for which the Purchase
Money Loan Rate Request shall be delivered by 11:00 a.m. (Detroit time) on the
proposed date of Advance.
2.8B Purchase Money Loan Rate Requests; Refundings and Conversions of
Advances. Company or a Designated Borrower may refund or convert any Advance of
Purchase Money Loans at the Prime-based Rate or the Eurocurrency-based Rate and
request the Advance of a Purchase Money Loan at the Prime-based Rate or the
Eurocurrency-based Rate, but only after delivery to Agent of a Purchase Money
Loan Rate Request executed by an authorized officer of Company or the applicable
Designated Borrower (with the countersignature of the Company) and subject to
the terms hereof and to the following:
(a) each such Purchase Money Loan Rate Request shall set forth the
information required on the Purchase Money Loan Rate Request form with
respect to such Purchase Money Loan, including without limitation:
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<PAGE> 17
(i) the proposed date of the refunding or conversion
of the Advances, which must be a Business Day;
(ii) whether the Advance is a refunding or conversion
of any outstanding Advances; and
(iii) whether such Advance is to be a Prime-based
Advance or a Eurocurrency-based Advance, and,
except in the case of a Prime-based Advance, the
Interest Period applicable thereto.
(b) each such Purchase Money Loan Rate Request shall be delivered to
Agent by 12 Noon (Detroit time) three (3) Business Days prior to the
proposed date of Advance, except in the case of a Prime-based Advance, for
which the Request for Advance must be delivered by 11 a.m. on the proposed
date of Advance;
(c) the principal amount of such Advance of a Purchase Money Loan or
Loans, plus the amount of any other Advances of Purchase Money Loans to be
then combined therewith having the same Applicable Interest Rate and
Interest Period, if any, shall be (i) in the case of a Prime-based Advance
at least Three Hundred Fifty Thousand Dollars ($350,000), or the remaining
principal balance outstanding under all Purchase Money Loans funded prior
thereto, whichever is less and (ii) in the case of a Eurocurrency-based
Advance at least Two Million Five Hundred Thousand Dollars ($2,500,000), or
a larger whole dollar multiple;
(d) no Advance shall have an Interest Period ending after the
Purchase Money Loan Maturity Date, and, notwithstanding any provision
hereof to the contrary, Company or the applicable Designated Borrower shall
be required to select Interest Periods for sufficient portions of Purchase
Money Indebtedness(or maintain sufficient portions thereof as a Prime-based
Advance) such that the Company or the applicable Designated Borrower may
make its required principal payments hereunder (if a Call Option has been
exercised), on a timely basis and otherwise in accordance with Section 2.3
above;
(e) upon completion of the Advance there shall be no more than three
(3) Interest Periods and Two (2) Applicable Interest Rates (including the
Prime-based Rate) in effect with respect to all of the Purchase Money Loans
then outstanding; and
(f) a Purchase Money Loan Rate Request, once delivered to Agent,
shall not be revocable by Company or the applicable Designated Borrower.
Each selection of an Interest Period, and the amount and date of any repayment
shall be noted on Agent's records, which records will be rebuttably presumptive
evidence thereof, absent demonstrable error.
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2.8C Purchase Money Loan Certifications. Each Purchase Money Loan Initial
Request and Purchase Money Loan Rate Request shall constitute and include a
certification by the Company or the applicable Designated Borrower as of the
date thereof that:
(a) both before and after the Advance so requested, the obligations
of the Company and its Subsidiaries set forth in this Agreement and the
other Purchase Money Loan Documents to which such Persons are parties are
valid, binding and enforceable obligations of the Company, its Subsidiaries
and the Designated Borrowers, as the case may be;
(b) all conditions to Advances of the applicable Purchase Money Loan
or Purchase Money Loans have been satisfied, and shall remain satisfied to
the date of the Advance (both before and after giving effect to such
Advance);
(c) there is no Default or Event of Default in existence, and none
will exist upon the making of the applicable Advance (both before and after
giving effect to such Advance);
(d) the representations and warranties contained in this Agreement
and the other Purchase Money Loan Documents are true and correct in all
material respects and shall be true and correct in all material respects as
of the making of the applicable Advance (both before and after giving
effect to such Advance);
(e) the execution of the applicable Purchase Money Loan Initial
Request or Purchase Money Loan Rate Request will not violate the material
terms and conditions of any material contract, agreement or other borrowing
of Company or any of its Subsidiaries; and
(f) Company or the applicable Designated Borrower, as the case may
be, requesting such Advance has good and marketable title to the particular
machinery, equipment or fixtures or other fixed assets to be funded with
the proceeds of such Advance or will acquire such good and marketable title
concurrently upon the making of the Advance with respect thereto, subject
to no liens, claims, security interests or encumbrances.
Each Purchase Money Loan Initial Request or Purchase Money Loan Rate Request, as
the case may be, shall be accompanied by such documents, instruments and other
materials required hereunder or otherwise necessary to evidence satisfaction of
all conditions to the applicable Advance or Advances of a specified Purchase
Money Loan or Purchase Money Loans.
2.8D Failure to Refund or Convert. In the event the Company shall fail with
respect to any Advance of a Purchase Money Loan or Loans (other than a
Prime-based Advance) to timely exercise its option to refund or convert such
Advance in accordance with this Section 2.8 (and such Advance has not been paid
in full on the last day of the Interest Period applicable thereto according to
the terms hereof) the principal amount of such Advance which has not been
prepaid shall be automatically converted to a Prime-based Advance.
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2.9 Disbursement of Advances.
(a) Upon receiving a Purchase Money Loan Initial Request from
Company or a Designated Borrower in compliance with Sections 2.1, 2.8A and
2.8B hereof, together with such other documents and instruments required
thereunder, Agent shall promptly notify each Bank by wire, telex or by
telephone (confirmed by wire, telecopy or telex) of the amount of such
Advance to be made and the date such Advance is to be made by said Bank
pursuant to its Percentage of the Advance. Unless such Bank's commitment to
make Advances hereunder shall have been suspended or terminated in
accordance with this Agreement, each Bank shall make available to Agent the
amount of its Percentage of the Advance in immediately available funds, as
follows:
(i) for Prime-based Advances, at the office of Agent
located at One Detroit Center, 500 Woodward
Avenue, Detroit, Michigan 48226, not later than
2:00 p.m. (Detroit time) on the date of such
Advance; and
(ii) for Eurocurrency-based Advances, at the Agent's
Correspondent for the account of the Eurocurrency
Lending Office of the Agent, not later than 12
Noon (the time of the Agent's Correspondent) on
the date of such Advance.
(b) Subject to receipt of the Purchase Money Loan Initial Requests,
as applicable, and such other documents and instruments referred to in
Section 2.9(a) hereof (without exceptions noted in the compliance
certifications therein), Agent shall make available to Company or the
applicable Designated Borrower, as the case may be, the aggregate of the
amounts so received by it from the Banks in like funds:
(i) for Advances in respect of Purchase Money Loans
which refund prior purchases of machinery,
equipment, fixtures or other fixed assets, not
later than 4:00 p.m. (Detroit time, or the time of
the Agent's Correspondent, as the case may be) on
the date of such Advance by deposit to an account
of the Company or the applicable Designated
Borrower maintained with Agent, or Agent's
Correspondent, as the case may be, or to such
other account or third party as Company or the
applicable Designated Borrower may reasonably
direct;
(ii) in connection with all other Advances to purchase
machinery, equipment, fixtures or other fixed
assets hereunder, not later than 4:00 p.m.
(Detroit time or the time of the Agent's
Correspondent, as the case may be) on the date of
such Advance, directly to the vendor of such fixed
assets.
(c) Agent shall deliver the documents and papers received by it for
the account of each Bank to such Bank or upon its order. Unless Agent shall
have been notified by any
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<PAGE> 20
Bank prior to the date of any proposed Advance that such Bank does not
intend to make available to Agent such Bank's Percentage of the Advance,
Agent may assume that such Bank has made such amount available to Agent on
such date, as aforesaid and may, in reliance upon such assumption, make
available to Company or the applicable Designated Borrower a corresponding
amount. If such amount is not in fact made available to Agent by such Bank,
as aforesaid, Agent shall be entitled to recover such amount on demand from
such Bank. If such Bank does not pay such amount forthwith upon Agent's
demand therefor, the Agent shall promptly notify Company and Company or the
applicable Designated Borrower shall pay such amount to Agent. Agent shall
also be entitled to recover from such Bank or Company (and the applicable
Designated Borrower), as the case may be, interest on such amount in
respect of each day from the date such amount was made available by Agent
to Company or the applicable Designated Borrower to the date such amount is
recovered by Agent, at a rate per annum equal to:
(i) in the case of such Bank, with respect to
Prime-based Advances, the Federal Funds Effective
Rate, and with respect to Eurocurrency-based
Advances, Agent's aggregate marginal cost
(including the cost of maintaining any required
reserves or deposit insurance and of any fees,
penalties, overdraft charges or other costs or
expenses incurred by Agent as a result of such
failure to deliver funds hereunder) of carrying
such amount; and
(ii) in the case of Company, the rate of interest then
applicable to the Purchase Money Loans.
The obligation of any Bank to make any Advance hereunder shall not be
affected by the failure of any other Bank to make any Advance hereunder,
and no Bank shall have any liability to the Company or its Subsidiaries,
the Agent, any other Bank, or any other party for another Bank's failure to
make any loan or Advance hereunder.
2.10 No Prepayment or Reduction of Commitment by Company. Unless and until
the Company has duly and irrevocably terminated the Revolving Credit Agreement,
and all of its obligations thereunder and under the other Loan Documents (as
such term is defined in the Revolving Credit Agreement) (or does so concurrently
therewith), the Company shall not be entitled to prepay all or any portion of
the Purchase Money Indebtedness, and the Banks shall have no obligation
whatsoever to accept any such prepayment. Nor shall Company or any Designated
Borrower be entitled to reduce the amount of the Purchase Money Loan Aggregate
Commitment available to be advanced hereunder. Notwithstanding the foregoing
however, if on the proposed date of prepayment there are no outstanding Advances
under the Revolving Credit Agreement and the Company has maintained such
Advances at zero (0) for a period of not less than thirty (30) consecutive days
through the proposed date of prepayment, then the Company may, subject to
Article 8 and the other terms and conditions hereof, prepay all or any portion
of the Purchase Money Indebtedness outstanding at such time and the Banks shall
accept such prepayment.
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2.11 Termination or Reduction of Commitment by Banks. At any time and from
time to time, and whether or not a Default or Event of Default has occurred and
is continuing, the Majority Banks may elect, by written notice to the Company,
to terminate the Banks' commitment to fund Purchase Money Loans under Section
2.1 hereof which then remains unfunded, provided that any Purchase Money Loans
funded prior to the effective date of such termination shall not be affected by
termination of such commitment. Termination shall be effective immediately upon
the giving of notice by Agent (at the direction of with the concurrence of the
Majority Banks) to Company and the Designated Borrowers.
2.12 Purpose. Purchase Money Loans shall be available, subject to the terms
hereof, to fund the purchase of machinery, equipment, fixtures and other fixed
assets by the Company and the Designated Borrowers or refinancings of such
purchases pursuant to Section 2.1(d) hereof.
3. CONDITIONS. The obligations of Banks to make Advances or loans pursuant
to this Agreement are subject to the following conditions, provided however that
Sections 3.1 through 3.10 below shall only apply to the initial Advances or
loans hereunder:
3.1 Execution of Purchase Money Notes, this Agreement and the other
Purchase Money Loan Documents. The Company (on or before the Effective Date),
each Guarantor and the Designated Borrowers (prior to requesting any Advance
hereunder), as applicable, shall have executed and delivered to the Agent for
the account of each Bank, the Purchase Money Notes and this Agreement (including
all schedules, exhibits, certificates, opinions, financial statements and other
documents to be delivered pursuant hereto) and the other Purchase Money Loan
Documents, and, as applicable, this Agreement and the other Purchase Money Loan
Documents shall be in full force and effect.
3.2 Corporate Authority. Agent shall have received, with a counterpart
thereof for each Bank: (i) certified copies of resolutions of the Board of
Directors of the Company, each of the Designated Borrowers (prior to requesting
any Advance hereunder) and each Guarantor evidencing approval of this Agreement,
the Purchase Money Notes and the other Purchase Money Loan Documents to which
such Person is a party and (if applicable) authorizing the execution and
delivery thereof and the borrowing of Advances hereunder; (ii) (A) certified
copies of the Company's, each Designated Borrower's and each Guarantor's
articles of incorporation and bylaws or other constitutional documents certified
as true and complete as of a recent date by the appropriate official of the
jurisdiction of incorporation of each such entity (or, if unavailable in such
jurisdiction, by a responsible officer of such entity); and (B) certificates of
good standing for Company, the Designated Borrowers and the Guarantors
satisfying the requirements set forth in Section 6.2 of the Revolving Credit
Agreement, as applicable.
3.3 Perfection of Liens Under Purchase Money Collateral Documents. In
addition, the Agent shall have received, concurrently with or prior to the
making of any Purchase Money Loan hereunder, proof that appropriate financing
statements, collateral and other documents covering such collateral, have been
executed and delivered by the appropriate parties and recorded, registered or
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filed in such jurisdictions and such other steps have been taken as necessary to
perfect the security interests or other liens granted thereby.
3.4 Representations and Warranties. The representations and warranties made
by the Company, the Designated Borrowers, the Guarantors and any other party to
any of the Purchase Money Loan Documents under this Agreement or any of the
other Purchase Money Loan Documents (excluding the Agent and the Banks), and the
representations and warranties of any of the foregoing which are contained in
any certificate, document or financial or other statement furnished at any time
hereunder or thereunder or in connection herewith or therewith shall have been
true and correct in all material respects when made and shall be true and
correct in all material respects on and as of the date of the making of the
initial Advance hereunder.
3.5 Compliance with Certain Documents and Agreements. The Company, the
Designated Borrowers and the Guarantors (and any of their respective
Subsidiaries or Affiliates) shall have each performed and complied with all
agreements and conditions contained in this Agreement, the other Purchase Money
Loan Documents, or any agreement or other document executed hereunder or
thereunder and required to be performed or complied with by each of them (as of
the applicable date) and none of such parties shall be in default in the
performance or compliance with any of the terms or provisions hereof or thereof.
3.6 Opinion of Counsel. The Company, the Designated Borrowers and the
Guarantors shall have furnished Agent with signed copies for each Bank (and
addressed to each of the Banks) opinions of counsel given upon the express
instructions of the Company, the Designated Borrowers and the Guarantors, dated
as of the applicable dates of delivery thereof, and covering such matters as
required by and otherwise satisfactory in form and substance to the Agent and
each of the Banks.
3.7 Company's Certificate. The Agent shall have received, with a signed
counterpart for each Bank, a certificate of a responsible senior officer of
Company, dated the date of the making of the initial Advances hereunder, stating
that the conditions of paragraphs 3.1, 3.4, 3.5 and 3.10(a) through (c) hereof
have been fully satisfied.
3.8 Payment of Agent's and Other Fees. Company shall have paid to the Agent
all fees, costs and expenses required hereunder.
3.9 Other Documents and Instruments. The Agent shall have received, with a
photocopy for each Bank, such other instruments and documents as the Majority
Banks may reasonably request in connection with the making of Advances
hereunder, and all such instruments and documents shall be satisfactory in form
and substance to the Majority Banks.
3.10 Continuing Conditions. Subject to the terms hereof, the obligations of
the Banks to make any of the Advances or loans under this Agreement shall be
subject to the following continuing conditions:
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(a) No Default or Event of Default shall have occurred and be
continuing as of the making of the proposed Advance (both before and after
giving effect thereto);
(b) There shall have been no material adverse change in the
condition (financial or otherwise), properties, business, results or operations
of the Company and its Subsidiaries, taken as a whole, from December 31, 1996,
except changes in the ordinary course of business (including without limitation
the information set forth in the Consolidated financial statements of the
Company and its Subsidiaries as of December 31, 1996), or any subsequent
December 31st, if the Agent determines, with the concurrence of the Majority
Banks, based on the Company's financial statements for such subsequent fiscal
year that no material adverse change has occurred during such year, such
determination being made solely for purposes of determining the applicable date
under this paragraph to the date of the proposed Advance hereunder;
(c) The representations and warranties contained in this Agreement
and the other Purchase Money Loan Documents are true and correct in all material
respects as of the making of the applicable Advance; and
(d) All documents executed or submitted pursuant hereto shall be
reasonably satisfactory in form and substance (consistent with the terms hereof)
to Agent and its counsel and to each of the Banks; Agent and its counsel and
each of the Banks and their respective counsel shall have received all
information, and such counterpart originals or such certified or other copies of
such materials, as Agent or its counsel and each of the Banks and their
respective counsel may reasonably request; and all other legal matters relating
to the transactions contemplated by this Agreement (including, without
limitation, matters arising from time to time as a result of changes occurring
with respect to any statutory, regulatory or decisional law applicable hereto)
shall be satisfactory to counsel to Agent and counsel to each of the Banks.
4. REPRESENTATIONS AND WARRANTIES
Each of the Company and the Designated Borrowers ratify, confirm and by
reference thereto, represent and warrant to Agent and the Banks with respect to
themselves and with respect to this Agreement those matters set forth in
Sections 7.1 through 7.20, inclusive, of the Revolving Credit Agreement (and,
for purposes of this Agreement, but not otherwise, each reference in the
Revolving Credit Agreement to the Loan Documents shall include the Purchase
Money Loan Documents), and such representations and warranties shall be deemed
to be continuing representations and warranties during the entire life of this
Agreement.
5. INCORPORATION OF COVENANTS OF REVOLVING CREDIT
AGREEMENT; ADDITIONAL COVENANTS
5.1 Incorporation of Covenants in Credit Agreement. For the benefit of the
Banks, Company and the Designated Borrowers shall comply with all covenants
contained in the Revolving Credit Agreement, as fully as though such covenants
were set forth herein in their entirety. The provisions of the Revolving Credit
Agreement, as amended, modified restated, or supplemented
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from time to time according to the terms thereof, and subject to any waiver or
consent granted by the Majority Banks or the Banks, as the case may be,
thereunder, are incorporated herein by reference in accordance with the
foregoing and shall remain in full force and effect for the benefit of the
Banks, notwithstanding any termination of the Revolving Credit Aggregate
Commitment after the date hereof.
5.2 Required Appraisals; and Reductions of Purchase Money Indebtedness.
(a) Commencing on June 1, 1999, and on June 1st of every third year
thereafter and, at the sole discretion of the Majority Banks, more frequently
if an Event of Default has occurred and is continuing so long as this Agreement
remains in effect, Company shall deliver or cause to be delivered to the Agent
(with copies for each of the Banks) a personal property appraisal in form and
substance satisfactory to the Majority Banks performed by an appraiser
satisfactory to Agent and the Majority Banks (and addressing such matters as
Agent or the Majority Banks shall specify in writing from time to time to the
Company) covering each item of the Collateral and setting forth, among other
things, the "forced sale value" thereof. In addition, subject to the consent of
its insurance carriers (and any appraisers retained by such insurance
carriers), Company shall deliver or cause to be delivered to Agent (with copies
for each of the Banks), promptly upon Company's receipt thereof, copies of any
insurance appraisals performed from time to time. The appraisals required
hereunder shall be delivered at the sole expense of the Company.
(b) In addition, in the event of the receipt by Company, any
Designated Borrower or any other Subsidiary of the proceeds of any sale,
condemnation, insurance, loss or casualty of or affecting any item of Collateral
(or any other proceeds of any kind or nature in respect thereof), the amount of
such proceeds shall be immediately paid to Agent, for application by Agent
against the Purchase Money Loan used to fund the acquisition of such item of
Collateral, in the order and manner as determined by the Majority Banks in their
sole discretion.
5.3 Additional Reporting and Indemnification. In addition to the report and
other information required to be provided under Section 8.3 of the Revolving
Credit Agreement, Company shall be obligated to provide promptly, and in form to
be satisfactory to Agent and the requesting Bank or Banks, such other
information as Agent or any of the Banks (acting through Agent) may reasonably
request from time to time with respect to the purchase of any machinery,
equipment, fixtures or other fixed assets, or with respect to the Collateral,
this Agreement or the other Purchase Money Loan Documents. Furthermore, Company
and each of the Designated Borrowers shall also indemnify and save Agent and
each of the Banks (and their respective officers, directors, agents, employees
and other representatives) harmless from all reasonable loss, cost, damage,
liability or other expenses, including reasonable attorney fees and
disbursements, incurred by Agent and each of the Banks with respect to this
Agreement and the other Purchase Money Loan Documents on the same basis and to
the full extent as set forth in Section 8.11 of the Revolving Credit Agreement
for the Revolving Credit Agreement and the other Loan Documents (as defined
therein).
5.4 Joinder of Future Significant Domestic Subsidiaries. Company shall (a)
cause each Domestic Subsidiary which becomes a Significant Domestic Subsidiary
(as determined under Section 8.17 of the Revolving Credit Agreement) to promptly
(but in any event within thirty days
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of the date such Domestic Subsidiary becomes a Significant Domestic Subsidiary)
execute and deliver to Agent, for and on behalf of each of the Banks, a joinder
agreement whereby such Significant Domestic Subsidiary becomes obligated as a
Guarantor under the Purchase Money Guaranty (in the form of joinder agreement
attached thereto) and (b) cause each Significant Domestic Subsidiary which
becomes a Designated Borrower after the date hereof, concurrently with the
delivery by such Designated Borrower of Notes hereunder, to execute and deliver
to Agent, for and on behalf of the Banks, a joinder agreement whereby such
Designated Borrower becomes obligated as a Debtor under the Purchase Money
Security Agreement (in the form of joinder agreement attached thereto),
together, in the case of clauses (a) and (b) hereof, as applicable, with such
financing statements and other supporting documentation, including without
limitation corporate authority items, certificates and opinions of counsel, as
reasonably required by Agent and the Majority Banks.
5.5 Disposition of Collateral. Notwithstanding the provision of Section 9.3
of the Revolving Credit Agreement, the Company shall not sell, lease, transfer,
relocate or dispose of any of the Collateral except as expressly permitted under
the Purchase Money Loan Documents.
6. DEFAULTS
6.1 Events of Default. Any of the following events is an "Event of
Default":
(a) non-payment when due of the principal or interest under any of
the Purchase Money Notes issued hereunder in accordance with the terms
thereof, and in the case of interest payments, continuance thereof for
three (3) Business Days;
(b) default in the payment of any money by Company or any of the
Designated Borrowers under this Agreement (other than as set forth in
subsection (a), above), within three (3) days of the date the same is due
and payable;
(c) default in the observance or performance of any of the other
conditions, covenants or agreements set forth in this Agreement or any of
the other Purchase Money Loan Documents by any party thereto or the
occurrence of any other default or event of default, as the case may be,
hereunder or thereunder;
(d) any representation or warranty made by Company or any of the
Designated Borrowers herein or in any instrument submitted pursuant hereto
or by any other party to the Purchase Money Loan Documents proves untrue in
any material adverse respect when made or deemed made;
(e) default in the observance or performance of or failure to comply
with any of the conditions, covenants or agreements of Company, the
Designated Borrowers or any Guarantor set forth in any of the other
Purchase Money Loan Documents, and the continuance thereof beyond any
period of grace or cure specified in any such document;
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(f) any provision of the Purchase Money Guaranty shall at any time
for any reason cease to be valid and binding and enforceable against the
Company or any of the Guarantors, as applicable, or the validity, binding
effect or enforceability thereof shall be contested by any Person, or the
Company or any of the Guarantors shall deny that it has any or further
liability or obligation under the Purchase Money Guaranty, or the Purchase
Money Guaranty shall be terminated, invalidated, revoked or set aside or in
any way cease to give or provide to the Banks and the Agent the benefits
purported to be created thereby; or
(g) the occurrence of an Event of Default under the Revolving Credit
Agreement or the other Loan Documents.
6.2 Exercise of Remedies. If an Event of Default has occurred and is
continuing hereunder: (a) the Agent shall, if directed to do so by the Majority
Banks, declare any commitment of the Banks to lend hereunder immediately
terminated; (b) the Agent shall, if directed to do so by the Majority Banks,
declare the entire unpaid principal Purchase Money Indebtedness, including the
Purchase Money Notes, immediately due and payable, without presentment, notice
or demand, all of which are hereby expressly waived by Company and each of the
Designated Borrowers; (c) upon the occurrence of any Event of Default specified
in Section 10.1 (l) of the Revolving Credit Agreement and notwithstanding the
lack of any declaration by Agent under preceding clause (b) hereof, the entire
unpaid principal Purchase Money Indebtedness, including the Purchase Money
Notes, shall become automatically due and payable; and (d) the Agent shall, if
directed to do so by the Majority Banks or the Banks, as applicable (subject to
the terms hereof), exercise any remedy permitted by this Agreement, the other
Purchase Money Loan Documents or law.
6.3 Rights Cumulative. No delay or failure of Agent and/or Banks in
exercising any right, power or privilege hereunder shall affect such right,
power or privilege, nor shall any single or partial exercise thereof preclude
any other or further exercise thereof, or the exercise of any other power, right
or privilege. The rights of Banks under this Agreement are cumulative and not
exclusive of any right or remedies which Banks would otherwise have.
6.4 Waiver by Company and the Designated Borrowers of Certain Laws; WAIVER
OF JURY TRIAL. To the extent permitted by applicable law, Company and the
Designated Borrowers hereby agree to waive, and do hereby absolutely and
irrevocably waive and relinquish the benefit and advantage of any valuation,
stay, appraisement, extension or redemption laws now existing or which may
hereafter exist, which, but for this provision, might be applicable to any sale
made under the judgment, order or decree of any court, on any claim for interest
on the Purchase Money Notes, AND FURTHER HEREBY IRREVOCABLY AGREE TO WAIVE THE
RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY AND ALL ACTIONS OR PROCEEDINGS IN
WHICH AGENT OR THE BANKS (OR ANY OF THEM), ON ONE HAND, AND THE COMPANY OR THE
DESIGNATED BORROWERS (OR ANY OF THEM), ON THE OTHER HAND, ARE PARTIES, WHETHER
OR NOT SUCH ACTIONS OR PROCEEDINGS ARISE OUT OF THIS AGREEMENT OR THE OTHER
PURCHASE MONEY LOAN DOCUMENTS, OR OTHERWISE. These waivers have been voluntarily
given, with full knowledge of the consequences thereof.
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6.5 Waiver of Defaults. No Event of Default shall be waived by the Banks
except in a writing signed by an officer of the Agent in accordance with Section
9.13 hereof. No single or partial exercise of any right, power or privilege
hereunder, nor any delay in the exercise thereof, shall preclude other or
further exercise of the Banks' rights by Agent. No waiver of any Event of
Default shall extend to any other or further Event of Default. No forbearance on
the part of the Agent in enforcing any of the Banks' rights shall constitute a
waiver of any of their rights. Company and each of the Designated Borrowers
expressly agree that this Section may not be waived or modified by the Banks or
Agent by course of performance, estoppel or otherwise.
7. PAYMENTS, RECOVERIES AND COLLECTIONS; MARGIN
ADJUSTMENTS.
7.1 Payment Procedure.
(a) All payments by Company and/or by the Designated Borrowers of
principal of, or interest on, the Purchase Money Notes or of fees shall be
made without setoff or counterclaim on the date specified for payment under
this Agreement not later than 12:00 noon (Detroit time) in immediately
available funds to Agent, for the ratable account of the Banks, at Agent's
office located at One Detroit Center, Detroit, Michigan 48226 or, in the
case of Eurocurrency-based Advances, at Agent's Eurocurrency Lending
Office. Upon receipt of each such payment, the Agent shall make prompt
payment to each Bank, or, in respect of Eurocurrency-based Advances, such
Bank's Eurocurrency Lending Office, in like funds, of all amounts received
by it for the account of such Bank.
(b) Unless the Agent shall have been notified by the Company prior
to the date on which any payment to be made by the Company or a Designated
Borrower is due that the Company or such Designated Borrower does not
intend to remit such payment, the Agent may, in its discretion, assume that
the Company or the applicable Designated Borrower has remitted such payment
when so due and the Agent may, in reliance upon such assumption, make
available to each Bank on such payment date an amount equal to such Bank's
share of such assumed payment. If the Company or such Designated Borrower
has not in fact remitted such payment to the Agent, each Bank shall
forthwith on demand repay to the Agent the amount of such assumed payment
made available to such Bank, together with the interest thereon, in respect
of each day from and including the date such amount was made available by
the Agent to such Bank to the date such amount is repaid to the Agent at a
rate per annum equal to (i) for Domestic Advances, the Federal Funds
Effective Rate, as the same may vary from time to time, and (ii) with
respect to Eurocurrency-based Advances, Agent's aggregate marginal cost
(including the cost of maintaining any required reserves or deposit
insurance and of any fees, penalties, overdraft charges or other costs or
expenses incurred by Agent) of carrying such amount.
(c) Whenever any payment to be made hereunder (other than payments
in respect of any Eurocurrency-based Advance) shall otherwise be due on a
day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and such
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extension of time shall be included in computing interest, if any, in
connection with such payment. Whenever any payment of principal of, or
interest on, a Eurocurrency-based Advance shall be due on a day which is
not a Business Day the date of payment thereof shall be extended to the
next succeeding Business Day unless as a result thereof it would fall in
the next calendar month, in which case it shall be shortened to the next
preceding Business Day and, in the case of a payment of principal, interest
thereon shall be payable for such extended or shortened time, if any.
(d) All payments to be made by the Company or any of the Designated
Borrowers under this Agreement or any of the Purchase Money Notes shall be
made without set-off or counterclaim, as aforesaid, and without deduction
for or on account of any present or future withholding or other taxes of
any nature imposed by any governmental authority or of any political
subdivision thereof or any federation or manner as determined by the
Majority Banks (subject, however, to the applicable Percentages of the
Purchase Money Indebtedness held by each of the Banks), next, to any other
Purchase Money Indebtedness on a pro rata basis, and then, if there is any
excess, to the Company or the Designated Borrowers, as the case may be. The
application of such proceeds and other sums to the Purchase Money Notes
shall be based on each Bank's Percentage of the aggregate Purchase Money
Indebtedness.
7.2 Pro-rata Recovery. If any Bank shall obtain any payment or other
recovery (whether voluntary, involuntary, by application of offset or otherwise)
on account of principal of, or interest on, any of the Purchase Money Notes in
excess of its pro rata share of payments then or thereafter obtained by all
Banks upon principal of and interest on all Purchase Money Notes, such Bank
shall purchase from the other Banks such participations in the Purchase Money
Notes held by them as shall be necessary to cause such purchasing Bank to share
the excess payment or other recovery ratably in accordance with the Percentages
with each of them; provided, however, that if all or any portion of the excess
payment or other recovery is thereafter recovered from such purchasing holder,
the purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.
7.3 Setoff. In addition to and not in limitation of any rights of any Bank
or other holder of any of the Purchase Money Notes under applicable law, each
Bank and each other such holder shall, upon acceleration of the Purchase Money
Indebtedness under the Purchase Money Notes and without notice or demand of any
kind, have the right to set-off, appropriate and apply to the payment of the
Purchase Money Notes owing to it (whether or not then due) any and all balances,
credits, deposits, accounts or moneys of Company or any of the Designated
Borrowers then or thereafter with such Bank or other holder; provided, however,
that any such amount so applied by any Bank or other holder on any of the
Purchase Money Notes owing to it shall be subject to the provisions of Section
7.3 hereof.
7.4 Margin Adjustments. Adjustments to the Applicable Margin, based on
Schedule 5.1 to the Revolving Credit Agreement shall be implemented as follows:
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(i) Such adjustments to the Applicable Margin shall be
given prospective effect only, effective (A) as to all Prime-based Advances
outstanding hereunder, immediately upon the required date of delivery of the
financial statements required to be delivered under Section 8.3(b) and 8.3(c) of
the Revolving Credit Agreement establishing applicability of the appropriate
adjustments, if any, and (B) as to each Eurocurrency-based Advance outstanding
hereunder, effective upon the expiration of the applicable Interest Period(s),
if any, in effect on the required date of delivery of the latest of such
financial statements required to be delivered thereunder during such Interest
Period(s), as applicable, in each case with no retroactivity or claw-back.
(ii) With respect to Eurocurrency-based Advances
outstanding hereunder, an adjustment hereunder, after becoming effective, shall
remain in effect only through the end of the applicable Interest Period(s) for
such Eurocurrency-based Advances if any; provided, however, that upon the
delivery of quarterly financial statements demonstrating any change in the
Funded Debt Ratio established under the Revolving Credit Agreement, as
aforesaid, or the occurrence of any other event which under the terms hereof
causes such adjustment no longer to be applicable, then any such subsequent
adjustment or no adjustment, as the case may be, shall be effective (and said
pricing shall thereby be adjusted up or down, as applicable) with the
commencement of each Interest Period following such change or event, all in
accordance with the preceding subparagraph.
8. CHANGES IN LAW OR CIRCUMSTANCES; INCREASED COSTS.
8.1 Reimbursement of Prepayment Costs. If Company or any of the Designated
Borrowers (a) makes any payment of principal with respect to any
Eurocurrency-based Advance on any day other than the last day of the Interest
Period applicable thereto (whether voluntarily, by acceleration, or otherwise),
or (b) converts or refunds (or attempts to convert or refund), any such Advance,
or (c) fails to borrow, refund or convert any Eurocurrency-based Advance after
notice has been given by Company or such Designated Borrower to Agent in
accordance with the terms hereof requesting such Advance, or (d) fails to make
any payment of principal or interest in respect of a Eurocurrency-based Advance
when due, then Company and the applicable Designated Borrower shall reimburse
Agent and Banks, as the case may be on demand for any resulting loss, cost or
expense incurred by Agent or any of the Banks, as the case may be as a result
thereof, including, without limitation, any such loss, cost or expense incurred
in obtaining, liquidating, employing or redeploying deposits from third parties,
whether or not Agent and such Banks, as the case may be, shall have funded or
committed to fund such Advance, but excluding loss of the Applicable Margin.
Such amount payable by Company and the applicable Designated Borrower to Agent
and Banks, as the case may be, may include, without limitation, an amount equal
to the excess, if any, of (i) the amount of interest which would have accrued on
the amount so prepaid, or not so borrowed, refunded or converted, for the period
from the date of such prepayment or of such failure to borrow, refund or
convert, through the last day of the relevant Interest Period, at the applicable
rate of interest for said Advance(s) provided under this Agreement (excluding
the Applicable Margin, if any), over (ii) the amount of interest (as reasonably
determined by Agent and or any of the Banks, as the case may be) which would
have accrued to Agent or such Bank(s), as the case may be, on such amount by
placing such amount on deposit for a comparable period with leading banks in the
interbank eurocurrency market. Calculation of any amounts payable to any Bank
under this
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paragraph shall be made as though each such Bank shall have actually funded or
committed to fund the relevant Advance through the purchase of an underlying
deposit in an amount equal to the amount of such Advance and having a maturity
comparable to the relevant Interest Period; provided, however, that any Bank may
fund any Eurocurrency-based Advance in any manner it deems fit and the foregoing
assumptions shall be utilized only for the purpose of the calculation of amounts
payable under this paragraph. Upon the written request of Company, Agent and the
applicable Bank(s) shall deliver to Company a certificate setting forth in
reasonable detail the basis for determining such losses, costs and expenses,
which certificate shall be rebuttably presumptive evidence thereof, absent
demonstrable error.
8.2 Eurocurrency Lending Office. For any Advance to which the
Eurocurrency-based Rate is applicable, if Agent or a Bank, as applicable, shall
designate a Eurocurrency Lending Office which maintains books separate from
those of the rest of Agent or such Bank, Agent or such Bank, as the case may be,
shall have the option of maintaining and carrying the relevant Advance on the
books of such Eurocurrency Lending Office.
8.3 Circumstances Affecting Eurocurrency-based Rate. If with respect to any
Interest Period Agent shall determine that, by reason of circumstances affecting
the foreign exchange and interbank markets generally, deposits in eurodollars in
the applicable amounts are not being offered to the Agent or such Bank for such
Interest Period, then Agent shall forthwith give notice thereof to the Company
and the applicable Designated Borrower. Thereafter, until Agent notifies Company
and the applicable Designated Borrower that such circumstances no longer exist,
(i) the obligation of Banks to make Eurocurrency-based Advances, and the right
of Company or any Designated Borrower to convert an Advance to or refund an
Advance as a Eurocurrency-based Advance, as the case may be, shall be suspended,
and (ii) the Company and the applicable Designated Borrower shall repay in full
(or cause to be repaid in full) the then outstanding principal amount of each
such Eurocurrency-based Advance, together with accrued interest thereon, any
amounts payable under Sections 8.1 and 8.4, hereof, and all other amounts
payable hereunder on the last day of the then current Interest Period applicable
to such Advance. Upon the date for repayment as aforesaid and unless Company or
the applicable Designated Borrower notifies Agent to the contrary within two (2)
Business Days after receiving a notice from Agent pursuant to this Section, such
outstanding principal amount shall be converted to a Prime-based Advance as of
the last day of such Interest Period.
8.4 Laws Affecting Eurocurrency-based Availability. If, after the date
hereof, the introduction of, or any change in, any applicable law, rule or
regulation or in the interpretation or administration thereof by any
governmental authority charged with the interpretation or administration
thereof, or compliance by any of the Banks (or any of their respective
Eurocurrency Lending Offices) with any request or directive (whether or not
having the force of law) of any such authority, shall make it unlawful or
impossible for any of the Banks (or any of their respective Eurocurrency Lending
Offices) to honor its obligations hereunder to make or maintain any Advance with
interest at the Eurocurrency-based Rate, such Bank shall forthwith give notice
thereof to Company and to Agent. Thereafter, (a) the obligations of Banks to
make Eurocurrency-based Advances and the right of Company or any Designated
Borrower to convert an Advance into or
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refund an Advance as a Eurocurrency-based Advance shall be suspended and
thereafter Company or the applicable Designated Borrower may select as
Applicable Interest Rates only those which remain available and which are
permitted to be selected hereunder, and (b) if any of the Banks may not lawfully
continue to maintain an Advance to the end of the then current Interest Period
applicable thereto as a Eurocurrency-based Advance, the applicable Advance shall
immediately be converted to a Prime-based Advance and the Prime-based Rate shall
be applicable thereto for the remainder of such Interest Period. For purposes of
this Section, a change in law, rule, regulation, interpretation or
administration shall include, without limitation, any change made or which
becomes effective on the basis of a law, rule, regulation, interpretation or
administration presently in force, the effective date of which change is delayed
by the terms of such law, rule, regulation, interpretation or administration.
8.5 Increased Cost of Eurocurrency-based Advances. If the adoption after
the date hereof, or any change after the date hereof in, any applicable law,
rule or regulation of or in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Agent or any of the
Banks (or any of their respective Eurocurrency Lending Offices) with any request
or directive (whether or not having the force of law) made by any such
authority, central bank or comparable agency after the date hereof:
(a) shall subject any of the Banks (or any of their respective
Eurocurrency Lending Offices) to any tax, duty or other charge with respect
to any Advance or any Purchase Money Note or shall change the basis of
taxation of payments to any of the Banks (or any of their respective
Eurocurrency Lending Offices) of the principal of or interest on any
Advance or any Purchase Money Note or any other amounts due under this
Agreement in respect thereof (except for changes in the rate of tax on the
overall net income of any of the Banks or any of their respective
Eurocurrency Lending Offices imposed by the jurisdiction in which such
Bank's principal executive office or Eurocurrency Lending Office is
located); or
(b) shall impose, modify or deem applicable any reserve (including,
without limitation, any imposed by the Board of Governors of the Federal
Reserve System), special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by any of the Banks
(or any of their respective Eurocurrency Lending Offices) or shall impose
on any of the Banks (or any of their respective Eurocurrency Lending
Offices) or the foreign exchange and interbank markets any other condition
affecting any Advance or any of the Purchase Money Notes;
and the result of any of the foregoing is to increase the costs to any of the
Banks of maintaining any part of the Purchase Money Indebtedness hereunder as a
Eurocurrency-based Advance or to reduce the amount of any sum received or
receivable by any of the Banks under this Agreement or under the Purchase Money
Notes in respect of a Eurocurrency-based Advance, whether with respect to
Advances to Company or to any of the Designated Borrowers, then such Bank shall
promptly notify Agent and Agent (or such Bank, as aforesaid) shall promptly
notify Company and the applicable
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Designated Borrowers of such fact and demand compensation therefor and, within
thirty (30) days after such notice, Company and the applicable Designated
Borrowers agree to pay to such Bank such additional amount or amounts as will
compensate such Bank or Banks for such increased cost or reduction. Agent will
promptly notify Company and the applicable Designated Borrowers of any event of
which it has knowledge which will entitle Banks to compensation pursuant to this
Section, or which will cause Company or Designated Borrower to incur additional
liability under Sections 8.1 and 8.6 hereof, provided that Agent shall incur no
liability whatsoever to the Banks, Company or any of the Designated Borrowers in
the event it fails to do so. A certificate of Agent (or such Bank, if
applicable) setting forth in reasonable detail the basis for determining such
additional amount or amounts necessary to compensate such Bank or Banks shall be
presumed to be correct, save for demonstrable error. For purposes of this
Section, a change in law, rule, regulation, interpretation, administration,
request or directive shall include, without limitation, any change made or which
becomes effective on the basis of a law, rule, regulation, interpretation,
administration, request or directive presently in force, the effective date of
which change is delayed by the terms of such law, rule, regulation,
interpretation, administration, request or directive.
8.6 Indemnity. The Company and each of the Designated Borrowers will
indemnify Agent and each of the Banks against any loss or expense which may
arise or be attributable to the Agent's and each Bank's obtaining, liquidating
or employing deposits or other funds acquired to effect, fund or maintain the
Advances (a) as a consequence of any failure by the Company or the applicable
Designated Borrower to make any payment when due of any amount due hereunder in
connection with a Eurocurrency-based Advance, (b) due to any failure of the
Company or the applicable Designated Borrower to borrow, refund or convert on a
date specified therefor in a
Request for Advance or (c) due to any payment, prepayment or conversion of any
Eurocurrency-based Advance on a date other than the last day of the Interest
Period for such Advance. Such loss or expense shall be calculated based upon the
present value, as applicable, of payments due from the Company or the applicable
Designated Borrower with respect to a deposit obtained by the Agent or any of
the Banks in order to fund such Advance to the Company or to the applicable
Designated Borrower. The Agent's and each Bank's, as applicable, calculations of
any such loss or expense shall be furnished to the Company in reasonable detail
and shall be presumed correct, absent demonstrable error.
8.7 Other Increased Costs. In the event that at any time after the date of
this Agreement any change in law such as described in Section 8.5 hereof, shall
require that the Banks' commitments to fund Purchase Money Loans hereunder or
any other Purchase Money Indebtedness or commitment under this Agreement or any
of the other Purchase Money Loan Documents be treated as an asset or otherwise
be included for purposes of calculating the appropriate amount of capital to be
maintained by each of the Banks or any corporation controlling such Banks, as
the case may be (or shall increase the amount of capital required under such
law, as of the date hereof, to be so maintained), the Agent, in consultation
with the Banks, shall notify the Company. The Company and the Agent shall
thereafter negotiate in good faith an agreement to assess new fees or increase
the existing fees payable to the Agent, for the benefit of the Banks, under this
Agreement, which in the opinion of the Agent (in consultation with the Banks),
will adequately compensate the Banks for the costs associated with such change
in law. If such new fees or increased fees are approved in
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writing by the Company within thirty (30) days from the date of the notice to
the Company from the Agent, the other fees, if applicable, payable by the
Company under this Agreement shall, effective from the date of such agreement,
include the amount of such agreed new or increased fees. If the Company and the
Agent are unable to agree on such fees within thirty (30) days from the date of
the notice to the Company, the Company shall have the option (subject to the
terms hereof), exercised by written notice to the Agent within forty-five (45)
days from the date of the aforesaid notice to the Company from the Agent, to
terminate any commitments to fund Purchase Money Loans hereunder, or other
commitments if applicable, in which event, all sums then outstanding to Banks
and to Agent hereunder shall be due and payable in full. If (a) the Company and
the Agent (in consultation with the Banks) fail to agree on such fees and (b)
the Company fails to give timely notice that it has elected to exercise its
option to terminate any commitments to fund Purchase Money Loans hereunder or
other commitments, if applicable, as set forth above, then any commitments to
fund Purchase Money Loans hereunder and/or such other commitments shall
automatically terminate as of the last day of the aforesaid forty-five (45) day
period, in which event all sums then outstanding to Banks and to Agent hereunder
shall be due and payable in full.
9. AGENT
9.1 Appointment of Agent. Each Bank and the holder of each Purchase Money
Note appoints and authorizes Agent to act on behalf of such Bank or holder under
the Purchase Money Loan Documents and to exercise such powers hereunder and
thereunder as are specifically delegated to or required of Agent by the terms
hereof and thereof, together with such powers as may be reasonably incidental
thereto. Each Bank agrees (which agreement shall survive any termination of this
Agreement) to reimburse Agent for all reasonable out-of-pocket expenses
(including in-house and outside attorneys' fees) incurred by Agent hereunder or
in connection herewith or with an Event of Default or in enforcing the
obligations of Company or any of the Designated Borrowers under this Agreement
or the other Purchase Money Loan Documents or any other instrument executed
pursuant hereto, and for which Agent is not reimbursed by Company or the
Designated Borrowers, pro rata according to such Bank's Percentage, but
excluding any such expenses resulting from Agent's gross negligence or willful
misconduct. Agent shall not be required to take any action under the Purchase
Money Loan Documents, or to prosecute or defend any suit in respect of the
Purchase Money Loan Documents, unless indemnified to its satisfaction by the
Banks against loss, costs, liability and expense (excluding liability resulting
from its gross negligence or willful misconduct). If any indemnity furnished to
Agent shall become impaired, it may call for additional indemnity and cease to
do the acts indemnified against until such additional indemnity is given.
9.2 Deposit Account with Agent. Company and each of the Designated
Borrowers may, by written notice to Agent, authorize Agent to charge their
respective general deposit accounts, if any, maintained with Agent for the
amount of any principal, interest, or other amounts or costs due under this
Agreement when the same shall become due and payable under the terms of this
Agreement or the Purchase Money Notes.
9.3 Exculpatory Provisions. Agent agrees to exercise its rights and powers,
and to perform its duties, as Agent hereunder and under the other Purchase Money
Loan Documents in
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accordance with its usual customs and practices in bank-agency transactions, but
only upon and subject to the express terms and conditions of this Section 9 (and
no implied covenants or other obligations shall be read into this Agreement
against the Agent); neither Agent nor any of its directors, officers, employees
or agents shall be liable to any Bank for any action taken or omitted to be
taken by it or them under this Agreement or any document executed pursuant
hereto, or in connection herewith or therewith, except for its or their own
willful misconduct or gross negligence, nor be responsible for any recitals or
warranties herein or therein, or for the effectiveness, enforceability, validity
or due execution of this Agreement or any document executed pursuant hereto, or
any security thereunder, or to make any inquiry respecting the performance by
Company, any of its Subsidiaries or the Designated Borrowers of their respective
obligations hereunder or thereunder. Nor shall Agent have, or be deemed to have,
a fiduciary relationship with any Bank by reason of this Agreement. Agent shall
be entitled to rely upon advice of counsel concerning legal matters and upon any
notice, consent, certificate, statement or writing which it believes to be
genuine and to have been presented by a proper person.
9.4 Successor Agents. Agent may resign as such at any time upon at least 30
days prior notice to Company and all Banks. If Agent at any time shall resign or
if the office of Agent shall become vacant for any other reason, Majority Banks
shall, by written instrument, appoint a successor Agent (consisting of Co-Agent,
or of any other Bank or financial institution satisfactory to such Majority
Banks and, provided that no Default or Event of Default has occurred and is
continuing, to Company, such approval of Company not to be unreasonably withheld
or delayed) which shall thereupon become Agent hereunder and shall be entitled
to receive from the prior Agent such documents of transfer and assignment as
such successor Agent may reasonably request. Such successor Agent shall succeed
to all of the rights and obligations of the retiring Agent as if originally
named. The retiring Agent shall duly assign, transfer and deliver to such
successor Agent all moneys at the time held by the retiring or removed Agent
hereunder after deducting therefrom its expenses for which it is entitled to be
reimbursed. Upon such succession of any such successor Agent, the retiring agent
shall be discharged from its duties and obligations hereunder, except for its
gross negligence or willful misconduct arising prior to its retirement
hereunder, and the provisions of this Section 9 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent.
9.5 Loans by Agent. Agent shall have the same rights and powers with
respect to the credit extended by it and the Purchase Money Notes held by it as
any Bank and may exercise the same as if it were not Agent, and the term "Bank"
and, when appropriate, "holder" shall include Agent in its individual capacity.
9.6 Credit Decisions. Each Bank acknowledges that it has, independently of
Agent and each other Bank and based on the financial statements of Company, the
Designated Borrowers and their respective Subsidiaries and such other documents,
information and investigations as it has deemed appropriate, made its own credit
decision to extend credit hereunder from time to time. Each Bank also
acknowledges that it will, independently of Agent and each other Bank and based
on such other documents, information and investigations as it shall deem
appropriate at any time, continue
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to make its own credit decisions as to exercising or not exercising from time to
time any rights and privileges available to it under this Agreement or any
document executed pursuant hereto.
9.7 Notices by Agent. Agent shall give prompt notice to each Bank of its
receipt of each notice or request required or permitted to be given to Agent by
Company or any of the Designated Borrowers pursuant to the terms of this
Agreement and shall promptly distribute to the Banks any reports received from
the Company or any of its Subsidiaries or the Designated Borrowers under the
terms hereof, or other material information or documents received by Agent, in
its capacity as Agent, from the Company, its Subsidiaries or the Designated
Borrowers.
9.8 Nature of Agency. The appointment of Agent as agent hereunder is for
the convenience of Banks, Company and the Designated Borrowers in making
Advances of Purchase Money Loans and any other Purchase Money Indebtedness of
Company or the Designated Borrowers hereunder, and collecting fees and principal
and interest on the Purchase Money Indebtedness. No Bank is purchasing any
Purchase Money Indebtedness from Agent and this Agreement is not intended to be,
and shall not constitute, a purchase or participation agreement.
9.9 Actions; Confirmation of Agent's Authority to Act in Event of Default.
Subject to the terms and conditions of this Agreement (including without
limitation any required approval or direction of the Majority Banks or Banks, as
applicable, to be obtained by or given to Agent hereunder) Agent, in its
capacity as Agent, is hereby expressly authorized to act in all litigation by or
against Agent and in all other respects as the representative of the Banks to
the full extent of any approval or direction of the Majority Banks or the Banks,
as applicable, obtained by or given to Agent hereunder. Without necessarily
accepting service of process or designating Agent to do so in its stead, each
Bank hereby agrees with each other Bank and with Agent, but without intending to
confer or conferring any rights on any other party, (a) that it shall be bound
by any litigation brought by or against Agent by the Company, any Subsidiary,
any of the Designated Borrowers or any other party in connection with the
Purchase Money Indebtedness or any other rights, duties or obligations arising
hereunder or under this Agreement or the other Purchase Money Loan Documents and
(b) that it now irrevocably waives the defense of procedural impediment or
failure to name or join such Bank as an indispensable party. In conducting such
litigation hereunder on behalf of the Banks, Agent shall at all times be
indemnified by the Banks as provided herein. Agent shall undertake to give each
Bank prompt written notice of any litigation commenced against Agent and/or the
Banks with respect to this Agreement or the other Purchase Money Loan Documents
or any matter referred to herein or therein.
9.10 Authority of Agent to Enforce Purchase Money Notes and This Agreement.
Each Bank, subject to the terms and conditions of this Agreement (including
without limitation any required approval or direction of the Majority Banks or
the Banks, as applicable, to be obtained by or given to the Agent hereunder),
authorizes the Agent with full power and authority as attorney-in-fact to
institute and maintain actions, suits or proceedings for the collection and
enforcement of the Purchase Money Notes, this Agreement and the other Purchase
Money Loan Documents and to file such proofs of debt or other documents as may
be necessary to have the claims of the Banks allowed in any proceeding relative
to the Company, any of its Subsidiaries, any of the Designated Borrowers
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or each such party's creditors or affecting each such party's properties, and to
take such other actions which Agent considers to be necessary or desirable for
the protection, collection and enforcement of the Purchase Money Notes, this
Agreement or the other Purchase Money Loan Documents, but in each case only to
the extent of any required approval or direction of the Majority Banks or the
Banks, as applicable, obtained by or given to the Agent hereunder.
9.11 Indemnification. The Banks agree to indemnify the Agent in its
capacity as such, to the extent not reimbursed by the Company or the Designated
Borrowers, pro rata according to their respective Percentages, from and against
any and all claims, liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against the
Agent in any way relating to or arising out of this Agreement or any of the
other Purchase Money Loan Documents or any action taken or omitted to be taken
or suffered in good faith by the Agent hereunder, provided that no Bank shall be
liable for any portion of any of the foregoing items resulting from the gross
negligence or willful misconduct of the Agent or any of its officers, employees,
directors or agents.
9.12 Knowledge of Default. It is expressly understood and agreed that the
Agent shall be entitled to assume that no Default or Event of Default has
occurred and is continuing, unless the officers of the Agent immediately
responsible for matters concerning this Agreement shall have actual (rather than
constructive) knowledge of such occurrence or shall have been notified in
writing by a Bank that such Bank considers that a Default or an Event of Default
has occurred and is continuing, and specifying the nature thereof. Upon
obtaining actual knowledge of any Default or Event of Default as described
above, the Agent shall promptly, but in any event within three (3) Business Days
after obtaining knowledge thereof, notify each Bank of such Default or Event of
Default and the action, if any, the Agent proposes be taken with respect
thereto.
9.13 Agent's Authorization; Action by Banks. Except as otherwise expressly
provided herein, whenever the Agent is authorized and empowered hereunder on
behalf of the Banks to give any approval or consent, or to make any request, or
to take any other action on behalf of the Banks (including without limitation
the exercise of any right or remedy hereunder or under the other Purchase Money
Loan Documents), the Agent shall be required to give such approval or consent,
or to make such request or to take such other action only when so requested in
writing by the Majority Banks or the Banks, as applicable hereunder. Action that
may be taken by Majority Banks or all of the Banks, as the case may be (as
provided for hereunder), may be taken (i) pursuant to a vote at a meeting (which
may be held by telephone conference call) as to which all of the Banks have been
given reasonable advance notice (subject to the requirement that amendments,
waivers or consents under Section 10.11 hereof be made in writing by the
Majority Banks or all of the Banks, as applicable), or (ii) pursuant to the
written consent of the requisite Percentages of the Banks as required hereunder,
provided that all of the Banks are given reasonable advance notice of the
requests for such consent.
9.14 Enforcement Actions by the Agent. Except as otherwise expressly
provided under this Agreement or in any of the other Purchase Money Loan
Documents and subject to the terms hereof, Agent will take such action, assert
such rights and pursue such remedies under this
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Agreement and the other Purchase Money Loan Documents as the Majority Banks or
all of the Banks, as the case may be (as provided for hereunder), shall direct.
Except as otherwise expressly provided in any of the Purchase Money Loan
Documents, Agent will not (and will not be obligated to) take any action, assert
any rights or pursue any remedies under this Agreement or any of the other
Purchase Money Loan Documents in violation or contravention of any express
direction or instruction of the Majority Banks or all of the Banks, as the case
may be (as provided for hereunder). Agent may refuse (and will not be obligated)
to take any action, assert any rights or pursue any remedies under this
Agreement or any of the other Purchase Money Loan Documents in the absence of
the express written direction and instruction of the Majority Banks or all of
the Banks, as the case may be (as provided for hereunder). In the event Agent
fails, within a commercially reasonable time, to take such action, assert such
rights, or pursue such remedies as the Majority Banks or all of the Banks, as
the case may be (as provided for hereunder), shall direct in conformity with
this Agreement, the Majority Banks or all of the Banks, as the case may be (as
provided for hereunder), shall have the right to take such action, to assert
such rights, or pursue such remedies on behalf of all of the Banks unless the
terms hereof otherwise require the consent of all the Banks to the taking of
such actions (in which event all of the Banks must join in such action).
9.15 Co-Agent. Harris Bank has been designated by the Company as "Co-Agent"
under this Agreement. Other than its rights and remedies as a Bank hereunder,
Co-Agent shall have no administrative, collateral or other rights or
responsibilities, provided, however, that Co-Agent shall be entitled to the
benefits afforded to Agent under Sections 9.5 and 9.6 hereof.
10. MISCELLANEOUS
10.1 Accounting Principles. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, it shall be done in accordance with GAAP.
10.2 Consent to Jurisdiction. The Company and each of the Designated
Borrowers hereby irrevocably submit to the non-exclusive jurisdiction of any
United States Federal or Michigan state court sitting in Detroit in any action
or proceeding arising out of or relating to this Agreement or any of the other
Purchase Money Loan Documents and the Company and each of the Designated
Borrowers hereby irrevocably agree that all claims in respect of such action or
proceeding may be heard and determined in any such United States Federal or
Michigan state court. Each of the Designated Borrowers irrevocably appoints the
Company as its agent for service of process. The Company and each of the
Designated Borrowers irrevocably consent to the service of any and all process
in any such action or proceeding brought in any court in or of the State of
Michigan by the delivery of copies of such process to the Company at its address
specified on the signature page hereto or by certified mail directed to such
address. Nothing in this Section shall affect the right of the Banks and the
Agent to serve process in any other manner permitted by law or limit the right
of the Banks or the Agent (or any of them) to bring any such action or
proceeding against the Company or any of the Designated Borrowers or any of its
or their property in the courts of any other jurisdiction. The Company and each
of the Designated Borrowers hereby irrevocably
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waive any objection to the laying of venue of any such suit or proceeding in the
above described courts.
10.3 Law of Michigan. This Agreement, the Purchase Money Notes and the
other Purchase Money Loan Documents have been delivered at Detroit, Michigan,
and shall be governed by and construed and enforced in accordance with the laws
of the State of Michigan, except to the extent that the Uniform Commercial Code,
other personal property law or real property law of a jurisdiction where
Collateral is located is applicable and except as and to the extent expressed to
the contrary in any of the Purchase Money Loan Documents. Whenever possible each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
10.4 Interest. In the event the obligation of the Company or the Designated
Borrowers to pay interest on the principal balance of any of the Purchase Money
Notes is or becomes in excess of the maximum interest rate which the Company or
any of the Designated Borrowers is permitted by law to contract or agree to pay,
giving due consideration to the execution date of this Agreement, then, in that
event, the rate of interest applicable with respect to such Bank's Percentage
shall be deemed to be immediately reduced to such maximum rate and all previous
payments in excess of the maximum rate shall be deemed to have been payments in
reduction of principal and not of interest.
10.5 Closing Costs; Other Costs. Each of the Company and the Designated
Borrowers, jointly and severally, shall pay or reimburse (a) Agent for payment
of, on demand, all reasonable closing costs and expenses, including, by way of
description and not limitation, reasonable in-house and outside attorney fees
and advances, appraisal and accounting fees, lien search fees, and required
travel costs, incurred by Agent in connection with the commitment, consummation
and closing of the loans or advances contemplated hereby, or in connection with
any refinancing or restructuring of the loans or Advances provided under this
Agreement or the other Purchase Money Loan Documents, or any amendment thereof
requested by Company or any of the Designated Borrowers, and (b) Agent and each
of the Banks, as the case may be, for all stamp and other taxes and duties
payable or determined to be payable in connection with the execution, delivery,
filing or recording of this Agreement and the other Purchase Money Loan
Documents and the consummation of the transactions contemplated hereby, and any
and all liabilities with respect to or resulting from any delay in paying or
omitting to pay such taxes or duties. Furthermore, all reasonable costs and
expenses, including without limitation attorney fees, incurred by Agent and,
after the occurrence and during the continuance of an Event of Default, by the
Banks, in revising, preserving, protecting, exercising or enforcing any of its
or any of the Banks' rights against Company or any of the Designated Borrowers,
or otherwise incurred by Agent and the Banks in connection with any Event of
Default or the enforcement of the loans (whether incurred through negotiations,
legal proceedings or otherwise), including by way of description and not
limitation, such charges in any court or bankruptcy proceedings or arising out
of any claim or action by any person against Agent or any Bank which would not
have been asserted were it not for Agent's or such Bank's relationship with
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Company and the Designated Borrowers hereunder or otherwise, shall also be paid
by Company and each of the Designated Borrowers. All of the amounts required to
be paid by Company and Designated Borrowers hereunder and not paid forthwith
upon demand, as aforesaid, shall bear interest, from the date incurred to the
date payment is received by Agent, at the Prime-based Rate, plus two percent
(2%).
10.6 Notices. Except as otherwise provided herein, all notices or demands
hereunder to the parties hereto shall be sufficient if made in writing and
delivered by messenger or deposited in the mail, postage prepaid, certified
mail, and addressed to the parties as set forth on the signature pages of this
Agreement and to each of the Designated Borrowers at the Company's address. Any
notice or demand given to the Company hereunder shall be deemed given to each of
the Designated Borrowers, whether or not said notice or demand is addressed to
or received by such Designated Borrowers.
10.7 Further Action. Company and each of the Designated Borrowers, from
time to time, upon written request of Agent, will make, execute, acknowledge and
deliver or cause to be made, executed, acknowledged and delivered, all such
further and additional instruments, and take all such further action, as may be
reasonably required to carry out the intent and purpose of this Agreement, and
to provide for Advances under and payment of the Purchase Money Notes, according
to the intent and purpose herein and therein expressed.
10.8 Successors and Assigns; Assignments and Participations.
(a) This Agreement shall be binding upon and shall inure to the
benefit of Company and the Designated Borrowers and the Banks and their
respective successors and assigns.
(b) The foregoing shall not authorize any assignment by Company or
any of the Designated Borrowers, of its rights or duties hereunder, and no such
assignment shall be made (or effective) without the prior written approval of
the Banks.
(c) The Company, the Designated Borrowers and Agent acknowledge that
each of the Banks may at any time and from time to time, subject to the terms
and conditions hereof, assign or grant participations in such Bank's rights and
obligations hereunder and under the other Purchase Money Loan Documents to any
commercial bank, the identity of which institution is approved by Company and
Agent, such approval not to be unreasonably withheld or delayed; provided,
however, that (i) the approval of Company shall not be required upon the
occurrence and during the continuance of a Default or Event of Default and (ii)
the approval of Company and Agent shall not be required for any such sale,
transfer, assignment or participation to the Affiliate of an assigning Bank, any
other Bank or any such sale, transfer, assignment, participation or pledge to
any Federal Reserve Bank ("Federal Reserve Transfer"). The Company and each of
the Designated Borrowers authorize each Bank to disclose to any prospective
assignee or participant, once approved by Company and Agent, any and all
financial information in such Bank's possession concerning the Company and the
Designated Borrowers which has been delivered to such Bank pursuant to this
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Agreement; provided that each such prospective participant shall execute a
confidentiality agreement consistent with the terms of Section 10.13 hereof.
(d) Each assignment by a Bank of any portion of its rights and
obligations hereunder and under the other Purchase Money Loan Documents (other
than any Federal Reserve Transfer) shall be made pursuant to an Assignment
Agreement substantially (as determined by Agent) in the form of Exhibit N to the
Revolving Credit Agreement (with appropriate conforming modifications and
insertions acceptable to Agent) and shall be subject to the terms and conditions
hereof, and to the following restrictions:
(i) each assignment shall cover all of the Purchase
Money Notes issued by Company and the Designated
Borrowers hereunder to the assigning Bank (and not
any particular note or notes), and shall be for a
fixed and not varying percentage thereof, with the
same percentage applicable to each such Purchase
Money Note and shall also cover all Notes and
other Indebtedness under the Revolving Credit
Agreement;
(ii) any assignment hereunder may be made only
concurrently with a permitted assignment of the
Indebtedness under the Revolving Credit Agreement
and the percentage of the Purchase Money
Indebtedness assigned hereunder shall be the same
percentage as the percentage of Indebtedness being
concurrently assigned under the Revolving Credit
Agreement; and
(iii) no assignment shall violate any "blue sky" or
other securities law of any jurisdiction or shall
require the Company, the Designated Borrowers or
any other Person to file a registration statement
or similar application with the United States
Securities and Exchange Commission (or similar
state regulatory body) or to qualify under the
"blue sky" or other securities laws of any
jurisdiction.
In connection with any such assignment, Company, the Designated Borrowers and
Agent shall be entitled to continue to deal solely and directly with the
assigning Bank in connection with the interest so assigned until (x) the Agent
shall have received a notice of assignment duly executed by the assigning Bank
and an Assignment Agreement (with respect thereto) duly executed by the
assigning Bank and each assignee; and (y) the assigning Bank shall have
delivered to the Agent the original of each Purchase Money Note held by the
assigning Bank under this Agreement. From and after the date on which the Agent
shall notify Company and the assigning Bank that the foregoing conditions shall
have been satisfied and all consents (if any) required shall have been given,
the assignee thereunder shall be deemed to be a party to this Agreement. To the
extent that rights and obligations hereunder shall have been assigned to such
assignee as provided in such notice of assignment (and Assignment Agreement),
such assignee shall have the rights and obligations of a Bank under this
Agreement and the other Purchase Money Loan Documents (including without
limitation the right to receive fees payable hereunder in respect of the period
following such
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assignment). In addition, the assigning Bank, to the extent that rights and
obligations hereunder shall have been assigned by it as provided in such notice
of assignment and the Assignment Agreement, but not otherwise, shall relinquish
its rights and be released from its obligations under this Agreement and the
other Purchase Money Loan Documents. It is acknowledged and agreed by the
parties hereto that any Bank which makes a Federal Reserve Transfer shall remain
fully obligated hereunder.
Within five (5) Business Days following Company's receipt of notice from the
Agent that Agent has accepted and executed a notice of assignment and the duly
executed Assignment Agreement, Company and the Designated Borrowers shall, to
the extent applicable, execute and deliver to the Agent in exchange for any
surrendered Purchase Money Note(s), new Purchase Money Note(s) payable to the
order of the assignee in an amount equal to the amount assigned to it pursuant
to such notice of assignment (and Assignment Agreement), and with respect to the
portion of the Purchase Money Indebtedness retained by the assigning Bank, to
the extent applicable, new Purchase Money Note(s) payable to the order of the
assigning Bank in an amount equal to the amount retained by such Bank hereunder
shall be executed and delivered by the Company and each of the Designated
Borrowers, and applicable Agent, the Banks and the Company and the Designated
Borrowers acknowledge and agree that any such new Purchase Money Note(s) shall
be given in renewal and replacement of the surrendered Purchase Money Notes and
shall not effect or constitute a novation or discharge of the Purchase Money
Indebtedness evidenced by any surrendered Purchase Money Note, and each such new
Purchase Money Note may contain a provision confirming such agreement. In
addition, promptly following receipt of such Purchase Money Notes, Agent shall
prepare and distribute to Company, the Designated Borrowers and each of the
Banks a revised Exhibit C to this Agreement setting forth the applicable new
Percentages of the Banks (including the assignee Bank), taking into account such
assignment.
(e) Each Bank agrees that any participation agreement permitted
hereunder shall comply with all applicable laws and shall be subject to the
following restrictions (which shall be set forth in the applicable participation
agreement):
(i) such Bank shall remain the holder of its Purchase
Money Notes hereunder, notwithstanding any such
participation;
(ii) except as expressly set forth in this Section
10.8(e) with respect to rights of setoff and the
benefits of Section 8 hereof, a participant shall
have no direct rights or remedies hereunder;
(iii) a participant shall not reassign or transfer, or
grant any sub-participations in its participation
interest hereunder or any part thereof; and
(iv) such Bank shall retain the sole right and
responsibility to enforce the obligations of the
Company and Designated Borrowers relating to the
Purchase Money Notes and the other Purchase Money
Loan
36
<PAGE> 42
Documents, including, without limitation, the
right to proceed against any of the Guarantors, or
cause Agent to do so (subject to the terms and
conditions hereof), and the right to approve any
amendment, modification or waiver of any provision
of this Agreement without the consent of the
participant, except for those matters covered by
Section 10.11(a) through (e) and (h) hereof
(provided that a participant may exercise approval
rights over such matters only on an indirect
basis, acting through such Bank, and Company, the
Designated Borrowers, Agent and the other Banks
may continue to deal directly with such Bank in
connection with such Bank's rights and duties
hereunder), and shall otherwise be in form
satisfactory to Agent.
Company and the Designated Borrowers each agrees that each participant shall be
deemed to have the right of setoff under Section 7.4 hereof in respect of its
participation interest in amounts owing under this Agreement and the other
Purchase Money Loan Documents to the same extent as if the Purchase Money
Indebtedness were owing directly to it as a Bank under this Agreement, shall be
subject to the pro rata recovery provisions of Section 7.3 hereof and that each
participant shall be entitled to the benefits of Section 8 hereof. The amount,
terms and conditions of any participation shall be as set forth in the
participation agreement between the issuing Bank and the Person purchasing such
participation, and none of the Company, the Designated Borrowers, the Agent and
the other Banks shall have any responsibility or obligation with respect
thereto, or to any Person to whom any such participation may be issued. No such
participation shall relieve any issuing Bank of any of its obligations under
this Agreement or any of the other Purchase Money Loan Documents, and all
actions hereunder shall be conducted as if no such participation had been
granted.
(f) Nothing in this Agreement, the Purchase Money Notes or the other
Purchase Money Loan Documents expressed or implied, is intended to or shall
confer on any Person other than the respective parties hereto and thereto and
their successors and assignees permitted hereunder and thereunder any benefit or
any legal or equitable right, remedy or other claim under this Agreement, the
Purchase Money Notes or the other Purchase Money Loan Documents.
10.9 Indulgence. No delay or failure of Agent and the Banks in exercising
any right, power or privilege hereunder shall affect such right, power or
privilege, nor shall any single or partial exercise thereof preclude any other
or further exercise thereof, or the exercise of any other right, power or
privilege. The rights of Agent and the Banks hereunder are cumulative and are
not exclusive of any rights or remedies which Agent and the Banks would
otherwise have.
10.10 Counterparts. This Agreement may be executed in several counterparts,
and each executed copy shall constitute an original instrument, but such
counterparts shall together constitute but one and the same instrument.
10.11 Amendment and Waiver. No amendment or waiver of any provision of this
Agreement or any other Purchase Money Loan Document, or consent to any departure
by the
37
<PAGE> 43
Company or any of the Designated Borrowers therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Majority Banks
(or signed by the Agent at the direction of the Majority Banks), and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver
or consent shall, unless in writing and signed by all the Banks (or signed by
the Agent at the direction of all the Banks), do any of the following: (a)
subject any of the Banks to any additional obligations, (b) reduce the principal
of, or interest on, the Purchase Money Notes or any fees or other amounts
payable hereunder, (c) postpone any date fixed for any payment of principal of,
or interest on, the Purchase Money Notes or any fees or other amounts payable
hereunder, (d) waive any Event of Default specified in or grace period provided
under Sections 6.1(a) or 6.1(b) hereof, (e) release or defer the granting or
perfecting of a lien or security interest in any Collateral or release any
Guarantor, any indemnity or similar undertaking provided by any Person, except
as shall be otherwise expressly provided in this Agreement or any other Purchase
Money Loan Document, (f) take any action which requires the signing of all Banks
pursuant to the terms of this Agreement or any other Purchase Money Loan
Document, (g) change the aggregate unpaid principal amount of the Purchase Money
Notes which shall be required for the Banks or any of them to take any action
under this Agreement or any other Purchase Money Loan Document, (h) change the
definition of "Majority Banks" or (i) change this Section 10.11, and provided
further, however, that no amendment, waiver, or consent shall, unless in writing
and signed by the Agent in addition to all the Banks, affect the rights or
duties of the Agent under this Agreement or any other Purchase Money Loan
Document, all references in this Agreement to "Banks" or "the Banks" shall refer
to all Banks, unless expressly stated to refer to Majority Banks.
10.12 Taxes and Fees. Should any tax (other than a tax based upon the net
income of any Bank or Agent by any jurisdiction where a Bank or Agent is
located), recording or filing fee become payable in respect of this Agreement or
any of the other Purchase Money Loan Documents or any amendment or modification
hereto or thereto, or supplement hereof or thereof, the Company and each of the
Designated Borrowers, jointly and severally, agrees to pay the same, together
with any interest or penalties thereon (unless the failure to pay such tax on a
timely basis is not due to the action or inaction of the Company or any of its
Subsidiaries) and agrees to hold the Agent and the Banks harmless with respect
thereto.
10.13 Confidentiality. Each Bank agrees that without the prior consent of
Company, it will not disclose (other than to its employees, to another Bank or
to its auditors or counsel) any information with respect to the Company or any
of its Subsidiaries or any of the Designated Borrowers which is furnished
pursuant to the terms and conditions of this Agreement or any of the other
Purchase Money Loan Documents or which is designated (in writing) by Company or
any of the Designated Borrowers to be confidential; provided that any Bank may
disclose any such information (a) as has become generally available to the
public or has been lawfully obtained by such Bank from any third party under no
duty of confidentiality to the Company, (b) as may be required in any report,
statement or testimony submitted to, or in respect of any inquiry, by, any
municipal, state or federal regulatory body having or claiming to have
jurisdiction over such Bank, including the Board of Governors of the Federal
Reserve System of the United States or the Federal Deposit Insurance Corporation
or similar organizations (whether in the United States or elsewhere)
38
<PAGE> 44
or their successors, (c) as may be required in respect of any summons or
subpoena or in connection with any litigation, (d) in order to comply with any
law, order, regulation or ruling applicable to such Bank, and (e) to any
permitted transferee or assignee or to any approved participant of, or with
respect to, the Purchase Money Notes, as aforesaid.
10.14 Withholding Taxes. If any Bank is not incorporated under the laws of
the United States or a state thereof, such Bank shall promptly deliver to the
Agent two executed copies of (i) Internal Revenue Service Form 1001 specifying
the applicable tax treaty between the United States and the jurisdiction of such
Bank's domicile which provides for the exemption from withholding on interest
payments to such Bank, (ii) Internal Revenue Service Form 4224 evidencing that
the income to be received by such Bank hereunder is effectively connected with
the conduct of a trade or business in the United States or (iii) other evidence
satisfactory to the Agent that such Bank is exempt from United States income tax
withholding with respect to such income. Such Bank shall amend or supplement any
such form or evidence as required to insure that it is accurate, complete and
non-misleading at all times. Promptly upon notice from the Agent of any
determination by the Internal Revenue Service that any payments previously made
to such Bank hereunder were subject to United States income tax withholding when
made, such Bank shall pay to the Agent the excess of the aggregate amount
required to be withheld from such payments over the aggregate amount actually
withheld by the Agent. In addition, from time to time upon the reasonable
request and at the sole expense of the Company or any of the Designated
Borrowers, each Bank and the Agent shall (to the extent it is able to do so
based upon applicable facts and circumstances), complete and provide the Company
or any of the Designated Borrowers with such forms, certificates or other
documents as may be reasonably necessary to allow the Company or the Designated
Borrower, as applicable, to make any payment under this Agreement or the other
Purchase Money Loan Documents without any withholding for or on the account of
any tax under Section 7.1(d) hereof (or with such withholding at a reduced
rate), provided that the execution and delivery of such forms, certificates or
other documents does not adversely affect or otherwise restrict the right and
benefits (including without limitation economic benefits) available to such Bank
or the Agent, as the case may be, whether under this Agreement or any of the
other Purchase Money Loan Documents or otherwise, or whether under or in
connection with any transactions not related to the transactions contemplated
hereby.
10.15 Effective Upon Execution. This Agreement shall become effective upon
the Effective Date, and shall remain effective until the Purchase Money
Indebtedness has been repaid and discharged in full and no commitment to extend
any credit hereunder remains outstanding. By execution of the aforesaid Purchase
Money Notes, the Designated Borrowers shall become obligated hereunder.
10.16 Severability. In case any one or more of the obligations of the
Company or any of the Designated Borrowers under this Agreement, the Purchase
Money Notes or any of the other Purchase Money Loan Documents shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining obligations of the Company or the Designated
Borrowers shall not in any way be affected or impaired thereby, and such
invalidity, illegality or unenforceability in one jurisdiction shall not affect
the validity, legality or enforceability of the
39
<PAGE> 45
obligations of the Company or the Designated Borrowers under this Agreement, the
Purchase Money Notes or any of the other Purchase Money Loan Documents in any
other jurisdiction.
10.17 Table of Contents and Headings. The table of contents and the
headings of the various subdivisions hereof are for convenience of reference
only and shall in no way modify or affect any of the terms or provisions hereof.
10.18 Construction of Certain Provisions. If any provision of this
Agreement or any of the other Purchase Money Loan Documents refers to any action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person, whether or not expressly specified in such provision.
10.19 Independence of Covenants. Each covenant hereunder shall be given
independent effect (subject to any exceptions stated in such covenant) so that
if a particular action or condition is not permitted by any such covenant
(taking into account any such stated exception), the fact that it would be
permitted by an exception to, or would be otherwise within the limitations of,
another covenant shall not avoid the occurrence of a Default or an Event of
Default if such action is taken or such condition exists.
10.20 Reliance on and Survival of Various Provisions. All terms, covenants,
agreements, representations and warranties of the Company or any party to any of
the Purchase Money Loan Documents made herein or in any of the other Purchase
Money Loan Documents or in any certificate, report, financial statement or other
document furnished by or on behalf of the Company, any such party in connection
with this Agreement or any of the other Purchase Money Loan Documents shall be
deemed to have been relied upon by the Banks, notwithstanding any investigation
heretofore or hereafter made by any Bank or on such Bank's behalf, and those
covenants and agreements of the Company and the Designated Borrowers set forth
in Section 8.8 hereof (together with any other indemnities of the Company or the
Designated Borrowers contained elsewhere in this Agreement or in any of the
other Purchase Money Loan Documents) and of Banks set forth in Section 10.13
hereof shall, notwithstanding anything to the contrary contained in this
Agreement, survive the repayment in full of the Purchase Money Indebtedness and
the termination of any commitments to make Advances hereunder.
10.21 Complete Agreement; Amendment and Restatement. This Agreement, the
Purchase Money Notes, any requests for Advances hereunder, the other Purchase
Money Loan Documents and any agreements, certificates, or other documents given
to secure the Purchase Money Indebtedness, and the Revolving Credit Agreement
and the other Loan Documents (as defined therein), to the extent referenced
herein or applicable hereunder, contain the entire agreement of the parties
hereto with respect to the transactions contemplated hereby, and none of the
parties hereto shall be bound by anything not expressed in writing.
* * *
[Signatures follow on succeeding pages]
40
<PAGE> 46
WITNESS the due execution hereof as of the day and year first above
written.
COMPANY: AGENT:
WALBRO CORPORATION COMERICA BANK, As Agent
By:/s/ Michael A. Shope By: /s/ Mark B. Grover
------------------------- -------------------------
Its: Chief Financial Officer Its: Vice President
and Treasurer
------------------------ ------------------------
6242 Garfield Street One Detroit Center
Cass City, MI 48726 500 Woodward Avenue
Attention: Michael A. Shope 9th Floor MC3265
Fax No. (517) 872-2301 Detroit, Michigan 48226
Attention: Mark B. Grover
Fax No. (313) 222-3776
BANKS:
COMERICA BANK
By:/s/ Mark B. Grover
------------------------
Its: Vice President
-----------------------
HARRIS TRUST AND SAVINGS BANK
By:/s/ Jeffrey C. Nicholson
------------------------
Its: Vice President
-----------------------
(First Signature Page to Purchase Money Loan Agreement)
<PAGE> 47
NATIONAL CITY BANK
By: /s/ Carlton M. Faison
------------------------
Its: Vice President
-----------------------
THE BANK OF TOKYO-MITSUBISHI
LTD., CHICAGO BRANCH
By: /s/ Hajime Watanabe
------------------------
Its: Deputy General Manager
-----------------------
THE BANK OF NEW YORK
By: /s/ William Barnum
------------------------
Its: Vice President
-----------------------
SOCIETE GENERALE
By: /s/ Joseph A. Philbin
-----------------------
Its: Vice President
-----------------------
(Second Signature Page to Purchase Money Loan Agreement)
<PAGE> 48
COOPERATIVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.
"RABOBANK NEDERLAND", NEW
YORK BRANCH
By: /s/ David J. Thompson
---------------------------
Its: Vice President
--------------------------
And By: /s/ W. Pieter C. Kodde
-----------------------
Its: Vice President
--------------------------
(Third Signature Page to Purchase Money Loan Agreement)
<PAGE> 49
SCHEDULE 2.1
Purchase Money Loans to be funded on the Effective Date, including description
(with other identifying information) of Machinery, Equipment, Fixtures or other
Fixed Assets to be purchased with proceeds of Purchase Money Loan on the
Effective Date
(1) $154,437.50 Purchase Money Loan to Walbro Automotive Corporation
Collateral: Coordinate Measuring Machine
Serial No. 014108004
Purchase Price: $ 220,625
(x) Advance Rate .70
-----------
Loan Amount: $154,437.50
Location: Meriden, Connecticut (Fixture Filing)
(2) $146,797.00 Purchase Money Loan to Walbro Automotive Corporation
Collateral: HPM Model H400-32 Injection Molding Machine
(400 ton)
Serial No. 96429
Purchase Price: $208,727.20
(x) Advance Rate .70
-----------
Loan Amount: $146,109.00
Location: Meriden, Connecticut (Fixture Filing)
(3) $2,551,000 Purchase Money Loan to Walbro Automotive Corporation
Collateral: 5th Krupp Kautex KBS2-241D Robot Machine Serial No.
64-450-003 (with mounting frame and other accoutrements)
Purchase Price: DM 6,632,783.29 @ DM 1.82/$1.00 [$3,644,386]
(x) Advance Rate .70
--------------------------------------------
Loan Amount: $2,551,000
Location: Ossian, Wells County, Indiana (Fixture Filing)
<PAGE> 50
EXHIBIT A
FORM OF NOTICE OF AND
PURCHASE MONEY LOAN INITIAL REQUEST
No. Dated:___________
TO: Comerica Bank ("Agent")
RE: Walbro Corporation Purchase Money Loan Agreement dated as of August ___,
1997 by and among Walbro Corporation (the "Company"), the Banks signatories
thereto and Comerica Bank, as Agent (as amended or otherwise modified from
time to time, the "Purchase Money Loan Agreement")
[The Company][The undersigned Designated Borrower, with the
countersignature of Company], pursuant to Sections 2.1 and 2.8A of the Purchase
Money Loan Agreement, requests a Purchase Money Loan from the Banks, as follows:
A. Attached hereto as Attachment I is a list of the specific machinery,
equipment, fixtures or other fixed assets to be purchased with the
proceeds of the requested Purchase Money Loan ("Collateral"), together
with, for each item on the list:
1. a description thereof, (including serial number(s));
2. sales brochures or other sales literature, if any;
3. the proposed invoice or purchase order;
4. proposed location after acquisition thereof of each such item;
5. whether such item may be affixed to real estate or otherwise
become a fixture under applicable law and the legal description
of the applicable real estate (together with ownership
information as to property owner(s) and/or mortgagees and
titlework in connection with such property) to which such item
may become affixed); and
6. completed UCC-1 and (if applicable) UCC-2 financing statements,
as required to perfect on each item on list.
B. The proposed Purchase Price [net of any discounts, shipping,
installation or other similar charges, and excluding capitalized
interest or finance charges] for the machinery, equipment, fixtures or
other fixed assets listed on Attachment I: $_____________.
<PAGE> 51
.
C. 70% of proposed Purchase Price: $____________________.
D. Amount of Purchase Money Loan requested (which shall equal item C):
$________, to be disbursed as follows:
[ ] Comerica Bank Account No. ______________
[ ] Other:
_________________________________
C. Requested funding date (which shall be at least twenty (20) but not
more than sixty (60) Business Days after the date of this Request (the
"Funding Date")):______________
II. In furtherance of the foregoing, the undersigned [Company] [Designated
Borrower with countersignature of Company] represents, warrants and certifies to
the matters specified in Section 2.8C of the Purchase Money Loan Agreement and
to the matters specified in Section I of this Request.
Furthermore, the undersigned Company or Designated Borrower, as the case
may be, hereby pledges, assigns and transfers to Agent, for the benefit of the
Banks, and grants to Agent for the benefit of the Banks, a security interest in,
and a lien on the machinery, equipment, fixtures and/or fixed assets described
on Attachment I hereto, and all proceeds thereof, to the extent such undersigned
has (or will acquire) any rights, title or interest therein, all in accordance
with the terms and conditions of the Purchase Money Security Agreement to secure
the requested Purchase Money Loan and the associated Purchase Money
Indebtedness.
Upon the funding by the Banks of the requested Purchase Money Loan in
accordance with Section 2.1 of the Purchase Money Loan Agreement, this Purchase
Money Loan Initial Request shall constitute the grant of a security interest and
lien on the specific collateral described on Attachment 1 hereto, and the
proceeds and products thereof, all on the terms and conditions set forth in the
Purchase Money Security Agreement, which terms and conditions shall be
incorporated by reference herein; provided, however that the following terms as
used in this Request (after the incorporation by reference of the terms and
conditions of the Purchase Money Security Agreement) shall have the following
meanings: the term "Collateral" shall mean the machinery, equipment, fixtures
and fixed assets listed on Attachment I hereto and all substitutions therefor,
and all proceeds and all products thereof, including insurance proceeds; the
term "Purchase Money Loan Initial Request" shall mean this Purchase Money Loan
Initial Request; and the term "Purchase Money Loan" shall be the "Purchase Money
Loan" requested pursuant to this Purchase Money Loan Initial Request.
Capitalized terms used herein, except as defined to the contrary, have the
meanings given them in the Purchase Money Loan Agreement.
2
<PAGE> 52
WALBRO CORPORATION
By:_________________________________________
Its:________________________________________
[Designated Borrower]
By:_______________________________________
Its:________________________________________
Acknowledged and Accepted
as of____________________ , 199__
COMERICA BANK, as Agent
By:________________________________
Its:________________________________
[To be signed by Agent upon funding of the Purchase
Money Loan]
3
<PAGE> 53
Attachment I
to
Purchase Money Loan Initial Request
1. Describe Collateral, including serial numbers or attach a description and
attach sales brochures as sales incentive (if any) and invoice or purchase
order
2. Location of Collateral:__________________________________________
3. Will then become affixed to real estate
[ ] yes, may become a fixture
[ ] no, will not become a fixture
4. If yes to number 3, attach legal description of real estate, ownership
information (as to owners and mortgagees) and titlework.
4
<PAGE> 54
EXHIBIT B-1
PURCHASE MONEY NOTE
[COMPANY]
$___________________ August ___, 1997
On or before the Purchase Money Loan Maturity Date, FOR VALUE RECEIVED,
Walbro Corporation, a Delaware corporation ("Company"), promises to pay to the
order of [insert Bank] ("Bank") at Detroit, Michigan, care of Agent, in lawful
money of the United States of America, the sum of [Insert Amount derived from
Percentages] Dollars ($___________), or so much as said sum as may from time to
time have been advanced and then be outstanding hereunder pursuant to the
Walbro Corporation Purchase Money Loan Agreement dated as of August ___, 1997,
made by and among the Company, certain Designated Borrowers and certain banks
signatory thereto, including the Bank, and Comerica Bank, as Agent for such
banks, as the same may be amended or otherwise modified from time to time (the
"Agreement"), together with interest thereon as hereinafter set forth.
Each of the Advances made hereunder shall bear interest at the Applicable
Interest Rate from time to time applicable thereto under the Agreement or as
otherwise determined thereunder, and interest shall be computed, assessed and
payable as set forth in the Agreement.
This Note is a note under which advances (including refundings and
conversions), may be made from time to time, but only in accordance with the
terms and conditions of the Agreement. This Note evidences borrowings under, is
subject to, is secured in accordance with, and may be accelerated or matured
under, the terms of the Agreement, to which reference is hereby made.
Capitalized terms used herein, except as defined to the contrary, shall have the
meanings given them in the Agreement.
This Note shall be interpreted and the rights of the parties hereunder
shall be determined under the laws of, and enforceable in, the State of
Michigan.
Company hereby waives presentment for payment, demand, protest and notice
of dishonor and nonpayment of this Note and agrees that no obligation hereunder
shall be discharged by reason of any extension, indulgence, release, or
forbearance granted by any holder of this Note to any party now or hereafter
liable hereon or any present or subsequent owner of any property, real or
personal, which is now or hereafter security for this Note.
<PAGE> 55
Nothing herein shall limit any right granted Bank by any other instrument
or by law.
WALBRO CORPORATION
By:_________________________________
Its:________________________________
2
<PAGE> 56
EXHIBIT B-2
PURCHASE MONEY NOTE
(Designated Borrowers)
$_______________________ August ___, 1997
On or before the Purchase Money Loan Maturity Date, FOR VALUE RECEIVED,[___
_________________] [Designated Borrower] ("Borrower"), promises to pay to the
order of [Insert Bank] ("Bank") at Detroit, Michigan, care of Agent, in lawful
money of the United States of America so much of the sum of [insert amount
derived from Percentages] Dollars ($ ), as may from time to time have been
advanced and then be outstanding hereunder pursuant to the Walbro Corporation
Purchase Money Loan Agreement dated as of August ___, 1997, made by and among
Walbro Corporation, the Designated Borrowers, including the Borrower, and
certain banks signatory thereto, including the Bank, and Comerica Bank as Agent
for such banks, as the same may be amended or otherwise modified from time to
time ("Agreement"), together with interest thereon as hereinafter set forth.
By executing and delivering this Note to Bank, [ ] hereby assumes and
agrees, with respect to all Advances to it hereunder, to be bound by all of the
terms and conditions of the Agreement as fully as though such terms and
conditions were set forth herein.
Each of the Advances made hereunder shall bear interest at the Applicable
Interest Rate from time to time applicable thereto under the Agreement or as
otherwise determined thereunder, and interest shall be computed, assessed and
payable as set forth in the Agreement.
This Note is a note under which advances (including refundings and
conversions), may be made from time to time, but only in accordance with the
terms and conditions of the Agreement. This Note evidences borrowings under, is
subject to, is secured in accordance with, and may be accelerated or matured
under, the terms of the Agreement to which reference is hereby made. Capitalized
terms used herein, except as defined to the contrary, shall have the meanings
given them in the Agreement.
This Note shall be interpreted and the rights of the parties hereunder
shall be determined under the laws of, and enforceable in, the State of
Michigan.
Borrower hereby waives presentment for payment, demand, protest and notice
of dishonor and nonpayment of this Note and agrees that no obligation hereunder
shall be discharged by reason of any extension, indulgence, release, or
forbearance granted by any holder of this Note to any party
<PAGE> 57
now or hereafter liable hereon or any present or subsequent owner of any
property, real or personal, which is now or hereafter security for this Note.
Nothing herein shall limit any right granted Bank by any other instrument
or by law.
[__________________________________ ]
By:___________________________________
Its:__________________________________
2
<PAGE> 58
EXHIBIT C
BANKS PERCENTAGES
Comerica Bank 33.32%
Harris Trust and Savings Bank 14.81%
National City Bank 11.11%
Societe Generale 10.19%
The Bank of Tokyo Mitsubishi, 10.19%
Ltd.
Rabobank Nederland 10.19%
The Bank of New York 10.19%
Total 100%
3
<PAGE> 59
EXHIBIT D
FORM OF PURCHASE MONEY RATE REQUEST
No.______________________ Dated:_____________
To: Comerica Bank - Agent
RE: Walbro Corporation Purchase Money Loan Agreement dated as of August ____,
1997 by and among Walbro Corporation (the "Company"), the Designated
Borrowers, the Banks signatories thereto and Comerica Bank, as Agent (as
amended or otherwise modified from time to time, the "Purchase Money Loan
Agreement")
Pursuant to the Purchase Money Loan Agreement, the [Company] [Designated
Borrower] in accordance with Section 2.8B of the Purchase Money Loan Agreement,
hereby requests that the Banks refund or convert, as applicable, an Advance of
the Purchase Money Loan from Banks to the undersigned, as follows:
A. Date of requested Refund or Conversion of Advance:____________________
_____
B. Amount of Advance:
$____________________
C. Type of Activity:
1. Refunding []
2. Conversion []
D. Interest Rate:
1. Prime-based Rate []
2. Eurocurrency-based Rate []
E. Interest Period (for Eurocurrency-based Advances only):
1. One (1) Month []
2. Two (2) Months []
3. Three (3) Months []
The Company certifies to the matters specified in Section 2.8C of the
Agreement.
<PAGE> 60
F. Defined Terms
Capitalized terms used herein, unless specifically defined to the contrary
herein, have the meanings given them in the Purchase Money Loan Agreement.
Dated this_________day of____________, 199__.
WALBRO CORPORATION
By:_____________________________
Its:_____________________________
[DESIGNATED BORROWER]
By:_____________________________
Its:_____________________________
2
<PAGE> 61
EXHIBIT E
FORM OF CALL OPTION NOTICE
Dated:_____________
TO: [Walbro Corporation]
[Designated Borrower]
From: Comerica Bank ("Agent")
Re: Walbro Corporation Purchase Money Loan Agreement dated as of August ___,
1997 by and among Walbro Corporation (the "Company"), the Banks
signatories thereto and Comerica Bank, as Agent (as amended or otherwise
modified from time to time, the "Purchase Money Loan Agreement").
Capitalized terms used herein but not otherwise defined are used herein
as in Purchase Money Loan Agreement
Ladies and Gentlemen:
Pursuant to Section 2.3 of the Purchase Money Loan Agreement, the Majority
Banks hereby notify you that they are exercising their Call Option in connection
with the Purchase Money Indebtedness specified below:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Date and initial Amount of Amount of such Loan Amount of such Loan being
Purchase Money Loan outstanding on the date of called by this Call Notice
Call Notice
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
</TABLE>
The Purchase Money Indebtedness specified above shall become due and
payable within thirty (30) days following your receipt of this Call Notice. The
Majority Banks shall, unless they otherwise elect, apply sums received from you
in connection with this Call Notice as follows:
- --------------------------------------------------------------------------------
Purchase Money Loan Amount to be repaid
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 62
This Call Option Notice shall be subject to the terms and conditions of the
Purchase Money Loan Agreement.
Very truly yours,
COMERICA BANK, as Agent
By:____________________________________
Its:___________________________________
<PAGE> 1
EXHIBIT 4.24
EXECUTION COPY
PURCHASE MONEY GUARANTY
This PURCHASE MONEY GUARANTY (this "Purchase Money Guaranty") is made as of
the 27th day of August, 1997 by Walbro Corporation, a Delaware corporation (the
"Company" and each of the other undersigned guarantors (any and all such
guarantors collectively, including the Company, the "Guarantors" and
individually each a "Guarantor"), to Comerica Bank, as Agent ("Agent") for and
on behalf of the Banks (as defined below).
RECITALS
A. Pursuant to that certain Walbro Corporation Purchase Money Loan
Agreement (as amended or otherwise modified from time to time, the "Purchase
Money Loan Agreement") by and among the Company, Agent and the banks which are
named in and are signatories to the Purchase Money Loan Agreement ("Banks"), the
Banks have agreed to extend credit to Company and the Designated Borrowers which
from time to time become parties to the Purchase Money Loan Agreement on the
terms set forth in the Purchase Money Loan Agreement.
B. As a condition to entering into and performing their respective
obligations under the Purchase Money Loan Agreement, the Banks and the Agent
have required that the Guarantors provide to Agent, for and on behalf of the
Banks, among other guaranties, this Purchase Money Guaranty.
C. Each of the Guarantors desires to see the success of the Company and the
Designated Borrowers and, furthermore, shall receive direct and/or indirect
benefits from extensions of credit made or to be made pursuant to the Purchase
Money Loan Agreement to the Company and the Designated Borrowers.
D. The Agent is acting as Agent for the Banks pursuant to Section 9 of the
Purchase Money Loan Agreement.
NOW, THEREFORE, as a continuing inducement to the Agent and the Banks to
enter into and perform their respective obligations under the Purchase Money
Loan Agreement, each of the Guarantors has executed and delivered this Purchase
Money Guaranty.
1. Definitions. Unless otherwise provided herein, all capitalized terms
used in this Purchase Money Guaranty shall have the meanings specified in the
Purchase Money Loan Agreement. The term "Banks" as used herein shall include any
successors or permitted assigns of the Banks, in accordance with the Purchase
Money Loan Agreement.
<PAGE> 2
2. Guaranty. Each of the Guarantors hereby guarantees to the Banks the
punctual payment to the Banks when due, whether by acceleration or otherwise, of
all Purchase Money Indebtedness for which it is not otherwise obligated as a
primary obligor (under the Purchase Money Notes executed by it), including,
without limitation, principal, interest (including interest accruing on or after
the filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding by such Guarantor, whether or not a claim for
post-filing or post-petition interest is allowed in such a proceeding), and all
other liabilities and obligations, direct or indirect, absolute or contingent,
due or to become due, now existing or hereafter incurred, which may arise under,
out of, or in connection with:
(a) any and all Purchase Money Notes made or to be made to the order
of the Banks (or any of them) by the Company, from time to time pursuant to
the terms and conditions of the Purchase Money Loan Agreement;
(b) any and all Purchase Money Notes made or to be made to the order
of the Banks (or any of them) by any of the Designated Borrowers, from time
to time pursuant to the terms and conditions of the Purchase Money Loan
Agreement; and
(c) all extensions, renewals and amendments of or to the Purchase
Money Notes or any replacements or substitutions therefor;
whether on account of principal, interest, fees, indemnities, and reasonable
costs and expenses (including without limitation, all reasonable fees and
disbursements of counsel to the Agent or any Bank) or otherwise, and hereby
agrees that if Company or any Designated Borrower, as applicable, shall fail to
pay any of such amounts when and as the same shall be due and payable, or shall
fail to perform and discharge any covenant, representation or warranty in
accordance with the terms of the Purchase Money Notes, the Purchase Money Loan
Agreement, or any of the other Purchase Money Loan Documents (subject, in each
case, to any applicable periods of grace or cure), each such Guarantor will
forthwith pay to the Agent, on behalf of the Banks, an amount equal to any such
amount or cause Company or the applicable Designated Borrower, as the case may
be, to perform and discharge any such covenant, representation or warranty, as
the case may be, and will pay any and all damages that may be incurred or
suffered in consequence thereof by Agent or any of the Banks and all reasonable
expenses, including reasonable attorneys' fees, that may be incurred by Agent in
enforcing such covenant, representation or warranty of Company or such
Designated Borrower, and in enforcing the covenants and agreements of this
Purchase Money Guaranty.
3. Unconditional Character of Guaranty. The obligations of each of the
Guarantors under this Purchase Money Guaranty, to the full extent of its
guaranty of Purchase Money Indebtedness hereunder, shall be absolute and
unconditional, and shall be a guaranty of payment and not of collection,
irrespective of the validity, regularity or enforceability of the Purchase Money
Notes, the Purchase Money Loan Agreement, or any of the other Purchase Money
Loan Documents, or any provision thereof, the absence of any action to enforce
the same, any waiver or consent with respect to or any amendment of any
provision thereof, the recovery of any judgment against any
2
<PAGE> 3
Person or action to enforce the same, any failure or delay in the enforcement of
the obligations of Company or any Designated Borrower under the Purchase Money
Notes, the Purchase Money Loan Agreement, or any of the other Purchase Money
Loan Documents, or any setoff, counterclaim, recoupment, limitation, defense or
termination, whether with or without notice to such Guarantor. Each of the
Guarantors hereby waives diligence, demand for payment, filing of claims with
any court, any proceeding to enforce any provision of the Purchase Money Notes
executed by Company or any of the Designated Borrowers, or the Purchase Money
Loan Agreement, or any of the other Purchase Money Loan Documents, any right to
require a proceeding first against Company or such Designated Borrower, as the
case may be, or against any other guarantor or other party providing collateral,
or to exhaust any security for the performance of the obligations of Company or
any of the Designated Borrowers, any protest, presentment, notice or demand
whatsoever, and such Guarantor hereby covenants that this Purchase Money
Guaranty shall not be terminated, discharged or released except, subject to
Section 5.5 hereof, upon final payment in full (subject to no revocation or
rescission) of all amounts due and to become due from Company or any Designated
Borrower, as and to the extent described above, and only to the extent of any
such payment, performance and discharge. Each of the Guarantors further
covenants that no security now or subsequently held by the Agent or the Banks
for the payment of the Purchase Money Indebtedness evidenced by the Purchase
Money Notes made by Company or any Designated Borrower, under the Purchase Money
Loan Agreement, or for the payment of any other Purchase Money Indebtedness of
Company or any Designated Borrower, to the Agent or the Banks under the Purchase
Money Loan Agreement, or the other Purchase Money Loan Documents, whether in the
nature of a security interest, pledge, lien, assignment, setoff, suretyship,
guaranty, indemnity, insurance or otherwise, and no act, omission or other
conduct of Agent or the Banks in respect of such security, shall affect in any
manner whatsoever the unconditional obligation of this Purchase Money Guaranty,
and that the Agent and each of the Banks, in their respective sole discretion
and without notice to Company or such Designated Borrower, may release,
exchange, enforce, apply the proceeds of and otherwise deal with any such
security without affecting in any manner the unconditional obligation of this
Purchase Money Guaranty.
Without limiting the generality of the foregoing, such obligations, and the
rights of the Agent to enforce the same on behalf of the Banks, by proceedings,
whether by action at law, suit in equity or otherwise, shall not be in any way
affected by (i) any insolvency, bankruptcy, liquidation, reorganization,
readjustment, composition, dissolution, winding up or other proceeding involving
or affecting Company or any of the Designated Borrowers, or others, or (ii) any
change in the ownership of the capital stock of Company, any Designated
Borrower, or any other party providing collateral for any indebtedness covered
by this Purchase Money Guaranty, or any of their respective Affiliates.
Each of the Guarantors hereby waives to the fullest extent possible under
applicable law:
(a) any defense based upon the doctrine of marshaling of assets or
upon an election of remedies by Agent or the Banks, including, without
limitation, an election to proceed by non-judicial rather than judicial
foreclosure;
3
<PAGE> 4
(b) any defense based upon any statute or rule of law which provides
that the obligation of a surety must be neither larger in amount nor in other
respects more burdensome than that of the principal;
(c) any duty on the part of Agent or any of the Banks to disclose to
such Guarantor any facts Agent or the Banks may now or hereafter know about the
Company or any Designated Borrower, regardless of whether Agent or any Bank has
reason to believe that any such facts materially increase the risk beyond that
which such Guarantor intends to assume or has reason to believe that such facts
are unknown to such Guarantor or has a reasonable opportunity to communicate
such facts to such Guarantor, since such Guarantor acknowledges that it is fully
responsible for being and keeping informed of the financial condition of Company
and each of the Designated Borrowers and of all circumstances bearing on the
risk of non-payment of any Purchase Money Indebtedness hereby guaranteed;
(d) any claim for reimbursement, contribution, exoneration, indemnity
or subrogation, or any other similar claim, which such Guarantor may have or
obtain against the Company or any Designated Borrower, by reason of the
existence of this Purchase Money Guaranty, or by reason of the payment by such
Guarantor of any Purchase Money Indebtedness or the performance of this Purchase
Money Guaranty or of any other Purchase Money Loan Documents, until the Purchase
Money Indebtedness has been repaid and discharged in full and no commitment to
extend any credit under the Purchase Money Loan Agreement or any of the Purchase
Money Loan Documents (whether optional or obligatory), remains outstanding, and
any amounts paid to such Guarantor on account of any such claim at any time when
the obligations of such Guarantor under this Purchase Money Guaranty shall not
have been fully and finally paid shall be held by such Guarantor in trust for
Agent and the Banks, segregated from other funds of such Guarantor, and
forthwith upon receipt by such Guarantor shall be turned over to Agent in the
exact form received by such Guarantor (duly endorsed to Agent by such Guarantor,
if required), to be applied to such Guarantor's obligations under this Purchase
Money Guaranty, whether matured or unmatured, in such order and manner as Agent
may determine; and
(e) any other event or action (excluding compliance by such Guarantor
with the provisions hereof) that would result in the discharge by operation of
law or otherwise of such Guarantor from the performance or observance of any
obligation, covenant or agreement contained in this Purchase Money Guaranty.
The Agent and each of the Banks may deal with Company and the Designated
Borrowers, and any security held by them for the obligations of Company or any
of the Designated Borrowers (as aforesaid), in the same manner and as freely as
if this Purchase Money Guaranty did not exist and the Agent shall be entitled,
on behalf of Banks, without notice to the Guarantors, among other things, to
grant to the Company or any Designated Borrower, such extension or extensions of
time to perform any act or acts as may seem advisable to such Agent (on behalf
of the Banks) at any time and from time to time, and to permit the Company or
any Designated Borrower to incur additional indebtedness to Agent, the Banks, or
any of them, without terminating, affecting or impairing the
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<PAGE> 5
validity or enforceability of this Purchase Money Guaranty or the obligations of
the Guarantors hereunder.
The Agent may proceed, either in its own name (on behalf of the Banks) or
in the name of any of the Guarantors, or otherwise, to protect and enforce any
or all of its rights under this Purchase Money Guaranty by suit in equity,
action at law or by other appropriate proceedings, or to take any action
authorized or permitted under applicable law, and shall be entitled to require
and enforce the performance of all acts and things required to be performed
hereunder by the Guarantors. Each and every remedy of the Agent and of the Banks
shall, to the extent permitted by law, be cumulative and shall be in addition to
any other remedy given hereunder or now or hereafter existing at law or in
equity.
No waiver or release shall be deemed to have been made by the Agent or any
of the Banks of any of its rights hereunder unless the same shall be in writing
and signed by all of the Banks or on behalf of the Banks by the Agent, and any
such waiver shall be a waiver or release only with respect to the specific
matter involved and shall in no way impair the rights of the Agent or any of the
Banks or the obligations of the Guarantors under this Purchase Money Guaranty in
any other respect at any other time.
At the option of the Agent, any of the Guarantors may be joined in any
action or proceeding commenced by the Agent against Company, any of the
Designated Borrowers, or any of the other parties providing collateral for any
indebtedness covered by this Purchase Money Guaranty in connection with or based
upon the Purchase Money Notes made by Company or any Designated Borrower, the
Purchase Money Loan Agreement, or any of the other Purchase Money Loan Documents
or other Purchase Money Indebtedness, or any provision thereof, and recovery may
be had against any such Guarantor in such action or proceeding or in any
independent action or proceeding against such Guarantor, without any requirement
that the Agent or the Banks first assert, prosecute or exhaust any remedy or
claim against Company, any Designated Borrower and/or any of the other parties
providing collateral for any Purchase Money Indebtedness covered by this
Purchase Money Guaranty, or any other Purchase Money Indebtedness.
As a separate, additional and continuing obligation, each of the Guarantors
unconditionally and irrevocably undertakes and agrees with Agent that, should
the amounts referred to in Section 2 of this Purchase Money Guaranty not be
recoverable from such Guarantor in its capacity as a guarantor under this
Purchase Money Guaranty for any reason whatsoever (including, without
limitation, by reason of any provision of the Purchase Money Notes, the Purchase
Money Loan Agreement, or any of the other Purchase Money Loan Documents being or
becoming void, unenforceable, or otherwise invalid under any applicable law)
then, notwithstanding any knowledge thereof by the Agent and the Banks or any of
them at any time, such Guarantor as sole, original and independent obligor, upon
demand by Agent, will make payment to Agent of all such amounts by way of a full
indemnity.
5
<PAGE> 6
4. Representations and Warranties. Each of the Guarantors (a) ratifies,
confirms and, by reference thereto (as fully as though such matters were
expressly set forth herein), represents and warrants with respect to itself
those matters set forth in Sections 7.1, 7.3, 7.4, 7.5, 7.7, 7.8, 7.10, 7.12,
7.14, 7.15 through 7.19, inclusive, of the Revolving Credit Agreement (as
defined in the Purchase Money Loan Agreement) which Sections are incorporated by
reference in the Purchase Money Loan Agreement pursuant to Section 5.1 thereof,
and (b) agrees not to engage in any action or inaction, the result of which
would cause a violation of any term or condition of the Purchase Money Loan
Agreement.
5. Miscellaneous.
5.1 Governing Law. This Purchase Money Guaranty has been delivered in
Michigan and shall be interpreted and the rights of the parties hereunder shall
be determined under the laws of, and be enforceable in, the State of Michigan
(without regard to its conflict of laws provisions), each of the Guarantors
hereby consenting to the jurisdiction of state and all federal courts sitting in
such state.
5.2 Severability. If any term or provision of this Purchase Money
Guaranty, or the application thereof to any circumstance, shall, to any extent,
be invalid or unenforceable, the remainder of this Purchase Money Guaranty, or
the application of such term or provision to circumstances other than those as
to which it is held invalid or unenforceable, as the case may be, shall not be
affected thereby, and each term, provision and obligation of this Purchase Money
Guaranty shall be valid and enforceable to the fullest extent permitted by law.
5.3 Notice. All notices and other communications to be made or given
pursuant to this Guaranty shall be sufficient if made or given in writing and
delivered by messenger, reputable air courier or deposited in the United States
mails, registered or certified first class mail, or sent by telecopy, receipt
confirmed, addressed as provided in the Purchase Money Loan Agreement, or at
such other addresses as directed by any of such parties to the others, as
applicable, in compliance with this paragraph.
5.4 Right of Offset. Each of the Guarantors acknowledges the rights of
the Agent and of each of the Banks, upon the occurrence and during the
continuance of an Event of Default, to offset against the Purchase Money
Indebtedness of such Guarantor to the Banks under this Purchase Money Guaranty,
any amount owing by the Agent or the Banks, or either or any of them to such
Guarantor, whether represented by any deposit of such Guarantor with the Agent
or any of the Banks or otherwise.
5.5 Release. Upon the satisfaction of the obligations of the
Guarantors hereunder, and when the Guarantors are not subject to any obligation
under the Purchase Money Loan Agreement or any of the other Purchase Money Loan
Documents, the Agent shall deliver to the Guarantors, upon written request
therefor, a written release of this Purchase Money Guaranty;
6
<PAGE> 7
provided however that the effectiveness of this Purchase Money Guaranty shall
continue or be reinstated, as the case may be, in the event that any payment
received or credit given by the Agent or the Banks, or any of them, is returned,
disgorged, rescinded or required to be recontributed to any party as an
avoidable preference, impermissible setoff, fraudulent conveyance, restoration
of capital or otherwise under any applicable state, federal or national law of
any jurisdiction, including without limitation laws pertaining to bankruptcy or
insolvency, and this Purchase Money Guaranty shall thereafter be enforceable
against the Guarantors as if such returned, disgorged, recontributed or
rescinded payment or credit had not been received or given by the Agent or the
Banks, and whether or not the Agent or any Bank relied upon such payment or
credit or changed its position as a consequence thereof.
5.6 Amendments; Joinder. The terms of this Purchase Money Guaranty may
not be waived, altered, modified, amended, supplemented or terminated in any
manner whatsoever except as provided herein and in accordance with the Purchase
Money Loan Agreement. In accordance with Section 5.4 of the Purchase Money Loan
Agreement, all Significant Domestic Subsidiaries of the Company created or
otherwise acquired after the Effective Date shall become obligated as Guarantors
hereunder (each as fully as though an original signatory hereto) by executing
and delivering to Agent and the Banks that certain joinder agreement in the form
attached to this Purchase Money Guaranty as Exhibit A.
5.7 Consent to Jurisdiction. Each of the Guarantors and each of the
Agent and the Banks (by accepting the benefits hereof) hereby irrevocably submit
to the non-exclusive jurisdiction of any United States Federal Court or Michigan
state court sitting in Detroit, Michigan in any action or proceeding arising out
of or relating to this Purchase Money Guaranty and each of the Guarantors and
the Agent and the Banks hereby irrevocably agree that claims in respect of such
action or proceeding may be heard and determined in any such United States
Federal Court or Michigan state court. Each of the Guarantors irrevocably
consents to the service of any and all process in any such action or proceeding
brought in any court in or of the State of Michigan by the delivery of copies of
such process to such Guarantor at its address specified on the signature page
hereto or by certified mail directed to such address or such other address as
may be designated by the Guarantor in a notice to the other parties that
complies as to delivery with the terms of Section 5.3 hereof. Nothing in this
Section shall affect the right of the Banks and the Agent to serve process in
any other manner permitted by law or limit the right of the Banks or the Agent
(or any of them) to bring any such action or proceeding against any of the
Guarantors or any of its or their property in the courts of any other
jurisdiction. Each of the Guarantors hereby irrevocably waives any objection to
the laying of venue of any such suit or proceeding in the above described
courts.
5.8 Joint and Several Obligation, etc. The obligation of each of the
Guarantors under this Purchase Money Guaranty shall be several and also joint,
each with all and also each with any one or more of the others, and may be
enforced against each severally, any two or more jointly, or some severally and
some jointly. Any one or more of the Guarantors may be released from its
obligations hereunder with or without consideration for such release and the
obligations of the other Guarantors hereunder shall be in no way affected
thereby. Agent, on behalf of Banks, may fail or
7
<PAGE> 8
elect not to prove a claim against any bankrupt or insolvent Guarantor and
thereafter, Agent and the Bank may, without notice to any of the Guarantors,
extend or renew any part or all of any indebtedness of any of the Guarantors,
and may permit any of the Guarantors to incur additional indebtedness, without
affecting in any manner the unconditional obligation of the remaining
Guarantors. Such action shall not affect any right of contribution among the
Guarantors.
5.9 WAIVER OF JURY TRIAL. THE BANKS (BY ACCEPTING THE BENEFITS
HEREOF), THE AGENT (BY ACCEPTING THE BENEFITS HEREOF) AND EACH OF THE GUARANTORS
AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO
A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS PURCHASE
MONEY GUARANTY OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY
COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTION OF
ANY OF THEM. NEITHER THE BANKS, THE AGENT, NOR ANY OF THE GUARANTORS SHALL SEEK
TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY SUCH ACTION IN WHICH A JURY
TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR
HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED
IN ANY RESPECT OR RELINQUISHED BY THE BANKS AND THE AGENT OR THE GUARANTORS
EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
5.10 Limitation under Applicable Insolvency Laws. Notwithstanding
anything to the contrary contained herein, it is the intention of each of the
Guarantors, Agent and the Banks that the amount of each Guarantor's obligations
hereunder (other than the Company's obligations as a Guarantor hereunder, which
shall not be subject to this Section 5.10) shall be in, but not in excess of,
the maximum amount thereof not subject to avoidance or recovery by operation of
applicable law governing bankruptcy, reorganization, arrangement, adjustment of
debts, relief of debtors, dissolution, insolvency, fraudulent transfers or
conveyances or other similar laws (collectively, "Applicable Insolvency Laws").
To that end, but only in the event and to the extent that a Guarantor's
obligations hereunder or any payment made pursuant thereto would, but for the
operation of the foregoing proviso, be subject to avoidance or recovery under
Applicable Insolvency Laws, the amount of such Guarantor's obligations hereunder
shall be limited to the largest amount which, after effect thereto, would not,
under Applicable Insolvency Laws, render such Guarantor's respective obligations
hereunder unenforceable or avoidable or subject to recovery under Applicable
Insolvency Laws. To the extent any payment actually made hereunder exceeds the
limitation contained in this Section 5.10, then the amount of such excess shall,
from and after the time of payment by the Guarantors (or any of them), be
reimbursed by the Banks upon demand by such Guarantor. The foregoing proviso is
intended solely to preserve the rights of the Agent and the Banks hereunder
against the Guarantors to the maximum extent permitted by Applicable Insolvency
Laws and neither Company nor any Guarantor nor any other Person shall have any
right or claim under this Section 5.10 that would not otherwise be available
under Applicable Insolvency Laws.
8
<PAGE> 9
[signature follows on succeeding page]
9
<PAGE> 10
IN WITNESS WHEREOF, the undersigned each of the Guarantors has executed
this Purchase Money Guaranty as of the date first above written.
WALBRO CORPORATION
By: /s/ Michael A. Shope
--------------------------------
Its: Chief Financial Officer
and Treasurer
-------------------------------
WALBRO AUTOMOTIVE CORPORATION,
a Delaware corporation
By: /s/ Michael A. Shope
--------------------------------
Its: Treasurer
-------------------------------
SHARON MANUFACTURING COMPANY,
a Michigan corporation
By: /s/ Michael A. Shope
--------------------------------
Its: Treasurer
-------------------------------
10
<PAGE> 11
WALBRO ENGINE MANAGEMENT
CORPORATION, a Delaware corporation
By: /s/ Michael A. Shope
--------------------------------
Its: Treasurer
-------------------------------
WHITEHEAD ENGINEERED PRODUCTS,
INC., a Delaware corporation
By: /s/ Michael A. Shope
--------------------------------
Its: Treasurer
-------------------------------
<PAGE> 12
EXHIBIT A
to Purchase Money Guaranty
JOINDER AGREEMENT
THIS JOINDER AGREEMENT is dated as of ______________, ______ by
_____________________, a ______________________ corporation ("New Guarantor").
WHEREAS, pursuant to Section 5.4 of that certain Walbro Corporation
Purchase Money Loan Agreement dated as of August _____, 1997 (as amended or
otherwise modified from time to time, the "Purchase Money Loan Agreement") by
and among Walbro Corporation ("Company"), the Banks signatory thereto and
Comerica Bank, as Agent for the Banks (in such capacity, "Agent"), and pursuant
to Section 5.6 of that certain Purchase Money Guaranty dated as of July ___,
1997 (as amended or otherwise modified from time to time the "Purchase Money
Guaranty") executed and delivered by the Guarantors named therein ("Guarantors")
in favor of Agent, for and on behalf of the Banks, the New Guarantor must
execute and deliver a Joinder Agreement in accordance with the Purchase Money
Loan Agreement and the Purchase Money Guaranty.
NOW THEREFORE, as a further inducement to Banks to continue to provide
credit accommodations to Company and each of the Designated Borrowers (as
defined in the Purchase Money Loan Agreement), New Guarantor hereby covenants
and agrees as follows:
1. All capitalized terms used herein shall have the meanings assigned to
them in the Purchase Money Loan Agreement unless expressly defined to
the contrary.
2. New Guarantor hereby enters into this Joinder Agreement in order to
comply with Section 5.4 of the Purchase Money Loan Agreement and
Section 5.6 of the Purchase Money Guaranty and does so in
consideration of the Advances made or to be made from time to time
under the Purchase Money Loan Agreement (and the other Purchase Money
Loan Documents, as defined in the Purchase Money Loan Agreement), from
which New Guarantor shall derive direct and indirect benefit as with
the other Guarantors (all as set forth and on the same basis as in the
Purchase Money Guaranty).
3. New Guarantor shall be considered, and deemed to be, for all purposes
of the Purchase Money Loan Agreement, the Purchase Money Guaranty and
the other Purchase Money Loan Documents, a Guarantor under the
Purchase Money Guaranty as fully as though New Guarantor had executed
and delivered the Purchase Money Guaranty at the time originally
executed and delivered under the Purchase Money Loan Agreement and
hereby ratifies and confirms its obligations under the Purchase Money
Guaranty, all in accordance with the terms thereof.
4. No Default or Event of Default (each such term being defined in the
Purchase Money Loan Agreement) has occurred and is continuing under
the Purchase Money Loan Agreement.
<PAGE> 13
5. This Joinder Agreement shall be governed by the laws of the State of
Michigan and shall be binding upon New Guarantor and its successors
and assigns.
IN WITNESS WHEREOF, the undersigned New Guarantor has executed and
delivered this Joinder Agreement as of __________________, ________.
[NEW GUARANTOR]
By:_________________________________
Its:_________________________________
2
<PAGE> 1
EXHIBIT 4.25
EXECUTION COPY
PURCHASE MONEY SECURITY AGREEMENT
This PURCHASE MONEY SECURITY AGREEMENT ("Security Agreement") is made as of
this 27th day of August, 1997 by and among Walbro Corporation, Delaware
corporation (the "Company"), and such Designated Borrowers (as defined below)
which from time to time become parties hereto (collectively, including the
Company, the "Debtors" and individually each a "Debtor") and Comerica Bank, a
Michigan banking corporation, as Agent for and on behalf of the Banks (as
defined below) ("Secured Party").
RECITALS
A. WHEREAS, pursuant to that certain Walbro Corporation Purchase Money Loan
Agreement dated as of August 27, 1997 (as amended or otherwise modified from
time to time, the "Purchase Money Loan Agreement"), among the Company, each of
the financial institutions party thereto (collectively, the "Banks") and Secured
Party, as Agent for the Banks, the Banks have agreed, subject to the
satisfaction of certain terms and conditions, to make Purchase Money Loans (as
therein defined) to the Company and to the Designated Borrowers (as defined in
the Purchase Money Loan Agreement to fund the purchase of certain items of
machinery, equipment, fixtures or other fixed assets, as provided therein; and
B. WHEREAS, the obligations of the Company and each of the Designated
Borrowers under the Purchase Money Loan Agreement (including without limitation
any future Designated Borrowers which deliver a joinder agreement in the form
attached hereto as Exhibit A) are to be secured pursuant to this Security
Agreement, such that, contemporaneously with the making of each Purchase Money
Loan to the Company or a Designated Borrower, the Company or such Designated
Borrower, as the case may be, shall grant a security interest to the Secured
Party, as Agent for the Banks, in the particular machinery, equipment, fixtures
or other fixed assets purchased with the proceeds of such loan, all on the terms
and conditions set forth herein.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
I. Creation of Security Interest
As security for each Purchase Money Loan funded by the Banks under the
Purchase Money Loan Agreement, Company or the applicable Designated Borrower, as
the case may be, shall, by delivery of Purchase Money Loan Initial Request as
referred to below, pledge, assign and transfer to the Secured Party, and grant
to Secured Party a first lien on, and security interest in, all of Company's or
such Designated Borrower's right, title and interest, as applicable, in and to
such machinery, equipment, fixtures or other fixed assets described in the
Purchase Money Loan Initial
<PAGE> 2
Request delivered by Company or the applicable Designated Borrower to the
Secured Party pursuant to Purchase Money Loan Agreement in connection with the
funding of the applicable Purchase Money Loan, as collateral security for the
full and prompt payment, when due (whether by acceleration or otherwise), by
Company or such Designated Borrower of the applicable Purchase Money Loan,
whether any such property is now owned or hereafter acquired or existing by such
Debtor, and all proceeds and all products of the foregoing, including insurance
proceeds, to the fullest extent permitted by law, subject in each case only to
the Lien granted hereunder (the "Collateral"). The pledge and grant of a
security interest in proceeds hereunder shall not be deemed to give the Debtors
any right to dispose of any of the Collateral.
II. Debtors' Obligations
A. Payment of Secured Indebtedness. Each security interest created
hereunder by a Debtor's delivery of a Purchase Money Loan Initial Request is
given as security for the discharge and performance of such Debtor's obligations
as principal obligor in connection with the Purchase Money Loan identified in
the applicable Purchase Money Loan Initial Request and funded pursuant to the
Purchase Money Loan Agreement, the Purchase Money Notes executed by such Debtor
and the other Purchase Money Loan Documents, whether such indebtedness is now or
hereafter existing, or due or to become due, together with interest thereon as
set forth therein; and any judgments that may hereafter be rendered on such
indebtedness or any part thereof, with interest according to the rates and terms
specified, or as provided by law, and any and all replacements, consolidations,
amendments, renewals or extensions of the foregoing (collectively herein called
the "Purchase Money Indebtedness").
B. Protection of Collateral. Each Debtor shall take any and all reasonable
steps required to protect the Collateral encumbered by it pursuant to Section
II(A) hereof, and in pursuance thereof, each such Debtor agrees that:
(1) Such Collateral will not be misused, wasted or allowed to
deteriorate, except for the ordinary wear and tear of its intended primary use
or to the extent no longer useful or necessary to such Debtor's business, and
will at all times be maintained in accordance with the applicable terms of the
Purchase Money Loan Agreement.
(2) Such Collateral will be insured with insurance coverage by
financially sound and reputable insurers and in such forms and amounts and
against such risks as prudent business judgment and then current practice would
dictate for companies or professional enterprises engaged in the same or a
similar business and owning and operating similar properties. In the case of all
such insurance policies, each such Debtor shall designate the Secured Party, on
behalf of Banks, as mortgagee and loss payee and such policies shall provide
that any loss be payable to each such Debtor and Secured Party, on behalf of
Banks, as mortgagee and loss payee, as their respective interests may appear.
Further, upon the request of the Secured Party acting at the request of the
Banks, each such Debtor shall deliver copies of all said policies, including all
endorsements thereon and those required hereunder, or certificates evidencing
such policies and endorsements, to Secured
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<PAGE> 3
Party; and each such Debtor assigns to Secured Party, on behalf of Banks, as
additional security hereunder (subject to the terms hereof), all its rights to
receive proceeds of insurance with respect to such Collateral. All such
insurance shall, by its terms, provide that no cancellation, lapse (including
without limitation any lapse for non-payment of premiums) or material change in
coverage shall become effective until thirty (30) days after receipt by Secured
Party of written notice from the applicable carrier. Each Debtor further shall
provide Secured Party upon request with evidence reasonably satisfactory to
Secured Party that each such Debtor is at all times in compliance with this
paragraph. Secured Party may act as each such Debtor's attorney-in-fact in
obtaining, adjusting, settling and compromising such insurance and endorsing any
drafts. Upon default in this covenant, Secured Party may procure such insurance
and its costs therefor shall be charged to Company or the applicable Designated
Borrower, as the case may be, payable on demand, with interest at the highest
rate set forth in the Purchase Money Loan Agreement and added to the Purchase
Money Indebtedness secured thereby. The disposition of proceeds of any insurance
on Collateral ("Insurance Proceeds") shall be governed by the following:
(i) provided that no Event of Default has occurred and is
continuing hereunder, (a) if the amount of Insurance Proceeds in respect of
any loss or casualty does not exceed Fifty Thousand Dollars ($50,000), the
applicable Debtor shall be entitled, in the event of such loss or casualty,
to receive all such Insurance Proceeds and to apply the same toward the
replacement of the Collateral affected thereby; and (b) if the amount of
Insurance Proceeds in respect of any loss or casualty exceeds Fifty
Thousand Dollars ($50,000), such Insurance Proceeds shall be paid to and
received by Secured Party, for release to such Debtor for the replacement
of the Collateral affected thereby or, upon written request of such Debtor
(accompanied by reasonable supporting documentation), for such other use or
purpose as approved by the Majority Banks, in their reasonable discretion,
it being understood and agreed in connection with any release of funds
under this subparagraph (B), that the Secured Party and Majority Banks may
impose reasonable and customary conditions on the disbursement of such
Insurance Proceeds; and
(ii) if an Event of Default has occurred and is continuing
hereunder or if a Call Option has been exercised (and remains outstanding)
in respect of the Purchase Money Loan relating to such Collateral, all
Insurance Proceeds from any loss or casualty shall be paid to and received
by the Secured Party, to be applied by the Secured Party against the
applicable Purchase Money Indebtedness and/or to be held by the Secured
Party as cash collateral for such Purchase Money Indebtedness, as the
Majority Banks may direct in accordance with the Purchase Money Loan
Agreement.
(3) Each item of Collateral encumbered by such Debtor is or
shall be located on the premises set forth in the Purchase Money Loan
Initial Request relating thereto, and will not be moved to premises other than
those set forth on such Purchase Money Loan Initial Request, and such other
locations with respect to which each such Debtor shall have executed and
delivered to Secured Party all financing statements and other documents and
instruments necessary to perfect or continue the perfection of the Secured
Party's security interest in such Collateral. Subject to the applicable
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<PAGE> 4
terms of the Purchase Money Loan Agreement, each such Debtor will inform the
Secured Party in writing of the whereabouts of the Collateral encumbered by such
Debtor and upon request therefor by the Secured Party, will promptly arrange for
any inspections requested by the Secured Party, on behalf of Banks;
(4) Each such Debtor shall comply with all applicable laws, rules,
ordinances, regulations and orders of any governmental authority, whether
federal, state, local or foreign in effect from time to time with respect to the
Collateral, to the full extent required under the Purchase Money Loan Agreement.
(5) Secured Party, on behalf of the Banks, may, subject to the
applicable terms of the Purchase Money Loan Agreement, examine and inspect the
Collateral at any time wherever located.
C. Protection of Security Interest. Each Debtor agrees that:
(1) Except as permitted by the Purchase Money Loan Agreement, it will
not sell, transfer, lease or otherwise dispose of any of the Collateral
encumbered by such Debtor (or any interest therein) or offer to do so without
the prior written consent of Secured Party, given at the written direction or
with the written approval of the Banks, and will not create, incur, assume or
suffer to exist any mortgage, pledge, encumbrance, security interest, lien or
charge of any kind upon any of the Collateral encumbered by such Debtor (or any
interest therein or portion thereof), other than in favor of Secured Party, on
behalf of the Banks and liens permitted under the Purchase Money Loan Agreement.
(2) It will, to the full extent required under the Purchase Money Loan
Agreement, pay all taxes, assessments, governmental charges and levies upon the
Collateral encumbered by such Debtor or for its use or operation.
(3) It will sign and execute alone or with Secured Party any financing
statement or other document or procure any documents and pay all connected
costs, necessary to protect the security interest under this Security Agreement
against the rights or interests of third persons, including, without limitation,
with respect to any Collateral which constitutes or may constitute fixtures
under applicable law (as specified in the applicable Purchase Money Loan Initial
Request or as otherwise reasonably determined by the Majority Banks) UCC 1-A
fixture filings or other applicable documents or instruments reasonably required
to perfect a security interest in fixtures, accompanied by a description of the
real property upon which such items of Collateral are to be located or affixed
and the name(s) and address(es) of the owner(s) and mortgagee(s) of such real
property and, upon the reasonable request of the Majority Banks shall furnish
Secured Party with consents or disclaimers filed by all Persons having an
interest in such real property (including without limitation, owners, mortgage
holders and lessees) consenting to the security interests and liens established
hereunder in such Collateral and acknowledging or otherwise confirming the
priority of the Lien established hereunder in favor of the Banks.
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<PAGE> 5
(4) It will reimburse Secured Party for all reasonable costs,
including reasonable attorneys' fees, incurred for any action taken by Secured
Party to remedy an Event of Default of Debtor which Secured Party elects to
remedy pursuant to its rights under Paragraph IV hereof.
(5) It will,
(i) subject to Sections 5.3 and 5.11 (incorporating by
reference Section 8.7 of the Revolving Credit Agreement) of the Purchase
Money Loan Agreement, allow Secured Party, or any Bank, to examine, audit
and inspect such Debtor's books, accounts, and other records relating to
Collateral wherever located at all reasonable times during normal business
hours, upon oral or written request of Secured Party, and to make and take
away copies of any and all such books, accounts, records and ledgers;
(ii) punctually and properly perform all of its covenants
and duties under any other security agreement, mortgage, collateral
document, pledge agreement or contract of any kind now or hereafter
existing as security for or in connection with payment of the Purchase
Money Indebtedness, or any part thereof;
(iii) perform its obligations under and comply with the
terms and provisions of the Purchase Money Loan Agreement and the other
Purchase Money Loan Documents to which it is or may become a party or
otherwise obligated thereunder;
(iv) keep, at the addresses designated on the Purchase
Money Loan Initial Request and such additional addresses as may be
provided from time to time for its records, all records concerning the
Collateral encumbered by such Debtor, which records will be of such
character as will enable Secured Party or its designees to determine at
any time the status of such Collateral;
(v) give Secured Party not less than 30 days prior written
notice of all contemplated changes in such Debtor's name, legal
structure, or chief executive office, or in the location of the Collateral
encumbered by such Debtor or such Debtor's records concerning same and,
prior to making any such changes, file or cause to be filed all financing
statements or amendments or other documents or instruments determined by
Secured Party to be necessary or appropriate to establish and maintain a
valid first priority security interest in all the Collateral encumbered by
such Debtor in accordance with the terms hereof;
(vi) promptly furnish Secured Party with any information in
writing which Secured Party may reasonably request concerning the
Collateral encumbered by such Debtor;
(vii) to the extent required under the Purchase Money Loan
Agreement, promptly notify Secured Party of any material claim, action or
proceeding affecting the
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<PAGE> 6
Collateral encumbered by such Debtor and title therein, or in any part
thereof, or the security interest created herein, and, at the request of
the Secured Party, appear in and defend, at such Debtor's expense, any such
action or proceeding; and
(viii) promptly, after being requested by Secured Party, pay
to Secured Party the amount of all reasonable expenses, including
reasonable attorneys' fees and other legal expenses, incurred by Secured
Party pursuant to and in accordance with the Purchase Money Loan Agreement
in protecting and maintaining the Collateral encumbered by such Debtor or
its rights hereunder, or in connection with any audit or inspection of such
Collateral pursuant to the terms hereof, and in enforcing the security
interest created herein.
(6) With respect to any Collateral of a kind requiring an additional
security agreement, financing statement, or other writing to perfect a security
interest therein in favor of Secured Party, on behalf of Banks, such Debtor will
forthwith upon demand by Secured Party execute and deliver to Secured Party on
behalf of Banks, whatever documentation the Secured Party or the requisite Banks
shall reasonably deem necessary or proper for such purpose. Should any covenant,
duty or agreement of such Debtor fail to be performed in accordance with its
terms hereunder resulting in an Event of Default, Secured Party may, but shall
never be obligated to, perform or attempt to perform such covenant, duty or
agreement on behalf of such Debtor, and any amount expended by Secured Party in
such performance or attempted performance shall become part of the Purchase
Money Indebtedness, and, at the request of Secured Party, such Debtor agrees to
pay such amount to Secured Party upon demand at Secured Party's office in
Detroit, Michigan together with interest thereon at the highest rate at which
interest accrues on amounts after the same become due pursuant to the terms of
the Purchase Money Loan Agreement, from the date of such expenditure by Secured
Party until paid.
(7) It will hold the proceeds of any of the Collateral encumbered by
such Debtor which is sold as permitted under the Purchase Money Loan Agreement
or otherwise (subject to the terms thereof) in trust for Secured Party on behalf
of the Banks, will not commingle said proceeds with any other funds, and, after
an Event of Default, will deliver such proceeds to Secured Party immediately
upon its request. The provisions of this Section II(B)(7) shall not be deemed to
give the Debtors (or any of them) any right to dispose the Collateral.
(8) If Secured Party, acting in its sole discretion, redelivers any
Collateral to a Debtor or such Debtor's designee for the purpose of (i) the
ultimate sale or exchange thereof, or (ii)presentation, collection, renewal, or
registration of transfer thereof, or (iii) loading, unloading, storing,
shipping, transshipping, manufacturing, processing or otherwise dealing
therewith preliminary to sale or exchange; such redelivery shall not constitute
a release of Secured Party's security interest therein or in the proceeds
thereof unless Secured Party, with the consent of the Banks, specifically so
agrees in writing. If such Debtor requests any such redelivery, such Debtor will
deliver with such request a duly executed financing statement in form and
substance satisfactory to Secured Party.
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<PAGE> 7
(9) Subject to the applicable terms of the Purchase Money Loan
Agreement, each Debtor shall take any and all other steps reasonably required
under applicable law to perfect the lien and security interest established
hereby in favor of Secured Party, on behalf of the Banks, including without
limitation the execution, delivery and/or performance of appropriate
acknowledgments, governmental acknowledgments, registrations or approvals,
financing statements and other documents and instruments, and the registration,
recording and/or filing of such instruments with such Persons and in such
jurisdictions as necessary to perfect the security interest and lien established
hereby.
III. Default
The terms "Default" and "Event of Default", as used herein, shall mean the
occurrence of a Default or an Event of Default, as the case may be, under the
Purchase Money Loan Agreement.
IV. Secured Party's Rights and Remedies.
In addition to its rights and remedies under the Purchase Money Loan
Agreement and the other Purchase Money Loan Documents, and under applicable law,
Secured Party shall have available to it the following rights and remedies upon
the occurrence and during the continuance of an Event of Default:
A. Right to Discharge Debtors' Obligations. Secured Party may, with the
approval of the Majority Banks, discharge taxes, liens or security interests or
other encumbrances at any time levied or placed on the Collateral, whether
senior or junior to the security interest herein granted, may remedy or cure any
default of a Debtor under the terms of any lease, rental agreement, land
contract, mortgage or other document which in any way pertains to or affects
such Debtor's title to or interest in any of the Collateral, may pay for
insurance on the Collateral, and may pay for the maintenance and preservation of
the Collateral, unless the applicable Debtor is contesting in good faith such
obligations, and such Debtor agrees to reimburse Secured Party, on demand, for
any payment made or any expense incurred by Secured Party pursuant to the
foregoing authorization, with interest, which payments and expenses shall be
secured by the Collateral affected thereby.
B. Remedies and Enforcement. Secured Party shall have and may exercise, at
the direction or with the approval of the Majority Banks, any and all rights of
enforcement and remedies afforded to a secured party under the Uniform
Commercial Code as adopted and in force in the State of Michigan or other
applicable uniform commercial code (or other applicable law), to the full extent
permitted by applicable law, on the date of this Security Agreement or the date
of a Default or Event of Default, together with any and all other rights and
remedies otherwise provided and available to Secured Party by applicable law
unless such application would result in the invalidity or unenforceability of
any provision hereof, in which case the law of the state in which any of the
Collateral is located shall apply to the extent necessary to render such
provision valid and enforceable; and, in conjunction with, in addition to, or
substitution for those rights, Secured Party
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<PAGE> 8
may, at the direction or with the approval of the Majority Banks, or with
respect to subparagraph (3) below), all of the Banks:
(1) Enter upon such Debtor's premises to take possession of, assemble,
collect and/or dispose of the Collateral encumbered by such Debtor and, if
Secured Party elects to do, to apply any of such Collateral against any of
the Purchase Money Indebtedness secured thereby;
(2) Require each of the Debtors to assemble the Collateral encumbered
by such Debtor and make it available at a place Secured Party designates to
allow Secured Party to take possession or dispose of such Collateral;
(3) Waive any default, or remedy any default, without waiving its
rights and remedies upon default and without waiving any other prior or
subsequent default;
(4) Appoint any officer or agent of Secured Party as such Debtor's
true and lawful proxy and attorney-in-fact, with power, upon the occurrence
of any Event of Default (exercisable so long as such Event of Default is
continuing); to endorse such Debtor's name or any of its officers or agents
upon any notes, checks, drafts, money orders, or other instruments of
payment in respect of or constituting Collateral (including payments
payable under any policy of insurance on Collateral) that may come into
possession of the Secured Party in full or part payment of any amounts
owing to the Banks; to sign and endorse the name of such Debtor and/or any
of its officers or agents upon any invoice, freight or express bill, bill
of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with accounts, and any
instrument or document relating thereto or to such Debtor's rights therein;
to execute on behalf of such Debtor any financing statements, amendments,
subordinations or other filings pursuant to the Purchase Money Loan
Agreement, this Security Agreement or the other Purchase Money Loan
Documents; such Debtor hereby granting unto Secured Party on behalf of the
Banks, as the proxy and attorney-in-fact of such Debtor, full power to do
any and all things necessary to be done in and about the premises as fully
and effectually as such Debtor might or could do, and hereby ratifying all
that said proxy and attorney shall lawfully do or cause to be done by
virtue hereof. The proxy and power of attorney described herein shall be
deemed to be coupled with an interest and shall be irrevocable for the
entire term of the Purchase Money Loan Agreement, and all transactions
thereunder and thereafter as long as any Purchase Money Indebtedness or any
of the commitments to lend (whether optional or obligatory) remain
outstanding. The Secured Party shall have full power to collect,
compromise, endorse, sell or otherwise deal with Collateral or proceeds
thereof on behalf of the Banks in its own name or in the name of such
Debtor, provided that Secured Party shall act in a commercially reasonable
manner.
C. Right of Sale.
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<PAGE> 9
(1) Each Debtor agrees that upon the occurrence and continuance of an
Event of Default, Secured Party may, at its option, sell and dispose of the
Collateral encumbered by such Debtor at public or private sale without any
previous demand of performance. Each Debtor agrees that notice of such sale
sent to such Debtor's address, as set forth on the signature pages attached
hereto (or in any Purchase Money Note delivered under the Purchase Money
Loan Agreement), by certified or registered mail sent at least five (5)
Business Days prior to such sale, shall constitute reasonable notice of
sale. The foregoing shall not require notice if none is necessary under
applicable law. The proceeds of sale shall be applied in the following
order:
(i) to all reasonable costs and charges incurred by
Secured Party in the taking and causing the removal and sale of said
property, including such reasonable attorneys' fees as shall have been
incurred by Secured Party;
(ii) to the Purchase Money Indebtedness secured by such
Collateral, including without limitation all accrued interest thereon,
premiums, breakage costs, and make whole amounts, if any, in the order
and manner set forth in the Purchase Money Loan Agreement; and
(iii) any surplus of such proceeds remaining shall be paid
to such Debtor, or to such other party who shall lawfully be entitled
thereto.
(2) At any sale or sales made pursuant to this Security Agreement or
in a suit to foreclose the same, the Collateral may be sold en masse or
separately, at the same or at different times, at the option of the Secured
Party or its assigns. Such sale may be public or private with notice as
required by the Uniform Commercial Code as then in effect in the state in
which the Collateral is located, and the Collateral need not be present at
the time or place of sale. At any such sale, the Secured Party may bid for
and purchase any of the property sold, notwithstanding that such sale is
conducted by the Secured Party or its attorneys, agents, or assigns.
D. Miscellaneous. Secured Party shall have the right at all times to
enforce the provisions of this Security Agreement, on behalf of the Banks, in
strict accordance with the terms hereof, notwithstanding any conduct or custom
on the part of Secured Party or any of the Banks in refraining from so doing at
any time or times. The failure of Secured Party or any of the Banks at any time
or times to enforce its rights under said provisions strictly in accordance with
the same shall not be construed as having created a custom in any way or manner
contrary to the specific provisions of this Security Agreement or as having in
any way or manner modified the same. All rights and remedies of Secured Party
and Banks hereunder shall be cumulative and concurrent, and the exercise of one
right or remedy shall not be deemed a waiver or release of any other right or
remedy.
VI. Representations, Warranties and Covenants of Debtors.
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<PAGE> 10
Each Debtor represents and warrants, and, after the date hereof, covenants
so long as any of the Purchase Money Loan Agreement, the Purchase Money Notes or
the other Purchase Money Loan Documents remains in effect, that:
A. The Collateral does not comprise a part of the Company's or the
applicable Designated Borrower's inventory and it is and will only be used by
the Company or such Designated Borrower, as the case me be, in its business and
will not be held for sale or lease, or removed from the premises where presently
located, or otherwise disposed of by the Company or such Designated Borrower
without the prior written consent of the Majority Banks.
B. No financing statement covering the Collateral, or any part thereof, has
been or will be filed with any filing officer, except as permitted under the
Purchase Money Loan Agreement.
C. No other agreement, pledge or assignment covering the Collateral, or any
part thereof, has been or will be made and no security interest, other than the
one created hereby or pursuant to security agreements and pledges previously
made in favor of Secured Party on behalf of the Banks, has or will be attached
or has been or will be perfected in the Collateral or in any part thereof,
except as permitted under the Purchase Money Loan Agreement.
D. No material dispute, right of setoff, counterclaim or defenses exist
with respect to any part of the Collateral (excluding accounts, accounts
receivable and rights to payment for services rendered), except as permitted
under the Purchase Money Loan Agreement.
E. At the time Secured Party's security interest attaches to any of the
Collateral (or its proceeds), the applicable Debtor will be the lawful owner
thereof with the right to transfer any interest therein, such Collateral is free
and clear of all liens other than the one created hereby or permitted by the
Purchase Money Loan Agreement and that such Debtor will make such further
assurances to prove its title to the Collateral as may be reasonably required,
will keep such Collateral free and clear of all liens other than the one created
hereby and liens permitted by the Purchase Money Loan Agreement, and will take
such action to defend such Collateral and its proceeds against the lawful claims
and demands of all persons whomsoever.
F. The representations and warranties contained in the Purchase Money Loan
Agreement are incorporated by reference herein and are all made as of the date
hereof.
VII. Mutual Agreements.
Each Debtor and Secured Party mutually agree as follows:
A. "Debtor" and "Secured Party" as used in this Security Agreement include
the successors and permitted assigns of those parties, and, as used herein,
"Debtors" shall refer to the Debtors collectively, and each of them.
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<PAGE> 11
B. To the extent permitted by applicable law, except as otherwise provided
herein, the law governing this Security Agreement shall be that of the State of
Michigan.
C. This Security Agreement includes all amendments and supplements hereto
and all assignments hereof, provided, that Debtors and Secured Party shall not
be bound by any amendment hereto unless such amendment is expressed in a writing
executed by each of them.
D. All capitalized or other terms not specifically defined herein are used
as defined in the Purchase Money Loan Agreement. To the extent not inconsistent
therewith, all such terms shall also be construed in conformity with the
Michigan or other applicable Uniform Commercial Code.
E. This Security Agreement shall remain in full force and effect for the
entire duration that the Purchase Money Loan Agreement remains effective and
until all of the Purchase Money Indebtedness has been repaid and discharged in
full.
F. THE PARTIES HERETO ACKNOWLEDGE THAT THIS SECURITY AGREEMENT IS SUBJECT
TO THE MUTUAL WAIVER OF JURY TRIAL CONTAINED IN THE APPLICABLE PROVISIONS OF THE
PURCHASE MONEY LOAN AGREEMENT.
G. Each of the Debtors hereby irrevocably submits to the non-exclusive
jurisdiction of any United States Federal Court or Michigan state court sitting
in Detroit, Michigan in any action or proceeding arising out of or relating to
this Security Agreement and hereby irrevocably agrees that all claims in respect
of such action or proceeding may be heard and determined in any such United
States Federal Court or Michigan state court. Each Debtor irrevocably consents
to the service of any and all process in any such action or proceeding brought
in any court in or of the State of Michigan by the delivery of copies of such
process to such Debtor at its address specified in Schedule II hereto or by
certified mail directed to such address. Nothing in this paragraph shall affect
the right of the Banks and the Secured Party to serve process in any other
manner permitted by law or limit the right of the Banks or the Secured Party (or
any of them) to bring any such action or proceeding against any of the Debtors
or any of its or their property in the courts of any other jurisdiction. Each of
the Debtors hereby irrevocably waives any objection to the laying of venue of
any such suit or proceeding in the above described courts.
H. All notices and other communications to be made or given pursuant to
this Purchase Money Security Agreement shall be sufficient if made or given in
writing and delivered by messenger, reputable air courier or deposited in the
United States mails, registered or certified first class mail, or sent by
telecopy, receipt confirmed, addressed as provided in the Purchase Money Loan
Agreement, or at such other addresses as directed by any of such parties to the
others, as applicable, in compliance with this paragraph.
[SIGNATURES FOLLOW ON SUCCEEDING PAGES]
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<PAGE> 12
IN WITNESS WHEREOF, each of the undersigned Debtors and Secured Party have
executed this Security Agreement as of the day and year first above written.
DEBTORS:
WALBRO CORPORATION
By: /s/ Michael A. Shope
-------------------------------
Its: Chief Financial Officer
and Treasurer
------------------------------
WALBRO AUTOMOTIVE
CORPORATION
By: /s/ Michael A. Shope
-------------------------------
Its: Treasurer
------------------------------
ACCEPTED BY SECURED PARTY:
COMERICA BANK, as Agent for the Banks
By: /s/ Mark B. Grover
---------------------------
Its: Vice President
--------------------------
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<PAGE> 13
JOINDER AGREEMENT
A. This Joinder Agreement is executed and delivered by the undersigned
Designated Borrower pursuant to that certain Walbro Corporation
Purchase Money Loan Agreement dated as of August 14, 1997, as amended
according to the terms thereof ("Purchase Money Loans Account").
B. All capitalized terms used herein shall, unless expressly defined to
the contrary in this Joinder Agreement, have their respective meanings
set forth in the Purchase Money Loan Agreement.
C. In accordance with Section 5.4 of the Purchase Money Loan Agreement,
the undersigned Designated Borrower shall, by executing and delivering
this Joinder Agreement, become immediately obligated as a Debtor under
the Purchase Money Security Agreement, attached hereto, as fully as
though an original signatory thereto.
[FUTURE DESIGNATED BORROWER]
By:____________________________
Its:___________________________
ACCEPTED BY SECURED PARTY:
COMERICA BANK, as Agent for the Banks
By:_____________________________
Its:____________________________
13
<PAGE> 1
EXHIBIT 10.33
WALBRO CORPORATION
BROAD-BASED LONG TERM INCENTIVE PLAN
EFFECTIVE DECEMBER 9, 1997
<PAGE> 2
WALBRO CORPORATION
BROAD-BASED LONG TERM INCENTIVE PLAN
EFFECTIVE DECEMBER 9, 1997
SECTION 1. Purpose; Definitions.
The purpose of the Plan is to enable employees of and consultants to
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 employees of
merit.
For purposes of the Plan, the following terms are defined as set forth
below:
(a) "Affiliate" means a corporation or other entity controlled
by the Company and designated by the Committee as such.
(b) "Award" means a Stock Appreciation Right, Stock Option,
Restricted Stock or Deferred Stock.
(c) "Board" means the Board of Directors of the Company.
(d) "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.
(e) "Change in Control" and "Change in Control Price" have the
meanings set forth in Sections 10(b) and (c), respectively.
(f) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto.
(g) "Commission" means the Securities and Exchange Commission
or any successor agency.
(h) "Committee" means the Committee referred to in Section 3.
(i) "Common Stock" means common stock, par value $0.50 per
share, of the Company.
<PAGE> 3
(j) "Company" means Walbro Corporation, a Delaware
corporation.
(k) "Deferred Stock" means an award made pursuant to Section
8.
(l) "Disability" means permanent and total disability as
determined under procedures established by the Committee for purposes
of the Plan.
(m) "Early Retirement" means retirement from active employment
with the Company or an Affiliate on or after attainment of age 55.
(n) "Effective Date" means the date specified by the Board at
the time the Plan is approved by the Board.
(o) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, and any successor thereto.
(p) "Fair Market Value" means, except as otherwise provided in
this Plan, the closing 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.
(q) "Normal Retirement" means retirement from active
employment with the Company or an Affiliate at or after age sixty-five
(65).
(r) "Plan" means the Walbro Corporation Equity Based Long Term
Incentive Plan, as set forth herein and as hereinafter amended from
time to time.
(s) "Restricted Stock" means an award under Section 8.
(t) "Retirement" means Normal or Early Retirement.
(u) "Stock Appreciation Right" means a right granted under
Section 7.
(v) "Stock Option" or "Option" means an option granted under
Section 6.
(w) "Termination of Employment" means the termination of the
participant's employment with the Company or any Affiliate, or the
termination of a consulting arrangement between the participant and the
Company. 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.
In addition, certain other terms used herein have definitions given to
them in the first place on which they are used.
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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
more fully described elsewhere in this Plan, are Stock 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, or (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.
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 a Committee of the Board, composed of
not less than three (3) members, 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
Board.
The Committee shall have plenary authority to grant Awards to employees
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 employees to whom Awards may from time to
time be granted;
(b) to determine whether and to what extent Stock 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
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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);
(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 Sections 6(g) and 9(b)(i); and
(g) to determine to what extent and under what circumstances
Common Stock and other amounts payable with respect to an award shall
be deferred.
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 of the Plan shall be final and binding on all
persons, including the Company and 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 572,129 shares
of Common Stock. Such shares may consist, in whole or in part, of authorized and
issued shares or treasury shares.
Subject to Section 7(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 or if any Award otherwise terminates without
a payment being made to the participant in the form of Stock, 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;
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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.
Employees of and consultants to the Company and its Affiliates who are
responsible for or contribute to the growth and profitability of the business of
the Company and its Affiliates are eligible to be granted Awards under the Plan;
provided, however, no "Insider" as such term is defined in Section 16 of the
Exchange Act shall be eligible to participate in this Plan.
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 employees and consultants 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.
(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 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 (10) years after the date the Stock Option is granted.
(iii) Exercisability. Subject to Section 6(c)(i) and 10(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
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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 in the form of unrestricted Common Stock already owned by the optionee or
Restricted Stock or Deferred Stock subject to an Award hereunder (based, in each
case, on the Fair Market Value of the Common Stock on the date the Stock Option
is exercised).
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 13(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. 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, it being understood that 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 by will or the laws of descent
and distribution.
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(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 it
was exercisable at the time of termination 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 period (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 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 term of such Stock Option, 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 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 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)
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<PAGE> 9
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.
(h) Change in Control. Notwithstanding any other provision of the Plan,
upon a Change in Control, in the case of Stock Options, 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 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 subsection (h) shall have been exercised.
SECTION 7. Stock Appreciation Rights.
(a) Grant and Exercise. Stock Appreciation rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. Such
rights may be granted either at or after the time of grant of such Stock Option.
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 6(b). Stock Options which
have been so surrendered shall no longer be exercisable to the extent the
related Stock Appreciation Rights have been exercised.
(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 7.
(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
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<PAGE> 10
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.
(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) 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 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 8. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be awarded either
alone or in addition to other Awards granted under the Plan. The Committee shall
determine the participants 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 8(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 the shares of
stock represented hereby are subject to the terms and conditions
(including forfeiture) of the Walbro Corporation Broad 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.
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(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 8(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.
(ii) Rights as Shareholder. Except as provided in this
paragraph (ii) and Section 8(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
10(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 8(c)(vi)) and Sections 8(c)(i), 8(c)(iv) and
10(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 9. 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 participants to whom
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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 9(b).
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 as the
Committee shall determine. The provisions of Deferred Stock Awards need not be
the same with respect to each recipient.
(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 9(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 9(b)(vi), where
applicable), the Committee may 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 13(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 9(b)(iv), 9(b)(v) and
10(a)(ii), upon a participant's Termination of Employment for any
reason during the Deferral Period, the rights to the 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
10(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.
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<PAGE> 13
(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 10. 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 10(b)):
(i) Any Stock Appreciation Rights and 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.
(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:
(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 8(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
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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
sixty percent (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 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 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 Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, thirty
percent (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, thirty percent (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) 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 sixty percent (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
-13-
<PAGE> 15
corporation and any Person beneficially owning, immediately prior to
such sale or other disposition, directly or indirectly, thirty percent
(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, thirty percent (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 of 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 11. 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 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.
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. The
Committee may also substitute new Stock Options for previously granted Stock
Options, including previously granted Stock Options having higher option prices.
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 12. 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;
-14-
<PAGE> 16
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 13. 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 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 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).
-15-
<PAGE> 17
(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.
Executed effective as of the 9th day of December, 1997.
WALBRO CORPORATION
BY: /s/ DANIEL L. HITTLER
--------------------------------
ITS: Secretary
-------------------------------
-16-
<PAGE> 1
EXHIBIT 12
COMPUTATIONS OF RATIO OF EARNINGS TO FIXED CHARGES
(In thousands, except for ratios)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------------- ---------------------
1996 1995 1994 1993 1992 1997 1996
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
FIXED CHARGES:
Interest on debt ..................... $ 19,833 $ 12,071 $ 3,862 $ 2,594 $ 3,704 $ 17,672 $ 15,652
Dividends on convertible trust
preferred securities ............... -- -- -- -- -- 3,649 --
Interest element of rentals (1) ...... 2,567 1,587 1,108 885 936 1,215 1,725
Capitalized interest ................. 3,683 518 -- -- -- 1,014 1,040
Amortization of debt expense ......... 702 349 108 94 735 759 525
-------- -------- -------- -------- -------- -------- --------
$ 26,785 $ 14,525 $ 5,078 $ 3,573 $ 5,375 $ 24,309 $ 18,942
======== ======== ======== ======== ======== ======== ========
EARNINGS:
Net income ........................... $ 11,229 $ 13,830 $ 14,595 $ 9,667 $ 12,526 $ 2,360 $ 11,704
Provision for national income
taxes .............................. 3,075 1,258 5,824 4,574 4,664 474 3,032
Cumulative effect of accounting
change ............................. -- -- -- 4,394 -- -- --
Fixed charges ........................ 26,785 14,525 5,078 3,573 5,375 24,309 18,942
Capitalized interest ................. (3,683) (518) -- -- -- (1,014) (1,040)
Minority interest in income .......... 285 472 92 -- -- 66 320
Equity in (income) losses of joint
ventures ........................... (4,187) (3,877) (2,609) 89 (179) (3,219) (3,969)
-------- -------- -------- -------- -------- -------- --------
$ 33,504 $ 25,690 $ 22,980 $ 22,297 $ 22,386 $ 22,976 $ 28,989
======== ======== ======== ======== ======== ======== ========
RATIO OF EARNINGS TO FIXED CHARGES ..... 1.3 1.8 4.5 6.2 4.2 0.9 1.5
FIXED CHARGES IN EXCESS OF EARNINGS .... $-- $-- $-- $-- $-- $ 1,333 $--
</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 on Form S-4 and to the incorporation by
reference in this registration statement of our report dated February 11, 1997,
included in Walbro Corporation and Subsidiaries' Form 10-K as of and for the
year ended December 31, 1996 and to all references to our firm included in this
registration statement.
/s/ ARTHUR ANDERSEN LLP
Detroit, Michigan
January 30, 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 on Form S-4 of our reports dated March
17, 1995, February 26, 1996 and March 7, 1997 with respect to the balance
sheets of Marwal Systems as of December 31, 1994, 1995 and 1996 and the related
statements of income for the years then ended, which reports are included or
incorporated by reference in the Registration Statement 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 "Experts" included therein.
ERNST & YOUNG AUDIT
Paris, France /s/ Gilles Meyer
February 2, 1998 Gilles Meyer
<PAGE> 1
EXHIBIT 25
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT
OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2)_________
---------------
BANKERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
NEW YORK 13-4941247
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification no.)
FOUR ALBANY STREET
NEW YORK, NEW YORK 10006
(Address of principal (Zip Code)
executive offices)
BANKERS TRUST COMPANY
LEGAL DEPARTMENT
310 LIBERTY STREET, 31ST FLOOR
NEW YORK, NEW YORK 10006
(212) 250-2201
(Name, address and telephone number of agent for service)
=========================================================
WALBRO CORPORATION
(Exact name of obligor as specified in its charter)
DELAWARE 38-1358966
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification no.)
6242 GARFIELD STREET
CASS CITY, MI 48726
(Address of principal executive offices) (Zip Code)
10 1/8% SENIOR NOTES DUE 2007, SERIES B
(Title of the indenture securities)
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information to the trustee.
(a) Name and address of each examining or supervising
authority to which it is subject.
NAME ADDRESS
---- -------
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
(b) Whether it is authorized to exercise corporate trust
powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the Trustee, describe each
such affiliation.
ITEM 3.-15. NOT APPLICABLE
ITEM 16. LIST OF EXHIBITS
EXHIBIT 1 - Restated Organization Certificate of Bankers Trust
Company dated August 7, 1990, Certificate of Amendment
of the Organization Certificate of Bankers Trust
Company dated June 21, 1995 - Incorporated herein by
reference to Exhibit 1 filed with Form T-1 Statement,
Registration No. 33-65171, Certificate of Amendment of
the Organization Certificate of Bankers Trust Company
dated March 20, 1996, incorporate by referenced to
Exhibit 1 filed with Form T-1 Statement, Registration
No. 333-25843 and Certificate of Amendment of the
Organization Certificate of Bankers Trust Company dated
September 17, 1997, copy attached.
EXHIBIT 2 - Certificate of Authority to commence business -
Incorporated herein by reference to Exhibit 2 filed
with Form T-1 Statement, Registration No. 33-21047.
EXHIBIT 3 - Authorization of the Trustee to exercise corporate
trust powers - Incorporated herein by reference to
Exhibit 2 filed with Form T-1 Statement, Registration
No. 33-21047.
EXHIBIT 4 - Existing By-Laws of Bankers Trust Company, as amended
on February 18, 1997, Incorporated herein by reference
to Exhibit 4 filed with Form T-1 Statement,
Registration No. 333-24509-01.
-2-
<PAGE> 3
EXHIBIT 5 - Not applicable.
EXHIBIT 6 - Consent of Bankers Trust Company required by Section
321(b) of the Act. - Incorporated herein by reference
to Exhibit 4 filed with Form T-1 Statement,
Registration No. 22-18864.
EXHIBIT 7 - The latest report of condition of Bankers Trust
Company dated as of September 30, 1997. Copy attached.
EXHIBIT 8 - Not Applicable.
EXHIBIT 9 - Not Applicable.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in The City of New York, and State of New
York, on the 28th day of January, 1998.
BANKERS TRUST COMPANY
By: /s/ KEVIN WEEKS
------------------------------
Kevin Weeks
Assistant Vice President
-4-
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date 09/30/97 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 PAGE RC-1
City, State Zip: New York, NY 10006 11
FDIC Certificate No.: 0 0 6 2 3
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR SEPTEMBER 30, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, reported the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC-BALANCE SHEET
<TABLE>
<CAPTION>
C400
Dollar Amounts in Thousands RCFD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS ///////////////////////
1. Cash and balances due from depository institutions (from Schedule RC-A): /////////////////////////
a. Noninterest-bearing balances and currency and coin (1).................. 0081 1,526,000 1.a
b. Interest-bearing balances (2)........................................... 0071 2,591,000 1.b
2. Securities: ///////////////////////
a. Held-to-maturity securities (from Schedule RC-B, column A).............. 1754 0 2.a
b. Available-for-sale securities (from Schedule RC-B, column D)............ 1773 3,903,000 2.b
3. Federal funds sold and securities purchased under agreements to resell...... 1350 29,339,000 3.
4. Loans and lease financing receivables: ///////////////////////
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 19,343,000 /////////////////////// 4.a
b. LESS: Allowance for loan and lease losses.....................RCFD 3123 723,000 /////////////////////// 4.b
c. LESS: Allocated transfer risk reserve.........................RCFD 3128 0 /////////////////////// 4.c
d. Loans and leases, net of unearned income, ///////////////////////
allowance, and reserve (item 4.a minus 4.b and 4.c)..................... 2125 18,620,000 4.d
5. Trading Assets (from Schedule RC-D)......................................... 3545 43,032,000 5.
6. Premises and fixed assets (including capitalized leases)................... 2145 766,000 6.
7. Other real estate owned (from schedule RC-M)................................ 2150 186,000 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) 2130 59,000 8.
9. Customers' liability to this bank on acceptances outstanding................ 2155 703,000 9.
10. Intangible assets (from Schedule RC-M)...................................... 2143 84,000 10.
11. Other assets (from Schedule RC-F)........................................... 2160 5,343,000 11.
12. Total assets (sum of items 1 through 11).................................... 2170 106,152,000
</TABLE>
- ---------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE> 6
<TABLE>
<S> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date 09/30/97 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 PAGE RC-2
City, State Zip: New York, NY 10006 12
FDIC Certificate No: 0 0 6 2 3
</TABLE>
SCHEDULE RC-CONTINUED
<TABLE>
<CAPTION>
-------------------------
Dollar Amounts in Thousands //// Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES /////////////////////
13. Deposits: /////////////////////
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part 1) RCON 2200 22,016,000
(1) Noninterest-bearing(1)........RCON 6631 2,272,000................... /////////////////////
(2) Interest-bearing..............RCON 6636 19,744,000................... /////////////////////
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E /////////////////////
part II) RCFN 2200 26,396,000
(1) Noninterest-bearing...........RCFN 6631 1,304,000 /////////////////////
(2) Interest-bearing..............RCFN 6636 25,092,000 /////////////////////
14. Federal funds purchased and securities sold under agreements to repurchase RCFD 2800 11,779,000
15. a. Demand notes issued to the U.S. Treasury................................... RCON 2840 0
b. Trading liabilities (from Schedule RC-D)................................... RCFD 3548 23,059,000
16. Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases) ://///////////////////
a. With a remaining maturity of one year or less.............................. RCFD 2332 6,391,000
b. With a remaining maturity of more than one year through three years........ A547 369,000
c. With a remaining maturity of more than three years......................... A548 3,176,000
17. Not Applicable /////////////////////
18. Bank's liability on acceptances executed and outstanding....................... RCFD 2920 703,000
19. Subordinated notes and debentures(2)........................................... RCFD 3200 1,250,000
20. Other liabilities (from Schedule RC-G)......................................... RCFD 2930 5,222,000
21. Total liabilities (sum of items 13 through 20)................................. RCFD 2948 100,361,000
22. Not Applicable /////////////////////
/////////////////////
EQUITY CAPITAL /////////////////////
23. Perpetual preferred stock and related surplus.................................. RCFD 3838 1,000,000
24. Common stock................................................................... RCFD 3230 1,202,000
25. Surplus (exclude all surplus related to preferred stock)....................... RCFD 3839 540,000
26. a. Undivided profits and capital reserves..................................... RCFD 3632 3,409,000
b. Net unrealized holding gains (losses) on available-for-sale securities..... RCFD 8434 15,000
27. Cumulative foreign currency translation adjustments............................ RCFD 3284 (375,000)
28. Total equity capital (sum of items 23 through 27).............................. RCFD 3210 5,791,000
29. Total liabilities and equity capital (sum of items 21 and 28).................. RCFD 3300 106,152,000
</TABLE>
<TABLE>
<CAPTION>
Memorandum
Number
------
<S> <C> <C>
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that
best describes the most comprehensive level of auditing work performed
for the bank by independent external auditors as of any date during 1996... RCFD 6724 N/A
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank.
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified
public accounting firm which submits a report on the consolidated holding
company (but not on the bank separately.)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- ---------------------
(1) Including total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
<PAGE> 7
State of New York,
BANKING DEPARTMENT
I, MANUEL KURSKY, Deputy Superintendent of Bank of the State of New York,
DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF AMENDMENT OF
THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY UNDER SECTION 8005 OF THE
BANKING LAW," dated September 17, 1997, providing for an increase in authorized
capital stock from $2,001,666,670 consisting of 100,166,667 shares with a par
value of $10 each designated as Common Stock and 500 shares with a par value of
$1,000,000 each designated as Series Preferred Stock to $2,201,666,670
consisting of 120,166,667 shares with a par value of $10 each designated as
Common Stock and 1,000 shares with a par value of $1,000,000 each designated as
Series Preferred Stock.
WITNESS, my hand and official seal of the Banking Department at the City of
New York, this 26th day of September in the Year of our Lord one thousand nine
hundred and ninety-seven.
Manuel Kursky
------------------------------
Deputy Superintendent of Banks
<PAGE> 8
CERTIFICATE OF AMENDMENT
OF THE
ORGANIZATION CERTIFICATE
OF BANKERS TRUST
Under Section 8005 of the Banking Law
-----------------------------------
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and an Assistant Secretary of Bankers Trust Company, do hereby
certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of March, 1903.
3. The organization certificate as heretofore amended is hereby amended
to increase the aggregate number of shares which the corporation shall have
authority to issue and to increase the amount of its authorized capital stock
in conformity therewith.
4. Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock
outstanding, which reads as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is Two Billion, One Million, Six Hundred Sixty-Six Thousand, Six
Hundred Seventy Dollars ($2,001,666,670), divided into One Hundred Million,
One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven (100,166,667)
shares with a par value of $10 each designated as Common Stock and 1000
shares with a par value of One Million Dollars ($1,000,000) each designated
as Series Preferred Stock."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is Two Billion, Two Hundred and One Million, Six Hundred Sixty-Six
Thousand, Six Hundred Seventy Dollars ($2,201,666,670), divided into One
Hundred Twenty Million, One Hundred Sixty-Six Thousand, Six Hundred
Sixty-Seven (120,166,667) shares with a par value of $10 each designated as
Common Stock and 1000 shares with a par value of One Million Dollars
($1,000,000) each designated as Series Preferred Stock."
<PAGE> 9
6. The foregoing amendment of the organization certificate was
authorized by unanimous written consent signed by the holder of all outstanding
shares entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this 17th
day of September, 1997.
James T. Byrne, Jr.
-----------------------
James T. Byrne, Jr.
Managing Director
Lea Lahtinen
-----------------------
Lea Lahtinen
Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is an Assistant
Secretary of Bankers Trust Company, the corporation described in the foregoing
certificate; that she has read the foregoing certificate and knows the contents
thereof, and that the statements herein contained are true.
Lea Lahtinen
-----------------------
Lea Lahtinen
Sworn to before me this 17th day
of September, 1997.
Josephine A. Monti
- -----------------------------
Notary Public
JOSEPHINE A. MONTI
Notary Public State of New York
No. 52-4519901
Qualified in New York County
Commission Expires October 19, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 12,723
<SECURITIES> 0
<RECEIVABLES> 158,546
<ALLOWANCES> 0
<INVENTORY> 59,402
<CURRENT-ASSETS> 246,720
<PP&E> 394,163
<DEPRECIATION> 103,790
<TOTAL-ASSETS> 638,878
<CURRENT-LIABILITIES> 160,124
<BONDS> 277,249
69,000
0
<COMMON> 4,332
<OTHER-SE> 112,614
<TOTAL-LIABILITY-AND-EQUITY> 638,878
<SALES> 454,384
<TOTAL-REVENUES> 454,384
<CGS> 387,169
<TOTAL-COSTS> 436,880
<OTHER-EXPENSES> (2,846)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,020
<INCOME-PRETAX> 3,330
<INCOME-TAX> 474
<INCOME-CONTINUING> 2,360
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,360
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FOR TENDER OF
10 1/8% SENIOR NOTES DUE 2007, SERIES A
IN EXCHANGE FOR
10 1/8% SENIOR NOTES DUE 2007, SERIES B
OF
WALBRO CORPORATION
Pursuant to the Prospectus dated ____________, 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON ____________, 1998 UNLESS EXTENDED (THE "EXPIRATION DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal
should be completed, signed, and submitted to the Exchange Agent:
BANKERS TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Overnight or Courier: By Hand:
BT Services Tennessee, Inc. BT Services Tennessee, Inc. Bankers Trust Company
Reorganization Unit Corporate Trust & Agency Group Corporate Trust & Agency Group
P.O. Box 292737 Reorganization Unit Attn: Reorganization Department
Nashville, Tennessee 37229-2737 648 Grassmere Park Road Receipt & Delivery Window
Nashville, Tennessee 37211 123 Washington Street, 1st Floor
New York, New York 10006
Facsimile Transmission Number: Confirm by Telephone: Information:
(615) 835-3701 (615) 835-3572 (800) 735-7777
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION
VIA FACSIMILE TO A NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY
ADDITIONAL INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT.
The undersigned hereby acknowledges receipt of the Prospectus dated
____________, 1998 (as it may be supplemented and amended from time to time,
the "Prospectus") of Walbro Corporation, a Delaware corporation (the
"Company"), and this Letter of Transmittal (the "Letter of Transmittal"), that
together constitute the Company's offer (the "Exchange Offer") to exchange
$1,000 in principal amount of its 10 1/8% Senior Notes due 2007, Series B (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to a Registration Statement, for
each $1,000 in principal amount of its outstanding 10 1/8% Senior Notes due
2007, Series A (the "Old Notes"), of which $100,000,000 aggregate principal
amount is outstanding. Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
The undersigned hereby tenders the Old Notes described in Box 1 below
(the "Tendered Notes") pursuant to the terms and conditions described in the
Prospectus and this Letter of Transmittal. The undersigned is the registered
owner of all the Tendered Notes and the undersigned represents that it has
received from each beneficial owner of the Tendered Notes (the "Beneficial
Owners") a duly completed and executed form of "Instructions to
<PAGE> 2
Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner" accompanying this Letter of Transmittal, instructing the
undersigned to take the action described in this Letter of Transmittal.
Subject to, and effective upon, the acceptance for exchange of the
Tendered Notes, the undersigned hereby exchanges, assigns and transfers to, or
upon the order of, the Company all right, title, and interest in, to and under
the Tendered Notes.
Please issue the Exchange Notes exchanged for the Tendered Notes in
the name(s) of the undersigned. Similarly, unless otherwise indicated under
"SPECIAL DELIVERY INSTRUCTIONS" below (see Box 3), please send or cause to be
sent the certificates for the Exchange Notes (and accompanying documents, as
appropriate) to the undersigned at the address shown below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent as the true and lawful agent and attorney in fact of the
undersigned with respect to the Tendered Notes, with full power of substitution
(such power of attorney being deemed to be an irrevocable power coupled with an
interest), to (i) deliver the Tendered Notes to the Company or cause ownership
of the Tendered Notes to be transferred to, or upon the order of, the Company,
on the books of the registrar for the Old Notes and deliver all accompanying
evidences of transfer and authenticity to, or upon the order of, the Company
upon receipt by the Exchange Agent, as the undersigned's agent, of the Exchange
Notes to which the undersigned is entitled upon acceptance by the Company of
the Tendered Notes pursuant to the Exchange Offer, and (ii) receive all
benefits and otherwise exercise all rights of beneficial ownership of the
Tendered Notes, all in accordance with the terms of the Exchange Offer.
The undersigned understands that tenders of the Old Notes pursuant to
the procedures described under the caption "The Exchange Offer" in the
Prospectus and in the instructions hereto will constitute a binding agreement
between the undersigned and the Company upon the terms and subject to the
conditions of the Exchange Offer, subject only to withdrawal of such tenders on
the terms set forth in the Prospectus under the caption "The Exchange Offer--
Withdrawal of Tenders." All authority herein conferred or agreed to be
conferred shall survive the death or incapacity of the undersigned and any
Beneficial Owner(s), and every obligation of the undersigned or any Beneficial
Owner(s) hereunder shall be binding upon the heirs, representatives,
successors, and assigns of the undersigned and such Beneficial Owner(s).
The undersigned hereby represents and warrants that the undersigned
has full power and authority to tender, exchange, assign, and transfer the
Tendered Notes and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges, encumbrances and
adverse claims when the Tendered Notes are acquired by the Company as
contemplated herein. The undersigned and each Beneficial Owner will, upon
request, execute and deliver any additional documents reasonably requested by
the Company or the Exchange Agent as necessary or desirable to complete and
give effect to the transactions contemplated hereby.
The undersigned hereby represents and warrants that the information
set forth in Box 2 is true and correct.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) the Exchange Notes to be acquired by the undersigned and any
Beneficial Owner(s) in connection with the Exchange Offer are being acquired by
the undersigned and any Beneficial Owner(s) in the ordinary course of business
of the undersigned and any Beneficial Owner(s), (ii) the undersigned and each
Beneficial Owner are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, (iii) except as otherwise disclosed in
writing herewith, neither the undersigned nor any Beneficial Owner is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company,
and (iv) the undersigned and each Beneficial Owner acknowledge and agree that
any person participating in the Exchange Offer with the intention or for the
purpose of distributing the Exchange Notes must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with a
secondary resale of the Exchange Notes acquired by such person and cannot rely
on the position of the staff of the Securities and Exchange Commission (the
"Commission") set forth in the no-action letters that are discussed in the
section of the Prospectus entitled "The Exchange Offer." In addition, by
accepting the Exchange Offer, the undersigned hereby (i) represents and
warrants that, if the undersigned or any Beneficial Owner of the Old Notes is a
Participating Broker-Dealer, such Participating Broker-Dealer acquired the Old
Notes for its own account as a result of market-making activities or other
trading
-2-
<PAGE> 3
activities and has not entered into any arrangement or understanding with the
Company or any "affiliate" of the Company (within the meaning of Rule 405 under
the Securities Act) to distribute the Exchange Notes to be received in the
Exchange Offer, and (ii) acknowledges that, by receiving the Exchange Notes for
its own account in exchange for the Old Notes, where the Old Notes were
acquired as a result of market-making activities or other trading activities,
the Participating Broker-Dealer will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of the
Exchange Notes.
Holders of the Old Notes that are tendering by book-entry transfer to
the Exchange Agent's account at DTC can execute the tender through the DTC
Automated Tender Offer Program ("ATOP"), for which the transaction will be
eligible. DTC participants that are accepting the Exchange Offer must transmit
their acceptance to DTC, which will verify the acceptance and execute a
book-entry delivery to the Exchange Agent's DTC account. DTC will then send an
Agent's Message to the Exchange Agent for its acceptance. DTC participants may
also accept the Exchange Offer prior to the Expiration Date by submitting a
Notice of Guaranteed Delivery or Agent's Message relating thereto as described
herein under Instruction 2, "Guaranteed Delivery Procedures."
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH.
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND
COMPLETE "USE OF GUARANTEED DELIVERY" BELOW (Box 4).
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE "USE OF BOOK-ENTRY TRANSFER"
BELOW (Box 5).
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
- --------------------------------------------------------------------------------
BOX 1
DESCRIPTION OF THE OLD NOTES TENDERED
(Attach additional signed pages, if necessary)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Note Aggregate Principal Aggregate
Holder(s), exactly as name(s) appear(s) on Note Certificate Amount Principal
Certificate(s) Number(s) of Represented by Amount
(Please fill in, if blank) Old Notes* the Old Notes Tendered**
- -------------------------------------------------------- ----------------- --------------------- -------------------
<S> <C> <C> <C>
- -------------------------------------------------------- ----------------- --------------------- -------------------
- -------------------------------------------------------- ----------------- --------------------- -------------------
- -------------------------------------------------------- ----------------- --------------------- -------------------
- -------------------------------------------------------- ----------------- --------------------- -------------------
Total
- -------------------------------------------------------- ----------------- --------------------- -------------------
</TABLE>
* Need not be completed by persons tendering by book-entry transfer.
** The minimum permitted tender is $1,000 in principal amount of the Old
Notes. All other tenders must be in integral multiples of $1,000 of
principal amount. Unless otherwise indicated in this column, the
principal amount of all Note Certificates identified in this Box 1 or
delivered to the Exchange Agent herewith shall be deemed tendered.
See Instruction 4.
- --------------------------------------------------------------------------------
-3-
<PAGE> 4
- --------------------------------------------------------------------------------
BOX 2
BENEFICIAL OWNER(S)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------ --------------------------------------------------
State of Principal Residence of Each Principal Amount of the Tendered Notes
Beneficial Owner of the Tendered Notes Held for Account of the Beneficial Owner
- ------------------------------------------------------ --------------------------------------------------
<S> <C>
- ------------------------------------------------------ --------------------------------------------------
- ------------------------------------------------------ --------------------------------------------------
- ------------------------------------------------------ --------------------------------------------------
- ------------------------------------------------------ --------------------------------------------------
- ------------------------------------------------------ --------------------------------------------------
- ------------------------------------------------------ --------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BOX 3
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
- --------------------------------------------------------------------------------
TO BE COMPLETED ONLY IF THE EXCHANGE NOTES EXCHANGED FOR THE OLD NOTES AND
THE UNTENDERED NOTES ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED,
OR TO THE UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail the Exchange Note(s) and any untendered Old Notes to:
Name(s):
----------------------------------------------------------------------------
(please print)
Address:
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(include Zip Code)
Tax Identification or
Social Security No.:
- --------------------------------------------------------------------------------
-4-
<PAGE> 5
- --------------------------------------------------------------------------------
BOX 4
USE OF GUARANTEED DELIVERY
(SEE INSTRUCTION 2)
- --------------------------------------------------------------------------------
TO BE COMPLETED ONLY IF THE OLD NOTES ARE BEING TENDERED BY MEANS OF A
NOTICE OF GUARANTEED DELIVERY.
Name(s) of the Registered Holder(s):
----------------------------------------
Window Ticket No. (if any):
--------------------------------------------------
Date of Execution of the Notice of Guaranteed Delivery:
----------------------
Name of Institution that Guaranteed Delivery:
--------------------------------
If Delivered by Book-Entry Transfer:
Account Number with DTC:
---------------------------------------------
Transaction Code Number:
---------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BOX 5
USE OF BOOK-ENTRY TRANSFER
(SEE INSTRUCTION 1)
- --------------------------------------------------------------------------------
TO BE COMPLETED ONLY IF DELIVERY OF THE TENDERED NOTES IS TO BE MADE BY
BOOK-ENTRY TRANSFER.
Name of Tendering Institution:
-----------------------------------------------
Account Number:
--------------------------------------------------------------
Transaction Code Number:
-----------------------------------------------------
- --------------------------------------------------------------------------------
-5-
<PAGE> 6
- --------------------------------------------------------------------------------
BOX 6
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5)
IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
X
------------------------------------------
X
------------------------------------------
(Signature of Registered Holder(s)
or Authorized Signatory)
Note: The above lines must be signed by the
registered holder(s) of the Old Notes as their name(s)
appear(s) on the Old Notes or by persons(s)
authorized to become registered holder(s) (evidence
of such authorization must be transmitted with this
Letter of Transmittal). If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact,
officer or other person acting in a fiduciary or
representative capacity, such person must set forth his
or her full title below. See Instruction 5.
Name(s):
------------------------------------------
Capacity:
------------------------------------------
Street Address:
------------------------------------
------------------------------------
(Zip Code)
Area Code and Telephone Number:
------------------------------------------
Tax Identification or Social Security Number:
------------------------------------------
- ----------------------------------------------------------
Signature Guarantee
(If required by Instruction 5)
Authorized Signature
X
------------------------------------------
Name:
--------------------------------------
(please print)
Title:
-------------------------------------
Name of
Firm:
--------------------------------------
(Must be an Eligible Institution as
defined in Instruction 5)
Address:
------------------------------------
------------------------------------
------------------------------------
(Zip Code)
Area Code and Telephone Number:
------------------------------------
Dated:
------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BOX 7
BROKER-DEALER STATUS
- --------------------------------------------------------------------------------
[ ] Check this box if the Beneficial Owner of the Old Notes is a
Participating Broker-Dealer and the Participating Broker-Dealer
acquired the Old Notes for its own account as a result of market-
making activities or other trading activities. IF THIS BOX IS
CHECKED, REGARDLESS OF WHETHER YOU ARE TENDERING BY BOOK-ENTRY
TRANSFER THROUGH ATOP, AN EXECUTED COPY OF THIS LETTER OF
TRANSMITTAL MUST BE RECEIVED WITHIN THREE NYSE TRADING DAYS AFTER
THE EXPIRATION DATE BY WALBRO CORPORATION, ATTENTION ____________,
FACSIMILE (_____) ____________.
[ ] Check this box if such Participating Broker-Dealer wishes to
receive 10 additional copies of the Prospectus and 10 copies of
any amendments or supplements thereto.
- --------------------------------------------------------------------------------
-6-
<PAGE> 7
- --------------------------------------------------------------------------------
PAYORS' NAME: BANKERS TRUST COMPANY
- --------------------------------------------------------------------------------
Name (if joint names, list first and circle the name of
the person or entity whose number you enter in Part 1
below. See instructions if your name has changed.)
-------------------------------------------------------------
Address
-------------------------------------------------------------
SUBSTITUTE City, State and ZIP Code
FORM W-9
-------------------------------------------------------------
Department of List account number(s) here (optional)
the Treasury
-------------------------------------------------------------
Internal Revenue PART 1--PLEASE PROVIDE YOUR TAXPAYER Social Security
Service IDENTIFICATION NUMBER ("TIN") IN THE Number or TIN
BOX AT RIGHT AND CERTIFY BY SIGNING
DATING BELOW
-------------------------------------------------------------
PART 2--Check the box if you are NOT subject to backup
withholding under the provisions of section 3406(a)(1)(C) of
the Internal Revenue Code because (1) you have not been
notified that you are subject to backup withholding as a
result of failure to report all interest or dividends or (2)
the Internal Revenue Service has notified you that you are no
longer subject to backup withholding.[ ]
-------------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES PART 3--
OF PERJURY, I CERTIFY THAT THE Awaiting TIN [ ]
INFORMATION PROVIDED ON THIS
FORM IS TRUE, CORRECT AND COMPLETE.
SIGNATURE DATE
--------------- -------
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.
-7-
<PAGE> 8
WALBRO CORPORATION
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND THE OLD NOTES. This
Letter of Transmittal is to be completed by registered holders of the Old Notes
if certificates representing the Old Notes are to be forwarded herewith
pursuant to the procedures set forth in the Prospectus under "The Exchange
Offer -- Procedures for Tendering," unless delivery of such certificates is to
be made by book-entry transfer to the Exchange Agent's account maintained by
DTC through ATOP. For a holder to properly tender the Old Notes pursuant to
the Exchange Offer, a properly completed and duly executed copy of this Letter
of Transmittal, including Substitute Form W-9, and any other documents
required by this Letter of Transmittal must be received by the Exchange Agent
at one of its addresses set forth herein, and either (i) certificates for the
Tendered Notes must be received by the Exchange Agent at one of its addresses
set forth herein, or (ii) the Tendered Notes must be transferred pursuant to
the procedures for book-entry transfer described in the Prospectus under the
caption "The Exchange Offer--Procedures for Tendering" (and a confirmation of
such transfer received by the Exchange Agent), in each case prior to 5:00 p.m.,
New York City time, on the Expiration Date. The method of delivery of
certificates for the Tendered Notes, this Letter of Transmittal and all other
required documents to the Exchange Agent is at the election and risk of the
tendering holder and the delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended. Instead of
delivery by mail, it is recommended that the Holder use an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. No Letter of Transmittal or Tendered Notes should be sent to
the Company. Neither the Company nor the Exchange Agent is under any
obligation to notify any tendering holder of the Company's acceptance of
Tendered Notes prior to the closing of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. If a registered holder desires
to tender the Old Notes pursuant to the Exchange Offer and (a) certificates
representing the Tendered Notes are not immediately available, (b) time will
not permit the holder's Letter of Transmittal, certificates representing the
Tendered Notes and all other required documents to reach the Exchange Agent on
or prior to the Expiration Date, or (c) the procedures for book-entry transfer
cannot be completed on or prior to the Expiration Date, the holder may
nevertheless tender the Tendered Notes with the effect that the tender will be
deemed to have been received on or prior to the Expiration Date if the
procedures set forth below and in the Prospectus under the caption "The
Exchange Offer -- Guaranteed Delivery Procedures" (including the completion of
Box 4 above) are followed. Pursuant to these procedures, (i) the tender must
be made by or through an Eligible Institution (as defined herein), (ii) a
properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by the Company herewith, or an Agent's
Message with respect to a guaranteed delivery that is accepted by the Company,
must be received by the Exchange Agent on or prior to the Expiration Date, and
(iii) the certificates for the Tendered Notes, in proper form for transfer (or
a Book-Entry Confirmation of the transfer of the Tendered Notes to the Exchange
Agent's account at DTC as described in the Prospectus), together with a Letter
of Transmittal (or manually signed facsimile thereof) properly completed and
duly executed, with any required signature guarantees and any other documents
required by the Letter of Transmittal or a properly transmitted Agent's
Message, must be received by the Exchange Agent within three New York Stock
Exchange trading days after the date of execution of the Notice of Guaranteed
Delivery. Any holder who wishes to tender the Old Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery relating to the Tendered Notes
prior to 5:00 p.m., New York City time, on the Expiration Date. Failure to
complete the guaranteed delivery procedures outlined above will not, of itself,
affect the validity or effect a revocation of any Letter of Transmittal form
properly completed and executed by an Eligible Holder who attempted to use the
guaranteed delivery process.
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a
holder in whose name the Tendered Notes are registered on the books of the
registrar (or the legal representative or attorney-in-fact of such registered
holder) may execute and deliver this Letter of Transmittal. Any Beneficial
Owner of the Tendered Notes who is not the registered holder must arrange
promptly with the registered holder to execute and deliver this Letter of
Transmittal
-8-
<PAGE> 9
on his or her behalf through the execution and delivery to the registered
holder of the "Instructions to Registered Holder and/or Book-Entry Transfer
Facility Participant from Beneficial Owner" form accompanying this Letter of
Transmittal.
4. PARTIAL TENDERS. Tenders of the Old Notes will be accepted only
in integral multiples of $1,000 in principal amount. If less than the entire
principal amount of the Old Notes held by the holder is tendered, the tendering
holder should fill in the principal amount tendered in the column labeled
"Aggregate Principal Amount Tendered" of the box entitled "Description of the
Old Notes Tendered" (see Box 1) above. The entire principal amount of the Old
Notes delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated. If the entire principal amount of all Old Notes
held by the holder is not tendered, then the Old Notes for the principal amount
of the Old Notes not tendered and the Exchange Notes issued in exchange for any
Old Notes tendered and accepted will be sent to the holder at his or her
registered address, unless a different address is provided in the appropriate
box on this Letter of Transmittal, as soon as practicable following the
Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed
by the registered holder(s) of the Tendered Notes, the signature must
correspond with the name(s) as written on the face of the Tendered Notes
without alteration, enlargement or any change whatsoever.
If any of the Tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names, it will be necessary to complete, sign and
submit as many separate copies of the Letter of Transmittal as there are
different names in which the Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
the Tendered Notes, and the Exchange Notes issued in exchange therefor are to
be issued (and any untendered principal amount of the Old Notes is to be
reissued) in the name of the registered holder(s), then the registered
holder(s) need not and should not endorse any Tendered Notes, nor provide a
separate bond power. In any other case, the registered holder(s) must either
properly endorse the Tendered Notes or transmit a properly completed separate
bond power with this Letter of Transmittal, with the signature(s) on the
endorsement or bond power guaranteed by a Medallion Signature Guarantor (as
defined below).
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Notes, the Tendered Notes must be endorsed
or accompanied by appropriate bond powers, in each case, signed as the name(s)
of the registered holder(s) appear(s) on the Tendered Notes, with the
signature(s) on the endorsement or bond power guaranteed by a Medallion
Signature Guarantor.
If this Letter of Transmittal or any Tendered 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 this Letter of Transmittal.
Signatures on this Letter of Transmittal must be guaranteed by a
recognized participant in the Securities Transfer Agents Medallion Program, the
New York Stock Exchange Medallion Signature Program or the Stock Exchange
Medallion Program (each a "Medallion Signature Guarantor"), unless the Tendered
Notes are tendered (i) by a registered holder of the Tendered Notes (or by a
participant in DTC whose name appears on a security position listing as the
owner of the Tendered Notes) who has not completed Box 3 on this Letter of
Transmittal, or (ii) for the account of a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office or
correspondent in the United States (each of the foregoing being referred to as
an "Eligible Institution"). If the Tendered Notes are registered in the name
of a person other than the signor of the Letter of Transmittal or if the Old
Notes not tendered are to be returned to a person other than the registered
holder, then the signature on this Letter of Transmittal accompanying the
Tendered Notes must be guaranteed by a Medallion Signature Guarantor as
described above. Beneficial owners whose Old Notes are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee must
contact such broker, dealer, commercial bank, trust company or other nominee if
they desire to tender their Old Notes.
-9-
<PAGE> 10
6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should indicate
in Box 3 the name and address to which the Exchange Notes and/or substitute Old
Notes for principal amounts not tendered or not accepted for exchange are to be
sent, if different from the name and address of the person signing this Letter
of Transmittal. In the case of issuance in a different name, the taxpayer
identification or social security number of the person named must also be
indicated.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of the Tendered Notes pursuant to the Exchange
Offer. If, however, a transfer tax is imposed for any reason other than the
transfer and exchange of the Tendered Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or on any other person) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with this Letter of Transmittal, the amount of such transfer taxes
will be billed directly to the tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Notes listed in this Letter
of Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that
the holder(s) of any Tendered Notes which are accepted for exchange must
provide the Exchange Agent (as payor) with its correct taxpayer identification
number ("TIN"), which, in the case of a holder who is an individual, is his or
her social security number. If the Exchange Agent is not provided with the
correct TIN, the holder may be subject to backup withholding and a $50 penalty
imposed by the Internal Revenue Service. (If withholding results in an
over-payment of taxes, a refund may be obtained.) Certain holders (including,
among others, all corporations and certain foreign individuals) are not subject
to these backup withholding and reporting requirements. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional instructions.
To prevent backup withholding, each holder of the Tendered Notes must
provide the holder's correct TIN by completing the Substitute Form W-9 set
forth herein, certifying that the TIN provided is correct (or that the holder
is awaiting a TIN) and that (i) the holder has not been notified by the
Internal Revenue Service that the holder is subject to backup withholding as a
result of failure to report all interest or dividends, or (ii) if previously so
notified, the Internal Revenue Service has notified the holder that the holder
is no longer subject to backup withholding. If the Tendered Notes are
registered in more than one name or are not in the name of the actual owner,
consult the "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for information on which TIN to report.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of the
Tendered Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the right to
reject any and all Old Notes not validly tendered or any Old Notes the
Company's acceptance of which would, in the opinion of the Company or its
counsel, be unlawful. The Company also reserves the right to waive any
conditions of the Exchange Offer or defects or irregularities in tenders of the
Old Notes as to any ineligibility of any holder who seeks to tender the Old
Notes in the Exchange Offer. The interpretation of the terms and conditions of
the Exchange Offer (including this Letter of Transmittal and the instructions
hereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of the Old
Notes must be cured within such time as the Company shall determine. Neither
the Company, the Exchange Agent nor any other person shall be under any duty to
give notification of defects or irregularities with respect to tenders of the
Old Notes, nor shall any of them 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 have been cured or waived. Any Old Notes
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned by
the Exchange Agent to the tendering holders, unless otherwise provided in this
Letter of Transmittal, as soon as practicable following the Expiration Date.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to
amend, waive or modify any of the conditions in the Exchange Offer in the case
of any Tendered Notes.
-10-
<PAGE> 11
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular,
or contingent tender of the Old Notes or transmittal of this Letter of
Transmittal will be accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any tendering
holder whose Old Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated herein for further
instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance and requests for additional copies of the Prospectus or
this Letter of Transmittal may be directed to the Exchange Agent at the address
indicated herein. Holders may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
14. ACCEPTANCE OF THE TENDERED NOTES AND ISSUANCE OF THE EXCHANGE
NOTES; RETURN OF THE OLD NOTES. Subject to the terms and conditions of the
Exchange Offer, the Company will accept for exchange all validly Tendered Notes
as soon as practicable after the Expiration Date and will issue the Exchange
Notes therefor as soon as practicable thereafter. For purposes of the Exchange
Offer, the Company shall be deemed to have accepted the Tendered Notes when, as
and if the Company has given written or oral notice (immediately followed in
writing) thereof to the Exchange Agent. If any Tendered Notes are not
exchanged pursuant to the Exchange Offer for any reason, such unexchanged Old
Notes will be returned, without expense, to the undersigned at the address
shown in Box 1 or at a different address as may be indicated herein under
"Special Delivery Instructions" (Box 3).
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the
procedures set forth in the Prospectus under the caption "The Exchange
Offer--Withdrawal of Tenders."
-11-
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
10 1/8% SENIOR NOTES DUE 2007, SERIES A
IN EXCHANGE FOR
10 1/8% SENIOR NOTES DUE 2007, SERIES B
OF
WALBRO CORPORATION
Pursuant to the Prospectus dated ____________, 1998
The Exchange Agent for the Exchange Offer is:
BANKERS TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Overnight or Courier: By Hand:
BT Services Tennessee, Inc. BT Services Tennessee, Inc. Bankers Trust Company
Reorganization Unit Corporate Trust & Agency Group Corporate Trust & Agency Group
P.O. Box 292737 Reorganization Unit Attn: Reorganization Department
Nashville, Tennessee 37229-2737 648 Grassmere Park Road Receipt & Delivery Window
Nashville, Tennessee 37211 123 Washington Street, 1st Floor
New York, New York 10006
Facsimile Transmission Number: Confirm by Telephone: Information:
(615) 835-3701 (615) 835-3572 (800) 735-7777
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION VIA FACSIMILE TO A NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE VALID DELIVERY.
As set forth in the Prospectus dated ____________, 1998 (as it may be
supplemented and amended from time to time, the "Prospectus") of Walbro
Corporation (the "Company") under the caption "The Exchange Offer -- Guaranteed
Delivery Procedures," and in the Instructions to the related Letter of
Transmittal (the "Letter of Transmittal"), this form, or one substantially
equivalent hereto, or an Agent's Message relating to the guaranteed delivery
procedures, must be used to accept the Company's offer (the "Exchange Offer") to
exchange any and all of its outstanding 10 1/8% Senior Notes due 2007, Series A
(the "Old Notes"), for new 10 1/8% Senior Notes due 2007, Series B (the
"Exchange Notes"), if time will not permit the Letter of Transmittal,
certificates representing such Old Notes and other required documents to reach
the Exchange Agent, or the procedures for book-entry transfer cannot be
completed, on or prior to the Expiration Date (as defined herein).
This form must be delivered by an Eligible Institution (as defined
herein) by mail or hand delivery or transmitted via facsimile to the Exchange
Agent as set forth above. If a signature on the Letter of Transmittal is
required to be guaranteed by a Medallion Signature Guarantor (as defined in the
Letter of Transmittal) under the instructions thereto, such signature guarantee
must appear in the applicable space provided in the Letter of Transmittal. This
form is not to be used to guarantee signatures.
Questions and requests for assistance and requests for additional
copies of the Prospectus may be directed to the Exchange Agent. Holders may also
contact their broker, dealer, commercial bank, trust company or other nominee
for assistance concerning the Exchange Offer.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON ____________, 1998, UNLESS EXTENDED ("THE EXPIRATION DATE").
- --------------------------------------------------------------------------------
- 1 -
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and
subject to the conditions set forth in the Prospectus and the related Letter of
Transmittal (receipt of which is hereby acknowledged), the principal amount of
the Old Notes specified below pursuant to the guaranteed delivery procedures set
forth in the Prospectus under "The Exchange Offer -- Guaranteed Delivery
Procedures" and in Instruction 2 to the Letter of Transmittal. The undersigned
hereby authorizes the Exchange Agent to deliver this Notice of Guaranteed
Delivery to the Company with respect to the Notes tendered pursuant to the
Exchange Offer.
The undersigned understands that the Old Notes will be exchanged only
after timely receipt by the Exchange Agent of (i) the Old Notes or a Book-Entry
Confirmation, and (ii) a Letter of Transmittal (or a manually signed facsimile
thereof), including by means of an Agent's Message, of the transfer of the Old
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility,
with respect to the Old Notes, properly completed and duly executed, with any
signature guarantees and any other documents required by the Letter of
Transmittal within three New York Stock Exchange trading days after the
execution hereof. The undersigned also understands that the method of delivery
of this Notice of Guaranteed Delivery and any other required documents to the
Exchange Agent is at the election and sole risk of the holder, and the delivery
will be deemed made only when actually received by the Exchange Agent.
The undersigned understands that tenders of the Old Notes will be
accepted only in principal amounts equal to $1,000 or integral multiples
thereof. The undersigned also understands that tenders of the Old Notes may be
withdrawn at any time prior to the Expiration Date.
All authority conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and every obligation of the undersigned under
this Notice of Guaranteed Delivery shall be binding upon the heirs, executors,
administrators, trustees in bankruptcy, personal and legal representatives,
successors and assigns of the undersigned.
All capitalized terms used herein but not defined herein shall have the
meanings ascribed to them in the Prospectus.
- 2 -
<PAGE> 3
PLEASE SIGN AND COMPLETE
<TABLE>
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Signature(s) of Registered Holder(s) or Date:
Authorized Signatory: ---------------------------------------
--------------------------- Address:
------------------------------------
- ------------------------------------------------
-------------------------------------------
- ------------------------------------------------
Area Code and Telephone No.
----------------
Name(s) of Registered Holder(s):
---------------- If the Old Notes will be delivered by book-entry
transfer, check book-entry transfer facility below:
- ------------------------------------------------
[ ] The Depository Trust Company
- ------------------------------------------------
Principal Amount of the Old Notes
Tendered:
---------------------------------------
- ------------------------------------------------
Depository
Certificate No.(s) of the Old Notes Account No.
(if available) --------------------------------------
----------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the holder(s) exactly as
their name(s) appear(s) on the certificate(s) for the Old Notes or on a security
position listing as the owner of the Old Notes, or by person(s) authorized to
become holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery without alteration, enlargement or any change whatsoever. If
signature is by a trustee, executor, administrator, guardian, attorney-in-fact,
officer or other person acting in a fiduciary or representative capacity, such
person must provide the following information.
Please print name(s) and address(es)
Name(s):
------------------------------------------------------------------------
Capacity:
-----------------------------------------------------------------------
Address(es):
--------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DO NOT SEND THE OLD NOTES WITH THIS FORM. THE OLD NOTES SHOULD BE SENT
TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED
LETTER OF TRANSMITTAL.
- 3 -
<PAGE> 4
- --------------------------------------------------------------------------------
GUARANTEE
(Not To Be Used for Signature Guarantee)
The undersigned, a member of the Securities Transfer Agents Medallion
Program, the Stock Exchange Medallion Program or the New York Stock Exchange,
Inc. Medallion Signature Program (each, an "Eligible Institution"), hereby (i)
represents that the above-named persons are deemed to own the Old Notes tendered
hereby within the meaning of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended ("Rule 14e-4"), (ii) represents that such
tender of the Old Notes complies with Rule 14e-4, and (iii) guarantees that the
Old Notes tendered are in proper form for transfer (pursuant to the procedures
set forth in the Prospectus under "The Exchange Offer -- Guaranteed Delivery
Procedures"), and that the Exchange Agent will receive (a) the Old Notes, or a
Book-Entry Confirmation of the transfer of the Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility, and (b) a properly
completed and duly executed Letter of Transmittal or facsimile thereof (or
Agent's message) with any required signature guarantees and any other documents
required by the Letter of Transmittal within three New York Stock Exchange
trading days after the date of execution hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Exchange Agent and must deliver the Letter of Transmittal and
the Old Notes to the Exchange Agent within the time period shown herein. Failure
to do so could result in a financial loss to the Eligible Institution.
Name of Firm:
-------------------------------------------------------------------
Authorized Signature:
-----------------------------------------------------------
Title:
--------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
(Zip Code)
----------------------------------------------------------------------
Area Code and Telephone Number:
-------------------------------------------------
Dated: , 1998
----------------------------------
- --------------------------------------------------------------------------------
- 4 -
<PAGE> 1
EXHIBIT 99.3
FOR TENDER OF
10 1/8% SENIOR NOTES DUE 2007, SERIES A
IN EXCHANGE FOR
10 1/8% SENIOR NOTES DUE 2007, SERIES B
OF
WALBRO CORPORATION
-----------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON ______________, 1998 UNLESS EXTENDED (THE "EXPIRATION DATE").
-----------------------------------------------------------------------------
To Registered Holders and Depository
Trust Company Participants:
We are enclosing the material listed below relating to the offer by
Walbro Corporation, a Delaware corporation (the "Company"), to exchange its 10
1/8% Senior Notes Due 2007, Series B (the "Exchange Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for a like principal amount of its issued and outstanding 10 1/8% Senior Notes
Due 2007, Series A (the "Old Notes") upon the terms and subject to the
conditions set forth in the Company's Prospectus dated ________________, 1998
(the "Prospectus") and the related Letter of Transmittal (which together
constitute the "Exchange Offer").
Enclosed are copies of the following documents:
1. Prospectus dated _________________, 1998;
2. Letter of Transmittal (together with accompanying
Substitute Form W-9 Guidelines);
3. Notice of Guaranteed Delivery;
4. Letter to Clients which may be sent to your clients
for whose account you hold the Old Notes in your name
or in the name of your nominee; and
5. Instructions to Registered Holder and/or Book-Entry
Transfer Facility Participant from Beneficial Owner.
We urge you to contact your clients promptly. Please note that the
Exchange Offer will expire on the Expiration Date unless extended.
The Exchange Offer is not conditioned upon any minimum number of the
Old Notes being tendered.
Pursuant to the Letter of Transmittal, each holder of the Old Notes
being tendered will represent to the Company that of the tendered Old Notes (i)
the Exchange Notes to be acquired by the holder and any beneficial owner(s) of
the tendered Old Notes in connection with the Exchange Offer are being acquired
by the holder and any beneficial owner(s) in the ordinary course of business of
the holder and any beneficial owner(s), (ii) the holder and each beneficial
owner are not participating, do not intend to participate, and have no
arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, (iii) except as otherwise disclosed in
writing herewith, neither the holder nor any beneficial owner is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company,
and (iv) the holder and each beneficial owner acknowledge and agree
<PAGE> 2
that any person participating in the Exchange Offer with the intention or for
the purpose of distributing the Exchange Notes must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale of the Exchange Notes acquired by such
person and cannot rely on the position of the staff of the Securities and
Exchange Commission set forth in the no-action letters that are discussed in
the section of the Prospectus entitled "The Exchange Offer." In addition, by
accepting the Exchange Offer, the holder will (i) represent and warrant that,
if the holder or any beneficial owner of the tendered Old Notes is a
Participating Broker-Dealer (as defined in the Prospectus), such Participating
Broker-Dealer acquired the Old Notes for its own account as a result of
market-making activities or other trading activities and has not entered into
any arrangement or understanding with the Company or any "affiliate" of the
Company (within the meaning of Rule 405 under the Securities Act) to distribute
the Exchange Notes to be received in the Exchange Offer, and (ii) acknowledges
that, by receiving the Exchange Notes for its own account in exchange for the
Old Notes, where the Old Notes were acquired as a result of market-making
activities or other trading activities, the Participating Broker-Dealer will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of the Exchange Notes. By acknowledging that it
will deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes, the holder
is not deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
The enclosed Instructions to Registered Holder and/or Book-Entry
Transfer Facility Participant from beneficial owner(s) contain an authorization
by the beneficial owner(s) for you to make the foregoing representations.
The Company will not pay any fee or commission to any broker or dealer
or to any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of the Old Notes pursuant to the Exchange Offer. The
Company will pay or cause to be paid any transfer taxes payable on the transfer
of the Old Notes to it, except as otherwise provided in Instruction 7 of the
enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
WALBRO CORPORATION
2
<PAGE> 1
EXHIBIT 99.4
FOR TENDER OF
10 1/8% SENIOR NOTES DUE 2007, SERIES A
IN EXCHANGE FOR
10 1/8% SENIOR NOTES DUE 2007, SERIES B
OF
WALBRO CORPORATION
------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON ______________, 1998 UNLESS EXTENDED (THE "EXPIRATION DATE").
------------------------------------------------------------------------------
To Our Clients:
We are enclosing a Prospectus dated _______________, 1998 (the
"Prospectus") of Walbro Corporation, a Delaware corporation (the "Company"),
and a related Letter of Transmittal (which together constitute the "Exchange
Offer") relating to the offer by the Company to exchange its 10 1/8% Senior
Notes Due 2007, Series B (the Exchange Notes"), which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), for a like
principal amount of its issued and outstanding 10 1/8% Senior Notes Due 2007,
Series A (the "Old Notes") upon the terms and subject to the conditions set
forth in the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum number of the
Old Notes being tendered.
We are the holder of record of the Old Notes held by us for your
account. A tender of the Old Notes can be made only by us as the record holder
and pursuant to your instructions. The Letter of Transmittal is furnished to
you for your information only and cannot be used by you to tender the Old Notes
held by us for your account.
We request instructions as to whether you wish to tender any or all of
the Old Notes held by us for your account pursuant to the terms and conditions
of the Exchange Offer. We also request that you confirm that we may on your
behalf make the representations contained in the Letter of Transmittal.
Pursuant to the Letter of Transmittal, each holder of the Old Notes
will represent to the Company that (i) the Exchange Notes to be acquired by the
undersigned and any beneficial owner(s) of the tendered Old Notes in connection
with the Exchange Offer are being acquired by the undersigned and any
beneficial owner(s) in the ordinary course of business of the undersigned and
any beneficial owner(s), (ii) the undersigned and each beneficial owner are not
participating, do not intend to participate, and have no arrangement or
understanding with any person to participate, in the distribution of the
Exchange Notes, (iii) except as otherwise disclosed in writing herewith,
neither the undersigned nor any beneficial owner is an "affiliate," as defined
in Rule 405 under the Securities Act, of the Company, and (iv) the undersigned
and each beneficial owner acknowledge and agree that any person participating
in the Exchange Offer with the intention or for the purpose of distributing the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale of the
Exchange Notes acquired by such person and cannot rely on the position of the
staff of the Securities and Exchange Commission set forth in the no-action
letters that are discussed in the section of the Prospectus entitled "The
Exchange Offer." In addition, by accepting the Exchange Offer, the undersigned
will (i) represent and warrant that, if the undersigned or any beneficial owner
of the tendered Old Notes is a Participating Broker-Dealer (as defined in the
Prospectus), such Participating Broker-Dealer acquired the Old Notes for its
own account as a result of market-making activities or other trading activities
and has not entered into any arrangement or understanding with the Company or
any "affiliate" of the Company (within the meaning of Rule 405 under the
<PAGE> 2
Securities Act) to distribute the Exchange Notes to be received in the Exchange
Offer, and (ii) acknowledges that, by receiving the Exchange Notes for its own
account in exchange for the Old Notes, where the Old Notes were acquired as a
result of market-making activities or other trading activities, the
Participating Broker-Dealer will deliver a prospectus meeting the requirements
of the Securities Act in connection with any resale of the Exchange Notes. By
acknowledging that it will deliver and by delivering a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes, the undersigned is not deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
Very truly yours,
2
<PAGE> 1
EXHIBIT 99.5
INSTRUCTIONS TO REGISTERED HOLDER AND/OR BOOK-ENTRY
TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
FOR TENDER OF
10 1/8 SENIOR NOTES DUE 2007, SERIES A
IN EXCHANGE FOR
10 1/8% SENIOR NOTES DUE 2007, SERIES B
OF
WALBRO CORPORATION
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
September 3, 1997 (as the same may be amended or supplemented from time to
time, the "Prospectus") of Walbro Corporation, a Delaware corporation (the
"Company"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer") to exchange any and all of its outstanding 10 1/8% Senior Notes due
2007, Series A (the "Old Notes"), for new 10 1/8% Senior Notes due 2007, Series
B (the "Exchange Notes"). Capitalized terms used but not defined herein have
the meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry
transfer facility participant, as to action to be taken by you relating to the
Exchange Offer with respect to the Old Notes held by you for the account of the
undersigned.
The aggregate face amount of the Old Notes held by you for the account
of the undersigned is (FILL IN AMOUNT):
$______________________ of the 10 1/8% Senior Notes due 2007, Series A.
With respect to the Exchange Offer, the undersigned hereby instructs
you (CHECK APPROPRIATE BOX):
[ ] TO TENDER the following Old Notes held by you for the account
of the undersigned (INSERT PRINCIPAL AMOUNT OF THE OLD NOTES
TO BE TENDERED, IF ANY): $______________
[ ] NOT TO TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you
for the account of the undersigned, it is understood that you are authorized
(a) to make, on behalf of the undersigned (and the undersigned, by its
signature below, hereby makes to you), the representations and warranties
contained in the Letter of Transmittal that are to be made with respect to the
undersigned as a beneficial owner, including, but not limited to, the
representations that (i) the undersigned's principal residence is in the state
of (FILL IN STATE) __________________, (ii) the undersigned is acquiring the
Exchange Notes in the ordinary course of business of the undersigned, (iii) the
undersigned is not participating, do not intend to participate, and has no
arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, (iv) the undersigned acknowledges that any
person participating in the Exchange Offer for the purpose of distributing the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the Exchange Notes acquired by such person and cannot rely on
the position of the staff of the Commission set forth in no-action letters that
are discussed in the section of the Prospectus entitled "The Exchange
Offer--Resale of the Exchange Notes," and (v) the undersigned is not an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company or
any Guarantor; (b) to agree, on behalf of the undersigned, as set forth in the
Letter of Transmittal; and (c) to take such other action as necessary under the
Prospectus or the Letter of Transmittal to effect the valid tender of the Old
Notes.
- --------------------------------------------------------------------------------
Check this box if the Beneficial Owner of the Old Notes is a
Participating Broker-Dealer and such Participating Broker-Dealer
acquired the Old Notes for its own account as a result of market-
[ ] making activities or other trading activities. IF THIS BOX IS
CHECKED, A COPY OF THESE INSTRUCTIONS MUST BE RECEIVED WITHIN THREE
NEW YORK STOCK EXCHANGE TRADING DAYS AFTER THE EXPIRATION DATE BY
WALBRO CORPORATION, ATTENTION ___________, FACSIMILE (___) _________.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGN HERE
Name of beneficial owner(s):
---------------------------------------------------
Signature(s):
------------------------------------------------------------------
Name (please print):
-----------------------------------------------------------
Address:
---------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Telephone number:
----------------------------------------------------
Taxpayer Identification or Social Security Number:
-----------------------------
Date:
--------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 99.6
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER -
Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<CAPTION>
- ------------------------------------------------------------- ----------------------------------------------------
For this type of account: Give the For this type of account: Give the EMPLOYER
SOCIAL SECURITY IDENTIFICATION
number of - number of -
- ------------------------------------------------------------- ----------------------------------------------------
<S> <C> <C> <C>
1. An individual's account The individual 9. A valid trust, The legal entity (do
estate or pension not furnish the
trust identifying number of
the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title)(5)
2. Two or more individuals (joint The actual owner of the 10. Corporate account The corporation
account) account or, if combined
funds, any one of the
individuals(1)
3. Husband and wife (joint account) The actual owner of the
account or, if joint
funds, either person(1)
4. Custodian account of a minor The minor(2) 11. Partnership The partnership
(Uniform Gift to Minors Act) account held in
the name of the
business
5. Adult and minor (joint account) The adult or, if the 12. Association, The organization
minor is the only club, religious,
contributor, the charitable,
minor(1) educational or
other tax-exempt
organization
6. Account in the name of guardian or The ward, minor or 13. A broker or The broker or nominee
committee for a designated ward, incompetent person(3) registered
minor or incompetent person nominee
7. a. The usual revocable savings trust The grantor-trustee(1) 14. Account with the The public entity
account (grantor is also trustee) Department of
Agriculture in
the name of a
public entity
b. So-called trust account that is The actual owner(1) (such as a State
not a legal or valid trust under or local
state law government,
school district
or prison) that
8. Sole proprietorship account The owner(4) receives
agricultural
program payments
- ------------------------------------------------------------- ----------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your social security number
or employer identification number.
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Internal Revenue Service Form SS-5 (Application for Social
Security Number Card) or Form SS-4 (Application for Employer Identification
Number) from your local office of the Social Security Administration or the
Internal Revenue Service and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
o A corporation.
o A financial institution.
o An organization exempt from tax under Section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual
retirement plan or a custodial account under Section 403(b)(7) of the
Code.
o The United States or any agency or instrumentality thereof.
o A State, the District of Columbia, a possession of the United States
or any subdivision or instrumentality thereof.
o A foreign government, a political subdivision of a foreign government,
or any agency or instrumentality thereof.
o An international organization or any agency or instrumentality
thereof.
o A registered dealer in securities or commodities registered in the
United States or a possession of the United States.
o A real estate investment trust.
o A common trust fund operated by a bank under Section 584(a) of the
Code.
o An exempt charitable remainder trust, or a non-exempt trust described
in Section 4947(a)(1) of the Code.
o An entity registered at all times under the Investment Company Act of
1940.
o A foreign central bank of issue.
PAYMENTS EXEMPT FROM BACKUP WITHHOLDING
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
o Payments to nonresident aliens subject to withholding under Section
1441 of the Code.
o Payments to partnerships not engaged in a trade or business in the
United States and which have at least one nonresident partner.
o Payments of patronage dividends where the amount received is not paid
in money.
o Payments made by certain foreign organizations.
o Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
o Payments of interest on obligations issued by individuals. NOTE: You
may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you
have not provided your correct taxpayer identification number to the
payer.
o Payments of tax-exempt interest (including exempt interest dividends
under Section 852 of the Code).
o Payments described in Section 6049(b)(5) of the Code to nonresident
aliens.
o Payments on tax-free covenant bonds under Section 1451 of the Code.
o Payments made by certain foreign organizations.
o Payments made to a nominee.
Exempt payees described above should file Substitute Form W-9 to avoid possible
erroneous backup withholding. FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER,
WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO
THE PAYER. IF YOU ARE A NONRESIDENT ALIEN OR A FOREIGN ENTITY NOT SUBJECT TO
BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED INTERNAL REVENUE FORM W-8
(CERTIFICATE OF FOREIGN STATUS).
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see Sections 6041, 6041A(a), 6045, and 6050A of the
Code.
PRIVACY ACT NOTICE - Section 6109 of the Code requires most recipients of
dividend, interest or other payments to give taxpayer identification numbers to
payers who must report the payments to the Internal Revenue Service. The
Internal Revenue Service uses the numbers for identification purposes and to
help verify the accuracy of your tax return. Payers must be given the numbers
whether or not recipients are required to file tax returns. Payers must
generally withhold 31% of taxable interest, dividends and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER - If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure, unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING - If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION - Wilfully falsifying
certifications or affirmations may subject you to criminal penalties, including
fines and/or imprisonment.
(4) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS - If you fail to
include any portion of an includable payment for interest, dividends, or
patronage dividends in gross income, such failure will be subject to a penalty
of 5% on any portion of an under-payment attributable to that failure unless
there is clear and convincing evidence to the contrary.
FOR ADDITIONAL INFORMATION CONTACT YOUR OWN TAX ADVISOR OR THE INTERNAL REVENUE
SERVICE
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF WALBRO CORPORATION
NAME OF SUBSIDIARY JURISDICTION
- ------------------ ------------
971143 Ontario Inc. Ontario, Canada
Auburn Diecast Corporation Michigan
Fujian Hualong Caburetor Co., Ltd. People's Republic of China
Mutual Walbro P. Ltd. India
Sharon Manufacturing Company Michigan
TDD S.r.1. Italy
Tianjin Walbro Industries, Ltd. People's Republic of China
Tucson Precision Products Delaware
U.S. Coexcell, Inc. Ohio
Walbro Asia Pacific Japan
Walbro Automotive A.S. Norway
Walbro Automotive Argentina Argentina
Walbro Automotive do Brasil Ltda. Brazil
Walbro Automotive Corporation Delaware
Walbro Automotive Europe S.A. France
Walbro Automotive FSC, Inc. U.S. Virgin Islands
Walbro Automotive GmbH Germany
Walbro Automotive Limited Great Britian
Walbro Automotive N.V. Belgium
Walbro Automotive S.A. France
Walbro Automotive S.A. Spain
Walbro Capital Pte. Ltd. Republic of Singapore
Walbro Capital Trust Delaware
Walbro ECU Corporation, s.a. Luxembourg
Walbro Engine Management Corporation Delaware
Walbro GmbH Germany
Walbro Japan, Inc. Japan
Walbro Investment Inc. Michigan
Walbro Korea, Ltd. Republic of Korea
Walbro de Mexico, S.A. de C.V. Mexico
Walbro Netherlands B.V. Netherlands
Walbro Singapore Pte. Ltd. Republic of Singapore
Walbro Tucson Corporation Delaware
Whitehead Engineered Products, Inc. Delaware
