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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 6, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
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STANADYNE AUTOMOTIVE CORP.
DSD INTERNATIONAL CORP.
PRECISION ENGINE PRODUCTS CORP.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 3714 22-2940378
DELAWARE 3714 22-2953338
DELAWARE 3714 13-3500174
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or Classification Code Number) Number)
organization)
</TABLE>
92 DEERFIELD ROAD
WINDSOR, CT 06095
TELEPHONE: (860) 525-0821
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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MICHAEL H. BOYER
92 DEERFIELD ROAD
WINDSOR, CT 06095
TELEPHONE: (860) 525-0821
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
JACK M. FEDER
KIRKLAND & ELLIS
655 FIFTEENTH STREET, N.W., SUITE 1200
WASHINGTON, D.C. 20005
TELEPHONE: (202) 879-5000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
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<S> <C> <C> <C> <C>
Series B 10 1/4% Senior Subordinated $1,000 principal
Notes due 2007........................ $100,000,000 amount $100,000,000 $29,500
Guarantees of Series B 10 1/4% Senior
Subordinated Notes due 2007........... $100,000,000 (2) (2) None
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f).
(2) No further fee is payable pursuant to Rule 457(n).
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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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 6, 1998
PROSPECTUS
STANADYNE AUTOMOTIVE CORP.
[STANADYNE AUTOMOTIVE LOGO]
OFFER TO EXCHANGE ITS SERIES B 10 1/4% SENIOR SUBORDINATED NOTES DUE 2007
FOR ANY AND ALL OF ITS OUTSTANDING 10 1/4% SENIOR SUBORDINATED NOTES DUE 2007
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1998, UNLESS EXTENDED.
Stanadyne Automotive Corp., a Delaware corporation ("Stanadyne" or the
"Company"), hereby offers (the "Exchange Offer"), upon the terms and conditions
set forth in this Prospectus (the "Prospectus") and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), to exchange $1,000 principal amount
of its Series B 10 1/4% Senior Subordinated Notes due 2007 (the "Exchange
Notes"), which will have been registered under the Securities Act of 1933, as
amended (the "Securities Act") pursuant to a Registration Statement of which
this prospectus is a part, for each $1,000 principal amount of its outstanding
10 1/4% Senior Subordinated Notes due 2007 (the "Notes"), of which $100,000,000
principal amount is outstanding. The form and terms of the Exchange Notes are
the same as the form and term of the Notes (which they replace) except that the
Exchange Notes will bear a Series B designation and will have been registered
under the Securities Act and, therefore, will not bear legends restricting their
transfer and will not contain certain provisions relating to an increase in the
interest rate which were included in the terms of the Notes in certain
circumstances relating to the timing of the Exchange Offer. The Exchange Notes
will evidence the same debt as the Notes (which they replace) and will be issued
under and be entitled to the benefits of the Indenture (the "Indenture") dated
December 11, 1997 between Stanadyne (as Issuer), DSD International Corp. and
Precision Engine Products Corp. (as Guarantors), and United States Trust Company
of New York (the "Trustee") governing the Notes. See "The Exchange Offer" and
"Description of Exchange Notes."
Interest on the Exchange Notes will be payable semi-annually in arrears on June
15 and December 15 of each year, commencing on June 15, 1998. The Exchange Notes
will mature on December 15, 2007. The Exchange Notes will be redeemable at the
option of the Company, in whole or in part, on or after December 15, 2002 at the
redemption prices set forth herein, plus accrued and unpaid interest, and
Liquidated Damages (as defined herein), if any, thereon to the applicable date
of redemption. In addition, at any time, prior to December 15, 2000, the Company
may, at its option, on any one or more occasions, redeem up to 35% of the
aggregate principal amount of the Exchange Notes originally issued at a
redemption price equal to 110.250% of the aggregate principal amount thereof,
plus accrued and unpaid interest, and Liquidated Damages, if any, thereon to the
redemption date, with the Net Cash Proceeds (as defined herein) received by the
Company of one or more Equity Offerings (as defined herein); provided that, in
each case, at least 65% of the aggregate principal amount of the Exchange Notes
will remain outstanding immediately following each such redemption. Upon the
occurrence of a Change of Control (as defined herein), each holder of the
Exchange Notes will have the right to require the Company to repurchase such
holder's Exchange Notes at 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest, and Liquidated Damages, if any, to the date of
repurchase. See "Description of Exchange Notes -- Optional Redemption."
The Exchange Notes will be senior subordinated, unsecured, general obligations
of the Company, will rank subordinate in right of payment to all existing and
future Senior Indebtedness (as defined herein) of the Company and will rank
senior or pari passu in right of payment to all existing and future subordinated
indebtedness of the Company. On the Issue Date (as defined herein), the Exchange
Notes will be guaranteed pursuant to the Guarantee (as defined herein) and any
future subsidiary guarantees (the "Subsidiary Guarantees") on a senior
subordinated basis by each of the Company's domestic subsidiaries (each a
"Guarantor" and collectively the "Guarantors"). Each Subsidiary Guarantee will
be a general unsecured obligation of the Guarantor subordinated in rights of
payment to all Senior Indebtedness of such Guarantor. As of September 30, 1997,
on a pro forma basis after giving effect to the Acquisition Transactions (as
defined herein), the Company and its subsidiaries would have had approximately
$62.2 million of Senior Indebtedness and Guarantor Senior Indebtedness (as
defined herein), including approximately $1.8 million of indebtedness of Foreign
Subsidiaries, all of which would effectively rank senior in right of payment to
the Exchange Notes and the Subsidiary Guarantees. The Indenture permits the
Company to incur additional indebtedness, including Senior Indebtedness subject
to certain limitations. See "Description of Exchange Notes -- Certain
Covenants."
Stanadyne will accept for exchange any and all Notes validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on , 1998, unless
extended by Stanadyne in its sole discretion (the "Expiration Date").
Notwithstanding the foregoing, Stanadyne will not extend the Expiration Date
beyond , 1998. Tenders of Notes may be withdrawn at any time prior to
5:00 p.m. on the Expiration Date. The Exchange Offer is subject to certain
customary conditions. The Notes were sold by Stanadyne on December 11, 1997 to
the Initial Purchaser (as defined herein) in a transaction not registered under
the Securities Act in reliance upon an exemption under the Securities Act. The
Initial Purchaser subsequently placed the Notes with qualified institutional
buyers in reliance upon Rule 144A under the Securities Act and with a limited
number of institutional accredited investors that agreed to comply with certain
transfer restrictions and other conditions. Accordingly, the 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 Stanadyne
under the Registration Rights Agreement entered into by Stanadyne in connection
with the offering of the Notes. See "The Exchange Offer."
Based on no-action letters issued by the staff of the Securities and Exchange
Commission (the "Commission") to third parties, Stanadyne believes the Exchange
Notes issued pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by any holder thereof (other than any such holder that
is an "affiliate" of Stanadyne within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holder's business and such holder has no
arrangement or understanding with any person to participate in the distribution
of such Exchange Notes. See "The Exchange Offer -- Purpose and Effect of the
Exchange Offer" and "The Exchange Offer -- Resale of the Exchange Notes." Each
broker-dealer (a "Participating Broker-Dealer") that receives Exchange Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. The
Letter of Transmittal states that by so acknowledging 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. 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 Exchange Notes
received in exchange for Notes where such Notes were acquired by such
Participating Broker-Dealer as a result of market-making activities or other
trading activities. Stanadyne has agreed that, for a period of 180 days after
the Expiration Date, it will make this Prospectus available to any participating
Broker-Dealer for use in connection with any such resale. See "Plan of
Distribution."
Holders of Notes not tendered and accepted in the Exchange Offer will continue
to hold such 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. Stanadyne will pay all the
expenses incurred by it incident to the Exchange Offer. See "The Exchange
Offer."
SEE "RISK FACTORS" ON PAGE [15] FOR A DESCRIPTION OF CERTAIN RISKS TO BE
CONSIDERED BY HOLDERS WHO TENDER THEIR NOTES 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 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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There has not previously been any public market for the Notes or the
Exchange Notes. Stanadyne does not intend to list the Exchange Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active market for the
Exchange Notes will develop, which could adversely affect the value of the
Exchange Notes. See "Risk Factors -- Lack of a Public Market." Moreover, to the
extent that Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Notes could be adversely
affected.
The Exchange Notes will be available initially only in book-entry form.
Stanadyne expects that the Exchange Notes issued pursuant to this Exchange Offer
will be issued in the form of a Global Note (as defined herein), which will be
deposited with the Trustee (herein also referred to as the "Exchange Agent"), on
behalf of, The Depository Trust Company ("DTC") and registered in its name or in
the name of Cede & Co., its nominee. Beneficial interests in the Global Note
representing the Exchange Notes will be shown on, and transfers thereof to
qualified institutional buyers will be effected through, records maintained by
the Exchange Agent and its participants. After the initial issuance of the
Global Note, Exchange Notes in certificated form will be issued in exchange for
the Global Note only on the terms set forth in the Indenture. See "Description
of Exchange Notes -- Book-Entry; Delivery and Form."
AVAILABLE INFORMATION
Stanadyne has filed with the Commission a Registration Statement on Form
S-4 (the "Exchange Offer Registration Statement," which term shall encompass all
amendments, exhibits, annexes and schedules thereto) pursuant to the Securities
Act, and the rules and regulations promulgated thereunder, covering the Exchange
Notes being offered hereby. This Prospectus does not contain all the information
set forth in the Exchange Offer Registration Statement. For further information
with respect to Stanadyne and the Exchange Offer, reference is made to the
Exchange Offer Registration Statement. Statements made in this Prospectus as to
the contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Exchange Offer Registration Statement,
reference is made to the exhibit for a more complete description of the document
or matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. The Exchange Offer Registration Statement, including
the exhibits thereto, can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at the Regional Offices of the Commission at 75 Park
Place, New York, New York 10007 and at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
can be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Additionally, the
Commission maintains a web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission.
As a result of the filing of the Exchange Offer Registration Statement with
the Commission, Stanadyne will become subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith is required to file periodic reports and other information
with the Commission. The obligation of Stanadyne to file periodic reports and
other information with the Commission will be suspended if the Exchange Notes
are held of record by fewer than 300 holders as of the beginning of any fiscal
year of Stanadyne other than the fiscal year in which the Exchange Offer
Registration Statement is declared effective. Stanadyne will nevertheless be
required to continue to file reports with the Commission if the Exchange Notes
are listed on a national securities exchange. In the event Stanadyne ceases to
be subject to the informational requirements of the Exchange Act, Stanadyne is
required under the Indenture to continue to file with the Commission the annual
and quarterly reports, information, documents, or other reports, including,
without limitation, reports on Forms 10-K, 10-Q and 8-K, which would be required
pursuant to the informational requirements of the Exchange Act. Under the
Indenture, Stanadyne will also furnish to the holders of both Notes and Exchange
Notes (i) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K if the
Company were required to file such Forms and (ii) all current reports that would
be required to be filed with the Commission on Form 8-K if the Company were
required to file such reports. Stanadyne shall file with the
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Trustee annual, quarterly and other reports within fifteen days after it files
such reports with the Commission. Annual reports delivered to the Trustee and
the holders of Exchange Notes will contain financial information that has been
examined and reported upon, with an opinion expressed by an independent public
or certified public accountant. Stanadyne will also furnish such other reports
as may be required by law.
FORWARD LOOKING STATEMENTS
THE PROSPECTUS CONTAINS CERTAIN FORWARD LOOKING STATEMENTS WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WITH RESPECT TO
THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF THE COMPANY,
INCLUDING STATEMENTS UNDER THE CAPTIONS "SUMMARY," "UNAUDITED PRO FORMA
FINANCIAL INFORMATION," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS." ALL OF THESE FORWARD
LOOKING STATEMENTS ARE BASED ON ESTIMATES AND ASSUMPTIONS MADE BY THE MANAGEMENT
OF THE COMPANY WHICH, ALTHOUGH BELIEVED TO BE REASONABLE, ARE INHERENTLY
UNCERTAIN. THEREFORE, UNDUE RELIANCE SHOULD NOT BE PLACED UPON SUCH ESTIMATES
AND STATEMENTS. NO ASSURANCE CAN BE GIVEN THAT ANY OF SUCH ESTIMATES WILL BE
REALIZED AND IT IS LIKELY THAT ACTUAL RESULTS WILL DIFFER MATERIALLY FROM THOSE
CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH
DIFFERENCES INCLUDE: (1) INCREASED COMPETITION; (2) INCREASED COSTS; (3) LOSS OR
RETIREMENT OF KEY MEMBERS OF MANAGEMENT; (4) INCREASES IN THE COMPANY'S COST OF
BORROWING OR INABILITY OR UNAVAILABILITY OF ADDITIONAL DEBT OR EQUITY CAPITAL;
(5) ADVERSE STATE OR FEDERAL LEGISLATION OR REGULATION OR ADVERSE DETERMINATIONS
IN PENDING LITIGATION; AND (6) CHANGES IN GENERAL ECONOMIC CONDITIONS AND/OR IN
THE MARKETS IN WHICH THE COMPANY MAY, FROM TIME TO TIME, COMPETE. MANY OF SUCH
FACTORS ARE BEYOND THE CONTROL OF THE COMPANY AND ITS MANAGEMENT. FOR FURTHER
INFORMATION OR OTHER FACTORS WHICH COULD AFFECT THE FINANCIAL RESULTS OF THE
COMPANY AND SUCH FORWARD LOOKING STATEMENTS, SEE "RISK FACTORS."
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SUMMARY
The following is a summary of certain information contained herein and is
qualified in its entirety by, and should be read in conjunction with, the more
detailed information and consolidated financial statements, including the notes
thereto, contained elsewhere in this Prospectus and incorporated herein by
reference. Unless the context indicates otherwise, all references to the
"Company" or "Stanadyne" shall mean Stanadyne Automotive Corp. and its
consolidated subsidiaries after giving effect to the Acquisition Transactions.
THE COMPANY
The Company is a leading designer and manufacturer of highly engineered,
precision manufactured engine components, including fuel injection equipment for
diesel engines and hydraulic lash compensating devices (commonly known as
"hydraulic valve lifters") for gasoline engines. The Company's products serve to
improve engine performance by incorporating technologies that are key to
achieving emissions compliance, noise reduction and fuel economy. The Company
sells engine components to engine original equipment manufacturers ("OEMs") for
use in a variety of applications, including automobiles, light duty trucks,
agricultural and construction vehicles and equipment, industrial products and
marine equipment. The Company also sells replacement units and parts through its
extensive aftermarket distribution network. Due in part to its proven
technological capabilities and its reputation for innovative, high quality
products, the Company has become the sole source supplier of certain engine
components on a number of engine platforms characterized by long-term, high
volume production runs. The Company conducts its business through two principal
operating groups: the Diesel Group, which accounted for 73% of the Company's
1996 net sales, and Precision Engine, which accounted for 27% of the Company's
1996 net sales. For the latest twelve month period ended September 30, 1997, the
Company had pro forma net sales and EBITDA (as defined herein) of $267.0 and
$31.9 million, respectively.
Together with its predecessors, the Company has long-standing relationships
with important OEMs including Chrysler Corporation (50+ years), Ford Motor
Company (50+ years), Deere & Company (40 years), Caterpillar Inc. (27 years),
General Motors Corporation (20 years), Cummins Engine Co. Inc. (16 years) and
Perkins Engines (10 years). The Company's engineering staff works closely with
its OEM customers, generally for periods of two to five years prior to
introduction of the Company's products on an engine platform, to develop or
adapt application specific engine components to satisfy its customers' engine
requirements. The Company typically supplies these components on a sole source
basis pursuant to long-term arrangements with OEMs. Due to the expense and long
lead times necessary to develop application specific engine components, it is
rare for a competitor to replace an incumbent component supplier such as
Stanadyne during the production term of an engine platform. Accordingly, the
Company generally continues supplying components to an OEM throughout the
manufacturing term of a specific engine platform, which typically ranges from
7-15 years for automobile and light duty truck engines and 15-20 years for
agricultural and industrial equipment engines. As evidence of its commitment to
quality, the Company is in the process of registering for QS9000 certification
(which is expected to be completed during the first quarter of 1998), and its
operating groups have received numerous OEM quality awards, including Ford's
"Q-1" award and Chrysler's "Pentastar Award." OEM sales comprised 68% of the
Company's 1996 net sales, with the remaining 32% constituting replacement sales.
The Diesel Group is the largest independent (non-captive) manufacturer of
diesel fuel injection equipment in the United States, and one of only five
independent worldwide manufacturers selling to the geographic areas in which the
Company competes. The Diesel Group produces fuel injection equipment for diesel
engines of up to 250 horsepower, the engine range comprising approximately 90%
of all diesel engines produced worldwide. Fuel pumps and injectors, the Diesel
Group's primary products, are the most highly engineered, precision manufactured
components on a diesel engine and comprise the core components of a diesel
engine's fuel system. Unlike gasoline engines, which ignite pre-mixed air and
fuel with a timed spark, diesel engines rely on high pressure fuel injection
pumps to control combustion timing, engine power and speed. Because fuel system
components are so elemental to the proper functioning and optimum performance of
a diesel engine, they are essentially custom engineered for a specific engine
platform. The Diesel Group also
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manufactures diesel fuel filters, fuel heaters and water separators and
distributes diesel fuel conditioners and stabilizers and diesel engine
diagnostic equipment.
Diesel engines have been an important power source for nearly 100 years,
with the worldwide market for diesel engines experiencing consistent growth in
recent years. According to MotoData, global diesel engine production has grown
from 13.3 million engines manufactured in 1991 to 16.2 million in 1995, and is
expected to grow to 18.6 million engines by the year 2000. Growth in diesel
engine production has been fueled by the competitive advantages associated with
diesel, which typically include substantially greater fuel efficiency, improved
engine durability and favorable emissions compliance when compared to similar
gasoline engines. These advantages associated with diesel engines are expected
to become more prominent as world-wide environmental regulations continue to
become more stringent. The projected growth in the number of diesel engines
produced is due in part to continued penetration of diesel engines in passenger
cars and light trucks worldwide.
Precision Engine is a leading independent domestic manufacturer of
hydraulic valve lifters, including aluminum roller rocker arm assemblies and
lash adjusters, for gasoline engines. These products convert the rotary motion
of a camshaft into a reciprocating motion and allow for the adjustment of lash
(clearance) as valves are opened and closed in the cylinder head of an engine.
Hydraulic valve lifters began to replace mechanical valve lifters in domestic
on-highway vehicles in the 1950s since hydraulic valve lifters are more
efficient in reducing valve train noise, minimizing maintenance requirements and
assisting in improved fuel economy and decreased emissions. The Company believes
that Precision Engine's share of the North American market for hydraulic valve
lifters for the gasoline powered, automobile and light duty truck market is
approximately 20%. Precision Engine has developed an especially important
relationship with Chrysler, to which it currently supplies approximately 50% of
Chrysler's overall domestic hydraulic valve lifter requirements. Specifically,
Precision Engine is the sole source supplier of roller rocker arm assemblies for
Chrysler's 3.5/3.2L and 2.0L engines pursuant to long-term exclusive
arrangements extending for the life of these engines. These engines appear in
Chrysler's "LH" Series (Chrysler LHS and Concorde, Dodge Intrepid and Eagle
Vision) and the Dodge and Plymouth Neon vehicles. Precision Engine's net sales
have grown from $30.2 million in 1991 to $73.2 million in 1996, representing a
compound annual growth rate of 19.4%.
The Company believes that the worldwide market for valve lifters (which
includes both hydraulic as well as mechanical valve lifters) is in excess of $1
billion, with hydraulic valve lifters representing 79% of total production and
mechanical valve lifters representing the remaining 21%. North America
represents approximately 36% of worldwide production (consisting of
substantially all hydraulic valve lifters). The Company believes that several
industry trends will benefit hydraulic valve lifter manufacturers such as
Stanadyne. First, relative stability in overall fuel prices has created a
renewed interest in six and eight cylinder engines, which correspondingly
require greater numbers of valve lifters. In addition, engines with four or more
valves per cylinder, requiring more valve lifters than typical two valve per
cylinder engines, have grown in popularity in recent years due to their reduced
emissions and greater fuel economy. Finally, in order to meet increasingly
stringent emissions regulations and fuel efficiency standards, European engine
manufacturers are continuing to convert from mechanical to hydraulic valve
lifters, presenting Precision Engine with significant opportunities to develop
supply relationships with such manufacturers.
BUSINESS STRATEGY
The Company's strategic objective is to continue to increase its sales and
improve its profitability by capitalizing on its position as a leading
manufacturer of highly engineered, precision manufactured engine components. The
Company intends to capitalize on favorable industry trends by pursuing numerous
opportunities that it believes are available to continue to design and develop
application specific engine components for OEMs worldwide. To execute this
strategy, the Company benefits from a skilled management team with an average of
approximately 25 years of industry experience. Specifically, the Company's
business strategy centers upon the following:
Expand and Grow OEM Relationships. The Company believes that engine OEMs
will continue to rely on independent specialized engine component suppliers such
as Stanadyne in response to technological
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challenges presented by stricter worldwide environmental regulations, as well as
competitive pressures to improve quality and reduce production costs. The
Company has established and intends to continue to develop relationships with
OEM customers worldwide in order to work closely with such customers during the
early stages of engine development to design and manufacture
application-specific products. The Company is currently conducting a number of
joint development and application programs in conjunction with certain engine
manufacturers in an attempt to create new long-term supply relationships with
such OEMs. In addition, the Company intends to further develop its strong
relationships with OEM customers by continuing to expand its product offerings
through internal product development and through strategic acquisitions.
Capitalize on New Platform Wins. As testimony to its strong relationships
with its OEM customer base, the Company has recently been awarded firm orders to
produce engine components on several new or existing engine platforms with
expected significant volume beginning in 1998. For example, the Diesel Group was
recently awarded a long-term contract to be the sole supplier of rotary diesel
fuel injection pumps for Deere's 320-350 series engines, a supply arrangement
which had previously been shared (approximately 50-50) with another diesel
engine component supplier. Through the development of its innovative RSN
injector, the Diesel Group was recently named the sole supplier of RSN injectors
for Ford UK's 2.5L engine as well as a supplier of RSN injectors for two
Volkswagen direct injection engine platforms. The Company's Fuel Manager
filtration system has been selected by Ford as the sole source filtration system
for the next generation Transit Van, with production commencing in 2000.
Moreover, Precision Engine was recently awarded a long-term contract renewal as
the sole supplier of roller rocker arms for Chrysler's 3.5/3.2L and 2.0L
engines. Finally, Precision Engine has recently been selected as the sole
supplier of roller rocker arm assemblies for the 1.6L engine to be jointly
produced by BMW and Chrysler in Brazil starting in 2000. The Company believes
that such new platform wins (or renewals) will enhance its future sales and
profitability.
Capitalize on Proven Technological Capabilities. The Company believes that
its proven technological capabilities and reputation for innovative engine
component solutions are a distinct competitive advantage. The Company believes
that increasingly stringent worldwide environmental regulations create
opportunities for the Company to sell technologically advanced engine components
to OEMs trying to produce engines that satisfy emission standards and which have
improved fuel economy and engine performance. The Company has attained a
reputation for unique technical solutions through continued investment in
research and development programs, which have led to several patented products,
including the DS Electronic Pump (a state-of-the-art, electronically controlled
distributor pump), the RSN injector (an innovative injector designed to improve
emissions and reduce engine noise) and the Fuel Manager (a fuel filter system
featuring interchangeable modular components and a design for easy maintenance
and repair). The Company has extensive engineering and product development
facilities (including a modern 80,000 sq. ft. diesel engineering center in
Windsor, CT) and full service product management capability (which OEMs require
of key suppliers), which enable it to develop proprietary technology and support
design and development activities for the Company's products.
Emphasize Replacement Sales. The Company sells replacement units to OEMs
for distribution through their service organizations and sells replacement units
and parts through the Company's own extensive aftermarket distribution network.
Replacement sales tend to be "counter-cyclical" to the general economic cycle
and, with respect to diesel engine products, generally afford higher margins
than original equipment sales. The Company believes that its diesel aftermarket
distribution network is an important competitive advantage because OEMs select a
supplier, in part, based on the strength of the supplier's aftermarket service
and distribution capability. The Company's diesel aftermarket network consists
of 17 central distributors, who support over 563 authorized service dealers in
North America, and 66 central distributors and 566 service dealers outside of
North America, including 22 central distributors and 323 service dealers in
Europe. All of the Company's central distributors and service dealers are
trained and certified in accordance with Company policies. Precision Engine
sells replacement components directly to a variety of aftermarket customers,
including Dana, which resells the Company's products through an independent
network as well as through the NAPA parts organization. With a large and growing
in-service equipment population, the Company believes that it is well positioned
to further increase replacement sales.
6
<PAGE> 8
Expand European Presence. The Company believes that significant
opportunities exist to expand its sales in Western Europe, which currently
produces approximately 30% of the world's diesel engines. Since the initiation
of programs targeting European OEMs, the Company's European sales have grown
from $22.8 million in 1991 to $74.9 million in 1996, representing a compound
annual growth rate of 26.9%. To better serve the needs of its European OEM
customers, the Company acquired injector manufacturing operations in Brescia and
Bari, Italy to complement its established marketing, engineering and services
support facilities in Trappes, France and Huntingdon, England. In addition, the
Company believes that Precision Engine is well positioned to capitalize on the
continuing trend among Western European engine manufacturers to convert from
mechanical to hydraulic valve lifters in on-highway engines. In 1995, Precision
Engine began supplying lash adjusters for two Fiat engine platforms, and in
1996, Precision Engine was named one of Fiat's top 25 suppliers for its
exemplary quality and support. The Company believes that its reputation as a
high quality provider of engine components and its established European service
network and manufacturing operations will enable it to develop new OEM
relationships, as well as to expand its current OEM relationships in Western
Europe.
THE ACQUISITION TRANSACTIONS
The "Acquisition Transactions" refer collectively to the Notes Offering,
the Acquisition, Merger I, Merger II, the AIP Common Equity Contribution, the
execution of, and initial borrowings under, the New Credit Agreement and the
cancellation of the Intercompany Note (each as defined herein). See "The
Acquisition Transactions."
THE OFFERING
NOTES...................... The Notes were sold by the Company on December 11,
1997 to Donaldson, Lufkin & Jenrette Securities
Corporation (the "Initial Purchaser") pursuant to a
Purchase Agreement dated December 4, 1997 (the
"Purchase Agreement"). The Initial Purchaser
subsequently resold the Notes to qualified
institutional buyers pursuant to Rule 144A under
the Securities Act and to a limited number of
institutional accredited investors that agreed to
comply with certain transfer restrictions and other
conditions.
REGISTRATION RIGHTS
AGREEMENT.................. Pursuant to the Purchase Agreement, the Company and
the Initial Purchaser entered into a Registration
Rights Agreement dated December 11, 1997, which
granted the holders of the Notes certain exchange
and registration rights. The Exchange Offer is
intended to satisfy such exchange rights which
terminate upon the consummation of the Exchange
Offer.
THE EXCHANGE OFFER
SECURITIES OFFERED......... $100,000,000 aggregate principal amount of Series B
10 1/4% Senior Subordinated Notes due 2007 (the
Exchange Notes).
THE EXCHANGE OFFER......... $1,000 principal amount of the Exchange Notes in
exchange for each $1,000 principal amount of Notes.
As of the date hereof, $100,000,000 aggregate
principal amount of Notes are outstanding. The
Company will issue the Exchange Notes to holders on
or promptly after the Expiration Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer in
exchange for
7
<PAGE> 9
Notes may be offered for resale, resold and
otherwise transferred by any holder thereof (other
than any such holder which is an "affiliate" of the
Company within the meaning of Rule 405 under the
Securities Act) without compliance with the
registration and prospectus delivery provisions of
the Securities Act, provided that such Exchange
Notes are acquired in the ordinary course of such
holder's business and that such holder does not
intend to participate and has no arrangement or
understanding with any person to participate in the
distribution of such Exchange Notes.
Each Participating Broker-Dealer that receives
Exchange Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale
of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging 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. 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
Exchange Notes received in exchange for Notes where
such Notes were acquired by such Participating
Broker-Dealer as a result of market-making
activities or other trading activities. The Company
has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus
available to any Participating Broker-Dealer for
use in connection with any such resale. See "Plan
of Distribution."
Any holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose of
participating, in a distribution of the Exchange
Notes could not rely on the position of the staff
of the Commission enunciated in no-action letters
and, in the absence of an exemption therefrom, must
comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any resale transaction. Failure to
comply with such requirements in such instance may
result in such holder incurring liability under the
Securities Act for which the holder is not
indemnified by the Company.
EXPIRATION DATE............ 5:00 p.m., New York City time, on , 1998
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest
date and time to which the Exchange Offer is
extended.
ACCRUED INTEREST ON THE
EXCHANGE NOTES AND
THE NOTES................ Each Exchange Note will bear interest from its
issuance date. Holders of Notes that are accepted
for exchange will receive, in cash, accrued
interest thereon to, but not including, the
issuance date of the Exchange Notes. Such interest
will be paid with the first interest payment on the
Exchange Notes. Interest on the Notes accepted for
exchange will cease to accrue upon issuance of the
Exchange Notes.
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 -- Conditions."
8
<PAGE> 10
PROCEDURES FOR
TENDERING NOTES.......... Each holder of Notes wishing to accept the Exchange
Offer must complete, sign and date the accompanying
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with the Notes and any other required documentation
to the Exchange Agent (as defined herein) at the
address set forth herein. By executing the Letter
of Transmittal, each holder will represent to the
Company that, among other things, the Exchange
Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business
of the person receiving such Exchange Notes,
whether or not such person is the holder, that
neither the holder nor any such other person has
any arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes and that neither the holder nor any such
other person is an "affiliate," as defined under
Rule 405 of the Securities Act, of the Company. See
"The Exchange Offer -- Purpose and Effect of the
Exchange Offer" and "-- Procedures for Tendering."
UNTENDERED NOTES........... Following the consummation of the Exchange Offer,
holders of Notes eligible to participate but who do
not tender their Notes will not have any further
exchange rights and such Notes will continue to be
subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for such
Notes could be adversely affected.
CONSEQUENCES OF FAILURE TO
EXCHANGE................. The Notes that are not exchanged pursuant to the
Exchange Offer will remain restricted securities.
Accordingly, such Notes may be resold only (i) to
the Company, (ii) pursuant to Rule 144A or Rule 144
under the Securities Act or pursuant to some other
exemption under the Securities Act, (iii) outside
the United States to a foreign person pursuant to
the requirements of Rule 904 under the Securities
Act, or (iv) pursuant to an effective registration
statement under the Securities Act. See "The
Exchange Offer -- Consequences of Failure to
Exchange."
SHELF REGISTRATION
STATEMENT.................. If any holder of the Notes (other than any such
holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities
Act) is not eligible under applicable securities
laws to participate in the Exchange Offer, and such
holder has provided information regarding such
holder and the distribution of such holder's Notes
to the Company for use therein, the Company has
agreed to register the Notes on a shelf
registration statement (the "Shelf Registration
Statement") and use its best efforts to cause it to
be declared effective by the Commission as promptly
as practical on or after the consummation of the
Exchange Offer. The Company has agreed to maintain
the effectiveness of the Shelf Registration
Statement for, under certain circumstances, a
maximum of two years, to cover resales of the Notes
held by any such holders.
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS........ Any beneficial owner whose Notes are registered in
the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender should contact such registered holder
promptly and instruct such registered holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's
own
9
<PAGE> 11
behalf, such owner must, prior to completing and
executing the Letter of Transmittal and delivering
its Notes, either make appropriate arrangements to
register ownership of the Notes in such owner's
name or obtain a properly completed bond power from
the registered holder. The transfer of registered
ownership may take considerable time. The Company
will keep the Exchange Offer open for not less than
20 days in order to provide for the transfer of
registered ownership.
GUARANTEED DELIVERY
PROCEDURES............... Holders of Notes who wish to tender their Notes and
whose Notes are not immediately available or who
cannot deliver their Notes, the Letter of
Transmittal or any other documents required by the
Letter of Transmittal to the Exchange Agent (or
comply with the procedures for book-entry transfer)
prior to the Expiration Date must tender their
Notes according to the guaranteed delivery
procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS.......... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
ACCEPTANCE OF NOTES AND
DELIVERY OF EXCHANGE
NOTES.................... The Company will accept for exchange any and all
Notes which are properly tendered in the Exchange
Offer prior to 5:00 p.m., New York City time, on
the Expiration Date. The Exchange Notes issued
pursuant to the Exchange Offer will be delivered
promptly following the Expiration Date. See "The
Exchange Offer -- Terms of the Exchange Offer."
FEDERAL INCOME TAX
CONSEQUENCES............. The exchange pursuant to the Exchange Offer should
not be a taxable event for Federal income tax
purposes. See "Certain Federal Income Tax
Consequences."
USE OF PROCEEDS............ There will be no cash proceeds to the Company from
the exchange pursuant to the Exchange Offer.
EXCHANGE AGENT............. United States Trust Company of New York.
THE EXCHANGE NOTES
GENERAL.................... The form and terms of the Exchange Notes are the
same as the form and terms of the Notes (which they
replace) except that (i) the Exchange Notes bear a
Series B designation, (ii) the Exchange Notes have
been registered under the Securities Act and,
therefore, will not bear legends restricting the
transfer thereof, and (iii) the holders of Exchange
Notes will not be entitled to certain rights under
the Registration Rights Agreement, including the
provisions providing for an increase in the
interest rate on the Notes in certain circumstances
relating to the timing of the Exchange Offer, which
rights will terminate when the Exchange Offer is
consummated. See "The Exchange Offer -- Purpose and
Effect of the Exchange Offer." The Exchange Notes
will evidence the same debt as the Notes and will
be entitled to the benefits of the Indenture. See
"Description of Exchange Notes." The Notes and the
Exchange Notes are referred to herein collectively
as the "Senior Subordinated Notes."
SECURITIES OFFERED......... $100,000,000 aggregate principal amount of Series B
10 1/4% Senior Subordinated Notes due 2007 of the
Company.
10
<PAGE> 12
MATURITY DATE.............. December 15, 2007.
INTEREST PAYMENT DATES..... Semi-annually in arrears on June 15 and December 15
of each year, commencing June 15, 1998.
SUBORDINATION.............. The Exchange Notes will constitute senior
subordinated, unsecured, general obligations of the
Company, rank subordinate in right of payment to
all existing and future Senior Indebtedness and
rank senior or pari passu in right of payment to
all existing and future subordinated indebtedness
of the Company. On the Issue Date, the Exchange
Notes will be guaranteed on a senior subordinated
basis pursuant to the Guarantee by the Guarantors.
Each Subsidiary Guarantee will be a general,
unsecured obligation of the Guarantor, subordinate
in right of payment to all Senior Indebtedness of
such Guarantor. As of September 30, 1997, on a pro
forma basis after giving effect to the Acquisition
Transactions, the Exchange Notes and the Subsidiary
Guarantees would have been subordinated to $62.2
million of Senior Indebtedness and Guarantor Senior
Indebtedness, including $1.8 million of
indebtedness of non-guarantor Foreign Subsidiaries.
See "Risk Factors -- Subordination."
OPTIONAL REDEMPTION........ The Exchange Notes will be redeemable at the option
of the Company, in whole or in part, at any time on
or after December 15, 2002, at the redemption
prices set forth herein, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to
the applicable date of redemption. In addition, at
any time prior to December 15, 2000, the Company
may, on any one or more occasions, redeem up to 35%
of the aggregate principal amount of Exchange Notes
originally issued at a redemption price equal to
110.250% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages,
if any, thereon to the date of redemption with the
Net Cash Proceeds received by the Company of one or
more Equity Offerings; provided that, in each case,
at least 65% of the aggregate principal amount of
Exchange Notes originally issued remains
outstanding immediately following each such
redemption. See "Description of Exchange
Notes -- Optional Redemption."
CHANGE OF CONTROL.......... Upon the occurrence of a Change of Control, each
holder of Exchange Notes will have the right to
require the Company to repurchase all or any part
of such holder's Exchange Notes at an offer price
in cash equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the date
of repurchase. See "Description of Exchange
Notes -- Repurchase at the Option of
Holders -- Change of Control." There can be no
assurance that, in the event of a Change of
Control, the Company would have sufficient funds to
repurchase all Exchange Notes tendered. See "Risk
Factors -- Possible Inability to Repurchase
Exchange Notes Upon Change of Control."
NOTE GUARANTEES............ The Exchange Notes will be guaranteed on a senior
subordinated basis by all Guarantors of the
Company. The Subsidiary Guarantees will be general
unsecured obligations of the Guarantors,
subordinated in right of payment to all Senior
Indebtedness of such Guarantors.
CERTAIN COVENANTS.......... The Indenture contains certain covenants that
limit, among other things, the ability of the
Company and the Subsidiary Guarantors to (i) pay
dividends, redeem capital stock or make certain
other restricted pay-
11
<PAGE> 13
ments or investments; (ii) incur additional
indebtedness or issue certain preferred equity
interests; (iii) merge, consolidate or sell all or
substantially all of its assets; (iv) create liens
on assets and (v) enter into certain transactions
with affiliates or related persons. See
"Description of Exchange Notes -- Certain
Covenants."
For additional information regarding the Exchange Notes, see "Description
of Exchange Notes."
RISK FACTORS
Holders of the Exchange Notes should carefully consider all of the
information set forth in this Prospectus and, in particular, should evaluate the
specific factors under "Risk Factors" as well as the other information and data
included in this Prospectus prior to tendering their Notes in the Exchange
Offer.
12
<PAGE> 14
SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table sets forth summary consolidated historical and pro
forma financial, operating and other data of the Company and its subsidiaries.
The summary consolidated financial data for each of the three fiscal years ended
December 31, 1996 has been derived from the Consolidated Financial Statements of
the Company and the related notes thereto included elsewhere herein, which have
been audited by KPMG Peat Marwick LLP, independent auditors. The summary
financial data for the two years ended December 31, 1992 and December 31, 1993
has been derived from the Consolidated Financial Statements of Old Holdings (as
defined herein), which have also been audited by KPMG Peat Marwick LLP,
independent auditors, and are not contained elsewhere herein. The summary
financial data for the nine month periods ended September 30, 1996 and September
30, 1997 have been derived from the Unaudited Consolidated Financial Statements
of the Company, and include, in the opinion of management, all adjustments
necessary to present fairly the data for such periods. The results for the nine
month period ended September 30, 1997 are not necessarily indicative of the
results to be expected for the year ended December 31, 1997 or for any future
period. The summary pro forma data for the latest twelve months ("LTM") ended
September 30, 1997 give effect to the Acquisition Transactions as if they
occurred on January 1, 1996. The summary consolidated pro forma balance sheet
data give effect to the Acquisition Transactions as if they had occurred as of
September 30, 1997. The data presented below should be read in conjunction with
the Consolidated Financial Statements and the related notes thereto included
elsewhere herein, the other financial information included elsewhere herein and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales..................................... $217,962 $264,346 $286,964 $272,145 $275,639 $209,679 $201,034
Gross profit(a)............................... 38,646 50,312 42,657 36,500 40,883 32,400 32,030
Selling, general and administrative
expenses(b)................................. 27,975 43,630 35,075 31,740 30,976 24,024 19,409
Operating income.............................. 10,671 6,682 7,582 4,760 9,907 8,376 12,621
Net income (loss)(c)(d)(e).................... 730 (5,042) (504) (4,946) 5,602 5,536 4,602
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
1997
---------------------
PRO
HISTORICAL FORMA
---------- --------
<S> <C> <C>
BALANCE SHEET DATA:
Fixed assets, net of accumulated depreciation and amortization.............................. 93,170 124,432
Total assets................................................................................ 190,715 300,071
Long-term debt (including current portion).................................................. 82,695 162,160
Stockholders' equity........................................................................ 12,118 54,218
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Adjusted EBITDA(f)............................ $ 32,308 $ 39,090 $ 28,335 $ 23,516 $ 27,545 $ 21,908 $ 25,665
Capital expenditures.......................... 13,165 12,728 9,934 6,667 8,827 6,361 10,359
Depreciation.................................. 18,469 18,241 15,166 15,700 16,113 12,157 12,036
Amortization.................................. 2,430 3,633 3,541 2,401 873 794 512
Net working capital(g)........................ $ 30,971 $ 34,469
</TABLE>
13
<PAGE> 15
<TABLE>
<CAPTION>
LTM ENDED
SEPTEMBER 30,
1997
-------------
<S> <C>
PRO FORMA DATA:
Net sales......................................................................................... $ 266,994
Adjusted EBITDA(f)................................................................................ 31,902
Operating income.................................................................................. 5,224
Cash interest expense............................................................................. 15,801
Ratio of net debt to Adjusted EBITDA.............................................................. 5.1
Ratio of Adjusted EBITDA to cash interest expense................................................. 2.0
</TABLE>
- ---------------
(a) Includes approximately $14.8 million of warranty expense in 1994 relating to
the voluntary non-safety recall by General Motors of vehicles carrying a
General Motors 6.5L engine, which contained the Company's DS Electronic
Pump.
(b) Approximately $10.0 million and $1.5 million are included in selling,
general and administrative expense for 1993 and 1994, respectively, that
represent loss on disposal and writedown of assets. For all remaining
periods presented the loss on disposal and write-down of assets is also
included in selling, general and administrative expenses but is not
material. In addition, in 1994 selling, general and administrative expenses
include a $1.3 million write-off of deferred debt issuance costs.
(c) Net income for 1993 includes the cumulative effect of changes in accounting
principles for adoption of certain accounting pronouncements: (i) a loss of
$3.0 million, net of income taxes, for the adoption of SFAS No. 106
"Employers' Accounting for Post-retirement Benefits Other Than Pensions,"
(ii) a loss of $0.4 million, net of income taxes, for the adoption of SFAS
112, "Employers' Accounting for Post-employment Benefits," and (iii) a
benefit of $0.04 million, net of income taxes, for the adoption of SFAS 109
"Accounting for Income Taxes."
(d) Net income for the nine months ended September 30, 1996 and for fiscal 1996
includes a gain of $4.3 million, net of income taxes, for the cumulative
effect of a change in accounting principle for post-retirement benefits to
amortize unrecognized gains and losses exceeding 10% of the accumulated
post-retirement benefit obligation over twelve months. Previously, these
gains and losses were amortized over the average remaining service period
of the plan participants.
(e) Net income for 1995 includes an extraordinary loss of $1.7 million, net of
income taxes, for the early extinguishment of debt.
(f) Adjusted EBITDA represents net income (loss) before extraordinary items and
cumulative effect of accounting changes, interest expense, interest income,
income taxes, depreciation and amortization (including amortization of
purchase accounting adjustments), management fees and gains (losses) on
disposals and write-downs of assets. Adjusted EBITDA is not intended to
represent cash flow from operations as defined by generally accepted
accounting principles and should not be used as an alternative to net
income as an indicator or operating performance or to cash flows as a
measure of liquidity. Adjusted EBITDA is included in the Prospectus as it
is a basis upon which the Company assesses its financial performance, and
certain covenants in the Company's borrowing arrangements will be tied to
similar measures. Adjusted EBITDA, as presented, represents useful measures
of assessing the Company's ongoing operating activities without the impact
of financing activity and non-recurring charges. While EBITDA is frequently
used as a measure of operations and the ability to meet debt service
requirements, it is not necessarily comparable to other similarly titled
captions of other companies due to potential inconsistencies in the method
of calculation.
(g) Net working capital as defined in the Stock Purchase Agreement equals
current assets excluding cash less current liabilities excluding the
current portion of capital lease obligations and the current portion of
long-term debt.
14
<PAGE> 16
RISK FACTORS
In addition to the other information contained in this Prospectus, holders
of Notes should consider carefully the following factors in addition to the
other information set forth in this Prospectus prior to tendering their Notes in
the Exchange Offer.
SUBSTANTIAL LEVERAGE; LIQUIDITY
The Company has operated with substantial leverage in the past and, as a
result of the consummation of the Acquisition Transactions, the Company has a
significant amount of indebtedness. As of September 30, 1997 on a pro forma
basis after giving effect to the Acquisition Transactions, the Company would
have had $162.2 million of indebtedness. In addition, subject to the
restrictions in the New Credit Agreement and the Indenture, the Company may
incur additional senior or other indebtedness from time to time to finance
acquisitions or capital expenditures or for other general corporate purposes.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," "Description of Exchange Notes"
and "Description of New Credit Agreement."
The level of the Company's indebtedness could have important consequences
to the holders of the Exchange Notes, including, but not limited to, the
following: (i) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions, product
development, general corporate purposes or other purposes may be materially
limited or impaired; (ii) a significant portion of the Company's cash flow from
operations must be dedicated to the payment of principal and interest on its
indebtedness, thereby reducing the funds available to the Company for its
operations and future business opportunities; (iii) significant amounts of the
Company's borrowings will bear interest at variable rates, which could result in
higher interest expense in the event of increases in interest rates; (iv) the
Indenture and the New Credit Agreement contain financial and restrictive
covenants, the failure to comply with which may result in an event of default
which, if not cured or waived, could have a material adverse effect on the
Company; (v) the indebtedness outstanding under the New Credit Agreement is
secured and matures prior to the maturity of the Exchange Notes; (vi) the
Company may be substantially more leveraged than certain of its competitors,
which may place the Company at a competitive disadvantage and (vii) the
Company's substantial degree of leverage may limit its flexibility to adjust to
changing market conditions, reduce its ability to withstand competitive
pressures and make it more vulnerable to a downturn in general economic
conditions or in its business or be unable to carry out capital spending that is
important to its growth and productivity improvement programs. See "Description
of Exchange Notes" and "Description of New Credit Agreement."
The Company's ability to make scheduled payments or to refinance its debt
obligations will depend upon its future financial and operating performance,
which will be affected by prevailing economic conditions and financial, business
and other factors, certain of which are beyond its control, including interest
rates, unscheduled plant shutdowns, increased operating costs, regulatory
developments and the ability of the Company to repatriate cash generated outside
of the United States without incurring a substantial tax liability. There can be
no assurance that the Company's operating results, cash flow and capital
resources will be sufficient for payment of its indebtedness in the future. In
the absence of such operating results and capital resources, the Company could
face substantial liquidity problems, may be forced to reduce or delay capital
expenditures, and might be required to dispose of material assets or operations
to meet its debt service and other obligations, and there can be no assurance as
to the timing of such sales or the proceeds that the Company could realize
therefrom. If the Company is unable to service its indebtedness, it may take
actions such as reducing or delaying planned expansion and capital expenditures,
selling assets, restructuring or refinancing its indebtedness or seeking
additional equity capital. There can be no assurance that any of these actions
could be effected on satisfactory terms, if at all.
RESTRICTIVE DEBT COVENANTS
The Indenture and the New Credit Agreement contain a number of significant
covenants that, among other things, restrict the ability of the Company and its
subsidiaries to dispose of assets, incur additional
15
<PAGE> 17
indebtedness, prepay other indebtedness (including the Exchange Notes), amend
certain debt instruments (including the Indenture), pay dividends, create liens
on assets, enter into sale and leaseback transactions, make investments, loans
or advances, make acquisitions, engage in mergers or consolidations, make
capital expenditures, change the business conducted by the Company or its
subsidiaries, or engage in certain transactions with affiliates and otherwise
restrict certain corporate activities. In addition, under the New Credit
Agreement, the Company is required to maintain specified financial ratios and
tests, including leverage ratio tests below a specified maximum, minimum net
worth levels, minimum fixed charge coverage levels and minimum levels of EBITDA.
See "Description of Exchange Notes" and "Description of New Credit Agreement."
The Company's ability to comply with such agreements may be affected by
events beyond its control, including prevailing economic, financial and industry
conditions. The breach of any of such covenants or restrictions could result in
a default under the New Credit Agreement and/or the Indenture, which would
permit the senior lenders, or the holders of the Exchange Notes, or both, as the
case may be, to declare all amounts borrowed thereunder to be due and payable,
together with accrued and unpaid interest, and the commitments of the senior
lenders to make further extensions of credit under the New Credit Agreement
could be terminated. If the Company were unable to repay its indebtedness to its
senior lenders, such lenders could proceed against the collateral securing such
indebtedness as described under "Description of New Credit Agreement."
SUBORDINATION
The Exchange Notes will be unsecured and subordinated to the prior payment
in full of all Senior Indebtedness of the Company, whether existing upon the
consummation of the Offering or thereafter incurred, including borrowings under
the New Credit Agreement. The Exchange Notes will also be effectively
subordinated to all secured indebtedness of either the Company or any of its
subsidiaries to the extent of the assets securing such indebtedness. As of
September 30, 1997, on a pro forma basis and after giving effect to the
Acquisition Transactions, the aggregate outstanding principal amount of all
Senior Indebtedness would have been approximately $62.2 million. By reason of
such subordination, in the event of a bankruptcy, liquidation or reorganization
of the Company, the assets of the Company will be available to pay obligations
on the Exchange Notes only after all Senior Indebtedness has been paid in full,
and there may not be sufficient assets remaining to pay amounts due on any or
all of the Exchange Notes. In addition, the Company may not pay principal or
premium, or Liquidated Damages, if any, or interest on the Exchange Notes if any
Senior Indebtedness is not paid when due or any other default on any Senior
Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated
in accordance with its terms, unless, in either case, such amount has been paid
in full or the default has been cured or waived and such acceleration has been
rescinded. Moreover, if any default occurs with respect to certain Senior
Indebtedness and certain other conditions are satisfied, the Company may not
make any payments on the Exchange Notes for a designated period of time. In
addition, if any judicial proceeding is pending with respect to any such default
in payment on any Senior Indebtedness, or other default with respect to certain
Senior Indebtedness, or if the maturity of the Exchange Notes is accelerated
because of a default under the Indenture and such default constitutes a default
with respect to any Senior Indebtedness, the Company may not make any payment on
the Exchange Notes.
POSSIBLE INABILITY TO REPURCHASE EXCHANGE NOTES UPON CHANGE OF CONTROL
The New Credit Agreement generally prohibits the Company from purchasing
any of the Exchange Notes, including upon the occurrence of a Change of Control,
and also provides that certain change of control events with respect to the
Company constitutes a default thereunder. Any future credit agreements or other
agreements relating to Senior Indebtedness to which the Company becomes a party
may contain similar restrictions and provisions. In the event a Change of
Control occurs at a time when the Company is prohibited from purchasing the
Exchange Notes, the Company could seek the consent of its lenders to the
purchase of the Exchange Notes or could attempt to refinance the borrowings that
contain such prohibition. If the Company does not obtain such consent or repay
such borrowings, the Company will remain prohibited from purchasing the Exchange
Notes by the terms of the relevant Senior Indebtedness. In such case, the
16
<PAGE> 18
Company's failure to purchase the tendered Exchange Notes would constitute an
event of default under the Indenture which would, in turn, constitute a default
under the New Credit Agreement and could constitute a default under other Senior
Indebtedness. In such circumstances, the subordination provisions in the
Indenture would restrict payments to the holders of the Exchange Notes.
Furthermore, no assurance can be given that the Company will have sufficient
resources to satisfy its repurchase obligation with respect to the Exchange
Notes following a Change of Control. See "Description of Exchange Notes" and
"Description of New Credit Agreement."
FRAUDULENT TRANSFER CONSIDERATIONS
The Company's obligations under the Exchange Notes may be subject to review
under state or federal fraudulent transfer laws in the event of the bankruptcy
or other financial difficulty of the Company.
Under those laws, if a court, in a lawsuit by an unpaid creditor or
representative of creditors of the Company, such as a trustee in bankruptcy or
the Company as a Chapter 11 debtor in possession, were to find that when the
Company issued the Exchange Notes, it (a) received less than fair consideration
or reasonably equivalent value therefor and (b) either (i) was or was rendered
insolvent, (ii) was engaged in a business or transaction for which its remaining
unencumbered assets constituted unreasonably small capital or (iii) intended to
incur or believed (or reasonably should have believed) that it would incur debts
beyond its ability to pay as such debts matured, the court could avoid the
Exchange Notes and the Company's obligations thereunder, or subordinate the
Exchange Notes to all of the Company's other obligations, and in either case
direct the return of any amounts paid thereunder to the Company or to a fund for
the benefit of its creditors. It should be noted that a court could avoid the
Exchange Notes and the Company's obligations thereunder without regard to
factors (a) and (b) above if it found that the Company issued the Exchange Notes
with actual intent to hinder, delay, or defraud its creditors.
A court will likely find that the Company did not receive fair
consideration or reasonably equivalent value for its obligation under the
Exchange Notes to the extent that the Exchange Notes' proceeds are used to pay
the purchase price to the Sellers for the common equity of Holdings or otherwise
do not directly benefit the Company.
Similarly, a Subsidiary Guarantee may be subject to review in the event of
the bankruptcy or financial difficulty of any Guarantor. In that event, if a
court found that when a Guarantor issued its guarantee (or, in some
jurisdictions, when it became liable to make payments thereunder), factors (a)
and (b) above applied to the Guarantor (or if the court found that the Guarantor
had issued its guarantee with actual intent to hinder, delay, or defraud its
creditors), then the court could avoid the respective Subsidiary Guarantee and
direct the repayment of any amounts paid thereunder. A court will likely find
that a Guarantor did not receive fair consideration or reasonably equivalent
value for its guarantee to the extent that its liability thereunder exceeds any
direct benefit it received from the issuance of the Exchange Notes.
The Indenture limits the liability of each Guarantor under its guarantee to
the maximum amount that it could pay without the guarantee being deemed a
fraudulent transfer. See "Description of Exchange Notes." There can be no
assurance that (if this limitation is effective) the limited amount so
guaranteed will suffice to pay amounts owed under the Exchange Notes in full.
The measure of insolvency for purposes of the foregoing will vary depending
on the law of the jurisdiction being applied. Generally, however, an entity
would be considered insolvent if the sum of its debts (including contingent or
unliquidated debts) is greater than all of its property at a fair valuation or
if the present fair salable value of its assets is less than the amount that
will be required to pay its probable liability on its existing debts as they
become absolute and matured.
DEPENDENCE ON SIGNIFICANT CUSTOMERS
The Company's five largest customers, Chrysler Corporation, General Motors
Corporation, Deere & Company, Ford Motor Company and Perkins Engines, accounted
for approximately $169.9 million of the Company's 1996 net sales, or
approximately 61.7% of the Company's 1996 net sales. No other customer
17
<PAGE> 19
accounted for more than 2% of the Company's 1996 net sales. None of Chrysler,
General Motors, Deere, Ford and Perkins is obligated to continue to produce the
engines which require the Company's products, renew its contracts with the
Company when they expire or enter into new agreements with the Company for
future engine platforms. A substantial decrease in orders from Chrysler, General
Motors, Deere, Ford or Perkins would have a material adverse effect on the
Company.
CYCLICAL NATURE OF INDUSTRY AND ENGINE PLATFORM SALES
The principal operations of the Company have been, and will continue to be,
directly dependent upon domestic and foreign production of automobiles, light
duty vehicles and off-highway equipment. Historically, the North American and
European automotive industries have experienced periodic, cyclical downturns.
Industry sales and production can be affected by the strength of the economy
generally, or in specific regions such as North America or Europe, by prevailing
interest rates and by other factors that may have an effect on the level of the
Company's sales. The Company believes that the generally counter-cyclical nature
of replacement sales reduces some of this risk.
Demand for the Company's products is directly dependent upon demand for the
engine platforms on which the Company's products are incorporated. There is no
assurance that the demand for such engine platforms will continue. A substantial
decrease in demand for such engine platforms would have a material adverse
effect on the Company.
RISKS OF SIGNIFICANT OPERATIONS IN FOREIGN COUNTRIES
Approximately 30.2% of the Company's 1996 net sales were derived from
products sold outside of the United States. The Company's worldwide operations
are subject to the risks normally associated with foreign operations, including,
but not limited to, the disruption of markets, changes in export or import laws,
labor unrest, political instability, restrictions on transfers of funds,
unexpected changes in regulatory environments, difficulty in obtaining
distribution and support and potentially adverse tax consequences. In addition,
even though the Company generally matches, to the extent possible, related costs
and revenues in a single currency, and generally includes exchange rate
protections in its sales contracts, the U.S. dollar value of the Company's
foreign sales varies with currency exchange rate fluctuations. There can be no
assurance that any of the foregoing factors will not have a material adverse
effect on the Company and its ability to meet interest and principal obligations
of the Exchange Notes.
COMPETITION
The market for engine components is highly competitive. Several actual
competitors exist, including the captive component operations of certain engine
manufacturers as well as other independent suppliers, some of which are larger
and have greater financial and other resources available to them than the
Company. There can be no assurance that the Company's products will continue to
compete successfully with the products of other companies, or that engine
manufacturers will continue to purchase engine components from outside
suppliers. See "Business -- Competition."
ENVIRONMENTAL MATTERS
The Company's facilities are subject to federal, state and local
environmental requirements, including those governing discharges to the air and
water, the handling and disposal of solid and hazardous wastes, and the
remediation of contamination associated with releases of hazardous substances.
The Company's manufacturing operations involve the use of hazardous substances
and, as is the case with manufacturers in general, if a release of hazardous
substances occurs or has occurred on or from the Company's facilities, the
Company may be held liable and may be required to pay the cost of remedying the
condition. The amount of any such liability could be material. The Company is
conducting remediation of soil and groundwater contamination at its Windsor, CT
and Jacksonville, NC facilities. Although the Sellers have indemnified the
Company with respect to these matters and certain other environmental matters,
there can be no assurance that the Sellers will have the ability to fully
indemnify the Company for such matters. If the Sellers are unable to fulfill
their
18
<PAGE> 20
indemnification obligations, the Company will be responsible for such matters
and the cost could be material. See "Business -- Environmental Matters."
LACK OF A PUBLIC MARKET FOR THE EXCHANGE NOTES
Prior to the Exchange Offer, there has not been any public market for the
Notes. The Notes have not been registered under the Securities Act and will be
subject to restrictions on transferability to the extent that they are not
exchanged for Exchange Notes by holders who are entitled to participate in this
Exchange Offer. The holders of Notes (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) who are not eligible to participate in the Exchange Offer are entitled to
certain registration rights, and the Company is required to file a Shelf
Registration Statement with respect to such Notes.
There is no existing trading market for the Exchange Notes. Although the
Initial Purchaser has advised the Company that it currently intends to make a
market in the Exchange Notes, it is not obligated to do so and may discontinue
such market-making at any time without notice. Although the Exchange Notes are
expected to be eligible for trading by qualified buyers in the Private
Offerings, Resale and Trading through Automated Linkages (PORTAL) market, there
can be no assurance as to the development of any market or the liquidity of any
market that may develop for the Exchange Notes. The Company does not intend to
apply to list the Exchange Notes on any securities exchange or for quotation
through the National Association of Securities Dealers, Inc. Automated Quotation
System.
The Exchange Notes generally will be permitted to be resold or otherwise
transferred (subject to the restrictions described under "Registration Rights
Agreement" and "Certain Covenants") by each holder without the requirement of
further registration. The Exchange Notes, however, will also constitute a new
issue of securities with no established trading market. The Exchange Offer will
not be conditioned upon any minimum or maximum aggregate principal amount of
Notes being tendered for exchange. No assurance can be given as to the liquidity
of the trading market for the Exchange Notes, or, in the case of non-exchanging
holders of Notes, the trading market for the Notes following the Exchange Offer.
The liquidity of, and trading market for, the Notes or the Exchange Notes
also may be adversely affected by general declines in the market for similar
securities, regardless of the Company's financial performance or prospects.
EXCHANGE OFFER PROCEDURES
Issuance of the Exchange Notes in exchange for the Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Company of such
Notes, a properly completed and duly executed Letter of Transmittal and all
other required documents. Therefore, holders of the Notes desiring to tender
such Notes in exchange for Exchange Notes should allow sufficient time to ensure
timely delivery. The Company is under no duty to give notification of defects or
irregularities with respect to the tenders of Notes for exchange. Notes that are
not tendered or are tendered but not accepted will, following the consummation
of the Exchange Offer, continue to be subject to the existing restrictions upon
transfer thereof and, upon consummation of the Exchange Offer, certain
registration rights under the Registration Rights Agreement will terminate. In
addition, any holder of 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 transactions. Each Participating Broker-Dealer that
receives Exchange Notes for its own account in exchange for Notes, where such
Notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
See "Plan of Distribution." To the extent that Notes are tendered and accepted
in the Exchange Offer, the trading market for untendered and tendered but
unaccepted Notes could be adversely affected. See "The Exchange Offer."
19
<PAGE> 21
THE ACQUISITION TRANSACTIONS
Pursuant to a stock purchase agreement dated November 7, 1997, as amended
by Amendment No. 1 to Stock Purchase Agreement dated December 8, 1997 (the
"Stock Purchase Agreement"), SAC Inc. ("Holdings"), a corporation formed by
American Industrial Partners Capital Fund II, L.P. ("AIP") purchased (the
"Acquisition") all the issued and outstanding capital stock of Stanadyne
Automotive Holding Corp. ("Old Holdings"), the parent of the Company, from
Metromedia Company and certain other stockholders (collectively, the "Sellers")
for an aggregate purchase price (including the repayment of outstanding
indebtedness of Old Holdings) of approximately $210.0 million, less net debt
assumed of approximately $4.2 million, subject to post-closing adjustments.
Immediately after the consummation of the Acquisition, (i) Old Holdings merged
with and into its wholly owned subsidiary, the Company, with the Company as the
surviving corporation ("Merger I"), and (ii) SAC Automotive, Inc. ("SAC
Automotive"), a wholly owned subsidiary of Holdings, merged with and into the
Company, with the Company as the surviving corporation ("Merger II").
Subsequently, Holdings changed its name to Stanadyne Automotive Holding Corp.
In order to finance the Acquisition, (i) AIP, its related investors and
certain members of management contributed $60.0 million in exchange for common
equity of Holdings (the "AIP Common Equity Contribution"), (ii) the Company (as
successor by merger to SAC Automotive) entered into a syndicated senior secured
loan facility (the "New Credit Agreement") providing for term loan borrowings in
the aggregate principal amounts of $30.0 million (the Term A Loan Facility, as
defined herein) and $25.0 million (the Term B Loan Facility, as defined herein)
and revolving loan borrowings of up to $30.0 million (the Revolving Credit
Facility, as defined herein), and borrowed all term loans available and
approximately $11.5 million of revolving loans, reduced to approximately $2.1
million within five business days, under the Revolving Credit Facility, plus
approximately $4.5 million in the form of letters of credit, (iii) the Company
(as successor by merger to SAC Automotive) issued and sold $100.0 million
aggregate principal amount of Notes (the "Notes Offering") and (iv) the Company
loaned $67.5 million of the net proceeds to it from the Notes Offering, together
with the proceeds of the borrowings pursuant to the New Credit Agreement, to
Holdings pursuant to an intercompany note (the "Intercompany Note"), to pay part
of the purchase price payable in the Acquisition. The Acquisition, Merger I,
Merger II, the Notes Offering, the AIP Common Equity Contribution, the execution
of, and initial borrowings under, the New Credit Agreement and the cancellation
of the Intercompany Note are referred to herein collectively as the "Acquisition
Transactions." Upon consummation of Merger II, the Company succeeded to the
obligations of SAC Automotive with respect to the New Credit Agreement. After
the consummation of the Acquisition Transactions, the Company canceled the
Intercompany Note. Consummation of each of the Acquisition Transactions was
conditioned upon the substantially simultaneous consummation of all other
Acquisition Transactions.
AIP is a private investment fund based in San Francisco and New York which,
together with its affiliates, has committed capital of approximately $800
million. AIP does not seek to play a role in daily management; rather, AIP seeks
to provide its portfolio companies with access to the management expertise of
its operating partners, all of whom are former Chief Executive Officers of
Fortune 500 corporations, through active board-level participation as well as
on-call advice when desired. Following consummation of the Acquisition, Robert
Cizik, an operating partner of AIP and former Chairman and Chief Executive
Officer of Cooper Industries, Inc., became the Company's Chairman of the Board.
Although no specific arrangements are in place, the Company expects to issue
options to members of management pursuant to an option plan to be established by
its board of directors.
20
<PAGE> 22
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. The Company will not
receive any cash proceeds from the issuance of the Exchange Notes in the
Exchange Offer. The proceeds of $100 million to the Company from the Notes
Offering, together with the borrowings under the New Credit Agreement and the
AIP Common Equity Contribution were used to finance the Acquisition Transactions
and the expenses and fees incurred in connection therewith. See "The Acquisition
Transactions."
The following table sets forth the approximate cash sources and uses of
funds as if the Acquisition Transactions, including the application of the
proceeds therefrom, had occurred and were completed on September 30, 1997:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
TOTAL SOURCES:
Borrowings under New Credit Agreement(a).................................. $ 57,840
Senior Subordinated Notes offered in Notes Offering....................... 100,000
AIP Common Equity Contribution............................................ 60,000
--------
Total Sources........................................................ $217,840
========
TOTAL USES:
Purchase Price of Acquisition(b).......................................... $205,840
Estimated transaction fees and expenses................................... 12,000
--------
Total Uses........................................................... $217,840
========
</TABLE>
- ---------------
(a) The New Credit Agreement provides for a $30 million Revolving Credit
Facility, of which approximately $11.5 million was drawn at closing. That
amount was reduced to $2.1 million within five business days. The Revolving
Credit Facility is expected to be used to finance working capital and
capital expenditures and will be subject to a borrowing base limitation. See
"Description of New Credit Agreement."
(b) Estimate of amounts payable to the Sellers under the Stock Purchase
Agreement plus approximately $78.4 million used to repay outstanding
indebtedness of the Company (excluding net debt assumed of approximately
$4.2 million).
21
<PAGE> 23
CAPITALIZATION
The following table sets forth as of September 30, 1997 (i) the actual
unaudited consolidated capitalization of the Company and (ii) the unaudited
consolidated capitalization of the Company, as adjusted to give effect to the
Acquisition Transactions, including the sale of the Notes pursuant to the
Offering. The following table should be read in conjunction with the "Unaudited
Pro Forma Condensed Consolidated Financial Data" and the related notes thereto
included elsewhere herein and the "Selected Consolidated Historical Financial
Data" and the related notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
1997
-----------------------
ACTUAL AS ADJUSTED
------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and short-term cash investments................................... $ 160 $ 160
======= ===========
Debt:
Existing credit facility............................................. 78,375 --
New Revolving Credit Facility(a)..................................... -- 2,840
Term A Loan Facility................................................. -- 30,000
Term B Loan Facility................................................. -- 25,000
Senior Subordinated Notes............................................ -- 100,000
Other indebtedness................................................... 4,320 4,320
------- -----------
Total debt........................................................ 82,695 162,160
Shareholders' equity................................................... 12,118 54,218
------- -----------
Total capitalization.............................................. $94,813 $ 216,378
======= ===========
</TABLE>
- ---------------
(a) The Revolving Credit Facility provides for up to $30 million of borrowing
availability, subject to a borrowing base limitation. See "Description of
New Credit Agreement."
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following Unaudited Pro Forma Condensed Consolidated Financial Data
have been derived by the application of pro forma adjustments to the Company's
historical financial data included elsewhere herein. The pro forma consolidated
statements of operations for the periods presented give effect to the
Acquisition Transactions as if such Acquisition Transactions were consummated as
of January 1, 1996. The pro forma consolidated balance sheet gives effect to the
Acquisition Transactions as if such Acquisition Transactions had occurred as of
September 30, 1997. The adjustments are described in the accompanying notes. The
Unaudited Pro Forma Condensed Consolidated Financial Data do not purport to
represent what the Company's results of operations or financial position
actually would have been if the Acquisition Transactions had been consummated on
the date indicated, or what such results will be as of any future date or for
any future period. The Unaudited Pro Forma Condensed Consolidated Financial Data
should be read in conjunction with the "Selected Consolidated Historical
Financial Data" and the related notes thereto included elsewhere herein.
22
<PAGE> 24
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
LAST TWELVE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO
HISTORICAL ADJUSTMENTS FORMA
-------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales.................................................. $266,994 $ -- $266,994
Cost of goods sold......................................... 226,481 7,063(a) 233,544
-------- -------- ---------
Gross profit............................................. 40,513 (7,063) 33,450
Selling, general and administrative expenses............... 26,361 1,865(a) 28,226
-------- -------- ---------
Operating income......................................... 14,152 (8,928) 5,224
Other income (expense):
Interest income.......................................... 30 -- 30
Interest expense......................................... (7,291) (8,510)(b) (15,801)
-------- -------- ---------
Income (loss) before income taxes..................... 6,891 (17,438) (10,547)
Income tax expense (benefit)............................... 2,223 (6,653)(c) (4,430)
-------- -------- ---------
Net income (loss).......................................... $ 4,668 $ (10,785) $ (6,117)
======== ======== =========
Adjusted EBITDA(d)......................................... $ 31,302 $ 31,902
======== =========
</TABLE>
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA PRO
HISTORICAL ADJUSTMENTS FORMA
-------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales.................................................. $275,639 $ -- $275,639
Cost of goods sold......................................... 234,756 6,780(a) 241,536
-------- -------- ---------
Gross profit............................................. 40,883 (6,780) 34,103
Selling, general and administrative expenses............... 30,976 1,865(a) 32,841
-------- -------- ---------
Operating income......................................... 9,907 (8,645) 1,262
Other income (expense):
Interest income.......................................... 52 -- 52
Interest expense......................................... (8,311) (7,710)(b) (16,021)
-------- -------- ---------
Income (loss) before income taxes and cumulative
effect of change in accounting principle............ 1,648 (16,355) (14,707)
Income tax expense (benefit)............................... 376 (6,553)(c) (6,177)
-------- -------- ---------
Net income (loss) before income taxes and cumulative effect
of change in accounting principle........................ $ 1,272 $ (9,802) $ (8,530)
======== ======== =========
Adjusted EBITDA(d)......................................... $ 27,545 $ 28,145
======== =========
</TABLE>
See accompanying notes to the unaudited pro forma statements of operations.
23
<PAGE> 25
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO
HISTORICAL ADJUSTMENTS FORMA
-------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales.................................................. $201,034 $ -- $201,034
Cost of goods sold......................................... 169,004 5,229(a) 174,233
-------- -------- ---------
Gross profit............................................. 32,030 (5,229) 26,801
Selling, general and administrative expenses............... 19,409 1,962(a) 21,371
-------- -------- ---------
Operating income......................................... 12,621 (7,191) 5,430
Other income (expense):
Interest income.......................................... 18 -- 18
Interest expense......................................... (5,356) (6,452)(b) (11,808)
-------- -------- ---------
Income (loss) before income taxes..................... 7,283 (13,643) (6,360)
Income tax expense (benefit)............................... 2,681 (5,352)(c) (2,671)
-------- -------- ---------
Net income (loss).......................................... $ 4,602 $ (8,291) $ (3,689)
======== ======== =========
Adjusted EBITDA(d)......................................... $ 25,665 $ 25,552
======== =========
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PRO FORMA PRO
HISTORICAL ADJUSTMENTS FORMA
-------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales.................................................. $209,679 $ -- $209,679
Cost of goods sold......................................... 177,279 4,946(a) 182,225
-------- -------- ---------
Gross profit............................................. 32,400 (4,946) 27,454
Selling, general and administrative expenses............... 24,024 1,962(a) 25,986
-------- -------- ---------
Operating income......................................... 8,376 (6,908) 1,468
Other income (expense):
Interest income.......................................... 40 -- 40
Interest expense......................................... (6,376) (5,652)(b) (12,028)
-------- -------- ---------
Income (loss) before income taxes and cumulative
effect of change in accounting principle............ 2,040 (12,560) (10,520)
Income tax expense (benefit)............................... 834 (5,252)(c) (4,418)
-------- -------- ---------
Net income (loss) before income taxes and cumulative effect
of change in accounting principle........................ $ 1,206 $ (7,308) $ (6,102)
======== ======== =========
Adjusted EBITDA(d)......................................... $ 21,908 $ 21,795
======== =========
</TABLE>
See accompanying notes to the unaudited pro forma statements of operations.
24
<PAGE> 26
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(a) The following table summarizes the pro forma adjustments to operating
income.
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS LTM
YEAR ENDED ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1996 1997 1997
------------ ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Cost of goods sold:(i)
Increase in depreciation for step-up of
property, plant and equipment(ii)....... $4,830 $ 3,623 $ 3,623 $ 4,830
Increase in amortization for step-up of
intangible assets(ii)................... 1,950 1,323 1,606 2,233
----------- ------- ----- ------- ----- ------- -----
$6,780 $ 4,946 $ 5,229 $ 7,063
=========== ============ ============ ============
Selling, general and administrative:(iii)
Directors fees............................. $ 150 $ 113 $ 113 $ 150
Difference in management fees(iv).......... 600 450 450 600
Elimination of debt reduction bonus(v)..... (750) -- -- (750)
Change in amortization of debt issuance
costs................................... 169 127 127 169
Goodwill amortization(vi).................. 1,696 1,272 1,272 1,696
----------- ------- ----- ------- ----- ------- -----
$1,865 $ 1,962 $ 1,962 $ 1,865
=========== ============ ============ ============
</TABLE>
- ---------------
(i) Cost of goods sold does not include a one-time, non-cash charge for the
effect of the step-up in inventory under purchase accounting of $6.03
million.
(ii) Assumes average life of seven years for patents and intellectual property.
(iii) The pro forma financial statements do not include a nonrecurring expense
and deemed capital contribution of approximately $2.3 million recognized
concurrently with closing of the Acquisition Transactions, relating to
compensation provided by Metromedia to certain current and former
management employees of the Company.
(iv) Represents the difference between the new management fee and the historical
management fee.
(v) Represents the elimination of a bonus plan incenting reduced debt levels.
(vi) Assumes goodwill is amortized over forty years.
(b) To reflect the pro forma adjustments to interest expense:
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS LTM
YEAR ENDED ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1996 1997 1997
------------ ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Historical interest expense.................. $ 8,311 $ 6,376 $ 5,356 $ 7,291
Less: amounts in historical statement of
operation for refinanced debt.............. 7,404 5,684 4,884 6,604
Add: New Credit Agreement and Senior
Subordinated Notes......................... 15,114 11,336 11,336 15,114
----------- -------- ---- -------- ---- -------- ----
Pro forma interest expense................... $ 16,021 $12,028 $11,808 $15,801
=========== ============ ============ ============
</TABLE>
(c) To adjust the income tax provision to result in a pro forma total of 42% for
an effective income tax rate.
(d) Adjusted EBITDA represents net income (loss) before extraordinary items and
cumulative effect of accounting change, interest expense, interest income,
income taxes, depreciation and amortization
25
<PAGE> 27
(including amortization of purchase accounting adjustments), management
fees and gains (losses) on disposals of assets. Adjusted EBITDA is not
intended to represent cash flow from operations as defined by generally
accepted accounting principles and should not be used as an alternative to
net income as an indicator or operating performance or to cash flows as a
measure of liquidity. Adjusted EBITDA is included in the Prospectus as it
is a basis upon which the Company assesses its financial performance, and
certain covenants in the Company's borrowing arrangements will be tied to
similar measures. Adjusted EBITDA, as presented, represents useful measures
of assessing the Company's ongoing operating activities without the impact
of financing activity and non-recurring charges. While EBITDA is frequently
used as a measure of operations and the ability to meet debt service
requirements, it is not necessarily comparable to other similarly titled
captions of other companies due to potential inconsistencies in the method
of calculation.
26
<PAGE> 28
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
-------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 160 $ -- $ 160
Accounts receivable, net................................ 41,291 -- 41,291
Inventories............................................. 31,068 6,030(a) 37,098
Prepaid expenses and other assets....................... 300 -- 300
Deferred income taxes................................... 6,863 (2,532)(a) 4,331
-------- -------- ---------
Total current assets................................. 79,682 3,498 83,180
Property, plant and equipment, net........................ 93,170 31,262(a) 124,432
Intangible and other assets, net.......................... 3,313 89,146(a) 92,459
Deferred income taxes..................................... 14,550 (14,550)(a) --
-------- -------- ---------
Total assets....................................... $190,715 $ 109,356 $300,071
======== ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................ $ 20,642 $ -- $ 20,642
Accrued liabilities..................................... 27,909 -- 27,909
Current maturities of long-term debt.................... 11,672 (10,250)(b) 1,422
Current portion of capital lease obligations............ 1,709 -- 1,709
-------- -------- ---------
Total current liabilities............................ 61,932 (10,250) 51,682
Long-term debt, excluding current maturities.............. 68,125 89,715(b) 157,840
Capital lease obligations, excluding current portion...... 1,189 -- 1,189
Deferred taxes............................................ -- 495(a) 495
Other non-current liabilities............................. 47,351 (12,704)(a) 34,647
-------- -------- ---------
Total liabilities.................................... 178,597 67,256 245,853
-------- -------- ---------
Total stockholders' equity........................... 12,118 42,100(c) 54,218
-------- -------- ---------
Total liabilities and stockholders' equity......... $190,715 $ 109,356 $300,071
======== ======== =========
</TABLE>
See accompanying notes to the unaudited pro forma balance sheet.
27
<PAGE> 29
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(a) The acquisition was accounted for as a purchase, applying the
provisions of Accounting Principles Board Opinion No. ("APB") 16. The purchase
cost was allocated to the acquired assets and liabilities based on their
relative fair values at the closing date, based on valuations and other studies
which are not yet complete. Furthermore, the aggregate purchase price is subject
to adjustment as set forth in the Stock Purchase Agreement. Accordingly, the
excess of the purchase cost over the book value of the net assets acquired has
not yet been allocated to individual assets and liabilities. The Company does
not expect the final allocation to differ significantly from amounts reflected
in the pro forma presentation.
The purchase cost and preliminary allocation of the excess of cost over the
net book value of assets acquired is as follows (dollars in thousands):
<TABLE>
<S> <C>
Purchase cost pursuant to the Stock Purchase Agreement:
Enterprise value........................................................ $210,000
Less: assumed capital lease obligations and overdraft facilities........ (4,320)
Less: existing indebtedness to be refinanced............................ (78,375)
Add: cash............................................................... 160
--------
Purchase of stock of Holdings............................................. 127,465
Transaction fees and expenses............................................. 12,000
--------
Total purchase cost....................................................... 139,465
Book value of net assets acquired....................................... (12,118)
--------
Excess of purchase cost over the net book value of assets acquired...... $127,347
========
Allocated to:
Increase in value of property, plant and equipment...................... $ 31,262
Increase in value of inventory.......................................... 6,030
Adjust accrued pension cost to the projected benefit obligation......... 1,866
Adjust accrued post-retirement benefit cost to the projected
post-retirement benefit obligation................................... 9,838
Increase in value of intangible assets.................................. 17,262
Adjust environmental cost recoverable from Seller....................... 1,000
Adjustment of deferred taxes for step-up in asset bases................. (17,577)
Deferred debt issuance costs............................................ 4,850
Adjustment to equity for carryover stockholder basis.................... 4,976
Remaining excess purchase cost over the net book value of assets
acquired............................................................. 67,840
--------
Total allocation.......................................................... $127,347
========
Adjustments to intangibles include:
Excess of purchase cost over the net book value of assets acquired...... $ 67,840
Adjustment to increase value of intangibles............................. 17,262
Deferred debt issuance costs............................................ 4,850
Less: Deferred debt issuance costs written-off.......................... (806)
--------
$ 89,146
========
</TABLE>
28
<PAGE> 30
(b) The net effect on cash and cash equivalents reflects the following
(dollars in thousands):
<TABLE>
<S> <C>
TOTAL SOURCES:
New Credit Agreement proceeds............................................. $ 57,840
Senior Subordinated Notes................................................. 100,000
AIP Common Equity Contribution............................................ 60,000
--------
$217,840
========
TOTAL USES:
Total assets acquired..................................................... $127,465
Repayment of existing debt................................................ 78,375
Estimated transaction fees and expenses................................... 12,000
--------
$217,840
========
</TABLE>
(c) Represents the net change in stockholders' equity as a result of the
Acquisition, including the acquisition financing and the application of the
proceeds thereof (dollars in thousands):
<TABLE>
<S> <C>
AIP equity contribution................................................... $ 60,000
Adjustment to equity for carryover stockholder basis...................... (4,976)
Write-off of deferred debt issuance costs................................. (806)
--------
Pro forma stockholders' equity............................................ 54,218
Net book value of assets acquired......................................... (12,118)
--------
Pro forma adjustments to stockholders' equity............................. $ 42,100
========
</TABLE>
29
<PAGE> 31
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The following table sets forth selected consolidated historical and
consolidated pro forma financial, operating, other and balance sheet data of the
Company for each of the three years ended December 31, 1996, which has been
derived from the Consolidated Financial Statements of the Company and the
related notes thereto included elsewhere herein, which have been audited by KPMG
Peat Marwick LLP, independent auditors. The summary financial data for the two
years ended December 31, 1992 and December 31, 1993 has been derived from the
Consolidated Financial Statements of Old Holdings, which have also been audited
by KPMG Peat Marwick LLP, independent auditors, and are not contained elsewhere
herein. The selected consolidated financial data for the nine month periods
ended September 30, 1996 and September 30, 1997 have been derived from the
Unaudited Consolidated Financial Statements of the Company, and include, in the
opinion of management, all adjustments necessary to present fairly the data for
such periods. The results for the nine months ended September 30, 1997 are not
necessarily indicative of the results to be expected for the fiscal year ended
December 31, 1997 or for any future period. The data presented below should be
read in conjunction with the Consolidated Financial Statements and the related
notes thereto included elsewhere herein, the other financial information
included elsewhere herein and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales..................................... $217,962 $264,346 $286,964 $272,145 $275,639 $209,679 $201,034
Cost of goods sold............................ 179,316 214,034 244,307 235,645 234,756 177,279 169,004
-------- -------- -------- -------- -------- -------- --------
Gross profit(a)............................... 38,646 50,312 42,657 36,500 40,883 32,400 32,030
Selling, general and administrative
expenses(b)................................. 27,975 43,630 35,075 31,740 30,976 24,024 19,409
-------- -------- -------- -------- -------- -------- --------
Operating income.............................. 10,671 6,682 7,582 4,760 9,907 8,376 12,621
Interest expense, net......................... (8,159) (9,188) (9,050) (9,292) (8,259) (6,336) (5,338)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before taxes, extraordinary item
and cumulative effect of change in
accounting 2,512 (2,506) (1,468) (4,532) 1,648 2,040 7,283
Income tax expense (benefit).................. 1,782 (801) (964) (1,297) 376 834 2,681
-------- -------- -------- -------- -------- -------- --------
Income (loss) before extraordinary item and
cumulative effect of change in accounting... 730 (1,705) (504) (3,235) 1,272 1,206 4,602
Extraordinary item(e)......................... -- -- -- (1,711) -- -- --
Effect of change in accounting(c)(d).......... -- (3,337) -- -- 4,330 4,330 --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)............................. 730 (5,042) (504) (4,946) 5,602 5,536 4,602
Preferred dividend requirement................ (600) (600) (600) (600) (600) (450) (450)
-------- -------- -------- -------- -------- -------- --------
Net income (loss) applicable to common
shareholders.............................. $ 130 $ (5,642) $ (1,104) $ (5,546) $ 5,002 $ 5,086 $ 4,152
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA (AT PERIOD END):
Fixed assets, net of accumulated depreciation
and amortization............................ $113,720 $113,797 $110,336 $103,202 $ 96,116 $ 97,608 $ 93,170
Total assets.................................. 202,726 219,449 214,255 219,417 194,917 204,414 190,715
Long-term debt (including current portion).... 117,458 105,361 94,331 112,199 85,912 92,855 82,695
Stockholders' equity.......................... 19,114 11,467 11,621 3,116 8,879 7,504 12,118
CASH FLOW DATA:
Net cash provided by (used in) operations..... $ 15,908 $ 27,710 $ 22,401 $ (5,063) $ 37,773 $ 25,803 $ 10,450
Net cash used in investing activities......... (13,165) (12,303) (8,288) (6,584) (8,615) (6,361) (10,359)
Net cash (used in) provided by financing
activities.................................. (2,550) (15,924) (14,337) 12,209 (27,235) (20,028) (3,230)
OTHER DATA:
Adjusted EBITDA(f)............................ $ 32,308 $ 39,090 $ 28,335 $ 23,516 $ 27,545 $ 21,908 $ 25,665
Net working capital(h)........................ 29,482 38,320 31,647 47,513 26,431 37,709 30,971
Depreciation and amortization................. 20,899 21,874 18,707 18,101 16,986 12,951 12,548
Capital expenditures.......................... 13,165 12,728 9,934 6,667 8,827 6,361 10,359
Ratio of earnings to fixed charges(g)......... 1.3 -- -- -- 1.2 1.3 2.1
</TABLE>
30
<PAGE> 32
- ---------------
(a) Includes approximately $14.8 million of warranty expense in 1994 relating to
the voluntary non-safety recall by General Motors of vehicles carrying a
General Motors 6.5L engine, which contained the Company's DS Electronic
Pump.
(b) Approximately $10.0 million and $1.5 million are included in selling,
general and administrative expense for 1993 and 1994, respectively, that
represent loss on disposal and write-down of assets. For all remaining
periods presented the loss on disposal and write-down of asset is also
included in selling, general and administrative expense but is not
material. In addition, in 1994 selling, general and administrative expenses
include a $1.3 million write-off of deferred debt issuance costs.
(c) Net income for 1993 includes the cumulative effect of changes in accounting
principles for adoption of certain accounting pronouncements: (i) a loss of
$3.0 million, net of income taxes, for the adoption of SFAS No. 106
"Employers' Accounting for Post-retirement Benefits Other Than Pensions,"
(ii) a loss of $0.4 million, net of income taxes, for the adoption of SFAS
112, "Employers' Accounting for Post-employment Benefits," and (iii) a
benefit of $0.04 million, net of income taxes, for the adoption of SFAS 109
"Accounting for Income Taxes."
(d) Net income for the nine months ended September 30, 1996 and for fiscal 1996
includes a gain of $4.3 million, net of income taxes for the cumulative
effect of a change in accounting principle for post-retirement benefits to
amortize unrecognized gains and losses exceeding 10% of the accumulated
post-retirement benefit obligation over twelve months. Previously, these
gains and losses were amortized over the average remaining service period
of the plan participants.
(e) Net income for 1995 includes an extraordinary loss of $1.7 million, net of
income taxes, for the early extinguishment of debt.
(f) Adjusted EBITDA represents net income (loss) before extraordinary items and
cumulative effect of accounting changes, interest expense, interest income,
income taxes, depreciation and amortization (including amortization of
purchase accounting adjustments), management fees and gains (losses) on
disposals and write-downs of assets. Adjusted EBITDA is not intended to
represent cash flow from operations as defined by generally accepted
accounting principles and should not be used as an alternative to net
income as an indicator or operating performance or to cash flows as a
measure of liquidity. Adjusted EBITDA is included in the Prospectus as it
is a basis upon which the Company assesses its financial performance, and
certain covenants in the Company's borrowing arrangements will be tied to
similar measures. Adjusted EBITDA, as presented, represents useful measures
of assessing the Company's ongoing operating activities without the impact
of financing activity and non-recurring charges. While EBITDA is frequently
used as a measure of operations and the ability to meet debt service
requirements, it is not necessarily comparable to other similarly titled
captions of other companies due to potential inconsistencies in the method
of calculation.
(g) For purposes of this computation, fixed charges consist of interest expense,
amortization of deferred financing fees and one-third of rental expenses,
representing an approximation of that portion of rental expenses
attributable to interest. Earnings consist of income before income taxes
and extraordinary items and cumulative effect of changes in accounting
principles, plus fixed charges. Earnings were inadequate to cover fixed
charges by $2.5 million, $1.5 million and $4.5 million during the years
ended December 31, 1993, December 31, 1994 and December 31, 1995,
respectively.
(h) Net working capital as defined in the Stock Purchase Agreement equals
current assets excluding cash less current liabilities excluding the
current portion of capital lease obligations and the current portion of
long-term debt.
31
<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Consolidated Historical Financial Data" and the Consolidated Financial
Statements and the related notes thereto included elsewhere herein.
GENERAL
The Company is a leading designer and manufacturer of highly-engineered,
precision manufactured engine components, including fuel injection equipment for
diesel engines and hydraulic valve lifters for gasoline engines. The Company
sells application-specific engine components to OEMs and sells replacement units
and parts through its extensive aftermarket distribution network. The Company's
technical and engineering staff work closely with an OEM, generally for periods
of two to five years, prior to the introduction of the Company's products on an
engine platform, to develop or adapt application specific products to satisfy
the OEM's requirements. During the pre-production period, the Company will incur
R&D expenses, some of which may be reimbursed by the OEM. In addition, the
Company also incurs some R&D expenses in support of improvements to products on
existing engine platforms. The Company incurred R&D expenses (net of customer
reimbursements) of $10.6 million, $13.1 million and $10.6 million in fiscal
years 1994, 1995 and 1996, respectively. Once the OEM commits to procure a new
component from the Company, usually one to three years into the development
process, the Company may need to allocate capital for the machining, equipment,
tooling and other costs necessary for the engine program ramp-up. In addition,
with the launch of a new engine component or ramp-up in production of an
existing component, the Company may incur some start-up costs such as employee
training and equipment re-tooling. As a result of the long lead times necessary
to develop application-specific engine components and the financial commitment
made by both the Company and the OEM to design and incorporate the engine
component into the engine platform, the Company will typically serve as the sole
source supplier for the life of an engine platform.
During the period from 1994 to 1996, the Company's net sales declined 4%
from $287.0 million to $275.6 million. The Company's sales were affected during
this period by the planned phase-out of its supply arrangement with Navistar,
which had been announced in 1987, but did not begin to take effect until 1993.
Partially offsetting the effect of the Navistar phase-out were the introductions
of the DS Electronic Pump on General Motors' 6.5L diesel engine, the roller
rocker arm on Chrysler's 2.0L engine and the Company's patented Fuel Manager
diesel fuel filtration system. While the launch of these products offset to a
large degree the Navistar phase-out, the Company's gross margins and operating
income (as a percentage of sales) declined in contrast to the pre-1994 period.
This is attributable in large part to the start-up costs associated with these
new products, as well as the higher percentage of purchased parts that these
products contain. In addition, following the launch of the new electronically
controlled 6.5L engine by General Motors in 1993, reliability issues surfaced
with respect to both the Company's DS Electronic Pump and General Motors'
vehicle electronic system. The reliability issue on the DS Electronic Pump was
caused primarily by a purchased electronic component, which impacted the
operation and performance of the fuel injection system, among other things. In
addition, there were problems with other engine components and with the
performance of the GM electronics, all of which negatively affected the
reliability and performance of vehicles which utilized the 6.5L engine. As a
result, in 1994 GM announced a non safety recall on all vehicles carrying the
6.5L engine. These conditions had a major impact on the Company's warranty
expenses during fiscal years 1994-1996, as the Company incurred warranty
expenses related to the DS Electronic Pump of $14.8 million, $2.4 million, and
$4.5 million in 1994, 1995 and 1996, respectively. For the nine months ended
September 30, 1997, the Company's warranty expenses related to the DS Electronic
Pump declined to $1.2 million. The Company believes that the problems associated
with the 6.5L engine and the DS Electronic Pump have been resolved and that
future warranty expenses will be significantly lower than in the previous fiscal
years.
As testimony to its strong relationships with its OEM customer base, the
Company has recently been awarded firm orders to produce engine components on
several new or existing engine platforms with expected significant volume
beginning in 1998. For example, the Diesel Group was recently awarded a
long-term contract to be the sole supplier of rotary diesel fuel injection pumps
for Deere's 320-350 series engines, a
32
<PAGE> 34
supply arrangement which had previously been shared (approximately 50-50) with
another diesel engine component supplier. Through the development of its
innovative RSN injector, the Diesel Group was recently named the sole supplier
of RSN injectors for Ford UK's 2.5L engine as well as a supplier of RSN
injectors for two Volkswagen direct injection engine platforms. The Company's
Fuel Manager filtration system has been selected by Ford as the sole source
filtration system for the next generation Transit Van, with production
commencing in 2000. Moreover, Precision Engine was recently awarded a long-term
contract renewal as the sole supplier of roller rocker arms for Chrysler's
3.5/3.2L and 2.0L engines. Finally, Precision Engine has recently been selected
as the sole supplier of roller rocker arm assemblies for the 1.6L engine to be
jointly produced by BMW and Chrysler in Brazil starting in 2000. The Company
believes that such new platform wins (or renewals) will enhance its future sales
and profitability.
Since 1991, the Company, most notably the Diesel Group, has been targeting
European OEMs since approximately 30% of the world's diesel engine production
occurs in Europe. Europe has experienced significant growth in diesel on-highway
production in recent years. The following table details the Company's sales by
geographic region:
NET SALES BY REGION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
MARKET 1992 1993 1994 1995 1996
- -------------------------------------------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
North America........................................... 85.3% 86.9% 81.4% 73.7% 71.3%
Europe.................................................. 13.5 12.1 17.8 25.6 27.2
Other................................................... 1.2 1.0 0.8 0.7 1.5
---- ---- ---- ---- ----
- - - - -
100% 100% 100% 100% 100%
===== ===== ===== ===== =====
</TABLE>
BASIS OF PRESENTATION
The following table sets forth, for the periods shown, net sales, cost of
goods sold, gross profit, selling, general and administrative expense ("SG&A")
and operating income in millions of dollars and as a percentage of net sales:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------- --------------------------------
1994 1995 1996 1996 1997
-------------- -------------- -------------- -------------- --------------
$ % $ % $ % $ % $ %
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales......... $287.0 100.0% $272.1 100.0% $275.6 100.0% $209.7 100.0% $201.0 100.0%
Cost of goods
sold............ 244.3 85.1 235.6 86.6 234.7 85.2 177.3 84.5 169.0 84.1
Gross profit...... 42.7 14.9 36.5 13.4 40.9 14.8 32.4 15.5 32.0 15.9
SG&A.............. 35.1 12.2 31.7 11.7 31.0 11.2 24.0 11.4 19.4 9.7
Operating
income.......... 7.6 2.6 4.8 1.8 9.9 3.6 8.4 4.0 12.6 6.3
</TABLE>
COMPARISON OF RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996
Net Sales. Net sales decreased to $201.0 million for the nine months ended
September 30, 1997, from $209.7 million for the nine months ended September 30,
1996, a decrease of $8.7 million or 4.1%. This decrease was attributable to
Precision Engine, where net sales declined $11.0 million or 19.6%, due in part
to lower sales of roller rocker arm assemblies to Chrysler, as Chrysler
experienced lower sales of the Dodge and Plymouth Neon vehicles and retooled its
engine plants in anticipation of the planned gradual launch of the 3.2L engine
to replace the 3.5L used in Chrysler's new LH series vehicles. This decrease was
partially offset by a $2.3 million or 1.5% increase in Diesel Group sales, due
to strong demand from agricultural and industrial OEM customers.
33
<PAGE> 35
Gross Profit. Gross profit decreased to $32.0 million for the nine months
ended September 30, 1997, from $32.4 million for the nine months ended September
30, 1996, a decrease of $0.4 million or 1.2%. As a percentage of net sales,
gross profit increased to 15.9% from 15.5%. This margin increase was due
primarily to the increase in sales at the Diesel Group (whose products generally
carry higher margins than those of Precision Engine), reduced warranty expenses,
as well as cost savings resulting from improved purchasing of raw materials and
component parts in 1997, partially offset by start-up costs associated with the
launch of the Diesel Group's RSN injector and increased production rates for
mechanical pumps.
Selling, General and Administrative Expenses. SG&A expenses decreased to
$19.4 million for the nine months ended September 30, 1997, from $24.0 million
for the nine months ended September 30, 1996, a decrease of $4.6 million or
19.2%. As a percentage of net sales, SG&A decreased to 9.7% from 11.4%. This
decrease was a result of the conclusion of a product development program which
the Company chose no longer to pursue and reductions in post-retirement benefit
costs.
Operating Income. Operating income increased to $12.6 million for the nine
months ended September 30, 1997, from $8.4 million for the nine months ended
September 30, 1996, an increase of $4.2 million or 50.0%. As a percentage of net
sales, operating income increased to 6.3% from 4.0%, primarily as a result of
the improved gross margins and lower SG&A as a percentage of sales.
1996 COMPARED TO 1995
Net Sales. Net sales increased to $275.6 million in 1996 from $272.1
million in 1995, an increase of $3.5 million or 1.3%. The increase was
attributable to net sales growth at Precision Engine of $7.9 million or 12.2%,
partially offset by a $4.4 million or 2.1% decrease in net sales at the Diesel
Group. Precision Engine's sales increase was due to a greater demand by Chrysler
for the roller rocker arm assemblies, and the Diesel Group's sales decline
resulted from lower demand by General Motors for the DS Pump. Since the Company
is the sole source supplier of both engine platforms, the resulting increase and
decrease of sales was the result of the increase and decrease, as applicable, of
demand for the vehicles on which such parts are incorporated.
Gross Profit. Gross profit increased to $40.9 million in 1996 from $36.5
million in 1995, an increase of $4.4 million or 12.1%. As a percentage of net
sales, gross profit increased to 14.8% from 13.4%. Both the Diesel Group and
Precision Engine improved their gross profit margins in 1996 from 1995. In
particular, the Diesel Group's gross profit margins were positively impacted by
price increases as well as factory overhead savings due to reductions in
indirect labor, which were implemented during late 1995 and early 1996 offset by
higher warranty expenses.
Selling, General and Administrative Expenses. SG&A expenses decreased to
$31.0 million in 1996 from $31.7 million in 1995, a decrease of $0.7 million or
2.2%. As a percentage of net sales, SG&A decreased to 11.2% from 11.7%.
Operating Income. Operating income increased to $9.9 million in 1996 from
$4.8 million in 1995, an increase of $5.1 million or 106.3%, primarily as a
result of the increase in net sales, as well as the improvement in gross profit
margin and reduction in SG&A expenses as a percentage of sales. As a percentage
of net sales, operating income increased to 3.6% from 1.8%.
1995 COMPARED TO 1994
Net Sales. Net sales decreased to $272.1 million in 1995 from $287.0
million in 1994, a decrease of $14.9 million or 5.2%. The decrease in net sales
was attributable to a decline in the net sales of Precision Engine of $6.0
million or 8.4%, and a decline in the net sales of the Diesel Group of $8.8
million or 4.1%. Precision Engine's net sales were impacted by lower demand from
Chrysler and Ford for the Company's roller rocker arm assemblies and roller
lifters, respectively, as a result of lower vehicle sales. Diesel Group's net
sales were negatively impacted by the final phase-out of its supply arrangement
with Navistar, which had been planned since 1987. This was significantly offset
by the introduction of the DS Electronic Pump on GM's 6.5L diesel engine, as
well as strong demand from agricultural and industrial equipment manufacturers.
34
<PAGE> 36
Gross Profit. Gross profit decreased to $36.5 million in 1995 from $42.7
million in 1994, a decrease of $6.2 million or 14.5%. As a percentage of net
sales, gross profit decreased to 13.4% from 14.9%. This decrease is due both to
the lower sales volume and the final phase out of the Navistar arrangement which
had previously been a highly profitable supply arrangement, offsetting the
benefit of the lower warranty expenses.
Selling, General and Administrative Expenses. SG&A expenses decreased to
$31.7 million in 1995 from $35.1 million in 1994, a decrease of $3.4 million or
9.7%. As a percentage of sales, SG&A expenses decreased to 11.7% from 12.2%. The
decline is the result of an increase in 1995 in product development costs offset
by lower post employment benefit costs, as the Company recorded $1.7 million of
expense in 1994 associated with the initial liability valuation required
pursuant to FAS 112. In addition, in 1994 the Company incurred a charge in
connection with the write off of certain deferred debt issuance costs.
Operating Income. Operating income decreased from $7.6 million in 1994 to
$4.8 million in 1995, primarily as a result of the decrease in net sales and
gross profit margin. As a percentage of net sales, operating income decreased to
1.8% from 2.6% due to the lower sales and gross profit margins, partially offset
by lower SG&A expenses.
LIQUIDITY AND CAPITAL RESOURCES
HISTORICAL
The Company's principal sources of liquidity have been cash flow from
operations supplemented by borrowings under a revolving credit facility. In
addition, the Company, from time to time, has utilized capital leases and, for
its Italian subsidiary, Stanadyne Automotive S.p.A., has had an overdraft
facility with local financial institutions.
Net cash flows provided by operating activities was $10.5 million for the
nine months ended September 30, 1997, versus $25.8 million for the nine months
ended September 30, 1996. The reduction in cash flow provided by operations was
due to increased working capital requirements associated with the expansion of
the Diesel Group's pump and injector operations. Net cash flow provided (used)
by operating activities was $22.4 million, ($5.1) million and $37.8 million in
1994, 1995 and 1996, respectively. The improvement in cash flow from operations
in 1996 was attributable to higher gross margins, aggressive working capital
reduction efforts primarily in the areas of accounts receivable and inventory
management, and receipt of $2.5 million in state and federal refunds of taxes
paid in prior years. Cash flow from operations in 1995 was negatively impacted
by the Company's net sales decline, refinancing penalties, new debt issuance
expenses and $5.7 million of temporary increases in accounts receivable and
reimbursable tooling accounts necessary to expand and support the DS Electronic
Pump program with General Motors. Cash flow operations in 1994 was positively
impacted by working capital reduction efforts, but was partially offset by $14.8
million in product recall program costs associated with General Motors.
Capital expenditures were $9.9 million, $6.7 million and $8.8 million in
1994, 1995 and 1996, respectively. These amounts primarily reflect cash outlays
for the purchase of machinery and equipment and the maintenance of existing
facilities. Management estimates that the Company has historically spent, and
will continue to spend, approximately $3.0 million annually on maintenance of
plant and equipment. The remaining non-maintenance capital expenditures
represent cash outlays for equipment, machinery or plant expansion in order to
support new engine platforms on which the Company intends to supply engine
components or to increase capacity to support increased production volumes on
existing engine platforms. Non-maintenance capital expenditures generally are
not incurred until the Company is awarded orders to supply components on new
engine platforms or agrees with its OEM customers to increase capacity on
existing engine platforms. The Company has budgeted capital expenditures of
$14.2 million for 1997, which includes amounts relating to capacity expansion in
connection with the Diesel Group's award of 100% of Deere's rotary pump
purchases for its 320 and 350 series engines, the machinery and equipment for
production of the RSN injector and equipment necessary to machine in-house the
aluminum castings for the production of roller rocker arm assemblies for sales
to Chrysler. The Company believes that the in-house machining of the roller
rocker arm assemblies will further improve the gross profit margin on sales of
this product.
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<PAGE> 37
POST-ACQUISITION TRANSACTIONS
Following the Acquisition Transactions, the Company's principal sources of
liquidity will be cash flow from operations supplemented by borrowings under the
Revolving Credit Facility. In addition, the Company intends to retain its
Italian overdraft facility and its capital leases.
In connection with the Acquisition Transactions, the Company issued the
Notes for $100.0 million in gross proceeds, and entered into the Term A Loan
Facility and Term B Loan Facility (as defined herein) and the Revolving Credit
Facility (as defined herein) under the New Credit Agreement. The Term A Loan
Facility is a single tranche term facility in the aggregate principal amount of
$30.0 million. The Term B Loan Facility is a single tranche term facility in the
aggregate principal amount of $25.0 million. The Revolving Credit Facility
provides revolving loans in an aggregate amount of up to $30.0 million, subject
to a borrowing base limitation. Upon closing of the Acquisition Transactions,
the Company borrowed the full amount available under the Term A Loan Facility
and Term B Loan Facility and approximately $11.5 million of revolving loans,
reduced to $2.1 million within five business days, under the Revolving Credit
Facility, plus approximately $4.5 million in the form of letters of credit.
Proceeds to the Company from the issuance of the Notes and from initial
borrowings under the New Credit Agreement were distributed to Holdings to
finance, in part, the Acquisition and the fees and expenses in connection
therewith. To provide additional financing to fund the Acquisition, Holdings
raised $60.0 million through an equity contribution by AIP and its related
investors, including certain members of management.
Borrowings under the New Credit Agreement bear interest at a rate per annum
equal (at the Company's option) to a margin over either a base rate or LIBOR (as
defined herein). The Term A Loan Facility and Revolving Credit Facility will
mature in six years, and the Term B Loan Facility will mature in seven years.
The Company's obligations under the New Credit Agreement are guaranteed by
Holdings and each of Holdings' direct and indirect domestic subsidiaries and, to
the extent no adverse tax consequences would result, Foreign Subsidiaries. The
New Credit Agreement and the guarantees thereof are secured by a perfected first
priority security interest in substantially all assets of Holdings and its
direct and indirect domestic subsidiaries and, to the extent no adverse tax
consequences would result, Foreign Subsidiaries. The New Credit Agreement
contains customary covenants and events of default, including substantial
restrictions on the Company's ability to make dividends or distributions to
Holdings. See "Description of New Credit Agreement."
The Exchange Notes will be issued by the Company, will be guaranteed by
each Guarantor of the Company, and will not be guaranteed by Holdings. The
Exchange Notes will mature on December 15, 2007. Interest on the Exchange Notes
will be payable semi-annually in cash. The Exchange Notes will contain customary
covenants and events of default, including covenants that limit the ability of
the Company and its subsidiaries to incur debt, pay dividends and make certain
investments. See "Description of Exchange Notes."
Management believes that, upon completion of the Acquisition Transactions,
cash flow from operations and availability under the Revolving Credit Facility
will provide adequate funds for the Company's foreseeable working capital needs,
planned capital expenditures and debt service obligations. The Company's ability
to fund its operations and make planned capital expenditures, to make scheduled
debt payments, to refinance indebtedness and to remain in compliance with all of
the financial covenants under its debt agreements depends on its future
operating performance and cash flow, which in turn, are subject to prevailing
economic conditions and to financial, business and other factors, some of which
are beyond its control. See "Risk Factors."
36
<PAGE> 38
BUSINESS
GENERAL
The Company is a leading designer and manufacturer of highly engineered,
precision manufactured engine components, including fuel injection equipment for
diesel engines and hydraulic lash compensating devices (commonly known as
"hydraulic valve lifters") for gasoline engines. The Company's products serve to
improve engine performance by incorporating technologies that are key to
achieving emissions compliance, noise reduction and fuel economy. The Company
sells engine components to engine OEMs for use in a variety of applications,
including automobiles, light duty trucks, agricultural and construction vehicles
and equipment, industrial products and marine equipment. The Company also sells
replacement units and parts through its extensive aftermarket distribution
network. Due in part to its proven technological capabilities and its reputation
for innovative, high quality products, the Company has become the sole source
supplier of certain engine components on a number of engine platforms
characterized by long-term, high volume production runs. The Company conducts
its business through two principal operating groups: the Diesel Group, which
accounted for 73% of the Company's 1996 net sales, and Precision Engine, which
accounted for 27% of the Company's 1996 net sales. For the latest twelve month
period ended September 30, 1997, the Company had pro forma net sales and EBITDA
of $267.0 and $31.9 million, respectively.
Together with its predecessors, the Company has long-standing relationships
with important OEMs including Chrysler Corporation (50+ years), Ford Motor
Company (50+ years), Deere & Company (40 years), Caterpillar Inc. (27 years),
General Motors Corporation (20 years), Cummins Engine Co. Inc. (16 years) and
Perkins Engines (10 years). The Company's engineering staff works closely with
its OEM customers, generally for periods of two to five years prior to
introduction of the Company's products on an engine platform, to develop or
adapt application specific engine components to satisfy its customers' engine
requirements. The Company typically supplies these components on a sole source
basis pursuant to long-term arrangements with OEMs. Due to the expense and long
lead times necessary to develop application specific engine components, it is
rare for a competitor to replace an incumbent component supplier such as
Stanadyne during the production term of an engine platform. Accordingly, the
Company generally continues supplying components to an OEM throughout the
manufacturing term of a specific engine platform, which typically ranges from
7-15 years for automobile and light duty truck engines and 15-20 years for
agricultural and industrial equipment engines. As evidence of its commitment to
quality, the Company is in the process of registering for QS9000 certification
(which is expected to be completed during the first quarter of 1998), and its
operating groups have received numerous OEM quality awards, including Ford's
"Q-1" award and Chrysler's "Pentastar Award." OEM sales comprised 68% of the
Company's 1996 net sales, with the remaining 32% constituting replacement sales.
The Diesel Group is the largest independent (non-captive) manufacturer of
diesel fuel injection equipment in the United States, and one of only five
independent worldwide manufacturers selling to the geographic areas in which the
Company competes. The Diesel Group produces fuel injection equipment for diesel
engines of up to 250 horsepower, the engine range comprising approximately 90%
of all diesel engines produced worldwide. Fuel pumps and injectors, the Diesel
Group's primary products, are the most highly engineered, precision manufactured
components on a diesel engine and comprise the core components of a diesel
engine's fuel system. Unlike gasoline engines, which ignite pre-mixed air and
fuel with a timed spark, diesel engines rely on high pressure fuel injection
pumps to control combustion timing, engine power and speed. Because fuel system
components are so elemental to the proper functioning and optimum performance of
a diesel engine, they are essentially custom engineered for a specific engine
platform. The Diesel Group also manufactures diesel fuel filters, fuel heaters
and water separators and distributes diesel fuel conditioners and stabilizers
and diesel engine diagnostic equipment.
Precision Engine is a leading independent domestic manufacturer of
hydraulic valve lifters, including aluminum roller rocker arm assemblies and
lash adjusters, for gasoline engines. These products convert the rotary motion
of a camshaft into a reciprocating motion and allow for the adjustment of lash
(clearance) as valves are opened and closed in the cylinder head of an engine.
Hydraulic valve lifters began to replace mechanical valve lifters in domestic
on-highway vehicles in the 1950s since hydraulic valve lifters are more
37
<PAGE> 39
efficient in reducing valve train noise, minimizing maintenance requirements and
assisting in improved fuel economy and decreased emissions. The Company believes
that Precision Engine's share of the North American market for hydraulic valve
lifters for the gasoline powered, automobile and light duty truck market is
approximately 20%. Precision Engine has developed an especially important
relationship with Chrysler, to which it currently supplies approximately 50% of
Chrysler's overall domestic hydraulic valve lifter requirements. Specifically,
Precision Engine is the sole source supplier of roller rocker arm assemblies for
Chrysler's 3.5/3.2L and 2.0L engines pursuant to long-term exclusive
arrangements extending for the life of these engines. These engines appear in
Chrysler's "LH" Series (Chrysler LHS and Concorde, Dodge Intrepid and Eagle
Vision) and the Dodge and Plymouth Neon vehicles. Precision Engine's net sales
have grown from $30.2 million in 1991 to $73.2 million in 1996, representing a
compound annual growth rate of 19.4%.
BUSINESS STRATEGY
The Company's strategic objective is to continue to increase its sales and
improve its profitability by capitalizing on its position as a leading
manufacturer of highly engineered, precision manufactured engine components. The
Company intends to capitalize on favorable industry trends by pursuing numerous
opportunities that it believes are available to continue to design and develop
application specific engine components for OEMs worldwide. To execute this
strategy, the Company benefits from a skilled management team with an average of
approximately 25 years of industry experience. Specifically, the Company's
business strategy centers upon the following:
Expand and Grow OEM Relationships. The Company believes that engine OEMs
will continue to rely on independent specialized engine component suppliers such
as Stanadyne in response to technological challenges presented by stricter
worldwide environmental regulations, as well as competitive pressures to improve
quality and reduce production costs. The Company has established and intends to
continue to develop relationships with OEM customers worldwide in order to work
closely with such customers during the early stages of engine development to
design and manufacture application-specific products. The Company is currently
conducting a number of joint development and application programs in conjunction
with certain engine manufacturers in an attempt to create new long-term supply
relationships with such OEMs. In addition, the Company intends to further
develop its strong relationships with OEM customers by continuing to expand its
product offerings through internal product development and through strategic
acquisitions.
Capitalize on New Platform Wins. As testimony to its strong relationships
with its OEM customer base, the Company has recently been awarded firm orders to
produce engine components on several new or existing engine platforms with
expected significant volume beginning in 1998. For example, the Diesel Group was
recently awarded a long-term contract to be the sole supplier of rotary diesel
fuel injection pumps for Deere's 320-350 series engines, a supply arrangement
which had previously been shared (approximately 50-50) with another diesel
engine component supplier. Through the development of its innovative RSN
injector, the Diesel Group was recently named the sole supplier of RSN injectors
for Ford UK's 2.5L engine as well as a supplier of RSN injectors for two
Volkswagen direct injection engine platforms. The Company's Fuel Manager
filtration system has been selected by Ford as the sole source filtration system
for the next generation Transit Van, with production commencing in 2000.
Moreover, Precision Engine was recently awarded a long-term contract renewal as
the sole supplier of roller rocker arms for Chrysler's 3.5/3.2L and 2.0L
engines. Finally, Precision Engine has recently been selected as the sole
supplier of roller rocker arm assemblies for the 1.6L engine to be jointly
produced by BMW and Chrysler in Brazil starting in 2000. The Company believes
that such new platform wins (or renewals) will enhance its future sales and
profitability.
Capitalize on Proven Technological Capabilities. The Company believes that
its proven technological capabilities and reputation for innovative engine
component solutions are a distinct competitive advantage. The Company believes
that increasingly stringent worldwide environmental regulations create
opportunities for the Company to sell technologically advanced engine components
to OEMs trying to produce engines that satisfy emission standards and which have
improved fuel economy and engine performance. The Company has attained a
reputation for unique technical solutions through continued investment in
research and development programs, which have led to several patented products,
including the DS Electronic Pump (a state-of-the-art, electronically controlled
distributor pump), the RSN injector (an innovative injector
38
<PAGE> 40
designed to improve emissions and reduce engine noise) and the Fuel Manager (a
fuel filter system featuring interchangeable modular components and a design for
easy maintenance and repair). The Company has extensive engineering and product
development facilities (including a modern 80,000 sq. ft. diesel engineering
center in Windsor, CT) and full service product management capability (which
OEMs require of key suppliers), which enable it to develop proprietary
technology and support design and development activities for the Company's
products.
Emphasize Replacement Sales. The Company sells replacement units to OEMs
for distribution through their service organizations and sells replacement units
and parts through the Company's own extensive aftermarket distribution network.
Replacement sales tend to be "counter-cyclical" to the general economic cycle
and, with respect to diesel engine products, generally afford higher margins
than original equipment sales. The Company believes that its diesel aftermarket
distribution network is an important competitive advantage because OEMs select a
supplier, in part, based on the strength of the supplier's aftermarket service
and distribution capability. The Company's diesel aftermarket network consists
of 17 central distributors, who support over 563 authorized service dealers in
North America, and 66 central distributors and 566 service dealers outside of
North America, including 22 central distributors and 323 service dealers in
Europe. All of the Company's central distributors and service dealers are
trained and certified in accordance with Company policies. Precision Engine
sells replacement components directly to a variety of aftermarket customers,
including Dana, which resells the Company's products through an independent
network as well as through the NAPA parts organization. With a large and growing
in-service equipment population, the Company believes that it is well positioned
to further increase replacement sales.
Expand European Presence. The Company believes that significant
opportunities exist to expand its sales in Western Europe, which currently
produces approximately 30% of the world's diesel engines. Since the initiation
of programs targeting European OEMs, the Company's European sales have grown
from $22.8 million in 1991 to $74.9 million in 1996, representing a compound
annual growth rate of 26.9%. To better serve the needs of its European OEM
customers, the Company acquired injector manufacturing operations in Brescia and
Bari, Italy to complement its established marketing, engineering and services
support facilities in Trappes, France and Huntingdon, England. In addition, the
Company believes that Precision Engine is well positioned to capitalize on the
continuing trend among Western European engine manufacturers to convert from
mechanical to hydraulic valve lifters in on-highway engines. In 1995, Precision
Engine began supplying lash adjusters for two Fiat engine platforms, and in
1996, Precision Engine was named one of Fiat's top 25 suppliers for its
exemplary quality and support. The Company believes that its reputation as a
high quality provider of engine components and its established European service
network and manufacturing operations will enable it to develop new OEM
relationships, as well as to expand its current OEM relationships in Western
Europe.
INDUSTRY OVERVIEW
Since the late 1970's, North American and European governments have adopted
more stringent emissions regulations. Stricter worldwide emissions requirements
and the continuing goals of improved fuel economy and engine performance present
technical challenges for engine manufacturers. Due to the technical expertise,
lower cost structures and responsiveness of outside suppliers from both a
development and manufacturing perspective in developing engine components that
assist in optimizing combustion and hence lowering emissions, the Company
believes that OEMs will continue to rely on outside suppliers such as Stanadyne.
By relying on outside manufacturers to produce these critical components, OEMs
are able to focus on overall design, assembly and consumer marketing issues.
The Diesel Group and Precision Engine each competes with a relatively small
number of other suppliers. The awarding of business to an engine supplier such
as Stanadyne generally begins with a selection process in which an OEM
approaches one or more suppliers for an intended engine component. Based upon
initial design and engineering evaluations, as well as the ability of a
potential supplier to fulfill the OEM's requirements, the OEM generally chooses
a single supplier to manufacture a given component. This selection process
usually occurs two to five years in advance of production. Once selected, the
Company's technical and engineering staff continues to work closely with the
OEM's design and production teams to develop application specific
39
<PAGE> 41
products to meet the OEM's engine requirements. Generally, the supplier will
manufacture components for the entire production cycle for the engine platform
and will continue manufacturing components as long as there is a viable
aftermarket. The production run of an engine platform ranges on average from
7-15 years for automobile and light duty truck engines (diesel and gasoline) and
15-20 years for diesel agricultural and industrial equipment engines.
THE DIESEL GROUP
PRODUCTS
Unlike gasoline engines, which ignite pre-mixed air and fuel with a timed
spark, diesel engines rely on fuel injection equipment, including high-pressure
fuel injection pumps and injectors, to control combustion timing, engine power
and speed. High compression ratios (typically double those of gasoline engines),
unthrottled air inlet and high-pressure atomization of fuel injected directly
into the combustion chamber just before the start of combustion result in the
diesel engine's relative superior emissions compliance and substantial fuel
economy advantage over gasoline engines. Achieving these characteristics
requires fuel system components of greater complexity, and machined to closer
tolerances, than are found in the typical gasoline engine.
The Diesel Group's diesel fuel injection components are developed in
response to the needs of its OEM customer base and in anticipation of evolving
market requirements. These products are specifically engineered for each engine
application in order to optimize the performance of the fuel delivery system on
the engine to achieve the desired power, economy and emissions characteristics.
The Diesel Group's primary products, including fuel pumps and injectors, are the
most highly-engineered, precision manufactured components on a diesel engine and
comprise the core components of a diesel engine's fuel system. Together with the
Diesel Group's other product offerings, which include diesel fuel filtration
equipment, fuel heaters, water separators, diesel fuel conditioners and
stabilizers and diesel engine diagnostic equipment, the Company offers a
comprehensive line of fuel system management products.
The following chart shows the Diesel Group's product offerings as a
percentage of the Diesel Group's total sales:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
PRODUCT 1992 1993 1994 1995 1996
- ------------------------------------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Pumps............................................ 54.9% 60.1% 55.8% 55.1% 52.8%
Injectors........................................ 31.4 25.7 29.2 29.2 28.7
Filters.......................................... 11.4 11.2 12.0 13.3 15.8
Other............................................ 2.3 3.0 3.0 2.4 2.7
----- ----- ----- ----- -----
Total....................................... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
The Diesel Group's products are primarily targeted for diesel engines of up
to 250 horsepower, the engine range comprising approximately 90% of all diesel
engines produced worldwide. Applications for which the Company's diesel engine
components are used include sport utility vehicles, pick-up trucks, vans,
tractors, bulldozers, combines, logging equipment, generator sets, compressors
and water pumps.
PUMPS. In general, diesel fuel pumps pressurize the fuel and deliver exact
quantities to each cylinder at precisely the correct timing. The Diesel Group
produces a broad line of diesel fuel pumps, including electronic, mechanical and
submerged pumps, with varying prices depending upon performance characteristics.
Electronic and mechanical fuel pumps range in price from $250 to $550 per pump,
with submerged pumps being less expensive. Below is a summary of the Diesel
Group's main pump product lines:
- DS Electronic Pump. The DS Electronic Pump is a state-of-the-art
electronically controlled distributor pump. This pump was initially
designed for emission sensitive, on-highway applications and offers
superior, precision electronic control of fuel quantity, combustion
timing and high injection pressure. Electronic sensors mounted on both
the engine and the vehicle provide information on
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<PAGE> 42
engine operating characteristics to an electronic control module, which
instructs the pump on the timing and amount of fuel delivery. The Company
believes that significant opportunities exist to apply the technologies
developed in the DS program to produce electronic pumps for certain
emissions sensitive off-highway applications.
- DB2 and DB4 Mechanical Distributor Pumps. Mechanical distributor pumps
are less expensive than electronic pumps and are primarily used in
agricultural, construction and industrial equipment, which are currently
subject to less stringent emissions regulations than on-highway vehicles.
The DB2 Mechanical Pump is generally used in diesel engines with up to
125 horsepower and the DB4 Mechanical Pump is generally used in diesel
engines with between 125 and 250 horsepower. The Diesel Group also
produces advanced versions of its mechanical pumps for certain emissions
sensitive applications where the cost associated with a more expensive
electronic pump is not warranted.
- Submerged Pumps. The submerged type diesel fuel injection pumps are
utilized for engines with one-, two- and three-cylinder configurations
with less than 50 horsepower. The submerged pump performs the same
function as a rotary pump, but the submerged pump is mounted inside the
engine and the pumping elements are driven by the camshaft of the engine.
Fuel Injectors. The fuel injector is an assembly comprised of a nozzle and
a nozzle holder through which a measured amount of fuel, determined by the fuel
pump, is injected under high pressure into the combustion chamber through a hole
or holes in the nozzle. A smaller diameter nozzle provides the engine designer
more flexibility for the location of the injector in the cylinder head,
assisting in cleaner combustion and accordingly reduced emissions, increased
power and improved fuel economy. Since the 1940s, the Diesel Group has developed
a range of different sized and shaped fuel injectors to meet varying OEM
requirements. The Diesel Group's nozzle offerings are as follows:
- Conventional (17 or 21 mm) Injectors. Injectors of this size are used
today in most high-volume on and off-highway diesel engine applications.
The Company manufactures injectors of this size range at its operations
in Italy.
- Pencil Nozzle. Over 25 years ago, the Company developed the Pencil
Nozzle as an alternative to conventionally sized injectors. The Pencil
Nozzle's compact 9.5 mm diameter allows more flexibility for positioning
the injector in the cylinder head and combustion chamber, and the simple
one-bolt design of the Pencil Nozzle facilitates clamping and allows for
a simplified cylinder head design.
- Slim Tip Pencil Nozzle. The Company's patented Slim Tip Pencil Nozzle
is a continued miniaturization of the Pencil Nozzle, intended to further
increase the engine designer's flexibility in locating the injector.
- RSN Injector. The Company has recently introduced the RSN injector, an
innovative rate shaping nozzle. By varying the rate at which the fuel is
injected into the combustion chamber and the amount of fuel injected,
this patented design produces lower combustion noise and improves
light-load/low speed emissions. The appeal of the RSN is that it
accomplishes the necessary fuel flow regulation for injection rate
control through a greatly simplified and more compact design than other
methods currently in use. The RSN design can be used in both conventional
and pencil-type injectors.
Filters. The Diesel Group manufactures a full line of fuel filters. Fuel
filters remove dirt and debris from the fuel to protect the fuel injection
system from damage and wear. The Company's primary filter product is its
patented Fuel Manager, which features interchangeable modular components which
allow it to be adapted for nearly all diesel equipment fuel management
functions. The Fuel Manager is designed to provide filtration on a broad range
of engines and also includes various options such as chassis- or engine-mounting
as well as the ability to add on components such as water separators, sensors,
fuel heaters, and fuel primers. In 1997, a modular fuel lift pump option was
introduced as another Fuel Manager optional feature, which assists in the
reliability of the fuel system performance on emissions sensitive engines. For
ease of maintenance, no tools are needed to change the modular options or
replace filter elements. The design of the system provides numerous
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<PAGE> 43
mounting options, which are especially helpful in situations where there is
minimal engine space and maintenance access is restricted.
CUSTOMERS
Since the mid-1950's, the Diesel Group has developed strong relationships
with its global OEM customers, currently supplying 22 different diesel engine
manufacturers worldwide. Its primary OEM customers include Deere, Caterpillar,
General Motors, Cummins, Perkins, Ford, Volkswagen, SISU and IVECO (a subsidiary
of Fiat). The Diesel Group's growth has been driven by increasing sales of fuel
injection equipment to its long-term OEM customer base and by successfully
adding new customers. Since 1988, the Company has added 18 new customers, with
15 of these non-U.S. headquartered. Specifically, the Diesel Group has targeted
customers in Western Europe, the largest diesel engine market, producing
approximately 30% of the world's diesel engines. Through its acquisitions of
injector manufacturing operations in Brescia and Bari, Italy to complement its
established marketing, engineering and service support facilities in Trappes,
France and Huntingdon, England, the Diesel Group has the infrastructure and
manufacturing operations to efficiently supply European customers.
The following table sets forth information about the Diesel Group's primary
OEM customers:
<TABLE>
<CAPTION>
LENGTH OF
CURRENT CUSTOMER
ENGINE SUPPLY
QEM CUSTOMER COMPONENT APPLICATION(S) CURRENT EQUIPMENT APPLICATION(S) RELATIONSHIP
- --------------- -------------------- ------------- -------------------------------- ------------
<S> <C> <C> <C> <C>
Deere.......... Pumps, Injectors and 300, 320 and Agricultural and Industrial 40 years
Filters 350 Series Equipment, Generator Sets and
Engines Marine Equipment
Caterpillar.... Injectors 3208 Heavy Duty Trucks and Marine 27 years
Equipment
General Pumps and Filters 6.5L Pickups, Blazers, Suburbans, 20 years
Motors......... Vans and HUMMVs
Cummins........ Oil Pumps Northstar B Seville and Aurora 16 years
Pumps and Injectors Series Generator Sets
Generator
Drive Engines
Perkins........ Pumps, Injectors and 3.152, 4.236 Agricultural and Industrial 10 years
Filters and 900 and Equipment, Generator Sets and
1000 Series Marine Equipment
Engines
Ford........... Injectors 2.5L Vans 10 years
SISU........... Pumps, Injectors and Agricultural Agricultural Tractors 8 years
Filters Engines
IVECO.......... Injectors 8200 Heavy Duty Trucks and Industrial 6 years
Equipment
Volkswagen..... Injectors 4- and Polo and Golf 4 years
5-Cylinder
Direct
Injection
</TABLE>
The Diesel Group also sells replacement units to OEMs for distribution
through their respective service organizations and sells replacement units and
parts through the Company's own extensive aftermarket distribution network.
Replacement sales represent a stable and recurring source of revenue for the
Company, even during recessionary economic periods. In addition, sales of
replacement units and parts are typically higher margin than sales of original
components to OEMs. Since the working life of an individual fuel injection
component is generally less than the working life of the individual engine, the
Company has multiple
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<PAGE> 44
opportunities throughout the life of the engine to service its products via
either repair or replacement. With a large and growing in-service equipment
population, the Company believes that it is well positioned to further increase
replacement sales.
MARKET
Diesel engines have been an important power source for nearly 100 years,
with the worldwide market for diesel engines experiencing consistent growth in
recent years. According to MotoData, global diesel engine production has grown
from 13.3 million engines manufactured in 1991 to 16.2 million in 1995, and is
expected to grow to 18.6 million engines by the year 2000. Growth in diesel
engine production has been fueled by the competitive advantages associated with
diesel, which typically include substantially greater fuel efficiency, improved
engine durability and favorable emissions compliance when compared to similar
gasoline engines. These advantages associated with diesel engines are expected
to become more prominent as world-wide environmental regulations continue to
become more stringent. The projected growth in the number of diesel engines
produced is due in part to continued penetration of diesel engines in passenger
cars and light trucks worldwide.
global production chart
Source: The Engine Review published by MotoData
Western Europe is the leading producer of diesel engines worldwide,
representing approximately 30% of global diesel engine production. The demand
for diesel engines in Western Europe is driven primarily by the Western European
automobile market. Demand for diesel powered passenger cars in Western Europe is
attributable to the fact that in several European countries, tax rates and
license fees imposed on gasoline powered passenger cars, when combined with the
typical consumer advantages associated with diesel such as improved fuel economy
and lower maintenance costs, make owning and operating a diesel automobile less
than half the cost of owning and operating a comparable gasoline powered
vehicle. In terms of off-highway diesel engines, the demand for diesel engines
is expected to be driven by emerging and underdeveloped regions, where
industrial, construction and agricultural equipment will be utilized in building
modernized infrastructures.
PRECISION ENGINE
PRODUCTS
Precision Engine produces hydraulic valve lifters for gasoline engines.
These products convert the rotary motion of a camshaft into a reciprocating
motion and allow for the adjustment of lash (clearance) as valves are opened and
closed in the cylinder head of an engine. Hydraulic valve lifters began to
replace mechanical valve lifters in domestic on-highway vehicles in the 1950s
since hydraulic valve lifters are more efficient in reducing valve train noise,
minimizing maintenance requirements, and assisting in improved fuel economy and
decreased emissions. Recognizing these advantages of hydraulic valve lifters,
European OEMs are continuing
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<PAGE> 45
to convert from mechanical to hydraulic valve lifters. The Company believes that
significant future opportunities exist for further penetration with European
OEMs as this conversion continues.
Precision Engine designs and manufacturers four basic types of hydraulic
valve lifters, all of which have similar functions but are designed for use in
different engine platforms:
- Roller Rocker Arms. The aluminum roller rocker arm assembly, which is
designed for center-pivot engines, is currently Precision Engine's
largest selling product line comprising approximately 65% of Precision
Engine's 1996 net sales. Precision Engine began production of the roller
rocker arm in 1992 after an extensive design and development program with
Chrysler. In 1997, Precision Engine began its own in-house machining of
aluminum castings for the roller rocker arm assembly, a process that had
previously been outsourced. The Company believes that this in-house
machining will result in significant cost savings to the Company and
Chrysler.
- Lash Adjusters. The lash adjuster, which is designed for end-pivot
engines, accounted for 8% of Precision Engine's 1996 net sales. Precision
Engine sells the lash adjuster to certain European OEMs producing the
end-pivot engine.
- Roller Valve Lifters. The roller valve lifter, which is designed for
cam-in-head engines, accounted for 14% of Precision Engine's 1996 net
sales. It is sold primarily to Ford for use in its 2.0L engine.
- Slipper Valve Lifters. The slipper valve lifter was originally
engineered in the 1950s for the classic push rod engine. Precision Engine
manufactures and purchases for resale over 25 styles of slipper valve
lifters, targeting older domestic cars and light trucks. Currently all of
Precision Engine's slipper valve lifter sales are to non-OEM customers.
Slipper valve lifter sales accounted for 13% of Precision Engine's 1996
net sales.
CUSTOMERS
Precision Engine supplies hydraulic valve lifters to a variety of worldwide
OEMs, including Chrysler, Ford, Fiat and First Auto Works (China's third largest
automobile manufacturer). Precision Engine has developed an especially important
relationship with Chrysler, to which it currently supplies 50% of Chrysler's
overall domestic hydraulic valve lifter requirements. Specifically, Precision
Engine is the sole source supplier of roller rocker arm assemblies for
Chrysler's 3.5/3.2L and 2.0L engines pursuant to long-term exclusive
arrangements for the life of these engines. These engines are used in Chrysler's
"LH" Series (Chrysler LHS and Concorde, Dodge Intrepid and Eagle Vision) and the
Dodge and Plymouth Neon vehicles. Precision Engine has received several awards
from its customers for exemplary quality and support, including Chrysler's
"Quality Excellence Award," Chrysler's "Pentastar Award" and Ford's "Q-1"
awards, and Precision Engine has been named one of Fiat's top 25 suppliers.
The following table sets forth information about Precision Engine's primary
OEM customers:
<TABLE>
<CAPTION>
LENGTH OF
CURRENT CUSTOMER
ENGINE CURRENT EQUIPMENT SUPPLY
OEM CUSTOMER COMPONENT APPLICATION(S) APPLICATION(S) RELATIONSHIP
- ------------------- --------------------- --------------- ----------------------------- ------------
<S> <C> <C> <C> <C>
Chrysler........... Roller Rocker Arm 3.5/3.2L Intrepid, Vision, Concorde 50+ years
and LHS
Roller Rocker Arm 2.0L Neon
Ford............... Roller Valve Lifter 2.0L Escort and Tracer 50+ years
First Auto Works... Lash Adjuster 2.2/2.5L Light Duty Trucks, Passenger 10 years
Cars
SAM-Piaggio........ Lash Adjuster 898 CincoCento 3 years
Fiat............... Lash Adjuster 1370 Tipo, Bravo and Brava 2 years
</TABLE>
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<PAGE> 46
Precision Engine has developed strong relationships with its aftermarket
customers. Precision Engine supplies replacement components to OEMs, as well as
to a number of manufacturing repackagers such as Muskegon, Pioneer, Repco and
Dana, with whom the Company has a 20+ year supply relationship. In addition,
Precision Engine sells to Jasper Engine and Transmission Exchange, an engine
rebuilder. Precision Engine has been recognized by both Dana and Jasper for
exemplary quality and service and has received Dana's "Partner in Excellence"
award.
MARKET
The market for Precision Engine's products is driven in part by global
gasoline engine production, which according to MotoData grew from 78.1 million
engines manufactured in 1991 to an estimated 96.3 million engines manufactured
in 1996. The Company believes that this growth was due in part to the global
economic recovery and the expansion of markets in developing countries. The
market is projected to continue growing with gasoline engine production
estimated to reach 102.5 million engines by the year 2000. Demand from third
world countries will largely fuel the growth, but it is expected that North
America will remain the dominant region of engine production with an estimated
35% of total production.
The Company believes that the worldwide market for valve lifters (which
includes both hydraulic as well as mechanical valve lifters) is in excess of $1
billion, with hydraulic valve lifters representing 79% of total production and
mechanical valve lifters representing the remaining 21%. North America
represents approximately 36% of worldwide production (consisting of
substantially all hydraulic valve lifters). The Company believes that several
industry trends will benefit hydraulic valve lifter manufacturers such as
Stanadyne. First, relative stability in overall fuel prices has created a
renewed interest in six and eight cylinder engines, which correspondingly
require greater numbers of valve lifters. In addition, engines with four or more
valves per cylinder, requiring more valve lifters than typical two valve per
cylinder engines, have grown in popularity in recent years due to their reduced
emissions and greater fuel economy. Finally, in order to meet increasingly
stringent emissions regulations and fuel efficiency standards, European engine
manufacturers are continuing to convert from mechanical to hydraulic valve
lifters, presenting Precision Engine with significant opportunities to develop
supply relationships with such manufacturers.
SALES, MARKETING AND DISTRIBUTION
The Company believes that its long standing relationships with its OEM
customers and its reputation for innovative engine component solutions
facilitate its marketing and sales efforts. The Company's sales, engineering and
quality representatives meet regularly with the purchasing, engineering and
quality personnel of OEM customers to develop or adapt products to meet each
OEM's engine requirements. In order to demonstrate its commitment to quality,
the Company is in the process of registering for QS9000 certification. It is
expected that such registration will be completed during the first quarter of
1998.
The Company's diesel aftermarket distribution and service network consists
of 83 central distributors and 1,129 service dealers, all of whom are trained
and certified in accordance with Company policies. The Company believes that its
North American service network is the most extensive and capable in the
industry.
The following table sets forth information on the Company's service
network.
<TABLE>
<CAPTION>
CENTRAL SERVICE
MARKET DISTRIBUTORS DEALERS
--------------------------------------------------- ------------ -------
<S> <C> <C>
North America...................................... 17 563
Europe............................................. 22 323
Other.............................................. 44 243
--
----
Total......................................... 83 1,129
== ====
</TABLE>
In addition to its sales to its OEM customers, Precision Engine sells
replacement components directly to its manufacturing repackager and engine
rebuilder customers.
45
<PAGE> 47
RAW MATERIALS AND COMPONENT PARTS
The Company's products are made largely of specially designed metal parts,
most of which are designed, purchased, cast or stamped, and machined by the
Company to its own technical specifications. Metallic raw materials such as
steel, aluminum, copper and brass are commodity items readily available from a
number of suppliers. Certain parts, such as electronic components or fasteners,
are purchased by the Company from outside suppliers as standardized parts or are
made to the Company's specifications. Although from time to time the Company has
experienced temporary supply shortages due to localized conditions, no such
shortage has materially adversely affected the Company.
COMPETITION
Because of the technical expertise required to design and manufacture the
Company's products to the specifications and tolerances required, the existence
of longstanding supply relationships in the engine component business and the
significant capital expenditures and lead time required to enter the business,
there are a limited number of manufacturers selling to the global markets in
which the Company competes. Several competitors exist, including the internal
component operations of a few OEMs, as well as independent suppliers, many of
which are larger and have financial resources exceeding those of the Company.
For the Company's principal products, competition is a factor early in the
design process. In particular, when an OEM develops a new engine line, the
Company competes on the basis of technological innovation, product quality,
processing and manufacturing capabilities, service support and price. The main
competitors with the Diesel Group are Robert Bosch GmbH (the leading supplier of
fuel injection equipment in Europe), Lucas Varity (formerly Lucas C.A.V.,
another large European supplier) and Zexel and Nippondenso (licensees of Bosch
with few sales outside of Japan). The main competitors of Precision Engine are
INA Walzlager Schaeffler KG, Eaton Corporation and WA Thomas (formerly the
Hylift division of SPX Corporation).
ENGINEERING AND DESIGN; INTELLECTUAL PROPERTY
Through 50 years of supplying engine components, the Company has developed
significant know-how and experience in the areas of product design and precision
manufacturing. The Company's engineers utilize advanced computer aided design
and testing software in the areas of hydraulics, stress analysis, film thickness
and geometric analysis to design products and components and develop
manufacturing processes. The Company is continuously engaged in creating and
developing new fuel injection and valve train products, applications for
existing products to meet the needs of the marketplace and manufacturing
processes. Factory floor operations for products such as the DS Electronic Pump
and the aluminum roller rocker arm assembly utilize computer controlled
equipment and gauges requiring advanced skills by manufacturing teams and their
leaders.
The Company relies upon patent, trademark and copyright protection, as well
as upon unpatented proprietary know-how and other trade secrets, for certain of
its products, components, processes and applications. The Company considers its
proprietary information important, especially in the maintenance of its
competitive position in the aftermarket and replacement parts business, and
takes actions to protect its intellectual property rights. However, the Company
cannot assure that any of its patents will not be challenged, invalidated,
circumvented or rendered unenforceable or that meaningful protection or adequate
remedies will be available in respect of its other intellectual property. The
Company's operations are not dependent upon any single or related group of
patents, copyrights or trademarks.
PROPERTIES
The Company's executive offices are located in Windsor, Connecticut. The
Company believes that substantially all of its properties and equipment are in
good condition, and that it has sufficient capacity to meet its current and
projected manufacturing and distribution needs. The Company's 80,000 sq. ft.
diesel engineering center in Windsor, Connecticut contains fifteen dynamometer
test cells, a vehicle emission test site, 188 development and durability test
strands, five vehicle test bays, microprocessor, instrumentation, vibration and
filtration research laboratories and environmental chambers for cold test,
hot/cold cycle and salt exposure testing.
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<PAGE> 48
Below is a summary of the existing facilities:
<TABLE>
<CAPTION>
SQUARE TYPE OF
LOCATION FOOTAGE INTEREST DESCRIPTION OF USE
- ------------------------- ------- -------- --------------------------------------------------
<S> <C> <C> <C>
DIESEL GROUP:
Windsor, CT.............. 571,000 Owned Corporate Offices, Diesel Group Headquarters,
Sales and Marketing, Engineering Center,
Manufacturing
Jacksonville, NC......... 110,000 Owned Manufacturing, Distribution
Washington, NC........... 177,000 Owned Manufacturing
Trappes, France.......... 23,000 Leased Engineering, Sales
Huntingdon, England...... 3,000 Leased Engineering, Sales
Brescia, Italy........... 175,000 Owned Stanadyne Automotive S.p.A. Headquarters,
Engineering, Sales, Manufacturing
Bari, Italy.............. 117,000 Leased Manufacturing
PRECISION ENGINE:
Windsor, CT.............. 119,000 Owned Manufacturing
Tallahassee, FL.......... 125,000 Owned Precision Engine Headquarters; Manufacturing,
Engineering
Elmhurst, IL............. 1,100 Leased Sales
</TABLE>
ENVIRONMENTAL MATTERS
The Company's facilities in the United States are subject to federal, state
and local environmental requirements, including those governing discharges to
the air and water, the handling and disposal of solid and hazardous wastes, and
the remediation of contamination associated with releases of hazardous
substances. The Company's Italian facilities are subject to Italian and local
environmental requirements, as well as the environmental requirements
promulgated by the European Community.
Based on a review conducted by independent environmental consultants in
connection with the Acquisition, the Company believes that it is currently in
material compliance with environmental requirements. Nevertheless, the Company's
manufacturing operations involve the use of hazardous substances and, as is the
case with manufacturers in general, if a release of hazardous substances occurs
or has occurred on or from the Company's facilities, the Company may be held
liable and may be required to pay the cost of remedying the condition. The
amount of any such liability could be material.
The Company has made, and will continue to make, expenditures to comply
with current and future environmental requirements. Because environmental
requirements are becoming increasingly stringent, the Company's expenditures for
environmental compliance may increase in the future. The Company does not
anticipate material capital expenditures for environmental controls in 1998 or
1999.
In 1995, the Company entered into a consent order with the Connecticut
Department of Environmental Protection ("DEP") to correct certain hazardous
waste management regulatory compliance matters and to investigate and address
soil and groundwater contamination at its Windsor, CT facility. The Company has
corrected the hazardous waste management matters, and is continuing to
investigate areas of contamination. The investigation has identified solvent
compounds in soil and groundwater at the southeast portion of the property and
other less significant areas of contamination. The solvent contamination extends
beyond the property boundary and the Company has entered into agreements with
the adjacent property owners that obligate the Company to address the
contamination to the extent required by DEP. The Company expects that a
groundwater treatment system will be installed to address the contamination.
In early 1996, an oil sump at the Company's Jacksonville, NC facility was
found to be leaking. The Company began an approved interim remediation in March
1996. In August 1997, the Company submitted a Corrective Action Plan to the
North Carolina Department of Health and Natural Resources to address the
47
<PAGE> 49
soil and groundwater contamination that resulted from the leak. The Plan was
approved in December 1997 and is being implemented.
Under the federal Superfund law, also known as the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), persons who
may be liable for the costs of investigation and cleanup of sites from which
there have been releases of hazardous substances include current and former
owners and operators of such sites, persons who arranged for the disposal of
hazardous substances at such sites, and persons who transported hazardous
substances to such sites. Liability under CERCLA is generally strict, joint and
several, although as a practical matter, a potentially responsible party's
liability at a Superfund site will be allocated among all financially viable
responsible parties based on a variety of equitable factors, including, but not
limited to, degree of culpability, relative amount of waste sent to the site,
and toxicity of the waste sent to the site. The Company is involved as a
potentially responsible party with regard to waste disposal at four Superfund
cleanup sites. The Company does not expect its liability at these sites to be
material. The Company has settled its liability at three other waste cleanup
sites, subject to the standard "reopener" provisions found in Superfund
settlements.
In connection with the Acquisition, Sellers have indemnified the Company
with respect to the Windsor, CT soil and groundwater contamination matter, the
Jacksonville, NC oil contamination matter, and the Company's involvement at the
aforementioned Superfund cleanup sites. Sellers have also indemnified the
Company with respect to certain other matters identified during SAC, Inc.'s
environmental due diligence of the Company. These indemnities are not subject to
time or dollar limitations. In addition to these specific indemnities, Sellers
have agreed, subject to certain time and dollar limitations, to indemnify the
Company for "unknown" environmental liabilities associated with past operation
of the Company.
There can be no assurances that Sellers will have the ability to indemnify
the Company for all the aforementioned environmental conditions when requested
by the Company. If Sellers are unable to fulfill their indemnification
obligations, the Company will be responsible for such matters and the cost of
addressing such matters could be material. As of December 31, 1996, the Company
had recorded accruals of $2.2 million to reflect future costs associated with
the aforementioned contamination matters at the Windsor, CT and Jacksonville, NC
facilities. Because of the uncertainties associated with environmental
remediation, no assurance can be given that the total costs to be incurred with
respect to these matters will not exceed the recorded accrual.
EMPLOYEE AND EMPLOYEE RELATIONS
As of September 30, 1997, the Company employed approximately 2,000 people
in the United States and approximately 500 people in Europe. The Company
believes its employee and labor relations are good. None of the U.S. employees
are unionized.
LEGAL PROCEEDINGS
From time to time, the Company is involved in various legal proceedings
arising in the ordinary course of business. Management believes that none of
these matters in which the Company is currently involved, either individually or
in the aggregate, is expected to have a material adverse effect on the Company's
business or financial condition. See "-- Environmental Matters."
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<PAGE> 50
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age as of September 30, 1997 and
position with the Company of each person who is a member of the Board of
Directors or an executive officer of Stanadyne following the Acquisition. All
directors serve for the term for which they are elected or until their
successors are duly elected and qualified or until death, retirement,
resignation or removal.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- ----------------------------------------------------
<S> <C> <C>
William D. Gurley.................. 49 President, Chief Executive Officer and Director
Michael H. Boyer................... 47 Vice President, Chief Financial Officer, Stanadyne
Robert A. Massa.................... 60 Vice President, Human Resources, Stanadyne
Arthur S. Caruso................... 56 Vice President and General Manager, Precision Engine
William W. Kelly................... 45 Vice President, Engineering & Marketing,
Diesel Systems Division
Don Buonomo........................ 58 Vice President, Quality and Reliability, Stanadyne
Lee Janik.......................... 54 Vice President, Power Products Division
Bryan M. Wysong.................... 54 Vice President, European Operations,
Managing Director, Stanadyne Automotive S.p.A.
W. Richard Bingham................. 61 Director
Robert Cizik....................... 66 Director and Chairman of the Board
Kenneth J. Diekroeger.............. 35 Director
Theodore C. Rogers................. 63 Director
Lawrence W. Ward, Jr............... 45 Director
</TABLE>
WILLIAM D. GURLEY
President, Chief Executive Officer and Director
Mr. Gurley came to Stanadyne's Diesel Systems Division in 1984 as Vice
President of Marketing and Planning and was promoted in 1987 to the position of
Vice President, Marketing and Product Engineering. With the formation of
Holdings in 1989, Mr. Gurley was promoted to the position of Executive Vice
President, Marketing, Engineering and Operations. At that time, he was elected
as a director of Stanadyne Automotive Corp. In 1995, he was promoted to his
current position. Prior to joining Stanadyne, he worked for the Garrett
Corporation's Automotive Products Company (now a division of Allied-Signal) in a
series of sales-management positions. Mr. Gurley eventually became the President
and General Manager of its Japanese subsidiary. Before Garrett Corporation, he
worked at the Packard Electric Division General Motors in engineering,
manufacturing and sales positions. Mr. Gurley holds a B.S. in mechanical
engineering from Rose Hulman Institute of Technology and an M.B.A. degree from
Pepperdine University.
MICHAEL H. BOYER
Vice President, Chief Financial Officer, Stanadyne
Mr. Boyer joined Stanadyne in July 1978 and held progressively more
responsible positions in accounting until being named Controller of the Diesel
System Division in 1985. When Holdings was formed in 1989, Mr. Boyer was
promoted to his current position. Prior to Stanadyne, he worked for the Dexter
Corporation. Mr. Boyer holds a B.B.A. degree in accounting from the University
of Massachusetts and an M.B.A. from Western New England College.
ROBERT A. MASSA
Vice President, Human Resources, Stanadyne
Mr. Massa joined Stanadyne in October 1990 as Vice President, Human
Resources. Prior to joining Stanadyne, he worked in the Hartford area for
Veeder-Root for 13 years in a variety of managerial positions in
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<PAGE> 51
Employee Relations and finally as Vice President, Industrial and Community
Relations. Mr. Massa holds a B.S. degree from the University of Hartford and is
a graduate of the Management Development Program conducted by The Hartford
Graduate Center.
ARTHUR S. CARUSO
Vice President and General Manager, Precision Engine
Mr. Caruso joined Stanadyne's Precision Products Division (the predecessor
entity to Precision Engine) in 1965 and has held progressively more responsible
positions in finance and manufacturing since that time. He was designated
Manager at Precision Engine's manufacturing plant in Tallahassee in 1986, having
served previously as the Factory Manager at the Bellwood Plant, and was promoted
to his present position in late 1988. Mr. Caruso holds a B.S. degree in
accounting/finance from Elmhurst College and an M.B.A. from the University of
Chicago.
WILLIAM W. KELLY
Vice President, Engineering & Marketing, Diesel Systems Division
Mr. Kelly joined Stanadyne in May 1982 as Assistant Chief Engineer for
Advanced Engineering and was promoted to Director of Product Engineering in
October 1997. Effective with the formation of Stanadyne Automotive Corp., Mr.
Kelly was appointed to his current position, Vice President of Engineering and
Marketing for Diesel Systems Division. Previously, he worked for Eaton
Corporation for one year in new product development, preceded by eight years
with Chrysler Corporation in various areas of vehicle and engine systems
engineering. Mr. Kelly holds an M.S. degree from Wayne State University
(Michigan) and a B.S. Engineering degree from Oakland University (Michigan).
DON BUONOMO
Vice President, Quality and Reliability, Stanadyne
Mr. Buonomo joined Stanadyne in May 1997 as Vice President, Quality and
Reliability. Prior to joining Stanadyne, he served as Vice President, Corporate
Quality with C. Cowles & Company and Vice President, Quality & Reliability with
Veeder-Root Company. Mr. Buonomo holds a M.S. in Management from the Hartford
Graduate Center and a B.A. from Dowling Center.
LEE JANIK
Vice President, Power Products Division
Mr. Janik joined Stanadyne in March 1970 as a development engineer and was
promoted to positions of increasing responsibility in Product Engineering,
Reliability and Quality Assurance, Manufacturing and Manufacturing Engineering
before becoming Director of the Power Products Business Unit in 1987. Effective
with the formation of Stanadyne Automotive Corp. in 1989, Mr. Janik was
appointed to his current position, Vice President, Power Products Division.
Prior to joining Stanadyne, Mr. Janik worked for four years with the Hamilton
Standard Division of United Technologies Corp. in the Quality Assurance
Department. Mr. Janik holds a B.S.M.E. degree from Marquette University and a
Masters in Business Management from the Hartford Graduate Center.
BRYAN M. WYSONG
Vice President, European Operations, Managing Director, Stanadyne Automotive
S.p.A.
Mr. Wysong joined Stanadyne in October 1969 as a Development Engineer and
was promoted to increasingly more responsible positions in Engineering, Service,
Sales and Management before becoming Director of Engineering in 1984. Effective
with the formation of Stanadyne Automotive Corp. in 1989, Mr. Wysong was
appointed to his current position as Director, European Operations. Before
becoming part of the Stanadyne team, he served in the U.S. Navy as a
Commissioned Officer, last serving as Executive Officer aboard the USS Gallop
PG-85. Mr. Wysong holds a B.S.M.E. degree from the University of Illinois and an
M.B.A. from the University of Hartford.
50
<PAGE> 52
W. RICHARD BINGHAM
Director
Mr. Bingham is a Director, the President, the Treasurer and the Assistant
Secretary of American Industrial Partners Corporation. He co-founded AIP
Management Co. and has been a director and officer of AIP Management Co. since
1989. He was elected to the Board of Directors for Stanadyne Automotive Corp. in
1997. Mr. Bingham is also a director of Bucyrus International, Inc., Day
International Group, Inc., Easco Corporation, RBX Corporation and Sweetheart
Holdings, Inc. He formerly served on the boards of Avis, Inc., ITT Life
Insurance Corporation and Valero Energy Corporation.
ROBERT CIZIK
Director and Chairman of the Board
Mr. Cizik is a Director and a Managing Director of American Industrial
Partners Corporation. He was elected to the Board of Directors for Stanadyne
Automotive Corp. in 1997. Mr. Cizik served as Chairman and Chief Executive
Officer of Cooper Industries, Inc., a diversified international manufacturing
company, from 1975 to 1996. Mr. Cizik is Chairman of the Board of Easco
Corporation and a director of Air Products and Chemicals, Inc., Harris
Corporation and Temple-Inland, Inc.
KENNETH J. DIEKROEGER
Director
Mr. Diekroeger joined the San Francisco office of AIP in 1996 from The
Shansby Group, a private equity investment firm, where he had been employed
since before January 1, 1992, and where he sourced, executed and served as a
director for several middle-market investments and buyouts. He was elected to
the Board of Directors for Stanadyne Automotive Corp. in 1997.
THEODORE C. ROGERS
Director
Mr. Rogers is a Director, the Chairman of the Board and the Secretary of
American Industrial Partners Corporation. He co-founded AIP Management Co. and
has been a director and officer of AIP Management Co. since 1989. Mr. Rogers is
currently a director of Bucyrus International, Inc., Day International Group,
Inc., Derby International, Easco Corporation, RBX Corporation and Sweetheart
Holdings, Inc. He was elected to the Board of Directors for Stanadyne Automotive
Corp. in 1997.
LAWRENCE W. WARD, JR.
Director
Mr. Ward has been an employee of AIP since 1992. From 1989 to 1992, he was
Vice President and Chief Financial Officer of Plantronics, Inc., a
telecommunications equipment company. Mr. Ward is currently a director of
Bucyrus International, Inc., Day International Group, Inc., Easco Corporation
and RBX Corporation. He was elected to the Board of Directors for Stanadyne
Automotive Corp. in 1997.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
Directors are not expected to receive compensation for their services as
directors, with the exception of the Chairman of the Board, who will receive
$150,000 per year. Directors of the Company will be entitled to reimbursement of
their reasonable out-of-pocket expenses in connection with their travel to and
attendance at meetings of the board of directors or committees thereof.
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<PAGE> 53
COMPENSATION OF EXECUTIVE OFFICERS
The compensation of executive officers of the Company is determined by the
Board of the Directors of the Company. The following table sets forth
information concerning compensation received by the five most highly compensated
officers of the Company for services rendered in fiscal 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL LOCATION YEAR SALARY BONUS COMPENSATION(1) COMPENSATION(2)
- -------------------------------------- ---- -------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
William D. Gurley..................... 1997 $300,000 $ 58,013 33,334 $ 916,626
(President, Chief Executive Officer
and Director)
Michael H. Boyer...................... 1997 190,000 39,504 23,381 565,028
(Vice President, Chief Financial
Officer)
Arthur S. Caruso...................... 1997 160,000 114,405 28,579 248,870
(Vice President and General Manager)
Lee Janik............................. 1997 140,000 4,821 21,041 294,054
(Vice President)
William W. Kelly...................... 1997 200,000 7,173 20,986 567,602
(Vice President, Engineering &
Marketing)
</TABLE>
- ---------------
(1) Other Annual Compensation is received in the form of taxable and nontaxable
fringe benefits, which include, among other things, club allowances,
personal umbrella insurance, executive life and disability insurance, and
automobile leases.
(2) Other compensation was paid in 1997 in connection with the Acquisition
Transactions. Prior to the Acquisition Transactions, Stanadyne Automotive
Corp. maintained two incentive plans for top level executives: the Debt
Reduction Agreement ("DRA") and the Equity Participation Promotion
Agreement ("EPP"). The DRA was an incentive plan where cash was awarded to
plan members if certain performance objectives were achieved. The EPP was a
stock incentive plan pursuant to which restricted stock granted to plan
members in 1989 would vest upon achieving certain pre-designated
performance benchmarks. Immediately prior to the Acquisition Transactions,
the DRA was paid in full and all stock issued pursuant to the EPP was
accelerated. The EPP and DRA were terminated and all stock owned by
management was sold in connection with the Acquisition Transactions.
EMPLOYMENT AGREEMENTS
William D. Gurley is the Company's President and Chief Executive Officer.
For the fiscal year ended December 31, 1997, the Company paid Mr. Gurley an
annual salary of $300,000 and a bonus of $58,013 and the Company paid $33,334
for various expenses incurred by Mr. Gurley, which represents additional
compensation. The Company has entered into an employment agreement with Mr.
Gurley, the terms of which provide for Mr. Gurley to serve as the Company's
Chief Executive Officer with an annual base compensation of $320,000, subject to
an annual increase, an annual bonus plan administered at the discretion of the
Company's board of directors, and a stock option plan. See "-- Stock Option
Plan." The Company currently compensates Mr. Gurley in accordance with such
terms.
Michael H. Boyer is the Company's Chief Financial Officer. For the fiscal
year ended December 31, 1997, the Company paid Mr. Boyer an annual salary of
$190,000 and a bonus of $39,504 and the Company paid $23,381 for various
expenses incurred by Mr. Boyer, which represents additional compensation. The
Company has entered into an employment agreement with Mr. Boyer the terms of
which provide for Mr. Boyer to serve as the Company's Chief Financial Officer
with an annual base compensation of $202,000, subject to an annual increase, an
annual bonus plan administered at the discretion of the Company's board of
directors, and a stock option plan. See "-- Stock Option Plan." The Company
currently compensates Mr. Boyer in accordance with such terms.
52
<PAGE> 54
Arthur S. Caruso is the Company's Vice President and General Manager of
Precision Engine Products Corp. For the fiscal year ended December 31, 1997, the
Company paid Mr. Caruso an annual salary of $160,000 and a bonus of $114,405 and
the Company paid $28,579 for various expenses incurred by Mr. Caruso, which
represents additional compensation. The Company has entered into an employment
agreement with Mr. Caruso, the terms of which provide for Mr. Caruso to serve as
Vice President and General Manager of Precision Engine Products Corp. with an
annual base compensation of $185,000, subject to an annual increase, an annual
bonus plan administered at the discretion of the Company's board of directors,
and a stock option plan. See "-- Stock Option Plan." The Company currently
compensates Mr. Caruso in accordance with such terms.
Lee Janik is the Company's Vice President of the Power Products Division.
For the fiscal year ended December 31, 1997, the Company paid Mr. Janik an
annual salary of $140,000 and a bonus of $4,821 and the Company paid $21,041 for
various expenses incurred by Mr. Janik, which represents additional
compensation. Mr. Janik is an at-will employee with an annual base compensation
of $185,000, subject to an annual increase, an annual bonus plan administered at
the discretion of the Company's board of directors, and a stock option plan. See
"-- Stock Option Plan." The Company currently compensates Mr. Janik in
accordance with such terms.
William W. Kelly is the Company's Vice President of Engineering and
Marketing for the Diesel Systems Division. For the fiscal year ended December
31, 1997, the Company paid Mr. Kelly an annual salary of $200,000 and a bonus of
$7,173 and the Company paid $20,986 for various expenses incurred by Mr. Kelly,
which represents additional compensation. The Company has entered into an
employment agreement with Mr. Kelly, the terms of which provide for Mr. Kelly to
serve as the Company's Vice President of Engineering and Marketing for the
Diesel Systems Division with an annual base compensation of $210,000, subject to
an annual increase, an annual bonus plan administered at the discretion of the
Company's board of directors, and a stock option plan. See "-- Stock Option
Plan." The Company currently compensates Mr. Kelly in accordance with such
terms.
STOCK OPTION PLAN
The Board of Directors will adopt a stock plan (the "Stock Plan"), which
provides for the grant to certain key employees and/or directors of the Company
of stock options that are non-qualified options for federal income tax purposes.
The Board of Directors will have the exclusive authority under the Stock Plan
(except as otherwise provided in the Stock Plan) to determine (i) who will
receive awards, (ii) the type, size and terms of awards, (iii) the time when
awards will be granted, and (iv) vesting criteria, if any, of the awards.
EMPLOYEE BENEFIT PLANS
401(k) PLAN
The Company sponsors two savings plans which are intended to be qualified
under Sections 401(a) and 401(k) of the Internal Revenue Code. All regular
employees, including salaried and hourly employees, of the Company and its
subsidiary, Precision Engine Products Corp., who are employed at the Windsor
Plant, Jacksonville Plant and Washington Plant and salaried employees employed
at the Tallahassee Plant and Melrose Park Plant are eligible to participate in
the Stanadyne Automotive Corp. Savings Plus Plan (the "SAC Savings Plan") and
beginning in January 1, 1998, hourly employees at the Tallahassee Plant are
eligible to participate in the Precision Engine Products Corp. Retirement Fund
(the "PEPC 401(k) Plan"). For each employee who elects to participate in the SAC
Savings Plan and makes a contribution thereto, the Company makes a matching
contribution. The maximum matching contribution for any participant, excluding
the participants in the PEPC 401(k) Plan, for any year is 50% of such
participant's contributions up to a maximum amount of $300.00. The participants
in the PEPC 401(k) Plan receive a Company contribution of $300.00 per year plus
a maximum matching contribution of $100.00.
53
<PAGE> 55
PENSION PLAN TABLE(1)(2)
<TABLE>
<CAPTION>
YEARS OF SERVICE
-----------------------------------------------
15 20 25 30 35
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
125,000.......................................... 27,848 37,131 46,414 55,696 61,946
150,000.......................................... 34,223 45,631 57,039 68,446 75,946
175,000.......................................... 40,598 54,131 67,664 81,196 89,946
200,000.......................................... 46,973 62,631 78,289 93,946 103,946
225,000.......................................... 53,348 71,131 88,914 106,696 117,946
250,000.......................................... 59,723 79,631 99,539 119,446 131,946
300,000.......................................... 72,473 96,631 120,789 144,946 159,946
400,000.......................................... 97,973 130,631 163,289 195,946 215,946
450,000.......................................... 110,723 147,631 184,539 221,446 243,946
500,000.......................................... 123,473 164,631 205,789 246,946 271,946
</TABLE>
- ---------------
Note:
(1) Amounts shown above represent the annual benefit from the SAC Pension Plan
(as defined herein) plus the benefit from the SERP (as defined herein).
(2) For this illustration, the annual social security benefit was assumed to be
$16,104 for the calculation of the Social Security offset.
The Company formerly maintained a noncontributory defined benefit pension
plan entitled the "Precision Engine Products Corp. Tallahassee Hourly Pension
Plan." This plan was terminated as of December 31, 1997. The Company now
maintains only one noncontributory defined benefit pension plan entitled the
"Stanadyne Automotive Corp. Pension Plan" (the "SAC Pension Plan").
The SAC Pension Plan. The SAC Pension Plan provides benefits for all
non-collectively bargained, salaried employees of the Company and hourly
employees of the Company employed at the Hartford, Washington and Jacksonville
facilities. Salaried employees who participate in the SAC Pension Plan are
provided benefits calculated under one of two different formulas. Salaried
participants are entitled to the greater of the two benefit amounts. Under
Formula One, benefits are based upon (i) a percentage of the monthly average
compensation received by a participant during the five consecutive calendar
years of employment that would produce the highest such average (the "Final
Average Compensation"), (ii) the years of service of the participant with the
Company and certain related or predecessor employers ("Years of Credited
Service"), and (iii) a percentage of the Final Average Compensation that is in
excess of the Social Security taxable wage base (the "Excess Compensation").
Specifically, the accrued benefit payable under Formula One of the SAC Pension
Plan is equal to (w) + (x) = (y) = (z), where
<TABLE>
<S> <C> <C>
(w) = 1.7% of Final Average Compensation times Years of Credited Service (not in excess
of 30)
(x) = 1% of Final Average Compensation times Years of Credited Service in excess of 30
(y) = 1.66% of primary Social Security times Years of Credited Service (not in excess of
30)
(z) = Annuity for employees actively employed prior to July 2, 1988 (where applicable)
</TABLE>
Formula Two under the SAC Pension Plan provides salaried participants with
an accrued benefit equal to $18.00 times Years of Credited Service less an
Annuity for employees actively employed prior to July 2, 1988 (where
applicable).
Benefits provided under the SAC Pension Plan for hourly employees are based
upon (i) a fixed amount per month and (ii) the years of service of the
participant with the Company and certain related or predecessor employers
("Years of Credited Service"). Specifically, the accrued benefit ordinarily
payable under the SAC Pension Plan for hourly employees employed at the
Washington and Jacksonville locations is equal to: $11.00 multiplied by the
participant's Years of Credited Service. Hourly employees employed at the
Hartford facility receive a monthly benefit of $18.00 multiplied by Years of
Credited Service.
54
<PAGE> 56
For purposes of the SAC Pension Plan, compensation used in the
determination of Final Average Compensation includes total earnings received for
personal services to the Company. For the 1995 and 1996 calendar years, the
total compensation that can be considered for any purpose under the SAC Pension
Plan is limited to $150,000, and for 1997, the limit is $160,000, pursuant to
requirements imposed by the Internal Revenue Code of 1986, as amended (the
"Code"). The Code also places certain other limitations on the annual benefits
that may be paid under the Plan.
The Company has also adopted two nonqualified plans entitled the "Stanadyne
Automotive Corp. Benefit Equalization Plan" and the "Stanadyne Automotive Corp.
Supplemental Retirement Plan" (together, the "SERP"), which are designed to
supplement the benefits payable under the SAC Pension Plan for designated
employees. The annual benefit payable under the SERP is equal to the difference
between the benefit the designated employee would have received under the SAC
Pension Plan if certain Code limitations did not apply and the designated
employee's SAC Pension Plan benefit.
Benefits may be paid under the SAC Pension Plan and the SERP in the form of
(i) a straight-life annuity for the life of the participant; (ii) a 50% joint
and survivor annuity for the lives of the participant and spouse; (iii) a 75% or
100% joint and survivor annuity whereby the participant receives a reduced
monthly benefit for life and the spouse receives 75% or 100% of such reduced
monthly benefit for life; and (iv) for participants with an accrued benefit of
$3,500.00 or less, a lump sum.
The Years of Credited Service under the SAC Pension Plan at December 31,
1997, were 13.75, 20.0, 32.414, 27.793 and 16.0 for Messrs. Gurley, Boyer,
Caruso, Janik and Kelly, respectively. The estimated annual benefits payable
under the Plan and the SERP are illustrated as follows:
<TABLE>
<CAPTION>
ESTIMATED ACCRUED
PENSION BENEFIT AS OF 12/31/97
--------------------------------
THE SAC
PENSION PLAN THE SERP TOTAL
------------ -------- ------
<S> <C> <C> <C>
Boyer........................................................... 40,773 13,203 53,977
Caruso.......................................................... 47,848 31,616 79,464
Gurley.......................................................... 34,505 24,482 58,986
Kelly........................................................... 32,408 10,963 43,371
Janik........................................................... 33,944 847 34,791
</TABLE>
55
<PAGE> 57
SECURITY OWNERSHIP
The Company is authorized by its Certificate of Incorporation to issue
10,000 shares of Common Stock, par value $.01 per share ("Company Common
Stock"). Holdings owns all of the outstanding and issued shares of Company
Common Stock. Holdings is authorized by its Certificate of Incorporation to
issue 1000 shares of Common Stock, par value $.01 per share ("Holdings Common
Stock"). AIP and management will own approximately all of Holdings Common Stock.
All of the capital stock of the Guarantors is owned by the Company and is
pledged to secure borrowings under the New Credit Agreement. After the
consummation of the Acquisition Transactions, the Company plans to adopt the
Stock Plan, which shall provide for the grant to certain key employees and/or
directors of the Company of stock options that are non-qualified options for
federal income tax purposes.
The following table sets forth certain information with respect to the
common and preferred equity interests of Holdings. See "The Acquisition
Transactions."
<TABLE>
<CAPTION>
PERCENTAGE
OF
OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK
----------------------------------------------------------------------- ------------
<S> <C>
AIP.................................................................... 95.22%
Management Investors................................................... 4.78%
</TABLE>
56
<PAGE> 58
CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS
ACQUISITION ARRANGEMENTS
In connection with the Acquisition Transactions, Holdings, AIP and other
stockholders of Holdings entered into a stockholders agreement (as subsequently
amended, the "Stockholders Agreement") pursuant to which such persons will be
granted certain registration rights and participation rights. Pursuant to the
Stockholders Agreement, AIP shall have the right to elect the directors of
Holdings. It is expected that the directors of the Company shall be the same as
the directors of Holdings.
In connection with the Acquisition Transactions, Holdings and certain
Sellers who are also members of the management of the Company entered into
securities purchase agreements (as subsequently amended, the "Securities
Purchase Agreements") pursuant to which each such Seller could put their
Holdings Common Stock to Holdings on or before February 2, 1998 if Holdings and
such Seller were unable to agree to an amendment to the Stockholders Agreement.
At the close of the Acquisition Transactions, AIP was paid a fee of $4.0
million and was reimbursed for out-of-pocket expenses in connection with the
negotiation of the Acquisition Transactions and for providing certain investment
banking services to the Company, including the arrangement and negotiation of
the terms of the New Credit Agreement and the arrangement and negotiation of the
terms of the Notes, and for other financial advisory and management consulting
services.
MANAGEMENT SERVICES AGREEMENT
Pursuant to a management services agreement, AIP expects to provide
substantial ongoing financial and management services to the Company utilizing
the extensive operating and financial experience of AIP's principals. AIP will
receive an annual fee of $1.1 million for providing general management,
financial and other corporate advisory services to the Company, payable
semiannually 45 days after the scheduled interest payment date for the Exchange
Notes, and will be reimbursed for out-of-pocket expenses. The fees will be paid
to AIP pursuant to a management services agreement among AIP and the Company and
will be subordinated in right of payment to the Exchange Notes.
57
<PAGE> 59
DESCRIPTION OF EXCHANGE NOTES
GENERAL
The Exchange Notes will be issued pursuant to an Indenture (the
"Indenture") between Stanadyne Automotive Corp. (the "Company") and United
States Trust Company of New York, as trustee (the "Trustee"). The terms of the
Exchange Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (the "Trust Indenture
Act"). The Exchange Notes are subject to all such terms, and holders of Exchange
Notes are referred to the Indenture and the Trust Indenture Act for a statement
thereof. The following summary of certain provisions of the Indenture does not
purport to be complete and is qualified in its entirety by reference to the
Indenture, including the definitions therein of certain terms used below. A copy
of the proposed form of Indenture and Registration Rights Agreement is available
as set forth under "-- Additional Information." The definitions of certain terms
used in the following summary are set forth below under "-- Certain
Definitions."
The Notes are and the Exchange Notes will be senior subordinated,
unsecured, general obligations of the Company, limited in aggregate principal
amount to $125.0 million (of which $100.0 million was issued in the Notes
Offering). The Notes and the Exchange Notes (together the "Senior Subordinated
Notes") will be jointly and severally irrevocably and unconditionally guaranteed
on a senior subordinated basis by each of the Company's present and future
Subsidiaries (the "Guarantors") other than Subsidiaries that are not guarantors.
The obligations of each Guarantor under its guarantee, however, will be limited
in a manner intended to avoid it being deemed a fraudulent conveyance under
applicable law. See "-- Certain Bankruptcy Limitations" below. The term
"Subsidiaries" as used herein, however, does not include Unrestricted
Subsidiaries.
The Indenture provides, in addition to the Notes issued on December 11,
1997 and the Exchange Notes being issued on the Issue Date, for the issuance of
additional Notes having identical terms and conditions to the Notes offered
hereby (the "Additional Notes"), subject to compliance with the covenants
contained in the Indenture. Any Additional Notes will be part of the same issue
as the Exchange Notes offered hereby and will vote on all matters with the
Exchange Notes offered hereby. The aggregate principal amount of Senior
Subordinated Notes and Additional Notes will be limited to up to $125.0 million
at any one time outstanding. For purposes of this "Description of Exchange
Notes", reference to the Senior Subordinated Notes does not include the
Additional Notes.
As of the date of the Indenture, none of the Company's Subsidiaries were
Unrestricted Subsidiaries. However, under certain circumstances, the Company
will be able to designate current or future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries generally will not be subject to the
restrictive covenants set forth in the Indenture and will not be Guarantors.
Notwithstanding anything herein to the contrary, the provisions of the Indenture
do not prevent or restrict consummation of the Exchange Offer contemplated
herein.
PRINCIPAL, MATURITY AND INTEREST
The Senior Subordinated Notes are limited in aggregate principal amount to
$125.0 million (of which $100.0 million were issued on December 11, 1997 in the
Notes Offering) and will mature on December 15, 2007. Interest on the Senior
Subordinated Notes will accrue at the rate of 10 1/4% per annum and will be
payable semi-annually in arrears on June 15 and December 15, commencing on June
15, 1998, to holders of record on the immediately preceding June 1 and December
1. Interest on the Senior Subordinated Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of original issuance. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months. Principal, premium if any, and interest
and Liquidated Damages, if any, on the Senior Subordinated Notes will be payable
at the office or agency of the Company maintained for such purpose within the
City and State of New York or, at the option of the Company, any payment of
interest and Liquidated Damages, if any, may be made by check mailed to the
holders of the Senior Subordinated Notes at their respective addresses set forth
in the register of holders of Senior Subordinated Notes; provided that all
payments with respect to Global Notes and Certificated Notes, the holders of
whom have given wire transfer instructions to the
58
<PAGE> 60
Company, will be required to be made by wire transfer of immediately available
funds to the accounts specified by the holders thereof. Until otherwise
designated by the Company, the Company's office or agency in New York will be
the office of the Trustee maintained for such purpose. The Exchange Notes will
be issued in denominations of $1,000 and integral multiples thereof.
SUBORDINATION
The payment of principal of premium, if any, and interest on the Senior
Subordinated Notes, and Liquidated Damages, if any, is subordinated in right of
payment, as set forth in the Indenture, to the prior payment in full in cash or
Cash Equivalents of all Senior Indebtedness, whether outstanding on the date of
the Indenture or thereafter incurred. In addition, as set forth in "Subsidiary
Guarantees" below, the Subsidiary Guarantee will be a general unsecured
obligation of the Guarantors subordinated in right of payment to the Guarantor
Senior Indebtedness. The Senior Subordinated Notes and Subsidiary Guarantees are
effectively subordinated to the indebtedness of certain Foreign Subsidiaries. As
of September 30, 1997, on a pro forma basis after giving effect to the
Acquisition Transactions, the Company and its subsidiaries would have had
approximately $62.2 million of Senior Indebtedness and Senior Guarantor
Indebtedness, including approximately $1.8 million of indebtedness of Foreign
Subsidiaries all of which would effectively rank senior in right of payment to
the Senior Subordinated Notes and Subsidiary Guarantees.
Upon any distribution to creditors of the Company or a Guarantor in a
liquidation or dissolution of the Company or a Guarantor or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or a Guarantor or its property, whether voluntary or involuntary, an
assignment for the benefit of creditors or any marshaling of the Company's or
Guarantors assets and liabilities, the holders of Senior Indebtedness or the
applicable Guarantor Senior Indebtedness, as applicable, will be entitled to
receive payment in full in cash or Cash Equivalents of all Obligations due in
respect of such Senior Indebtedness or the applicable Guarantor Senior
Indebtedness, as applicable (including interest after the commencement of any
such proceeding at the rate specified in the applicable Senior Indebtedness, or
the applicable Guarantor Senior Indebtedness, as applicable, whether or not
allowable as a claim in any such proceeding), before the holders of Senior
Subordinated Notes or the applicable Guarantees, will be entitled to receive any
payment with respect to the Senior Subordinated Notes, or the applicable
Guarantees, and until all Obligations with respect to the applicable Senior
Indebtedness or the applicable Guarantor Senior Indebtedness, as applicable, are
paid in full in cash or Cash Equivalents, any distribution to which the holders
of Senior Subordinated Notes or the applicable Guarantees would be entitled
shall be made to the holders of the applicable Senior Indebtedness or the
applicable Guarantor Senior Indebtedness, as applicable (except that holders of
Senior Subordinated Notes or the applicable Guarantees, may receive securities
that are subordinated at least to the same extent as the Senior Subordinated
Notes or the applicable Guarantees to Senior Indebtedness or the applicable
Guarantor Senior Indebtedness, as applicable, and any securities issued in
exchange for the applicable Senior Indebtedness or the applicable Guarantor
Senior Indebtedness, as applicable, and that have a final maturity date and
Weighted Average Life to Maturity (as defined herein) that is the same as or
greater than the Senior Subordinated Notes or the applicable Guarantees, and
that are not secured by any collateral and payments made from the trust
described under "-- Legal Defeasance and Covenant Defeasance").
The Company and the Guarantors also may not make any payment upon or in
respect of the Senior Subordinated Notes or the applicable Guarantees (except in
such subordinated securities or from the trust described under "-- Legal
Defeasance and Covenant Defeasance") if (i) a default in the payment of the
principal of, premium, if any, or interest on Designated Senior Indebtedness
occurs and is continuing beyond any applicable period of grace (a "Payment
Default") or (ii) any other default occurs and is continuing with respect to
Designated Senior Indebtedness that permits holders of the Designated Senior
Indebtedness as to which such default relates to accelerate its maturity (a
"Nonpayment Default") and the Trustee receives a notice of such default (a
"Payment Blockage Notice") from the Company or the representative of the holders
of any Designated Senior Indebtedness. Payments on the Senior Subordinated Notes
may and shall be resumed (a) in the case of a Payment Default, upon the date on
which such default is cured or waived and (b) in case of a Nonpayment Default,
the earlier of the date on which such Nonpayment Default is cured or waived or
179 days after the date on which the applicable Payment Blockage Notice is
received, unless the
59
<PAGE> 61
maturity of any Designated Senior Indebtedness has been accelerated. No new
period of payment blockage may be commenced unless and until 360 days have
elapsed since the commencement of the immediately prior Payment Blockage Notice.
No Nonpayment Default that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice (it being acknowledged that any subsequent
action, or any breach of any financial covenant for a period ending after the
expiration of such Payment Blockage Period that, in either case, would give rise
to a new event of default, even though it is a breach pursuant to any provision
under which a prior event of default previously existed, shall constitute a new
event of default for this purpose).
The Indenture further requires that the Company promptly notify holders of
Senior Indebtedness if payment of the Senior Subordinated Notes is accelerated
because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, holders of Senior Subordinated Notes may recover
less ratably than creditors of the Company who are holders of Senior
Indebtedness. See "Risk Factors -- Subordination." On a pro forma basis, after
giving effect to issuance of the Senior Subordinated Notes and the application
of the proceeds therefrom in the Acquisition Transactions, the principal amount
of Senior Indebtedness outstanding at September 30, 1997 would have been
approximately $60.4 million. The Indenture limits, subject to certain financial
tests, the amount of additional Indebtedness, including Senior Indebtedness,
that the Company and its subsidiaries can incur. See "-- Certain
Covenants-Incurrence of Indebtedness and Issuance of Preferred Stock."
No provision contained in the Indenture or the Senior Subordinated Notes
affects the obligation of the Company and the Guarantors, which is absolute and
unconditional, to pay, when due, principal of, premium, if any, and interest on
the Senior Subordinated Notes. The subordination provisions of the Indenture and
the Senior Subordinated Notes do not prevent the occurrence of any Default or
Event of Default under the Indenture or limit the rights of the Trustee or any
holder to pursue any other rights or remedies with respect to the Senior
Subordinated Notes.
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Senior Subordinated Notes are
guaranteed pursuant to the Guarantee and any future subsidiary guarantees
(collectively, the "Subsidiary Guarantees") on a senior subordinated basis by
the present Guarantors and any other Subsidiaries that become guarantors
(collectively, the "Guarantors") under the covenant entitled "Additional
Subsidiary Guarantees." The Subsidiary Guarantees of the Guarantors are
subordinated to the prior payment in full of all Guarantor Senior Indebtedness,
of which there would be none as of September 30, 1997 on a pro forma basis, and
the amounts for which the Guarantors will be liable under the guarantees issued
from time to time with respect to Senior Indebtedness. The obligations of each
Guarantor under its Subsidiary Guarantee are limited in a manner intended to not
constitute a fraudulent conveyance under applicable law. See, however, "Risk
Factors -- Fraudulent Transfer Considerations," and "-- Certain Bankruptcy
Limitations" below.
The Indenture provides that no Guarantor (other than as provided in the
immediately following paragraph) may consolidate with or merge with or into
(whether or not such Guarantor is the surviving Person) another corporation,
Person or entity whether or not affiliated with such Guarantor unless (i)
subject to the provisions of the following paragraph, the Person formed by or
surviving any such consolidation or merger (if other than such Guarantor)
assumes all the obligations of such Guarantor pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the Trustee under the
Indenture; (ii) immediately after giving effect to such transaction no Default
or Event of Default exists; and (iii) such Guarantor, or any Person formed by or
surviving any such consolidation or merger, would be permitted by virtue of the
Company's pro forma Fixed Charge Coverage Ratio to incur, immediately after
giving effect to such transaction, at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant
described under the caption "-- Incurrence of Indebtedness and Issuance of
Preferred Stock"; provided, however, that the foregoing may not apply to the
merger of two or more Guarantors with and into each other.
60
<PAGE> 62
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, by way of merger, consolidation or otherwise, then such Guarantor (in
the event of a sale or other disposition of all of the capital stock of such
Guarantor) or the corporation acquiring the property (in the event of a sale or
other disposition of all of the assets of such Guarantor) will be released and
relieved of any obligations under its Subsidiary Guarantee; provided that the
Net Proceeds of such sale or other disposition are applied in accordance with
the applicable provisions of the Indenture. See "-- Repurchase at the Option of
Holders -- Asset Sales."
CERTAIN BANKRUPTCY LIMITATIONS
The Company conducts certain of its business through Guarantors, which have
guaranteed the Company's Obligations with respect to the Senior Subordinated
Notes and Unrestricted Subsidiaries and Foreign Subsidiaries, which Unrestricted
Subsidiaries and Foreign Subsidiaries do not guarantee the Senior Subordinated
Notes. See "Risk Factors." Holders of the Senior Subordinated Notes will be
direct creditors of each Guarantor by virtue of its guarantee. Nonetheless, in
the event of the bankruptcy or financial difficulty of a Guarantor, such
Guarantor's obligations under its guarantee may be subject to review and
avoidance under state and federal fraudulent transfer laws. Among other things,
such obligations may be avoided if a court concludes that such obligations were
incurred for less than reasonably equivalent value or fair consideration at a
time when the Guarantor was insolvent, was rendered insolvent, or was left with
inadequate capital to conduct its business. A court would likely conclude that a
Guarantor did not receive reasonably equivalent value or fair consideration to
the extent that the aggregate amount of its liability on its guarantee exceeds
the economic benefits it receives in the Exchange Offer. The obligations of each
Guarantor under its guarantee will be limited in a manner intended to cause it
not to be a fraudulent conveyance under applicable law, although no assurance
can be given that a court would give the holder the benefit of such provision.
See "Risk Factors -- Fraudulent Transfer Considerations."
If the obligations of a Guarantor under its guarantee were avoided, holders
of Senior Subordinated Notes would have to look to the assets of any remaining
Guarantors for payment. There can be no assurance in that event that such assets
would suffice to pay the outstanding principal and interest on the Senior
Subordinated Notes.
OPTIONAL REDEMPTION
The Senior Subordinated Notes will not be redeemable at the Company's
option prior to December 15, 2002 except as provided below. Thereafter, the
Senior Subordinated Notes will be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the applicable redemption date if redeemed during the twelve-month
period beginning on December 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
-------------------------------------------------------------- ----------
<S> <C>
2002.......................................................... 105.125%
2003.......................................................... 103.417%
2004.......................................................... 101.708%
2005 and thereafter........................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to December 15,
2000, the Company may (but shall not have the obligation to) redeem up to 35% of
the original aggregate principal amount of the Senior Subordinated Notes at a
redemption price of 110.250% of the principal amount thereof, in each case plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
redemption date, with the Net Cash Proceeds received by the Company from one or
more Equity Offerings; provided that, in each case at least 65% of the aggregate
principal amount of Senior Subordinated Notes originally issued remain
61
<PAGE> 63
outstanding immediately after the occurrence of such redemption; and provided
further, that such redemption shall occur within 60 days of the date of the
closing of such Equity Offering.
If less than all of the Senior Subordinated Notes are to be redeemed at any
time, selection of Senior Subordinated 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 Senior Subordinated Notes are listed, or, if the
Senior Subordinated Notes are not so listed, on a pro rata basis, by lot or by
such method as the Trustee shall deem fair and appropriate; provided that no
Senior Subordinated Notes of $1,000 or less shall be redeemed in part. Notices
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 Senior Subordinated Notes
to be redeemed at its registered address. If any Senior Subordinated Note is to
be redeemed in part only, the notice of redemption that relates to such Senior
Subordinated Note shall state the portion of the principal amount thereof to be
redeemed. A new Senior Subordinated Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the holder thereof upon
cancellation of the original Senior Subordinated Note. On and after the
redemption date, interest ceases to accrue on the Senior Subordinated Notes or
portions of them called for redemption unless the Company defaults in such
payments due on the redemption date.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Senior Subordinated Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of Senior
Subordinated Notes will have the right to require the Company to repurchase all
or any part (equal to $1,000 or an integral multiple thereof) of such holder's
Senior Subordinated Notes pursuant to the offer described below (the "Change of
Control Offer") at an offer price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of purchase (the "Change of Control
Payment") on a date (the "Change of Control Payment Date") no later than 60
Business Days after the occurrence of the Change of Control. Within 35 days
following any Change of Control, the Company will mail a notice to each holder
describing the transaction or transactions that constitute the Change of Control
and offering to repurchase Senior Subordinated Notes pursuant to the procedures
required by the Indenture and described in such notice, which offer shall remain
open for at least 20 Business Days following its commencement, but in any event
no longer than 30 Business Days. The Company will comply with the requirements
of 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
connection with the repurchase of the Senior Subordinated Notes as a result of a
Change of Control. To the extent that the provisions of any such securities laws
or regulations conflict with the provisions of this paragraph, compliance by the
Company or any of the Guarantors with such laws and regulations shall not in and
of itself cause a breach of its obligations under such covenant.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Senior Subordinated Notes or portions thereof
properly tendered pursuant to the Change of Control Offer, (2) deposit with the
Paying Agent an amount equal to the Change of Control Payment in respect of all
Senior Subordinated Notes or portions thereof so tendered and (3) deliver or
cause to be delivered to the Trustee the Senior Subordinated Notes so accepted
together with an Officers' Certificate stating the aggregate principal amount of
Senior Subordinated Notes or portions thereof being purchased by the Company.
The Paying Agent will promptly mail to each holder of Senior Subordinated Notes
so tendered the Change of Control Payment for such Senior Subordinated Notes,
and the Trustee will promptly authenticate and mail (or cause to be transferred
by book entry) to each holder a new Senior Subordinated Note equal in principal
amount to any unpurchased portion of the Senior Subordinated Notes surrendered,
if any; provided that each such new Senior Subordinated Note will be in a
principal amount of $1,000 or an integral multiple thereof. The
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Company will publicly announce the results of the Change of Control Offer on or
as soon as practicable after the Change of Control Payment Date.
The Indenture provides that, prior to complying with the provisions of this
covenant, but in any event within 30 days following a Change of Control, the
Company will either repay all outstanding Designated Senior Indebtedness or
obtain the requisite consents, if any, under all agreements governing
outstanding Designated Senior Indebtedness to permit the repurchase of Senior
Subordinated Notes required by this covenant. The Company will not be required
to purchase any Senior Subordinated Notes until it has complied with the
preceding sentence, but the Company's failure to make a Change of Control Offer
when required or to purchase tendered Senior Subordinated Notes when tendered
would constitute an Event of Default. See "Risk Factors."
Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the holders of the Senior
Subordinated Notes to require that the Company repurchase or redeem the Senior
Subordinated Notes in the event of a takeover, recapitalization or similar
restructuring.
The Change of Control purchase feature of the Senior Subordinated Notes may
make more difficult or discourage a takeover of the Company, and, thus, the
removal of incumbent management.
The phrase "all or substantially all" of the assets of the Company will
likely be interpreted under applicable state law and will be dependent upon
particular facts and circumstances. As a result, there may be a degree of
uncertainty in ascertaining whether a sale or transfer of "all or substantially
all" of the assets of the Company has occurred. In addition, no assurances can
be given that the Company will be able to acquire Senior Subordinated Notes
tendered upon the occurrence of a Change of Control.
If the Change of Control Payment Date hereunder is on or after an interest
payment Record Date and on or before the associated Interest Payment Date, any
accrued and unpaid interest (and Liquidated Damages, if any) due on such
Interest Payment Date will be paid to the person in whose name a Note is
registered at the close of business on such Record Date, and such interest (and
Liquidated Damages, if applicable) will not be payable to holders who tender the
Senior Subordinated Notes pursuant to the Change of Control Offer.
The Credit Agreement provides that certain change of control events with
respect to the Company constitutes a default thereunder. Any future credit
agreements or other agreements relating to Senior Indebtedness to which the
Company becomes a party may contain similar restrictions and provisions. In the
event a Change of Control occurs at a time when the Company is prohibited from
purchasing Senior Subordinated Notes, the Company could seek the consent of its
lenders to the purchase of Senior Subordinated Notes or could attempt to
refinance the borrowings that contain such prohibition. If the Company does not
obtain such a consent or repay such borrowings, the Company will remain
prohibited from purchasing Senior Subordinated Notes. In such case, the
Company's failure to purchase tendered Senior Subordinated Notes would
constitute an Event of Default under the Indenture which would, in turn,
constitute as default under the Credit Agreement. In such circumstances, the
subordination provisions in the Indenture restricts payments to the holders of
Senior Subordinated Notes.
ASSET SALES
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, engage in an Asset Sale in excess of $1.0 million unless
(i) the Company (or the 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
assets or Equity Interests sold or otherwise disposed of and, in the case of a
lease of assets, a lease providing for rent and other conditions which are no
less favorable to the Company (or the Subsidiary, as the case may be) in any
material respect than the then prevailing market conditions (evidenced in each
case by a resolution of the Board of Directors of such entity set forth in an
Officers' Certificate delivered to the Trustee) and (ii) at least 75% (100% in
the case of lease payments) of the consideration therefor received by the
Company or such Subsidiary is in the form of cash or Cash Equivalents; provided
that the amount of (x) any liabilities (as shown on the Company's or such
Subsidiary's most recent balance sheet or in the notes thereto, but excluding
contingent liabilities and trade payables) of the Company or any Subsidiary
(other than liabilities that are by
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their terms subordinated to the Senior Subordinated Notes or any Guarantee
thereof) that are assumed by the transferee of any such assets and (y) any
notes, securities or other obligations received by the Company or any such
Subsidiaries from such transferee that are promptly, but in no event more than
30 days after receipt, converted by the Company or such Subsidiary into cash
shall (to the extent of the cash received) be deemed to be cash for purposes of
this provision and the receipt of such cash shall be treated as cash received
from the Asset Sale for which such Senior Subordinated Notes or obligations were
received.
The Company or any of its Subsidiaries may apply the Net Proceeds from each
Asset Sale, at its option, within 360 days after the consummation of such Asset
Sale, (a) to permanently reduce any Senior Indebtedness (and in the case of any
senior revolving indebtedness to correspondingly permanently reduce commitments
with respect thereto), (b) for the acquisition of another business or the
acquisition of other long-term assets, in each case, in the same or a Related
Business, or (c) to reimburse the Company or its Subsidiaries for expenditures
made, and costs incurred, to repair, rebuild, replace or restore property
subject to loss, damage or taking to the extent that the Net Proceeds consist of
insurance proceeds received on account of such loss, damage or taking. Pending
the final application of any such Net Proceeds, the Company may temporarily
reduce Senior Revolving Debt or otherwise invest such Net Proceeds in any manner
that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that
are not applied or invested as provided in the first sentence of this paragraph
will be deemed to constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $5.0 million, the Company will be required to make an
offer to all holders of Senior Subordinated Notes (an "Asset Sale Offer") and to
holders of other Indebtedness of the Company outstanding ranking on a parity
with the Senior Subordinated Notes with similar provisions requiring the Company
to make a similar offer with proceeds from asset sales, pro rata in proportion
to the respective principal amounts (or accreted values in the case of
Indebtedness issued with an original issue discount) of the Senior Subordinated
Notes and such other Indebtedness then outstanding, to purchase the maximum
principal amount (or accreted value, as applicable) of Senior Subordinated Notes
and such other Indebtedness, if any, that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount (or accreted value, as applicable) thereof plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of purchase, in
accordance with the procedures set forth in the Indenture. If the aggregate
principal amount (or accreted value, as applicable) of Senior Subordinated Notes
and such Indebtedness surrendered by holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Senior Subordinated Notes and such
Indebtedness to be purchased on a pro rata basis. Upon completion of such offer
to purchase, the amount of Excess Proceeds shall be reset at zero.
Any Asset Sale Offer shall remain open for at least 20 Business Days, in
any event no longer than 30 Business Days, and shall be made in compliance with
all applicable laws, rules, and regulations, including, if applicable,
Regulation 14E of the Exchange Act and the rules and regulations thereunder and
all other applicable Federal and state securities laws. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
this paragraph, compliance by the Company or any of its subsidiaries with such
laws and regulations shall not in and of itself cause a breach of its
obligations under such covenant.
If the payment date in connection with an Asset Sale Offer hereunder is on
or after an interest payment Record Date and on or before the associated
Interest Payment Date, any accrued and unpaid interest (and Liquidated Damages,
if any, due on such Interest Payment Date) will be paid to the person in whose
name a Senior Subordinated Note is registered at the close of business on such
Record Date, and such interest (or Liquidated Damages, if applicable) will not
be payable to holders who tender Senior Subordinated Notes pursuant to such
Asset Sale Offer.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to directly or indirectly: (i) declare or pay any dividend
or make any distribution on account of the Company or any of its Subsidiaries'
or direct or indirect parent's Equity Interests (including, without limitation,
any payment in connection with any merger or consolidation involving the
Company) (other than dividends or distributions
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payable in Equity Interests (other than Disqualified Stock) of the Company or
dividends or distributions payable to the Company or any Subsidiary of the
Company that is a Guarantor); (ii) purchase, redeem or otherwise acquire or
retire for value any Equity Interests of the Company or any direct or indirect
Parent of the Company or other Affiliate or Subsidiary of the Company (other
than any such Equity Interests owned by the Company or any Wholly Owned
Subsidiary of the Company that is a Guarantor); (iii) make any principal payment
on or purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to or pari passu (unless, in the case of pari
passu Indebtedness only, such purchase, redemption, defeasance, acquisition, or
retirement is made, or offered (if applicable), pro rata with the Senior
Subordinated Notes or the Guarantees, if applicable) with the Senior
Subordinated Notes or any of the Guarantees, as applicable (and other than
Senior Subordinated Notes or the Guarantees, as applicable), except for any
scheduled repayment or at the final maturity thereof; or (iv) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (iv) above being collectively referred to as "Restricted Payments"),
unless at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
the covenant described below under the caption "-- Incurrence of
Indebtedness and Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after the
Issue Date (including Restricted Payments permitted by clauses (i), (vi),
(vii), (viii) and (ix), but excluding Restricted Payments permitted by
clauses (ii), (iii), (iv), (v) and (x) of the next succeeding paragraph),
is less than the sum of (i) $7.5 million, plus (ii) 50% of the Consolidated
Net Income (adjusted to exclude any amounts that are otherwise included in
this clause (c) to the extent there would be, and to avoid, any duplication
in the crediting of any such amounts) of the Company for the period (taken
as one accounting period) from the beginning of the first fiscal quarter
commencing after the Issue Date to the end of the Company's most recently
ended fiscal quarter for which internal financial statements are available
at the time of such Restricted Payment (or, if such Consolidated Net Income
for such period is a deficit, less 100% of such deficit), plus (iii) 100%
of the aggregate Net Proceeds received by the Company after the Issue Date
from a Capital Contribution or from the issue or sale of Equity Interests
of the Company or of debt securities of the Company that have been
converted into such Equity Interests (other than Equity Interests (or
convertible debt securities) sold to a Subsidiary or an Unrestricted
Subsidiary of the Company and other than Disqualified Stock or debt
securities that have been converted into Disqualified Stock), plus (iv)
100% of any cash dividends received by the Company or a Wholly Owned
Subsidiary that is a Guarantor after the Issue Date from an Unrestricted
Subsidiary of the Company, plus (v) 100% of the Net Proceeds realized by
the Company or a Guarantor upon the sale of any Unrestricted Subsidiary
(less the amount of any reserve established for purchase price adjustments
and less the maximum amount of any indemnification or similar contingent
obligation for the benefit of the purchaser, any of its Affiliates or any
other third party in such sale, in each case as adjusted for any permanent
reduction in any such amount on or after the date of such sale, other than
by virtue of a payment made to such person) following the Issue Date, plus
(vi) to the extent that any Restricted Investment that was made after the
Issue Date is sold for cash or otherwise liquidated or repaid for cash, the
amount of Net Proceeds received by the Company or a Guarantor with respect
to such Restricted Investment.
The foregoing provisions do not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) if no Default or Event of Default shall have occurred and be
continuing (and shall not have been waived) or shall occur as a consequence
thereof, the payment by the Company (either directly or indirectly, e.g.,
through the Parent) of a management fee to AIP in an amount not to exceed $1.1
million in any year and the reimbursement by the Company of AIP's reasonable
out-of-pocket expenses incurred in
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connection with the rendering of management services to or on behalf of the
Company; provided, however, that the obligation of the Company to pay such
management fee and expenses will be subordinated to the payment of all
Obligations with respect to the Senior Subordinated Notes (and any Subsidiary
Guarantee thereof); (iii) the making of any Restricted Investment in exchange
for, or out of the Net Cash Proceeds of, the substantially concurrent sale
(other than to a Subsidiary of the Company) of Equity Interests of the Company
(other than Disqualified Stock); provided, that any Net Cash Proceeds that are
utilized for any such Restricted Investment, and any Net Income resulting
therefrom, shall be excluded from clauses (c)(ii) and (c)(iii) of the preceding
paragraph; (iv) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company in exchange for, or out of the proceeds of,
the substantially concurrent sale (other than to a Subsidiary of the Company) of
other Equity Interests of the Company (other than any Disqualified Stock);
provided that any Net Cash Proceeds that are utilized for any such redemption,
repurchase, retirement or other acquisition, and any Net Income resulting
therefrom, shall be excluded from clauses (c)(ii) and (c)(iii) of the preceding
paragraph; (v) the defeasance, redemption, repurchase, acquisition or other
retirement of pari passu or subordinated Indebtedness with the Net Cash Proceeds
from an incurrence of Permitted Refinancing Indebtedness or, in exchange for, or
out of the Net Cash Proceeds of, the substantially concurrent sale (other than
to a Subsidiary of the Company) of Equity Interests of the Company (other than
Disqualified Stock); provided, that any Net Cash Proceeds that are utilized for
any such defeasance, redemption, repurchase, and any Net Income resulting
therefrom, shall be excluded from clauses (c)(ii) and (c)(iii) of the preceding
paragraph; (vi) the repurchase, redemption, or other acquisition or retirement
for value of any Equity Interests of the Company, the Parent or any Subsidiary
of the Company held by any member of the Company's (or the Parent's or any
Subsidiaries') management pursuant to any management agreement or stock option
agreement; provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed $5.0 million in
the aggregate (net of the Net Cash Proceeds received by the Company from
subsequent reissuances of such Equity Interests to new members of management),
and no Default or Event of Default shall have occurred and be continuing
immediately after such transaction; (vii) the acquisition by a Receivables
Subsidiary in connection with a Qualified Receivables Transaction of Equity
Interests of a trust or other person established by such Receivables Subsidiary
to effect such Qualified Receivables Transaction; (viii) pro rata dividends and
other distributions on the Capital Stock of any Subsidiary of the Company by
such Subsidiary; (ix) payments in lieu of fractional shares in an amount not to
exceed $250,000 in the aggregate; and (x) Permitted Payments to Parent.
The Board of Directors may designate any Subsidiary to be an Unrestricted
Subsidiary if such designation would not cause a Default. For purposes of making
such determination, all outstanding Investments by the Company and its
Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary
so designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant. All such outstanding Investments will be
deemed to constitute Investments in an amount equal to the greatest of (x) the
net book value of such Investments at the time of such designation, (y) the fair
market value of such Investments at the time of such designation and (z) the
original fair market value of such Investments at the time they were made. Such
designation will only be permitted if such Restricted Payment would be permitted
at such time and if such Subsidiary otherwise meets the definition of an
Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) on the date of the Restricted
Payment of the asset(s) proposed to be transferred by the Company or such
Subsidiary, as the case may be, pursuant to the Restricted Payment. Not later
than the date of making any Restricted Payment, the Company shall deliver to the
Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
the covenant "-- Restricted Payments" were computed, which calculations may be
based upon the Company's latest available financial statements.
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INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guaranty or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Indebtedness) and that the Company will not issue any Disqualified
Stock and will not permit any of its Subsidiaries to issue any shares of
preferred stock; provided, however, that the Company may incur Indebtedness
(including Acquired Indebtedness) or issue shares of Disqualified Stock and the
Company's Subsidiaries that are Guarantors may incur Indebtedness and issue
preferred stock if: (i) the Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock or preferred stock is issued
would have been at least 2 to 1, determined on a pro forma basis (including a
pro forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock or preferred stock had
been issued, as the case may be at the beginning of such four-quarter period;
and (ii) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; provided, that no Guarantee may be
incurred pursuant to this paragraph, unless the guaranteed Indebtedness is
incurred by the Company or a Guarantor pursuant to this paragraph. The foregoing
provisions do not apply to:
(i) the incurrence of Indebtedness by the Company or the Guarantors
under the Credit Agreement (and Guarantees thereof by Subsidiaries that are
Guarantors) in an aggregate principal amount at any time outstanding (with
letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and its Subsidiaries thereunder)
not to exceed an amount (including any Indebtedness incurred to refinance,
retire, renew, defease, refund or otherwise replace any such Indebtedness)
equal to the greater of (a) $85.0 million, less the aggregate amount of all
Net Proceeds of Asset Sales applied to permanently reduce the outstanding
amount or, as applicable, the commitments with respect to such Indebtedness
pursuant to the covenant described above under the caption " -- Asset
Sales," and (b) an amount equal to the sum of 80% of the book value of the
consolidated accounts receivable of the Company and its Subsidiaries that
are Guarantors and 50% of the book value of the consolidated inventory of
the Company and its Subsidiaries that are Guarantors;
(ii) the Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by the
Senior Subordinated Notes (up to an aggregate principal amount of $100
million) and by the Subsidiaries of Indebtedness represented by the
Subsidiary Guarantees of such Senior Subordinated Notes;
(iv) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by Capital Lease Obligations, Mortgage Financings
or Purchase Money Obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property used in the business of the Company or such
Subsidiary, in an aggregate principal amount not to exceed $10.0 million at
any time outstanding (including any Indebtedness incurred to refinance,
retire, renew, defease, refund or otherwise replace any such Indebtedness);
(v) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund,
Indebtedness that was permitted by the Indenture to be incurred or was
outstanding on the Issue Date, after giving effect to the Acquisition
Transactions;
(vi) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Wholly Owned Subsidiaries or between or among any Wholly Owned
Subsidiaries; provided, however, that (i) any subsequent issuance or
transfer of Equity Interests that results in any such Indebtedness being
held by a Person other than a Wholly Owned Subsidiary and (ii) any sale or
other transfer of any such Indebtedness to a Person that is not either the
Company or a Wholly Owned Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Subsidiary, as the case may be;
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(vii) the incurrence by the Company or any of its Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the Indenture to be incurred;
(viii) the incurrence by the Company or any of its Subsidiaries that
is a Guarantor of Indebtedness in an aggregate principal amount at any time
outstanding (including any Indebtedness incurred to refinance, retire,
renew, defease, refund or otherwise replace any such Indebtedness) not to
exceed $15.0 million;
(ix) the incurrence by Foreign Subsidiaries of Indebtedness in an
aggregate amount not to exceed $7.0 million at any time outstanding
(including any Indebtedness incurred to refinance, retire, renew, defease,
refund or otherwise replace any such Indebtedness);
(x) the incurrence by the Company or any Subsidiary of Indebtedness in
respect of judgment, appeal, surety, performance and other like bonds,
bankers acceptance and letters of credit provided by the Company and its
Subsidiaries in the ordinary course of business in an aggregate amount
outstanding (including any indebtedness incurred to refinance, retire,
renew, defease, refund or otherwise replace any such indebtedness) at any
time of not more than $500,000;
(xi) Indebtedness incurred by the Company or any of its Subsidiaries
arising from agreements providing for indemnification, adjustment of
purchase price or similar obligations, or from guarantees of letters of
credit, surety bonds or performance bonds securing the performance of the
Company or any of its Subsidiaries to any person acquiring all or a portion
of such business or assets of a Subsidiary of the Company for the purpose
of financing such acquisition, in a principal amount not to exceed 25% of
the gross proceeds (with proceeds other than cash or Cash Equivalents being
valued at the fair market value thereof as determined by the Board of
Directors of the Company in good faith) actually received by the Company or
any of its Subsidiaries in connection with such disposition; and
(xii) the incurrence by a Receivables Subsidiary of Indebtedness in a
Qualified Receivables Transaction that is without recourse to the Company
or to any Subsidiary of the Company or their assets (other than such
Receivables Subsidiary and its assets), and is not guaranteed by any such
person.
Notwithstanding any other provision of this covenant, a Guarantee by a
Guarantor of Indebtedness of the Company or another Guarantor permitted by the
terms of the Indenture at the time such Indebtedness was incurred will not
constitute a separate incurrence of Indebtedness.
Indebtedness or Disqualified Stock of any person which is outstanding at
the time such Person becomes a Subsidiary of the Company (including upon
designation of any subsidiary or other person as a Subsidiary) or is merged with
or into or consolidated with the Company or a Subsidiary of the Company shall be
deemed to have been incurred at the time such Person becomes such a Subsidiary
of the Company or is merged with or into or consolidated with the Company or a
Subsidiary of the Company, as applicable.
LIENS
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to directly or indirectly, create, incur, assume or suffer
to exist any Lien on any asset now owned or hereafter acquired, or any income or
profits therefrom or assign or convey any right to receive income therefrom,
except Permitted Liens, unless the Senior Subordinated Notes are secured by such
Lien on an equal and ratable basis.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any
of its 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 Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Subsidiaries (1) on its Capital Stock
or (2) with respect to any other interest or participation in, or measured by,
its profits, or (b) pay any indebtedness owed to the Company or any of its
Subsidiaries, (ii) make loans or advances to the Company or any of its
Subsidiaries or (iii) transfer any of its properties or
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assets to the Company or any of its Subsidiaries, except for such encumbrances
or restrictions existing under or by reason of (a) Existing Indebtedness as in
effect on the date of the Indenture, (b) the Credit Agreement as in effect as of
the date of the Indenture, and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings
thereof, provided that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings are no more
restrictive with respect to such dividend and other payment restrictions than
the most restrictive of those contained in the Credit Agreement as in effect on
the date of the Indenture, (c) the Indenture and the Senior Subordinated Notes
or Indebtedness permitted to be incurred pursuant to the Indenture and ranking
pari passu with the Senior Subordinated Notes or the Guarantees, as applicable,
to the extent such restrictions are no more restrictive than those of the
Indenture, (d) applicable law, (e) any instrument governing Acquired
Indebtedness or Capital Stock of a Person acquired by the Company or any of its
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Acquired Indebtedness was incurred in connection with contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, (f) by reason of customary
non-assignment provisions in leases and licenses entered into in the ordinary
course of business and consistent with past practices, (g) Purchase Money
Obligations, Capital Lease Obligations or Mortgage Financings for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, (h)
agreements relating to the financing of the acquisition of real or tangible
personal property acquired after the date of the Indenture, provided, that such
encumbrance or restriction relates only to the property which is acquired and in
the case of any encumbrance or restriction that constitutes a Lien, such Lien
constitutes a Permitted Lien as set forth in clause (xi) of the definition of
"Permitted Lien," (i) Indebtedness or other contractual requirements of a
Receivables Subsidiary in connection with a Qualified Receivables Transaction,
provided that such restrictions apply only to such Receivables Subsidiary, (j)
any restriction or encumbrance contained in contracts for sale of assets
permitted by this Indenture in respect of the assets being sold pursuant to such
contract, (k) Senior Indebtedness or Guarantor Senior Indebtedness permitted to
be incurred under the Indenture and incurred on or after the date of the
Indenture; provided, that such encumbrances or restrictions in such Indebtedness
are no more onerous than the most restrictive of those contained in the Credit
Agreement on the date of the Indenture, (l) Indebtedness of Foreign Subsidiaries
incurred under clause (ix) of the covenant entitled "Incurrence of Indebtedness
and Issuance of Preferred Stock" or (m) Permitted Refinancing Indebtedness,
provided that the restrictions contained in the agreements governing such
Permitted Refinancing Indebtedness are no more restrictive than those contained
in the agreements governing the Indebtedness being refinanced.
LIMITATION ON LAYERING DEBT
The Indenture provides that (i) the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that by its
terms or the terms of any document or instrument relating thereto is subordinate
or junior in right of payment to any Senior Indebtedness and senior in any
respect in right of payment to the Senior Subordinated Notes, and (ii) no
Guarantor will incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that by its terms or the terms of any document or
instrument relating thereto is subordinate or junior in right of payment to any
Guarantor Senior Indebtedness and senior in any respect in right of payment to
any Subsidiary Guarantees.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture provides that the Company will not in a single transaction or
series of related transactions consolidate or merge with or into (whether or not
the Company is the surviving corporation), or directly or indirectly, sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company, as the case
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may be, under the Senior Subordinated Notes, the Guarantee and the Indenture
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee; (iii) immediately after such transaction no Default or Event of Default
exists; and (iv) the Company, or the entity or Person formed by or surviving any
such consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made will, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of the covenant described above under the caption "-- Incurrence
of Indebtedness and Issuance of Preferred Stock." Notwithstanding the foregoing,
Merger I and Merger II and the related transactions comprising the Acquisition
Transactions were expressly permitted under the Indenture and did not require
the execution and delivery of a supplemental 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, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such transfer is made shall succeed to and (except in the case of a
lease) 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 therein as the Company, and (except in the case of a
lease) the Company shall be released from the obligations under the Senior
Subordinated Notes and the Indenture except with respect to any obligations that
arise from, or are related to, such transaction.
For the purposes of the foregoing, the transfer (by lease, assignment, sale
or otherwise) of all or substantially all of the properties and assets of one or
more Subsidiaries of the Company, the Company's interest in 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.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make any contract, agreement, understanding, loan, advance or guarantee with,
or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such Subsidiary
with an unrelated Person and (ii) the Company delivers to the Trustee (a) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
entered into after the date of the Indenture involving aggregate consideration
in excess of $5.0 million, a resolution of the Board of Directors set forth in
an Officers' Certificate certifying that such Affiliate Transactions comply with
clause (i) above and that such Affiliate Transactions have been approved by a
majority of the disinterested members of the Board of Directors and (b) with
respect to any Affiliate Transactions or series of related Affiliate
Transactions involving aggregate consideration in excess of $10.0 million, a
favorable written opinion as to the fairness to the Company or such Subsidiary
of such Affiliate Transactions from a financial point of view issued by an
investment banking firm of national standing in the United States, or in the
event such transaction is a type that investment bankers do not generally render
fairness opinions, a valuation or appraisal firm of national standing; provided
that the following shall not be deemed to be Affiliate Transactions: (w) the
provision of administrative or management services by the Company or any of its
officers to any of its Subsidiaries in the ordinary course of business
consistent with past practice, (x) any employment agreement entered into by the
Company or any of its Subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or such Subsidiary, (y)
transactions between or among the Company and/or its Wholly Owned Subsidiaries
or Guarantors or transactions between a Receivables Subsidiary and any Person in
which the Receivables Subsidiary has an Investment and (z) transactions
permitted by the provisions of the Indenture described above under the caption
"Restricted Payments." In addition, none of the Acquisition Transactions are
deemed to be Affiliate Transactions.
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ADDITIONAL SUBSIDIARY GUARANTEES
The Indenture provides that all Subsidiaries of the Company (other than
Receivables Subsidiaries and the Foreign Subsidiaries) substantially all of
whose assets are located in the United States or that conduct substantially all
of their business in the United States shall be Guarantors. In addition, the
Company will not, and will not permit any of the Guarantors to, make any
Investment in any Subsidiary that is not a Guarantor, unless either (i) such
Investment is permitted by the covenant entitled "Restricted Payments" or (ii)
such Subsidiary executes a Subsidiary Guarantee and delivers an opinion of
counsel in accordance with the provisions of the Indenture. Notwithstanding
anything herein or in the Indenture to the contrary, if any Subsidiary of the
Company that is not a Guarantor guarantees any other Indebtedness of the Company
or any Subsidiary of the Company that is a Guarantor, or the Company or a
Subsidiary of the Company pledges more than 65% of the capital stock of such
Subsidiary to a United States lender, then such Subsidiary must become a
Guarantor.
LINE OF BUSINESS
The Indenture provides that neither the Company nor any of its Subsidiaries
shall directly or indirectly engage to any substantial extent in any line or
lines of business activity other than that which, in the reasonable good faith
judgment of the Board of Directors of the Company, is a Related Business.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission so long as any Exchange Notes are outstanding, the
Company will furnish to the holders of Exchange Notes (i) all quarterly and
annual financial information that would be required to be contained in a filing
with the Commission on Forms 10-Q and 10-K if the Company were required to file
such Forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual information
and a report thereon by the Company's certified independent accountants and (ii)
all current reports that would be required to be filed with the Commission on
Form 8-K if the Company were required to file such reports. In addition, whether
or not required by the rules and regulations of the Commission, at any time
after the effectiveness of a registration statement with respect to the Exchange
Offer, the Company will file a copy of all such information and reports with the
Commission for public availability (unless the Commission will not accept such a
filing) and make such information available to securities analysts and
prospective investors upon request. In addition, the Company and the Subsidiary
Guarantors have agreed that, for so long as any Notes remain outstanding, they
will furnish to the holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Senior Subordinated Notes
(whether or not prohibited by the subordination provisions of the Indenture);
(ii) default in payment when due of the principal of or premium, if any, on the
Senior Subordinated Notes (whether or not prohibited by the subordination
provisions of the Indenture); (iii) failure by the Company to comply with the
provisions described under the captions "Repurchase at the Option of Holders --
Change of Control, -- Asset Sales"; (iv) failure by the Company for 60 days
after notice to comply with any of its other agreements in the Indenture or the
Senior Subordinated Notes; (v) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (other than a Receivables Subsidiary) (or the payment which is
guaranteed by the Company or any of its Subsidiaries) whether such Indebtedness
or Guarantee now exists, or is created after the date of the Indenture, which
default (a) is caused by a failure to pay principal of or premium on such
Indebtedness when due (after giving effect to any applicable grace period
provided in such Indebtedness) or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
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such Indebtedness under which there has been such a payment default or the
maturity of which has been so accelerated, aggregates $7.5 million or more; (vi)
failure by the Company or any of its Significant Subsidiaries to pay
nonappealable final judgments (not fully covered insurance) aggregating in
excess of $7.5 million, which judgments are not paid, bonded, discharged or
stayed within a period of 60 days; (vii) except as permitted by the Indenture,
any Subsidiary Guarantee shall be held in a judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall
deny or disaffirm its obligations under its Subsidiary Guarantee; and (viii)
certain events of bankruptcy or insolvency with respect to the Company or any of
its Significant Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in aggregate principal amount of the then outstanding
Senior Subordinated Notes may declare all the Senior Subordinated Notes to be
due and payable immediately by notice in writing to the Company (and to the
Trustee if given by the holders) and the representative of holders of
Indebtedness under the Credit Agreement, if any amounts are outstanding
thereunder (an "Acceleration Notice"). Notwithstanding the foregoing, in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency with respect to the Company, any Significant Subsidiary or any group
of Subsidiaries that, taken together, would constitute a Significant Subsidiary,
all outstanding Senior Subordinated Notes will (i) become due and payable
without further action or notice or (ii) if there are any amounts outstanding
under the Credit Agreement, become due and immediately payable upon the first to
occur of an acceleration under the Credit Agreement or five Business Days after
receipt by the Company and the representative of the holders of the Indebtedness
under the Credit Agreement of the Acceleration Notice, but only if an Event of
Default is then continuing. Holders of the Senior Subordinated Notes may not
enforce the Indenture or the Senior Subordinated Notes except as provided in the
Indenture. Subject to certain limitations, holders of a majority in aggregate
principal amount of the then outstanding Senior Subordinated Notes may direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
holders of the Senior Subordinated Notes notice of any continuing Default or
Event of Default (except a Default or Event of Default relating to the payment
of principal or interest) if it determines that withholding notice is in their
interest.
The holders of a majority in aggregate principal amount of the Senior
Subordinated Notes then outstanding by notice to the Trustee may on behalf of
the holders of all of the Senior Subordinated Notes waive any existing Default
or Event of Default and its consequences under the Indenture except a continuing
Default or Event of Default in the payment of interest on, or the principal of,
the Senior Subordinated Notes.
The Company is required to deliver to the Trustee quarterly a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Senior Subordinated Notes, the Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each holder of Senior
Subordinated Notes by accepting a Senior Subordinated Note waives and releases
all such liability. The waiver and release are part of the consideration for
issuance of the Senior Subordinated Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Senior Subordinated Notes
("Legal Defeasance") except for (i) the rights of holders of outstanding Senior
Subordinated Notes to receive payments in respect of the principal of, premium,
if any, and interest and Liquidated Damages on such Senior Subordinated Notes
when such payments are due from the trust referred to below, (ii) the Company's
obligations with respect to the Senior Subordinated Notes
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concerning issuing temporary Senior Subordinated Notes, registration of Senior
Subordinated Notes, mutilated, destroyed, lost or stolen Senior Subordinated
Notes and the maintenance of an office or agency for payment and money for
security payments held in trust, (iii) the rights, powers, trusts, duties and
immunities of the Trustee, and the Company's obligations in connection therewith
and (iv) the Legal Defeasance provisions of the Indenture. In addition, the
Company may, at its option and at any time, elect to have the obligations of the
Company released with respect to certain covenants that are described in the
Indenture ("Covenant Defeasance") and thereafter any omission to comply with
such obligations shall not constitute a Default or Event of Default with respect
to the Senior Subordinated Notes. In the event Covenant Defeasance occurs,
certain events (not including nonpayment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Senior Subordinated
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Senior Subordinated Notes, cash in U.S. dollars,
non-callable Government Securities, 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,
interest and Liquidated Damages on the outstanding Senior Subordinated Notes on
the stated maturity or on the applicable redemption date, as the case may be,
and the Company must specify whether the Senior Subordinated Notes are being
defeased to maturity or to a particular redemption date; (ii) in the case of
Legal Defeasance, the Company shall deliver to the Trustee an opinion of counsel
in the United States reasonably acceptable to the Trustee confirming that (A)
the Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of the Indenture, 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 confirm that, the holders
of the outstanding Senior Subordinated Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal 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 Legal Defeasance had
not occurred; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel of the United States reasonably
acceptable to the Trustee confirming that the holders of the outstanding Senior
Subordinated Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at same times as
would have been the case if such Covenant Defeasance had not occurred; (iv) no
Event of Default or Default shall have occurred and be continuing on the date of
such deposit (other than an Event of Default or Default resulting from the
borrowing of funds to be applied to such deposit); (v) such Legal Defeasance or
Covenant Defeasance will not result in a breach or violation of, or constitute a
default under the Senior Bank Debt or any other material agreement or instrument
(other than the Indenture) to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is bound; (vi) the
Company must 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; (vii) the Company must
deliver to the Trustee an Officers' Certificate stating that the deposit was not
made by the Company with the intent of preferring the holders of Senior
Subordinated Notes over the other creditors of the Company with the intent of
defeating, hindering, delaying or defrauding creditors of the Company or others;
and (viii) the Company must deliver to the Trustee an Officers' Certificate and
an opinion of counsel, each stating that all conditions precedent provided for,
in the case of the Officers' Certificate, (i) through (vii) and, in the case of
the opinion of counsel, clauses (i) (with respect to the validity and perfection
of the security interest), (ii), (iii) and (v) of this paragraph relating to the
Legal Defeasance or the Covenant Defeasance, as applicable, have been complied
with.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Senior Subordinated Notes in accordance
with the Indenture. The Registrar and the Trustee may require a holder, among
other things, to furnish appropriate endorsements and transfer documents and the
Company may require a holder to pay any taxes and fees required by law or
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permitted by the Indenture. The Company is not required to transfer or exchange
any Note selected for redemption. Also, the Company is not required to transfer
or exchange any Senior Subordinated Note for a period of 15 days before a
selection of Senior Subordinated Notes to be redeemed.
The registered holder of a Senior Subordinated Note will be treated as the
owner of it for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Senior Subordinated Notes may be amended or supplemented with the consent of
the holders of a majority in aggregate principal amount of the Senior
Subordinated Notes then outstanding (including consents obtained in connection
with a tender offer or exchange offer for Senior Subordinated Notes), any
existing default or compliance with any provision of the Indenture or the Senior
Subordinated Notes may be waived with the consent of the holders of a majority
in aggregate principal amount of the then outstanding Senior Subordinated Notes
(including consents obtained in connection with a tender offer or exchange offer
for Senior Subordinated Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Senior Subordinated Notes held by a non-consenting holder):
(i) reduce the aggregate principal amount of Senior Subordinated Notes whose
holders must consent to an amendment, supplement or waiver, (ii) reduce the
principal of or change the fixed maturity of any Senior Subordinated Note or
alter the provisions with respect to the redemption of the Senior Subordinated
Notes (other than provisions relating to the covenants described above under the
caption "-- Repurchase at the Option of Holders"), (iii) reduce the rate of or
change the time for payment of interest on any Senior Subordinated Note, (iv)
waive a Default or Event of Default in the payment of principal of or premium,
if any, or interest on the Senior Subordinated Notes (except a rescission of
acceleration of the Senior Subordinated Notes by the holders of a majority in
aggregate principal amount of the Senior Subordinated Notes and a waiver of the
payment default that resulted from such acceleration), (v) make any Senior
Subordinated Note payable in money other than that stated in the Senior
Subordinated Notes, (vi) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of holders of Senior
Subordinated Notes to receive payments of principal of or premium, if any, or
interest on the Senior Subordinated Notes, (vii) waive a redemption payment with
respect to any Senior Subordinated Note (other than a payment required by one of
the covenants described above under the caption "-- Repurchase at the Option of
Holders") or (viii) make any change in the foregoing amendment and waiver
provisions. In addition, any amendment to the subordination provisions of the
Indenture will require the consent of the holders of Designated Senior
Indebtedness if the amendment would adversely affect the holders of Designated
Senior Indebtedness.
Notwithstanding the foregoing, without the consent of any holder of Senior
Subordinated Notes, the Company and the Trustee may amend or supplement the
Indenture or the Senior Subordinated Notes to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Senior Subordinated Notes in
addition to or in place of Certificated Senior Subordinated Notes, to provide
for the assumption of the Company's obligations to holders of Senior
Subordinated Notes in the case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the holders of Senior
Subordinated Notes (including the addition of any Subsidiary Guarantors) or that
does not adversely affect the legal rights under the Indenture of any such
holder, or to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The holders of a majority in aggregate principal amount of the then
outstanding Senior Subordinated Notes will have the right to direct the time,
method and place of conducting any proceeding for exercising any
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remedy available to the Trustee, subject to certain exceptions. The Indenture
provides that in case an Event of Default shall occur (which shall not be
cured), the Trustee will be required, in the exercise of its power, to use the
degree of care of a prudent man in the conduct of his own affairs. Subject to
such provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any holder of Senior
Subordinated Notes, unless such holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to the Company at 92
Deerfield Road, Windsor, CT 06095-4209, Attention: Chief Financial Officer.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Indebtedness" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control. Notwithstanding the foregoing, (a) the limited partners
in AIP shall not be deemed to be Affiliates of AIP solely by reason of their
investment in such funds and (b) no Person (other than the Company or any
Subsidiary of the Company) in whom a Receivables Subsidiary makes an Investment
in connection with a Qualified Receivables Transaction shall be deemed to be an
Affiliate of the Company or any of its Subsidiaries solely by reason of such
Investment.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition
that does not constitute a Restricted Payment or an Investment by such person of
any of its non-cash assets (including, without limitation, by way of a sale and
leaseback and including the issuance, sale or other transfer of any of the
capital stock of any Subsidiary of such person but excluding Cash Equivalents
liquidated in the ordinary course of business) other than to the Company or to
any of its Wholly Owned Subsidiaries that is a Guarantor (including the receipt
of proceeds of insurance paid on account of the loss of or damage to any asset
and awards of compensation for any asset taken by condemnation, eminent domain
or similar proceeding, and including the receipt of proceeds of business
interruption insurance); and (ii) the issuance of Equity Interests in any
Subsidiaries or the sale of any Equity Interests in any Subsidiaries, in each
case, in one or a series of related transactions, provided, that notwithstanding
the foregoing, the term "Asset Sale" shall not include: (a) the sale, lease,
conveyance, disposition or other transfer of all or substantially all of the
assets of the Company, as permitted pursuant to the covenant entitled "Merger,
Consolidation or Sale of Assets," (b) the sale or lease of equipment, inventory,
accounts receivable or other assets in the ordinary course of business
consistent with past practice, (c) the sale or disposal of damaged, worn out or
other obsolete personal property in the ordinary course of business so long as
such property is no longer necessary for the proper conduct of the business of
the Company or such Subsidiary, as applicable; (d) a transfer of assets by the
Company to a Wholly Owned Subsidiary that is a Guarantor or by a Wholly Owned
Subsidiary to the Company or to another Wholly Owned Subsidiary that is a
Guarantor or by a Wholly Owned Subsidiary that is not a Guarantor to
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another Wholly Owned Subsidiary that is not a Guarantor, (e) an issuance of
Equity Interests by a Wholly Owned Subsidiary to the Company or to another
Wholly Owned Subsidiary that is a Guarantor, or by a Wholly Owned Subsidiary
that is not a Guarantor to another Wholly Owned Subsidiary that is not a
Guarantor, (f) the surrender or waiver of contract rights or the settlement,
release or surrender of contract, tort or other claims of any kind, (g) the
grant in the ordinary course of business of any non-exclusive license of
patents, trademarks, registrations therefor and other similar intellectual
property, (h) sales of accounts receivable and related assets of the type
specified in the definition of "Qualified Receivables Transaction" to a
Receivables Subsidiary for the fair market value thereof, including cash in an
amount at least equal to 75% of the book value thereof as determined in
accordance with GAAP, (i) Permitted Investments, or (j) transfers of accounts
receivable and related assets of the type specified in the definition of
"Qualified Receivables Transaction" (or a fractional undivided interest therein)
by a Receivables Subsidiary in a Qualified Receivables Transaction. For the
purposes of clauses (h) and (j), notes received in exchange for the transfer of
accounts receivable and related assets shall be deemed cash if the Receivables
Subsidiary or other payor is required to repay said notes as soon as practicable
from available cash collections less amounts required to be established as
reserves pursuant to contractual agreements with entities that are not
Affiliates of the Company entered into as part of a Qualified Receivables
Transaction.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York are authorized or
obligated by law or executive order to close.
"Capital Contribution" means any contribution to the equity of the Company
for which no consideration is given other than common stock with no redemption
rights and no special privileges, preferences, or special voting rights.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a Capital Lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Equivalents" means (a) securities 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 is pledged in support thereof) having maturities not more than twelve
months from the date of acquisition, (b) U.S. dollar denominated (or foreign
currency fully hedged) time deposits, certificates of deposit, Eurodollar time
deposits or Eurodollar certificates of deposit of (i) any domestic commercial
bank of recognized standing having capital and surplus in excess of $100 million
or (ii) any bank whose short-term commercial paper rating from S&P is at least
A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent
thereof (any such bank being an "Approved Lender"), in each case with maturities
of not more than twelve months from the date of acquisition, (c) commercial
paper and variable or fixed rate notes issued by any Approved Lender (or by the
parent company thereof) or any variable rate notes issued by, or guaranteed by,
any domestic corporation rated A-2 (or the equivalent thereof) or better by S&P
or P-2 (or the equivalent thereof) or better by Moody's and maturing within
twelve months of the date of acquisition, (d) repurchase agreements with a bank
or trust company or recognized securities dealer having capital and surplus in
excess of $100 million for direct obligations issued by or fully guaranteed by
the United States of America in which the Company shall have a perfected first
priority security interest (subject to no other Liens) and having, on the date
of purchase thereof, a fair market value of at least 100% of the amount of
repurchase obligations, and (e) interests in money market mutual funds which
invest solely in assets or securities of the type described in subparagraphs
(a), (b), (c) or (d) hereof.
"Change of Control" means such time as (i) prior to the initial public
offering by the Company of any shares of its common stock (other than a public
offering pursuant to a registration statement on Form S-8), AIP, its Affiliates
and Management Investors (collectively, the "Initial Investors") cease to be,
directly or
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indirectly, the beneficial owners, in the aggregate of at least 51% of the
voting power of the voting common stock of the Company or (ii) after the initial
public offering by the Company of any shares of its common stock (other than a
public offering pursuant to a registration statement on Form S-8), (A) any
Schedule 13D, Form 13F or Schedule 13G under the Exchange Act, or any amendment
to such Schedule or Form, is received by the Company which indicates that, or
the Company otherwise becomes aware that, a "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) (except, in the case
of the Company, the Parent) has become, directly or indirectly, the "beneficial
owner", by way of merger, consolidation or otherwise, of 35% or more of the
voting power of the voting capital stock of the Company and (B) any such person
or group has become, directly or indirectly, the beneficial owner of a greater
percentage of the voting capital stock of the Company than beneficially owned by
the Initial Investors, or (iii) the sale, lease or transfer of all or
substantially all of the assets of the Company to any person or group (other
than the Initial Investors or their Related Parties (as defined below)), or (iv)
during any period of two consecutive calendar years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any Continuing Directors) ceases for any reason to constitute a
majority of the directors of the Company, then in office. "Related Party" with
respect to any Initial Investor means (A) any controlling stockholder, 80% (or
more) owned Subsidiary, or spouse, or immediate family member (in the case of
any individual) of such Initial Investor or (B) any trust, corporation,
partnership or other entity, the beneficiaries, stockholders, partners, owners
or persons beneficially holding an 80% or more controlling interest of which
consist of such Initial Investor and/or such other persons referred to in the
immediately preceding clause (A).
"Consolidated EBITDA" means, with respect to the Company and its
Subsidiaries for any period, the sum of, without duplication, (i) the
Consolidated Net Income for such period, plus (ii) the Fixed Charges for such
period, plus (iii) provision for taxes based on income or profits for such
period (to the extent such income or profits were included in computing
Consolidated Net Income for such period), plus (iv) consolidated depreciation,
amortization and other non-cash charges of the Company and its Subsidiaries
required to be reflected as expenses on the books and records of the Company,
minus (v) cash payments with respect to any non-recurring, non-cash charges
previously added back pursuant to clause (iv), and (vi) excluding the impact of
foreign currency translations. Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and amortization
and other non-cash charges of, a Subsidiary of a Person shall be added to
Consolidated Net Income to compute Consolidated EBITDA only to the extent (and
in the same proportion) that the Net Income of such Subsidiary was included in
calculating the Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of determination to be paid
as a dividend to the Company by such Subsidiary without prior approval (that has
not been obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) of any Person that is not a Subsidiary or
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to the
referent Person or a Wholly Owned Subsidiary thereof that is a Guarantor, (ii)
the Net Income of any Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that Net Income is not at the date of determination permitted without any
prior governmental approval (which has not been obtained) or, 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 Subsidiary or its stockholders, (iii) the Net Income of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded, (iv) the cumulative effect of a
change in accounting principles shall be excluded, (v) the Net Income of, or any
dividends or other distributions from, any Unrestricted Subsidiary, to the
extent otherwise included, shall be excluded, whether or not distributed to the
Company or one of its Subsidiaries, and (vi) all other extraordinary gains and
extraordinary losses shall be excluded.
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"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the Issue Date, (ii) was nominated for election or elected to such
Board of Directors with the approval of a majority of the Continuing Directors
who were members of such Board of Directors at the time of such nomination or
election or (iii) was appointed by AIP pursuant to the Shareholders Agreement.
"Credit Agreement" means that certain Credit Agreement, also referred to as
the "New Credit Agreement", dated as of December 11, 1997, by and among the
Company and The First National Bank of Chicago, as administrative agent, and DLJ
Capital Funding, Inc., as syndication agent and the lenders parties thereto,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, renewed, refunded, replaced, extended, restated or refinanced from
time to time, including any agreement restructuring or adding Subsidiaries of
the Company as additional borrowers or guarantors thereunder and whether by the
same or any other agent, lender or group of lenders; provided that the total
amount of Senior Indebtedness is not thereby increased beyond the amount that
may then be incurred at such time pursuant to the covenant described under the
caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock".
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Indebtedness" means (i) so long as the Senior Bank Debt
is outstanding, the Senior Bank Debt and (ii) thereafter, any other Senior
Indebtedness permitted under the Indenture the principal amount of which is
$25.0 million or more and that has been designated by the Company as "Designated
Senior Indebtedness."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
on which the Senior Subordinated Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means an underwritten public offering of Equity Interests
of the Company, or the Parent, other than Disqualified Stock, pursuant to a
registration statement filed with the Commission in accordance with the
Securities Act.
"Existing Indebtedness" means the Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the date of the Indenture, December 11, 1997, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of original issue discount, amortization of deferred
financing fees, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments associated
with Capital Lease Obligations, commissions, discounts and other fees and
charges incurred in respect to letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations), (ii) the
consolidated interest expense of such Person and its Subsidiaries that was
capitalized during such period, (iii) any interest expense on Indebtedness of
another Person that is Guaranteed by such Person or one of its Subsidiaries or
secured by a Lien on assets of such Person or one of its Subsidiaries (whether
or not such Guarantee or Lien is called upon) and (iv) the product of (a) all
cash dividend payments (and non cash dividend payments in the case of a Person
that is a Subsidiary) on any series of preferred stock of such Person payable to
a party other than the Company or a Wholly Owned Subsidiary, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal state and local statutory tax rate of
such Person, expressed as a decimal, on a consolidated basis and in accordance
with GAAP.
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"Fixed Charge Coverage Ratio" means, with respect to any Person for any
period, the ratio of the Consolidated EBITDA of such Person and its Subsidiaries
for such period to the Fixed Charges of such Person and its Subsidiaries for
such period. In the event that the Company or any of its Subsidiaries incurs,
assumes, retires, Guarantees or redeems any Indebtedness (other than revolving
credit borrowings) or issues preferred stock subsequent to the commencement of
the four-quarter reference period for which the Fixed Charge Coverage Ratio is
being calculated but on or prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, retirement, Guarantee or redemption of
Indebtedness, or such issuance or redemption of preferred stock, as if the same
had occurred at the beginning of the applicable four-quarter reference period.
For purposes of making the computation referred to above, (i) acquisitions that
have been made by the Company or any of its Subsidiaries, including through
mergers or consolidations and including any related financing and refinancing
transactions, during the four-quarter reference period subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period, and (ii) the
Consolidated EBITDA attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of on or prior to
the Calculation Date, shall be excluded, and (iii) the Fixed Charges
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of on or prior to the Calculation Date,
shall be excluded, but only to the extent that the obligations giving rise to
such Fixed Charges will not be obligations of the referent Person or any of its
Subsidiaries following the Calculation Date.
"Foreign Intercompany Indebtedness" means any Indebtedness of one Foreign
Subsidiary to another Foreign Subsidiary.
"Foreign Subsidiary" means any Wholly Owned Subsidiary organized and
incorporated in a jurisdiction outside of the United States that is not a
Guarantor.
"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 have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture. All ratios and
computations based on GAAP contained in the Indenture shall be computed in
conformity with GAAP applied on a consistent basis, except that calculations
made for purposes of determining compliance with the terms of the covenants and
with other provisions of the Indenture shall be made without giving effect to
depreciation, amortization or other expenses recorded as a result of the
application of purchase accounting in accordance with Accounting Principles
Board Opinion Nos. 16 and 17.
"Guarantee" means a guarantee or other credit support (other than by
endorsement of negotiable instruments for collection in the ordinary course of
business), direct or indirect, in any manner (including, without limitation,
letters of credit and reimbursement agreements in respect thereof), of all or
any part of any Indebtedness.
"Guarantor Senior Indebtedness" means (i) any Guarantees by any Guarantor
of the Senior Bank Debt and (ii) any other Indebtedness permitted to be incurred
by any Guarantor under the terms of the Indenture, unless the instrument under
which such Indebtedness is incurred expressly provides that it is on a parity
with or subordinated in right of payment to the Subsidiary Guarantees.
Notwithstanding anything to the contrary in the foregoing, Guarantor Senior
Indebtedness will not include (w) any liability for federal, state, local, or
other taxes owed or owing by any Guarantor, (x) any Indebtedness of any
Guarantor to any of its Subsidiaries or other Affiliates, (y) any trade payables
or (z) any Indebtedness that is incurred in violation of the Indenture.
"Guarantors" means each Subsidiary of the Company that executes a
Subsidiary Guarantee guaranteeing the Senior Subordinated Notes in accordance
with the provisions of the Indenture, and their respective successors and
assigns.
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"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) currency exchange or interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates or currency exchange rates.
"Indebtedness" means, with respect to any Person, any (i) indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable
incurred in the ordinary course of business, but other than with respect to,
letters of credit and Hedging Obligations only, if and to the extent any of the
foregoing indebtedness would appear as a liability upon a consolidated balance
sheet of such Person prepared in accordance with GAAP, (ii) all indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person) and, (iii) to the extent not otherwise
included, the Guarantee by such Person of any indebtedness of any other Person.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations, but
excluding guarantees of Indebtedness of the Company or any Wholly Owned
Guarantor to the extent such guarantee is permitted by the covenant "Incurrence
of Indebtedness and Issuance of Preferred Stock"), advances or capital
contributions (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business), transfers of assets outside
the ordinary course of business other than Asset Sales, purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities and all other items that are or would be classified as investments on
a balance sheet prepared in accordance with GAAP; provided that an acquisition
of assets, Equity Interests or other securities by the Company for consideration
consisting of common equity securities of the Company shall not be deemed to be
an Investment.
"Issue Date" means the date of first issuance of the Exchange Notes under
the Indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and, except in connection with a Qualified Receivables Transaction,
any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"Management Investors" means William D. Gurley, Michael H. Boyer, Robert A.
Massa, Arthur S. Caruso, William W. Kelly, Don Buonomo, Lee Janik, Bryan M.
Wysong and any of their respective affiliates.
"Net Cash Proceeds" means the aggregate amount of cash or Cash Equivalents
received by the Company in the case of a sale or equity contribution in respect
of Qualified Capital Stock plus, in the case of an issuance of Qualified Capital
Stock upon any exercise, exchange or conversion of securities (including
options, warrants, rights and convertible or exchangeable debt) of the Company
that were issued for cash after the Issue Date, the amount of cash originally
received by the Company upon the issuance of such securities (including options,
warrants, rights and convertible or exchangeable debt) less, the sum of all
payments, fees, commissions, and customary and reasonable expenses (including,
without limitation, the fees and expenses of legal counsel and investment
banking fees and expenses) incurred in connection with such sale or equity
contribution in respect of Qualified Capital Stock.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
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extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"Net Proceeds" means the aggregate cash and Cash Equivalents received by
the Company or any of its Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other deposition of any
non-cash consideration received in any Asset Sale) and, with respect to the
covenant "Restricted Payments," by the Company or any Guarantor in respect of
the sale of an Unrestricted Subsidiary and the sale, liquidation or repayment
for cash of a Restricted Investment, in each case, net of the direct costs
relating thereto (including, without limitation, legal, accounting and
investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax-sharing
arrangements), and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damage and other liabilities payable under the
documentation governing any Indebtedness.
"Parent" means Stanadyne Automotive Holding Corp. (formerly known as SAC,
Inc.) or its successor.
"Permitted Investments" means (a) any Investments in the Company or in a
Wholly Owned Subsidiary of the Company that is a Guarantor and that is engaged
in one or more Related Businesses, (b) any Investment by the Company or a Wholly
Owned Subsidiary of the Company in a Receivables Subsidiary or any Investment by
a Receivables Subsidiary in any other Person in connection with a Qualified
Receivables Transaction; provided, that the foregoing Investment is in the form
of a note that the Receivables Subsidiary or other Person is required to repay
as soon as practicable from available cash collections less amounts required to
be established as reserves pursuant to contractual agreements with entities that
are not Affiliates of the Company entered into as part of a Qualified
Receivables Transaction; (c) any Investments in Cash Equivalents; (d)
Investments by the Company or any Subsidiary of the Company in a Person if as a
result of such Investment (i) such Person becomes a Wholly Owned Subsidiary of
the Company and a Guarantor that is engaged in one or more Related Businesses or
(ii) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Wholly Owned Subsidiary of the Company that is a Guarantor and
that is engaged in one or more Related Businesses; (e) Investments made as a
result of the receipt of non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with the covenant described above under the
caption " -- Repurchase at the Option of Holders -- Asset Sales"; (f)
Investments outstanding as of the date of the Indenture including but not
limited to the Intercompany Note from the Company to the Parent in the amount of
$67.5 million; (g) Investments in the form of promissory notes of members of the
Company's management in consideration of the purchase by such members of Equity
Interests (other than Disqualified Stock) in the Company; (h) Investments by the
Company or a Wholly Owned Subsidiary of the Company that is a Guarantor in a
Foreign Subsidiary if 100% of the proceeds thereof are concurrently used by such
Foreign Subsidiary to purchase the outstanding Equity Interests of another
Foreign Subsidiary from the Company or a Wholly Owned Subsidiary of the Company
that is a Guarantor and the resulting Investment by such first Foreign
Subsidiary in such second Foreign Subsidiary; (i) Investments which constitute
Existing Indebtedness of the Company of any of its Subsidiaries; (j) Investments
constituting Foreign Intercompany Indebtedness; (k) accounts receivable,
endorsements for collection or deposits arising in the ordinary course of
business; (l) other Investments in any Person or Persons that do not in the
aggregate exceed $10.0 million at any time outstanding; and (m) Investments in
Foreign Subsidiaries that do not in the aggregate exceed $5.0 million at any
time outstanding, provided however, that to the extent there would be, and to
avoid, any duplication in determining the amounts of investments outstanding
under these clauses (l), and (m) any amounts which were credited under clause
(c) of the covenant "Restricted Payments" shall reduce the amounts outstanding
under these clauses (l) and (m).
"Permitted Liens" means (i) Liens securing Senior Indebtedness or Guarantor
Senior Indebtedness in an aggregate principal amount at any time outstanding not
to exceed amounts permitted under the covenant
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entitled "Incurrence of Indebtedness and Issuance of Preferred Stock"; (ii)
Liens in favor of the Company; (iii) Liens on property of a Person existing at
the time such Person is merged into or consolidated with the Company or any
Subsidiary of the Company including any permitted Refinancings thereof; provided
that such Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Company; (iv) Liens on property existing at
the time of acquisition thereof by the Company or any Subsidiary of the Company,
provided that such Liens were in existence prior to the contemplation of such
acquisition; (v) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (vi) Liens existing on the date of
the Indenture; (vii) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, provided
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (viii) Liens incurred in the
ordinary course of business of the Company or any Subsidiary of the Company with
respect to obligations that do not exceed in the aggregate $5.0 million at any
one time outstanding and that (a) are not incurred in connection with the
borrowing of money or the obtaining of advances or credit (other than trade
credit in the ordinary course of business) and (b) do not in the aggregate
materially detract from the value of the property or materially impair the use
thereof in the operation of business by the Company or such Subsidiary; (ix)
Liens incurred or deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other types of social
security; (x) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the business of the Company or any of
its Subsidiaries, (xi) Purchase Money Liens (including extensions and renewals
thereof), (xii) Liens securing reimbursement obligations with respect to letters
of credit which encumber only documents and other property relating to such
letters of credit and the products and proceeds thereof; (xiii) judgment and
attachment Liens not giving rise to an Event of Default; (xiv) Liens encumbering
deposits made to secure obligations arising from statutory, regulatory,
contractual or warranty requirements; (xv) Liens arising out of consignment or
similar arrangements for the sale of goods; (xvi) any interest or title of a
lessor in property subject to any capital lease obligation or operating lease;
(xvii) Liens arising from filing Uniform Commercial Code financing statements
regarding leases; (xviii) Liens on assets of Subsidiaries with respect to
Acquired Indebtedness (including Permitted Refinancings thereof) provided such
Liens are only on assets or property acquired with such Acquired Indebtedness
and that such Liens were not created in contemplation of or in connection with
such Acquisition; (xix) Liens on the assets of a Receivables Subsidiary incurred
in connection with a Qualified Receivables Transaction and (xx) Liens securing
indebtedness of any Foreign Subsidiary.
"Permitted Payments to Parent" means without duplication, (a) payments to
Parent in an amount sufficient to permit Parent to pay reasonable and necessary
operating expenses and other general corporate expenses to the extent such
expenses relate or are fairly allocable to the Company and its Subsidiaries
including any reasonable professional fees and expenses, but excluding all
expenses payable to or to be paid to or on behalf of AIP, its other Affiliates
and its Related Parties not in excess of $300,000 in any fiscal year; and (b)
payments to Parent to enable Parent to pay foreign, federal, state or local tax
liabilities ("Tax Payment"), not to exceed the amount of any tax liabilities
that would be otherwise payable by the Company and its Subsidiaries and
Unrestricted Subsidiaries to the appropriate taxing authorities if they filed
separate tax returns to the extent that Parent has an obligation to pay such tax
liabilities relating to the operations, assets or capital of the Company or its
Subsidiaries and Unrestricted Subsidiaries provided, however, that (i),
notwithstanding the foregoing, in the case of determining the amount of a Tax
Payment that is permitted to be paid by Company and any of its United States
subsidiaries in respect of their Federal income tax liability, such payment
shall be determined on the basis of assuming that Company is the parent company
of an affiliated group (the "Company Affiliated Group") filing a consolidated
Federal income tax return and that Parent and each such United States subsidiary
is a member of the Company Affiliated Group and (ii) any Tax Payments shall
either be used by Parent to pay such tax liabilities within 90 days of Parent's
receipt of such payment or refunded to the payee.
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"Permitted Refinancing Debt" means any Indebtedness of the Company or any
of its Subsidiaries issued in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or refund other Indebtedness
of the Company or any of its Subsidiaries; provided that: (a) the principal
amount of such Permitted Refinancing Indebtedness does not exceed (after
deduction of reasonable and customary fees and expenses incurred in connection
with the Refinancing and the amount of any premium or prepayment penalty paid in
connection with such Refinancing Transaction to the extent in accordance with
the terms of the document governing such Indebtedness (except for any
modification to any such document made in connection with or in contemplation of
such refinancing) the lesser of (i) the principal amount of the Indebtedness so
extended refinanced, renewed, replaced, defeased or refunded; and (ii) if such
Indebtedness being Refinanced was issued with an original issue discount, the
accreted value thereof (as determined in accordance with GAAP) at the time of
such Refinancing, plus, in each case accrued interest on such Indebtedness being
Refinanced; (b) such Permitted Refinancing Indebtedness has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (c) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the Senior
Subordinated Notes, such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and is subordinated in right of
payment to, the Senior Subordinated Notes on terms at least as favorable to the
holders of Senior Subordinated Notes as those contained the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (d) such Indebtedness is incurred either by the
Company or by the Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Purchase Money Lien" means a Lien granted on an asset or property to
secure a Purchase Money Obligation permitted to be incurred under the Indenture
and incurred solely to finance the acquisition, including, in the case of a
Capital Lease, the lease, of such asset or property; provided, however, that
such Lien encumbers only such asset or property and is granted within 180 days
of such acquisition.
"Purchase Money Obligations" of any person means any obligations of such
person to any seller or another person incurred or assumed to finance solely the
acquisition, including, in the case of a Capital Lease, the lease, of real or
personal property to be used in the business of such person or any of its
Subsidiaries in an amount that is not more than 100% of the cost of such
property, and incurred within 180 days after the date of such acquisition
(excluding accounts payable to trade creditors incurred in the ordinary course
of business).
"Qualified Capital Stock" means any Capital Stock of the Company, or, if
expressly applicable, the Parent, that is not Disqualified Stock.
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Company or any of its Subsidiaries
pursuant to which the Company or any of its Subsidiaries may sell, convey or
otherwise transfer to (a) a Receivables Subsidiary (in the case of a transfer by
the Company or any of its Subsidiaries) and (ii) any other person (in the case
of a transfer by a Receivable Subsidiary), or may grant a security interest in,
any accounts receivable (whether now existing or arising in the future) which
arise in the ordinary course of business of the Company or any of its
Subsidiaries, and any assets related thereto including, without limitation, all
collateral securing such accounts receivable, all contracts and all guarantees
or other obligations in respect of such accounts receivable, proceeds of such
accounts receivable and other assets which are customarily transferred or in
respect of which security interests are customarily granted in connection with
asset securitization transactions involving accounts receivable.
"Receivables Subsidiary" means a Wholly Owned Subsidiary of the Company
which engages in activities other than in connection with the financing of
accounts receivable and which is designated by the Board of Directors of the
Company (as provided below) as a Receivables Subsidiary (a) no portion of the
Indebtedness or any other Obligations (contingent or otherwise) of which (i) is
guaranteed by the Company or any Subsidiary of the Company (excluding guarantees
of Obligations (other than the principal of, and interest on, Indebtedness)
pursuant to representations, warranties, covenants and indemnities excluding any
representations, warranties, covenants or indemnities relating to the payment of
principal or interest on, any Indebtedness entered into in the ordinary course
of business in connection with a Qualified Receivables Transaction),
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(ii) is recourse to or obligates the Company or any Subsidiary of the Company in
any way other than pursuant to representations, warranties, covenants or
indemnities excluding any representations, warranties, covenants or indemnities
relating to the payment of principal or interest on, any Indebtedness entered
into in the ordinary course of business in connection with a Qualified
Receivables Transaction or (iii) subjects any property or asset of the Company
or any Subsidiary of the Company, directly or indirectly, contingently or
otherwise, to the satisfaction thereof, other than pursuant to representations,
warranties, covenants or indemnities excluding any representations, warranties,
covenants or indemnities relating to the payment of principal of, or interest
on, any Indebtedness entered into in the ordinary course of business in
connection with a Qualified Receivables Transaction, (b) with which neither the
Company nor any Subsidiary of the Company has any material contract, agreement,
arrangement or understanding other than on terms no less favorable to the
Company or such Subsidiary than those that might be obtained at the time from
persons who are not Affiliates of the Company, other than fees payable in the
ordinary course of business in connection with servicing accounts receivable and
(c) with which neither the Company nor any Subsidiary of the Company has any
obligation to maintain or preserve such Subsidiary's financial condition or
cause such Subsidiary to achieve certain levels of operating results. Any such
designation by the Board of Directors of the Company shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the resolution of the
Board of Directors of the Company giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions.
"Related Business" means the business conducted (or proposed to be
conducted) by the Company and its Subsidiaries as of the Issue Date and any and
all businesses that in the good faith judgment of the Board of Directors of the
Company are materially related businesses, including reasonable extensions or
expansions thereof.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Senior Bank Debt" means the Indebtedness (including, without limitation,
interest accruing after filing of a petition in bankruptcy, whether or not such
interest is an allowable claim in such proceeding) outstanding under the Credit
Agreement and guarantees thereof as such agreements may be restated, further
amended, supplemented or otherwise modified or replaced from time to time
hereafter, together with any refunding or replacement of such Indebtedness.
"Senior Indebtedness" means (i) the Senior Bank Debt and (ii) any other
Indebtedness permitted to be incurred by the Company under the terms of the
Indenture, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Senior Subordinated Notes. Notwithstanding anything to the
contrary in the foregoing, Senior Indebtedness will not include (w) any
liability for federal, state, local or other taxes owed or owing by the Company,
(x) any Indebtedness of the Company to any of its Subsidiaries or other
Affiliates, (y) any trade payables or (z) any Indebtedness that is incurred in
violation of the Indenture.
"Senior Revolving Debt" means revolving credit borrowings and letters of
credit under the Credit Agreement and/or any successor facility or facilities.
"Senior Term Debt" means term loans under the Credit Agreement and/or any
successor facility or facilities.
"Shareholders Agreement" means the shareholders agreement by and between
Holdings and certain of its shareholders.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article l, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Exchange Act, as such Regulation is in effect on the date
hereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that
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Person (or a combination thereof) and (ii) any partnership (a) the sole general
partner or the managing general partner of which is such Person or a Subsidiary
of such Person or (b) the only general partners of which are such Person or of
one or more Subsidiaries of such Person (or any combination thereof).
Unrestricted Subsidiaries shall not be included in the definition of Subsidiary
for any purposes of the Indenture (except, as the context may otherwise require,
for purposes of the definition of "Unrestricted Subsidiary").
"Subsidiary Guarantor" means, a Subsidiary which has guaranteed the Senior
Subordinated Notes in accordance with the Indenture.
"Unrestricted Subsidiary" means (i) any Subsidiary (other than Guarantors
or any successors) that is designated by the Board of Directors as an
Unrestricted Subsidiary pursuant to a Board Resolution; but only to the extent
that such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b)
is not party to any agreement, contract, arrangement or understanding with the
Company or any Subsidiary of the Company unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to the Company or
such Subsidiary than those that might be obtained at the time from Persons who
are not Affiliates of the Company; (c) is a Person with respect to which neither
the Company nor any of the Subsidiaries has any direct or indirect obligation to
subscribe for additional Equity Interests or maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified level of
operating results; and (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Subsidiaries. Any such designation by the Board of Directors shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
Board Resolutions giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by the covenant described above under the caption "Certain
Covenants -- Restricted Payments." If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of the
Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred
by a Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted nor incurred as of such date under the covenant described under the
caption "Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock," the Company shall be in default of such covenant). The Board
of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a subsidiary provided that such designation shall be deemed to
be an incurrence of Indebtedness by a Subsidiary of the Company of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (i) such Indebtedness is permitted under the covenant
described under the caption "Certain Covenants -- Incurrence of Indebtedness and
Issuance of Preferred Stock," and (ii) no Default or Event of Default would be
in existence following such designation.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each the remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twentieth that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person. Unrestricted
Subsidiaries shall not be included in the definition of Wholly Owned Subsidiary
for any purposes of the Indenture (except, as the context may otherwise require,
for purposes of the definition of "Unrestricted Subsidiary.")
BOOK-ENTRY; DELIVERY AND FORM
The Senior Subordinated Notes sold to Qualified Institutional Buyers
initially will be in the form of one or more registered global notes without
interest coupons (collectively, the "U.S. Global Notes"). Upon
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issuance, the U.S. Global Notes will be deposited with the Trustee, (also
referred to as the Exchange Agent), as custodian for The Depositary Trust
Company ("DTC"), in New York, New York, and registered in the name of DTC or its
nominee, in each case for credit to the accounts of DTC's Direct and Indirect
Participants (as defined below). The Senior Subordinated Notes being offered and
sold in offshore transactions in reliance on Regulation S, if any, initially
will be in the form of one or more temporary, registered, global book-entry
notes without interest coupons (the "Reg S Temporary Global Notes"). The Reg S
Temporary Global Notes will be deposited with the Trustee, as custodian for the
DTC, in New York, New York, and registered in the name of a nominee of DTC (a
"Nominee") for credit to the accounts of Indirect Participants at the Euroclear
System ("Euroclear") and Cedel Bank, societe anonyme ("CEDEL"). During the
40-day period commencing on the day after the later of the Offering and the
original Issue Date (as defined) of the Senior Subordinated Notes (the "40-Day
Restricted Period"), beneficial interests in the Reg S Temporary Global Note may
be held only through Euroclear or CEDEL, and, pursuant to DTC's procedures,
Indirect Participants that hold a beneficial interest in the Reg S Temporary
Global Note will not be able to transfer such interest to a person that takes
delivery thereof in the form of an interest in the U.S. Global Notes. Within a
reasonable time after the expiration of the 40-Day Restricted Period, the Reg S
Temporary Global Notes will be exchanged for one or more permanent global notes
(the "Reg S Permanent Global Notes"; collectively with the Reg S Temporary
Global Notes, the "Reg S Global Notes") upon delivery to DTC of certification of
compliance with the transfer restrictions applicable to the Notes and pursuant
to Regulation S as provided in the Indenture. After the 40-Day Restricted
Period, (i) beneficial interests in the Reg S Permanent Global Notes may be
transferred to a person that takes delivery in the form of an interest in the
U.S. Global Notes and (ii) beneficial interests in the U.S. Global Notes may be
transferred to a person that takes delivery in the form of an interest in the
Reg S Permanent Global Notes, provided, in each case, that the certification
requirements described below are complied with. See "-- Transfers of Interests
in One Global Note for Interests in Another Global Note." All registered global
notes are referred to herein collectively "Global Notes."
Beneficial interests in all Global Notes and all Certificated Notes (as
defined herein), if any, will be subject to the applicable rules and procedures
of DTC and its Direct or Indirect Participants (including, if applicable, those
of Euroclear and CEDEL), which may change from time to time.
The Global Notes may be transferred, in whole and not in part, only to
another nominee of DTC or to a successor of DTC or its nominee in certain
limited circumstances. Beneficial interests in the Global Notes may be exchanged
for Senior Subordinated Notes in certificated form in certain limited
circumstances. See "-- Transfers of Interests in Global Notes for Certificated
Notes."
Initially, the Trustee will act as Paying Agent and Registrar. The Notes
may be presented for registration of transfer and exchange at the offices of the
Registrar.
DEPOSITARY PROCEDURES
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Direct Participants") and to facilitate the clearance and settlement of
transactions in those securities between Direct Participants through electronic
book-entry changes in accounts of Participants. The Direct Participants include
securities brokers and dealers (including the Initial Purchaser), banks, trust
companies, clearing corporations and certain other organizations, including
Euroclear and CEDEL. Access to DTC's system is also available to other entities
that clear through or maintain a direct or indirect, custodial relationship with
a Direct Participant (collectively, the "Indirect Participants"). DTC may hold
securities beneficially owned by other persons only through the Direct
Participants or Indirect Participants and such other persons' ownership interest
and transfer of ownership interest will be recorded only on the records of the
Direct Participant and/or Indirect Participant, and not on the records
maintained by DTC.
DTC has also advised the Company that, pursuant to DTC's procedures, (i)
upon deposit of the Global Notes, DTC will credit the accounts of the Direct
Participants designated by the Initial Purchaser with portions of the principal
amount of the Global Notes allocated by the Initial Purchaser to such Direct
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Participants, and (ii) DTC will maintain records of the ownership interests of
such Direct Participants in the Global Notes and the transfer of ownership
interests by and between Direct Participants. DTC will not maintain records of
the ownership interests of, or the transfer of ownership interests by and
between, Indirect Participants or other owners of beneficial interests in the
Global Notes. Direct Participants and Indirect Participants must maintain their
own records of the ownership interests of, and the transfer of ownership
interests by and between, Indirect Participants and other owners of beneficial
interests in the Global Notes.
Investors in the U.S. Global Notes may hold their interests therein
directly through DTC if they are Direct Participants in DTC or indirectly
through organizations that are Direct Participants in DTC. Investors in the Reg
S Temporary Global Notes may hold their interests therein directly through
Euroclear or CEDEL or indirectly through organizations that are participants in
Euroclear or CEDEL. After the expiration of the 40-Day Restricted Period (but
not earlier), investors may also hold interests in the Reg S Permanent Global
Notes through organizations other than Euroclear and CEDEL that are Direct
Participants in the DTC system. Morgan Guaranty Trust Company of New York,
Brussels office, is the operator and depository of Euroclear and Citibank, N.A.
is the operator and depository of CEDEL (each a "Nominee" of Euroclear and
CEDEL, respectively). Therefore, they will each be recorded on DTC's records as
the holders of all ownership interests held by them on behalf of Euroclear and
CEDEL, respectively. Euroclear and CEDEL will maintain on their records the
ownership interests, and transfers of ownership interests by and between, their
own customer's securities accounts. DTC will not maintain records of the
ownership interests of, or the transfer of ownership interests by and between,
customers of Euroclear or CEDEL. All ownership interests in any Global Notes,
including those of customers' securities accounts held through Euroclear or
CEDEL, may be subject to the procedures and requirements of DTC.
The laws of some states require that certain persons take physical delivery
in definitive, certificated form of securities that they own. This may limit or
curtail the ability to transfer beneficial interests in a Global Note to such
persons. Because DTC can act only on behalf of Direct Participants, which in
turn act on behalf of Indirect Participants and others, the ability of a person
having a beneficial interest in a Global Note to pledge such interest to persons
or entities that are not Direct Participants in DTC, or to otherwise take
actions in respect of such interests, may be affected by the lack of physical
certificates evidencing such interests. For certain other restrictions on the
transferability of the Senior Subordinated Notes see "-- Reg S Temporary and Reg
S Permanent Global Notes" and "-- Transfers of Interests in Global Notes for
Certificated Notes."
EXCEPT AS DESCRIBED IN "-- TRANSFERS OF INTERESTS IN GLOBAL NOTES FOR
CERTIFICATED NOTES", OWNERS OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE SENIOR SUBORDINATED NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE
PHYSICAL DELIVERY OF SENIOR SUBORDINATED NOTES IN CERTIFICATED FORM AND WILL NOT
BE CONSIDERED THE REGISTERED OWNERS OR HOLDERS THEREOF UNDER THE INDENTURE FOR
ANY PURPOSE.
Under the terms of the Indenture, the Company and the Trustee will treat
the persons in whose names the Senior Subordinated Notes are registered
(including Senior Subordinated Notes represented by Global Notes) as the owners
thereof for the purpose of receiving payments and for any and all other purposes
whatsoever. Payments in respect of the principal, premium, Liquidated Damages,
if any, and interest on Global Notes registered in the name of DTC or its
nominee will be payable by the Trustee to DTC or its nominee as the registered
holder under the Indenture. Consequently, neither the Company, the Trustee nor
any agent of the Company or the Trustee has or will have any responsibility or
liability for (i) any aspect of DTC's records or any Direct Participant's or
Indirect Participant's records relating to or payments made on account of
beneficial ownership interests in the Global Notes or for maintaining,
supervising or reviewing any of DTC's records or any Direct Participant's or
Indirect Participant's records relating to the beneficial ownership interests in
any Global Note or (ii) any other matter relating to the actions and practices
of DTC or any of its Direct Participants or Indirect Participants.
DTC has advised the Company that its current payment practice (for payments
of principal, interest and the like) with respect to securities such as the
Senior Subordinated Notes is to credit the accounts of the relevant Direct
Participants with such payment on the payment date in amounts proportionate to
such Direct Participant's respective ownership interests in the Global Notes as
shown on DTC's records. Payments by Direct Participants and Indirect
Participants to the beneficial owners of the Senior Subordinated Notes will be
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governed by standing instructions and customary practices between them and will
not be the responsibility of DTC, the Trustee or the Company. Neither the
Company nor the Trustee will be liable for any delay by DTC or its Direct
Participants or Indirect Participants in identifying the beneficial owners of
the Senior Subordinated Notes, and the Company and the Trustee may conclusively
rely on and will be protected in relying on instructions from DTC or its nominee
as the registered owner of the Senior Subordinated Notes for all purposes.
The Global Notes will trade in DTC's Same-Day Funds Settlement System and,
therefore, transfers between Direct Participants in DTC will be effected in
accordance with DTC's procedures, and will be settled in immediately available
funds. Transfers between Indirect Participants (other than Indirect Participants
who hold an interest in the Senior Subordinated Notes through Euroclear or
CEDEL) who hold an interest through a Direct Participant will be effected in
accordance with the procedures of such Direct Participant but generally will
settle in immediately available funds. Transfers between and among Indirect
Participants who hold interests in the Senior Subordinated Notes through
Euroclear and CEDEL will be effected in the ordinary way in accordance with
their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
Senior Subordinated Notes described herein, cross-market transfers between
Direct Participants in DTC, on the one hand, and Indirect Participants who hold
interests in the Senior Subordinated Notes through Euroclear or CEDEL, on the
other hand, will be effected by Euroclear or CEDEL's respective Nominee through
DTC in accordance with DTC's rules on behalf of Euroclear or CEDEL; however,
delivery of instructions relating to crossmarket transactions must be made
directly to Euroclear or CEDEL, as the case may be, by the counterparty in
accordance with the rules and procedures of Euroclear or CEDEL and within their
established deadlines (Brussels time for Euroclear and United Kingdom time for
CEDEL). Indirect Participants who hold interest in the Senior Subordinated Notes
through Euroclear and CEDEL may not deliver instructions directly to Euroclear's
or CEDEL's Nominee. Euroclear or CEDEL will, if the transaction meets its
settlement requirements, deliver instructions to its respective Nominee to
deliver or receive interests on Euroclear's or CEDEL's behalf in the relevant
Global Note in DTC, and make or receive payment in accordance with normal
procedures for same-day fund settlement applicable to DTC.
Because of time zone differences, the securities accounts of an Indirect
Participant who holds an interest in the Senior Subordinated Notes through
Euroclear or CEDEL purchasing an interest in a Global Note from a Direct
Participant in DTC will be credited, and any such crediting will be reported to
Euroclear or CEDEL, during the European business day immediately following the
settlement date of DTC in New York. Although recorded in DTC's accounting
records as of DTC's settlement date in New York, Euroclear and CEDEL customers
will not have access to the cash amount credited to their accounts as a result
of a sale of an interest in a Reg S Permanent Global Note to a DTC Participant
until the European business day for Euroclear or CEDEL immediately following
DTC's settlement date.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Senior Subordinated Notes only at the direction of one or
more Direct Participants to whose account interests in the Global Notes are
credited and only in respect of such portion of the aggregate principal amount
of the Notes as to which such Direct Participant or Direct Participants has or
have given direction. However, if there is an Event of Default under the Senior
Subordinated Notes, DTC reserves the right to exchange Global Notes (without the
direction of one or more of its Direct Participants) for legended Notes and
Exchange Notes in certificated form, and to distribute such certificated forms
of Senior Subordinated Notes to its Direct Participants. See "-- Transfers of
Interests in Global Notes for Certificated Notes."
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures
to facilitate transfers of interests in the Reg S Permanent Global Notes and in
the U.S. Global Notes among Direct Participants, Euroclear and CEDEL, they are
under no obligation to perform or to continue 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, Euroclear or CEDEL or their respective Direct and Indirect
Participants of their respective obligations under the rules and procedures
governing any of their operations.
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The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
REG S TEMPORARY AND REG S PERMANENT GLOBAL NOTES
An Indirect Participant who holds an interest in the Reg S Temporary Global
Notes through Euroclear or CEDEL must provide Euroclear or CEDEL, as the case
may be, with a certificate in the form required by the Indenture certifying that
such Indirect Participant is either not a U.S. Person (as defined below) or has
purchased such interests in a transaction that is exempt from the registration
requirements under the Securities Act, and Euroclear or CEDEL, as the case may
be, must provide to the Trustee (or the Paying Agent, if other than the Trustee)
a certificate in the form required by the Indenture prior to (i) the payment of
interest or principal with respect to such Indirect Participant's beneficial
interests in such Reg S Temporary Global Notes or (ii) any exchange of such
beneficial interests for beneficial interests in Reg S Permanent Global Notes.
"U.S. Person" means (i) any individual resident in the United States, (ii)
any partnership or corporation organized or incorporated under the laws of the
United States, (iii) any estate of which an executor or administrator is a U.S.
Person (other than an estate governed by foreign law and of which at least one
executor or administrator is a non-U.S. Person who has sole or shared investment
discretion with respect to its assets), (iv) any trust of which any trustee is a
U.S. Person (other than a trust of which at least one trustee is a non-U.S.
Person who has sole or shared investment discretion with respect to its assets
and no beneficiary of the trust (and no settler, if the trust is revocable) is a
U.S. Person), (v) any agency or branch of a foreign entity located in the United
States, (vi) any non-discretionary or similar account (other than an estate or
trust) held by a dealer or other fiduciary for the benefit or account of a U.S.
Person, (vii) any discretionary or similar account (other than an estate or
trust) held by a dealer or other fiduciary organized, incorporated or (if an
individual) resident in the United States (other than such an account held for
the benefit or account of a non-U.S. Person), (viii) any partnership or
corporation organized or incorporated under the laws of a foreign jurisdiction
and formed by a U.S. Person principally for the purpose of investing in
securities not registered under the Securities Act (unless it is organized or
incorporated and owned, by "accredited investors" within the meaning of Rule
501(a) under the Securities Act who are not natural persons, estates or trusts);
provided however that the term "U.S. Person" shall not include (A) a branch or
agency of a U.S. Person that is located and operating outside the United States
for valid business purposes as a locally regulated branch or agency engaged in
the banking or insurance business, (B) any employee benefit plan established and
administered in accordance with the law, customary practices and documentation
of a foreign country and (C) the international organizations set forth in
Section 902(o)(vii) of Regulation S under the Securities Act and any other
similar international organizations, and their agencies, affiliates and pension
plans.
TRANSFERS OF INTERESTS IN ONE GLOBAL NOTE FOR INTERESTS IN ANOTHER GLOBAL NOTE
Prior to the expiration of the 40-Day Restricted Period, an Indirect
Participant who holds an interest in the Reg S Temporary Global Note through
Euroclear or CEDEL will not be permitted to transfer its interest to a U.S.
Person who takes delivery in the form of an interest in U.S. Global Notes. After
the expiration of the 40-Day Restricted Period, an Indirect Participant who
holds an interest in Reg S Permanent Global Notes will be permitted to transfer
its interest to a U.S. Person who takes delivery in the form of an interest in
U.S. Global Notes.
Prior to the expiration of the 40-Day Restricted Period, a Direct or
Indirect Participant who holds an interest in the U.S. Global Note will not be
permitted to transfer its interests to any person that takes delivery thereof in
the form of an interest in the Reg S Temporary Global Notes. After the
expiration of the 40-Day Restricted Period, a Direct or Indirect Participant who
holds an interest in U.S. Global Notes may transfer its interests to a person
who takes delivery in the form of an interest in Reg S Permanent Global Notes
only upon receipt by the Trustee of a written certification from the transferor
to the effect that such transfer is being made in accordance with Rule 904 of
Regulation S.
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Transfers involving an exchange of a beneficial interest in Reg S Global
Notes for a beneficial interest in U.S. Global Notes or vice versa will be
effected by DTC by means of an instruction originated by the Trustee through
DTC/Deposit Withdraw at Custodian (DWAC) system. Accordingly, in connection with
such transfer, appropriate adjustments will be made to reflect a decrease in the
principal amount of the one Global Note and a corresponding increase in the
principal amount of the other Global Note, as applicable. Any beneficial
interest in the one Global Note that is transferred to a person who takes
delivery in the form of the other Global Note will, upon transfer, cease to be
an interest in such first Global Note and become an interest in such other
Global Note and, accordingly, will thereafter be subject to all transfer
restrictions and other procedures applicable to beneficial interests in such
other Global Note for as long as it remains such an interest.
TRANSFERS OF INTERESTS IN GLOBAL NOTES FOR CERTIFICATED NOTES
An entire Global Note may be exchanged for definitive Senior Subordinated
Notes in registered, certificated form without interest coupons ("Certificated
Notes") if (i) DTC (x) notifies the Company that it is unwilling or unable to
continue as depositary for the Global Notes and the Company thereupon fails to
appoint a successor depositary within 90 days or (y) has ceased to be a clearing
agency registered under the Exchange Act, (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of
Certificated Notes or (iii) there shall have occurred and be continuing a
Default or an Event of Default with respect to the Senior Subordinated Notes. In
any such case, the Company will notify the Trustee in writing that, upon
surrender by the Direct and Indirect Participants of their interest in such
Global Note, Certificated Notes will be issued to each person that such Direct
or Indirect Participants and the DTC identify as being the beneficial owner of
the related Senior Subordinated Notes.
Beneficial interests in Global Notes held by any Direct or Indirect
Participant may be exchanged for Certificated Notes upon request to DTC, by such
Direct Participant (for itself or on behalf of an Indirect Participant), to the
Trustee in accordance with customary DTC procedures. Certificated Notes
delivered in exchange for any beneficial interest in any Global Note will be
registered in the names, and issued in any approved denominations, requested by
DTC on behalf of such Direct or Indirect Participants (in accordance with DTC's
customary procedures).
Neither the Company, nor the Trustee will be liable for any delay by the
holder of the Global Notes or the DTC in identifying the beneficial owners of
Senior Subordinated Notes, and the Company and the Trustee may conclusively rely
on, and will be protected in relying on, instructions from the holder of the
Global Note or the DTC for all purposes.
SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Senior Subordinated
Notes represented by the Global Notes (including principal, premium, if any,
interest and Liquidated Damages, if any) be made by wire transfer of immediately
available same day funds to the accounts specified by the holder of interests in
such Global Note. With respect to Certificated Notes, the Company will make all
payments of principal, premium, if any, interest and Liquidated Damages, if any,
by wire transfer of immediately available same day funds to the accounts
specified by the holders thereof or, if no such account is specified, by mailing
a check to each such holder's registered address. The Company expects that
secondary trading in the Certificated Notes will also be settled in immediately
available funds.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Notes were originally sold in the Notes Offering by the Company on
December 11, 1997 to the Initial Purchaser pursuant to the Purchase Agreement.
The Initial Purchaser subsequently resold the Notes to qualified institutional
buyers in reliance on Rule 144A under the Securities Act and to a limited number
of institutional accredited investors that agreed to comply with certain
transfer restrictions and other conditions. As a condition to the Purchase
Agreement, the Company entered into the Registration Rights Agreement with the
Initial Purchaser pursuant to which the Company agreed to: file an Exchange
Offer Registration Statement with the Commission within 60 days of the Closing
Date, and use its best efforts to have it declared effective within 150 days of
the Closing Date. The Company also agreed to use its best efforts to cause the
Exchange Offer Registration Statement to be effective continuously, to keep the
Exchange Offer open for a period of not less than 20 business days and cause the
Exchange Offer to be consummated no later than the 30th business day after it is
declared effective by the Commission. For each Note surrendered to the Company
pursuant to the Exchange Offer, the holder of such Note will receive an Exchange
Note having a principal amount equal to that of the surrendered Note. Interest
on each Exchange Note will accrue from the date of its original issue.
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, the Exchange Notes would in general
be freely tradeable after the Exchange Offer without further registration under
the Securities Act. However, any purchaser of Notes who is an Affiliate of the
Company or who intends to participate in the Exchange Offer for the purpose of
distributing the Exchange Notes (i) will not be able to rely on the
interpretation of the staff of the Commission, (ii) will not be able to tender
its Notes in the Exchange Offer and (iii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
sale or transfer of the Notes, unless such sale or transfer is made pursuant to
an exemption from such requirements.
If (i) the Exchange Offer is not permitted by applicable law or Commission
policy or (ii) for any other reason the Exchange Offer is not consummated within
180 days after the original issue date of the Notes, or (iii) if any holder of
Notes which are Transfer Restricted Securities notifies the Company prior to the
20th business day following the consummation of the Exchange Offer that (a) it
is prohibited by law or Commission policy from participating in the Exchange
Offer, (b) 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 Offer Registration Statement is not appropriate or
available for such resales by it, or (c) it is a broker-dealer and holds the
Notes acquired directly from the Company or any of the Company's affiliates, the
Company will file with the Commission a Shelf Registration Statement to register
for public resale the Transfer Restricted Securities held by any such holder who
provides the Company with certain information for inclusion in the Shelf
Registration Statement.
For the purposes of the Registration Rights Agreement, "Transfer Restricted
Securities" means each Note until the earliest of the date of which (i) such
Note is exchanged in the Exchange Offering and entitled to be resold to the
public by the holder thereof without complying with the prospectus delivery
requirements of the Securities Act, (ii) such Note has been disposed of in
accordance with the Shelf Registration Statement, (iii) such Note is disposed of
by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the Prospectus
contained therein) or (iv) such Note is distributed to the public pursuant to
Rule 144 under the Securities Act.
The Registration Rights Agreement provides that (i) if the Company fails to
file an Exchange Offer Registration Statement with the Commission on or prior to
the 60th day after the Closing Date, (ii) if the Exchange Offer Registration
Statement is not declared effective by the Commission on or prior to the 150th
day after the Closing Date, (iii) if the Exchange Offer is not consummated on or
before the 30th business day after the Exchange Offer Registration Statement is
declared effective (iv) if obligated to file the Shelf Registration Statement
and the Company fails to file the Shelf Registration Statement with the
Commission on or prior to the 30th business day after such filing obligation
arises, (v) if obligated to file a
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Shelf Registration Statement and the Shelf Registration Statement is not
declared effective on or prior to the 90th day after the obligation to file a
Shelf Registration Statement arises, or (vi) if the Exchange Offer Registration
Statement or the Shelf Registration Statement, as the case may be, is declared
effective but thereafter ceases to be effective or usable in connection with
resales of the Transfer Restricted Securities, such time of non-effectiveness or
non-usability (each, a "Registration Default"), the Company agrees to pay to
each holder of Transfer Restricted Securities affected thereby liquidated
damages ("Liquidated Damages") in an amount equal to $0.05 per week per $1,000
in principal amount of Transfer Restricted Securities held by such holder for
each week or portion thereof that the Registration Default continues for the
first 90 day period immediately following the occurrence of such Registration
Default. The amount of the Liquidated Damages shall increase by an additional
$0.05 per week per $1,000 in principal amount of Transfer Restricted Securities
with respect to each subsequent 90 day period until all Registration Defaults
have been cured, up to a maximum amount of Liquidated Damages of $0.50 per week,
per $1,000 in principal amount of Transfer Restricted Securities. The Company
shall not be required to pay liquidated damages for more than one Registration
Default at any given time. Following the cure of all Registration Defaults, the
accrual of Liquidated Damages will cease.
All accrued Liquidated Damages shall be paid by the Company to holders
entitled thereto in the same manner as interest payments on the Notes on
semi-annual damages payment dates which correspond to interest payment dates for
the Notes.
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 any and all Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of outstanding Notes accepted
in the Exchange Offer. Holders may tender some or all of their Notes pursuant to
the Exchange Offer. However, Notes may be tendered only in integral multiples of
$1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Notes except that (i) the Exchange Notes bear a Series B designation and
a different CUSIP Number from the Notes, (ii) the Exchange Notes have been
registered under the Securities Act and hence will not bear legends restricting
the transfer thereof and (iii) the holders of the Exchange Notes will not be
entitled to certain rights under the Registration Rights Agreement, including
the provisions providing for an increase in the interest rate on the Notes in
certain circumstances relating to the timing of the Exchange Offer, all of which
rights will terminate when the Exchange Offer is terminated. The Exchange Notes
will evidence the same debt as the Notes and will be entitled to the benefits of
the Indenture.
As of the date of this Prospectus, $100,000,000 of the aggregate principal
amount of Notes were outstanding. The Company has fixed the close of business on
, 1998 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders of Notes do not have any appraisal or dissenters' rights under the
General Corporation Law of Delaware or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange Offer in accordance
with the applicable requirements of the Exchange Act and the rules and
regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Notes when,
as and if the Company has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering holders for the
purpose of receiving the Exchange Notes from the Company.
If any tendered Notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
the certificates for any such unaccepted Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
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Holders who tender 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 Notes pursuant to
the Exchange Offer. The Company will pay all charges and expenses, other than
transfer taxes in certain circumstances, 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. Notwithstanding the
foregoing, the Company will not extend the Expiration Date beyond ,
1998.
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 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 any Notes, to extend the Exchange Offer or to terminate the Exchange
Offer if any of the conditions set forth below under "-- Conditions" shall not
have been satisfied, by giving oral or written notice of such delay, extension
or termination to the Exchange Agent or (ii) to amend the terms of the Exchange
Offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof to the registered holders.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from their date of issuance. Holders
of Notes that are accepted for exchange will receive, in cash, accrued interest
thereon to, but not including, the date of issuance of the Exchange Notes. Such
interest will be paid with the first interest payment on the Exchange Notes on
June 15, 1998. Interest on the Notes accepted for exchange will cease to accrue
upon issuance of the Exchange Notes.
Interest on the Exchange Notes is payable semi-annually on each June 15 and
December 15, commencing on June 15, 1998.
PROCEDURES FOR TENDERING
Only a holder of Notes may tender such Notes in the Exchange Offer. To
tender in the Exchange Offer, a holder must complete, sign and date the Letter
of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed
if required by the Letter of Transmittal, and mail or otherwise deliver such
Letter of Transmittal or such facsimile, together with the Notes and any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. To be tendered effectively, the Notes, Letter of
Transmittal and other required documents must be completed and received by the
Exchange Agent at the address set forth below under "Exchange Agent" prior to
5:00 p.m., New York City time, on the Expiration Date. Delivery of the Notes may
be made by book-entry transfer in accordance with the procedures described
below. Confirmation of such book-entry transfer must be received by the Exchange
Agent prior to the Expiration Date.
By executing the Letter of Transmittal, each holder will make to the
Company the representations set forth above in the third paragraph under the
heading "-- Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Company will
constitute agreement between such holder and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK OF THE
HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO CONSIDER
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL
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CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE
AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR NOTES SHOULD BE
SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner whose Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered holder promptly and instruct such registered
holder to tender on such beneficial owner's behalf. See "Instruction to
Registered Holder and/or Book-Entry Transfer Facility Participant from Owner"
included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of the
Medallion System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Notes listed therein, such Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered holder
as such registered holder's name appears on such Notes with the signature
thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Notes at the book-entry transfer facility, DTC (the "Book-Entry Transfer
Facility"), for the purpose of facilitating the Exchange Offer, and subject to
the establishment thereof, any financial institution that is a participant in
the Book-Entry Transfer Facility's system may make book-entry delivery of Notes
by causing such Book-Entry Transfer Facility to transfer such Notes into the
Exchange Agent's account with respect to the Notes in accordance with the
Book-Entry Transfer Facility's procedures for such transfer. Although delivery
of the Notes may be effected through book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility, an appropriate Letter of
Transmittal properly completed and duly executed with any required signature
guarantee and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent at its address set forth below
on or prior to the Expiration Date, or, if the guaranteed delivery procedures
described below are 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.
The Exchange Agent and DTC have confirmed that the Exchange Offer is
eligible for the DTC Automated Tender Offer Program ("ATOP"). Accordingly, DTC
participants may electronically transmit their acceptance of the Exchange Offer
by causing DTC to transfer Notes to The Exchange Agent in accordance with DTC's
ATOP procedures for transfer. DTC will then send an Agent's Message to the
Exchange Agent.
The term "Agent's Message" means a message transmitted by DTC, received by
the Exchange Agent and forming part of the confirmation of a book-entry
transfer, which states that DTC has received an express acknowledgment from the
participant in DTC tendering Notes which are the subject of such book-entry
confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Company may enforce such
agreement against such participant. In the case of an Agent's Message relating
to guaranteed delivery, the term means a message transmitted by DTC and received
by the Exchange Agent, which states that DTC has received an express
acknowledgment from the participant
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in DTC tendering Notes that such participant has received and agrees to be bound
by the Notice of Guaranteed Delivery.
Notwithstanding the foregoing, in order to validly tender in the Exchange
Offer with respect to Securities transferred pursuant to ATOP, a DTC participant
using ATOP must also properly complete and duly execute the applicable Letter of
Transmittal and deliver it to the the Exchange Agent. Pursuant to authority
granted by DTC, any DTC participant which has Notes credited to its DTC account
at any time (and thereby held of record by DTC's nominee) may directly provide a
tender as though it were the registered holder by so completing, executing and
delivering the applicable Letter of Transmittal to the Depositary. DELIVERY OF
DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Notes and withdrawal of tendered 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
Notes not properly tendered or any Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right in its sole discretion to waive any defects, irregularities
or conditions of tender as to particular 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 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 Notes, neither the Company, the Exchange Agent nor any other person shall
incur any liability for failure to give such notification. Tenders of Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holders, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Notes and (i) whose Notes are not
immediately available, (ii) who cannot deliver their Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the Expiration
Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Notes and the principal amount of Notes tendered, stating that the
tender is being made thereby and guaranteeing that, within five New York
Stock Exchange trading days after the Expiration Date, the Letter of
Transmittal (or facsimile thereof) together with the certificate(s)
representing the Notes (or a confirmation of book-entry transfer of such
Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), 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 (of
facsimile thereof), as well as the certificate(s) representing all tendered
Notes in proper form for transfer (or a confirmation of book-entry transfer
of such Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), and all other documents required by the Letter of Transmittal
are received by the Exchange Agent upon five 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 Notes according to the guaranteed
delivery procedures set forth above.
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WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Notes in the Exchange Offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Notes to be withdrawn (the "Depositor"),
(ii) identify the Notes to be withdrawn (including the certificate number(s) and
principal amount of such Notes, or, in the case of Notes transferred by
book-entry transfer, the name and number of the account at the Book-Entry
Transfer Facility to be credited), (iii) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such
Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Trustee with respect
to the Notes register the transfer of such Notes into the name of the person
withdrawing the tender and (iv) specify the name in which any such Notes are to
be registered, if different from that of the Depositor. 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 Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no Exchange Notes will be issued
with respect thereto unless the Notes so withdrawn are validly retendered. Any
Notes which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Notes may be retendered by following one of the
procedures described above under "-- Procedures for Tendering" at any time prior
to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or Exchange Notes for, any Notes, and may
terminate or amend the Exchange Offer as provided herein before the acceptance
of such Notes, 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 sole judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer or any material
adverse development has occurred in any existing action or proceeding with
respect to the Company or any of its subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted, which, in the sole
judgment of the Company, might materially impair the ability of the Company
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; 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 Notes and return all
tendered Notes to the tendering holders, (ii) extend the Exchange Offer and
retain all Notes tendered prior to the expiration of the Exchange Offer,
subject, however, to the rights of holders to withdraw such Notes (see "--
Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with respect
to the Exchange Offer and accept all properly tendered Notes which have not been
withdrawn.
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EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance, requests
for additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Delivery to an address other than as set forth above will not constitute a
valid delivery.
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, telecopy, 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 brokers, 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. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Notes, which is face value, as reflected in the Company's accounting records on
the date of exchange. Accordingly, no gain or loss for accounting purposes will
be recognized by the Company. The expenses of the Exchange Offer will be
expensed over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Notes may be
resold only (i) to the Company (upon redemption thereof or otherwise), (ii) so
long as the Notes are eligible for resale pursuant to Rule 144A, to a person
inside the United States whom the seller reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A under the Securities Act in
a transaction meeting the requirements of Rule 144A, in accordance with Rule 144
under the Securities Act, or pursuant to another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel
reasonably acceptable to the Company), (iii) outside the United States to a
foreign person in a transaction meeting the requirements of Rule 904 under the
Securities Act, or (iv) pursuant to an effective registration statement under
the Securities Act, in each case in accordance with any applicable securities
laws of any state of the United States.
RESALE OF THE EXCHANGE NOTES
With respect to resales of 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 a holder or other person who receives Exchange Notes,
whether or not such person is the holder (other than a person that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) who receives Exchange Notes in exchange for Notes in the ordinary course of
business and who is not participating, does not intend to participate, and has
no arrangement or understanding with person to participate, in the distribution
of the Exchange Notes, will be allowed to resell the Exchange Notes to the
public without further registration under
97
<PAGE> 99
the Securities Act and without delivering to the purchasers of the Exchange
Notes a prospectus that satisfies the requirements of Section 10 of the
Securities Act. However, if any holder acquires Exchange Notes in the Exchange
Offer for the purpose of distributing or participating in a distribution of the
Exchange Notes, such holder cannot rely on the position of the staff of the
Commission enunciated in such no-action letters or any similar interpretive
letters, and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction,
unless an exemption from registration is otherwise available. Further, each
Participating Broker-Dealer that receives Exchange Notes for its own account in
exchange for Notes, where such Notes were acquired by such Participating
Broker-Dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes.
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 or the person receiving such Exchange Notes, whether or
not such person is the holder, in the ordinary course of business, (ii) the
holder or any such other person (other than a broker-dealer referred to in the
next sentence) is not engaging and does not intend to engage, in the
distribution of the Exchange Notes, (iii) the holder or any such other person
has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iv) neither the holder nor any such other
person is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, and (v) the holder or any such other person acknowledges that if
such holder or other person participates in the Exchange Offer for the purpose
of distributing the Exchange Notes it 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 those no-action letters. As
indicated above, each Participating Broker-Dealer that receives an Exchange Note
for its own account in exchange for Notes must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Notes. For a
description of the procedures for such resales by Participating Broker-Dealers,
see "Plan of Distribution."
98
<PAGE> 100
DESCRIPTION OF NEW CREDIT AGREEMENT
On December 11, 1997, the Company entered into the New Credit Agreement
with Holdings, the several lenders from time to time parties thereto
(collectively, the "Lenders"), The First National Bank of Chicago as
administrative agent (the "Administrative Agent") and DLJ Capital Funding, Inc.
as syndication agent (collectively, the "Agents"). The following is a summary
description of the principal terms of the New Credit Agreement and the other
loan documents. The description set forth below does not purport to be complete
and is qualified in its entirety by reference to certain agreements setting
forth the principal terms and conditions of the New Credit Agreement, which are
available upon request from the Company. The Company's obligations under the New
Credit Agreement will constitute Senior Indebtedness with respect to the
Exchange Notes.
Structure. The Lenders have committed, subject to compliance with customary
conditions, to provide the Company with (i) senior secured term loan facilities
(the "Term A Loan Facility" and "Term B Loan Facility") of up to $55.0 million
and (ii) a senior secured revolving credit facility (the "Revolving Credit
Facility") of up to $30.0 million.
The full amount of Term A Loan Facility, Term B Loan Facility and
approximately $11.5 million of Revolving Credit Facility, plus approximately
$4.5 million in the form of letters of credit, was borrowed on the closing date
under the New Credit Agreement (i) to partially finance the Acquisition, (ii) to
repay certain existing outstanding indebtedness of the Company and (iii) to pay
certain fees and expenses related to the Acquisition. Borrowings under the
Revolving Credit Facility were reduced to $2.1 million within five business
days. See "Use of Proceeds." The New Credit Agreement may be utilized to fund
the Company's working capital requirements, including issuance of stand-by and
trade letters of credit, bankers' acceptances and for other general corporate
purposes.
The Term A Loan Facility is a single tranche term facility of $30.0 million
which has a maturity of six years, subject to quarterly amortization commencing
in the fifteenth month after the Closing Date, in the following aggregate annual
amounts for the fiscal years ending in: 1999-$3 million; 2000-$3 million;
2001-$6 million; 2002-$7.5 million and 2003-$10.5 million. The Term B Loan
Facility is a single tranche term facility of $25.0 million that has a maturity
of seven years and amortizes at a rate of 1% annually in years 1 through 6 with
the remaining amounts payable in the form of a balloon payment in year 7. Loans
and letters of credit under the Revolving Credit Facility available at any time
during its six-year term subject to the fulfillment of customary conditions
precedent including the absence of a default under the New Credit Agreement.
Borrowings under the Revolving Credit Facility are governed by a borrowing base
calculation based on a percentage of the Company's eligible accounts receivable
and eligible inventory.
Security; Guaranty. The Company's obligations under the New Credit
Agreement are guaranteed by Holdings and each of the Company's direct and
indirect domestic and, to the extent no adverse tax consequences result, Foreign
Subsidiaries. The New Credit Agreement and the guarantees thereof are secured by
a perfected first priority security interest in substantially all assets of the
Company and its direct and indirect domestic and, to the extent no adverse tax
consequences result, Foreign Subsidiaries including: (i) all real property; (ii)
all accounts receivable, inventory and intangibles; and (iii) all of the capital
stock of the Company and its direct and indirect domestic and, to the extent no
adverse tax consequences result, Foreign Subsidiaries.
Interest, Maturity. Borrowings under the New Credit Agreement bear interest
at a rate per annum equal (at the Company's option) to: (i) the Administrative
Agent's reserve-adjusted LIBO rate ("LIBOR") plus an applicable margin or (ii)
an alternate base rate equal to the highest of the Administrative Agent's prime
rate, plus an applicable margin. Initially, the applicable margin for the Term A
Loan Facility and the Revolving Credit Facility is 2.25% per annum for LIBOR
loans and 1.25% per annum for alternate base rate loans and after the first six
months will be tied to a grid based on the Company's leverage ratio, and the
applicable margin for the Term B Loan Facility is 2.50% per annum for LIBOR
loans and 1.50% per annum for alternate base rate loans and after the first six
months will be tied to a grid based on the Company's leverage ratio.
99
<PAGE> 101
Fees. The Company is required to pay the Banks, on a quarterly basis, a
commitment fee on the undrawn portion of the Revolving Credit Facility at a rate
equal to .45% for the first six months and thereafter at a rate equal to .35% to
.45% per annum depending on the Company's leverage ratio. The Company is also
obligated to pay (i) a per annum letter of credit fee on the aggregate amount of
outstanding letters of credit; (ii) a fronting bank fee for the letter of credit
issuing bank; and (iii) customary agent, arrangement and other similar fees.
Covenants. The New Credit Agreement contains a number of covenants that,
among other things, restrict the ability of Holdings, the Company and its
subsidiaries to dispose of assets, incur additional indebtedness, prepay other
indebtedness or amend certain debt instruments (including the Indenture), pay
dividends, create liens on assets, enter into sale and leaseback transactions,
make investments, loans or advances, make acquisitions, engage in mergers or
consolidations, make capital expenditures, change the business conducted by the
Company or its subsidiaries or engage in certain transactions with affiliates
and otherwise restrict certain corporate activities. In addition, under the New
Credit Agreement, the Company is required to maintain specified financial ratios
and tests, including leverage ratios below a specified maximum, minimum net
worth levels, minimum fixed charge coverage levels and minimum levels of EBITDA.
See "Risk Factors -- Restrictive Debt Covenants."
Events of Default. The New Credit Agreement contains customary events of
default, including nonpayment of principal, interest or fees, material
inaccuracy of representations and warranties, violation of covenants,
cross-default and cross-acceleration to certain other indebtedness, certain
events of bankruptcy and insolvency, material judgments against the Company,
invalidity of any guarantee or security interest and a change of control of the
Company in certain circumstances as set forth therein.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion (including the opinion of special counsel
described below) is based upon current provisions of the Internal Revenue Code
of 1986, as amended, applicable Treasury regulations, judicial authority and
administrative rulings and practice. There can be no assurance that the Internal
Revenue Service (the "Service") will not take a contrary view, and no ruling
from the Service has been or will be sought. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could alter or
modify the statements and conditions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to holders. Certain holders (including insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United States)
may be subject to special rules not discussed below. The Company recommends that
each holder consult such holder's own tax advisor as to the particular tax
consequences of exchanging such holder's Notes for Exchange Notes, including the
applicability and effect of any state, local or foreign tax laws.
Kirkland & Ellis, special counsel to the Company, has advised the Company
that in its opinion, the exchange of the Notes for Exchange Notes pursuant to
the Exchange Offer will not be treated as an "exchange" for federal income tax
purposes because the Exchange Notes will not be considered to differ materially
in kind or extent from the Notes. Rather, the Exchange Notes received by a
holder will be treated as a continuation of the Notes in the hands of such
holder. As a result, there will be no federal income tax consequences to holders
exchanging Notes for Exchange Notes pursuant to the Exchange Offer.
100
<PAGE> 102
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplements from time to me, may be used by
a Participating Broker-Dealer in connection with resales of Exchange Notes
received in exchange for Notes where such Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that for a period of 180 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any Participating
Broker-Dealer for use in connection with any such resale. In addition, until
, 1998, all dealers effecting transactions in the Exchange Notes may
be required to deliver a prospectus.
The Company will not receive any proceeds from any sales of the Exchange
Notes by the Participating Broker-Dealers. 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 transaction, 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 negotiated prices. Any such resale may be made
directly to purchaser or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
Participating 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 Exchange Notes and any commissions or concessions
received by any such person 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.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker-Dealer that requests
such documents in the Letter of Transmittal.
LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be passed upon for
the Company by Kirkland & Ellis, New York, NY.
EXPERTS
The consolidated financial statements of the Company and subsidiaries as of
December 31, 1996 and December 31, 1995, and for the fiscal years ended December
31, 1996, December 31, 1995 and December 31, 1994, appearing in this Prospectus
have been audited by KPMG Peat Marwick LLP, independent auditors as stated in
their report appearing herein.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
The Company approved the replacement of KPMG Peat Marwick LLP (the "Former
Accountants") as the Company's independent outside accountants and the selection
of Deloitte & Touche LLP as the Company's new independent outside accountants.
The report of the Former Accountants on the financial statements of the
Company as of December 31, 1996 and 1995 and for the years ended December 31,
1996, 1995, and 1994 contained no adverse opinion or disclaimer of opinion and
was not qualified or modified as to uncertainty, audit scope or accounting
principles.
101
<PAGE> 103
During the Company's years ended December 31, 1996, 1995 and 1994 and
through the date of this report, there were no disagreements with the Former
Accountants on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures, which disagreements, if
not resolved to their satisfaction would have caused them to make reference
thereto in their report on the financial statements for such years.
The Company engaged Deloitte & Touche LLP as its new independent
accountants effective December 10, 1997.
102
<PAGE> 104
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
INDEPENDENT AUDITORS' REPORT........................................................... F-2
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1995 AND DECEMBER 31, 1996 AND FOR
EACH OF THE THREE FISCAL YEARS IN
THE PERIOD ENDED DECEMBER 31, 1996:
Consolidated Balance Sheets as of December 31, 1995 and December 31, 1996......... F-3
Consolidated Statements of Operations for the Years Ended December 31, 1994,
December 31, 1995 and December 31, 1996........................................... F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994,
December 31, 1995 and December 31, 1996........................................... F-5
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended
December 31, 1994, December 31, 1995 and December 31, 1996........................ F-6
Notes to Consolidated Financial Statements........................................ F-7
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996 AND
SEPTEMBER 30, 1997:
Condensed Consolidated Balance Sheets as of December 31, 1996 and
September 30, 1997................................................................ F-31
Condensed Consolidated Statements of Operations for the Nine Months Ended
September 30, 1996 and September 30, 1997......................................... F-32
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1996 and September 30, 1997......................................... F-33
Notes to Unaudited Condensed Consolidated Financial Statements.................... F-34
</TABLE>
F-1
<PAGE> 105
INDEPENDENT AUDITORS' REPORT
The Board of Directors
STANADYNE AUTOMOTIVE HOLDING CORP.:
We have audited the accompanying consolidated balance sheets of Stanadyne
Automotive Holding Corp. and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of operations, changes in stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Stanadyne
Automotive Holding Corp. and subsidiaries as of December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1996 in conformity with generally
accepted accounting principles.
As discussed in Notes 1 and 9, in 1996 the Company changed its method of
amortizing unrecognized gains and losses for its post-retirement benefit plans.
The cumulative effect of adopting this change is reported in the consolidated
statements of operations.
KPMG Peat Marwick LLP
Hartford, Connecticut
February 7, 1997, except for the first
paragraph of Note 19, which is
as of December 11, 1997
F-2
<PAGE> 106
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1996
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................................. $ 1,507 $ 3,371
Accounts receivable, net of allowance for uncollectible accounts of
$455 in 1995 and $478 in 1996....................................... 45,473 36,957
Inventories (note 2)................................................... 35,790 31,525
Prepaid expenses and other assets...................................... 2,469 656
Deferred income taxes (note 10)........................................ 6,688 6,863
Federal and state income tax refundable................................ 2,475 --
-------- --------
Total current assets................................................ 94,402 79,372
Property, plant and equipment, net (notes 3 and 4)....................... 103,202 96,116
Intangible and other assets, net......................................... 4,510 3,651
Deferred income taxes (note 10).......................................... 17,303 15,778
-------- --------
Total assets........................................................ $219,417 $194,917
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................................... $ 19,121 $ 21,361
Accrued liabilities (note 5)........................................... 26,261 28,209
Current maturities of long-term debt (note 7).......................... 13,750 14,514
Current installments of capital lease obligations (note 4)............. 1,653 1,685
-------- --------
Total current liabilities........................................... 60,785 65,769
Long-term debt, excluding current maturities (note 7).................... 92,752 67,250
Capital lease obligations, excluding current installments (note 4)....... 4,044 2,463
Other non-current liabilities (notes 6, 8 and 9)......................... 58,720 50,556
-------- --------
Total liabilities................................................... 216,301 186,038
======== ========
Stockholders' equity: (note 11)
Cumulative convertible preferred stock, par value $.01, $600 per share
annual dividend payable quarterly. Authorized 2,000 shares, shares,
issued and outstanding 1,000 shares. Liquidation preference $5,000
per share........................................................... -- --
Class A common stock, par value $.01, authorized 16,000 shares, issued
and outstanding 6,203.5 shares in 1995 and 6,198.5 in 1996.......... -- --
Class B common stock, par value $.01, authorized 4,000 shares, issued
and outstanding 1,008.6 shares...................................... -- --
Additional paid-in capital............................................. 35,526 35,630
-------- --------
35,526 35,630
Cumulative translation adjustment...................................... (398) (23)
Additional pension liability (note 8).................................. (422) (141)
Accumulated deficit.................................................... (29,385) (24,382)
-------- --------
Treasury stock at cost; Class A common stock 160 shares................ (2,205) (2,205)
-------- --------
Total stockholders' equity.......................................... 3,116 8,879
-------- --------
Commitments and contingencies (notes 4, 11 and 15)
Total liabilities and stockholders' equity.......................... $219,417 $194,917
======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 107
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Net sales (notes 14, 16 and 17).............................. $286,964 $272,145 $275,639
Cost of goods sold........................................... 229,485 235,645 234,756
Product recall program costs................................. 14,822 -- --
-------- -------- --------
Gross profit............................................ 42,657 36,500 40,883
Selling, general and administrative expenses (includes
payment to Metromedia Company of $500 in 1994, 1995 and
1996)
(notes 7 and 13)........................................... 35,075 31,740 30,976
-------- -------- --------
Operating income........................................ 7,582 4,760 9,907
Other income (expense):
Interest income............................................ 28 33 52
Interest expense........................................... (9,078) (9,325) (8,311)
-------- -------- --------
(Loss) income before income taxes, extraordinary item
and cumulative effect of change in accounting
principle............................................. (1,468) (4,532) 1,648
Income tax (benefit) expense (note 10)....................... (964) (1,297) 376
-------- -------- --------
(Loss) income before extraordinary item and cumulative
effect
of change in accounting principle..................... (504) (3,235) 1,272
Extraordinary item -- early extinguishment of debt, net of
income tax benefit of $688 (note 7)........................ -- (1,711) --
Cumulative effect of change in accounting for post-retirement
benefits, net of income tax expense of $2,609 (notes 1 and
9)......................................................... -- -- 4,330
-------- -------- --------
Net (loss) income............................................ (504) (4,946) 5,602
Preferred dividend requirement............................... (600) (600) (600)
-------- -------- --------
Net (loss) income applicable to common shareholders.......... $ (1,104) $ (5,546) $ 5,002
-------- -------- --------
Net (loss) income per share:
(Loss) income before extraordinary item and cumulative
effect
of change in accounting principle..................... $ (151) $ (536) $ 86
Extraordinary item...................................... -- (239) --
Cumulative effect of change in accounting principle..... -- -- 553
-------- -------- --------
Net (loss) income............................................ $ (151) $ (775) $ 639
-------- -------- --------
Weighted average number of common equivalent shares
outstanding................................................ 7,294.6 7,157.1 7,827.5
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 108
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income........................................... $ (504) $ (4,946) $ 5,602
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Depreciation and amortization of property, plant and
equipment and intangibles.............................. 18,707 18,101 16,986
Management incentive plan (income) expense............... (1,123) (1,502) 104
Deferred income tax (benefit) expense.................... (2,113) (171) 1,361
Loss on disposal and write-down of property, plant and
equipment.............................................. 1,546 155 152
Changes in assets and liabilities:
Accounts receivable.................................... (2,517) (8,944) 9,028
Inventories............................................ (1,701) (380) 4,807
Prepaid expenses and other assets...................... 2,947 (2,755) 4,286
Accounts payable....................................... 3,603 (3,091) 1,993
Accrued liabilities.................................... 3,358 (889) 1,939
Other non-current liabilities.......................... 198 (641) (8,485)
-------- -------- --------
Net cash provided by (used in) operating activities...... 22,401 (5,063) 37,773
Cash flows from investing activities:
Capital expenditures........................................ (9,934) (6,667) (8,827)
Proceeds from disposal of property, plant and equipment..... 1,646 83 212
-------- -------- --------
Net cash used in investing activities.................... (8,288) (6,584) (8,615)
Cash flows from financing activities:
Proceeds from refinancing of long-term debt................. -- 92,900 --
Net payments on revolving credit notes and overdrat
facilities............................................... (4,864) (19,207) (13,993)
Payments on long-term debt.................................. (6,200) (55,585) (10,375)
Payments of capitalized deferred financing costs............ (150) (1,499) --
Payments on SpA debt........................................ (1,040) (1,084) (593)
Payments on capital lease obligations....................... (944) (1,200) (1,668)
Purchase of treasury stock.................................. (689) (1,516) --
Dividends paid.............................................. (450) (600) (606)
-------- -------- --------
Net cash (used in) provided by financing activities...... (14,337) 12,209 (27,235)
Net (decrease) increase in cash and cash equivalents.......... (224) 562 1,923
Effect of exchange rate changes on cash and cash
equivalents................................................. 14 (132) (59)
Cash and cash equivalents at beginning of year................ 1,287 1,077 1,507
-------- -------- --------
Cash and cash equivalents at end of year...................... $ 1,077 $ 1,507 $ 3,371
======== ======== ========
</TABLE>
Supplemental disclosure of noncash financing transactions:
In 1994, 1995 and 1996, the Company entered into capital leases for new
equipment resulting in capital lease obligations of $1,758, $2,004 and $119,
respectively.
See notes to consolidated financial statements.
F-5
<PAGE> 109
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
CUMULATIVE
CONVERTIBLE CLASS A CLASS B
PREFERRED STOCK COMMON STOCK COMMON STOCK ADDITIONAL
------------------ ----------------- ------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
------ ------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1993.................... 1,000 $ -- 6,318.5 $ -- 1,008.6 $ -- $ 38,151
Net loss for 1994.................... -- -- -- -- -- -- --
Preferred dividends.................. -- -- -- -- -- -- --
Translation adjustment............... -- -- -- -- -- -- --
Decrease in additional pension
liability.......................... -- -- -- -- -- -- --
Management incentive plan income..... -- -- -- -- -- -- (1,123)
Purchase of Treasury stock........... -- -- -- -- -- --
Shares forfeited..................... (15)
------ ------- ------- ------- ------- ------- ----------
December 31, 1994.................... 1,000 -- 6,303.5 -- 1,008.6 -- 37,028
Net loss for 1995.................... -- -- -- -- -- -- --
Preferred dividends.................. -- -- -- -- -- -- --
Translation adjustment............... -- -- -- -- -- -- --
Increase in additional pension
liability.......................... -- -- -- -- -- -- --
Management incentive plan income..... -- -- -- -- -- -- (1,502)
Purchase of Treasury stock........... -- -- -- -- -- -- --
Shares forfeited..................... -- -- (100) -- -- -- --
------ ------- ------- ------- ------- ------- ----------
December 31, 1995.................... 1,000 -- 6,203.5 -- 1,008.6 -- 35,526
Net income for 1996.................. -- -- -- -- -- -- --
Preferred dividends.................. -- -- -- -- -- -- --
Translation adjustment............... -- -- -- -- -- -- --
Decrease in additional pension
liability.......................... -- -- -- -- -- -- --
Management incentive plan expense.... -- -- -- -- -- -- 104
Shares forfeited..................... -- -- (5) -- -- -- --
Rounding............................. -- -- -- -- -- -- --
------ ------- ------- ------- ------- ------- ----------
December 31, 1996.................... 1,000 $ -- 6,198.5 $ -- 1,008.6 $ -- $ 35,630
------ ------- ------- ------- ------- ------- ----------
<CAPTION>
CUMULATIVE ADDITIONAL
TRANSLATION PENSION ACCUMULATED TREASURY
ADJUSTMENT LIABILITY DEFICIT STOCK TOTAL
---------- ---------- ----------- -------- -------
<S> <C> <C> <C> <C> <C>
December 31, 1993.................... $ (1,363) $ (2,586) $ (22,735) $ -- $11,467
Net loss for 1994.................... -- -- (504) -- (504)
Preferred dividends.................. -- -- (600) -- (600)
Translation adjustment............... 722 -- -- -- 722
Decrease in additional pension
liability.......................... -- 2,348 -- -- 2,348
Management incentive plan income..... -- -- -- -- (1,123)
Purchase of Treasury stock........... -- -- -- (689) (689)
Shares forfeited.....................
---------- ---------- ----------- -------- -------
December 31, 1994.................... (641) (238) (23,839) (689) 11,621
Net loss for 1995.................... -- -- (4,946) -- (4,946)
Preferred dividends.................. -- -- (600) -- (600)
Translation adjustment............... 243 -- -- -- 243
Increase in additional pension
liability.......................... -- (184) -- -- (184)
Management incentive plan income..... -- -- -- -- (1,502)
Purchase of Treasury stock........... -- -- -- (1,516) (1,516)
Shares forfeited..................... -- -- -- -- --
---------- ---------- ----------- -------- -------
December 31, 1995.................... (398) (422) (29,385) (2,205) 3,116
Net income for 1996.................. -- -- 5,602 -- 5,602
Preferred dividends.................. -- -- (600) -- (600)
Translation adjustment............... 375 -- -- -- 375
Decrease in additional pension
liability.......................... -- 281 -- -- 281
Management incentive plan expense.... -- -- -- -- 104
Shares forfeited..................... -- -- -- --
Rounding............................. -- -- 1 -- 1
---------- ---------- ----------- -------- -------
December 31, 1996.................... $ (23) $ (141) $ (24,382) $(2,205) $ 8,879
---------- ---------- ----------- -------- -------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 110
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business. Stanadyne Automotive Corp. (the "Company"), a
subsidiary of Stanadyne Automotive Holding Corp., is a producer of diesel fuel
injection equipment which is sold worldwide to diesel engine manufacturers,
agricultural, industrial, and automotive manufacturers, and to the diesel
aftermarket. SAC's wholly-owned subsidiary, Precision Engine Products Corp.
("Precision Engine"), is a supplier of roller-rocker arms, hydraulic valve
lifters and lash adjusters to automotive engine manufacturers and the
independent automotive aftermarket.
A majority of the outstanding equity of Stanadyne Automotive Holding Corp.
("Holdings") is owned by Metromedia Company, a Delaware partnership.
Principles of Consolidation. The consolidated financial statements include
the accounts of Holdings, its wholly-owned subsidiary the Company, and all of
the Company's wholly-owned subsidiaries: Precision Engine, Stanadyne Automotive
SpA ("SpA"), DSD International and Stanadyne Automotive Foreign Sales Corp.
Intercompany balances have been eliminated in consolidation. The financial
statements of SpA, an Italian subsidiary, are consolidated on a fiscal year
basis ending November 30.
Cash and Cash Equivalents. Holdings considers cash on hand and short-term
investments with a maturity of three months or less to be "cash and cash
equivalents" for financial statement purposes. The carrying amount approximates
fair value because of the short maturity of these investments.
Inventories. Inventories are stated at the lower of cost or market. The
principal components of costs included in inventories are materials, labor,
subcontract cost and overhead. Holdings uses the last-in/first-out ("LIFO")
method of valuing its inventory, except for inventory located at SpA, which is
valued using the first-in/first-out ("FIFO") method.
Fair Value of Financial Instruments. Statement of Financial Accounting
Standards ("SFAS") No. 107, "Disclosures about Fair Value of Financial
Instruments", requires the disclosure of fair value information for certain
assets and liabilities, whether or not recorded in the balance sheets, for which
it is practicable to estimate that value. Holdings has the following financial
instruments: cash, receivables, accounts payable and accrued expenses and
long-term debt. Holdings considers the carrying amount of these items, excluding
long-term debt, to approximate the fair value because of the short period of
time between the origination of such instruments and their expected realization.
Refer to Note 7 for fair value disclosures of long-term debt.
Property, Plant, and Equipment. Property, plant and equipment, including
significant improvements thereto, are recorded at cost. Equipment under capital
leases is stated at the net present value of minimum lease payments.
Depreciation of plant and equipment is calculated using the straight-line method
over the estimated useful lives of the respective assets which are within the
following ranges:
<TABLE>
<S> <C>
Buildings and improvements.................................. 9 to 45 years
Machinery and equipment..................................... 3 to 15 years
</TABLE>
Intangible and Other Assets. Intangible assets consist primarily of
technological know-how, trademarks, patents and deferred financing costs.
Depreciable intangible assets are being amortized using the straight line method
over their estimated useful lives of 3 to 40 years. Other assets include
pension-related costs. In 1995, $1,649 of debt financing costs were capitalized
in connection with Holdings' refinancing (see Note 6). Accumulated amortization
of intangible assets for 1994, 1995 and 1996 was $37,398, $39,824 and $40,800,
respectively.
F-7
<PAGE> 111
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Foreign Currency Translation. Holdings' policy is to translate balance
sheet accounts at the exchange rate at the balance sheet date and income
statement accounts at the average monthly exchange rate for the month in which
the transactions are recognized. The resulting translation adjustment is
accumulated as a separate component of stockholders' equity. Worldwide foreign
currency transaction (losses) gains of $849, $274 and $(19) are included in the
consolidated statements of operations for 1994, 1995 and 1996, respectively.
Post Retirement Benefits. Holdings currently provides certain health care
and life insurance benefits for retired employees. Certain regular, full-time
employees may become eligible for those benefits when they reach retirement,
provided they have 10 or more consecutive years of service, if such programs are
still in effect.
Effective January 1, 1996, Holdings changed its accounting method of
amortizing unrecognized gains and losses for its post retirement benefits.
Previously, unrecognized gains or losses exceeding 10% of the accumulated post
retirement benefit obligation were amortized over the average remaining service
period of the plan participants. Holdings changed its policy whereby
unrecognized gains and losses exceeding 10% of the accumulated post retirement
benefit obligation are amortized over 12 months. This change was adopted because
the new amortization method allows for an accelerated recognition of economic
events that have occurred and represents an improvement in the financial
reporting of the accrued post retirement benefit obligation. As a result of the
curtailment and negative plan amendments discussed in Note 9, Holdings should
experience less volatility in the actuarial gains and losses of the plan since
certain future benefit costs have been fixed. Consequently, the new accounting
method's amortization period is expected to more closely match the benefit
period of plan participants and should not result in greater volatility of
reported earnings rising from the change in amortization method of unrecognized
gains or losses. The effect of the change was a one-time credit to income of
$6,939 before related income taxes of $2,609.
For the defined benefit pension plans, Holdings will continue to amortize
unrecognized gains and losses exceeding 10% of the accumulated benefit
obligation over the average remaining service life of plan participants as this
period approximates the benefit period.
Research and Development. Holdings charges research and development costs
through operations when incurred. Research and development costs incurred for
1994, 1995 and 1996 were $11,737, $15,217 and $12,720, respectively, of which
$1,107, $2,068 and $2,101, respectively, were reimbursed by customers. The net
expenses of $10,630, $13,149 and $10,619 in 1994, 1995 and 1996, respectively,
are included in the consolidated statements of operations.
Product Warranty. Holdings provides an accrual for the estimated future
warranty costs of its products. These estimates are based upon statistical
analyses of historical experience of product returns.
Revenue Recognition. Sales and related costs of sales are recorded when
products are shipped to customers. Holdings enters into long-term contracts with
certain customers for the purchase of parts during the contract period. Some of
these contracts have provisions which allow Holdings to negotiate with its
customers if targeted volumes, if defined in each contract, are not achieved.
Those negotiations may result in payments which are recognized as revenue when
the amount of such payment is agreed upon by Holdings and the customer and when
collection is probable.
Income Taxes. Income taxes are accounted for in accordance with the asset
and liability method. Deferred tax assets and liabilities are recognized for
future tax consequences attributable to differences between the tax basis of
assets and liabilities and their financial reporting amounts.
Net Income (Loss) per Share Applicable to Common Stockholders. Net income
(loss) per share applicable to common stockholders is based on the weighted
average number of shares outstanding for each of the periods presented using the
treasury stock method. Holdings considers convertible preferred stock and
F-8
<PAGE> 112
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
series B warrants to be common stock equivalents for purposes of calculating
earnings per share. In 1994 and 1995, the convertible preferred stock and series
B warrants were not included in the computation of earnings per share since the
effect would be anti-dilutive.
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 reporting period. Actual results could differ from those estimates.
(2) INVENTORIES
Inventories at December 31, 1995 and 1996 consisted of:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Raw materials...................................................... $ 3,353 $ 2,552
Work in process.................................................... 24,474 22,388
Finished goods..................................................... 7,963 6,585
------- -------
$35,790 $31,525
======= =======
</TABLE>
Certain inventories at December 31, 1995 and 1996 have been reduced by
approximately $2,370 and $2,473, respectively, to state the inventory at
approximate market value which was lower than LIFO cost. The LIFO reserve at
December 31, 1995 and 1996 was $349 and $620, respectively.
(3) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment including equipment under capital leases at
December 31, 1995 and 1996 consisted of:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Land............................................................. $ 2,998 $ 2,999
Building and improvements........................................ 41,587 42,088
Machinery and equipment.......................................... 164,823 169,133
Construction in progress......................................... 2,142 5,738
-------- --------
211,550 219,958
Less accumulated depreciation.................................... 108,348 123,842
-------- --------
$103,202 $ 96,116
======== ========
</TABLE>
Depreciation expense was $15,166, $15,700 and $16,113 for the years ended
December 31, 1994, 1995 and 1996, respectively.
F-9
<PAGE> 113
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) LEASES
Holdings is obligated under various capital leases for certain machinery
and equipment that expire between 1996 and 2000. At December 31, 1995 and 1996,
the gross amount of machinery and equipment and related accumulated amortization
recorded for equipment remaining under capital leases were as follows:
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Machinery and equipment.............................................. $8,557 $8,100
Less accumulated amortization........................................ 1,191 2,044
------- -------
- -
$7,366 $6,056
======== ========
</TABLE>
Amortization of assets acquired under capital leases is included in
depreciation expense.
Holdings is also obligated under certain noncancelable operating leases.
Rent expense for 1994, 1995 and 1996 were $1,370, $1,556 and $1,331,
respectively.
Future minimum lease payments under noncancelable operating leases with
initial or remaining lease terms in excess of one year and future minimum
capital lease payments as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
Year ending December 31:
1997......................................................... $ 2,017 $ 640
1998......................................................... 1,854 420
1999......................................................... 722 275
2000......................................................... 140 181
2001 and thereafter.......................................... -- 86
------ ------
Total minimum lease payments...................................... 4,733 $ 1,602
======
Less amount representing interest at a weighted average rate of
9.2%............................................................ 585
------
Present value of net minimum capital lease payments............... 4,148
Less current installments of obligations under capital leases..... 1,685
------
Obligations under capital leases excluding current
installments.............................................. $ 2,463
======
</TABLE>
F-10
<PAGE> 114
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) ACCRUED LIABILITIES
Accrued liabilities as of December 31, 1995 and 1996 consisted of:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Salaries, wages and bonus......................................... $ 3,110 $ 4,010
Vacation.......................................................... 4,396 4,522
Retiree health benefits........................................... 3,880 3,109
Accrued interest payable.......................................... 1,152 479
Pensions.......................................................... 1,610 1,701
Accrued taxes..................................................... 783 1,911
Health benefits................................................... 610 557
Workers' compensation............................................. 3,193 3,581
Accrued warranty.................................................. 3,900 3,800
Other............................................................. 3,627 4,539
------- -------
$26,261 $28,209
======= =======
</TABLE>
(6) OTHER NON-CURRENT LIABILITIES
Other non-current liabilities as of December 31, 1995 and 1996 consisted
of:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Retiree health benefits........................................... $43,764 $35,567
Italian leaving indemnity......................................... 7,170 7,960
Pensions.......................................................... 5,636 5,262
Environmental..................................................... 1,524 1,379
Other post-employment benefits.................................... 626 388
------- -------
$58,720 $50,556
======= =======
</TABLE>
(7) LONG-TERM DEBT
Long-term debt at December 31, 1995 and 1996 consisted of:
<TABLE>
<CAPTION>
1995 1996
-------- -------
<S> <C> <C>
Revolving credit notes, payable June 30, 1999.................... $ 41,950 $29,000
Term loans, payable quarterly in various installments through
December 31, 2001.............................................. 60,875 50,500
Stanadyne Automotive SpA debt, payable to Italian banks through
1997, bearing interest at rates ranging from
5.0% to 12.0%.................................................. 3,677 2,264
-------- -------
106,502 81,764
Less current maturities of long-term debt........................ 13,750 14,514
-------- -------
Long-term debt, excluding current maturities................ $ 92,752 $67,250
======== =======
</TABLE>
As of December 31, 1996, Holdings' revolving credit notes and term loans
consisted of LIBOR based loans aggregating $79,000 at rates ranging from 7.81%
to 8.56% and agent bank reference rate based loans aggregating $500 at a
year-end rate of 10.00%. Holdings has revolving credit lines aggregating $50,000
F-11
<PAGE> 115
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
comprised of $4,820 for standby letters of credit, outstanding borrowings of
$29,000, and available borrowings of $16,180 as of December 31, 1996. The
revolving credit notes and term loans are secured by substantially all of the
assets of the Company and Precision Engine and by a pledge of substantially all
of the issued and outstanding capital stock of the Company and Precision Engine
and 65% of the capital stock of SpA.
At December 31, 1995 and 1996 the weighted average interest rate on
short-term borrowings was 8.57% and 7.89%, respectively.
During February 1995, Holdings refinanced all of the debt of its domestic
subsidiaries by obtaining a $115,000 credit facility which made available a
$45,000 four and one-half year senior secured term loan, a $20,000 seven year
senior secured term loan, and a $50,000 senior secured revolving credit loan
which includes a $15,000 letter of credit sub-facility. The revolving credit
facility terminates on June 30, 1999. The proceeds were used to retire the debt
of Holdings' domestic subsidiaries, including $35,000 of unsecured notes.
Retirement of such unsecured notes resulted in a $2,400 prepayment penalty which
has been reported net of tax benefits as an extraordinary item.
The $45,000 term loan is due in quarterly installments of $2,000 commencing
on June 30, 1995 through December 31, 1996, $2,500 through December 31, 1998,
$5,500 on March 31, 1999, and $4,272 on June 30, 1999. The $20,000 term loan is
due in semi-annual installments of $125 through December 31, 1999, three
semi-annual installments of $4,688 through June 30, 2001, and a final
installment of $3,915 on December 31, 2001. In addition, Holdings was required
to prepay $2,000 of term debt in 1997 on an excess cash flow provision as it
applied to 1996 results.
Under the revolving credit loans and $45,000 term loan, Holdings has the
option to borrow at either (i) the Alternate Base Rate ("ABR") (the bank's prime
commercial lending rate in effect for that day or the Federal Funds Effective
Rate plus .5%, whichever is greater) plus 1% or (ii) for Eurodollar based loans,
at the LIBOR rate in effect at the time of the transaction plus 2 1/4%.
Borrowing rates for the $20,000 term loan are .75% higher than those applied to
the revolving credit loans. Holdings can elect, from time to time, to convert
ABR advances to Eurodollar advances, and vice versa. In addition, Holdings pays
a quarterly commitment fee of 1/2% per annum on the average daily unused
revolving commitment amount.
Pursuant to the credit agreement, Holdings entered into an Interest Rate
Cap Agreement in 1995, covering 50% of the principal balance of the term loans
through June 30, 1998. The cost of the cap was $34 and the Interest Rate Cap
Agreement will ensure a net interest cost of not greater than 10.5% for the
principal amounts covered under the Interest Rate Cap Agreement.
The credit agreement governing the revolving credit and term loan
facilities contains covenants as to the maintenance of certain financial ratios.
The agreement also contains customary restrictions and limitations as to certain
defined fundamental changes in the business, the incurring of additional debt or
contingent obligations, payment of dividends, liens on assets, the acquisition
of treasury stock, and the acquisition or sale of assets. In addition, there are
mandatory prepayment provisions under this agreement based upon excess cash
flow, as defined, from consolidated operations of Holdings.
Included in the December 31, 1995 and 1996 SpA debt is an overdraft
facility with $2,794 and $1,945, respectively, outstanding. The overdraft
facility is payable on demand and included in current maturities of long-term
debt.
The fair value of Holdings' long-term debt is estimated based on the quoted
market prices for the same or similar issues or on the current rates offered to
Holdings for debt of the same remaining maturities. Management believes the
carrying value of the debt approximates the market value at December 31, 1995
and 1996.
F-12
<PAGE> 116
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The aggregate maturities of long-term debt outstanding at December 31, 1996
were:
<TABLE>
<S> <C>
1997....................................................................... $14,514
1998....................................................................... 10,250
1999....................................................................... 39,022
2000....................................................................... 9,375
2001....................................................................... 8,603
-------
$81,764
=======
</TABLE>
For the years ended December 31, 1994, 1995 and 1996, interest paid was
$7,842 and $9,781 and $8,986, respectively.
(8) PENSIONS
Holdings has noncontributory defined benefit pension plans which cover
substantially all of the domestic hourly and salaried employees of Holdings.
Benefits under the pension plans are based on years of service and compensation
levels during employment for salaried employees and years of service for hourly
employees. It is Holdings' policy to fund the pension plans based on the minimum
permissible contribution as determined by the plans' actuaries. Plan assets are
invested primarily in a diversified portfolio of equity securities. Holdings
also sponsors an unfunded defined benefit supplemental executive retirement
plan.
The following table sets forth the funded status of the pension plans and
amounts recognized in Holdings' consolidated financial statements as of December
31:
<TABLE>
<CAPTION>
1995 1996
------------------- -------------------------------------------
PLANS IN WHICH PLANS IN WHICH
ACCUMULATED BENEFIT PLANS IN WHICH ASSETS ACCUMULATED BENEFIT
OBLIGATION EXCEEDS EXCEED ACCUMULATED OBLIGATION EXCEEDS
PLAN ASSETS BENEFIT OBLIGATION PLAN ASSETS
------------------- --------------------- -------------------
<S> <C> <C> <C>
Actuarial present value of accumulated
benefit obligation:
Vested.................................. $ 19,929 $ 20,916 $ 738
Nonvested............................... 3,772 3,795 46
------- ------- ------
Accumulated benefit obligation....... $ 23,701 $ 24,711 $ 784
======= ======= ======
Actuarial present value of projected
benefit obligation...................... $ 28,973 $ 29,520 $ 1,000
Plan assets at fair value................. (19,973) (25,539) --
------- ------- ------
Projected benefit obligation in
excess of plan assets.............. 9,000 3,981 1,000
Unrecognized net gain (loss).............. (2,003) 2,375 (357)
Unrecognized prior service costs.......... (524) (293) (158)
Additional liability...................... 611 -- 299
------- ------- ------
Accrued pension liability............ $ 7,084 $ 6,063 $ 784
======= ======= ======
</TABLE>
F-13
<PAGE> 117
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the net periodic pension costs for the years ended
December 31, 1994, 1995 and 1996 were as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Service cost............................................... $1,604 $1,465 $1,769
Interest cost.............................................. 1,692 2,051 2,171
Actual return on plan assets............................... (256) (4,405) (4,030)
Net amortization and deferrals............................. (739) 3,181 2,257
------ ------ ------
Net periodic pension cost.................................. $2,301 $2,292 $2,167
====== ====== ======
</TABLE>
An additional liability of $611 and $299 has been recorded with a $189 and
$158 intangible asset, and the remaining $422 and $141 are shown as a separate
component of stockholders' equity as of December 31, 1995 and 1996,
respectively. The additional liability is necessary so that the liability
recognized is at least equal to the unfunded accumulated benefit obligation as
actuarially determined on a plan-by-plan basis. Actuarial assumptions used in
accounting for the pension plan as of December 31, 1994, 1995 and 1996 were:
<TABLE>
<CAPTION>
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Assumed average salary compensation increase................. 4.5% 4.0% 4.0%
Discount rate................................................ 8.5% 7.25% 7.5%
Expected long-term rate of return on assets.................. 9.0% 9.0% 9.0%
</TABLE>
No compensation increase rate is applicable for the hourly plans as they
are flat pay for each year of service (regardless of compensation earned).
In accordance with Italian Civil Code, Holdings provides employees of SpA a
leaving indemnity payable on termination of employment. The amount of this
leaving indemnity is determined by the employee's category, length of service,
and overall remuneration earned during service. Amounts included as part of
other non-current liabilities at December 31, 1995 and 1996 are $7,170 and
$7,960, respectively. Leaving indemnity expense was $1,075, $1,202 and $1,135
for the years ended December 31, 1994, 1995 and 1996, respectively.
(9) POST-RETIREMENT HEALTH CARE AND LIFE INSURANCE
The Company and its domestic subsidiaries currently provide certain health
care and life insurance benefits for retired employees. Full-time employees of
Holdings (except non-grandfathered employees at the Tallahassee and Melrose Park
locations) may become eligible for those benefits if they reach retirement,
provided they attain age 57 with a minimum of 10 consecutive years of service
immediately preceding retirement, if such programs are still in effect.
During 1996, Holdings modified the benefits available to both existing and
future retirees. These changes resulted in both a curtailment gain and negative
plan amendments which have been reflected in the determination of the accrued
post-retirement benefit cost. Holdings recorded a $470 curtailment gain as a
result of the elimination of life insurance benefits to all employees retiring
after January 1, 1998. In addition, Holdings reduced their cost commitment
provided to existing and future retirees which resulted in negative plan
amendments of $7,569. The resulting gain from the negative plan amendment is
deferred and will be amortized over the remaining service period of the plan
participants.
Employees who retired prior to January 1, 1987 are eligible for a
Basic/Major Medical Plan and, in certain cases, prescription drug benefits for a
basic monthly contribution by the retiree. Benefit levels vary depending upon
the retiree's benefit plan eligibility. Holdings' health benefit cost commitment
for employees who retire between January 1, 1987 and December 31, 1997 is
limited to the 1997 cost level. Furthermore,
F-14
<PAGE> 118
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Holdings' cost commitment for employees who retire after 1997 will be $0.1 per
month per eligible participant prior to becoming Medicare eligible and $0.05 per
month when Medicare eligible. Employees hired after 1996 are required to pay the
full cost of post retirement medical coverage. Employees who retire before 1998
are eligible for Holdings provided life insurance benefits. Employees who retire
after 1997 are allowed to purchase life insurance at full cost.
As discussed in Note 1, effective January 1, 1996, Holdings changed its
accounting method of amortizing unrecognized gains and losses. Unrecognized
gains and losses exceeding 10% of the accumulated post-retirement benefit
obligation are amortized over 12 months. This accounting change reduced the
unrecognized gain by $6,939.
The following table presents the plan's funded status reconciled with
amounts recognized in Holdings' consolidated balance sheets at December 31, 1995
and 1996:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Retirees........................................................ $29,251 $23,401
Fully eligible active plan participants......................... 1,412 2,970
Other active plan participants.................................. 9,816 2,404
------ ------
40,479 28,775
Plan assets at fair value......................................... -- --
------ ------
Unfunded accumulated post-retirement benefit obligation......... 40,479 28,775
Unrecognized decrease in benefit obligation due to plan
amendment....................................................... -- 7,569
Unrecognized net gain............................................. 6,922 2,269
------ ------
Accrued post-retirement benefit cost included in accrued
liabilities and other non-current liabilities............... $47,401 $38,613
====== ======
</TABLE>
Net periodic post-retirement benefit costs for 1994, 1995 and 1996 included
the following components:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Service cost............................................... $ 561 $ 459 $ 475
Interest cost.............................................. 2,978 3,013 2,584
Actual return on plan assets............................... -- -- --
Amortization of unrecognized decrease in benefit obligation
due to plan amendment.................................... -- -- (303)
Amortization of unrecognized net gain...................... (182) (472) (189)
------ ------ ------
Net periodic post-retirement benefit cost................ $3,357 $3,000 $2,567
====== ====== ======
</TABLE>
F-15
<PAGE> 119
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
For measurement purposes, the following medical and dental cost trend rates
were assumed in determining the accumulated benefit obligation at December 31,
1995 and 1996:
<TABLE>
<S> <C>
Medical Cost Trend Rates
-- Medical prior to age 65 (Indemnity Plan)... 12.0% in 1994, decreasing 1.5% per year
for 5 years, ultimately 4.5% in 1999 and
thereafter.
-- Medical prior to age 65 (HMO's)............ 7.5% in 1994, decreasing 1.0% per year
for 3 years, ultimately 4.5% in 1997 and
thereafter.
-- Medical age 65 & older..................... 7.5% in 1994, decreasing 1.0% per year
for 3 years, ultimately 4.5% in 1997 and
thereafter.
Dental Cost Trend Rate
-- Dental costs............................... 7.5% in 1994, decreasing 1.0% per year
for 3 years, ultimately 4.5% in 1997 and
thereafter.
</TABLE>
A 1% increase in these trend rates would have increased the accumulated
post-retirement benefit obligation at December 31, 1996 by approximately $888
and would have increased the net periodic post retirement benefit cost by
approximately $93 for 1996. The discount rate used in determining the
accumulated post-retirement benefit obligation was 7.5% at December 31, 1996 and
7.25% at December 31, 1995.
(10) INCOME TAXES
Income tax expense (benefit) for the years ended December 31, 1994, 1995
and 1996 consisted of:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -------
<S> <C> <C> <C>
1994:
Federal............................................... $ (49) $ (1,157) $(1,206)
State................................................. 1,126 (855) 271
Foreign............................................... 72 (101) (29)
-------- -------- --------
$ 1,149 $ (2,113) $ (964)
======== ======== ========
1995:
Federal............................................... $(1,511) $ (77) $(1,588)
State................................................. 308 (99) 209
Foreign............................................... 75 7 82
-------- -------- --------
$(1,128) $ (169) $(1,297)
======== ======== ========
1996:
Federal............................................... $ 1,390 $ (140) $ 1,250
State................................................. 233 342 575
Foreign............................................... 1 (1,450) (1,449)
-------- -------- --------
$ 1,624 $ (1,248) $ 376
======== ======== ========
</TABLE>
F-16
<PAGE> 120
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Total income tax expense (benefit) differed from the amounts computed by
applying the U.S. Federal Income Tax rate of 35% to income (loss) before income
taxes, extraordinary item and cumulative effect of change in accounting
principle as a result of the following:
<TABLE>
<CAPTION>
1994 1995 1996
----- ------- -----
<S> <C> <C> <C>
Computed "expected" tax expense (benefit).................. $(514) $(1,586) $ 577
Increase (reduction) in income tax resulting from:
Adjustment to deferred tax asset for change in enacted
tax rates............................................. -- 175 215
Federal NOL for which no benefit realized................ -- 766 --
State taxes, net of federal income tax effect............ 179 164 292
Federal R&D credit permanent difference.................. (470) (807) --
Rate difference on income of foreign operations.......... 155 159 285
Foreign taxes............................................ 9 -- --
Change in valuation allowance............................ (279) (317) (591)
Other, net............................................... (44) 149 (402)
----- ------- -----
$(964) $(1,297) $ 376
===== ======= =====
</TABLE>
U.S. federal, state and foreign net income taxes paid (refunded) amounted
to $734, $266 and $(1,832) in 1994, 1995 and 1996, respectively. As a result of
losses in previous years, Holdings has unused regular federal net operating loss
carryforwards of approximately $8,393 at December 31, 1996, which, if not used
to offset future taxable income, will begin to expire in 2010.
As a result of losses in current and previous years, Holdings has unused
net operating loss carryforwards for state income tax purposes of approximately
$14,900 at December 31, 1996, which, if not used to offset future state taxable
income, will begin to expire in 1999. In addition, unused foreign net operating
losses of approximately $2,420 at December 31, 1996 exist which will begin to
expire in 1997.
Holdings has been subject to the U.S. Alternative Minimum Tax ("AMT") and,
therefore, has a cumulative AMT credit carryforward of approximately $4,884 as
of December 31, 1996. This carryforward has an unlimited life and may be used to
offset federal income taxes in excess of AMT in future periods.
Holdings has unused federal general business credit carryovers of
approximately $3,245 at December 31, 1996. The credit consists of $3,167 of
research and development credit and $78 of targeted job credit. The credit will
begin to expire in 2004. However, when the credit expires it can be used to
offset taxable income.
F-17
<PAGE> 121
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1995 and 1996 are presented as follows:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Current:
Deferred tax assets:
Post-retirement benefits..................................... $ 1,857 $ 1,237
Inventories.................................................. 685 796
Deferred compensation........................................ -- 60
Compensated absences......................................... 1,321 1,394
Workers' compensation........................................ 1,132 1,267
Health benefits.............................................. 212 209
Other........................................................ 1,481 1,900
------- -------
Net current deferred tax assets............................ $ 6,688 $ 6,863
======= =======
Non-current:
Deferred tax assets:
Post-retirement benefits..................................... $18,392 $15,723
Alternative minimum tax credit carryforwards................. 3,609 4,884
Inventories.................................................. 1,629 1,299
Federal general business credit.............................. 3,896 3,245
Deferred compensation........................................ 200 --
Net operating loss carryforwards............................. 4,559 4,407
Other........................................................ 872 676
------- -------
Deferred tax assets before valuation allowance............. 33,157 30,234
Less valuation allowance.......................................... (591) --
------- -------
Deferred tax assets........................................ 32,566 30,234
------- -------
Deferred tax liabilities:
Property, plant and equipment................................ 14,459 13,775
Other........................................................ 804 681
------- -------
Deferred tax liabilities................................... 15,263 14,456
------- -------
Net non-current deferred tax asset......................... $17,303 $15,778
======= =======
</TABLE>
At December 31, 1996, Holdings did not established a valuation allowance to
offset any deferred tax assets. Based on projections for future taxable income
over the periods during which the deferred tax assets are deductible, and the
expectation that a significant portion of these deferred tax assets are to be
realized by offsetting them against taxable temporary items, it is management's
belief that it is more likely than not that all deferred tax assets will be
fully realized. The net change in the total valuation allowance was a decrease
of $467, $317 and $591 for the years ended December 31, 1994, 1995 and 1996,
respectively.
(11) CAPITAL STOCK
The Certificate of Incorporation of Stanadyne Automotive Holding Corp.
provides that Holdings has the authority to issue 22,000 shares of stock
consisting of 16,000 shares of Class A common stock, par value $.01; 4,000
shares of Class B common stock, par value $.01; and 2,000 shares of preferred
stock, par value $.01. The Class A and Class B common stock have equivalent
rights and preferences, except that the Class A Stock has
F-18
<PAGE> 122
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
voting rights consisting of one vote per share. Holders of Class B common stock
do not have voting rights. The terms and conditions of the preferred stock were
designated at the time of issuance.
Holdings has designated 1,000 shares of $.01 par value preferred stock as
cumulative, convertible, nonvoting preferred stock, all of which are issued and
outstanding. The cumulative, convertible, nonvoting preferred stock is entitled
to cumulative dividends from the date of issuance at an annual rate of $0.6 per
share payable quarterly. In the event of liquidation, the holders of preferred
stock are entitled to receive at least $5 per preferred share together with
accrued and unpaid dividends prior to any distribution to common stockholders.
The holder of any share of preferred stock shall have a right, at the
shareholder's option, to convert all or a portion of such shares into fully paid
and nonassessable shares of Class A common stock of Holdings at any time at a
non-dilutive conversion rate, currently .75 shares of Class A common stock for
each share of preferred stock.
Included in the issued and outstanding Class A common stock of Holdings are
183.5 shares issued to management of Holdings' subsidiaries (the "Management
Shares") pursuant to individual subscription agreements. The vesting of shares
issued in connection with such plan is contingent upon future service of the
individual through the earlier of a change in control of Holdings or retirement,
as defined. The cumulative compensation expense related to these shares is
calculated by extending the vested number of Management Shares by a formula
share price to estimate market value. (Income) expense recorded by Holdings was
$(1,123), $(1,502) and $104 for the years ended December 31, 1994, 1995 and
1996, respectively. Further vesting is contingent upon certain future events
which presently cannot be estimated. The ultimate amount that will be expensed
could vary significantly from the cumulative expense recorded through December
31, 1996.
There are outstanding warrants to purchase 29.7 shares of Class B common
stock. The holders of the warrants also hold shares of Class B common stock. The
warrants were issued in order to ensure against the dilutive effect of the
management incentive Class A shares. Warrant holders are allowed to convert
warrants to shares of Class B common stock upon the issuance of additional
Management Shares. In addition, warrants are canceled on a pro rata basis with
the redemption by Holdings of Management Shares. Warrants may be exercised at a
price of $.01 per share. The warrant agreement expires on March 31, 2001.
During 1994 and 1995, Holdings purchased 50 shares and 110 shares of Class
A common stock from management for a total cost of $689 and $1,516,
respectively. These shares are held as treasury stock.
(12) 401(k) PLAN
Substantially all of Holdings' domestic employees are eligible to
participate in a 401(k) savings plan provided by SAC. The 401(k) savings plan
provides such employees with the opportunity to save for retirement on a tax
deferred basis. Holdings contributes 50% of the employees contribution per year
up to a limit, as defined in the plan document. Holdings made contributions of
$358, $373 and $352 for the years ended December 31, 1994, 1995 and 1996,
respectively.
(13) RELATED PARTY TRANSACTIONS
During each of the years ended December 31, 1994, 1995 and 1996, Holdings
incurred management fees of $500 to Metromedia Company for management services
provided. These charges are included in general and administrative expenses.
Holdings has accrued $150 and $144 at December 31, 1995 and 1996, respectively,
for dividends on the preferred stock which is owed primarily to Metromedia
Company.
F-19
<PAGE> 123
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(14) SIGNIFICANT CUSTOMERS
During 1994, 1995 and 1996, sales to customers and their affiliates, which
represented approximately 10% or more of consolidated total sales, were as
follows:
<TABLE>
<CAPTION>
1994 1995 1996
SEGMENT AMOUNT % AMOUNT % AMOUNT %
---------------- ------- ---- ------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Customer A.. Precision Engine $44,180 15.4% $40,099 14.7% $47,957 17.4%
Customer B.. Diesel Group 41,853 14.6 56,169 20.6 41,483 15.1
Customer C.. Diesel Group 32,104 11.2 33,915 12.5 38,893 14.1
Customer D.. Precision
Engine/Diesel
Group 30,965 10.8 27,138 10.0 22,164 8.0
</TABLE>
Accounts receivable balances with these customers and their affiliates were
$22,392 and $18,206 at December 31, 1995 and 1996, respectively.
(15) CONTINGENCIES
Holdings is involved in various legal and regulatory proceedings generally
incidental to its business. While the results of any litigation or regulatory
issue contain an element of uncertainty, management believes that the outcome of
any known, pending or threatened legal proceeding, or all of them combined, will
not have a material adverse effect on Holdings' financial position.
(16) SEGMENTS
Holdings has two reportable segments, the Diesel Systems Group (the "Diesel
Group") and the Precision Engine Products Corp. ("Precision Engine"). The Diesel
Group manufacturers diesel fuel injection equipment including fuel pumps,
injectors and filtration systems. This segment accounted for approximately 75%,
76% and 73% of Holdings' revenue for the years ended December 31, 1994, 1995 and
1996, respectively. Precision Engine manufactures roller-rocker arms, hydraulic
valve lifters and lash adjusters for gasoline engines. Revenues for Precision
Engine accounted for 25%, 24% and 27% of total revenues for the years ended
December 31, 1994, 1995 and 1996, respectively. Holdings' reportable segments
are strategic business units that offer similar products (engine parts) to
customers in related industries (agricultural, industrial and automotive engine
manufacturers). Holdings considers the Diesel Group and Precision Engine to be
two distinct segments because the operating results of each are compiled,
reviewed and managed separately. In addition, there were no intersegment sales
between the Diesel Group and Precision Engine for any of the periods presented
below.
The following summarizes key information used by Holdings in evaluating the
performance of each segment as of and for the years ended December 31, 1995 and
1996:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------------------------
PRECISION
DIESEL ENGINE ELIMINATIONS TOTALS
-------- --------- ------------ --------
<S> <C> <C> <C> <C>
Net sales................................. $206,903 $ 65,242 $ -- $272,145
Gross profit.............................. 27,309 9,191 -- 36,500
Operating (loss) income (1,034) 5,794 -- 4,760
Net (loss) income......................... (8,052) 3,106 -- (4,946)
Total assets.............................. 183,427 44,308 (8,318) 219,417
Total capital expenditures................ 5,025 1,642 -- 6,667
</TABLE>
F-20
<PAGE> 124
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------------------------------
PRECISION
DIESEL ENGINE ELIMINATIONS TOTALS
-------- --------- ------------ --------
<S> <C> <C> <C> <C>
Net sales................................. $202,467 $ 73,172 $ -- $275,639
Gross profit.............................. 28,020 12,863 -- 40,883
Operating income.......................... 1,205 8,702 -- 9,907
Net (loss) income......................... (891) 6,493 -- 5,602
Total assets.............................. 170,043 39,686 (14,812) 194,917
Total capital expenditures................ 6,335 2,492 -- 8,827
</TABLE>
(17) FOREIGN OPERATIONS
Holdings has manufacturing operations in the United States and Italy. The
following is a summary of information by area as of December 31, 1996 and 1995
and for the years ended December 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Net sales:
United States...................................... $251,894 $237,228 $243,284
Italy.............................................. 35,070 34,917 32,355
-------- -------- --------
Net sales....................................... $286,964 $272,145 $275,639
======== ======== ========
Income (loss) before extraordinary item and
cumulative effect of accounting change:
United States...................................... $ (1,441) $ (3,983) $ 3,130
Italy.............................................. 937 748 (1,858)
-------- -------- --------
Income (loss) before extraordinary item and
cumulative effect of accounting change........ $ (504) $ (3,235) $ 1,272
======== ======== ========
Identifiable assets:
United States...................................... $188,856 $169,173
Italy.............................................. 30,561 25,744
-------- --------
Identifiable assets............................. $219,417 $194,917
======== ========
Long-lived assets:
United States...................................... $ 98,434 $ 91,713
Italy.............................................. 9,278 8,054
-------- --------
Long-lived assets............................... $107,712 $ 99,767
-------- --------
Deferred tax assets (liabilities):
United States...................................... $ 24,102 $ 21,290
Italy.............................................. (111) 1,351
-------- --------
Deferred tax assets............................. $ 23,991 $ 22,641
======== ========
</TABLE>
F-21
<PAGE> 125
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(18) VALUATION AND QUALIFYING ACCOUNTS
The components of significant valuation and qualifying accounts for the
years ended December 31, 1994, 1995 and 1996 were as follows:
<TABLE>
<CAPTION>
RECEIVABLE OBSOLETE
ALLOWANCE FOR SLOW MOVING
ACCOUNTS RESERVE
------------- -----------
<S> <C> <C>
Balance January 1, 1994..................................... $ 290 $ 2,666
Charged to costs and expenses............................. 355 393
Write-offs................................................ (271) (718)
Exchange.................................................. 9 26
---- ----
Balance December 31, 1994................................... 383 2,367
Charged to costs and expenses............................. 146 2,143
Write-offs................................................ (79) (2,322)
Exchange.................................................. 5 (5)
---- ----
Balance December 31, 1995................................... 455 2,183
Charged to costs and expenses............................. 170 757
Write-offs................................................ (165) (1,164)
Exchange.................................................. 18 17
---- ----
Balance December 31, 1996................................... $ 478 $ 1,793
==== ====
</TABLE>
(19) SUBSEQUENT EVENT AND SUPPLEMENTAL COMBINED CONDENSED FINANCIAL STATEMENTS
On December 11, 1997, in connection with an acquisition by American
Industrial Partners Capital Fund II, L.P. ("AIP"), SAC, Inc. ("New Holdings")
acquired the outstanding stock of Stanadyne Automotive Holding Corp. ("Old
Holdings"), and SAC Automotive, Inc. ("Automotive") borrowed $100 million on
10 1/4% Senior Subordinated Notes (the "Notes") and $85 million of term loans
and revolving credit ("New Credit Agreement") to partially fund the Acquisition
Transactions. Simultaneous with the acquisition, Old Holdings and Automotive
merged with and into the Company and New Holdings changed its name to Stanadyne
Automotive Holding Corp. Under the terms of the New Credit Agreement the stock
of all of the Company's domestic subsidiaries and 65% of the stock of the
wholly-owned foreign subsidiaries and all of the assets of the Company and its
subsidiaries and the capital stock of the Company will be pledged as collateral.
Under the terms of the Notes, issued by the Company, the Notes are guaranteed by
its domestic subsidiaries. Its wholly-owned foreign subsidiaries will not be
guarantors with respect to the Notes.
The following are the supplemental combining condensed balance sheets as of
December 31, 1995 and 1996 and the supplemental combining condensed statements
of operations and of cash flows for each of the three years ended December 31,
1994, 1995 and 1996. Separate complete financial statements of the non-guarantor
subsidiaries are not presented because management has determined that they are
not material to investors. The financial statements of the Company are
essentially the same as Stanadyne Automotive Holding Corp.'s financial
statements after consolidations and eliminations.
F-22
<PAGE> 126
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
STANADYNE
AUTOMOTIVE
HOLDING CORP.
(ISSUER AND NON
SUBSIDIARY GUARANTOR
GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents....................... $ 1,398 $ 3 $ 106 $ 1,507
Accounts receivable, net........................ 34,895 10,578 -- 45,473
Inventories..................................... 25,458 10,637 (305) 35,790
Other current assets............................ 11,568 64 -- 11,632
-------- -------- -------- --------
Total current assets....................... 73,319 21,282 (199) 94,402
Property, plant and equipment, net.............. 94,358 8,844 -- 103,202
Other assets, net............................... 32,217 434 (10,838) 21,813
-------- -------- -------- --------
Total assets............................... $ 199,894 $ 30,560 $(11,037) $219,417
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses......... $ 36,408 $ 8,974 $ -- $ 45,382
Other current liabilities..................... 11,658 3,745 -- 15,403
-------- -------- -------- --------
Total current liabilities.................. 48,066 12,719 -- 60,785
Long-term debt and capital lease obligations.... 95,922 874 -- 96,796
Other non-current liabilities................... 51,550 7,281 (111) 58,720
Stockholders' equity............................ 4,356 9,686 (10,926) 3,116
-------- -------- -------- --------
Total liabilities and stockholders'
equity................................... $ 199,894 $ 30,560 $(11,037) $219,417
======== ======== ======== ========
</TABLE>
F-23
<PAGE> 127
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
STANADYNE
AUTOMOTIVE
HOLDING
CORP.
(ISSUER AND NON
SUBSIDIARY GUARANTOR
GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents......................... $ 3,365 $ 6 $ -- $ 3,371
Accounts receivable, net.......................... 28,615 8,342 -- 36,957
Inventories....................................... 23,861 7,919 (255) 31,525
Other current assets.............................. 7,446 73 -- 7,519
-------- ------- ------- --------
Total current assets......................... 63,287 16,340 (255) 79,372
Property, plant and equipment, net................ 88,351 7,765 -- 96,116
Other assets, net................................. 26,785 1,639 (8,995) 19,429
-------- ------- ------- --------
Total assets................................. $ 178,423 $ 25,744 $ (9,250) $194,917
======== ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses........... $ 42,991 $ 6,587 $ (8) $ 49,570
Other current liabilities....................... 13,680 2,519 -- 16,199
-------- ------- ------- --------
Total current liabilities.................... 56,671 9,106 (8) 65,769
Long-term debt and capital lease obligations 69,401 312 -- 69,713
Other non-current liabilities..................... 42,596 7,960 -- 50,556
Stockholders' equity.............................. 9,755 8,366 (9,242) 8,879
-------- ------- ------- --------
Total liabilities and stockholders' equity... $ 178,423 $ 25,744 $ (9,250) $194,917
======== ======= ======= ========
</TABLE>
F-24
<PAGE> 128
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
STANADYNE
AUTOMOTIVE
HOLDING
CORP.
(ISSUER AND NON
SUBSIDIARY GUARANTOR
GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales......................................... $ 252,337 $ 35,070 $ (443) $286,964
Cost of goods sold................................ 213,369 31,371 (433) 244,307
-------- ------- ------ --------
Gross profit.................................... 38,968 3,699 (10) 42,657
Selling, general and administrative expenses...... 32,715 2,360 -- 35,075
-------- ------- ------ --------
Operating income................................ 6,253 1,339 (10) 7,582
Interest, net..................................... (8,609) (441) -- (9,050)
-------- ------- ------ --------
(Loss) income before income taxes............... (2,356) 898 (10) (1,468)
Income tax benefit................................ (926) (38) -- (964)
-------- ------- ------ --------
Net (loss) income............................... $ (1,430) $ 936 $ (10) $ (504)
======== ======= ====== ========
</TABLE>
F-25
<PAGE> 129
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
STANADYNE
AUTOMOTIVE
HOLDING
CORP.
(ISSUER AND NON
SUBSIDIARY GUARANTOR
GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales......................................... $ 238,694 $ 34,917 $ (1,466) $272,145
Cost of goods sold................................ 205,678 31,470 (1,503) 235,645
-------- ------- ------- --------
Gross profit.................................... 33,016 3,447 37 36,500
Selling, general and administrative expenses...... 29,571 2,169 -- 31,740
-------- ------- ------- --------
Operating income................................ 3,445 1,278 37 4,760
Interest, net..................................... 8,843 449 -- 9,292
-------- ------- ------- --------
(Loss) income before income taxes and
extraordinary item........................... (5,398) 829 37 (4,532)
Income tax (benefit) expense...................... (1,378) 81 -- (1,297)
-------- ------- ------- --------
(Loss) income before extraordinary item......... (4,020) 748 37 (3,235)
Extraordinary item -- early extinguishment of
debt, net of income taxes....................... (1,711) -- -- (1,711)
-------- ------- ------- --------
Net (loss) income............................... $ (5,731) $ 748 $ 37 $ (4,946)
======== ======= ======= ========
</TABLE>
F-26
<PAGE> 130
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
STANADYNE
AUTOMOTIVE
HOLDING
CORP.
(ISSUER AND NON
SUBSIDIARY GUARANTOR
GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales......................................... $ 244,438 $ 32,355 $ (1,154) $275,639
Cost of goods sold................................ 203,049 32,860 (1,153) 234,756
-------- ------- ------- --------
Gross profit.................................... 41,389 (505) (1) 40,883
Selling, general and administrative expenses...... 28,715 2,261 -- 30,976
-------- ------- ------- --------
Operating income (loss)......................... 12,674 (2,766) (1) 9,907
Interest, net..................................... 7,717 542 -- 8,259
-------- ------- ------- --------
Income (loss) before income taxes and cumulative
effect of change in accounting principle..... 4,957 (3,308) (1) 1,648
Income tax expense (benefit)...................... 1,826 (1,450) -- 376
-------- ------- ------- --------
Income (loss) before cumulative effect of change
in accounting principle...................... 3,131 (1,858) (1) 1,272
Cumulative effect of change in accounting
for post-retirement benefits, net of income
taxes........................................... 4,330 -- -- 4,330
-------- ------- ------- --------
Net income (loss)............................... $ 7,461 $ (1,858) $ (1) $ 5,602
======== ======= ======= ========
</TABLE>
F-27
<PAGE> 131
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
STANADYNE
AUTOMOTIVE
HOLDING
CORP.
(ISSUER AND NON
SUBSIDIARY GUARANTOR
GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income............................... $ (1,430) $ 936 $ (10) $ (504)
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation and amortization................ 16,284 2,423 -- 18,707
Other adjustments............................ (1,589) (101) -- (1,690)
Changes in operating assets and
liabilities................................ 8,312 (2,240) (184) 5,888
------- ------ ---- -------
Net cash provided by operating
activities.............................. 21,577 1,018 (194) 22,401
------- ------ ---- -------
Cash flows from investing activities:
Capital expenditures............................ (8,598) (1,336) -- (9,934)
Proceeds from disposal of property, plant and
equipment.................................... 1,646 -- -- 1,646
------- ------ ---- -------
Net cash used in investing activities...... (6,952) (1,336) -- (8,288)
------- ------ ---- -------
Cash flows from financing activities:
Net change in debt.............................. (13,519) 321 -- (13,198)
Net change in equity............................ (1,139) -- -- (1,139)
------- ------ ---- -------
Net cash (used in) provided by financing
activities.............................. (14,658) 321 -- (14,337)
------- ------ ---- -------
Net (decrease) increase in cash and cash
equivalents..................................... (33) 3 (194) (224)
Effects of exchange rate changes on cash.......... 3 -- 11 14
Cash and cash equivalents at beginning of year.... 406 1 880 1,287
------- ------ ---- -------
Cash and cash equivalents at end of year..... $ 376 $ 4 $ 697 $ 1,077
======= ====== ==== =======
</TABLE>
F-28
<PAGE> 132
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
STANADYNE
AUTOMOTIVE
HOLDING
CORP.
(ISSUER AND NON
SUBSIDIARY GUARANTOR
GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income............................... $ (5,731) $ 748 $ 37 $ (4,946)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization................ 15,785 2,316 -- 18,101
Other adjustments............................ (1,549) 31 -- (1,518)
Changes in operating assets and
liabilities................................ (14,772) (1,450) (478) (16,700)
-------- ------- ----- --------
Net cash (used in) provided by operating
activities.............................. (6,267) 1,645 (441) (5,063)
-------- ------- ----- --------
Cash flows from investing activities:
Capital expenditures............................ (6,147) (520) -- (6,667)
Proceeds from disposal of property, plant and
equipment.................................... 83 -- -- 83
-------- ------- ----- --------
Net cash used in investing activities...... (6,064) (520) -- (6,584)
-------- ------- ----- --------
Cash flows from financing activities:
Net change in debt.............................. 15,451 (1,126) -- 14,325
-------- ------- ----- --------
Net change in equity............................ (2,116) -- -- (2,116)
-------- ------- ----- --------
Net cash provided by (used in) financing
activities.............................. 13,335 (1,126) -- 12,209
-------- ------- ----- --------
Net increase in cash and cash equivalents......... 1,004 (1) (441) 562
Effects of exchange rate changes on cash.......... 18 -- (150) (132)
Cash and cash equivalents at beginning of year.... 376 4 697 1,077
-------- ------- ----- --------
Cash and cash equivalents at end of year.......... $ 1,398 $ 3 $ 106 $ 1,507
======== ======= ===== ========
</TABLE>
F-29
<PAGE> 133
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
STANADYNE
AUTOMOTIVE
HOLDING CORP.
(ISSUER AND NON
SUBSIDIARY GUARANTOR
GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................. $ 7,461 $ (1,858) $ (1) $ 5,602
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.............. 14,940 2,046 -- 16,986
Other adjustments.......................... 3,067 (1,450) -- 1,617
Changes in operating assets and
liabilities.............................. 10,046 3,492 30 13,568
-------- ------- ---- --------
Net cash provided by operating
activities............................ 35,514 2,230 29 37,773
-------- ------- ---- --------
Cash flows from investing activities:
Capital expenditures.......................... (8,521) (306) -- (8,827)
Proceeds from disposal of property, plant and
equipment.................................. 212 -- -- 212
-------- ------- ---- --------
Net cash used in investing activities.... (8,309) (306) -- (8,615)
-------- ------- ---- --------
Cash flows from financing activities:
Net change in debt............................ (24,616) (2,013) -- (26,629)
Net change in equity.......................... (606) 92 (92) (606)
-------- ------- ---- --------
Net cash used in financing activities.... (25,222) (1,921) (92) (27,235)
-------- ------- ---- --------
Net increase in cash and cash equivalents....... 1,983 3 (63) 1,923
Effects of exchange rate changes on cash........ (16) -- (43) (59)
Cash and cash equivalents at beginning of
year.......................................... 1,398 3 106 1,507
-------- ------- ---- --------
Cash and cash equivalents at end of year........ $ 3,365 $ 6 $ -- $ 3,371
======== ======= ==== ========
</TABLE>
F-30
<PAGE> 134
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 3,371 $ 160
Accounts receivable, net of allowance for uncollectible accounts
of $478 in 1996 and $495 in 1997 (unaudited)....................... 36,957 41,291
Inventories........................................................ 31,525 31,068
Prepaid expenses and other assets.................................. 656 300
Deferred income taxes.............................................. 6,863 6,863
-------- --------
Total current assets............................................ 79,372 79,682
Property, plant and equipment, net................................... 96,116 93,170
Intangible and other assets, net..................................... 3,651 3,313
Deferred income taxes................................................ 15,778 14,550
-------- --------
Total assets.................................................... $194,917 $ 190,715
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................... $ 21,361 20,642
Accrued liabilities................................................ 28,209 27,909
Current maturities of long-term debt............................... 14,514 11,672
Current installments of capital lease obligations.................. 1,685 1,709
-------- --------
Total current liabilities....................................... 65,769 61,932
Long-term debt, excluding current maturities......................... 67,250 68,125
Capital lease obligations, excluding current installments............ 2,463 1,189
Other non-current liabilities........................................ 50,556 47,351
-------- --------
Total liabilities............................................... 186,038 178,597
-------- --------
Stockholders' equity:
Cumulative convertible preferred stock, par value $.01, $600 per
share annual dividend payable quarterly. Authorized 2,000 shares,
issued and outstanding 1,000 shares. Liquidation preference $5,000
per share.......................................................... -- --
Class A common stock, par value $.01, authorized 16,000 shares,
issued and outstanding 6,198.5 in 1996 and 6,190.5 in 1997
(unaudited)........................................................ -- --
Class B common stock, par value $.01, authorized 4,000 shares,
issued and outstanding 1,008.6 shares.............................. -- --
Additional paid-in capital......................................... 35,630 35,979
-------- --------
35,630 35,979
Cumulative translation adjustment.................................. (23) (1,285)
Additional pension liability....................................... (141) (141)
Accumulated deficit................................................ (24,382) (20,230)
Treasury stock at cost; Class A common stock 160 shares............ (2,205) (2,205)
-------- --------
Total stockholders' equity...................................... 8,879 12,118
-------- --------
Commitments and contingencies
Total liabilities and stockholders' equity...................... $194,917 $ 190,715
======== ========
</TABLE>
See notes to consolidated financial statements.
F-31
<PAGE> 135
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
-------------------
1996 1997
-------- --------
(UNAUDITED)
<S> <C> <C>
Net sales................................................................ $209,679 $201,034
Cost of goods sold....................................................... 177,279 169,004
-------- --------
Gross profit........................................................ 32,400 32,030
Selling, general and administrative expenses (includes payment to
Metromedia of $375 in 1996 and 1997)................................... 24,024 19,409
-------- --------
Operating income.................................................... 8,376 12,621
Other income (expense):
Interest income........................................................ 40 18
Interest expense....................................................... (6,376) (5,356)
-------- --------
Income before income taxes and cumulative effect of change in
accounting principle.............................................. 2,040 7,283
Income tax expense....................................................... 834 2,681
-------- --------
Income before cumulative effect of change in accounting principle... 1,206 4,602
Cumulative effect of change in accounting for post-retirement benefits,
net of income taxes of $2,609.......................................... 4,330 --
-------- --------
Net income............................................................... 5,536 4,602
Preferred dividend requirement........................................... (450) (450)
-------- --------
Net income applicable to common shareholders............................. $ 5,086 $ 4,152
======== ========
Net income per share:
Income before cumulative effect of change in accounting principle... $ 97 $ 531
Cumulative effect of change in accounting principle................. 553 --
-------- --------
Net income........................................................ $ 650 $ 531
======== ========
Weighted average number of common equivalent shares outstanding.......... 7,826.7 7,817.3
======== ========
</TABLE>
See notes to consolidated financial statements.
F-32
<PAGE> 136
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1996 1997
-------- -------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income.............................................................. $ 5,536 $ 4,602
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization of property, plant and equipment and
intangibles......................................................... 12,951 12,548
Management incentive plan (income) expense........................... -- 349
Deferred income tax expense.......................................... 3,190 1,024
Loss on disposal and write-down of property, plant and equipment..... 206 121
Changes in assets and liabilities:................................... -- --
Accounts receivable................................................ (313) (5,593)
Inventories........................................................ 3,489 (725)
Prepaid expenses and other assets.................................. 2,717 125
Accounts payable................................................... 6,625 (432)
Accrued liabilities................................................ (3,406) 532
Other non-current liabilities...................................... (5,192) (2,101)
-------- --------
Net cash provided by operating activities....................... 25,803 10,450
-------- --------
Cash flows from investing activities:
Capital expenditures.................................................... (6,361) (10,359)
-------- --------
Net cash used in investing activities........................... (6,361) (10,359)
-------- --------
Cash flows from financing activities:
Net payments on revolving credit notes and overdraft facilities......... (9,491) 8,340
Payments on long-term debt.............................................. (8,843) (9,941)
Payments of capital lease obligations................................... (1,244) (1,179)
Dividends paid.......................................................... (450) (450)
-------- --------
Net cash used in financing activities........................... (20,028) (3,230)
-------- --------
Net decrease in cash and cash equivalents................................. (586) (3,139)
Effect of exchange rate changes on cash and cash equivalents.............. (62) (72)
Cash and cash equivalents at beginning of period.......................... 1,507 3,371
-------- --------
Cash and cash equivalents at end of period................................ $ 859 $ 160
======== ========
Supplemental disclosure of noncash financing transactions:
In 1996 and 1997, the Company entered into capital leases for new
equipment resulting in capital lease obligations of $0 and $63,
respectively.
</TABLE>
See notes to consolidated financial statements.
F-33
<PAGE> 137
STANADYNE AUTOMOTIVE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Stanadyne
Automotive Holding Corp. and Subsidiaries ("Holdings") have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
and, therefore, do not include all information and footnotes necessary for
presentation of financial position, results of operations and cash flows
required by generally accepted accounting principles. The information furnished
reflects all normal recurring adjustments which are, in the opinion of
management, necessary for a fair summary of the financial position, results of
operations and cash flows. The financial statements should be read in
conjunction with the audited historical consolidated financial statements of
Holdings and notes thereto for the fiscal year ended December 31, 1996.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Earnings Per Share. In February 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standard ("SFAS") No. 128,
"Earnings Per Share", which is effective for periods ending after December 15,
1997. Earlier application is not permitted. SFAS No. 128 simplifies the
standards for computing earnings per share ("EPS") and makes them comparable to
international standards for computing EPS. When effective, this statement will
replace the presentation of primary EPS with the presentation of basic EPS and
will require a dual presentation of basic EPS and diluted EPS on the face of the
statements of operations.
Comprehensive Income. In June 1997, SFAS No. 130, "Reporting Comprehensive
Income" was issued which requires that changes in comprehensive income be shown
in a financial statement that is displayed with the same prominence as the other
financial statements. Comprehensive income is defined as "the change in equity
of a business enterprise during a period from transactions and other events and
circumstances from non-owner sources." It includes all changes in equity during
a period, except those resulting from investments by owners and distributions to
owners. This statement is effective for fiscal years beginning after December
15, 1997. The effect of SFAS 130 is that Holdings will present a statement of
comprehensive income with components including cumulative translation
adjustments and additional pension liability beginning in fiscal year ending
December 31, 1998.
Segment reporting. In June 1997, SFAS No. 131, "Disclosure about Segments
of an Enterprise and Related Information" was issued. SFAS No. 131 establishes
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim reports issued
to stockholders. It also establishes related disclosures about products and
services, geographic areas and major customers. This statement is effective for
financial statements for periods beginning after December 15, 1997, however,
early application is encouraged. Holdings will disclose information about
segments in accordance with SFAS 131 beginning in fiscal year ending December
31, 1998.
(3) SUBSEQUENT EVENTS
On December 11, 1997, in connection with an acquisition by American
Industrial Partners Capital Fund II, L.P. ("AIP"), SAC, Inc. ("New Holdings")
acquired the outstanding stock of Stanadyne Automotive Holding Corp. ("Old
Holdings"), and SAC Automotive, Inc. ("Automotive") borrowed $100 million on
10 1/4% Senior Subordinated Notes (the "Notes") and $85 million of term loans
and revolving credit ("New Credit Agreement") to partially fund the Acquisition
Transactions. Simultaneous with the acquisition, Old Holdings and Automotive
merged with and into the Company and New Holdings changed its name to Stanadyne
Automotive Holding Corp. Under the terms of the New Credit Agreement the stock
of all of the Company's domestic subsidiaries and 65% of the stock of the
wholly-owned foreign subsidiaries and all of the assets of the Company and its
subsidiaries and the capital stock of the Company will be pledged as collateral.
Under the terms of the Notes, issued by the Company, the Notes are guaranteed by
its domestic subsidiaries. Its wholly-owned foreign subsidiaries will not be
guarantors with respect to the Notes.
F-34
<PAGE> 138
- ------------------------------------------------------
------------------------------------------------------
- ------------------------------------------------------
------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE INITIAL PURCHASER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY, TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION
IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Summary............................... 4
Risk Factors.......................... 15
The Acquisition Transactions.......... 20
Use of Proceeds....................... 21
Capitalization........................ 22
Unaudited Pro Forma Condensed
Consolidated Financial Data......... 22
Selected Consolidated Historical
Financial Data...................... 30
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 32
Business.............................. 37
Management............................ 49
Security Ownership.................... 56
Certain Relationships and Related
Transactions........................ 57
Description of Exchange Notes......... 58
The Exchange Offer.................... 91
Description of New Credit Agreement... 99
Certain Federal Income Tax
Consequences........................ 100
Plan of Distribution.................. 101
Legal Matters......................... 101
Experts............................... 101
Index to Consolidated Financial
Statements.......................... F-1
Independent Auditors' Report.......... F-2
</TABLE>
$100,000,000
[STANADYNE AUTOMOTIVE LOGO]
STANADYNE
AUTOMOTIVE CORP.
OFFER TO EXCHANGE ITS SERIES B
10 1/4% SENIOR SUBORDINATED
NOTES DUE 2007 FOR ANY
AND ALL OF ITS
OUTSTANDING 10 1/4% SENIOR
SUBORDINATED NOTES DUE 2007
------------------------------------
PROSPECTUS
------------------------------------
, 1998
- ------------------------------------------------------
------------------------------------------------------
- ------------------------------------------------------
------------------------------------------------------
<PAGE> 139
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is incorporated under the laws of the State of Delaware.
Section 145 of the General Corporation Law of the State of Delaware, inter alia,
("Section 145") provides that a Delaware corporation may indemnify any persons
who were, are or are threatened to be made, parties to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of such corporation),
by reason of the fact that such person is or was an officer, director, employee
or agent of such corporation, or is or was serving at the request of such
corporation as a director, officer employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was illegal. A Delaware corporation may indemnify any persons who are,
were or are threatened to be made, a party to any threatened, pending or
completed action or suit by or in the right of the corporation by reason of the
fact that such person was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit, provided such person acted in good faith and in a manner
he reasonably believed to be in or not opposed to the corporation's best
interests, provided that no indemnification is permitted without judicial
approval if the officer, director, employee or agent is adjudged to be liable to
the corporation. Where an officer, director, employee or agent is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director has actually and reasonably incurred.
The Company's Certificate of Incorporation provides for the indemnification
of directors and officers of the Company to the fullest extent permitted by the
General Corporation Law of the State of Delaware, as it currently exists or may
hereafter be amended.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.
The Company maintains and has in effect insurance policies covering all of
the Company's directors and officers against certain liabilities for actions
taken in such capacities, including liabilities under the Securities Act of
1933.
II-1
<PAGE> 140
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
<TABLE>
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of Stanadyne Automotive
Corp.
3.2 Amended and Restated By-laws of Stanadyne Automotive Corp.
4.1 Indenture dated as of December 11, 1997 between Stanadyne Automotive Corp.,
DSD International Corp., Precision Engine Products Corp. and United States
Trust Company of New York
4.2 Purchase Agreement dated as of December 4, 1997 among SAC Automotive, Inc.
and Donaldson, Lufkin & Jenrette Securities Corporation
4.3 Registration Rights Agreement dated as of December 11, 1997 by and among
Stanadyne Automotive Corp. and Donaldson, Lufkin & Jenrette Securities
Corporation
5.1 Form of Opinion and Consent of Kirkland & Ellis
10.1 Credit Agreement dated as of December 11, 1997 among SAC Automotive, Inc.,
Stanadyne Automotive Corp., the Lenders listed therein, as Lenders, DLJ
Capital Funding, Inc., as Syndication Agent, and The First National Bank of
Chicago, as Administrative Agent
10.2 Stock Purchase Agreement dated November 7, 1997 for the Purchase of
Stanadyne Automotive Holding Corp. among SAC, Inc., a wholly owned
subsidiary of American Industrial Partners Capital Fund II, L.P., Stanadyne
Automotive Holding Corp., and Stanadyne Automotive Holding Corp.
Shareholders
10.3 Form of Amended and Restated Employment Agreement by and between Stanadyne
Automotive Corp. and [William Gurley] [Michael Boyer] [William Kelly]
10.4 Employment Agreement by and between Precision Engine Products Corp. and
Arthur Caruso
10.5 Stanadyne Automotive Corp. Pension Plan effective December 31, 1994
10.6 Stanadyne Automotive Corp. Savings Plus Plan restated as of January 1, 1993
10.7 Precision Engine Products Corp. Retirement Fund effective as of January 1,
1998
10.8 Stanadyne Automotive Corp. Benefit Equalization Plan effective as of January
1, 1992
10.9 Stanadyne Automotive Corp. Supplemental Retirement Plan effective January 1,
1992
10.10* Supply Agreement dated as of December 8, 1995 between Precision Engine
Products Corp. and the Ina Bearing Company
10.11* Customer Agreement dated as of November 1, 1996 between Stanadyne Automotive
Corp. and Deere & Company
10.12* Customer Agreement dated as of January 22, 1996 between Stanadyne Automotive
Corp. and General Motors Powertrain Group
10.13 Management Services Agreement dated as of December 11, 1997 between
Stanadyne Automotive Corp. and American Industrial Partners.
12.1 Statement of Computation of Ratios
21.1 Subsidiaries of Stanadyne Automotive Corp.
23.1 Consent of KPMG Peat Marwick, L.L.P.
23.2 Form of Consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1 Powers of Attorney (included in signature page)
25.1 Statement of Eligibility of Trustee on Form T-1
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Tender Instructions
</TABLE>
- ---------------
* To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES.
Not Applicable.
II-2
<PAGE> 141
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
posteffective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering; and
(4) If the registrant is a foreign private issuer, to file a
posteffective amendment to the registration statement to include any
financial statements required by Rule 3-19 of the chapter at the start of
any delayed offering or throughout a continuous offering. Financial
statements and information otherwise required by Section 10(a)(3) of the
Act need not be furnished, provided, that the registrant includes in the
prospectus, by means of a post-effective amendment, financial statements
required pursuant to this paragraph (a)(4) and other information necessary
to ensure that all other information in the prospectus is at least as
current as the date of those financial statements. Notwithstanding the
foregoing, with respect to registration statements on Form F-3, a
post-effective amendment need not be filed to include financial statements
and information required by Section 10(a)(3) of the Act or Rule 3-19 of
this chapter if such financial statements and information are contained in
periodic reports filed with or furnished to the Commission by the
registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the Form F-3.
(1) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described under
Item 20 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,
II-3
<PAGE> 142
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes 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.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
posteffective 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-4
<PAGE> 143
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Windsor, State of
Connecticut, on February 6, 1998.
STANADYNE AUTOMOTIVE CORP.
By: /s/ MICHAEL H. BOYER
------------------------------------
Name: Michael H. Boyer
Title: Chief Financial Officer, Vice
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints any of Kenneth J. Diekroeger, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities (including
his capacity as a director and/or officer of Stanadyne Automotive Corp.), to
sign any or all amendments (including post-effective amendments) to this
registration statement and any subsequent registration statement filed pursuant
to Rule 462(b) under the Securities Act of 1933, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent 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 to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------- ----------------------------------- -------------------
<C> <S> <C>
* Chief Executive Officer, President February 6, 1998
- ------------------------------------- and Director
William D. Gurley
* Chief Financial Officer, Vice February 6, 1998
- ------------------------------------- President Stanadyne
Michael H. Boyer
* Vice President, Human Resources, February 6, 1998
- ------------------------------------- Stanadyne
Robert A. Massa
* Vice President and General Manager, February 6, 1998
- ------------------------------------- Precision Engine
Arthur S. Caruso
* Vice President, Engineering & February 6, 1998
- ------------------------------------- Marketing, Diesel Systems Division
William W. Kelly
* Vice President, Quality and February 6, 1998
- ------------------------------------- Reliability, Stanadyne
Don Buonomo
</TABLE>
II-5
<PAGE> 144
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------- ----------------------------------- -------------------
<C> <S> <C>
* Vice-President, Power Products February 6, 1998
- ------------------------------------- Division
Lee Janik
* Vice President, European February 6, 1998
- ------------------------------------- Operations, Managing Director,
Bryan M. Wysong Stanadyne Automotive S.p.A.
* Director February 6, 1998
- -------------------------------------
W. Richard Bingham
* Director and Chairman of the Board February 6, 1998
- -------------------------------------
Robert Cizik
/S/ KENNETH J. DIEKROEGER Director February 6, 1998
- -------------------------------------
Kenneth J. Diekroeger
* Director February 6, 1998
- -------------------------------------
Theodore C. Rogers
* Director February 6, 1998
- -------------------------------------
Lawrence W. Ward, Jr.
*By: /s/ Kenneth J. Diekroeger
Kenneth J. Diekroeger
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 145
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------ ----------------------------------------------------------------------- ----------
<S> <C> <C>
3.1 Amended and Restated Certificate of Incorporation of Stanadyne
Automotive Corp.
3.2 Amended and Restated By-laws of Stanadyne Automotive Corp.
4.1 Indenture dated as of December 11, 1997 between Stanadyne Automotive
Corp., DSD International Corp., Precision Engine Products Corp. and
United States Trust Company of New York
4.2 Purchase Agreement dated as of December 4, 1997 among SAC Automotive,
Inc. and Donaldson, Lufkin & Jenrette
4.3 Registration Rights Agreement dated as of December 11, 1997 by and
among Stanadyne Automotive Corp. and Donaldson, Lufkin & Jenrette
5.1 Form of Opinion and consent of Kirkland & Ellis
10.1 Credit Agreement dated as of December 11, 1997 among SAC Automotive,
Inc., Stanadyne Automotive Corp., the Lenders listed therein, as
Lenders, DLJ Capital Funding, Inc., as Syndication Agent, and The First
National Bank of Chicago, as Administrative Agent
10.2 Stock Purchase Agreement dated November 7, 1997 for the Purchase of
Stanadyne Automotive Holding Corp. among SAC, Inc., a wholly owned
subsidiary of American Industrial Partners Capital Fund II, L.P.,
Stanadyne Automotive Holding Corp., and Stanadyne Automotive Holding
Corp. Shareholders
10.3 Form of Amended and Restated Employment Agreement by and between
Stanadyne Automotive Corp. and [William Gurley] [Michael Boyer]
[William Kelly]
10.4 Form of Employment Agreement by and between Precision Engine Products
Corp. and Arthur Caruso
10.5 Stanadyne Automotive Corp. Pension Plan
10.6 Stanadyne Automotive Corp. Savings Plus Plan
10.7 Precision Engine Products Corp. Retirement Fund
10.8 Stanadyne Automotive Corp. Benefit Equalization Plan
10.9 Stanadyne Automotive Corp. Supplemental Retirement Plan
10.10* Supply Agreement dated as of December 8, 1995 between Precision Engine
Products Corp. and the Ina Bearing Company
10.11* Customer Agreement dated as of November 1, 1996 between Stanadyne
Automotive Corp. and Deere & Company
10.12* Customer Agreement dated as of January 22, 1996 between Stanadyne
Automotive Corp. and General Motors Powertrain Group
10.13 Management Services Agreement dated as of December 11, 1997 between
Stanadyne Automotive Corp. and American Industrial Partners.
12.1 Statement of Computation of Ratios
21.1 Subsidiaries of Stanadyne Automotive Corp.
23.1 Consent of KPMG Peat Marwick, L.L.P.
23.2 Form of Consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1 Powers of Attorney (included in signature page)
25.1 Statement of Eligibility of Trustee on Form T-1
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Tender Instructions
</TABLE>
- ---------------
* To be filed by Amendment.
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
DSD ACQUISITION CO., INC.
The undersigned incorporator, in order to form a corporation under
the General Corporation Law of the State of Delaware, certifies as follows:
1. Name. The name of the corporation is DSD Acquisition Co., Inc.
2. Address; Registered Agent. The address of the Corporation's
registered office is 229 South State Street, City of Dover, County of Kent,
State of Delaware; and its registered agent at such address is The
Prentice-Hall Corporation System, Inc.
3. Purposes. The nature of the business and purposes to be
conducted or promoted by the Corporation are to engage in, carry on and conduct
any lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware.
4. Number of Shares. The total number of shares of stock
which the Corporation shall have authority to issue is: one hundred (100),all
of which shall be shares of Common Stock of the par value of ten dollars
($10.00) each.
<PAGE> 2
5. Name and Address of Incorporator. The name and mailing
address of the incorporator are: Jay Itzkowitz, 1285 Avenue of the Americas,
New York, New York 10019.
6. Election of Directors. Members of the Board of Directors
may be elected either by written ballot or by voice vote.
7. Limitation of Liability. No director of the Corporation's
shall be personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the Delaware General Corporation Law, or (iv) for any transaction from which
the director derived any improper personal benefits.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
8. Adoption, Amendment and/or Repeal of By-Laws. The Board of
Directors may from time to time (after adoption by the undersigned of the
original by-laws of the Corporation) make, alter or repeal the by-laws of the
Corporation; provided, that any by-laws made, amended or repealed by the Board
of Directors may be amended or repealed, and any by-laws may be made, by the
stockholders of the Corporation.
<PAGE> 3
IN WITNESS WHEREOF, this Certificate has been signed on this 10th of November,
1988.
Jay Itzkowitz,
Incorporator
<PAGE> 4
INSTRUMENT OF ORGANIZATION BY INCORPORATOR
of
DSD ACQUISITION CO., INC.
(Under Section 108(c) of the General Corporation Law)
I, the undersigned, sole Incorporator of DSD ACQUISITION CO.,
INC., a Delaware corporation formed under the General Corporation Law of
Delaware (the "Corporation"), hereby sign this instrument under Section 108(c)
of said General Corporation Law, and by it do hereby take action and certify as
follows:
1. Confirmation of Incorporation. I confirm that the
Certificate of Incorporation of the Corporation, a true copy of which is
annexed hereto as Exhibit A, was filed by the Secretary of State of Delaware on
November 14, 1988, and was recorded and indexed by the Recorder of the County
of Kent on November 16 ,1988, in accordance with Section 103 of the General
Corporation Law of Delaware.
2. Adoption of By-laws. I hereby adopt the By-laws
annexed hereto as Exhibit B as and to be the By-laws of the Corporation.
3. Designation of Directors. I hereby designate two (2) to
be the total number of directors of the Corporation
<PAGE> 5
and hereby designate and elect John Kluge and Stuart Subotnick as and to be the
directors of the Corporation until the first annual meeting of stockholders of
the Corporation.
IN WITNESS WHEREOF, I have signed this instrument as of the
14th day of November, 1988.
___________________
Jay Itzkowitz
<PAGE> 6
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
DSD ACQUISITION CO., INC.
The undersigned, an Executive Vice-President of DSD Acquisition Co.,
Inc., a Delaware corporation (the "Corporation"), does hereby certify as
follows:
First: The name of the Corporation is DSD Acquisition Co., Inc.
Second: The Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on November 14, 1988.
Third: The Certificate of Incorporation of the Corporation is
amended by deleting Article 4 in its entirety and replacing it with the
following:
"4. Number of Shares. The total number of shares of
stock which the Corporation shall have authority to issue is ten
thousand (10,000), all of which shall be shares of Common Stock with a
par value of one cent ($.0l) per share."
IN WITNESS WHEREOF, the undersigned affirms the truth of the foregoing
statements under penalty of perjury.
DSD ACQUISITION CO.,INC.
By:_________________________
Name: Stuart Subotnick
Title: Executive Vice President
Dated: December 6, 1988
ATTEST:
By:________________________
Name: Michael S. Kaufman
Title: Assistant Secretary
<PAGE> 7
DSD ACQUISITION CO., INC.
Certificate of Amendment of the
Certificate of Incorporation
The undersigned, the Vice President of DSD Acquisition Co.,
Inc., a corporation organized under the laws of the State of Delaware (the
"Corporation"), hereby certifies as follows:
FIRST: The Certificate of Incorporation of the Corporation was filed
in the office of the Secretary of State of the State of Delaware on November
14, 1988.
SECOND: The Corporation has not yet received any payment for any of
its stock.
THIRD: This Certificate of Amendment has been duly adopted in
accordance with Section 241 of the General Corporation Law of the State of
Delaware.
FOURTH: The Certificate of Incorporation of the Corporation is hereby
amended to change the name of the Corporation to "Stanadyne Automotive Corp."
To reflect such change, Paragraph FIRST of the Certificate of Incorporation is
amended in its entirety to read as follows:
"FIRST: The name of the Corporation is Stanadyne Automotive Corp."
IN WITNESS WHEREOF, the undersigned affirms the truth of the foregoing
statements under penalty of perjury.
DSD ACQUISITION CO.,INC.
By:_________________________
Name: Steven Einstein
Title: Vice President
Dated: January 30, 1989
ATTEST:
By:________________________
Name: Michael S. Kaufman
Title: Assistant Secretary
<PAGE> 1
Exhibit 3.2
BY-LAWS
OF
DSD ACQUISITION CO., INC.
(A Delaware Corporation)
ARTICLE 1
DEFINITIONS
As used in these By-laws, unless the context otherwise requires,
the term:
1.1 "Assistant Secretary" means an Assistant Secretary of the
Corporation.
1.2 "Assistant Treasurer" means an Assistant Treasurer of the
Corporation.
1.3 "Board" means the Board of Directors of the Corporation.
1.4 "By-laws" means the initial by-laws of the Corporation, as
amended from time to time.
1.5 "Certificate of Incorporation" means the initial certificate
of incorporation of the Corporation, as amended, supplemented or restated from
time to time.
1.6 "Corporation" means DSD Acquisition Co., Inc.
1.7 "Directors" means directors of the Corporation.
<PAGE> 2
2
1.8 "General Corporation Law" means the General Corporation Law
of the State of Delaware, as amended from time to time.
1.9 "Office of the Corporation" means the executive office of the
Corporation, anything in Section 131 of the General Corporation Law to the
contrary notwithstanding.
1.10 "President" means the President of the Corporation.
1.11 "Secretary" means the Secretary of the Corporation.
1.12 "Stockholders" means stockholders of the Corporation.
1.13 "Total number of directors" means the total number of
directors determined in accordance with Section 141(b) of the General
Corporation Law and Section 3.2 of the By-laws.
1.14 "Treasurer" means the Treasurer of the Corporation.
1.15 "Vice President" means a Vice President of the Corporation.
1.16 "Whole Board" means the total number of directors of the
Corporation.
<PAGE> 3
3
ARTICLE 2
STOCKHOLDERS
2.1 Place of Meetings. Every meeting of stockholders shall be
held at the office of the Corporation or at such other place within or without
the State of Delaware as shall be specified or fixed in the notice of such
meeting or in the waiver of notice thereof.
2.2 Annual Meeting. A meeting of stockholders shall be held
annually for the election of directors and the transaction of other business at
such hour and on such business day in May or June as may be determined by the
Board and designated in the notice of meeting.
2.3 Deferred Meeting for Election of Directors, Etc. If the
annual meeting of stockholders for the election of directors and the transaction
of other business is not held within the months specified in Section 2.2, the
Board shall call a meeting of stockholders for the election of directors and the
transaction of other business as soon thereafter as convenient.
2.4 Other Special Meetings. A special meeting of stockholders
(other than a special meeting for the election
<PAGE> 4
4
of directors), unless otherwise prescribed by statute, may be called at any time
by the Board or by the President or by the Secretary. At any special meeting of
stockholders only such business may be transacted as is related to the purpose
or purposes of such meeting set forth in the notice thereof given pursuant to
Section 2.6 of the By-laws or in any waiver of notice thereof given pursuant to
Section 2.7 of the By-laws.
2.5 Fixing Record Date. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or for the purpose of determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock, or for the purpose of any other lawful action, the Board
may fix, in advance, a date as the record date for any such determination of
stockholders. Such date shall not be more than sixty nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
action. If no such record date is fixed:
2.5.1 The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the
<PAGE> 5
5
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held;
2.5.2 The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the Board is necessary, shall be the day on which the first written
consent is expressed;
2.5.3 The record date for determining stockholders for any
purpose other than those specified in Sections 2.5.1 and 2.5.2 shall be at the
close of business on the day on which the Board adopts the resolution relating
thereto.
When a determination of stockholders entitled to notice of
or to vote at any meeting of stockholders has been made as provided in this
Section 2.5 such determination shall apply to any adjournment thereof, unless
the Board fixes a new record date for the adjourned meeting.
2.6 Notice of Meetings of Stockholders. Except as otherwise
provided in Sections 2.5 and 2.7 of the By-laws, whenever under the General
Corporation Law or the Certificate of Incorporation or the By-Laws, stockholders
are required or permitted to take any action at a meeting, written notice shall
be given stating the place, date and hour of the meeting and, in the case of a
special meeting, the purpose or
<PAGE> 6
6
purposes for which the meeting is called. A copy of the notice of any meeting
shall be given, personally or by mail, not less than ten nor more than sixty
days before the date of the meeting, to each stockholder entitled to notice of
or to vote at such meeting. If mailed, such notice shall be deemed to be given
when deposited in the United States mail, with postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation. An
affidavit of the Secretary or an Assistant-Secretary or of the transfer agent of
the Corporation that the notice required by this section has been given shall,
in the absence of fraud, be prima facie evidence of the facts stated therein.
When a meeting is adjourned to another time or place, notice need not be given
of the adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken, and at the adjourned meeting any
business may be transacted that might have been transacted at the meeting as
originally called. If, however, the adjournment is for more than thirty days, or
if after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
2.7 Waivers of Notice. Whenever notice is required to be given to
any stockholder under any provision of the General Corporation Law or the
Certificate of
<PAGE> 7
7
Incorporation or the By-laws, a written waiver thereof, signed by the
stockholder entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a stockholder at a meeting
shall constitute a waiver of notice of such meeting, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the stockholders need be specified in any
written waiver of notice.
2.8 List of Stockholders. The Secretary shall prepare and make,
or cause to be prepared and made, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
<PAGE> 8
8
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
2.9 Quorum of Stockholders; Adjournment. The holders of one-third
of the shares of stock entitled to vote at any meeting of stockholders, present
in person or represented by proxy, shall constitute a quorum for the transaction
of any business at such meeting. When a quorum is once present to organize a
meeting of stockholders, it is not broken by the subsequent withdrawal of any
stockholders. The holders of a majority of the shares of stock present in person
or represented by proxy at any meeting of stockholders, including an adjourned
meeting, whether or not a quorum is present, may adjourn such meeting to another
time and place.
2.10 Voting Proxies. Unless otherwise provided in the Certificate
of Incorporation, every stockholder of record shall be entitled at every meeting
of stockholders to one vote for each share of capital stock standing in his name
on the record of stockholders determined in accordance with Section 2.5 of the
By-laws. If the Certificate of Incorporation provides for more or less than one
vote for any share, on any matter, every reference in the By-laws or the General
Corporation Law to a majority or other proportion of stock shall refer to such
majority or other proportion of the votes
<PAGE> 9
9
of such stock. The provisions of Sections 212 and 217 of the General Corporation
Law shall apply in determining whether any shares of capital stock may be voted
and the persons, if any, entitled to vote such shares; but the Corporation shall
be protected in treating the persons in whose names shares of capital stock
stand on the record of stockholders as owners thereof for all purposes. At any
meeting of stockholders (at which a quorum was present to organize the meeting),
all matters, except as otherwise provided by law or by the Certificate of
Incorporation or by the By-laws, shall be decided by a majority of the votes
cast at such meeting by the holders of shares present in person or represented
by proxy and entitled to vote thereon, whether or not a quorum is present when
the vote is taken. All elections of directors shall be by written ballot unless
otherwise provided in the Certificate of Incorporation. In voting on any other
question on which a vote by ballot is required by law or is demanded by any
stockholder entitled to vote, the voting shall be by ballot. Each ballot shall
be signed by the stockholder voting or by his proxy, and shall state the number
of shares voted. On all other questions, the voting may be viva voce. Every
stockholder entitled to vote at a meeting of stockholders or to express consent
or dissent to corporate action in writing without a meeting may authorize
another person or persons to act for him by proxy. The
<PAGE> 10
10
validity and enforceability of any proxy shall be determined in accordance with
Section 212 of the General Corporation Law.
2.11 Selection and Duties of Inspectors at Meetings of
Stockholders. The Board, in advance of any meeting of stockholders, may appoint
one or more inspectors to act at the meeting or any adjournment thereof. If
inspectors are not so appointed, the person presiding at such meeting may, and
on the request of any stockholder entitled to vote thereat shall, appoint one or
more inspectors. In case any person appointed fails to appear or act, the
vacancy may be filled by appointment made by the Board in advance of the meeting
or at the meeting by the person presiding thereat. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspector or
inspectors shall determine the number of shares outstanding and the voting power
of each, the shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents, determine the
result, and do such acts as are proper to conduct the election or vote with
<PAGE> 11
11
fairness to all stockholders. On request of the person presiding at the meeting
or any stockholder entitled to vote thereat, the inspector or inspectors shall
make a report in writing of any challenge, question or matter determined by him
or them and execute a certificate of any fact found by him or them. Any report
or certificate made by the inspector or inspectors shall be prima facie evidence
of the facts stated and of the vote as certified by him or them.
2.12 Organization. At every meeting of stockholders, the
President, or in the absence of the President a Vice President, and in case more
than one Vice President shall be present, that Vice President designated by the
Board (or in the absence of any such designation, the most senior Vice
President, based on age, present), shall act as chairman of the meeting. The
Secretary, or in his absence one of the Assistant Secretaries, shall act as
secretary of the meeting. In case none of the officers above designated to act
as chairman or secretary of the meeting, respectively, shall be present, a
chairman or a secretary of the meeting, as the case may be, shall be chosen by a
majority of the votes cast at such meeting by the holders of shares of capital
stock present in person or represented by proxy and entitled to vote at the
meeting.
2.13 order of Business. The order of business at all meetings of
stockholders shall be as determined by the
<PAGE> 12
12
chairman of the meeting, but the order of business to be followed at any meeting
at which a quorum is present may be changed by a majority of the votes cast at
such meeting by the holders of shares of capital stock present in person or
represented by proxy and entitled to vote at the meeting.
2.14 Written Consent of Stockholders Without a Meeting. Unless
otherwise provided in the Certificate of Incorporation, any action required by
the General Corporation Law to be taken at any annual or special meeting of
stockholders of the Corporation, or any action which may be taken at any annual
or special meeting of such stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
<PAGE> 13
13
ARTICLE 3
DIRECTORS
3.1 General Powers. Except as otherwise provided in the
Certificate of Incorporation, the business and affairs of the Corporation shall
be managed by or under the direction of the Board. The Board may adopt such
rules and regulations, not inconsistent with the Certificate of Incorporation or
the By-laws or applicable laws, as it may deem proper for the conduct of its
meetings and the management of the Corporation. In addition to the powers
expressly conferred by the By-laws, the Board may exercise all powers and
perform all acts which are not required, by the By-laws or the Certificate of
Incorporation or by law, to be exercised and performed by the stockholders.
3.2 Number; Qualification; Term of Office. The Board shall
consist of one or more members. The total number of directors shall be fixed
initially by the incorporator and may thereafter be changed from time to time by
action of the stockholders or by action of the Board. Directors need not be
stockholders. Each director shall hold office until his successor is elected and
qualified or until his earlier death, resignation or removal.
3.3 Election. Directors shall, except as otherwise required by
law or by the Certificate of Incorporation, be elected by a plurality of the
votes cast at a meeting of
<PAGE> 14
14
stockholders by the holders of shares entitled to vote in the election.
3.4 Newly Created Directorships and Vacancies. Unless otherwise
provided in the Certificate of Incorporation, newly created directorships
resulting from an increase in the number of directors and vacancies occurring in
the Board for any other reason, including the removal of directors without
cause, may be filled by vote of a majority of the directors then in office,
although less than a quorum, or by a sole remaining director, or may be elected
by a plurality of the votes cast by the holders of shares of capital stock
entitled to vote in the election at a special meeting of stockholders called for
that purpose. A director elected to fill a vacancy shall be elected to hold
office until his successor is elected and qualified, or until his earlier death,
resignation or removal.
3.5 Resignations. Any director may resign at any time by written
notice to the Corporation. Such resignation shall take effect at the time
therein specified, and, unless otherwise specified, the acceptance of such
resignation shall not be necessary to make it effective.
3.6 Removal of Directors. Subject to the provisions of Section
141(k) of the General Corporation Law, any or all of the directors may be
removed with or without cause,
<PAGE> 15
15
by the holders of a majority of the shares then entitled to vote at an election
of directors.
3.7 Compensation. Each director, in consideration of his service
as such, shall be entitled to receive from the Corporation such amount per annum
or such fees for attendance at directors' meetings, or both, as the Board may
from time to time determine, together with reimbursement for the reasonable
expenses incurred by him in connection with the performance of his duties. Each
director who shall serve as a member of any committee of directors in
consideration of his serving as such shall be entitled to such additional amount
per annum or such fees for attendance at committee meetings, or both, as the
Board may from time to time determine, together with reimbursement for the
reasonable expenses incurred by him in the performance of his duties. Nothing
contained in this section shall preclude any director from serving the
Corporation or its subsidiaries in any other capacity and receiving proper
compensation therefor.
3.8 Place and Time of Meetings of the Board. Meetings of the
Board, regular or special, may be held at any place within or without the State
of Delaware. The times and places for holding meetings of the Board may be fixed
from time to time by resolution of the Board or (unless contrary to resolution
of the Board) in the notice of the meeting.
<PAGE> 16
16
3.9 Annual Meetings. On the day when and at the place where the
annual meeting of stockholders for the election of directors is held, and as
soon as practicable thereafter, the Board may hold its annual meeting, without
notice of such meeting, for the purposes of organization, the election of
officers and the transaction of other business. The annual meeting of the Board
may be held at any other time and place specified in a notice given as provided
in Section 3.11 of the By-laws for special meetings of the Board or in a waiver
of notice thereof.
3.10 Regular Meetings. Regular meetings of the Board may be held
at such times and places as may be fixed from time to time by the Board. Unless
otherwise required by the Board, regular meetings of the Board may be held
without notice. If any day fixed for a regular meeting of the Board shall be a
Saturday or Sunday or a legal holiday at the place where such meeting is to be
held, then such meeting shall be held at the same hour at the same place on the
first business day thereafter which is not a Saturday, Sunday or legal holiday.
3.11 Special Meetings. Special meetings of the Board shall be
held whenever called by the President or the Secretary or by any two or more
directors. Notice of each special meeting of the Board shall, if mailed, be
addressed to each director at the address designated by him for that
<PAGE> 17
17
purpose or, if none is designated, at his last known address at least two days
before the date on which the meeting is to be held; or such notice shall be sent
to each director at such address by telegraph, cable, or wireless, or be
delivered to him personally, not later than the day before the date on which
such meeting is to be held. Every such notice shall state the time and place of
the meeting but need not state the purposes of the meeting, except to the extent
required by law. If mailed, each notice shall be deemed given when deposited,
with postage thereon prepaid, in a post office or official depository under the
exclusive care and custody of the United States post office department. Such
mailing shall be by first class mail.
3.12 Adjourned Meetings. A majority of the directors present at
any meeting of the Board, including an adjourned meeting, whether or not a
quorum is present, may adjourn such meeting to another time and place. Notice of
any adjourned meeting of the Board need not be given to any director whether or
not present at the time of the adjournment. Any business may be transacted at
any adjourned meeting that might have been transacted at the meeting as
originally called.
3.13 Waiver of Notice. Whenever notice is required to be given
to any director or member of a committee of directors under any provision of the
General Corporation
<PAGE> 18
18
Law or of the Certificate of Incorporation or By-laws, a written waiver thereof,
signed by the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the directors, or members of a
committee of directors, need be specified in any written waiver of notice.
3.14 Organization. At each meeting of the Board, the President of
the Corporation, or in the absence of the President, a chairman chosen by a
majority of the directors present, shall preside. The Secretary shall act as
secretary at each meeting of the Board. In case the Secretary shall be absent
from any meeting of the Board, an Assistant Secretary shall perform the duties
of secretary at such meeting; and in the absence from any such meeting of the
Secretary and all Assistant Secretaries, the person presiding at the meeting may
appoint any person to act as secretary of the meeting.
3.15 Quorum of Directors. One-third of the total number of
directors shall constitute a quorum for the
<PAGE> 19
19
transaction of business or of any specified item of business at any meeting of
the Board.
3.16 Action by the Board. All corporate action taken by the Board or
any committee thereof shall be taken at a meeting of the Board, or of such
committee, as the case may be, except that any action required or permitted to
be taken at any meeting of the Board, or of any committee thereof, may be taken
without a meeting if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee. Members of the Board, or
any committee designated by the Board, may participate in a meeting of the
Board, or of such committee, as the case may be, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a
meeting pursuant to this Section 3.16 shall constitute presence in person at
such meeting. Except as otherwise provided by the Certificate of Incorporation
or by law, the vote of a majority of the directors present (including those who
participate by means of conference telephone or similar communications
equipment) at the time of the vote, if a quorum is present at such time, shall
be the act of the Board.
<PAGE> 20
20
ARTICLE 4
COMMITTEES OF THE BOARD
The Board may, by resolution passed by a majority of the whole
Board, designate one or more committees, each committee to consist of one or
more Of the directors Of the corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board to
act at the meeting in the place of any such absent or disqualified member. Any
such committee, to the extent provided in the resolution of the Board, shall
have and may exercise all the powers and authority of the Board in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement or merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution Of the Corporation
<PAGE> 21
21
or a revocation of a dissolution, or amending the By-laws of the Corporation;
and, unless the resolution designating it expressly so provides, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
ARTICLE 5
OFFICERS
5.1 Officers. The Board shall elect a President, a Secretary and
a Treasurer, and may elect or appoint one or more Vice Presidents and such other
officers as it may determine. The Board may designate one or more Vice
Presidents as Executive Vice Presidents, and may use descriptive words or
phrases to designate the standing, seniority or area of special competence of
the Vice Presidents elected or appointed by it. Each officer shall hold his
office until his successor is elected and qualified or until his earlier
death, resignation or removal in the manner provided in Section 5.2 of the
By-laws. Any two or more offices may be held by the same person. The Board may
require any officer to give a bond or other security for the faithful
performance of his duties, in such amount and with such sureties as the Board
may determine. All officers as between themselves and the Corporation shall
have such authority and perform such duties
<PAGE> 22
22
in the management of the Corporation as may be provided in the By-laws or as the
Board may from time to time determine.
5.2 Removal of Officers. Any officer elected or appointed by the
Board may be removed by the Board with or without cause. The removal of an
officer without cause shall be without prejudice to his contract rights, if any.
The election or appointment of an officer shall not of itself create contract
rights.
5.3 Resignations. Any officer may resign at any time by so
notifying the Board or the President or the Secretary in writing. Such
resignation shall take effect at the date of receipt of such notice or at such
later time as is therein specified, and, unless otherwise specified, the
acceptance of such resignation shall not be necessary to make it effective. The
resignation of an officer shall be without prejudice to the contract rights of
the Corporation, if any.
5.4 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled for
the unexpired portion of the term in the manner prescribed in the By-laws for
the regular election or appointment to such office.
5.5 Compensation. Salaries or other compensation of the officers
may be fixed from time to time by the Board. No officer shall be prevented from
receiving a salary or
<PAGE> 23
23
other compensation by reason of the fact that he is also a director.
5.6 President. The President shall be the Chief Executive Officer
of the Corporation and shall have general supervision over the business of the
Corporation, subject, however, to the control of the Board and of any duly
authorized committee of directors. The President shall, if present, preside at
all meetings of the stockholders and at all meetings of the Board. He may, with
the Secretary or the Treasurer or an Assistant Secretary or an Assistant
Treasurer, sign certificates for shares of capital stock of the Corporation. He
may sign and execute in the name of the Corporation deeds, mortgages, bonds,
contracts and other instruments, except in cases where the signing and execution
thereof shall be expressly delegated by the Board or by the By-laws to some
other officer or agent of the Corporation, or shall be required by law otherwise
to be signed or executed; and, in general, he shall perform all duties incident
to the office of President and such other duties as from time to time may be
assigned to him by the Board.
5.7 Vice Presidents. At the request of the President, or, in his
absence, at the request of the Board, the Vice Presidents shall (in such order
as may be designated by the Board or, in the absence of any such designation, in
order of seniority based on age) perform all of the duties of
<PAGE> 24
24
the President and so acting shall have all the powers of and be subject to all
restrictions upon the President. Any Vice President may also, with the Secretary
or the Treasurer or an Assistant Secretary or an Assistant Treasurer, sign
certificates for shares of capital stock of the Corporation; may sign and
execute in the name of the Corporation deeds, mortgages, bonds, contracts or
other instruments authorized by the Board, except in cases where the signing and
execution thereof shall be expressly delegated by the Board or by the By-laws to
some other officer or agent of the Corporation, or shall be required by law
otherwise to be signed or executed; and shall perform such other duties as from
time to time may be assigned to him by the Board or by the President.
5.8 Secretary. The Secretary, if present, shall act as secretary
of all meetings of the stockholders and of the Board, and shall keep the minutes
thereof in the proper book or books to be provided for that purpose; he shall
see that all notices required to be given by the Corporation are duly given and
served; he may, with the president or a Vice President, sign certificates for
shares of capital stock of the Corporation; he shall be custodian of the seal of
the Corporation and may seal with the seal of the Corporation, or a facsimile
thereof, all certificates for shares of capital stock of the Corporation and all
documents the execution of which on behalf of the Corporation under its
corporate seal
<PAGE> 25
25
is authorized in accordance with the provisions of the By-laws; he shall have
charge of the stock ledger and also of the other books, records and papers of
the Corporation relating to its organization and management as a Corporation,
and shall see that the reports, statements and other documents required by law
are properly kept and filed; and shall, in general, perform all the duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him by the Board or by the President.
5.9 Treasurer. The Treasurer shall have charge and custody of,
and be responsible for, all funds, securities and notes of the Corporation;
receive and give receipts for moneys due and payable to the Corporation from any
sources whatsoever; deposit all such moneys in the name of the Corporation in
such banks, trust companies or other depositaries as shall be selected in
accordance with these By-laws; against proper vouchers, cause such funds to be
disbursed by checks or drafts on the authorized depositaries of the Corporation
signed in such manner as shall be determined in accordance with any provisions
of the By-laws, and be responsible for the accuracy of the amounts of all moneys
so disbursed; regularly enter or cause to be entered in books to be kept by him
or under his direction full and adequate account of all moneys received or paid
by him for the account of the Corporation; have the right to require, from time
to
<PAGE> 26
26
time, reports or statements giving such information as he may desire with
respect to any and all financial transactions of the Corporation from the
officers or agents transacting the same; render to the President or the Board,
whenever the President or the Board, respectively, shall require him so to do,
an account of the financial condition Or the Corporation and of all his
transactions as Treasurer; exhibit at all reasonable times his books of account
and other records to any of the directors upon application at the office of the
Corporation where such books and records are kept; and, in general, perform all
the duties incident to the office of Treasurer and such other duties as from
time to time may be assigned to him by the Board or by the President; and he may
sign with the President or a Vice President certificates for shares of capital
stock of the Corporation.
5.10 Assistant Secretaries and Assistant Treasurers. Assistant
Secretaries and Assistant Treasurers shall perform such duties as shall be
assigned to them by the secretary or by the Treasurer, respectively, or by the
Board or by the President. Assistant Secretaries and Assistant Treasurers may,
with the President or a Vice President, sign certificates for shares of capital
stock of the Corporation.
<PAGE> 27
27
ARTICLE 6
CONTRACTS,CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
6.1 Execution of Contracts. The Board may authorize any officer,
employee or agent, in the name and on behalf of the Corporation, to enter into
any contract or execute and satisfy any instrument, and any such authority may
be general or confined to specific instances, or otherwise limited.
6.2 Loans. The President or any other officer, employee or agent
authorized by the By-laws or by the Board may effect loans and advances at any
time for the Corporation from any bank, trust company or other institutions or
from any firm, corporation or individual and for such loans and advances may
make, execute and deliver promissory notes, bonds or other certificates or
evidences of indebtedness of the Corporation, and, when authorized by the Board
so to do, may pledge and hypothecate transfer any securities or other property
of the Corporation as security for any such loans or advances. Such authority
conferred by the Board may be general or confined to specific instances or
otherwise limited.
6.3 Checks, Drafts, Etc. All checks, drafts and other orders for
the payment of money out of the funds of the Corporation and all notes or other
evidences of indebtedness of the Corporation shall be signed on behalf of the
<PAGE> 28
28
Corporation in such manner as shall from time to time be determined by
resolution Or the Board.
6.4 Deposits. The funds of the Corporation not otherwise employed
shall be deposited from time to time to the order of the Corporation in such
banks, trust companies or other Depositaries as the Board may select or as may
be selected by an officer, employee or agent of the Corporation to whom such
power may from time to time be delegated by the Board.
ARTICLE 7
STOCK AND DIVIDENDS
7.1 Certificates Representing Shares. The shares of capital stock
of the Corporation shall be represented by certificates in such form (consistent
with the provisions of section 158 of the General Corporation Law) as shall be
approved by the Board. Such certificates shall be signed by the President or a
Vice President and by the Secretary or an Assistant Secretary or the Treasurer
or an Assistant Treasurer, and may be sealed with the seal of the Corporation or
a facsimile thereof. The signatures of the officers upon a certificate may be
facsimiles, if the certificate is countersigned by a transfer agent or registrar
other than the Corporation itself or its employee. In case any officer, transfer
agent or registrar who has signed or whose facsimile
<PAGE> 29
29
signature has been placed upon any certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, such
certificate may, unless otherwise ordered by the Board, be issued by the
Corporation with the same effect as if such person were such officer, transfer
agent or registrar at the date of issue.
7.2 Transfer Of Shares. Transfers of shares of capital stock of
the Corporation shall be made only on the books of the Corporation by the holder
thereof or by his duly authorized attorney appointed by a power of attorney duly
executed and filed with the Secretary or a transfer agent of the Corporation,
and on surrender of the certificate or certificates representing such shares of
capital stock properly endorsed for transfer and upon payment of all necessary
transfer taxes. Every certificate exchanged, returned or surrendered to the
Corporation shall be marked "Cancelled," with the date of cancellation, by the
Secretary or an Assistant Secretary or the transfer agent of the Corporation. A
person in whose name shares of capital stock shall stand on the books of the
Corporation shall be deemed the owner thereof to receive dividends, to vote as
such owner and for all other purposes as respects the Corporation. No transfer
of shares of capital stock shall be valid as against the Corporation, its
stockholders and creditors for any purpose, except to render the transferee
liable for the debts of the
<PAGE> 30
30
Corporation to the extent provided by law, until such transfer shall have been
entered on the books of the Corporation by an entry showing from and to whom
transferred.
7.3 Transfer and Registry Agents. The Corporation may from time
to time maintain one or more transfer offices or agents and registry offices or
agents at such place or places as may be determined from time to time by the
Board.
7.4 Lost, Destroyed, Stolen and Mutilated Certificates. The
holder of any shares of capital stock of the Corporation shall immediately
notify the Corporation of any loss, destruction, theft or mutilation of the
certificate representing such shares, and the Corporation may issue a new
certificate to replace the certificate alleged to have been lost, destroyed,
stolen or mutilated. The Board may, in its discretion, as a condition to the
issue of any such new certificate, require the owner of the lost, destroyed,
stolen or mutilated certificate, or his legal representatives, to make proof
satisfactory to the Board of such loss, destruction, theft or mutilation and to
advertise such fact in such manner as the Board may require, and to give the
Corporation and its transfer agents and registrars, or such of them as the Board
may require, a bond in such form, in such sums and with such surety or sureties
as the Board may direct, to indemnify the Corporation and its transfer agents
and registrars against any claim that may be made against any of them on account
of
<PAGE> 31
31
the continued existence of any such certificate so alleged to have been lost,
destroyed, stolen or mutilated and against any expense in connection with such
claim.
7.5 Regulations. The Board may make such rules and regulations
as it may deem expedient, not inconsistent with the By-laws or with the
Certificate of Incorporation, concerning the issue, transfer and registration of
certificates representing shares of its capital stock.
7.6 Restriction on Transfer of stock. A written restriction on
the transfer or registration of transfer of capital stock of the Corporation, if
permitted by Section 202 of the General Corporation Law and noted conspicuously
on the certificate representing such capital stock, may be enforced against the
holder of the restricted capital stock or any successor or transferee of the
holder including an executor, administrator, trustee, guardian or other
fiduciary entrusted with like responsibility for the person or estate of the
holder. Unless noted conspicuously on the certificate representing such capital
stock, a restriction, even though permitted by Section 202 of the General
Corporation Law, shall be ineffective except against a person with actual
knowledge of the restriction. A restriction on the transfer or registration of
transfer of capital stock of the Corporation may be imposed either by the
Certificate of Incorporation or by an agreement among any number of stockholders
or
<PAGE> 32
32
among such stockholders and the Corporation. No restriction so imposed shall be
binding with respect to capital stock issued prior to the adoption of the
restriction unless the holders of such capital stock are parties to an agreement
or voted in favor of the restriction.
7.7 Dividends, Surplus, Etc Subject to the provisions of the
certificate of Incorporation and of law, the Board:
7.7.1 May declare and pay dividends or make other
distributions on the outstanding shares of capital stock in such
amounts and at such tine or times as, in its discretion, the condition
of the affairs of the Corporation shall render advisable;
7.7.2 May use and apply, in its discretion, any of the surplus
of the Corporation in purchasing or acquiring any shares of capital
stock of the Corporation, or purchase warrants therefor, in accordance
with law, or any of its bonds, debentures, notes, scrip or other
securities or evidences of indebtedness;
7.7.3 May set aside from time to time out of such surplus or
net profits such sum or sums as, in its discretion, it may think
proper, as a reserve fund to meet contingencies, or for equalizing
dividends or for the purpose of maintaining or increasing the property
or business of the Corporation, or for any purpose it may
<PAGE> 33
33
think conducive to the best interests of the Corporation.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification of Officers and Directors. The Corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a director or an officer of the Corporation, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding to the fullest extent and in the manner set forth in and permitted by
the General Corporation Law, and any other applicable law, as from time to time
in effect. Such right or indemnification shall not be deemed exclusive of any
other rights to which such director or officer may be entitled apart from the
foregoing provisions. The foregoing provisions of this Section 8.1 shall be
deemed to be a contract between the Corporation and each director and officer
who serves in such capacity at any time while this Article 8 and the relevant
provisions of the General Corporation Law and other applicable law, if any, are
in effect, and any
<PAGE> 34
34
repeal or modification thereof shall not affect any rights or obligations then
existing with respect to any state of facts then or theretofore existing or any
action, suit or proceeding theretofore or thereafter brought or threatened based
in whole or in part upon any such state of facts.
8.2 Indemnification of Other Persons. The Corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative by reason of the fact that he
is or was an employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding to the extent and in the manner set forth in and
permitted by the General Corporation Law, and any other applicable law, as from
time to time in effect. Such right of indemnification shall not be deemed
exclusive of any other rights to which any such person may be entitled apart
from the foregoing provisions.
8.3 Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person
<PAGE> 35
35
who is or was a director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of Sections 8.1 and 8.2 of the By-laws or under Section 145 of
the General Corporation Law or any other provision of law.
ARTICLE 9
BOOKS AND RECORDS
9.1 Books and Records. The Corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of the stockholders, the Board and any committee of the Board. The Corporation
shall keep at the office designated in the Certificate or Incorporation or at
the office of the transfer agent or registrar of the Corporation, a record
containing the names and addresses of all stockholders, the number and class of
shares held by each and the dates when they respectively became the owners of
record thereof.
<PAGE> 36
36
9.2 Form of Records. Any records maintained by the Corporation in
the regular course of its business, including its stock ledger, books of
account, and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, micro photographs, or any other information storage
device, provided that the records so kept can be converted into clearly legible
written form within a reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to inspect the same.
9.3 Inspection Of Books and Records. Except as otherwise provided
by law, the Board shall determine from time to time whether, and, if allowed,
when and under what conditions and regulations, the accounts, books, minutes and
other records of the Corporation, or any of them, shall be open to the
inspection of the stockholders.
ARTICLE 10
SEAL
The Board may adopt a corporate seal which shall be in the form
of a circle and shall bear the full name of the Corporation, the year of its
incorporation and the word "Delaware."
<PAGE> 37
37
ARTICLE 11
FISCAL YEAR
The fiscal year of the Corporation shall be determined, and may
be changed, by resolution of the Board.
ARTICLE 12
VOTING OF SHARES HELD
Unless otherwise provided by resolution of the Board, the
President may, from time to time, appoint one or more attorneys or agents of the
Corporation, in the name and on behalf of the Corporation, to cast the votes
which the Corporation may be entitled to cast as a stockholder or otherwise in
any other corporation, any of whose shares or securities may be held by the
Corporation, at meetings of the holders of stock or other securities of such
other corporation, or to consent in writing to any action by any such other
corporation, and may instruct the person or persons so appointed as to the
manner of casting such votes or giving such consent, and may execute or cause to
be executed on behalf of the Corporation and under its corporate seal, or
otherwise, such written proxies, consents, waivers or other instruments as he
may deem necessary or proper in the premises; or the President may himself
attend any meeting of the holders of the stock or other securities of any such
other corporation and thereat vote or exercise any or all other
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38
powers of the Corporation as the holder of such stock or other securities of
such other corporation.
ARTICLE 13
AMENDMENTS
The By-laws may be altered, amended, supplemented or repealed, or
new By-laws may be adopted, by vote of the holders of the shares entitled to
vote in the election of directors. The By-laws may be altered, amended,
supplemented or repealed, or new By-laws may be adopted, by the Board. Any
By-laws adopted, altered, amended, or supplemented by the Board may be altered,
amended, or supplemented or repealed by the stockholders entitled to vote
thereon.
<PAGE> 1
Exhibit 4.1
Stanadyne Automotive Corp.
as Issuer
Precision Engine Products Corp.
DSD International Corp.
as Guarantors
$125,000,000
10 1/4% Senior Subordinated Notes
due December 15, 2007
-------------
INDENTURE
Dated as of December 11, 1997
-------------
United States Trust Company of New York
Trustee
<PAGE> 2
INDENTURE dated as of December 11, 1997, among Stanadyne
Automotive Corp., a Delaware corporation (the "Company"), Precision Engine
Products Corp., a Delaware corporation, and DSD International Corp., a Delaware
corporation, as guarantors (collectively, the "Guarantors"), and United States
Trust Company of New York, as trustee (the "Trustee").
Each party agrees as follows for the benefit of each other and
for the equal and ratable benefit of the Holders of the 10 1/4% Series A Senior
Subordinated Notes due 2007 (the "Series A Notes") and the 10 1/4% Series B
Senior Subordinated Notes due 2007 (the "Series B Notes" and, together with the
Series A Notes, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01 DEFINITIONS
"Acquired Indebtedness" means, with respect to any specified
Person, (i) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Acquisition Transactions" means, the series of transactions
whereby pursuant to a Stock Purchase Agreement dated November 7, 1997 AIP will
purchase (the "Stock Purchase") from Metromedia Company and certain other
persons all of the issued and outstanding shares of capital stock of Stanadyne
Automotive Holding Corp., a Delaware corporation ("Old Holdings"). Pursuant to
the Stock Purchase and certain related transactions that will be consummated
substantially simultaneously, (i) AIP and certain management investors will
purchase common equity of SAC, Inc., a Delaware corporation ("New Holdings"),
(ii) the Company will issue and sell the Notes, together with the guarantee
thereof of the Subsidiary Guarantors, (iii) the Company will enter into a Credit
Agreement with the lenders and administrative and collateral agents named
therein pursuant to which it will borrow $55,000,000 in term loans and
approximately $11,500,000 in revolving loans, (iv) the Company will advance
$67,500,000 to New Holdings in the form of an intercompany note, and (v) New
Holdings will purchase the issued and outstanding capital stock of Old Holdings.
Immediately upon the consummation of the Acquisition, (a) Old Holdings will
merge with and into its wholly owned subsidiary, the Company, with the Company
being the surviving corporation, (b) SAC Automotive, Inc., a Delaware
Corporation, will merge with and into the Company, with the Company being the
surviving corporation, and (c) New Holdings will change its name to "Stanadyne
Automotive Holding Corp."
<PAGE> 3
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the voting securities of a
Person shall be deemed to be control. Notwithstanding the foregoing, (a) the
limited partners in AIP shall not be deemed to be Affiliates of AIP solely by
reason of their investment in such funds and (b) no Person (other than the
Company or any Subsidiary of the Company) in whom a Receivables Subsidiary makes
an Investment in connection with a Qualified Receivables Transaction shall be
deemed to be an Affiliate of the Company or any of its Subsidiaries solely by
reason of such Investment.
"Agent" means any Registrar, Paying Agent or co-registrar.
"AIP" means, collectively, American Industrial Partners
Capital Fund, L.P., a Delaware limited partnership, and American Industrial
Partners Capital Fund II, L.P., a Delaware limited partnership.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition that does not constitute a Restricted Payment or an Investment by
such person of any of its non-cash assets (including, without limitation, by way
of a sale and leaseback and including the issuance, sale or other transfer of
any of the capital stock of any Subsidiary of such person but excluding Cash
Equivalents liquidated in the ordinary course of business) other than to the
Company or to any of its Wholly Owned Subsidiaries that is a Guarantor
(including the receipt of proceeds of insurance paid on account of the loss of
or damage to any asset and awards of compensation for any asset taken by
condemnation, eminent domain or similar proceeding, and including the receipt of
proceeds of business interruption insurance); and (ii) the issuance of Equity
Interests in any Subsidiaries or the sale of any Equity Interests in any
Subsidiaries, in each case, in one or a series of related transactions,
provided, that notwithstanding the foregoing, the term "Asset Sale" shall not
include: (a) the sale, lease, conveyance, disposition or other transfer of all
or substantially all of the assets of the Company, as permitted pursuant to
Section 5.01 hereof, (b) the sale or lease of equipment, inventory, accounts
receivable or other assets in the ordinary course of business consistent with
past practice, (c) the sale or disposal of damaged, worn out or other obsolete
personal property in the ordinary course of business so long as such property is
no longer necessary for the proper conduct of the business of the Company or
such Subsidiary, as applicable; (d) a transfer of assets by the Company to a
Wholly Owned Subsidiary that is a Guarantor or by a Wholly Owned Subsidiary to
the Company or to another Wholly Owned Subsidiary that is a Guarantor or by a
Wholly Owned Subsidiary that is not a Guarantor to another Wholly
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Owned Subsidiary that is not a Guarantor, (e) an issuance of Equity Interests by
a Wholly Owned Subsidiary to the Company or to another Wholly Owned Subsidiary
that is a Guarantor, or by a Wholly Owned Subsidiary that is not a Guarantor to
another Wholly Owned Subsidiary that is not a Guarantor, (f) the surrender or
waiver of contract rights or the settlement, release or surrender of contract,
tort or other claims of any kind, (g) the grant in the ordinary course of
business of any non-exclusive license of patents, trademarks, registrations
therefor and other similar intellectual property, (h) sales of accounts
receivable and related assets of the type specified in the definition of
"Qualified Receivables Transaction" to a Receivables Subsidiary for the fair
market value thereof, including cash in an amount at least equal to 75% of the
book value thereof as determined in accordance with GAAP, (i) Permitted
Investments, or (j) transfers of accounts receivable and related assets of the
type specified in the definition of "Qualified Receivables Transaction" (or a
fractional undivided interest therein) by a Receivables Subsidiary in a
Qualified Receivables Transaction. For the purposes of clauses (h) and (j),
notes received in exchange for the transfer of accounts receivable and related
assets shall be deemed cash if the Receivables Subsidiary or other payor is
required to repay said notes as soon as practicable from available cash
collections less amounts required to be established as reserves pursuant to
contractual agreements with entities that are not Affiliates of the Company
entered into as part of a Qualified Receivables Transaction.
"Board of Directors" means the Board of Directors of the
Company, or any authorized committee of the Board of Directors.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in New York are
authorized or obligated by law or executive order to close.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
Capital Lease that would at such time be required to be capitalized on a balance
sheet in accordance with GAAP.
"Capital Contribution" means any contribution to the equity of
the Company for which no consideration is given other than common stock with no
redemption rights and no special privileges, preferences, or special voting
rights.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
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"Cash Equivalents" means (a) securities 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 is pledged in support thereof) having maturities not more than twelve
months from the date of acquisition, (b) U.S. dollar denominated (or foreign
currency fully hedged) time deposits, certificates of deposit, Eurodollar time
deposits or Eurodollar certificates of deposit of (i) any domestic commercial
bank of recognized standing having capital and surplus in excess of $100,000,000
or (ii) any bank whose short-term commercial paper rating from S&P is at least
A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent
thereof (any such bank being an "Approved Lender"), in each case with maturities
of not more than twelve months from the date of acquisition, (c) commercial
paper and variable or fixed rate notes issued by any Approved Lender (or by the
parent company thereof) or any variable rate notes issued by, or guaranteed by,
any domestic corporation rated A-2 (or the equivalent thereof) or better by S&P
or P-2 (or the equivalent thereof) or better by Moody's and maturing within
twelve months of the date of acquisition, (d) repurchase agreements with a bank
or trust company or recognized securities dealer having capital and surplus in
excess of $100,000,000 for direct obligations issued by or fully guaranteed by
the United States of America in with the Company shall have a perfected first
priority security interest (subject to no other Liens) and having, on the date
of purchase thereof, a fair market value of at least 100% of the amount of
repurchase obligations, and (e) interests in money market mutual funds which
invest solely in assets or securities of the type described in subparagraphs
(a), (b), (c) or (d) hereof.
"Change of Control" means such time as (i) prior to the
initial public offering by the Company of any shares of its common stock (other
than a public offering pursuant to a registration statement on Form S-8), AIP,
its Affiliates and Management Investors (collectively, the "Initial Investors")
cease to be, directly or indirectly, the beneficial owners, in the aggregate of
at least 51% of the voting power of the voting common stock of the Company or
(ii) after the initial public offering by the Company of any shares of its
common stock (other than a public offering pursuant to a registration statement
on Form S-8), (A) any Schedule 13D, Form 13F or Schedule 13G under the Exchange
Act, or any amendment to such Schedule or Form, is received by the Company which
indicates that, or the Company otherwise becomes aware that, a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
(except, in the case of the Company, the Parent) has become, directly or
indirectly, the "beneficial owner," by way of merger, consolidation or
otherwise, of 35% or more of the voting power of the voting capital stock of the
Company and (B) any such person or group has become, directly or indirectly, the
beneficial owner of a greater percentage of the voting capital stock of the
Company than beneficially owned by the Initial Investors, or (iii) the sale,
lease or transfer of all or substantially all of the assets of the Company to
any person or group (other than the Initial Investors or their Related Parties
(as defined below)), or (iv) during any period of two consecutive calendar
years, individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any Continuing Directors) ceases for any
reason to constitute a majority of the directors
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of the Company then in office. "Related Party" with respect to any Initial
Investor means (A) any controlling stockholder, 80% (or more) owned Subsidiary,
or spouse, or immediate family member (in the case of any individual) of such
Initial Investor or (B) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or persons beneficially holding an
80% or more controlling interest of which consist of such Initial Investor
and/or such other persons referred to in the immediately preceding clause (A).
"Consolidated EBITDA" means, with respect to the Company and
its Subsidiaries for any period, the sum of, without duplication, (i) the
Consolidated Net Income for such period, plus (ii) the Fixed Charges for such
period, plus (iii) provision for taxes based on income or profits for such
period (to the extent such income or profits were included in computing
Consolidated Net Income for such period), plus (iv) consolidated depreciation,
amortization and other non-cash charges of the Company and its Subsidiaries
required to be reflected as expenses on the books and records of the Company,
minus (v) cash payments with respect to any non-recurring, non-cash charges
previously added back pursuant to clause (iv), and (vi) excluding the impact of
foreign currency translations. Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and amortization
and other non-cash charges of, a Subsidiary of a Person shall be added to
Consolidated Net Income to compute Consolidated EBITDA only to the extent (and
in the same proportion) that the Net Income of such Subsidiary was included in
calculating the Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of determination to be paid
as a dividend to the Company by such Subsidiary without prior approval (that has
not been obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or distributions
paid in cash to the referent Person or a Wholly Owned Subsidiary thereof that is
a Guarantor, (ii) the Net Income of any Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar distributions by
that Subsidiary of that Net Income is not at the date of determination permitted
without any prior governmental approval (which has not been obtained) or,
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 Subsidiary or its stockholders, (iii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded, (iv) the
cumulative effect of a change in accounting principles shall be excluded, (v)
the Net Income of, or any dividends or other distributions from, any
Unrestricted Subsidiary, to the extent otherwise included, shall be excluded,
whether or not
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<PAGE> 7
distributed to the Company or one of its Subsidiaries, and (vi) all other
extraordinary gains and extraordinary losses shall be excluded.
"Continuing Directors" means, as of any date of determination,
any member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the Issue Date, (ii) was nominated for election or elected
to such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board of Directors at the time of such
nomination or election or (iii) was appointed by AIP pursuant to the
Shareholders Agreements.
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 12.02 hereof or such other address
as to which the Trustee may give notice to the Company.
"Credit Agreement" means that certain Credit Agreement, dated
as of the date of this Indenture, by and among the Company and The First
National Bank of Chicago, as administrative agent, DLJ Capital Funding, Inc., as
syndication agent, and the lenders parties thereto, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced, extended, restated or refinanced from time to time, including any
agreement restructuring or adding Subsidiaries of the Company as additional
borrowers or guarantors thereunder and whether by the same or any other agent,
lender or group of lenders; provided that the total amount of Senior
Indebtedness is not thereby increased beyond the amount that may then be
incurred at such time pursuant to the covenant described in Section 4.10.
"Default" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.
"Definitive Notes" means Notes that are in the form of the
Notes attached hereto as Exhibit A, that do not include the information called
for by footnotes 1 and 2 thereof.
"Depository" means, with respect to the Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depository with respect to the Notes, until a successor shall have
been appointed and become such Depository pursuant to the applicable provision
of this Indenture, and, thereafter, "Depository" shall mean or include such
successor.
"Designated Senior Indebtedness" means (i) so long as the
Senior Bank Debt is outstanding, the Senior Bank Debt and (ii) thereafter, any
other Senior Indebtedness
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permitted under this Indenture the principal amount of which is $25,000,000 or
more and that has been designated by the Company as "Designated Senior
Indebtedness."
"Disqualified Stock" means any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the Holder thereof, in whole or in part, on or prior
to the date on which the Notes mature.
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means an underwritten public offering of
Equity Interests of the Company or the Parent, other than Disqualified Stock,
pursuant to a registration statement filed with the SEC in accordance with the
Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Offer" means the offer that may be made by the
Company pursuant to the Registration Rights Agreement to exchange Series B Notes
for Series A Notes.
"Existing Indebtedness" means the Indebtedness of the Company
and its Subsidiaries (other than Indebtedness under the Credit Agreement) in
existence on the date of this Indenture until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) the consolidated interest expense
of such Person and its Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of original issue discount,
amortization of deferred financing fees, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), (ii) the consolidated interest expense of such Person and its
Subsidiaries that was capitalized during such period, (iii) any interest expense
on Indebtedness of another Person that is Guaranteed by such Person or one of
its Subsidiaries or secured by a Lien on assets of such Person or one of its
Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) the
product of (a) all cash dividend payments (and non-cash dividend payments in the
case of a Person that is a Subsidiary) on any series of preferred stock of such
Person payable to a party other than the Company or a Wholly Owned Subsidiary,
times (b) a fraction, the numerator of
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<PAGE> 9
which is one and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person, expressed as a
decimal, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means, with respect to any
Person for any period, the ratio of the Consolidated EBITDA of such Person and
its Subsidiaries for such period to the Fixed Charges of such Person and its
Subsidiaries for such period. In the event that the Company or any of its
Subsidiaries incurs, assumes, retires, Guarantees or redeems any Indebtedness
(other than revolving credit borrowings) or issues preferred stock subsequent to
the commencement of the four-quarter reference period for which the Fixed Charge
Coverage Ratio is being calculated but on or prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, retirement, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. For purposes of making the computation referred to above, (i)
acquisitions that have been made by the Company or any of its Subsidiaries,
including through mergers or consolidations and including any related financing
and refinancing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period, and (ii) the Consolidated EBITDA attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of on or prior to the Calculation Date, shall be excluded, and (iii)
the Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of on or prior to
the Calculation Date, shall be excluded, but only to the extent that the
obligations giving rise to such Fixed Charges will not be obligations of the
referent Person or any of its Subsidiaries following the Calculation Date.
"Foreign Subsidiary" means any Wholly Owned Subsidiary
organized and incorporated in a jurisdiction outside of the United States that
is not a Guarantor.
"Foreign Intercompany Indebtedness" means any Indebtedness of
one Foreign Subsidiary to another Foreign Subsidiary.
"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 have been approved by a significant segment
of the accounting profession, which are in effect on the date of this Indenture.
All ratios and computations based on GAAP contained in the Indenture shall be
computed in conformity with GAAP applied on a consistent basis, except
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<PAGE> 10
that calculations made for purposes of determining compliance with the terms of
the covenants and with other provisions of the Indenture shall be made without
giving effect to depreciation, amortization or other expenses recorded as a
result of the application of purchase accounting in accordance with Accounting
Principles Board Option Nos. 16 and 17.
"Global Note" means a Note that contains the paragraph
referred to in footnote 1 and the additional schedule referred to in footnote 2
to the form of the Note attached hereto as Exhibit A.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States is
pledged.
"Guarantee" means a guarantee or other credit support (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner (including, without
limitation, letters of credit and reimbursement agreements in respect thereof),
of all or any part of any Indebtedness.
"Guarantor Senior Indebtedness" means (i) any Guarantees by
any Guarantor of the Senior Bank Debt and (ii) any other Indebtedness permitted
to be incurred by any Guarantor under the terms of this Indenture, unless the
instrument under which such Indebtedness is incurred expressly provides that it
is on a parity with or subordinated in right of payment to the Subsidiary
Guarantees. Notwithstanding anything to the contrary in the foregoing, Guarantor
Senior Indebtedness will not include (w) any liability for federal, state,
local, or other taxes owed or owing by any Guarantor, (x) any Indebtedness of
any Guarantor to any of its Subsidiaries or other Affiliates, (y) any trade
payables or (z) any Indebtedness that is incurred in violation of this
Indenture.
"Guarantors" means each Subsidiary of the Company that
executes a Subsidiary Guarantee guaranteeing the Notes in accordance with the
provisions of this Indenture, and their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) currency exchange or interest rate swap
agreements, interest rate cap agreements and interest rate collar agreements and
(ii) other agreements or arrangements designed to protect such Person against
fluctuations in interest rates or currency exchange rates.
"Holder" means a Person in whose name a Note is registered on
the Registrar's books.
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"Indebtedness" means, with respect to any Person, any (i)
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the balance deferred
and unpaid of the purchase price of any property or representing any Hedging
Obligations, except any such balance that constitutes an accrued expense or
trade payable, incurred in the ordinary course of business, but other than with
respect to, letters of credit and Hedging Obligations only, if and to the extent
any of the foregoing indebtedness would appear as a liability upon a
consolidated balance sheet of such Person prepared in accordance with GAAP, (ii)
all indebtedness of others secured by a Lien on any asset of such Person
(whether or not such indebtedness is assumed by such Person) and, (iii) to the
extent not otherwise included, the Guarantee by such Person of any indebtedness
of any other Person.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including Affiliates) in the forms
of direct or indirect loans (including guarantees of Indebtedness or other
obligations, but excluding guarantees of Indebtedness of the Company or any
Wholly Owned Guarantor to the extent such guarantee is permitted in Section
4.10), advances or capital contributions (excluding commission, travel and
similar advances to officers and employees made in the ordinary course of
business), transfers of assets outside the ordinary course of business (other
than Asset Sales), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities and all other items that are
or would be classified as investments on a balance sheet prepared in accordance
with GAAP; provided that an acquisition of assets, Equity Interests or other
securities by the Company for consideration consisting of common equity
securities of the Company shall not be deemed to be an Investment.
"Issue Date" means the date of first issuance of the Notes
under this Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other
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<PAGE> 12
title retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in and, except in connection with
any Qualified Receivables Transaction, any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement.
"Management Investors" means William D. Gurley, Michael H.
Boyer, Robert A. Massa, Arthur S. Caruso, William W. Kelly, Don Buonomo, Lee
Janik, Bryan M. Wysong and any of their respective affiliates.
"Net Cash Proceeds" means the aggregate amount of cash or Cash
Equivalents received by the Company in the case of a sale or equity contribution
in respect of Qualified Capital Stock plus, in the case of an issuance of
Qualified Capital Stock upon any exercise, exchange or conversion of securities
(including options, warrants, rights and convertible or exchangeable debt) of
the Company that were issued for cash after the Issue Date, the amount of cash
originally received by the Company upon the issuance of such securities
(including options, warrants, rights and convertible or exchangeable debt) less,
the sum of all payments, fees, commissions, and customary and reasonable
expenses (including, without limitation, the fees and expenses of legal counsel
and investment banking fees and expenses) incurred in connection with such sale
or equity contribution in respect of Qualified Capital Stock.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however, (i) any
gain (but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions) or
(b) the disposition of any securities by such Person or any of its Subsidiaries
or the extinguishment of any Indebtedness of such Person or any of its
Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss),
together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash and Cash Equivalents
received by the Company or any of its Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale) and, with
respect to Section 4.09 hereof, by the Company or any Guarantor in respect of
the sale of an Unrestricted Subsidiary and the sale, liquidation or repayment
for cash of a Restricted Investment, in each case, net of the direct costs
relating thereto (including, without limitation, legal, accounting and
investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or
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payable as a result thereof (after taking into account any available tax credits
or deductions and any tax-sharing arrangements), and any reserve for adjustment
in respect of the sale price of such asset or assets established in accordance
with GAAP.
"Note Custodian" means the Trustee, as custodian with respect
to the Global Notes, or any successor entity thereto.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the Offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf
of the Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who
is reasonably acceptable to the Trustee, that meets the requirements of Section
12.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Parent" means Stanadyne Automotive Holding Corp. (formerly
known as SAC, Inc.) or its successor.
"Permitted Investments" means (a) any Investments in the
Company or in a Wholly Owned Subsidiary of the Company that is a Guarantor and
that is engaged in one or more Related Businesses; (b) any Investment by the
Company or a Wholly Owned Subsidiary of the Company in a Receivables Subsidiary
or any Investment by a Receivables Subsidiary in any other Person in connection
with a Qualified Receivables Transaction; provided, that the foregoing
Investment is in the form of a note that the Receivables Subsidiary or other
Person is required to repay as soon as practicable from available cash
collections less amounts required to be established as reserves pursuant to
contractual agreements with entities that are not Affiliates of the Company
entered into as part of a Qualified Receivables Transaction; (c) any Investments
in Cash Equivalents; (d) Investments by the Company or any Subsidiary of the
Company in a Person if as a result of such Investment (i) such Person becomes a
Wholly
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Owned Subsidiary of the Company and a Guarantor that is engaged in one or more
Related Businesses or (ii) such Person is merged, consolidated or amalgamated
with or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Wholly Owned Subsidiary of the Company that is
a Guarantor and that is engaged in one or more Related Businesses; (e)
Investments made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with Section 4.08; (f)
Investments outstanding as of the date of this Indenture including but not
limited to the Intercompany Note from the Company to the Parent in the amount of
$67,500,000; (g) Investments in the form of promissory notes of members of the
Company's management in consideration of the purchase by such members of Equity
Interests (other than Disqualified Stock) in the Company; (h) Investments by the
Company or a Wholly Owned Subsidiary of the Company that is a Guarantor in a
Foreign Subsidiary if 100% of the proceeds thereof are concurrently used by such
Foreign Subsidiary to purchase the outstanding Equity Interests of another
Foreign Subsidiary from the Company or a Wholly Owned Subsidiary of the Company
that is a Guarantor and the resulting Investment by such first Foreign
Subsidiary in such second Foreign Subsidiary; (i) Investments which constitute
Existing Indebtedness of the Company of any of its Subsidiaries; (j) Investments
constituting Foreign Intercompany Indebtedness; (k) accounts receivable,
endorsements for collection or deposits arising in the ordinary course of
business; (l) other Investments in any Person or persons that do not in the
aggregate exceed $10,000,000 at any time outstanding; and (m) Investments in
Foreign Subsidiaries that do not in the aggregate exceed $5,000,000 at any time
outstanding, provided however, that to the extent there would be, and to avoid,
any duplication in determining the amounts of investments outstanding under
these clauses (l), and (m) any amounts which were credited under clause (c) of
Section 4.09 hereof shall reduce the amounts outstanding under these clauses (l)
and (m).
"Permitted Liens" means (i) Liens securing Senior Indebtedness
or Guarantor Senior Indebtedness in an aggregate principal amount at any time
outstanding not to exceed amounts permitted under Section 4.10 hereof; (ii)
Liens in favor of the Company; (iii) Liens on property of a Person existing at
the time such Person is merged into or consolidated with the Company or any
Subsidiary of the Company including any permitted Refinancings thereof; provided
that such Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Company; (iv) Liens on property existing at
the time of acquisition thereof by the Company or any Subsidiary of the Company,
provided that such Liens were in existence prior to the contemplation of such
acquisition; (v) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (vi) Liens existing on the date of
this Indenture; (vii) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, provided
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (viii)
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<PAGE> 15
Liens incurred in the ordinary course of business of the Company or any
Subsidiary of the Company with respect to obligations that do not exceed in the
aggregate $5,000,000 at any one time outstanding and that (a) are not incurred
in connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by the Company or such
Subsidiary; (ix) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security; (x) easements, rights-of-way, restrictions,
minor defects or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the business of the
Company or any of its Subsidiaries; (xi) Purchase Money Liens (including
extensions and renewals thereof); (xii) Liens securing reimbursement obligations
with respect to letters of credit which encumber only documents and other
property relating to such letters of credit and the products and proceeds
thereof; (xiii) judgment and attachment Liens not giving rise to an Event of
Default; (xiv) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual or warranty requirements; (xv) Liens
arising out of consignment or similar arrangements for the sale of goods; (xvi)
any interest or title of a lessor in property subject to any capital lease
obligation or operating lease; (xvii) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; (xviii) Liens on assets
of Subsidiaries with respect to Acquired Indebtedness (including Permitted
Refinancings thereof) provided such Liens are only on assets or property
acquired with such Acquired Indebtedness and that such Liens were not created in
contemplation of or in connection with such Acquisition; (xix) Liens on assets
of a Receivables Subsidiary incurred in connection with a Qualified Receivables
Transaction and (xx) Liens securing indebtedness of any Foreign Subsidiary.
"Permitted Payments to Parent" means without duplication, (a)
payments to Parent in an amount sufficient to permit Parent to pay reasonable
and necessary operating expenses and other general corporate expenses to the
extent such expenses relate or are fairly allocable to the Company and its
Subsidiaries including any reasonable professional fees and expenses, but
excluding all expenses payable to or to be paid to or on behalf of AIP, its
other Affiliates and its Related Parties not in excess of $300,000 in any fiscal
year; and (b) payments to Parent to enable Parent to pay foreign, federal, state
or local tax liabilities ("Tax Payment"), not to exceed the amount of any tax
liabilities that would be otherwise payable by the Company and its Subsidiaries
and Unrestricted Subsidiaries to the appropriate taxing authorities if they
filed separate tax returns to the extent that Parent has an obligation to pay
such tax liabilities relating to the operations, assets or capital of the
Company or its Subsidiaries and Unrestricted Subsidiaries provided, however,
that (i), notwithstanding the foregoing, in the case of determining the amount
of a Tax Payment that is permitted to be paid by Company and any of its United
States subsidiaries in respect of their Federal income tax liability, such
payment shall be determined on the basis of assuming that Company is the parent
company of an affiliated group (the "Company Affiliated Group") filing a
consolidated
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<PAGE> 16
Federal income tax return and that Parent and each such United States subsidiary
is a member of the Company Affiliated Group and (ii) any Tax Payments shall
either be used by Parent to pay such tax liabilities within 90 days of Parent's
receipt of such payment or refunded to the payee.
"Permitted Refinancing Debt" means any Indebtedness of the
Company or any of its Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Subsidiaries; provided that: (a) the
principal amount of such Permitted Refinancing Indebtedness does not exceed
(after deduction of reasonable and customary fees and expenses incurred in
connection with the Refinancing and the amount of any premium or prepayment
penalty paid in connection with such Refinancing Transaction to the extent in
accordance with the terms of the document governing such Indebtedness (except
for any modification to any such document made in connection with or in
contemplation of such refinancing) the lesser of (i) the principal amount of the
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded
and (ii) if such Indebtedness being Refinanced was issued with an original issue
discount, the accreted value thereof (as determined in accordance with GAAP) at
the time of such Refinancing, plus, in each case accrued interest on such
Indebtedness being Refinanced; (b) such Permitted Refinancing Indebtedness has a
Weighted Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (c) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in right of
payment to the Notes, such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and is subordinated in
right of payment to, the Notes on terms at least as favorable to the Holders of
Notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (d) such
Indebtedness is incurred either by the Company or by the Subsidiary who is the
obligor on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"Purchase Money Lien" means a Lien granted on an asset or
property to secure a Purchase Money Obligation permitted to be incurred under
this Indenture and incurred solely to finance the acquisition, including, in the
case of a Capital Lease, the lease, of such asset or property; provided,
however, that such Lien encumbers only such asset or property and is granted
within 180 days of such acquisition.
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<PAGE> 17
"Purchase Money Obligations" of any person means any
obligations of such person to any seller or any other person incurred or assumed
to finance solely the acquisition, including, in the case of a Capital Lease,
the lease, of real or personal property to be used in the business of such
person or any of its Subsidiaries in an amount that is not more than 100% of the
cost of such property, and incurred within 180 days after the date of such
acquisition (excluding accounts payable to trade creditors incurred in the
ordinary course of business).
"Qualified Capital Stock" means any Capital Stock of the
Company, or, if expressly applicable, the Parent, that is not Disqualified
Stock.
"Qualified Receivables Transaction" means any transaction or
series of transactions that may be entered into by the Company or any of its
Subsidiaries pursuant to which the Company or any of its Subsidiaries may sell,
convey or otherwise transfer to (a) a Receivables Subsidiary (in the case of a
transfer by the Company or any of its Subsidiaries) and (ii) any other person
(in the case of a transfer by a Receivables Subsidiary), or may grant a security
interest in, any accounts receivable (whether now existing or arising in the
future) which arise in the ordinary course of business of the Company or any of
its Subsidiaries, and any assets related thereto including, without limitation,
all collateral securing such accounts receivable, all contracts and all
guarantees or other obligations in respect of such accounts receivable, proceeds
of such accounts receivable and other assets which are customarily transferred
or in respect of which security interests are customarily granted in connection
with asset securitization transactions involving accounts receivable.
"Receivables Subsidiary" means a Wholly Owned Subsidiary of
the Company which engages in no activities other than in connection with the
financing of accounts receivable and which is designated by the Board of
Directors of the Company (as provided below) as a Receivables Subsidiary (a) no
portion of the Indebtedness or any other Obligations (contingent or otherwise)
of which (i) is guaranteed by the Company or any Subsidiary of the Company
(excluding guarantees of Obligations (other than the principal of, and interest
on, Indebtedness) pursuant to representations, warranties, covenants and
indemnities excluding any representations, warranties, covenants or indemnities
relating to the payment of principal or interest on, any Indebtedness entered
into in the ordinary course of business in connection with a Qualified
Receivables Transaction), (ii) is recourse to or obligates the Company or any
Subsidiary of the Company in any way other than pursuant to representations,
warranties, covenants and indemnities excluding any representations, warranties,
covenants or indemnities relating to the payment of principal or interest on,
any Indebtedness entered into in the ordinary course of business in connection
with a Qualified Receivables Transaction or (iii) subjects any property or asset
of the Company or any Subsidiary of the Company, directly or indirectly,
contingently or otherwise, to the satisfaction thereof, other than pursuant to
representations, warranties, covenants or indemnities excluding any
representations, warranties, covenants or indemnities relating to the payment of
principal or interest on, any Indebtedness entered into in the ordinary course
16
<PAGE> 18
of business in connection with a Qualified Receivables Transaction, (b) with
which neither the Company nor any Subsidiary of the Company has any material
contract, agreement, arrangement or understanding other than on terms no less
favorable to the Company or such Subsidiary than those that might be obtained at
the time from persons who are not Affiliates of the Company, other than fees
payable in the ordinary course of business in connection with servicing accounts
receivable and (c) with which neither the Company nor any Subsidiary of the
Company has any obligation to maintain or preserve such Subsidiary's financial
condition or cause such Subsidiary to achieve certain levels of operating
results. Any such designation by the Board of Directors of the Company shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
resolution of the Board of Directors of the Company giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Indenture, by and among the Company and
the other parties named on the signature pages thereof, as such agreement may be
amended, modified or supplemented from time to time.
"Related Business" means the business conducted (or proposed
to be conducted) by the Company and its Subsidiaries as of the Issue Date and
any and all businesses that in the good faith judgment of the Board of Directors
of the Company are materially related businesses, including reasonable
extensions or expansions thereof.
"Representative" means the indenture trustee or other trustee,
agent or representative for any Senior Indebtedness.
"Responsible Officer," when used with respect to the Trustee,
means any officer within the Corporate Trust Department of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Investment" means an Investment other than a
Permitted Investment.
"SAC Automotive, Inc." means the precedessor to the Company,
immediately before the consummation of the Acquisition Transactions.
"SAC, Inc." means the predecessor to Stanadyne Automotive
Holdings Corp., immediately before the consummation of the Acquisition
Transactions after which such company changed its name.
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"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Bank Debt" means the Indebtedness (including, without
limitation, interest accruing after filing of a petition in bankruptcy, whether
or not such interest is an allowable claim in such proceeding) outstanding under
the Credit Agreement and guarantees thereof as such agreements may be restated,
further amended, supplemented or otherwise modified or replaced from time to
time hereafter, together with any refunding or replacement of such Indebtedness.
"Senior Indebtedness" means (i) the Senior Bank Debt and (ii)
any other Indebtedness permitted to be incurred by the Company under the terms
of this Indenture, unless the instrument under which such Indebtedness is
incurred expressly provides that it is on a parity with or subordinated in right
of payment to the Notes. Notwithstanding anything to the contrary in the
foregoing, Senior Indebtedness shall not include (w) any liability for federal,
state, local or other taxes owed or owing by the Company, (x) any Indebtedness
of the Company to any of its Subsidiaries or other Affiliates, (y) any trade
payables or (z) any Indebtedness that is incurred in violation of this
Indenture.
"Senior Revolving Debt" means revolving credit borrowings and
letters of credit under the Credit Agreement and/or any successor facility or
facilities.
"Senior Term Debt" means term loans under the Credit Agreement
and/or any successor facility or facilities.
"Shareholders Agreement" means the shareholders agreement by
and between Holdings and certain of its shareholders.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Exchange Act, as such Regulation is in effect on the
date hereof.
"Stanadyne Automotive Holding Corp." means the parent to the
Company.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the
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<PAGE> 20
only general partners of which are such Person or of one or more Subsidiaries of
such Person (or any combination thereof). Unrestricted Subsidiaries shall not be
included in the definition of Subsidiary for any purposes of this Indenture
(except, as the context may otherwise require, for purposes of the definition of
"Unrestricted Subsidiary").
"Subsidiary Guarantees" means the Subsidiary Guarantees of the
Guarantors in the form set forth as Exhibit B hereto.
"Subsidiary Guarantor" means a Subsidiary which has guaranteed
the Notes in accordance with the Indenture.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is
qualified under the TIA.
"Transfer Restricted Notes" means Notes that bear or are
required to bear the legend set forth in Section 2.06 hereof.
"Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
"Unrestricted Subsidiary" means (i) any Subsidiary (other than
Guarantors or any successors) that is designated by the Board of Directors as an
Unrestricted Subsidiary pursuant to a Board Resolution; but only to the extent
that such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b)
is not party to any agreement, contract, arrangement or understanding with the
Company or any Subsidiary of the Company unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to the Company or
such Subsidiary than those that might be obtained at the time from Persons who
are not Affiliates of the Company; (c) is a Person with respect to which neither
the Company nor any of its Subsidiaries has any direct or indirect obligation to
subscribe for additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; and (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Subsidiaries. Any such designation by the Board of Directors shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
Board Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by Section 4.09 hereof. If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of this
Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred
by a Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under Section 4.10 hereof, the Company
shall be in
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<PAGE> 21
default of such covenant). The Board of Directors of the Company may at any time
designate any Unrestricted Subsidiary to be a Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Subsidiary
of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary
and such designation shall only be permitted if (i) such Indebtedness is
permitted under Section 4.10 hereof, and (ii) no Default or Event of Default
would be in existence following such designation.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person.
Unrestricted Subsidiaries shall not be included in the definition of Wholly
Owned Subsidiary for any purposes of this Indenture (except, as the context may
otherwise require, for purposes of the definition of "Unrestricted Subsidiary.")
SECTION 1.02 OTHER DEFINITIONS
<TABLE>
<CAPTION>
Defined in
Term Section
---- -------
<S> <C> <C>
"Acceleration Notice" 6.02
"Affiliate Transaction" 4.14
"Asset Sale Offer" 4.08
"Bankruptcy Law" 6.01
"Change of Control Offer" 4.07
"Change of Control Payment" 4.07
"Change of Control Payment Date" 4.07
"Covenant Defeasance" 8.03
"DTC" 2.03
"Event of Default" 6.01
"Excess Proceeds" 4.08
"Legal Defeasance" 8.02
"Offer Amount" 4.08
</TABLE>
20
<PAGE> 22
<TABLE>
<CAPTION>
<S> <C> <C>
"Offer Period" 4.08
"Paying Agent" 2.03
"Payment Blockage Notice" 10.03
"Payment Default" 10.03
"Purchase Date" 4.08
"Registrar" 2.03
"Restricted Payments" 4.09
</TABLE>
SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT
Whenever this Indenture refers to a provision of the TIA, the
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:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee;
"obligor" on the Notes means the Company, the Guarantors and
any successor obligor upon the Notes.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
SECTION 1.04 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;
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<PAGE> 23
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and transactions;
and
(6) references to sections of or rules under the Securities
Act shall be deemed to include substitute, replacement of successor
sections or rules adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
SECTION 2.01 FORM AND DATING
The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. In the
event of a conflict, the terms of the Indenture shall control.
Global Notes shall be substantially in the form of Exhibit A
attached hereto (including the text referred to in footnotes 1 and 2 thereto).
Notes issued in definitive form shall be substantially in the form of Exhibit A
attached hereto (but without including the text referred to in footnotes 1 and 2
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate amount of outstanding Notes from time to time endorsed thereon and
that the aggregate amount of outstanding Notes represented thereby may from time
to time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Note to reflect the amount of any
increase or decrease in the amount of outstanding Notes represented thereby
shall be made by the Trustee or the Note Custodian, at the direction of the
Trustee, in accordance with instructions given by the Holder thereof as required
by Section 2.06 hereof.
SECTION 2.02 EXECUTION AND AUTHENTICATION
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<PAGE> 24
Two Officers shall sign the Notes for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Notes and may
be in facsimile form.
If an Officer whose signature is on a Note no longer holds
that office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed
by two Officers, authenticate Notes for original issue up to the aggregate
principal amount stated in paragraph 4 of the Notes. The aggregate principal
amount of Notes outstanding at any time may not exceed such amount except as
provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Notes. An authenticating agent may authenticate
Notes 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 or
an Affiliate of the Company.
SECTION 2.03 REGISTRAR AND PAYING AGENT
The Company shall maintain an office or agency where Notes may
be presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depository with respect to the Global Notes.
The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as Note Custodian with respect to the
Global Notes.
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<PAGE> 25
SECTION 2.04 PAYING AGENT TO HOLD MONEY IN TRUST
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal, premium or Liquidated Damages, if any, or interest on the
Notes, and will notify the Trustee of any default by the Company in making any
such payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05 HOLDER 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 all Holders and shall otherwise comply with TIA Section 312(a). If
the Trustee is not the Registrar, the Company shall furnish to the Trustee at
least seven Business Days before each interest payment date and at such other
times as the Trustee may request in writing, a list in such form and as of such
date as the Trustee may reasonably require of the names and addresses of the
Holders of Notes and the Company shall otherwise comply with TIA Section 312(a).
SECTION 2.06 TRANSFER AND EXCHANGE
(a) Transfer and Exchange of Definitive Notes. When Definitive
Notes are presented by a Holder to the Registrar with a request: (x) to register
the transfer of the Definitive Notes; or (y) to exchange such Definitive Notes
for an equal principal amount of Definitive Notes of other authorized
denominations, the Registrar shall register the transfer or make the exchange as
requested if its requirements for such transactions are met; provided, however,
that the Definitive Notes presented or surrendered for register of transfer or
exchange: (i) shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing; and (ii) in the case of a
Definitive Note that is a Transfer Restricted Note, such request shall be
accompanied by the following additional information and documents, as
applicable: (A) if such Transfer Restricted Note is being delivered to the
Registrar by a Holder for registration in the name of such Holder, without
transfer, a certification to that effect from such Holder (in substantially the
form of Exhibit B hereto); or (B) if such Transfer Restricted Note is being
transferred to a "qualified institutional buyer" (as defined in Rule 144A under
the Securities Act) in accordance with Rule 144A under the
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<PAGE> 26
Securities Act or pursuant to an exemption from registration in accordance with
Rule 144 or Rule 904 under the Securities Act or pursuant to an effective
registration statement under the Securities Act, a certification to that effect
from such Holder (in substantially the form of Exhibit B hereto); or (C) if such
Transfer Restricted Note is being transferred in reliance on another exemption
from the registration requirements of the Securities Act, a certification to
that effect from such Holder (in substantially the form of Exhibit B hereto) and
an Opinion of Counsel from such Holder or the transferee reasonably acceptable
to the Company and to the Registrar to the effect that such transfer is in
compliance with the Securities Act.
(b) Transfer of a Definitive Note for a Beneficial Interest in
a Global Note. A Definitive Note may not be exchanged for a beneficial interest
in a Global Note except upon satisfaction of the requirements set forth below.
Upon receipt by the Trustee of a Definitive Note, duly endorsed or accompanied
by appropriate instruments of transfer, in form satisfactory to the Trustee,
together with: (i) if such Definitive Note is a Transfer Restricted Note, a
certification from the Holder thereof (in substantially the form of Exhibit B
hereto) to the effect that such Definitive Note is being transferred by such
Holder to a "qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities Act; and (ii)
whether or not such Definitive Note is a Transfer Restricted Note, written
instructions from the Holder thereof directing the Trustee to make, or to direct
the Note Custodian to make, an endorsement on the Global Note to reflect an
increase in the aggregate principal amount of the Notes represented by the
Global Note, in which case the Trustee shall cancel such Definitive Note in
accordance with Section 2.11 hereof and cause, or direct the Note Custodian to
cause, in accordance with the standing instructions and procedures existing
between the Depository and the Note Custodian, the aggregate principal amount of
Notes represented by the Global Note to be increased accordingly. If no Global
Notes are then outstanding, the Company shall issue and, upon receipt of an
authentication order in accordance with Section 2.02 hereof, the Trustee shall
authenticate a new Global Note in the appropriate principal amount.
(c) Transfer and Exchange of Global Notes. The transfer and
exchange of Global Notes or beneficial interests therein shall be effected
through the Depository, in accordance with this Indenture and the procedures of
the Depository therefor, which shall include restrictions on transfer comparable
to those set forth herein to the extent required by the Securities Act.
(d) Transfer of a Beneficial Interest in a Global Note for a
Definitive Note.
(i) Any Person having a beneficial interest in a
Global Note may upon request exchange such beneficial interest for a Definitive
Note. Upon receipt by the Trustee 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
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<PAGE> 27
interest in a Global Note, and, in the case of a Transfer Restricted Note, the
following additional information and documents (all of which may be submitted by
facsimile): (A) if such beneficial interest is being transferred to the Person
designated by the Depository as being the beneficial owner, a certification to
that effect from such Person (in substantially the form of Exhibit B hereto); or
(B) if such beneficial interest is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act) in
accordance with Rule 144A under the Securities Act or pursuant to an exemption
from registration in accordance with Rule 144 or Rule 904 under the Securities
Act or pursuant to an effective registration statement under the Securities Act,
a certification to that effect from the transferor (in substantially the form of
Exhibit B hereto); or (C) 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 from the transferor (in
substantially the form of Exhibit B hereto) and an Opinion of Counsel from the
transferee or transferor reasonably acceptable to the Company and to the
Registrar to the effect that such transfer is in compliance with the Securities
Act, in which case the Trustee or the Note Custodian, at the direction of the
Trustee, shall, in accordance with the standing instructions and procedures
existing between the Depository and the Note Custodian, cause the aggregate
principal amount of Global Notes to be reduced accordingly and, following such
reduction, the Company shall execute and, upon receipt of an authentication
order in accordance with Section 2.02 hereof, the Trustee shall authenticate and
deliver to the transferee a Definitive Note in the appropriate principal amount.
(ii) Definitive Notes issued in exchange for a
beneficial interest in a Global Note pursuant to this Section 2.06(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 Trustee. The Trustee shall deliver such Definitive Notes to
the Persons in whose names such Notes are so registered.
(e) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provision of this Indenture (other than the provisions
set forth in subsection (f) of this Section 2.06), a Global Note 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) Authentication of Definitive Notes in Absence of
Depository. If at any time: (i) the Depository for the Notes notifies the
Company that the Depository is unwilling or unable to continue as Depository for
the Global Notes and a successor Depository for the Global Notes is not
appointed by the Company within 90 days after delivery of such notice; or (ii)
the Company, at its sole discretion, notifies the Trustee in writing that it
elects to cause the issuance of Definitive Notes under this Indenture,
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<PAGE> 28
then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02 hereof, authenticate and
deliver, Definitive Notes in an aggregate principal amount equal to the
principal amount of the Global Notes in exchange for such Global Notes.
(g) Legends.
(i) Except as permitted by the following paragraphs
(ii) and (iii), each Note certificate evidencing Global Notes and Definitive
Notes (and all Notes issued in exchange therefor or substitution thereof) shall
bear legends in substantially the following form:
"THE NOTES (OR THEIR PREDECESSORS) EVIDENCED HEREBY WERE ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE NOTES EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE NOTES EVIDENCED
HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE NOTES EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH NOTES MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) INSIDE THE
UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, OR (d) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS),
(2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
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<PAGE> 29
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE NOTES
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer
Restricted Note (including any Transfer Restricted Note represented by a Global
Note) pursuant to Rule 144 under the Securities Act or pursuant to an effective
registration statement under the Securities Act: (A) in the case of any Transfer
Restricted Note that is a Definitive Note, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Note for a Definitive Note that
does not bear the first legend set forth in (i) above and rescind any
restriction on the transfer of such Transfer Restricted Note; and (B) in the
case of any Transfer Restricted Note represented by a Global Note, such Transfer
Restricted Note shall not be required to bear the first legend set forth in (i)
above, but shall continue to be subject to the provisions of Section 2.06(c)
hereof; provided, however, that with respect to any request for an exchange of a
Transfer Restricted Note that is represented by a Global Note for a Definitive
Note that does not bear the first legend set forth in (i) above, which request
is made in reliance upon Rule 144, the Holder thereof shall certify in writing
to the Registrar that such request is being made pursuant to Rule 144 (such
certification to be substantially in the form of Exhibit B hereto).
(iii) Notwithstanding the foregoing, upon
consummation of the Exchange Offer, the Company shall issue and, upon receipt of
an authentication order in accordance with Section 2.02 hereof, the Trustee
shall authenticate Series B Notes in exchange for Series A Notes accepted for
exchange in the Exchange Offer, which Series B Notes shall not bear the first
legend set forth in (i) above, and the Registrar shall rescind any restriction
on the transfer of such Notes, in each case unless the Holder of such Series A
Notes is either (A) a broker-dealer, (B) a Person participating in the
distribution of the Series A Notes or (C) a Person who is an affiliate (as
defined in Rule 144A) of the Company.
(h) Cancellation and/or Adjustment of Global Notes. At such
time as all beneficial interests in Global Notes have been exchanged for
Definitive Notes, redeemed, repurchased or cancelled, all Global Notes shall be
returned to or retained and cancelled by the Trustee in accordance with Section
2.11 hereof. At any time prior to such cancellation, if any beneficial interest
in a Global Note is exchanged for Definitive Notes, redeemed, repurchased or
cancelled, the principal amount of Notes represented by such Global Note shall
be reduced accordingly and an endorsement shall be made on such Global Note, by
the Trustee or the Notes Custodian, at the direction of the Trustee, to reflect
such reduction.
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(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and
exchanges, the Company shall execute and the Trustee shall authenticate
Definitive Notes and Global Notes at the Registrar's request.
(ii) No service charge shall be made to a Holder 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 similar
governmental charge payable upon exchange or transfer pursuant to Sections 4.07
and 4.08 hereto).
(iii) The Registrar shall not be required to register
the transfer of or exchange any Note selected for redemption in whole or in
part, except the unredeemed portion of any Note being redeemed in part.
(iv) All Definitive Notes and Global Notes issued
upon any registration of transfer or exchange of Definitive Notes or Global
Notes shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Definitive Notes
or Global Notes surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required: (A) to issue,
to register the transfer of or to exchange Notes during a period beginning at
the opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.02 hereof and ending at the close of business on the
day of selection; or (B) to register the transfer of or to exchange any Note so
selected for redemption in whole or in part, except the unredeemed portion of
any Note being redeemed in part; or (C) to register the transfer of or to
exchange a Note between a record date and the next succeeding interest payment
date.
(vi) Prior to due presentment for the registration of
a transfer of any Note, the Trustee, any Agent and the Company may deem and
treat the Person in whose name any Note is registered as the absolute owner of
such Note for the purpose of receiving payment of principal of and interest on
such Notes, and neither the Trustee, any Agent nor the Company shall be affected
by notice to the contrary.
(vii) The Trustee shall authenticate Definitive Notes
and Global Notes in accordance with the provisions of Section 2.02 hereof.
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SECTION 2.07 REPLACEMENT NOTES
If any mutilated Note is surrendered to the Trustee, or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, the Company shall issue and the Trustee,
upon the written order of the Company signed by two Officers of the Company,
shall authenticate a replacement Note if the Trustee's requirements are met. If
required by the Trustee or the Company, an indemnity bond must be supplied by
the Holder that is sufficient in the judgment of the Trustee and the Company to
protect the Company, the Trustee, any Agent and any authenticating agent from
any loss that any of them may suffer if a Note is replaced. The Company may
charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Notes duly issued hereunder.
SECTION 2.08 OUTSTANDING NOTES
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation, those reductions in the interest in a Global Note
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section
2.09 hereof, a Note does not cease to be outstanding because the Company or an
Affiliate of the Company holds the Note.
If a Note is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or
an Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09 TREASURY NOTES
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common
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<PAGE> 32
control with the Company, shall be considered as though not outstanding, except
that for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Notes that the Trustee
knows are so owned shall be so disregarded.
SECTION 2.10 TEMPORARY NOTES
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes upon a written order
of the Company signed by two Officers of the Company. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate definitive Notes in exchange for temporary
Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
SECTION 2.11 CANCELLATION
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12 DEFAULTED INTEREST
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Company shall fix or cause to be fixed
each such special record date and payment date, provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Company (or, upon the written request of the Company,
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or cause to be mailed, by first the Trustee in the name and at the expense of
the Company) shall mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01 NOTICES TO TRUSTEE
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days (unless a shorter period is acceptable to the Trustee) but not
more than 60 days before a redemption date, an Officers' Certificate setting
forth (i) the clause of this Indenture pursuant to which the redemption shall
occur, (ii) the redemption date, (iii) the principal amount of Notes to be
redeemed and (iv) the redemption price.
SECTION 3.02 SELECTION OF NOTES TO BE REDEEMED
If less than all of the Notes are to be redeemed at any time,
the Trustee shall select the Notes to be redeemed among the Holders of the Notes
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 so
listed, on a pro rata basis, by lot or in accordance with any other method the
Trustee considers fair and appropriate. In the event of partial redemption by
lot, the particular Notes to be redeemed shall be selected, unless otherwise
provided herein, not less than 30 nor more than 60 days prior to the redemption
date by the Trustee from the outstanding Notes not previously called for
redemption.
The Trustee shall promptly notify the Company in writing of
the Notes selected for redemption and, in the case of any Note selected for
partial redemption, the principal amount thereof to be redeemed. Notes and
portions of Notes selected shall be in amounts of $1,000 or integral multiples
of $1,000; except that if all of the Notes of a Holder are to be redeemed, the
entire outstanding amount of Notes held by such Holder, even if not an integral
multiple of $1,000, shall be redeemed. Except as provided in the preceding
sentence, provisions of this Indenture that apply to Notes called for redemption
also apply to portions of Notes called for redemption.
SECTION 3.03 NOTICE OF REDEMPTION
Subject to the provisions of Section 3.07 hereof, at least 30
days but not more than 60 days before a redemption date, the Company shall mail
or cause to be mailed, by first
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class mail, a notice of redemption to each Holder whose Notes are to be redeemed
at its registered address.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
redemption date upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such
redemption payment, interest on Notes called for redemption ceases to
accrue on and after the redemption date;
(g) the paragraph of the Notes and/or Section of this
Indenture pursuant to which the Notes called for redemption are being
redeemed; and
(h) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
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SECTION 3.05 DEPOSIT OF REDEMPTION PRICE
One Business Day prior to the redemption date, the Company
shall deposit with the Trustee or with the Paying Agent money sufficient to pay
the redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption unless the Company
defaults in such payments due on the redemption date. If a Note is redeemed on
or after an interest record date but on or prior to the related interest payment
date, then any accrued and unpaid interest shall be paid to the Person in whose
name such Note was registered at the close of business on such record date. If
any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
SECTION 3.06 NOTES REDEEMED IN PART
Upon surrender of a Note that is redeemed in part, the Company
shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
SECTION 3.07 OPTIONAL REDEMPTION
(a) Except as set forth in clause (b) of this Section 3.07,
the Company shall not have the option to redeem the Notes pursuant to this
Section 3.07 prior to December 15, 2002. Thereafter, the Company shall have the
option to redeem the Notes, in whole or in part, upon not less than 30 nor more
than 60 days notice to the Holders, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the applicable redemption
date if redeemed during the twelve-month period beginning on of the
years indicated below:
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<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C> <C>
2002...................................................................105.125%
2003 ..................................................................103.417%
2004...................................................................101.708%
2005 and thereafter ...................................................100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this
Section 3.07, at any time prior to December 15, 2000, the Company may (but shall
not have the obligation to) redeem up to 35% of the original aggregate principal
amount of Notes at a redemption price of 110.250% of the principal amount
thereof, in each case plus accrued and unpaid interest and Liquidated Damages,
if any, thereon to the redemption date, with the Net Cash Proceeds received by
the Company from one or more Equity Offerings; provided that at least 65% of the
aggregate principal amount of the Notes originally issued remain outstanding
immediately after the occurrence of such redemption; and provided, further, that
such redemption shall occur within 60 days of the date of the closing of such
Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08 NO MANDATORY REDEMPTION
The Company shall not be required to make mandatory redemption
payments with respect to the Notes.
ARTICLE 4
COVENANTS
SECTION 4.01 PAYMENT OF NOTES
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Company
or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date
money deposited by the Company in immediately available funds and designated
for and sufficient to pay all principal, premium, if any, and interest then due.
The Company shall pay all Liquidated Damages, if any, in the same manner on the
dates and in the amounts set forth in the Registration Rights Agreement. The
Company shall notify the Trustee of the amount of Liquidated Damages, if any,
within one day of any payment date. In the absence of such notice, the Trustee
is conclusively entitled to assume that no Liquidated Damages are payable under
the Registration Rights Agreement.
The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at the
rate equal to 1% per
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<PAGE> 37
annum in excess of the then applicable interest rate on the Notes to the extent
lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY
The Company shall maintain in the Borough of Manhattan, the
City of New York, an office or agency (which may be an office of the Trustee or
an affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. 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 Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of
the Trustee as one such office or agency of the Company in accordance with
Section 2.03 hereof.
SECTION 4.03 REPORTS
(a) Whether or not required by the rules and regulations of
the SEC, so long as any Notes are outstanding, the Company shall furnish to all
Holders (i) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the
Company were required to file such forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the SEC on Form 8-K if the Company were required to file such
reports. In addition, whether or not required by the rules and regulations of
the SEC, at any time after the effectiveness of a registration statement with
respect to the Exchange Offer, the Company shall file a copy of all such
information with the SEC for public availability (unless the SEC will not accept
such
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<PAGE> 38
a filing) and shall promptly make such information available to all securities
analysts and prospective investors upon request.
(b) For so long as any Transfer Restricted Notes remain
outstanding, the Company and the Subsidiary Guarantors shall furnish to all
Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
SECTION 4.04 COMPLIANCE CERTIFICATE
(a) The Company shall deliver to the Trustee, within 90 days
after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company 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 or her knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions of this
Indenture (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he or she may have knowledge and
what action the Company is taking or proposes to take with respect thereto) and
that to the best of his or her knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of or
interest, if any, on the Notes is prohibited or if such event has occurred, a
description of the event and what action the Company is taking or proposes to
take with respect thereto.
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
year-end financial statements delivered pursuant to Section 4.03(a) hereof shall
be accompanied by a written statement of the Company's independent public
accountants (who shall be a firm of established national reputation) that in
making the examination necessary for certification 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 or Article 5 hereof 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, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
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SECTION 4.05 TAXES
The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders of the Notes.
SECTION 4.06 STAY, EXTENSION AND 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, extension or
usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
SECTION 4.07 CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of
Notes shall have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the date
of purchase (the "Change of Control Payment") on a date (the "Change of Control
Payment Date") no later than 60 Business Days after the occurrence of the Change
of Control. Within 35 days following any Change of Control, the Company shall
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes pursuant to
the procedures required by this Indenture and described in such notice, which
offer shall remain open for at least 20 Business Days following its
commencement, but in any event no longer than 30 Business Days. The Company
shall comply with the requirements of 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 connection with the repurchase of the Notes as a
result of a Change of Control. To the extent that the provisions of any such
securities laws or regulations conflict with the provisions of this paragraph,
compliance by the Company or any of the Guarantors with such laws and
regulations shall not in and of itself cause a breach of its obligations under
such covenant.
On the Change of Control Payment Date, the Company shall, to
the extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change
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of Control Payment in respect of all Notes or portions thereof so tendered and
(3) deliver or cause to be delivered to the Trustee the Notes so accepted
together with an Officers' Certificate stating the aggregate principal amount of
Notes or portions thereof being purchased by the Company. The Paying Agent shall
promptly mail to each Holder of Notes so tendered the Change of Control Payment
for such Notes, and the Trustee shall promptly authenticate and mail (or cause
to be transferred by book entry) to each Holder a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered, if any; provided
that each such new Note will be in a principal amount of $1,000 or an integral
multiple thereof. The Company shall publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
Prior to complying with the provisions of this covenant, but
in any event within 30 days following a Change of Control, the Company will
either repay all outstanding Designated Senior Indebtedness or obtain the
requisite consents, if any, under all agreements governing outstanding
Designated Senior Indebtedness to permit the repurchase of Notes required by
this Section 4.07. The Company will not be required to purchase any Notes until
it has complied with the preceding sentence, but the Company's failure to make a
Change of Control Offer when required or to purchase tendered Notes when
tendered would constitute an Event of Default.
If the Change of Control Payment Date hereunder is on or after
an interest payment record date and on or before the associated interest payment
date, any accrued and unpaid interest (and Liquidated Damages, if any) due on
such Interest Payment Date will be paid to the person in whose name a Note is
registered at the close of business on such Record Date, and such interest (and
Liquidated Damages, if applicable) will not be payable to Holders who tender the
Notes pursuant to the Change of Control Offer.
SECTION 4.08 ASSET SALES
The Company shall not, and shall not permit any of its
Subsidiaries to, engage in an Asset Sale in excess of $1,000,000 unless (i) the
Company (or the 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 assets
or Equity Interests sold or otherwise disposed of and, in the case of a lease of
assets, a lease providing for rent and other conditions which are no less
favorable to the Company (or the Subsidiary, as the case may be) in any material
respect than the then prevailing market conditions (evidenced in each case by a
resolution of the Board of Directors of such entity set forth in an Officers'
Certificate delivered to the Trustee) and (ii) at least 75% (100% in the case of
lease payments) of the consideration therefor received by the Company or such
Subsidiary is in the form of cash or Cash Equivalents; provided that the amount
of (x) any liabilities (as shown on the Company's or such Subsidiary's most
recent balance sheet or in the notes thereto, but excluding contingent
liabilities and trade payables) of the Company or any Subsidiary (other than
liabilities that are by their terms subordinated
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to the Notes or any Guarantee thereof) that are assumed by the transferee of any
such assets and (y) any notes, securities or other obligations received by the
Company or any such Subsidiary from such transferee that are promptly, but in no
event more than 30 days after receipt, converted by the Company or such
Subsidiary into cash shall (to the extent of the cash received) be deemed to be
cash for purposes of this provision and the receipt of such cash shall be
treated as cash received from the Asset Sale for which such Notes or obligations
were received.
The Company or any of its Subsidiaries may apply the Net
Proceeds from each Asset Sale, at its option, within 360 days after the
consummation of such Asset Sale, (a) to permanently reduce any Senior
Indebtedness (and in the case of any senior revolving indebtedness to
correspondingly permanently reduce commitments with respect thereto), (b) for
the acquisition of another business or the acquisition of other long-term
assets, in each case, in the same or a Related Business or (c) to reimburse the
Company or its Subsidiaries for expenditures made, and costs incurred, to
repair, rebuild, replace or restore property subject to loss, damage or taking
to the extent that the Net Proceeds consist of insurance proceeds received on
account of such loss, damage or taking. Pending the final application of any
such Net Proceeds, the Company may temporarily reduce Senior Revolving Debt or
otherwise invest such Net Proceeds in any manner that is not prohibited by this
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this paragraph shall be deemed to constitute
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds
$5,000,000, the Company shall be required to make an offer to all Holders of
Notes (an "Asset Sale Offer") and to holders of other Indebtedness of the
Company outstanding ranking on a parity with the Notes with similar provisions
requiring the Company to make a similar offer with proceeds from asset sales,
pro rata in proportion to the respective principal amounts (or accreted values
in the case of Indebtedness issued with an original issue discount) of the Notes
and such other Indebtedness then outstanding, to purchase the maximum principal
amount (or accreted value, as applicable) of Notes and such other Indebtedness,
if any, that may be purchased out of the Excess Proceeds, at an offer price in
cash in an amount equal to 100% of the principal amount (or accreted value, as
applicable) thereof plus accrued and unpaid interest and Liquidated Damages, if
any, thereon to the date of purchase, in accordance with the procedures set
forth in this Indenture. If the aggregate principal amount (or accreted value,
as applicable) of Notes and such Indebtedness surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and
such Indebtedness to be purchased on a pro rata basis. Upon completion of such
offer to purchase, the amount of Excess Proceeds shall be reset at zero.
Any Asset Sale Offer shall remain open for at least 20
Business Days, but in any event no longer than 30 Business Days, except to the
extent that a longer period is required by applicable law (the "Offer Period").
No later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the
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principal amount of Notes required to be purchased pursuant to this Section 4.08
(the "Offer Amount") or, if less than the Offer Amount has been tendered, all
Notes tendered in response to the Asset Sale Offer. Payment for any Notes so
purchased shall be made in the same manner as interest payments are made. Any
Asset Sale Offer shall be made in compliance with all applicable laws, rules,
and regulations, including, if applicable, Regulation 14E of the Exchange Act
and the rules and regulations thereunder and all other applicable Federal and
state securities laws. To the extent that the provisions of any securities laws
or regulations conflict with the provisions of this paragraph, compliance by the
Company or any of its subsidiaries with such laws and regulations shall not in
and of itself cause a breach of its obligations under such covenant.
If the payment date in connection with an Asset Sale Offer
hereunder is on or after an interest payment Record Date and on or before the
associated Interest Payment Date, any accrued and unpaid interest (and
Liquidated Damages, if any, due on such Interest Payment Date) will be paid to
the person in whose name a Note is registered at the close of business on such
Record Date, and such interest (or Liquidated Damages, if applicable) will not
be payable to Holders who tender Notes pursuant to such Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company
shall send, by first class mail, a notice to each of the Holders, with a copy to
the Trustee. The notice shall contain all instructions and materials necessary
to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The
Asset Sale Offer shall be made to all Holders. The notice, which shall govern
the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant
to this Section 4.08 and the length of time the Asset Sale Offer shall
remain open;
(b) the Offer Amount, the purchase price and the
Purchase Date;
(c) that any Note not tendered or accepted for
payment shall continue to accrete or accrue interest;
(d) that, unless the Company defaults in making such
payment, any Note accepted for payment pursuant to the Asset Sale Offer
shall cease to accrete or accrue interest on and after the Purchase
Date;
(e) that Holders electing to have a Note purchased
pursuant to an Asset Sale Offer may only elect to have all of such Note
purchased and may not elect to have only a portion of such Note
purchased;
(f) that Holders electing to have a Note purchased
pursuant to any Asset Sale Offer shall be required to surrender the
Note, with the form entitled
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"Option of Holder to Elect Purchase" on the reverse of the Note
completed, or transfer by book-entry transfer, to the Company, a
depositary, if appointed by the Company, or a Paying Agent at the
address specified in the notice at least three days before the Purchase
Date;
(g) that Holders shall be entitled to withdraw their
election if the Company, the depositary or the Paying Agent, as the
case may be, receives, not later than the expiration of the Offer
Period, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Note the
Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes
surrendered by Holders exceeds the Offer Amount, the Company shall
select the Notes to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of $1,000, or integral multiples thereof, shall
be purchased); and
(i) that Holders whose Notes were purchased only in
part shall be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered (or transferred by
book-entry transfer).
On or before the Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
the Offer Amount of Notes or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all Notes
tendered, and shall deliver to the Trustee an Officers' Certificate stating that
such Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 4.08. The Company, the Depository or
the Paying Agent, as the case may be, shall promptly (but in any case not later
than five days after the Purchase Date) mail or deliver to each tendering Holder
an amount equal to the purchase price of the Notes tendered by such Holder and
accepted by the Company for purchase, and the Company shall promptly issue a new
Note, and the Trustee, upon written request from the Company shall authenticate
and mail or deliver such new Note to such Holder, in a principal amount equal to
any unpurchased portion of the Note surrendered. Any Note not so accepted shall
be promptly mailed or delivered by the Company to the Holder thereof. The
Company shall publicly announce the results of the Asset Sale Offer on the
Purchase Date.
SECTION 4.09 RESTRICTED PAYMENTS
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly: (i) declare or pay any dividend or make any distribution
on account of the Company's or any of its Subsidiaries' or direct or indirect
parent's Equity Interests (including,
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without limitation, any payment in connection with any merger or consolidation
involving the Company) (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or dividends or
distributions payable to the Company or any Subsidiary of the Company that is a
Guarantor); (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any direct or indirect parent of the Company
or other Affiliate or Subsidiary of the Company (other than any such Equity
Interests owned by the Company or any Wholly Owned Subsidiary of the Company
that is a Guarantor); (iii) make any principal payment on, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to or pari passu (unless, in the case of pari passu Indebtedness
only, such purchase, redemption, defeasance, acquisition, or retirement is made,
or offered (if applicable), pro rata with the Notes or the Guarantees, if
applicable) with the Notes or any of the Guarantees, as applicable (and other
than Notes or the Guarantees, as applicable), except for any scheduled repayment
or at the final maturity thereof; or (iv) make any Restricted Investment (all
such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment
and after giving pro forma effect thereto as if such Restricted Payment
had been made at the beginning of the applicable four-quarter period,
have been permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of Section 4.10 hereof; and
(c) such Restricted Payment, together with the aggregate of
all other Restricted Payments made by the Company and its Subsidiaries
after the Issue Date (including Restricted Payments permitted by
clauses (i), (vi), (viii) and (ix), but excluding Restricted Payments
permitted by clauses (ii), (iii), (iv), (v) and (x) of the next
succeeding paragraph), is less than the sum of (i) $7,500,000, plus
(ii) 50% of the Consolidated Net Income (adjusted to exclude any
amounts that are otherwise included in this clause (c) to the extent
there would be, and to avoid, any duplication in the crediting of any
such amounts) of the Company for the period (taken as one accounting
period) from the beginning of the first fiscal quarter commencing after
the Issue Date to the end of the Company's most recently ended fiscal
quarter for which internal financial statements are available at the
time of such Restricted Payment (or, if such Consolidated Net Income
for such period is a deficit, less 100% of such deficit), plus (iii)
100% of the aggregate Net Proceeds received by the Company after the
Issue Date from a Capital Contribution or from the issue or sale of
Equity Interests of the Company or of debt securities of the Company
that have been converted into such Equity Interests (other than Equity
Interests (or convertible
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debt securities) sold to a Subsidiary or an Unrestricted Subsidiary of
the Company and other than Disqualified Stock or debt securities that
have been converted into Disqualified Stock), plus (iv) 100% of any
cash dividends received by the Company or a Wholly Owned Subsidiary
that is a Guarantor after the Issue Date from an Unrestricted
Subsidiary of the Company, plus (v) 100% of the Net Proceeds realized
by the Company or a Guarantor or upon the sale of any Unrestricted
Subsidiary (less the amount of any reserve established for purchase
price adjustments and less the maximum amount of any indemnification or
similar contingent obligation for the benefit of the purchaser, any of
its Affiliates or any other third party in such sale, in each case as
adjusted for any permanent reduction in any such amount on or after the
date of such sale, other than by virtue of a payment made to such
person) following the Issue Date, plus (vi) to the extent that any
Restricted Investment that was made after the Issue Date is sold for
cash or otherwise liquidated or repaid for cash, the amount of Net
Proceeds received by the Company or a Guarantor with respect to such
Restricted Investment.
The foregoing provisions will not prohibit (i) the payment of
any dividend within 60 days after the date of declaration thereof, if at said
date of declaration such payment would have complied with the provisions of this
Indenture; (ii) if no Default or Event of Default shall have occurred and be
continuing (and shall not have been waived) or shall occur as a consequence
thereof, the payment by the Company (either directly or indirectly, e.g. through
the Parent) of a management fee to AIP in an amount not to exceed $1,100,000 in
any year and the reimbursement by the Company of AIP's reasonable out-of-pocket
expenses incurred in connection with the rendering of management services to or
on behalf of the Company; provided, however, that the obligation of the Company
to pay such management fee and expenses will be subordinated to the payment of
all Obligations with respect to the Notes (and any Subsidiary Guarantee
thereof); (iii) the making of any Restricted Investment in exchange for, or out
of the Net Cash Proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company) of Equity Interests of the Company (other than
Disqualified Stock); provided, that any Net Cash Proceeds that are utilized for
any such Restricted Investment, and any Net Income resulting therefrom, shall be
excluded from clauses (c)(ii) and (c)(iii) of the preceding paragraph; (iv) the
redemption, repurchase, retirement or other acquisition of any Equity Interests
of the Company in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Company) of other Equity
Interests of the Company (other than any Disqualified Stock); provided that any
Net Cash Proceeds that are utilized for any such redemption, repurchase,
retirement or other acquisition, and any Net Income resulting therefrom, shall
be excluded from clauses (c)(ii) and (c)(iii) of the preceding paragraph; (v)
the defeasance, redemption, repurchase, acquisition or other retirement of pari
passu or subordinated Indebtedness with the Net Cash Proceeds from an incurrence
of Permitted Refinancing Indebtedness or, in exchange for, or out of the Net
Cash proceeds of, the substantially concurrent sale (other than to a Subsidiary
of the Company) of Equity Interests of the Company (other than Disqualified
Stock); provided, that any Net Cash
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Proceeds that are utilized for any such defeasance, redemption, repurchase, and
any Net Income resulting therefrom, shall be excluded from clauses (c)(ii) and
(c)(iii) of the preceding paragraph; (vi) the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of the Company, the
Parent or any Subsidiary of the Company held by any member of the Company's (or
the Parent's or any Subsidiaries') management pursuant to any management
agreement or stock option agreement; provided that the aggregate price paid for
all such repurchased, redeemed, acquired or retired Equity Interests shall not
exceed $5,000,000 in any fiscal year or $5,000,000 in the aggregate (net of the
Net Cash Proceeds received by the Company from subsequent reissuances of such
Equity Interests to new members of management), and no Default or Event of
Default shall have occurred and be continuing immediately after such
transaction; (vii) the acquisition by a Receivables Subsidiary in connection
with a Qualified Receivables Transaction of Equity Interests of a trust or other
person established by such Receivables Subsidiary to effect such Qualified
Receivables Transaction; (viii) pro rata dividends and other distributions on
the Capital Stock of any Subsidiary of the Company by such Subsidiary; (ix)
payments in lieu of fractional shares in an amount not to exceed $250,000 in the
aggregate; and (x) Permitted Payments to Parent.
The Board of Directors may designate any Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Subsidiaries (except to the extent repaid in cash) in the
Subsidiary so designated will be deemed to be Restricted Payments at the time of
such designation and will reduce the amount available for Restricted Payments
under the first paragraph of this covenant. All such outstanding Investments
will be deemed to constitute Investments in an amount equal to the greatest of
(x) the net book value of such Investments at the time of such designation, (y)
the fair market value of such Investments at the time of such designation and
(z) the original fair market value of such Investments at the time they were
made. Such designation will only be permitted if such Restricted Payment would
be permitted at such time and if such Subsidiary otherwise meets the definition
of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the
fair market value (evidenced by a resolution of the Board of Directors set forth
in an Officers' Certificate delivered to the Trustee) on the date of the
Restricted Payment of the asset(s) proposed to be transferred by the Company or
such Subsidiary, as the case may be, pursuant to the Restricted Payment. Not
later than the date of making any Restricted Payment, the Company shall deliver
to the Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculation required by
this Section 4.09 were computed, which calculations may be based upon the
Company's latest available financial statements.
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SECTION 4.10 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guaranty or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Indebtedness) and
that the Company will not issue any Disqualified Stock and will not permit any
of its Subsidiaries to issue any shares of preferred stock; provided, however,
that the Company may incur Indebtedness (including Acquired Indebtedness) or
issue shares of Disqualified Stock and the Company's Subsidiaries that are
Guarantors may incur Indebtedness and issue preferred stock if: (i) the Fixed
Charge Coverage Ratio for the Company's most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date on which such additional Indebtedness is incurred or such
Disqualified Stock or preferred stock is issued would have been at least 2 to 1,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock or preferred stock had been issued, as the case may be, at
the beginning of such four-quarter period; and (ii) no Default or Event of
Default shall have occurred and be continuing or would occur as a consequence
thereof; provided, that no Guarantee may be incurred pursuant to this paragraph,
unless the guaranteed Indebtedness is incurred by the Company or a Guarantor
pursuant to this paragraph.
The foregoing provisions will not apply to:
(i) the incurrence of Indebtedness by the Company or the
Guarantors under the Credit Agreement (and Guarantees thereof by
Subsidiaries that are Guarantors) in an aggregate principal amount at
any time outstanding (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the
Company and its Subsidiaries thereunder) not to exceed an amount
(including any Indebtedness incurred to refinance, retire, renew,
defease, refund or otherwise replace any such Indebtedness) equal to
the greater of (a) $85,000,000, less the aggregate amount of all Net
Proceeds of Asset Sales applied to permanently reduce the outstanding
amount or, as applicable the commitments with respect to such
Indebtedness pursuant to Section 4.08 hereof and (b) an amount equal to
the sum of 80% of the book value of the consolidated accounts
receivable of the Company and its Subsidiaries that are Guarantors and
50% of the book value of the consolidated inventory of the Company and
its Subsidiaries that are Guarantors;
(ii) the Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness
represented by the Notes (up to an aggregate principal amount of
$100,000,000) and by the Subsidiaries of Indebtedness represented by
the Subsidiary Guarantees of such Notes;
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(iv) the incurrence by the Company or any of its Subsidiaries
of Indebtedness represented by Capital Lease Obligations, Mortgage
Financings or Purchase Money Obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property used in the business of the
Company or such Subsidiary, in an aggregate principal amount not to
exceed $10,000,000 at any time outstanding (including any Indebtedness
incurred to refinance, retire, renew, defease, refund or otherwise
replace any such Indebtedness);
(v) the incurrence by the Company or any of its Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace,
defease or refund, Indebtedness that was permitted by this Indenture to
be incurred or was outstanding on the Issue Date, after giving effect
to the Acquisition Transactions;
(vi) the incurrence by the Company or any of its Subsidiaries
of intercompany Indebtedness between or among the Company and Parent,
the Company and any of its Wholly Owned Subsidiaries or between or
among any Wholly Owned Subsidiaries; provided, however, that (i) any
subsequent issuance or transfer of Equity Interests that results in any
such Indebtedness being held by a Person other than a Wholly Owned
Subsidiary and (ii) any sale or other transfer of any such Indebtedness
to a Person that is not either the Company or a Wholly Owned Subsidiary
shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Subsidiary, as the case may be;
(vii) the incurrence by the Company or any of its Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by this Indenture to be incurred;
(viii) the incurrence by the Company or any of its
Subsidiaries that is Guarantor of Indebtedness in an aggregate
principal amount at any time outstanding (including any Indebtedness
incurred to refinance, retire, renew, defease, refund or otherwise
replace any such Indebtedness) not to exceed $15,000,000;
(ix) the incurrence by Foreign Subsidiaries of Indebtedness in
an aggregate amount not to exceed $7,000,000 at any time outstanding
(including any Indebtedness incurred to refinance, retire, renew,
defease, refund or otherwise replace any such Indebtedness);
(x) the incurrence by the Company or any Subsidiary of
Indebtedness in respect of judgment, appeal, surety, performance and
other like bonds, bankers
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acceptance and letters of credit provided by the Company and its
Subsidiaries in the ordinary course of business in an aggregate amount
outstanding (including any indebtedness incurred to refinance, retire,
renew, defease, refund or otherwise replace any such indebtedness) at
any time of not more than $500,000;
(xi) Indebtedness incurred by the Company or any of its
Subsidiaries arising from agreements providing for indemnification,
adjustment of purchase price or similar obligations, or from guarantees
of letters of credit, surety bonds or performance bonds securing the
performance of the Company or any of its Subsidiaries to any person
acquiring all or a portion of such business, or assets of a Subsidiary
of the Company for the purpose of financing such acquisition, in a
principal amount not to exceed 25% of the gross proceeds (with proceeds
other than cash or Cash Equivalents being valued at the fair market
value thereof as determined by the Board of Directors of the Company in
good faith) actually received by the Company or any of its Subsidiaries
in connection with such disposition; and
(xii) the incurrence by a Receivables Subsidiary of
Indebtedness in a Qualified Receivables Transaction that is without
recourse to the Company or to any Subsidiary of the Company or their
assets (other than such Receivables Subsidiary and its assets), and is
not guaranteed by any such person.
Notwithstanding any other provision of this covenant, a Guarantee by a
Guarantor of Indebtedness of the Company or another Guarantor permitted by the
terms of this Indenture at the time such Indebtedness was incurred will not
constitute a separate incurrence of Indebtedness.
Indebtedness or Disqualified Stock of any person which is outstanding
at the time such Person becomes a Subsidiary of the Company (including upon
designation of any subsidiary or other person as a Subsidiary) or is merged with
or into or consolidated with the Company or a Subsidiary of the Company shall be
deemed to have been incurred at the time such Person becomes such a Subsidiary
of the Company or is merged with or into or consolidated with the Company or a
Subsidiary of the Company, as applicable.
SECTION 4.11 LIENS
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien on any
asset now owned or hereafter acquired, or any income or profits therefrom or
assign or convey any right to receive income therefrom, except Permitted Liens,
unless the Notes are secured by such Lien on an equal and ratable basis.
SECTION 4.12 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
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The Company shall not, and shall not permit any of its
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
Subsidiary to (i)(a) pay dividends or make any other distributions to the
Company or any of its Subsidiaries (1) on its Capital Stock or (2) with respect
to any other interest or participation in, or measured by, its profits, or (b)
pay any indebtedness owed to the Company or any of its Subsidiaries, (ii) make
loans or advances to the Company or any of its Subsidiaries or (iii) transfer
any of its properties or assets to the Company or any of its Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of (a)
Existing Indebtedness as in effect on the date of this Indenture, (b) the Credit
Agreement as in effect as of the date of this Indenture, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than the most restrictive of those
contained in the Credit Agreement as in effect on the date of this Indenture,
(c) this Indenture and the Notes or Indebtedness permitted to be incurred
pursuant to the Indenture and ranking pari passu with the Notes or the
Guarantees, as applicable, to the extent such restrictions are no more
restrictive than those of the Indenture, (d) applicable law, (e) any instrument
governing Acquired Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Subsidiaries as in effect at the time of such acquisition
(except to the extent such Acquired Indebtedness was incurred in connection with
or in contemplation of such acquisition), which encumbrance or restriction is
not applicable to any Person, or the properties or assets of any Person, other
than the Person, or the property or assets of the Person, so acquired, (f) by
reason of customary non-assignment provisions in leases and licenses entered
into in the ordinary course of business and consistent with past practices, (g)
Purchase Money Obligations, Capital Lease Obligations or Mortgage Financings for
property acquired in the ordinary course of business that impose restrictions of
the nature described in clause (iii) above on the property so acquired, (h)
agreements relating to the financing of the acquisition of real or tangible
personal property acquired after the date of this Indenture, provided, that such
encumbrance or restriction relates only to the property which is acquired and in
the case of any encumbrance or restriction that constitutes a Lien, such Lien
constitutes a Permitted Lien as set forth in clause (xi) of the definition of
"Permitted Lien," (i) Indebtedness or other contractual requirements of a
Receivables Subsidiary in connection with a Qualified Receivables Transaction,
provided that such restrictions apply only to such Receivables Subsidiary, (j)
any restriction or encumbrance contained in contracts for sale of assets
permitted by this Indenture in respect of the assets being sold pursuant to such
contract, (k) Senior Indebtedness or Guarantor Senior Indebtedness permitted to
be incurred under this Indenture and incurred on or after the date of this
Indenture, provided, that such encumbrances or restrictions in such Indebtedness
are no more onerous than the most restrictive of the restrictions contained in
the Credit Agreement on the date of this Indenture, (l) Indebtedness of Foreign
Subsidiaries incurred under clause (ix) of Section 4.10 hereof or (m) Permitted
Refinancing Indebtedness, provided that the restrictions contained in the
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agreements governing such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the Indebtedness
being refinanced.
SECTION 4.13 LIMITATION ON LAYERING DEBT
The Company shall not incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that by its terms or the terms of
any document or instrument relating thereto is subordinate or junior in right of
payment to any Senior Indebtedness and senior in any respect in right of payment
to the Notes. No Guarantor shall incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that by its terms or the terms of
any document or instrument relating thereto is subordinate or junior in right of
payment to any Guarantor Senior Indebtedness and senior in any respect in right
of payment to any Subsidiary Guarantees.
SECTION 4.14 TRANSACTIONS WITH AFFILIATES
The Company shall not, and shall not permit any of its
Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make any contract, agreement, understanding, loan, advance or guarantee with,
or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such Subsidiary
with an unrelated Person and (ii) the Company delivers to the Trustee (a) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
entered into after the date of this Indenture involving aggregate consideration
in excess of $5,000,000, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transactions comply with
clause (i) above and that such Affiliate Transactions have been approved by a
majority of the disinterested members of the Board of Directors and (b) with
respect to any Affiliate Transactions or series of related Affiliate
Transactions involving aggregate consideration in excess of $10,000,000, a
favorable written opinion as to the fairness to the Company or such Subsidiary
of such Affiliate Transactions from a financial point of view issued by an
investment banking firm of national standing in the United States, or in the
event such transaction is a type that investment bankers do not generally render
fairness opinions, a valuation or appraisal firm of national standing; provided
that the following shall not be deemed to be Affiliate Transactions: (w) the
provision of administrative or management services by the Company or any of its
officers to any of its Subsidiaries in the ordinary course of business
consistent with past practice, (x) any employment agreement entered into by the
Company or any of its Subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or such Subsidiary, (y)
transactions between or among the Company and/or its Wholly Owned Subsidiaries
or Guarantors or transactions between a Receivables Subsidiary and any Person in
which the Receivables Subsidiary has an Investment and (z) transactions
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permitted by Section 4.09 hereof. In addition, none of the Acquisition
Transactions shall be deemed to be Affiliate Transactions.
SECTION 4.15 ADDITIONAL SUBSIDIARY GUARANTEES
All Subsidiaries of the Company (other than a Receivables Subsidiary
and the Foreign Subsidiaries) substantially all of whose assets are located in
the United States or that conduct substantially all of their business in the
United States shall be Guarantors. In addition, the Company shall not, and shall
not permit any of the Guarantors to, make any Investment in any Subsidiary that
is not a Guarantor unless either (i) such Investment is permitted by Section
4.09 hereof, or (ii) such Subsidiary executes a Subsidiary Guarantee and
delivers an Opinion of Counsel in accordance with the provisions of this
Indenture. Notwithstanding anything herein or in the Indenture to the contrary,
if any subsidiary of the Company that is not a Guarantor guarantees any other
Indebtedness of the Company or any Subsidiary of the Company that is a
Guarantor, or the Company or a Subsidiary of the Company pledges more than 65%
of the capital stock of such subsidiary to a United States lender, then such
Subsidiary must become a Guarantor.
SECTION 4.16 LINE OF BUSINESS
Neither the Company nor any of its Subsidiaries shall directly or
indirectly engage to any substantial extent in any line or lines of business
activity other than that which, in the reasonable good faith judgment of the
Board of Directors of the Company, is a Related Business.
SECTION 4.17 CORPORATE EXISTENCE
Subject to Article 5 hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect (i)
its corporate existence, and the corporate, partnership or other existence of
each of its Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Subsidiary and (ii) the rights (charter and statutory), licenses and
franchises of the Company and its Subsidiaries; provided, however, that the
Company shall not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of any of its Subsidiaries, if
the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders of the Notes.
SECTION 4.18 STATUS AS AN INVESTMENT COMPANY
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The Company and its Subsidiaries are not required to register
as an "investment company" (as that term is defined in the Investment Company
Act of 1940, as amended), or otherwise become subject to regulation under the
Investment Company Act.
ARTICLE 5
SUCCESSORS
SECTION 5.01 MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Company will not in a single transaction or series of
related transactions consolidate or merge with or into (whether or not the
Company is the surviving corporation) or directly or indirectly sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia, (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Notes and this Indenture, pursuant to a supplemental
indenture, in a form reasonably satisfactory to the Trustee, (iii) immediately
after such transaction, no Default or Event of Default exists and (iv) the
Company or the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company), or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made will, at the time of
such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter period,
be permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph in Section
4.10 hereof. Notwithstanding the foregoing, the mergers and the related
transactions comprising the Acquisition Transactions shall be deemed to be
expressly permitted under the Indenture and shall not require the execution and
delivery of a supplemental indenture.
SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of the Company in accordance with Section 5.01
hereof, the successor corporation formed by such consolidation or into or with
which the Company is merged or to which such transfer is made shall succeed to,
and (except in the case of a lease) be substituted for and may exercise every
right and power of the Company under this Indenture with the same effect as if
such successor corporation had been named therein as the Company (except in the
case of a lease); the Company shall not be released from the obligations under
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the Notes and the Indenture except with respect to any obligations that arise
from, or are related to, such transaction.
For the purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise) of all or substantially all of the properties and
assets of one or more Subsidiaries of the Company, the Company's interest in
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.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT
An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest or
Liquidated Damages, if any on any Note when the same becomes due and
payable and the Default continues for a period of 30 days, whether or
not such payment is prohibited by the provisions of Article 10 hereof;
(2) the Company defaults in the payment of the principal of or
premium, if any, on any Note when the same becomes due and payable at
maturity, upon redemption or otherwise, whether or not such payment is
prohibited by the provisions of Article 10 hereof;
(3) the Company fails to observe or perform any covenant,
condition or agreement on the part of the Company to be observed or
performed pursuant to Sections 4.07 or 4.08 hereof, which failure
remains uncured for 30 days;
(4) the Company fails to comply with any of its other
agreements or covenants in, or provisions of, the Notes or this
Indenture and the Default continues for 60 days after notice;
(5) a default occurs under any mortgage, indenture or
instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company
or any of its Subsidiaries (other than a Receivables Subsidiary) (or
the payment of which is Guaranteed by the Company or any of its
Subsidiaries), whether such Indebtedness or Guarantee now exists or
shall be created hereafter, which default (a) is caused by a failure to
pay principal of or premium on such Indebtedness when due (after giving
effect to any applicable grace period provided in such Indebtedness) or
(b) results in the
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acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of such Indebtedness, together with the
principal amount of any other Indebtedness as to which there has been
such a payment default or the maturity of which has been so
accelerated, aggregates $7,500,000 or more;
(6) a nonappealable final judgment or final judgments for the
payment of money (not fully covered by insurance) are entered by a
court or courts of competent jurisdiction against the Company or any of
its Significant Subsidiaries and such judgment or judgments are not
paid, bonded, discharged or stayed for a period (during which execution
shall not be effectively stayed) of 60 days, provided that the
aggregate of all such undischarged judgments exceeds $7,500,000;
(7) any Guarantee shall be held in any judicial proceeding to
be unenforceable or invalid or shall cease for any reason to be in full
force and effect or any Guarantor, or any Person acting on behalf of
any Guarantor, shall deny or disaffirm its obligations under its
Subsidiary Guarantee;
(8) the Company or any of its Significant Subsidiaries
pursuant to or within the meaning of any Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief
against it in an involuntary case,
(c) consents to the appointment of a Custodian of it
or for all or substantially all of its property,
(d) makes a general assignment for the benefit of its
creditors, or
(e) generally is not paying its debts as they become
due; or
(9) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(a) is for relief against the Company or any
Subsidiary in an involuntary case,
(b) appoints a Custodian of the Company or any
Subsidiary or for all or substantially all of the property of
the Company or any Subsidiary, or
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(c) orders the liquidation of the Company or any
Subsidiary,
and the order or decree remains unstayed and in effect for 60
consecutive days.
The term "Bankruptcy Law" means title 11, U.S. Code or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
An Event of Default shall not be deemed to have occurred under
clause (3), (5) or (6) until the Trustee shall have received written notice from
the Company or any of the Holders or unless a Responsible Officer shall have
knowledge of such Event of Default. A Default under clause (4) is not an Event
of Default until the Trustee notifies the Company, or the Holders of at least
25% in principal amount of the then outstanding Notes notify the Company and the
Trustee, of the Default and the Company does not cure the Default within 60 days
after receipt of the notice. The notice must specify the Default, demand that it
be remedied and state that the notice is a "Notice of Default."
SECTION 6.02 ACCELERATION
If an Event of Default (other than an Event of Default
specified in clauses (8) and (9) of Section 6.01 relating to the Company, any
Significant Subsidiary or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary) occurs and is continuing, the Trustee or
the Holders of at least 25% in aggregate principal amount of the then
outstanding Notes by notice in writing to the Company (and to the Trustee if
given by the Holders) and the representative of holders of Indebtedness under
the Credit Agreement, if any amounts are outstanding thereunder (an
"Acceleration Notice"). Upon such declaration the principal and interest shall
be due and payable immediately (together with the premium referred to in Section
6.01, if applicable). If an Event of Default specified in clause (8) or (9) of
Section 6.01 relating to the Company, any Significant Subsidiary or any group of
Subsidiaries that, taken together, would constitute a Significant Subsidiary
occurs all outstanding Notes will (i) become due and payable without further
action or notice or (ii) if there are any amounts outstanding under the Credit
Agreement, become due and immediately payable upon the first to occur of an
acceleration under the Credit Agreement or five Business Days after receipt by
the Company and the representative of the holders of the Indebtedness under the
Credit Agreement of the Acceleration Notice, but only if an Event of Default is
then continuing. The Holders of a majority in aggregate principal amount of the
then outstanding Notes by written notice to the Trustee may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal or interest that has become due solely because of the acceleration)
have been cured or waived.
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SECTION 6.03 OTHER REMEDIES
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal, premium or
Liquidated Damages, if any, and interest on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Note 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. All remedies
are cumulative to the extent permitted by law.
SECTION 6.04 WAIVER OF PAST DEFAULTS
Holders of not less than a majority in aggregate principal
amount of the then outstanding Notes by notice to the Trustee may on behalf of
the Holders of all of the Notes waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of the principal of, premium and Liquidated Damages, if any, or
interest on, the Notes (including in connection with an offer to purchase)
(provided, however, that the Holders of a majority in aggregate principal amount
of the then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
SECTION 6.05 CONTROL BY MAJORITY
Holders of a majority in principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Notes or that may
involve the Trustee in personal liability.
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SECTION 6.06 LIMITATION ON SUITS
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice
of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the
then outstanding Notes make a written request to the Trustee to pursue
the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in
aggregate principal amount of the then outstanding Notes do not give
the Trustee a direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
SECTION 6.07 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the Note, on or after the respective
due dates expressed in the Note (including in connection with an offer to
purchase), 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
such Holder.
SECTION 6.08 COLLECTION SUIT BY TRUSTEE
If an Event of Default specified in Section 6.01 occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
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disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM
The Trustee is authorized to 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, disbursements and advances of the Trustee, its agents and counsel) and
the Holders of the Notes allowed in any judicial proceedings relative to the
Company (or any other obligor upon the Notes), its creditors or its property and
shall be entitled and empowered to collect, receive and distribute any money or
other property payable or deliverable on any such claims and any custodian in
any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee, and in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof out
of the estate in any such proceeding, shall be denied for any reason, payment of
the same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties that the
Holders may be entitled to receive in such proceeding whether in liquidation or
under any plan of reorganization or arrangement or otherwise. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10 PRIORITIES
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Liquidated Damages, if any and
interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction
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shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Notes 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 a 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, 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 does not apply to a suit by the Trustee, a suit by a
Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more
than 10% in principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01 DUTIES OF TRUSTEE
(a) If an Event of Default 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 its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need perform
only those duties that are specifically set forth in this Indenture and
no others, and no implied covenants or obligations shall be read into
this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions 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 liabilities for its
own negligent
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action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) 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 hereof.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or incur any liability. The Trustee shall be
under no obligation to exercise any of its rights and powers under this
Indenture at the request of any Holders, unless such Holder shall have offered
to the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
(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
(a) The Trustee may conclusively rely upon 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 or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel and the written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and
shall not
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be responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture,
any demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(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 or
direction of any of the Holders unless such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction.
(g) Except with respect to Section 4.01 herein, the Trustee
shall have no duty to inquire as to the performance of the Company's covenants
in Article 4 hereof. In addition, the Trustee shall not be deemed to have
knowledge of any Default or Event of Default except (i) any Event of Default
occurring pursuant to Sections 6.01(1), 6.01(2) and 4.01 or (ii) any Default or
Event of Default of which the Trustee shall have received written notification
or obtained actual knowledge.
SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
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 Notes, it
shall not be accountable for the Company's use of the proceeds from the Notes or
any money paid to the Company or upon the Company's direction under any
provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture
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other than its certificate of authentication.
SECTION 7.05 NOTICE OF DEFAULTS
If a Default or Event of Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to Holders of Notes a
notice of the Default or Event of Default within 90 days after it occurs. Except
in the case of a Default or Event of Default in payment of principal of,
premium, if any, or interest on any Note, the Trustee may withhold the notice if
and so long as a committee of its Responsible Officers in good faith determines
that withholding the notice is in the interests of the Holders of the Notes.
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES
Within 60 days after each December 15 beginning with the
December 15 following the date of this Indenture, and for so long as Notes
remain outstanding, the Trustee shall mail to the Holders of the Notes a brief
report dated as of such reporting date that complies with TIA Section 313(a)
(but if no event described in TIA Section 313(a) has occurred within the twelve
months preceding the reporting date, no report need be transmitted). The Trustee
also shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by
mail all reports as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the
Holders of Notes shall be mailed to the Company and filed with the SEC and each
stock exchange on which the Notes are listed in accordance with TIA Section
313(d). The Company shall promptly notify the Trustee when the Notes are listed
on any stock exchange.
SECTION 7.07 COMPENSATION AND INDEMNITY
The Company shall pay to the Trustee from time to time
reasonable compensation for its acceptance of this Indenture and 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 promptly upon request for all reasonable disbursements, advances and
expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all
losses, liabilities or expenses incurred by it arising out of or in connection
with the acceptance or administration of its duties under this Indenture,
including the costs and expenses of enforcing this Indenture against the Company
(including this Section 7.07) and defending itself against any claim (whether
asserted by the Company or any Holder or any other person) or liability in
connection with the exercise or performance of any of its powers or duties
hereunder,
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except to the extent any such loss, liability or expense may be attributable to
its negligence or bad faith. The Trustee shall notify the Company promptly of
any claim for which it may seek indemnity. 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.
The Trustee may have separate counsel and the Company shall pay the reasonable
fees and expenses of such counsel. The Company need not pay for any settlement
made without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall
survive the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section,
the Trustee shall have a Lien prior to the Notes on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(8) or (9) hereof occurs, the expenses
and the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section
313(b)(2) to the extent applicable.
SECTION 7.08 REPLACEMENT OF TRUSTEE
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Company. The
Holders of Notes of a majority in principal amount of the then outstanding Notes
may remove the Trustee by so notifying the Trustee and the Company in writing.
The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee
or its
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property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in aggregate principal amount of the then outstanding
Notes may appoint a successor Trustee to replace the successor Trustee appointed
by the Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company, or the Holders of Notes of at least 10% in aggregate principal amount
of the then outstanding Notes may petition any court of competent jurisdiction
for the appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note
who has been a Holder of a Note for at least six months, fails to comply with
Section 7.10, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, 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. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Trustee.
SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and
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surplus of at least $50,000,000 as set forth in its most recent published annual
report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY
The Trustee is subject to 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
therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE
The Company may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any time,
elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding
Notes upon compliance with the conditions set forth below in this Article 8.
SECTION 8.02 LEGAL DEFEASANCE AND DISCHARGE
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to
have been discharged from its obligations with respect to all outstanding Notes
on the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive solely from the trust fund described in Section
8.04 hereof, and as more fully set forth in such Section, payments in respect of
the principal of, premium, if any, and interest and Liquidated Damages, if any,
on such Notes when such payments are due, (b) the Company's obligations with
respect to such Notes under Article 2 and Section 4.02 hereof, (c) the rights,
powers, trusts, duties and immunities of the Trustee hereunder and the
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Company's obligations in connection therewith including, without limitation,
Section 7.07 hereof, and (d) this Article 8, the Company may exercise its option
under this Section 8.02 notwithstanding the prior exercise of its option under
Section 8.03 hereof.
SECTION 8.03 COVENANT DEFEASANCE
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be released
from its obligations under the covenants contained in Sections 4.07, 4.08, 4.09,
4.10, 4.11, 4.12, 4.13 and 4.14 hereof with respect to the outstanding Notes on
and after the date the conditions set forth below are satisfied (hereinafter,
"Covenant Defeasance"), and the Notes shall thereafter be deemed not
"outstanding" for the purposes 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 (it being understood that such Notes shall not be deemed outstanding
for accounting purposes). For this purpose, Covenant Defeasance means that, with
respect to the outstanding Notes, the Company 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 hereof, but, except as specified above, the remainder of this
Indenture and such Notes shall be unaffected thereby. In addition, upon the
Company's exercise under Section 8.01 hereof of the option applicable to this
Section 8.03 hereof, subject to the satisfaction of the conditions set forth in
Section 8.04 hereof, Sections 6.01(5) through 6.01(7) hereof shall not
constitute Events of Default.
SECTION 8.04 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(a) the Company must irrevocably deposit
with the Trustee, in trust, for the benefit of the Holders,
cash in United States dollars, non-callable Government
Securities, 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 and Liquidated Damages, if any,
on the outstanding Notes on the stated maturity or on the
applicable redemption date, as the case may be and the Company
must specify whether the Notes are being defeased to maturity
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or to a particular redemption date;
(b) in the case of an election under Section
8.02 hereof, the Company shall have delivered to the Trustee
an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of this
Indenture, 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 confirm that, the
Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of
such Legal 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 Legal Defeasance had
not occurred;
(c) in the case of an election under Section
8.03 hereof, the Company shall have delivered to the Trustee
an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such 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 Covenant Defeasance had not
occurred;
(d) no Event of Default or Default shall
have occurred and be continuing on the date of such deposit
(other than an Event of Default or Default resulting from the
incurrence of Indebtedness all or a portion of the proceeds of
which will be used to defease the Notes pursuant to this
Article 8 concurrently with such incurrence) or insofar as
Sections 6.01(8) or 6.01(9) hereof is concerned, at any time
in the period ending on the 91st day after the date of
deposit;
(e) such Legal Defeasance or Covenant
Defeasance will not result in a breach or violation of, or
constitute a default under the Senior Bank Debt or any other
material agreement or instrument (other than this Indenture)
to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries is bound;
(f) the Company shall have delivered to the
Trustee an Opinion of Counsel to the effect that on 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
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generally;
(g) the Company shall have delivered to the
Trustee an Officers' Certificate stating that the deposit was
not made by the Company with the intent of preferring the
Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any
other creditors of the Company; and
(h) the Company shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that all conditions precedent provided for, in
the case of the Officer's Certificate, (a) through (g) and, in
the case of the Opinion of Counsel, clauses (a) (with respect
to the validity and perfection of the trust), (b), (c) and (e)
of this paragraph relating to the Legal Defeasance or the
Covenant Defeasance, as applicable, have been complied with.
SECTION 8.05 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee satisfactory to the Company and the
Trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant
to Section 8.04 hereof in respect of the outstanding Notes shall be held in
trust and applied by the Trustee, in accordance with the provisions of such
Notes and this Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as Paying Agent) as the Trustee may
determine, to the Holders of such Notes of all sums due and to become due
thereon in respect of principal, premium, if any, and interest, but such money
need not be segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon the
request of the Company any money or non-callable Government Securities held by
it as provided in Section 8.04 hereof which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee (which may be the opinion
delivered
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under Section 8.04(a) hereof), are in excess of the amount thereof that would
then be required to be deposited to effect an equivalent Legal Defeasance or
Covenant Defeasance.
SECTION 8.06 REPAYMENT TO COMPANY
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of, premium,
if any, Liquidated Damages, or interest on any Note and remaining unclaimed for
two years after such principal, and premium, if any, Liquidated Damages or
interest has become due and payable shall be paid to the Company on its request
or (if then held by the Company) shall be discharged from such trust; and the
Holder of such Note shall thereafter, as a secured creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in the New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to the Company.
SECTION 8.07 REINSTATEMENT
If the Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with Section
8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee
or Paying Agent is permitted to apply all such money in accordance with Section
8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company
makes any payment of principal of, premium, if any, or interest on any Note
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the
money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01 WITHOUT CONSENT OF HOLDERS OF NOTES
Notwithstanding Section 9.02 of this Indenture, the Company
and the Trustee may amend or supplement this Indenture or the Notes without the
consent of any Holder of
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a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(c) to provide for the assumption of the Company's obligations
to the Holders of the Notes in the case of a merger or consolidation
pursuant to Article 5 hereof;
(d) to provide for additional Guarantors as set forth in
Section 4.15;
(e) to make any change that would provide any additional
rights or benefits to the Holders of the Notes (including the addition
of any Subsidiary Guarantors) or that does not adversely affect the
legal rights hereunder of any Holder of the Note; or
(f) to comply with requirements of the SEC in order to effect
or maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Company in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02 WITH CONSENT OF HOLDERS OF NOTES
Except as provided below in this Section 9.02, the Company and
the Trustee may amend or supplement this Indenture (including Sections 4.07 and
4.08 hereof) and the Notes may be amended or supplemented with the consent of
the Holders of a majority in aggregate principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for the Notes), and, subject to Sections 6.04 and 6.07 hereof,
any existing Default or Event of Default (other than a Default or Event of
Default in the payment of the principal of, premium, if any, Liquidated Damages,
if any, or interest on the Notes, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any provision of this
Indenture or the Notes may be waived with the consent of the Holders of a
majority in aggregate principal amount of the then
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outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for the Notes).
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid,
and upon receipt by the Trustee of the documents described in Section 7.02
hereof, the Trustee shall join with the Company in the execution of such amended
or supplemental Indenture unless such amended or supplemental Indenture affects
the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of
Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
Holders of a majority in aggregate principal amount of the Notes then
outstanding may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Notes. However, without the consent of
each Holder affected, an amendment or waiver may not (with respect to any Notes
held by a non-consenting Holder):
(a) reduce the aggregate principal amount of Notes
whose Holders must consent to an amendment, supplement or
waiver;
(b) reduce the principal of or change the fixed
maturity of any Note or alter or waive any of the provisions
with respect to the redemption of the Notes, except as
provided above with respect to Sections 4.07 and 4.08 hereof;
(c) reduce the rate of or change the time for payment
of interest, including default interest, on any Note;
(d) waive a Default or Event of Default in the
payment of principal of, premium, if any, Liquidated Damages,
if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of a majority in
aggregate principal amount of the then outstanding Notes and a
waiver of
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the payment default that resulted from such acceleration);
(e) make any Note payable in money other than that
stated in the Notes;
(f) make any change in the provisions of this
Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of or
interest on the Notes; or
(g) make any change in Section 6.04 or 6.07 hereof or
in the foregoing amendment and waiver provisions.
In addition, any amendment to the subordination provisions of
this Indenture will require the consent of the holders of Designated Senior
Indebtedness if the amendment would adversely affect the holders of Designated
Senior Indebtedness.
SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT
Every amendment or supplement to this Indenture or the Notes
shall be set forth in a amended or supplemental Indenture that complies with the
TIA as then in effect.
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05 NOTATION ON OR EXCHANGE OF NOTES
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Company in exchange for all Notes may issue and the Trustee shall authenticate
new Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
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SECTION 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01) shall be
fully protected in relying upon, an Officer's Certificate and an Opinion of
Counsel stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10
SUBORDINATION
SECTION 10.01 AGREEMENT TO SUBORDINATE
The Company agrees, and each Holder by accepting a Note
agrees, that the Indebtedness evidenced by the Note is subordinated in right of
payment, to the extent and in the manner provided in this Article 10, to the
prior payment in full of all Senior Indebtedness (whether outstanding on the
date hereof or hereafter created, incurred, assumed or guaranteed), and that the
subordination is for the benefit of the holders of Senior Indebtedness. This
Article 10 shall constitute a continuing offer to all Persons who become holders
of, or continue to hold, Senior Indebtedness, and such provisions are made for
the benefit of the holders of Senior Indebtedness.
SECTION 10.02 LIQUIDATION; DISSOLUTION; BANKRUPTCY
Upon any distribution to creditors of the Company or a
Guarantor in a liquidation or dissolution of the Company or a Guarantor or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or a Guarantor or its property, whether voluntary or
involuntary, an assignment for the benefit of creditors or any marshalling of
the Company's or Guarantors' assets and liabilities:
(1) holders of Senior Indebtedness or the applicable Guarantor
Senior Indebtedness, as applicable, shall be entitled to receive
payment in full in cash or Cash Equivalents of all Obligations due in
respect of such Senior Indebtedness or the applicable Guarantor Senior
Indebtedness, as applicable (including interest after the commencement
of any such proceeding at the rate specified in the applicable Senior
Indebtedness or the applicable Guarantor Senior Indebtedness, as
applicable, whether or not allowable as a claim in any such
proceeding), before Holders shall be entitled to receive any payment
with respect to the Notes or the applicable Guarantees (except that
Holders may receive (i) securities that are subordinated to at least
the same
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extent as the Notes to (a) Senior Indebtedness and (b) any securities
issued in exchange for Senior Indebtedness and (ii) payments and other
distributions made from any defeasance trust created pursuant to
Section 8.01 hereof); and
(2) until all Obligations with respect to the applicable
Senior Indebtedness or the applicable Guarantor Senior Indebtedness, as
applicable (as provided in subsection (1) above) are paid in full in
cash or Cash Equivalents, any distribution to which Holders or the
applicable Guarantees would be entitled but for this Article shall be
made to holders of Senior Indebtedness or the applicable Guarantor
Senior Indebtedness, as applicable (except that Holders or the
applicable Guarantees may receive securities that are subordinated to
at least the same extent as the Notes or the applicable Guarantees to
(a) Senior Indebtedness or the applicable Guarantor Senior
Indebtedness, as applicable, and (b) any securities issued in exchange
for the applicable Senior Indebtedness or the applicable Guarantor
Senior Indebtedness, as applicable, and that have a final maturity date
and weighted average life to maturity that is the same as or greater
than the Notes or the applicable Guarantees, and that are not secured
by collateral and payments made from the trust described under Section
8.02), as their interests may appear.
SECTION 10.03 DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS
The Company and the Guarantors may not make any payment or
distribution to the Trustee or any Holder in respect of Obligations with respect
to the Notes or the applicable Guarantees and may not acquire from the Trustee
or any Holder any Notes or the applicable Guarantees for cash or property (other
than (i) securities that are subordinated to at least the same extent as the
Notes or the applicable Guarantees to (a) Senior Indebtedness or the applicable
Guarantor Senior Indebtedness and (b) any securities issued in exchange for
Senior Indebtedness or the applicable Guarantor Senior Indebtedness and (ii)
payments and other distributions made from any defeasance trust created pursuant
to Section 8.01 hereof) until all principal and other Obligations with respect
to the Senior Indebtedness or the applicable Guarantor Senior Indebtedness have
been paid in full if:
(i) a default in the payment of any principal or other
Obligations with respect to Designated Senior Indebtedness occurs and
is continuing beyond any applicable grace period in the agreement,
indenture or other document governing such Designated Senior
Indebtedness (a "Payment Default"); or
(ii) a default, other than a payment default, on Designated
Senior Indebtedness occurs and is continuing that then permits holders
of the Designated Senior Indebtedness to accelerate its maturity and
the Trustee receives a notice of the default (a "Payment Blockage
Notice") from a Person who may give it pursuant to
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Section 10.11 hereof. If the Trustee receives any such Payment Blockage
Notice, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section 10.03 unless and until at least 360 days shall
have elapsed since the effectiveness of the immediately prior Payment
Blockage Notice. No nonpayment default that existed or was continuing
on the date of delivery of any Payment Blockage Notice to the Trustee
shall be, or be made, the basis for a subsequent Payment Blockage
Notice.
The Company may and shall resume payments on and distributions
in respect of the Notes and may acquire them upon the earlier of:
(1) the date upon which the default is cured or waived, or
(2) in the case of a default referred to in Section 10.03(ii)
hereof, 179 days pass after notice is received if the maturity of such
Designated Senior Indebtedness has not been accelerated,
if this Article 10 otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
SECTION 10.04 ACCELERATION OF NOTES
If payment of the Notes is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Indebtedness of the
acceleration.
SECTION 10.05 WHEN DISTRIBUTION MUST BE PAID OVER
In the event that the Trustee or any Holder receives any
payment of any Obligations with respect to the Notes at a time when the Trustee
or such Holder, as applicable, has actual knowledge that such payment is
prohibited by Section 10.03 hereof, such payment shall be held by the Trustee or
such Holder, in trust for the benefit of, and shall be paid forthwith over and
delivered, upon written request, to, the holders of Senior Indebtedness or
Guarantor Senior Indebtedness, as applicable, as their interests may appear or
their Representative under the indenture or other agreement (if any) pursuant to
which Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, may
have been issued, as their respective interests may appear, for application to
the payment of all Obligations with respect to Senior Indebtedness or Guarantor
Senior Indebtedness, as applicable, remaining unpaid to the extent necessary to
pay such Obligations in full in accordance with their terms, after giving effect
to any concurrent payment or distribution to or for the holders of Senior
Indebtedness or Guarantor Senior Indebtedness, as applicable.
With respect to the holders of Senior Indebtedness, or
Guarantor Senior
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Indebtedness, as applicable, the Trustee undertakes to perform only such
obligations on the part of the Trustee as are specifically set forth in this
Article 10, and no implied covenants or obligations with respect to the holders
of Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of Senior Indebtedness, or Guarantor
Senior Indebtedness, as applicable, and shall not be liable to any such holders
if the Trustee shall pay over or distribute to or on behalf of Holders or the
Company or any other Person money or assets to which any holders of Senior
Indebtedness or Guarantor Senior Indebtedness, as applicable, shall be entitled
by virtue of this Article 10, except if such payment is made as a result of the
willful misconduct or gross negligence of the Trustee.
SECTION 10.06 NOTICE BY COMPANY
The Company shall promptly notify the Trustee and the Paying
Agent of any facts known to the Company that would cause a payment of any
Obligations with respect to the Notes to violate this Article 10, but failure to
give such notice shall not affect the subordination of the Notes to the Senior
Indebtedness or Guarantor Senior Indebtedness, as applicable, as provided in
this Article 10.
SECTION 10.07 SUBROGATION
After all Senior Indebtedness or Guarantor Senior
Indebtedness, as applicable, is paid in full and until the Notes are paid in
full, Holders shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior
Indebtedness or Guarantor Senior Indebtedness, as applicable, to receive
distributions applicable to Senior Indebtedness or Guarantor Senior
Indebtedness, as applicable, to the extent that distributions otherwise payable
to the Holders have been applied to the payment of Senior Indebtedness or
Guarantor Senior Indebtedness, as applicable. A distribution made under this
Article 10 to holders of Senior Indebtedness or Guarantor Senior Indebtedness,
as applicable, that otherwise would have been made to Holders is not, as between
the Company or a Guarantor, as applicable, and Holders, a payment by the Company
or a Guarantor, as applicable, on the Notes.
SECTION 10.08 RELATIVE RIGHTS
This Article 10 defines the relative rights of Holders and
holders of Senior Indebtedness or Guarantor Senior Indebtedness, as applicable.
Nothing in this Indenture shall:
(1) impair, as between the Company and Holders, the obligation
of the Company, which is absolute and unconditional, to pay principal
of and interest on the Notes in accordance with their terms;
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(2) affect the relative rights of Holders and creditors of the
Company other than their rights in relation to holders of Senior
Indebtedness or Guarantor Senior Indebtedness, as applicable; or
(3) prevent the Trustee or any Holder from exercising its
available remedies upon a Default or Event of Default, subject to the
rights of holders and owners of Senior Indebtedness or Guarantor Senior
Indebtedness, as applicable, to receive distributions and payments
otherwise payable to Holders.
If the Company fails because of this Article 10 to pay
principal of or interest on a Note on the due date, the failure is still a
Default or Event of Default.
SECTION 10.9 SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY
No right of any holder of Senior Indebtedness or Guarantor
Senior Indebtedness, as applicable, to enforce the subordination of the
Indebtedness evidenced by the Notes shall be impaired by any act or failure to
act by the Company or any Holder or by the failure of the Company or a
Guarantor, as applicable, or any Holder to comply with this Indenture.
SECTION 10.10 DISTRIBUTION OR NOTICE TO REPRESENTATIVE
Whenever a distribution is to be made or a notice given to
holders of Senior Indebtedness or Guarantor Senior Indebtedness, as applicable,
the distribution may be made and the notice given to their Representative. The
Company shall provide the Trustee with notice of the name and address of any
Representative. In the absence of such notice, the Trustee may conclusively
assume that no Representative exists.
Upon any payment or distribution of assets of the Company
referred to in this Article 10, the Trustee and the Holders shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
for the purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other Indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
10.
SECTION 10.11 RIGHTS OF TRUSTEE AND PAYING AGENT
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee
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and the Paying Agent may continue to make payments on the Notes, unless the
Trustee shall have received at its Corporate Trust Office at least five Business
Days prior to the date of such payment written notice of facts that would cause
the payment of any Obligations with respect to the Notes to violate this Article
10. Only the Company or a Representative may give the notice. Nothing in this
Article 10 shall impair the claims of, or payments to, the Trustee under or
pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold
Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, with the
same rights it would have if it were not Trustee. Any Agent may do the same with
like rights.
SECTION 10.12 AUTHORIZATION TO EFFECT SUBORDINATION
Each Holder of a Note by the Holder's acceptance thereof
authorizes and directs the Trustee on the Holder's behalf to take such action as
may be necessary or appropriate to effectuate the subordination as provided in
this Article 10, and appoints the Trustee to act as the Holder's
attorney-in-fact for any and all such purposes. If the Trustee does not file a
proper proof of claim or proof of debt in the form required in any proceeding
referred to in Section 6.09 hereof at least 30 days before the expiration of the
time to file such claim, the Representative is hereby authorized to file an
appropriate claim for and on behalf of the Holders of the Notes.
SECTION 10.13 AMENDMENTS
The provisions of this Article 10 shall not be amended or
modified in a manner materially adverse to the Holders of Senior Indebtedness
without the written consent of the holders of all Designated Senior
Indebtedness.
ARTICLE 11
SUBSIDIARY GUARANTEES
SECTION 11.01 SUBSIDIARY GUARANTEES
Subject to the provisions of this Article 11, each Guarantor,
jointly and severally, hereby unconditionally guarantees to each Holder of a
Note authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, that: (a) the principal of, and premium, if any,
Liquidated Damages, if any, and interest on the Notes will be duly and
punctually paid in full when due, whether at maturity, by acceleration or
otherwise, and interest on overdue principal of, and premium, if any, Liquidated
Damages, if any and (to the extent permitted by law) interest on any interest,
if any, on the Notes and all other obligations of the Company to the Holders or
the Trustee hereunder or under the Notes (including fees, expenses or other)
will be promptly paid in full or performed, all in
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accordance with the terms hereof; and (b) in case of any extension of time of
payment or renewal of any Notes or any of 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, whether at stated maturity, by acceleration or
otherwise. Failing payment when due of any amount so guaranteed or failing
performance of any other obligation of the Company to the Holders, for whatever
reason, each Guarantor will be obligated to pay, or to perform or to cause the
performance of, the same immediately. An Event of Default under this Indenture
or the Notes shall constitute an event of default under this Subsidiary
Guarantee, and shall entitle the Holders of Notes to accelerate the obligations
of each Guarantor hereunder in the same manner and to the same extent as the
obligations of the Company. Each Guarantor hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any thereof, the entry 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 and relinquishes: (a) any right to require the Trustee, the Holders or
the Company (each, a "Benefitted Party") to proceed against the Company, the
Subsidiaries or any other Person or to proceed against or exhaust any security
held by a Benefitted Party at any time or to pursue any other remedy in any
secured party's power before proceeding against the Guarantors; (b) any defense
that may arise by reason of the incapacity, lack of authority, death or
disability of any other Person or Persons or the failure of a Benefitted Party
to file or enforce a claim against the estate (in administration, bankruptcy or
any other proceeding) of any other Person or Persons; (c) demand, protest and
notice of any kind (except as expressly required by this Indenture), including
but not limited to notice of the existence, creation or incurring of any new or
additional Indebtedness or obligation or of any action or non-action on the part
of the Guarantors, the Company, the Subsidiaries, any Benefitted Party, any
creditor of the Guarantors, the Company or the Subsidiaries or on the part of
any other Person whomsoever in connection with any obligations the performance
of which are hereby guaranteed; (d) any defense based upon an election of
remedies by a Benefitted Party, including but not limited to an election to
proceed against the Guarantors for reimbursement; (e) 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; (f) any defense arising because of a Benefitted Party's election, in
any proceeding instituted under the Bankruptcy Law, of the application of
Section 1111(b)(2) of the Bankruptcy Code; and (g) any defense based on any
borrowing or grant of a security interest under Section 364 of the Bankruptcy
Code. The Guarantors hereby covenant that the Subsidiary Guarantee will not be
discharged except by payment in full of all principal, premium, if any,
Liquidated Damages, if any, and interest on the Notes and all other costs
provided for under this Indenture, or as provided in Section 8.01.
If any Holder or the Trustee is required by any court or
otherwise to return to either the Company or the Guarantors, or any trustee or
similar official acting in relation
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to either the Company or the Guarantors, any amount paid by the Company or the
Guarantors to the Trustee or such Holder, the Subsidiary Guarantees, to the
extent theretofore discharged, shall be reinstated in full force and effect.
Each of the Guarantors agrees that it will not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor agrees that, as between it, on the one hand, and the Holders of Notes
and the Trustee, on the other hand, (x) the maturity of the obligations
guaranteed hereby may be accelerated as provided in Article 6 hereof for the
purposes hereof, 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 6 hereof, such obligations (whether or not due and payable) shall
forthwith become due and payable by such Guarantor for the purpose of the
Subsidiary Guarantee.
SECTION 11.02 EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES
To evidence the Subsidiary Guarantees set forth in Section
11.01 hereof, each of the Guarantors agrees that a notation of the Subsidiary
Guarantees substantially in the form included in Exhibit B shall be endorsed on
each Note authenticated and delivered by the Trustee and that this Indenture
shall be executed on behalf of the Guarantors by the Chairman of the Board, any
Vice Chairman, the President or one of the Vice Presidents of the Guarantors,
under a facsimile of its seal reproduced on this Indenture and attested to by an
Officer other than the Officer executing this Indenture.
Each of the Guarantors agree that the Subsidiary Guarantees
set forth in this Article 11 will remain in full force and effect and apply to
all the Notes notwithstanding any failure to endorse on each Note a notation of
the Subsidiary Guarantees.
If an Officer whose facsimile signature is on a Note no longer
holds that office at the time the Trustee authenticates the Note on which the
Subsidiary Guarantees are endorsed, the Subsidiary Guarantees shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
Subsidiary Guarantees set forth in this Indenture on behalf of the Guarantors.
SECTION 11.03 GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS
(a) Nothing contained in this Indenture or in the Notes shall
prevent any consolidation or merger of a Guarantor with or into the Company or
another Guarantor, or shall prevent the transfer of all or substantially all of
the assets of a Guarantor to the Company or another Guarantor. Upon any such
consolidation, merger, transfer or sale, the Subsidiary Guarantee of such
Guarantor shall no longer have any force or effect.
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(b) Except as set forth in Article 4, nothing contained in
this Indenture or in any of the Notes 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
successive consolidations or mergers in which such a Guarantor or its successor
or successors shall be a party or parties, or shall prevent the transfer of all
or substantially all of the assets of such a Guarantor, to a corporation other
than the Company or another Guarantor (whether or not affiliated with such
Guarantor) authorized to acquire and operate the same; provided, however, that,
except as provided in Section 11.04 hereof, each such Guarantor hereby covenants
and agrees that, upon any such consolidation, merger or transfer, the Subsidiary
Guarantee endorsed on the Notes, 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 a supplemental
indenture satisfactory in form to the Trustee, executed and delivered to the
Trustee, by the corporation formed by such consolidation, or into which such
Guarantor shall have been merged, or by the corporation which shall have
acquired such property. In case of any such consolidation, merger or transfer of
assets 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 Subsidiary Guarantee endorsed upon the Notes and the due and
punctual performance of all of the covenants and conditions of this Indenture to
be performed by such Guarantor, such successor corporation shall succeed to and
be substituted for such Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor corporation thereupon may cause to be
signed any or all of the Subsidiary Guarantees to be endorsed upon all of the
Notes issuable hereunder which theretofore shall not have been signed by the
Company and delivered to the Trustee. All the Subsidiary Guarantees so issued
shall in all respects have the same legal rank and benefit under this Indenture
as the Subsidiary Guarantees theretofore and thereafter issued in accordance
with the terms of this Indenture as though all of such Subsidiary Guarantees had
been issued at the date of the execution hereof.
(c) The Trustee, subject to the provisions of Section 11.04
hereof, shall be entitled to receive an Officers' Certificate and an Opinion of
Counsel as conclusive evidence that any such consolidation, merger, sale or
conveyance, and any such assumption of Obligations, comply with the provisions
of this Section 11.03. Such certificate and opinion shall comply with the
provisions of Section 11.05.
SECTION 11.04 RELEASES FOLLOWING SALE OF ASSETS
Concurrently with any sale of assets (including, if
applicable, all of the Capital Stock of any Guarantor other than the Guarantor),
any Liens in favor of the Trustee in the assets sold thereby shall be released;
provided that in the event of an Asset Sale, the Net Proceeds from such sale or
other disposition are treated in accordance with the provisions of Section 4.08
hereof. If the assets sold in such sale or other disposition include all or
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substantially all of the assets of any Guarantor or all of the Capital Stock of
any Guarantor in each case, in compliance with the terms hereof, then such
Guarantor (in the event of a sale or other disposition of all of the Capital
Stock of such Guarantor) or the corporation acquiring the property (in the event
of a sale or other disposition of all or substantially all of the assets of such
Guarantor) shall be released from and relieved of its obligations under its
Subsidiary Guarantee or Section 11.03 hereof as the case may be; provided that
in the event of an Asset Sale, the Net Proceeds from such sale or other
disposition are treated in accordance with the provisions of Section 4.08
hereof. Upon delivery by the Company to the Trustee of an Officer's Certificate
and Opinion of Counsel, and to the effect that such sale or other disposition
was made by the Company in accordance with the provisions of this Indenture,
including without limitation Section 4.08 hereof, the Trustee shall execute any
documents reasonably required in order to evidence the release of any such
Guarantor from its obligations under its Subsidiary Guarantee. Any Guarantor not
released from its obligations under its Subsidiary Guarantee shall remain liable
for the full amount of principal of and interest on the Notes and for the other
obligations of any Guarantor under this Indenture as provided in this Article
11.
SECTION 11.05 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 Subsidiary 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 this Article 11 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 this Article 11, result in the obligations of such Guarantor
under the Subsidiary Guarantee of such Guarantor not constituting a fraudulent
transfer or conveyance.
SECTION 11.06 APPLICATION OF CERTAIN TERMS AND PROVISIONS TO THE GUARANTOR
(a) For purposes of any provision of this Indenture which
provides for the delivery by any Guarantor of an Officers' Certificate and/or an
Opinion of Counsel, the definitions of such terms in Section 1.01 shall apply to
such Guarantor as if references therein to the Company were references to such
Guarantor.
(b) Any request, direction, order or demand which by any
provision of this Indenture is to be made by any Guarantor, shall be sufficient
if evidenced as described in Section 12.02 as if references therein to the
Company were references to such Guarantor.
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(c) Any notice or demand which by any provision of this
Indenture is required or permitted to be given or served by the Trustee or by
the holders of Notes to or on any Guarantor may be given or served as described
in Section 12.02 as if references therein to Company were references to such
Guarantor.
(d) Upon any demand, request or application by any Guarantor
to the Trustee to take any action under this Indenture, such Guarantor shall
furnish to the Trustee such certificates and opinions as are required in Section
11.04 hereof as if all references therein to the Company were references to such
Guarantor.
SECTION 11.07 SUBORDINATION OF SUBSIDIARY GUARANTEES
The Obligations of each Guarantor under its Subsidiary
Guarantee pursuant to this Article 11 shall be junior and subordinated to the
Guarantor Senior Indebtedness of such Guarantor on the same basis as the Notes
are junior and subordinated to the Senior Indebtedness of the Company. For the
purposes of the foregoing sentence, (a) each Guarantor may make, and the Trustee
and the Holders of the Notes shall have the right to receive and/or retain,
payments by any of the Guarantors only at such times as they may receive and/or
retain payments in respect of the Notes pursuant to this Indenture, including
Article 10 hereof, and (b) the rights and obligations of the relevant parties
relative to the Subsidiary Guarantees and the Guarantor Senior Indebtedness
shall be the same as their respective rights and obligations relative to the
Notes and Senior Indebtedness of the Company pursuant to Article 10.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01 TRUST INDENTURE ACT CONTROLS
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA Section 318(c), the imposed duties
shall control.
SECTION 12.02 NOTICES
Any notice or communication by the Company or the Trustee to
the others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Company:
Stanadyne Automotive Corp.
92 Deerfield Road
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Windsor, Connecticut 06095-4209
Telecopier No.: (860) 683-4500
Attention: Chief Financial Officer
If to the Trustee:
United States Trust Company
of New York
114 West 47th Street
New York, New York 10036
Telephone No.: (212) 852-1000
Telecopier No.: (212) 852-1626
Attention: Corporate Trust Department
The Company or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on the
register kept by the Registrar. Any notice or communication shall also be so
mailed to any Person described in TIA Section 313(c), to the extent required by
the TIA. Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 12.03 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
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SECTION 12.04 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:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 12.05 hereof) stating that, in the opinion of the
signers, all conditions precedent and covenants, if any, provided for
in this Indenture relating to the proposed action have been satisfied;
and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 12.05 hereof) stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been
satisfied.
SECTION 12.05 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 a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of
TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she
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 satisfied; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
SECTION 12.06 RULES BY TRUSTEE AND AGENTS
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
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<PAGE> 87
SECTION 12.07 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS
No past, present or future director, officer, employee,
incorporator or stockholder of the Company, as such, shall have any liability
for any obligations of the Company under the Notes, this Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes.
SECTION 12.08 GOVERNING LAW
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES.
SECTION 12.09 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Company or its Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 12.10 SUCCESSORS
All agreements of the Company in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 12.11 SEVERABILITY
In case any provision in this Indenture or in the Notes 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 12.12 COUNTERPART ORIGINALS
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
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SECTION 12.13 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
87
<PAGE> 89
SIGNATURES
Dated as of December 11, 1997 STANADYNE AUTOMOTIVE CORP.
By: /s/ Michael H. Boyer
-------------------------------
Name: Michael H. Boyer
Title: Chief Financial Officer
Attest:
/s/ William D. Gurley
- ----------------------------------
Name: William D. Gurley
Title: President and CEO
Dated as of December 11, 1997 PRECISION ENGINE PRODUCTS CORP.
By: /s/ Michael H. Boyer
-------------------------------
Name: Michael H. Boyer
Title: Chief Financial Officer
Attest:
/s/ William D. Gurley
- ----------------------------------
Name: William D. Gurley
Title: President and CEO
Dated as of December 11, 1997 DSD INTERNATIONAL CORP.
By: /s/ Michael H. Boyer
-------------------------------
Name: Michael H. Boyer
Title: Chief Financial Officer
Attest:
/s/ William D. Gurley
- ----------------------------------
Name: William D. Gurley
Title: President and CEO
<PAGE> 90
Dated as of December 11, 1997 UNITED STATES TRUST COMPANY OF NEW YORK
By: /s/ Margaret M. Ciesmelewski
-------------------------------
Name: Margaret M. Ciesmelewski
Title: Assistant Vice President
Attest:
/s/ Robert F. Lee (SEAL)
- ----------------------------------
Name: Robert F. Lee
Title: Assistant Secretary
89
<PAGE> 91
Exhibit A
(Face of Note)
10 1/4% [Series A] [Series B] Senior Subordinated Notes due 2007
No. $100,000,000
STANADYNE AUTOMOTIVE CORP.
promises to pay to
or registered assigns,
the principal sum of
Dollars on December 15, 2007
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
Dated: December 11, 1997
STANADYNE AUTOMOTIVE, CORP.
By:________________________
Name:
Title:
By:________________________
Name:
Title:
(SEAL)
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
United States Trust Company of New York
By:______________________________
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(Back of Note)
10 1/4% [Series A] [Series B] Senior Subordinated Notes due 2007
Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except 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 or by the Depository or any
such nominee to a successor Depository or a nominee of such successor
Depository. Unless this certificate is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York, New York) ("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 such other
name as may be requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or such other entity as may be 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.(1)/
THE NOTES (OR ITS PREDECESSOR) EVIDENCED HEREBY WERE
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE NOTES EVIDENCED HEREBY MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE NOTES EVIDENCED
HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE NOTE EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH NOTE MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON WHO
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE
UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR 904 OF REGULATION S UNDER THE SECURITIES
ACT, OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
- --------
1/ This paragraph should be included only if the Note is issued in global
form.
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<PAGE> 93
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE NOTES EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH IN (A) ABOVE.
Capitalized terms used herein shall have the meanings assigned to them
in this Indenture referred to below unless otherwise indicated.
1. Interest. Stanadyne Automotive Corp., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at
10 1/4% per annum from December 11, 1997 until maturity and shall pay the
Liquidated Damages, if any, payable pursuant to Section 5 of the Registration
Rights Agreement referred to below. The Company will pay interest and Liquidated
Damages semi-annually on June 15 and December 15 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each an
"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
date of issuance; provided that if there is no existing Default in the payment
of interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be June 15, 1998. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Notes at the close of business on the June 1 or
December 1 next preceding the Interest Payment Date, even if such Notes are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium, interest and
Liquidated Damages, if any, at the office or agency of the Company maintained
for such purpose within or without the City and State of New York, or, at the
option of the Company, payment of interest and Liquidated Damages, if any, may
be made by check mailed to the Holders at their addresses set forth in the
register of Holders, and provided that payment by wire transfer of immediately
available funds will be required with respect to principal of, interest, premium
and Liquidated Damages, if any, on all Global Notes and all other Notes the
Holders of which shall have provided wire transfer instructions to the Company
or the Paying Agent. Such payment shall be in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts.
3. Paying Agent and Registrar. Initially, United States Trust Company
of New York, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
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4. Indenture. The Company issued the Notes under an Indenture dated as
of December 11, 1997 ("Indenture") between the Company and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. The Notes are unsecured obligations of the Company limited to
$125,000,000 (of which $100,000,000 will be issued as of December 11, 1997) in
aggregate principal amount.
5. Optional Redemption.
(a) Except as set forth in clause (b) of this Section of this
Note, the Company shall not have the option to redeem the Notes prior to
December 15, 2002. Thereafter, the Company shall have the option to redeem the
Notes, in whole or in part, at the redemption prices (expressed as percentages
of principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages, if any, thereon, to the applicable redemption date, if
redeemed during the twelve-month period beginning on December 15 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002 .......................................... 105.125%
2003 .......................................... 103.417%
2004 .......................................... 101.708%
2005 and thereafter ........................... 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this
Section of the Notes, at any time prior to December 15, 2000, the Company may
(but shall not have the obligation to) redeem up to 35% of the original
aggregate principal amount of the Notes at a redemption price of 110.250% of the
principal amount thereof, in each case plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the redemption date, with the Net Cash
Proceeds received by the Company from one or more of Equity Offerings; provided
that at least 65% of the aggregate principal amount of Notes originally issued
remain outstanding immediately after the occurrence of such redemption; and
provided, further, that such redemption shall occur within 60 days of the date
of the closing of such Equity Offering.
(c) Notice of redemption will be mailed at least 30 days but
not more than 60 days before the redemption date to each Holder whose Notes are
to be redeemed at its registered address. Notes in denominations larger than
$1,000 may be redeemed in part but only in integral multiples of $1,000, unless
all of the Notes held by a Holder are to be redeemed. On and after the
redemption date interest ceases to accrue on Notes or portions thereof called
for redemption unless the Company defaults in such payments due on the
redemption date.
6. Mandatory Redemption.
The Company shall not be required to make mandatory redemption payments
with respect to the Notes.
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7. Repurchase at Option of Holder.
(a) Upon the occurrence of a Change of Control, each Holder of Notes
will have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to
the offer described below (the "Change of Control Offer") at an offer price in
cash equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date of purchase
on a date (the "Change of Control Payment") no later than 60 Business Days after
the occurrence of the Change of Control. Within 35 days following any Change of
Control, the Company will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Notes pursuant to the procedures required by the Indenture and
described in such notice, which offer shall remain open for at least 20 Business
Days following its commencement, but in any event no longer than 30 Business
Days. The Company will comply with the requirements of 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 connection with the
repurchase of the Notes as a result of a Change of Control. To the extent that
the provisions of any such securities laws or regulations conflict with the
provisions of this paragraph, compliance by the Company or any of the Guarantors
with such laws and regulations shall not in and of itself cause a breach of its
obligations under such covenant.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. Prior to complying with the
provisions of this covenant, but in any event within 30 days following a Change
of Control, the Company will either repay all outstanding Designated Senior
Indebtedness or obtain the requisite consents, if any, under all agreements
governing outstanding Designated Senior Indebtedness to permit the repurchase of
Notes required by this covenant. The Company will not be required to purchase
any Notes until it has complied with the preceding sentence, but the Company's
failure to make a Change of Control Offer when required or to purchase tendered
Notes when tendered would constitute an Event of Default. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(b) The Company will not, and will not permit any of its Subsidiaries
to, engage in an Asset Sale in excess of $1,000,000 unless (i) the Company (or
the 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 assets or Equity
Interest sold or otherwise disposed of and, in the case of a lease of assets, a
lease providing for rent and other conditions which are no less favorable to the
Company (or the Subsidiary, as the case may be) in any material respect than the
then prevailing market conditions (evidenced in each case by a resolution of the
Board of Directors
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of such entity set forth in an Officers' Certificate delivered to the Trustee)
of the assets or Equity Interests sold or otherwise disposed of, and (ii) at
least 75% (100% in the case of lease payments) of the consideration therefor
received by the Company or such Subsidiary is in the form of cash or Cash
Equivalents; provided that the amount of (x) any liabilities (as shown on the
Company's or such Subsidiary's most recent balance sheet or in the notes
thereto, but excluding contingent liabilities and trade payables) of the Company
or any Subsidiary (other than liabilities that are by their terms subordinated
to the Notes or any Guarantee thereof) that are assumed by the transferee of any
such assets and (y) any notes, securities or other obligations received by the
Company or any such Subsidiary from such transferee that are promptly, but in no
event more than 30 days after receipt, converted by the Company or such
Subsidiary into cash shall (to the extent of the cash received) be deemed to be
cash for purposes of this provision and the receipt of such cash shall be
treated as cash received from the Asset Sale for which such Notes or obligations
were received.
The Company or any of its Subsidiaries may apply the Net Proceeds from
each Asset Sale, at its option within 360 days, (a) to permanently reduce any
Senior Indebtedness (and in the case of any senior revolving indebtedness to
correspondingly permanently reduce commitments with respect thereto), (b) to
commit to the acquisition of another business or the acquisition of other
long-term assets, in each case, in the same or a Related Business, or (c) to
reimburse the Company or its Subsidiaries for expenditures made, and costs
incurred, to repair, rebuild, replace or restore property subject to loss,
damage or taking to the extent that the Net Proceeds consist of insurance
proceeds received on account of such loss, damage or taking. Pending the final
application of any such Net Proceeds, the Company may temporarily reduce Senior
Revolving Debt or otherwise invest such Net Proceeds in any manner that is not
prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this paragraph will be
deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $5,000,000, the Company will be required to make an offer to
all Holders of Notes (an "Asset Sale Offer") and to holders of other
Indebtedness of the Company outstanding ranking on a parity with the Notes with
similar provisions requiring the Company to make a similar offer with proceeds
from asset sales, pro rata in proportion to the respective principal amounts (or
accreted values in the case of Indebtedness issued with an original issue
discount) of the Notes and such other Indebtedness then outstanding, to purchase
the maximum principal amount (or accreted value, as applicable) of Notes and
such other Indebtedness, if any, that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase, in accordance with the procedures set forth in
the Indenture. If the aggregate principal amount (or accreted value, as
applicable) of Notes and such Indebtedness surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and
such Indebtedness to be purchased on a pro rata basis. Upon completion of such
offer to purchase, the amount of Excess Proceeds shall be reset at zero.
8. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption,
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except for the unredeemed portion of any Note being redeemed in part. Also, it
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
9. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
10. Amendment, Supplement and Waiver. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of a majority in aggregate principal amount of the then outstanding
Notes, and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in aggregate principal amount of the then outstanding Notes. Without
the consent of any Holder of a Note, the Indenture or the Notes may be amended
or supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of the Notes (including the
addition of any Subsidiary Guarantors) or that does not adversely affect the
legal rights under the Indenture of any such Holder, or to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act.
11. Defaults and Remedies. Events of Default include: (i) default for
30 days in the payment when due of interest on or Liquidated Damages, if any,
with respect to the Notes; (ii) default in payment when due of principal of or
premium, if any, on the Notes when the same becomes due and payable at maturity,
upon redemption (including in connection with an offer to purchase) or
otherwise, (iii) failure by the Company to comply with Section 4.07 and 4.08 of
the Indenture, which failure remains uncured for 30 days; (iv) failure by the
Company for 60 days after notice to the Company by the Trustee or the Holders of
at least 25% in aggregate principal amount of the Notes then outstanding to
comply with certain other agreements in the Indenture or the Notes; (v) default
under certain other agreements relating to Indebtedness of the Company which
default results in the acceleration of such Indebtedness prior to its express
maturity; (vi) certain nonappealable final judgments for the payment of money
that remain undischarged for a period of 60 days; (vii) a declaration that any
of the Subsidiary Guarantees is unenforceable; or (viii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Significant
Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in aggregate principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately by
notice in writing to the Company (and to the Trustee if given by the Holders)
and the representative of holders of Indebtedness under the Credit Agreement, if
any amounts are outstanding thereunder. Notwithstanding the foregoing, in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes will (i) become due and payable without
further action or notice or (ii) if there are any amounts outstanding under the
Credit Agreement, become due and immediately payable upon the first to occur of
an acceleration under the Credit Agreement or five Business Days after receipt
by the Company and the representative of the holders of the Indebtedness under
the Credit Agreement of the Acceleration Notice, but only if an Event of Default
is then continuing. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in aggregate principal amount of the then
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outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest. The Holders of a majority in aggregate principal amount of
the Notes then outstanding by notice to the Trustee may on behalf of the Holders
of all of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, the Notes. The Company is
required to deliver to the Trustee annually a statement regarding compliance
with the Indenture, and the Company is required upon becoming aware of any
Default or Event of Default, to deliver to the Trustee a statement specifying
such Default or Event of Default.
12. Subordination. The payment of principal of, premium, if any, and
interest on the Notes will be subordinated in right of payment to the prior
payment in full of Senior Indebtedness as set forth in Article 10 of the
Indenture.
13. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
15. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. Additional Rights of Holders of Transfer Restricted Notes. In
addition to the rights provided to Holders of Notes under the Indenture, Holders
of Transferred Restricted Notes shall have all the rights set forth in the
Registration Rights Agreement dated as of the date of the Indenture, between the
Company and the parties named on the signature pages thereof (the "Registration
Rights Agreement").
18. 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 Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
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The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Stanadyne Automotive Corp.
92 Deerfield Road
Windsor, Connecticut 06095-4209
Telecopier No.: (860) 683-4500
Attention: Chief Financial Officer
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EXHIBIT B
SUBSIDIARY GUARANTEE
The Guarantor listed below (hereinafter referred to as the
"Guarantors," which term includes any successor or assign under the Indenture
(the "Indenture") and any additional Guarantors), has irrevocably and
unconditionally guaranteed (i) the due and punctual payment of the principal of,
premium, if any, and interest on the 10 1/4% Senior Subordinated Notes due 2007
(the "Notes") of Stanadyne Automotive Corp., a Delaware corporation (the
"Company"), whether at stated maturity, by acceleration or otherwise, the due
and punctual payment of interest on the overdue principal, and premium if any,
and (to the extent permitted by law) interest on any interest, if any, on the
Notes, 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 11 of the Indenture, (ii) in case of any extension of time of
payment or renewal of any Notes or any 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, and (iii) the payment of any and all costs and expenses (including
reasonable attorneys' fees) incurred by the Trustee or any Holder in enforcing
any rights under this Subsidiary Guarantee.
The obligations of each Guarantor to the Holder and to the Trustee
pursuant to this Subsidiary Guarantee and the Indenture are expressly set forth
in Article 11 of the Indenture and reference is hereby made to such Indenture
for the precise terms of this Guarantee.
No stockholder, officer, director or incorporator, as such, past,
present or future of each Guarantor shall have any liability under this
Subsidiary Guarantee by reason of his or its status as such stockholder,
officer, director or incorporator.
This is a continuing Guarantee and shall remain in full force and
effect and shall be binding upon each Guarantor and its successors and assigns
until full and final payment of all of the Company's obligations under the Notes
and Indenture and shall inure to the benefit of the successors and assigns of
the Trustee and the Holders, and, in the event of any transfer or assignment of
rights by any Holder or the Trustee, the rights and privileges herein conferred
upon that party shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms and conditions hereof. This is a Guarantee
of payment and not of collectibility.
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Note upon which this
Subsidiary Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.
The Obligations of each Guarantor under its Subsidiary Guarantee shall
be limited to the extent necessary to insure that it does not constitute a
fraudulent conveyance under applicable law.
The Obligations of each Guarantor under its Subsidiary Guarantee
pursuant to Article 11 of the Indenture shall be junior and subordinated to the
Guarantor Senior Indebtedness (as defined in the Indenture) of such Guarantor on
the same basis as the Notes are junior and subordinated to the Senior
Indebtedness of the Company. For the purposes of the foregoing sentence, (a)
each Guarantor may make, and the Trustee and the Holders of the Notes shall
B-1
<PAGE> 101
have the right to receive and/or retain, payments by any of the Guarantors only
at such times as they may receive and/or retain payments in respect of the Notes
pursuant to the Indenture, including Article 10 thereof, and (b) the rights and
obligations of the relevant parties relative to the Subsidiary Guarantees and
the Guarantor Senior Indebtedness shall be the same as their respective rights
and obligations relative to the Notes and Senior Indebtedness of the Company
pursuant to Article 10 of the Indenture.
THE TERMS OF ARTICLE 11 OF THE INDENTURE ARE INCORPORATED HEREIN BY
REFERENCE.
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
Guarantors:
STANADYNE AUTOMOTIVE CORP.
By:________________________________
Name:
Title:
PRECISION ENGINE PRODUCTS CORP.
By:________________________________
Name:
Title:
DSD INTERNATIONAL CORP.
By:________________________________
Name:
Title:
B-2
<PAGE> 102
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:_________________________
Your Signature:________________________________
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee.
B-3
<PAGE> 103
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.07 or 4.08 of the Indenture, check the box below:
[ ] Section 4.07 [ ] Section 4.08
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.07 or Section 4.08 of the Indenture, state the
amount you elect to have purchased: $___________
Date:_______________________ Your Signature:__________________________
(Sign exactly as your name appears on
the Note)
Tax Identification No.:_________________
Signature Guarantee.
B-4
<PAGE> 104
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTE(2)/
The following exchanges of a part of this Global Note for Definitive
Notes have been made:
<TABLE>
<CAPTION>
Principal Amount of this Signature of
Amount of decrease in Amount of increase in Global Note following authorized officer of
Principal Amount of Principal Amount of such decrease Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
- ---------------- ---------------- ---------------- ------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
- --------
2/ This should be included only if the Note is issued in global form.
B-5
<PAGE> 105
EXHIBIT C
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
NOTES
Re: 10 1/4% Senior Subordinated Notes due 2007
This Certificate relates to $100,000,000 principal amount of Notes
held in * ________ book-entry or *_______ definitive form by ________________
(the "Transferor").
The Transferor*:
[ ] has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Note held by the Depository a Note or
Notes in definitive, registered form of authorized denominations in an aggregate
principal amount equal to its beneficial interest in such Global Note (or the
portion thereof indicated above); or
[ ] has requested the Trustee by written order to exchange or register
the transfer of a Note or Notes.
[ ] In connection with such request and in respect of each such Note, the
Transferor does hereby certify that Transferor is familiar with the Indenture
relating to the above captioned Notes and as provided in Section 2.06 of such
Indenture, the transfer of this Note does not require registration under the
Securities Act (as defined below) because:*
[ ] Such Note is being acquired for the Transferor's own account, without
transfer (in satisfaction of Section 2.06(a)(ii)(A) or Section 2.06(d)(i)(A) of
the Indenture).
[ ] Such Note is being transferred to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act")) in reliance on Rule 144A (in satisfaction of Section
2.06(a)(ii)(B), Section 2.06(b)(i) or Section 2.06(d)(i)(B) of the Indenture) or
pursuant to an exemption from registration in accordance with Rule 904 under the
Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section
2.06(d)(i)(B) of the Indenture.)
[ ] Such Note is being transferred in accordance with Rule 144 under the
Securities Act, or pursuant to an effective registration statement under the
Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section
2.06(d)(i)(B) of the Indenture).
_______________
*Check applicable box.
C-1
<PAGE> 106
[ ] Such Note is being transferred in reliance on and in compliance with
an exemption from the registration requirements of the Securities Act, other
than Rule 144A, 144 or Rule 904 under the Securities Act. An Opinion of Counsel
to the effect that such transfer does not require registration under the
Securities Act accompanies this Certificate (in satisfaction of Section
2.06(a)(ii)(C) or Section 2.06(d)(i)(C) of the Indenture).
_____________________________________
[INSERT NAME OF TRANSFEROR]
By:__________________________________
Date:____________________________
- ---------------
*Check applicable box.
C-2
<PAGE> 107
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
----------- -------
<S> <C> <C>
310(a)(1) ................................................................... 7.10
(a)(2) ................................................................... 7.10
(a)(3) ................................................................... N.A.
(a)(4) ................................................................... N.A.
(b) ................................................................... 7.08; 7.10; 12.02
(c) ................................................................... N.A.
311(a) ................................................................... 7.11
(b) ................................................................... 7.11
(c) ................................................................... N.A.
312(a) ................................................................... 2.05
(b) ................................................................... 12.03
(c) ................................................................... 12.03
313(a) ................................................................... 7.06
(b)(1) ................................................................... N.A.
(b)(2) ................................................................... 7.06
(c) ................................................................... 7.06; 12.02
(d) ................................................................... 7.06
314(a) ................................................................... 4.09; 12.02
(b) ................................................................... N.A.
(c)(1) ................................................................... 12.04
(c)(2) ................................................................... 7.02; 12.04
(c)(3) ................................................................... N.A.
(d) ................................................................... N.A.
(e) ................................................................... 12.05
(f) ................................................................... N.A.
315(a) ................................................................... 7.01(2)
(b) ................................................................... 7.05; 12.02
(c) ................................................................... 7.01(1)
(d) ................................................................... 7.01(3)
(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) ................................................................... 12.01
</TABLE>
- ---------------------
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE> 108
<TABLE>
<CAPTION>
Page
----
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
<S> <C> <C>
Section 1.01 Definitions.......................................................................... 1
Section 1.02 Other Definitions.................................................................... 21
Section 1.03 Incorporation by Reference of Trust Indenture Act.................................... 22
Section 1.04 Rules of Construction................................................................ 22
ARTICLE 2
THE NOTES
Section 2.01 Form and Dating...................................................................... 23
Section 2.02 Execution and Authentication......................................................... 23
Section 2.03 Registrar and Paying Agent........................................................... 24
Section 2.04 Paying Agent to Hold Money in Trust.................................................. 25
Section 2.05 Holder Lists......................................................................... 25
Section 2.06 Transfer and Exchange................................................................ 25
Section 2.07 Replacement Notes.................................................................... 31
Section 2.08 Outstanding Notes.................................................................... 31
Section 2.09 Treasury Notes....................................................................... 32
Section 2.10 Temporary Notes...................................................................... 32
Section 2.11 Cancellation......................................................................... 32
Section 2.12 Defaulted Interest................................................................... 33
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01 Notices to Trustee................................................................... 33
Section 3.02 Selection of Notes to Be Redeemed.................................................... 33
Section 3.03 Notice of Redemption................................................................. 34
Section 3.04 Effect of Notice of Redemption....................................................... 35
Section 3.05 Deposit of Redemption Price.......................................................... 35
Section 3.06 Notes Redeemed in Part............................................................... 35
Section 3.07 Optional Redemption.................................................................. 36
</TABLE>
i
<PAGE> 109
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Section 3.08 No Mandatory Redemption.............................................................. 36
ARTICLE 4
COVENANTS
Section 4.01 Payment of Notes..................................................................... 37
Section 4.02 Maintenance of Office or Agency...................................................... 37
Section 4.03 Reports.............................................................................. 38
Section 4.04 Compliance Certificate............................................................... 38
Section 4.05 Taxes................................................................................ 39
Section 4.06 Stay, Extension and Usury Laws....................................................... 39
Section 4.07 Change of Control.................................................................... 40
Section 4.08 Asset Sales.......................................................................... 41
Section 4.09 Restricted Payments.................................................................. 44
Section 4.10 Incurrence of Indebtedness and Issuance of Preferred Stock........................... 48
Section 4.11 Liens................................................................................ 51
Section 4.12 Dividend and Other Payment Restrictions Affecting Subsidiaries....................... 51
Section 4.13 Limitation on Layering Debt.......................................................... 52
Section 4.14 Transactions with Affiliates......................................................... 53
Section 4.15 Additional Subsidiary Guarantees..................................................... 53
Section 4.16 Line of Business..................................................................... 53
Section 4.17 Corporate Existence...................................................................54
Section 4.18 Status as an Investment Company.......................................................54
ARTICLE 5
SUCCESSORS
Section 5.01 Merger, Consolidation, or Sale of Assets............................................. 54
Section 5.02 Successor Corporation Substituted.................................................... 55
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 Events of Default.................................................................... 56
Section 6.02 Acceleration......................................................................... 58
Section 6.03 Other Remedies....................................................................... 59
</TABLE>
ii
<PAGE> 110
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 6.04 Waiver of Past Defaults.............................................................. 59
Section 6.05 Control by Majority.................................................................. 59
Section 6.06 Limitation on Suits.................................................................. 60
Section 6.07 Rights of Holders of Notes to Receive Payment........................................ 60
Section 6.08 Collection Suit by Trustee........................................................... 60
Section 6.09 Trustee May File Proofs of Claim..................................................... 61
Section 6.10 Priorities........................................................................... 61
Section 6.11 Undertaking for Costs................................................................ 62
ARTICLE 7
TRUSTEE
Section 7.01 Duties of Trustee.................................................................... 62
Section 7.02 Rights of Trustee.................................................................... 63
Section 7.03 Individual Rights of Trustee......................................................... 64
Section 7.04 Trustee's Disclaimer................................................................. 65
Section 7.05 Notice of Defaults................................................................... 65
Section 7.06 Reports by Trustee to Holders of the Notes........................................... 65
Section 7.07 Compensation and Indemnity........................................................... 65
Section 7.08 Replacement of Trustee............................................................... 66
Section 7.09 Successor Trustee by Merger, etc..................................................... 68
Section 7.10 Eligibility; Disqualification........................................................ 68
Section 7.11 Preferential Collection of Claims Against Company.................................... 68
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance............................. 68
Section 8.02 Legal Defeasance and Discharge....................................................... 68
Section 8.03 Covenant Defeasance.................................................................. 69
Section 8.04 Conditions to Legal or Covenant Defeasance........................................... 70
Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other
Miscellaneous Provisions............................................................. 71
Section 8.06 Repayment to Company................................................................. 72
Section 8.07 Reinstatement........................................................................ 72
</TABLE>
iii
<PAGE> 111
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01 Without Consent of Holders of Notes.................................................. 73
Section 9.02 With Consent of Holders of Notes..................................................... 74
Section 9.03 Compliance with Trust Indenture Act.................................................. 76
Section 9.04 Revocation and Effect of Consents.................................................... 76
Section 9.05 Notation on or Exchange of Notes..................................................... 76
Section 9.06 Trustee to Sign Amendments, etc...................................................... 76
ARTICLE 10
SUBORDINATION
Section 10.01 Agreement to Subordinate............................................................. 77
Section 10.02 Liquidation; Dissolution; Bankruptcy................................................. 77
Section 10.03 Default on Designated Senior Indebtedness............................................ 78
Section 10.04 Acceleration of Notes................................................................ 79
Section 10.05 When Distribution Must Be Paid Over.................................................. 79
Section 10.06 Notice by Company.................................................................... 80
Section 10.07 Subrogation.......................................................................... 80
Section 10.08 Relative Rights...................................................................... 80
Section 10.9 Subordination May Not Be Impaired by Company......................................... 81
Section 10.10 Distribution or Notice to Representative............................................. 81
Section 10.11 Rights of Trustee and Paying Agent................................................... 82
Section 10.12 Authorization to Effect Subordination................................................ 82
Section 10.13 Amendments........................................................................... 82
ARTICLE 11
SUBSIDIARY GUARANTEES
Section 11.01 Subsidiary Guarantees................................................................ 82
Section 11.02 Execution and Delivery of Subsidiary Guarantees...................................... 84
Section 11.03 Guarantors May Consolidate, etc., on Certain Terms................................... 85
Section 11.04 Releases Following Sale of Assets................................................... 86
Section 11.05 Limitation of Guarantor's Liability.................................................. 86
Section 11.06 Application of Certain Terms and Provisions to the Guarantor......................... 87
</TABLE>
iv
<PAGE> 112
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 11.07 Subordination of Subsidiary Guarantees............................................... 87
ARTICLE 12
MISCELLANEOUS
Section 12.01 Trust Indenture Act Controls......................................................... 88
Section 12.02 Notices.............................................................................. 88
Section 12.03 Communication by Holders of Notes with Other Holders of Notes........................ 89
Section 12.04 Certificate and Opinion as to Conditions Precedent................................... 89
Section 12.05 Statements Required in Certificate or Opinion........................................ 90
Section 12.06 Rules by Trustee and Agents.......................................................... 90
Section 12.07 No Personal Liability of Directors, Officers, Employees and
Stockholders......................................................................... 90
Section 12.08 Governing Law........................................................................ 90
Section 12.09 No Adverse Interpretation of Other Agreements........................................ 91
Section 12.10 Successors........................................................................... 91
Section 12.11 Severability......................................................................... 91
Section 12.12 Counterpart Originals................................................................ 91
Section 12.13 Table of Contents, Headings, etc..................................................... 91
EXHIBITS
Exhibit A FORM OF NOTE.........................................................................A-1
Exhibit B FORM OF GUARANTEE....................................................................B-1
Exhibit C CERTIFICATE OF TRANSFEROR............................................................C-1
</TABLE>
v
<PAGE> 1
Exhibit 4.2
$100,000,000
10 1/4% Senior Subordinated Notes due 2007
SAC AUTOMOTIVE, INC.
PURCHASE AGREEMENT
December 4, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE> 2
$100,000,000
10 1/4% Senior Subordinated Notes due 2007
SAC AUTOMOTIVE INC.
PURCHASE AGREEMENT
December 4, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
Dear Sirs:
SAC Automotive Inc., a Delaware corporation, which upon the
completion of the Acquisition and the Merger Transactions referred to below will
have the name "Stanadyne Automotive Corp." (the "COMPANY"), proposes to issue
and sell to Donaldson, Lufkin & Jenrette Securities Corporation (the "INITIAL
PURCHASER") an aggregate of $100,000,000 in principal amount of its 10 1/4%
Senior Subordinated Notes due 2007 (the "SERIES A NOTES"), subject to the terms
and conditions set forth herein. The Series A Notes are to be issued pursuant to
the provisions of an indenture (the "INDENTURE"), to be dated as of the Closing
Date (as defined below), among the Company, and United States Trust Company of
New York, as trustee (the "TRUSTEE"). The Series A Notes and the Series B Notes
(as defined below) issuable in exchange therefor are collectively referred to
herein as the "NOTES." The Notes will be guaranteed (the "SUBSIDIARY
GUARANTEES") by each of the entities listed on Schedule A hereto (each, a
"GUARANTOR" and collectively the "GUARANTORS"). The Company and the Guarantors
are referred to herein collectively as the "ISSUERS." Capitalized terms used but
not defined herein shall have the meanings given to such terms in the Indenture.
The Notes are being issued and sold in connection with the purchase
(the "STOCK PURCHASE"), pursuant to a Stock Purchase Agreement dated November 7,
1997 (the "STOCK PURCHASE AGREEMENT"), by American Industrial Partners Capital
Fund II, L.P. ("AIP"), from Metromedia Company and certain other persons
(collectively, the "STANADYNE SELLERS") of all of the issued and outstanding
shares of capital stock of Stanadyne Automotive Holding Corp., a Delaware
corporation ("OLD HOLDINGS"). Pursuant to the Stock Purchase and certain related
transactions that will be consummated substantially simultaneously, (i) AIP and
certain management investors will purchase common equity of SAC, Inc., a
Delaware corporation ("NEW HOLDINGS"), (ii) the Company will issue and sell the
Notes, together with the guarantee thereof of the Subsidiary Guarantors, (iii)
the Company will enter into a Credit Agreement (the "CREDIT AGREEMENT") with the
lenders and
<PAGE> 3
administrative and collateral agents named therein pursuant to which it will
borrow $55.0 million in term loans and approximately $11.5 million in revolving
loans, (iv) the Company will advance $67.5 million to New Holdings in the form
of an intercompany note, and (v) New Holdings will purchase the issued and
outstanding capital stock of Old Holdings. Immediately upon the consummation of
the Acquisition, (a) Old Holdings will merge with and into Stanadyne Automotive
Corp., a Delaware corporation ("OLD STANADYNE"), which will be the surviving
corporation of the merger, (b) the Company will merge with and into Old
Stanadyne, which will be the surviving corporation of the merger, and (c) New
Holdings will change its name to "Stanadyne Automotive Holding Corp."
As used in this Agreement, (I) the term "ACQUISITION" shall mean the
transaction described in clause (v) of the immediately foregoing paragraph; (II)
the term "MERGER TRANSACTIONS" shall mean, collectively, the transactions
described in clauses (a), (b) and (c) of the immediately foregoing paragraph;
(III) the term "ACQUISITION TRANSACTIONS" shall mean, collectively, all of the
transactions described in the immediately foregoing paragraph; (IV) the term
"ACQUISITION DOCUMENTS" shall mean, collectively, the Stock Purchase Agreement
and all related acquisition agreements and documentation (including without
limitation all documentation relating to or providing for the Merger
Transactions), (V) the term "BANK AGREEMENTS" shall mean, collectively, the
Credit Agreement and all related agreements creating security interests in the
assets of the Company for the benefit of the holders of indebtedness arising
under the Credit Agreement, and (VI) the term "TRANSACTION DOCUMENTS" shall
mean, collectively, the Acquisition Documents, the Bank Agreements, this
Agreement, the Notes, the Subsidiary Guarantees and the Indenture.
1. OFFERING MEMORANDUM. The Series A Notes will be offered and sold
to the Initial Purchaser pursuant to one or more exemptions from the
registration requirements under the Securities Act of 1933, as amended (the
"ACT"). The Issuers have prepared a preliminary offering memorandum, dated
November 17, 1997 (the "PRELIMINARY OFFERING MEMORANDUM") and a final offering
memorandum, dated December 4, 1997 (the "OFFERING MEMORANDUM"), relating to the
Series A Notes and the Subsidiary Guarantees.
Upon original issuance thereof, and until such time as the same is
no longer required pursuant to the Indenture, the Series A Notes (and all
securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
"THE NOTES (OR THEIR PREDECESSORS) EVIDENCED HEREBY WERE ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND THE NOTES EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE NOTES EVIDENCED HEREBY IS HEREBY NOTIFIED
THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE
HOLDER OF THE NOTES EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY
THAT (A) SUCH NOTES
2
<PAGE> 4
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) INSIDE THE
UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER ( AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION
S UNDER THE SECURITIES ACT, OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON
AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
NOTES EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Issuers agree to issue
and sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase
from the Issuers, an aggregate principal amount of $100,000,000 of Series A
Notes at a purchase price equal to 97 1/4% of the principal amount thereof (the
"PURCHASE PRICE").
3. TERMS OF OFFERING. The Initial Purchaser has advised the Issuers
that the Initial Purchaser will make offers (the "EXEMPT RESALES") of the Series
A Notes purchased hereunder on the terms set forth in the Offering Memorandum,
as amended or supplemented, solely to (i) persons whom the Initial Purchaser
reasonably believe to be "qualified institutional buyers" as defined in Rule
144A under the Act ("QIBS"), and (ii) to persons permitted to purchase the
Series A Notes in offshore transactions in reliance upon Regulation S under the
Act (each, a "REGULATION S PURCHASER") (such persons specified in clauses (i)
and (ii) being referred to herein as the "ELIGIBLE PURCHASERS"). The Initial
Purchaser will offer the Series A Notes to Eligible Purchasers initially at a
price equal to 100% of the principal amount thereof. Such price may be changed
at any time without notice.
Holders (including subsequent transferees) of the Series A Notes
will have the registration rights set forth in the registration rights agreement
(the "REGISTRATION RIGHTS AGREEMENT"), to be dated the Closing Date, in
substantially the form of Exhibit A hereto, for so long as such Series A Notes
constitute "TRANSFER RESTRICTED SECURITIES" (as defined in the Registration
Rights Agreement). Pursuant to the Registration Rights Agreement, the Issuers
will agree to file with the Securities and Exchange Commission (the
"COMMISSION") under the circumstances set forth therein (i) a registration
statement under the Act (the "EXCHANGE OFFER REGISTRATION STATEMENT") relating
to the Company's 10 1/4% Series B Senior Subordinated Notes (the "SERIES B
NOTES"), to be offered in exchange for the Series A Notes and the Subsidiary
Guarantees thereof (such offer to
3
<PAGE> 5
exchange being referred to as the "EXCHANGE OFFER") and (ii) a shelf
registration statement pursuant to Rule 415 under the Act (the "SHELF
REGISTRATION STATEMENT" and, together with the Exchange Offer Registration
Statement, the "REGISTRATION STATEMENTS") relating to the resale by certain
holders of the Series A Notes and to use its best efforts to cause such
Registration Statements to be declared and remain effective and usable for the
periods specified in the Registration Rights Agreement and to consummate the
Exchange Offer. The Transaction Documents and the Registration Rights Agreement
are hereinafter sometimes referred to collectively as the "OPERATIVE DOCUMENTS."
4. DELIVERY AND PAYMENT.
(a) Delivery of, and payment of the Purchase Price for, the
Series A Notes shall be made at the offices of Kirkland & Ellis at 153 East 53rd
Street, New York, New York 10022 or such other location as may be mutually
acceptable. Such delivery and payment shall be made at 9:00 a.m. New York City
time, on December 11, 1997 or at such other time as shall be agreed upon by the
Initial Purchaser and the Company. The time and date of such delivery and the
payment are herein called the "Closing Date."
(b) One or more of the Series A Notes in definitive global
form, registered in the name of Cede & Co., as nominee of the Depository Trust
Company ("DTC"), having an aggregate principal amount corresponding to the
aggregate principal amount of the Series A Notes (collectively, the "GLOBAL
NOTE"), shall be delivered by the Company to the Initial Purchaser (or as the
Initial Purchaser directs) in each case with any transfer taxes thereon duly
paid by the Company against payment by the Initial Purchaser of the Purchase
Price thereof by wire transfer in same day funds to the order of the Company.
The Global Note shall be made available to the Initial Purchaser for inspection
not later than 9:30 a.m., New York City time, on the business day immediately
preceding the Closing Date.
5. AGREEMENTS OF EACH OF THE ISSUERS. Each of the Issuers, jointly
and severally, hereby agrees with the Initial Purchaser as follows:
(a) To advise the Initial Purchaser promptly and, if requested
by the Initial Purchaser, confirm such advice in writing, (i) of the issuance by
any state securities commission of any stop order suspending the qualification
or exemption from qualification of any Series A Notes for offering or sale in
any jurisdiction designated by the Initial Purchaser pursuant to Section 5(e)
hereof, or the initiation of any proceeding by any state securities commission
or any other federal or state regulatory authority for such purpose and (ii) of
the happening of any event during the period referred to in Section 5(c) below
that makes any statement of a material fact made in the Preliminary Offering
Memorandum or the Offering Memorandum untrue or that requires any additions to
or changes in the Preliminary Offering Memorandum or the Offering Memorandum in
order to make the statements therein not misleading. The Company shall use its
best efforts to prevent the issuance of any stop order or order suspending the
qualification or exemption of any Series A Notes under any state securities or
Blue Sky laws and, if at any time any state securities commission or other
federal or state regulatory authority shall issue an order suspending the
qualification or exemption of any Series A Notes under any state securities or
Blue Sky laws, the Company shall use its best efforts to obtain the withdrawal
or lifting of such order at the earliest possible time.
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(b) To furnish the Initial Purchaser and those persons
identified by the Initial Purchaser to the Company as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and any amendments
or supplements thereto, as the Initial Purchaser may reasonably request for the
time period specified in Section 5(c). Subject to the Initial Purchaser's
compliance with its representations and warranties and agreements set forth in
Section 7 hereof, the Company consents to the use of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments and supplements
thereto required pursuant hereto, by the Initial Purchaser in connection with
Exempt Resales.
(c) During such period as in the opinion of counsel for the
Initial Purchaser an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchaser and in connection with
market-making activities of the Initial Purchaser for so long as any Series A
Notes are outstanding, (i) not to make any amendment or supplement to the
Offering Memorandum of which the Initial Purchaser shall not previously have
been advised or to which the Initial Purchaser shall reasonably object after
being so advised and (ii) to prepare promptly upon the Initial Purchaser's
reasonable request, any amendment or supplement to the Offering Memorandum which
may be necessary or advisable in connection with such Exempt Resales or such
market-making activities.
(d) If, during the period referred to in Section 5(c) above,
any event shall occur or condition shall exist as a result of which, in the
opinion of counsel to the Initial Purchaser, it becomes necessary to amend or
supplement the Offering Memorandum in order to make the statements therein, in
the light of the circumstances when such Offering Memorandum is delivered to an
Eligible Purchaser, not misleading, or if, in the opinion of counsel to the
Initial Purchaser, it is necessary to amend or supplement the Offering
Memorandum to comply with any applicable law, forthwith to prepare an
appropriate amendment or supplement to such Offering Memorandum so that the
statements therein, as so amended or supplemented, will not, in the light of the
circumstances when it is so delivered, be misleading, or so that such Offering
Memorandum will comply with applicable law, and to furnish to the Initial
Purchaser and such other persons as the Initial Purchaser may designate such
number of copies thereof as the Initial Purchaser may reasonably request.
(e) Prior to the sale of all Series A Notes pursuant to Exempt
Resales as contemplated hereby, to cooperate with the Initial Purchaser and
counsel to the Initial Purchaser in connection with the registration or
qualification of the Series A Notes for offer and sale to the Initial Purchaser
and pursuant to Exempt Resales under the securities or Blue Sky laws of such
states as the Initial Purchaser may request and to continue such registration or
qualification in effect so long as required for Exempt Resales and to file such
consents to service of process or other documents as may be necessary in order
to effect such registration or qualification; provided, however, that none of
the Issuers shall be required in connection therewith to qualify as a foreign
corporation in any jurisdiction in which it is not now so qualified or to take
any action that would subject it to general consent to service of process or
taxation other than as to matters and transactions relating to the Preliminary
Offering Memorandum, the Offering Memorandum or Exempt Resales, in any
jurisdiction in which it is not now so subject.
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<PAGE> 7
(f) So long as the Notes are outstanding, (i) to mail and make
generally available as soon as practicable after the end of each fiscal year to
the record holders of the Notes a financial report of the Company and its
subsidiaries on a consolidated basis (and a similar financial report of all
unconsolidated subsidiaries, if any), all such financial reports to include a
consolidated balance sheet, a consolidated statement of operations, a
consolidated statement of cash flows and a consolidated statement of
shareholders' equity as of the end of and for such fiscal year, together with
comparable information as of the end of and for the preceding year, certified by
the Company's independent public accountants and (ii) to mail and make generally
available as soon as practicable after the end of each quarterly period (except
for the last quarterly period of each fiscal year) to such holders, a
consolidated balance sheet, a consolidated statement of operations and a
consolidated statement of cash flows (and similar financial reports of all
unconsolidated subsidiaries, if any) as of the end of and for such period, and
for the period from the beginning of such year to the close of such quarterly
period, together with comparable information for the corresponding periods of
the preceding year.
(g) So long as the Notes are outstanding, to furnish to the
Initial Purchaser as soon as available copies of all reports or other
communications furnished by any of the Issuers to its security holders or
furnished to or filed with the Commission or any national securities exchange on
which any class of securities of any of the Issuers is listed and such other
publicly available information concerning the Company and/or its subsidiaries as
the Initial Purchaser may reasonably request.
(h) So long as any of the Series A Notes remain outstanding
and during any period in which the Issuers are not subject to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"),
to make available to any holder of Series A Notes in connection with any sale
thereof and any prospective purchaser of such Series A Notes from such holder
the information ("RULE 144A INFORMATION") required by Rule 144A(d)(4) under the
Act.
(i) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or cause to be
paid all expenses incident to the performance of the obligations of the Issuers
under this Agreement, including: (i) the fees, disbursements and expenses of
counsel to the Issuers and accountants of the Issuers in connection with the
sale and delivery of the Series A Notes to the Initial Purchaser and pursuant to
Exempt Resales, and all other fees and expenses in connection with the
preparation, printing, filing and distribution of the Preliminary Offering
Memorandum, the Offering Memorandum and all amendments and supplements to any of
the foregoing (including financial statements), including the mailing and
delivering of copies thereof to the Initial Purchaser and persons designated by
it in the quantities specified herein, (ii) all fees and expenses in connection
with the roadshow; provided, however, the Initial Purchaser shall, subject to
receipt of reasonably satisfactory supporting documentation therefore, pay 50%
of the costs and expenses related to the services of the airplane used for such
roadshow, (iii) all costs and expenses related to the transfer and delivery of
the Series A Notes to the Initial Purchaser and pursuant to Exempt Resales,
including any transfer or other taxes payable thereon, (iv) all costs of
printing or producing this Agreement, the other Operative Documents and any
other agreements or documents in connection with the offering, purchase, sale or
delivery of the Series A Notes, (v) all expenses in connection with the
registration or qualification of the Series A Notes and the Subsidiary
Guarantees for offer and sale under the securities or Blue
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<PAGE> 8
Sky laws of the several states and all costs of printing or producing any
preliminary and supplemental Blue Sky memoranda in connection therewith
(including the filing fees and fees and disbursements of counsel for the Initial
Purchaser in connection with such registration or qualification and memoranda
relating thereto), (vi) the cost of printing certificates representing the
Series A Notes and the Subsidiary Guarantees, (vii) all expenses and listing
fees in connection with the application for quotation of the Series A Notes in
the National Association of Securities Dealers, Inc. ("NASD") Automated
Quotation System - PORTAL ("PORTAL"), (viii) the fees and expenses of the
Trustee and the Trustee's counsel in connection with the Indenture, the Notes
and the Subsidiary Guarantees, (ix) the costs and charges of any transfer agent,
registrar and/or depositary (including DTC), (x) any fees charged by rating
agencies for the rating of the Notes, (xi) all costs and expenses of the
Exchange Offer and any Registration Statement, as set forth in the Registration
Rights Agreement, and (xii) and all other costs and expenses incident to the
performance of the obligations of the Issuers hereunder for which provision is
not otherwise made in this Section.
(j) To use its best efforts to effect the inclusion of the
Series A Notes in PORTAL and to maintain the listing of the Series A Notes on
PORTAL for so long as the Series A Notes are outstanding.
(k) To obtain the approval of DTC for "book-entry" transfer of
the Notes, and to comply with all of its agreements set forth in the
representation letters of the Issuers to DTC relating to the approval of the
Notes by DTC for "book-entry" transfer.
(l) During the period beginning on the date hereof and
continuing to and including the Closing Date, not to offer, sell, contract to
sell or otherwise transfer or dispose of any debt securities of any Issuer or
any warrants, rights or options to purchase or otherwise acquire debt securities
of any Issuer substantially similar to the Notes and the Subsidiary Guarantees
(other than (i) the Notes and the Subsidiary Guarantees and (ii) commercial
paper issued in the ordinary course of business), without the prior written
consent of the Initial Purchaser.
(m) 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 Series A Notes to the Initial Purchaser
or pursuant to Exempt Resales in a manner that would require the registration of
any such sale of the Series A Notes under the Act.
(n) Not to voluntarily claim, and to actively resist any
attempts to claim, the benefit of any usury laws against the holders of any
Notes.
(o) To cause the Exchange Offer to be made in the appropriate
form to permit Series B Notes and guarantees thereof by the Guarantors
registered pursuant to the Act to be offered in exchange for the Series A Notes
and the Subsidiary Guarantees and to comply with all applicable federal and
state securities laws in connection with the Exchange Offer.
(p) To comply with all of its agreements set forth in the
Registration Rights Agreement.
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<PAGE> 9
(q) To use its best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by it prior
to the Closing Date and to satisfy all conditions precedent to the delivery of
the Series A Notes and the Subsidiary Guarantees.
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF EACH OF THE
ISSUERS. As of the date hereof, each of the Issuers jointly and severally
represents and warrants to, and agrees with, the Initial Purchaser that:
(a) The Company and Old Stanadyne each have all requisite
corporate power and authority to execute, deliver and perform their respective
obligations under each of the Transaction Documents to which it is and will be a
party; each of the Transaction Documents, and the transactions contemplated
thereby, has been and upon completion of the Acquisition Transactions, will be
duly and validly authorized, executed and delivered by each of the Company and
Old Stanadyne and, to the extent it is a party thereto, each constitutes a valid
and legally binding agreement of each of the Company and Old Stanadyne
enforceable against the Company and Old Stanadyne in accordance with its terms
(assuming due authorization, execution and delivery of each Transaction Document
by any other party thereto) except that enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity); except as set forth in the Offering Memorandum,
no consent, approval, authorization or order of any court or governmental agency
or body is required for the performance of any of the Transaction Documents by,
to the extent each is a party thereto, or the consummation by the Company and
Old Stanadyne of any of the transactions contemplated thereby, except such as
may be required and have been obtained, or upon effectiveness of the
Registration Statements, will have been obtained, under the Act, the Trust
Indenture Act or state securities or "Blue Sky" laws in connection with the
purchase and distribution of the Notes by the Initial Purchaser; and neither the
Company, Old Stanadyne, nor any of the Guarantors, is (i) in violation of its
certificate of incorporation or bylaws, (ii) in violation of any statute,
judgment, decree, order, rule or regulation applicable to any of them or any of
their respective properties or assets, which violation would have a Material
Adverse Effect, or (iii) in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any of the Transaction
Documents or any other contract, indenture, mortgage, deed of trust, loan
agreement, note, lease, license, franchise agreement, permit, certificate or
agreement or instrument to which any of them is a party or to which any of them
is subject, which default would have a Material Adverse Effect.
(b) The execution, delivery and performance by the Company and
Old Stanadyne to the extent each is a party thereto, of each of the Transaction
Documents, and the consummation by the Company and Old Stanadyne of the
transactions contemplated thereby, will not violate, conflict with or constitute
or result in a breach of or a default under (or an event which, with notice or
lapse of time, or both, would constitute a breach of or a default under) any of
(i) the terms or provisions of any of the Transaction Documents or any other
indenture, mortgage, deed of trust, loan agreement, note, lease, license,
franchise agreement, or agreement or instrument to which the Company or Old
Stanadyne, is a party or to which any of their respective properties or assets
are subject, which violation, conflict, breach or default would have a Material
Adverse Effect, (ii) the certificate of incorporation or bylaws of the Company
or Old Stanadyne, or (iii) (assuming
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<PAGE> 10
compliance with all applicable state securities and "Blue Sky" laws) any
statute, judgment, decree, order, rule or regulation of any court or
governmental agency or other body applicable to the Company or Old Stanadyne, or
any of their respective properties or assets, which violation, conflict, breach
or default would have a Material Adverse Effect.
(c) Immediately after the consummation of the Acquisition
Transactions, the fair value and present fair saleable value of the assets of
each of the Company and Old Stanadyne will exceed the sum of their respective
stated liabilities and identified contingent liabilities; none of the Company
nor Old Stanadyne will be, after giving effect to the execution, delivery and
performance of the Transaction Documents, to the extent each is a party thereto,
and the consummation of the transactions contemplated thereby, (a) left with
unreasonably small capital with which to carry on its business as it is proposed
to be conducted, (b) unable to pay its debts (contingent or otherwise) as they
mature or (c) otherwise insolvent.
(d) The Company has delivered to the Initial Purchaser a true
and correct copy of each of the Transaction Documents that have been executed
and delivered prior to the date of this Agreement and each other Transaction
Document in the form substantially as it will be executed and delivered on or
prior to the Closing Date, together with all related agreements and all
schedules and exhibits thereto, and there have been no amendments, alterations,
modifications or waivers of any of the provisions of any of the Transaction
Documents since their date of execution or from the form in which it has been
delivered to the Initial Purchaser; there exists as of the date hereof (after
giving effect to the transactions contemplated by each of the Transaction
Documents) no event or condition which would constitute a default or an event of
default (in each case as defined in each of the Transaction Documents) under any
of the Transaction Documents which would result in a Material Adverse Effect or
materially adversely effect the ability of the Company and Old Stanadyne to
consummate the Acquisition Transactions and the transactions contemplated by the
Purchase Agreement.
(e) The Preliminary Offering Memorandum and the Offering
Memorandum do not, and any supplement or amendment to them 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 the light
of the circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (f) shall not apply
to statements in or omissions from the Preliminary Offering Memorandum or the
Offering Memorandum (or any supplement or amendment thereto) based upon
information relating to the Initial Purchaser furnished to the Company in
writing by the Initial Purchaser expressly for use therein. No stop order
preventing the use of the Preliminary Offering Memorandum or the Offering
Memorandum, or any amendment or supplement thereto, or any order asserting that
any of the transactions contemplated by this Agreement are subject to the
registration requirements of the Act, has been issued.
(f) Each of the Company and its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and has the corporate power and
authority to carry on its business as described in the Preliminary Offering
Memorandum and the Offering Memorandum and to own, lease and operate its
properties, and each is duly qualified and is in good standing as a foreign
corporation authorized to do business
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<PAGE> 11
in each jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the failure to be
so qualified would not have a material adverse effect on the business,
prospects, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, or draw into question the validity of this
Agreement or the other Operative Documents (a "MATERIAL ADVERSE EFFECT").
(g) All outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid, non-assessable
and not subject to any preemptive or similar rights. After giving effect to the
Acquisition Transactions, all of the outstanding shares of capital stock of the
Company will be owned by New Holdings, and all of the outstanding shares of
capital stock of New Holdings will be owned by AIP and management investors, in
each case free and clear of any security interest, claim, lien pledge or other
encumbrance (except as may arise pursuant to the Bank Agreements), and except as
set forth in the Offering Memorandum there are no, and at the Closing Date there
will not be, any outstanding rights (including without limitation pre-emptive
rights, warrants or options to acquire, or instruments convertible into or
exchangeable for, any shares of capital stock or other equity interest in the
Company or any of its direct or indirect subsidiaries (including without
limitation the Guarantors), or any contract, commitment, agreement,
understanding or arrangement of any kind relating to the issuance of any capital
stock of the Company or any such subsidiary, any such convertible or
exchangeable securities or any such rights, warrants or options.
(h) The entities listed on Schedule B hereto are the only
subsidiaries, direct or indirect, of the Company. All of the outstanding shares
of capital stock of each of the Company's subsidiaries have been duly authorized
and validly issued and are fully paid and non-assessable, and are owned by the
Company, directly or indirectly through one or more subsidiaries, free and clear
of any security interest, claim, lien, encumbrance or adverse interest of any
nature (each, a "LIEN") except for Liens under the Credit Agreement.
(i) This Agreement has been duly authorized, executed and
delivered by each of the Issuers.
(j) The Indenture has been duly authorized by each of the
Issuers and, on the Closing Date, will have been validly executed and delivered
by each of the Issuers. When the Indenture has been duly executed and delivered
by each of the Issuers, and assuming the due authorization, execution and
delivery of the Indenture by the Trustee, the Indenture will be a valid and
binding agreement of each of the Issuers, enforceable against each of the
Issuers in accordance with its terms except as (i) the enforceability thereof
may be limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability. On the Closing Date, the Indenture will conform in all material
respects to the requirements of the Trust Indenture Act of 1939, as amended (the
"TIA" or "TRUST INDENTURE ACT"), and the rules and regulations of the Commission
applicable to an indenture which is qualified thereunder.
(k) The Series A Notes have been duly authorized and, on the
Closing Date, will have been validly executed and delivered by the Company. When
the Series A Notes have been issued, executed and authenticated in accordance
with the provisions of the Indenture and delivered
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to and paid for by the Initial Purchaser in accordance with the terms of this
Agreement, the Series A Notes will be entitled to the benefits of the Indenture
and will be valid and binding obligations of the Company, enforceable in
accordance with their terms except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability. On the
Closing Date, the Series A Notes will conform as to legal matters to the
description thereof contained in the Offering Memorandum.
(l) On the Closing Date, the Series B Notes will have been
duly authorized by the Company. When the Series B Notes are issued, executed and
authenticated in accordance with the terms of the Exchange Offer and the
Indenture, the Series B Notes will be entitled to the benefits of the Indenture
and will be the valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability.
(m) The Subsidiary Guarantee to be endorsed on the Series A
Notes by each Guarantor has been duly authorized by such Guarantor and, on the
Closing Date, will have been duly executed and delivered by each such Guarantor.
When the Series A Notes have been issued, executed and authenticated in
accordance with the Indenture and delivered to and paid for by the Initial
Purchaser in accordance with the terms of this Agreement, the Subsidiary
Guarantee of each Guarantor endorsed thereon will be entitled to the benefits of
the Indenture and will be the valid and binding obligation of such Guarantor,
enforceable against such Guarantor in accordance with its terms, except as (i)
the enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) rights of acceleration and
the availability of equitable remedies may be limited by equitable principles of
general applicability. On the Closing Date, the Subsidiary Guarantees to be
endorsed on the Series A Notes will conform as to legal matters to the
description thereof contained in the Offering Memorandum.
(n) The Subsidiary Guarantee to be endorsed on the Series B
Notes by each Guarantor has been duly authorized by such Guarantor and, when
issued, will have been duly executed and delivered by each such Guarantor. When
the Series B Notes have been issued, executed and authenticated in accordance
with the terms of the Exchange Offer and the Indenture, the Subsidiary Guarantee
of each Guarantor endorsed thereon will be entitled to the benefits of the
Indenture and will be the valid and binding obligation of such Guarantor,
enforceable against such Guarantor in accordance with its terms, except as (i)
the enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) rights of acceleration and
the availability of equitable remedies may be limited by equitable principles of
general applicability. When the Series B Notes are issued, authenticated and
delivered, the Subsidiary Guarantees to be endorsed on the Series B Notes will
conform as to legal matters to the description thereof in the Offering
Memorandum.
(o) The Registration Rights Agreement has been duly authorized
by the Issuers and, on the Closing Date, will have been duly executed and
delivered by the Issuers. When the Registration Rights Agreement has been duly
executed and delivered, the Registration Rights
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<PAGE> 13
Agreement will be a valid and binding agreement of the Issuers, enforceable
against each of the Issuers in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability. On the Closing Date, the Registration Rights Agreement
will conform as to legal matters to the description thereof in the Offering
Memorandum.
(p) Neither the Company nor any of its subsidiaries is in
violation of its respective charter or by-laws or in default in the performance
of any obligation, agreement, covenant or condition contained in any indenture,
loan agreement, mortgage, lease or other agreement or instrument that is
material to the Company and its subsidiaries, taken as a whole, to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or their respective property is bound.
(q) The execution, delivery and performance of this Agreement
and the other Transaction Documents by the Issuers, compliance by the Issuers
with all provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not (i) require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under the securities
or Blue Sky laws of the various states), (ii) conflict with or constitute a
breach of any of the terms or provisions of, or a default under, (x) the charter
or by-laws of the Company or any of its subsidiaries or (y) any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is material to
the Company and its subsidiaries, taken as a whole, to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or any of their respective property is bound which default referred
to in this clause (y) would have a Material Adverse Effect, (iii) violate or
conflict with any applicable law or any rule, regulation, judgment, order or
decree of any court or any governmental body or agency having jurisdiction over
the Company, any of its subsidiaries or any of their respective property, (iv)
result in the imposition or creation of (or the obligation to create or impose)
a Lien under, any agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
their respective property is bound, or (v) result in the termination, suspension
or revocation of any Authorization (as defined below) of the Company or any of
its subsidiaries or result in any other impairment of the rights of the holder
of any such Authorization.
(r) There are no legal or governmental proceedings pending or
to the Company's knowledge threatened to which the Company or any of its
subsidiaries is or could be a party or to which any of their respective property
is or could be subject, which might, singly or in the aggregate, result in a
Material Adverse Effect.
(s) Neither the Company nor any of its subsidiaries has
violated any foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS") or any
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the rules and regulations promulgated thereunder, except for such
violations which, singly or in the aggregate, would not have a Material Adverse
Effect.
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(t) There are no costs or liabilities of the Company or any of
its subsidiaries, associated with Environmental Laws (including, without
limitation, any capital or operating expenditures required for clean-up, closure
of properties or compliance with Environmental Laws or any Authorization, any
related constraints on operating activities and any potential liabilities to
third parties) which would, singly or in the aggregate, have a Material Adverse
Effect.
(u) All material tax returns required to be filed by the
Company and each of its subsidiaries in any jurisdiction have been filed, other
than those filings being contested in good faith, and all material taxes,
including withholding taxes, penalties and interest, assessments, fees and other
charges due pursuant to such returns or pursuant to any assessment received by
the Company or any of its subsidiaries have been paid, other than those being
contested in good faith and for which adequate reserves have been provided.
(v) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its subsidiaries, in each case free and clear of all Liens and defects,
except such as are described in the Offering Memorandum or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries, in each case except as described in the Offering
Memorandum.
(w) The assets of the Company and its subsidiaries include all
of the assets and properties used by the Company and its subsidiaries in, and
material to, the conduct of the businesses of the Company and its subsidiaries
as currently conducted, and such assets are in working condition, except where
the failure of such assets to be in working condition will not be reasonably
expected to have a Material Adverse Effect.
(x) The Company and its subsidiaries own or possess, or can
acquire on reasonable terms, all patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names ("INTELLECTUAL PROPERTY") currently
employed by them in connection with the business now operated by them except
where the failure to own or possess or otherwise be able to acquire such
intellectual property would not, singly or in the aggregate, have a Material
Adverse Effect.
(y) Each of the Company and its subsidiaries has such permits,
licenses, consents, exemptions, franchises, authorizations and other approvals
(each, an "AUTHORIZATION") of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations and all
courts and other tribunals, including without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and operate its
respective properties and to conduct its business, except where the failure to
have any such Authorization or to make any such filing or notice would not,
singly or in the aggregate, have a Material Adverse Effect. Each such
Authorization is valid and in full force and effect and each of the Company and
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its subsidiaries is in compliance with all the terms and conditions thereof and
with the rules and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has occurred (including, without
limitation, the receipt of any notice from any authority or governing body)
which allows or, after notice or lapse of time or both, would allow, revocation,
suspension or termination of any such Authorization or results or, after notice
or lapse of time or both, would result in any other impairment of the rights of
the holder of any such Authorization; except where such failure to be valid and
in full force and effect or to be in compliance, the occurrence of any such
event or the presence of any such restriction would not, singly or in the
aggregate, have a Material Adverse Effect.
(z) There is no (i) significant unfair labor practice
complaint, grievance or arbitration proceeding pending or threatened against the
Company or any of its subsidiaries before the National Labor Relations Board or
any state or local labor relations board, (ii) strike, labor dispute, slowdown
or stoppage pending or threatened against the Company or any of its subsidiaries
or (iii) union representation question existing with respect to the employees of
the Company or any of its subsidiaries, except in the case of clauses (i), (ii)
and (iii) for such actions which, singly or in the aggregate, would not have a
Material Adverse Effect. To the best knowledge of the Company, no collective
bargaining organizing activities are taking place with respect to the Company or
any of its subsidiaries.
(aa) The accountants, Deloitte & Touche LLP, that have
certified the financial statements and supporting schedules included in the
Preliminary Offering Memorandum and the Offering Memorandum are independent
public accountants with respect to the Issuers, as required by the Act and the
Exchange Act. The historical financial statements, together with related
schedules and notes, set forth in the Preliminary Offering Memorandum and the
Offering Memorandum comply as to form in all material respects with the
requirements applicable to registration statements on Form S-1 under the Act.
(bb) The historical financial statements, together with
related schedules and notes forming part of the Offering Memorandum (and in each
case any amendment or supplement thereto), present fairly the consolidated
financial position, results of operations and changes in financial position of
the Company and its subsidiaries on the basis stated in the Offering Memorandum
at the respective dates or for the respective periods, as applicable, to which
they apply; such statements and related schedules and notes have been prepared
in accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; and the other
financial and statistical information and data set forth in the Offering
Memorandum (and any amendment or supplement thereto) are, in all material
respects, accurately presented and prepared on a basis consistent with such
financial statements and the books and records of the Company.
(cc) The pro forma financial statements and the related notes
thereto included in the Preliminary Offering Memorandum and the Offering
Memorandum (and in each case any amendment or supplement thereto) have been
prepared on a basis consistent with the historical financial statements and the
related notes thereto of the Company and its subsidiaries, except as
specifically referred to therein or in the notes thereto, and give effect to
assumptions used in the preparation thereof on a reasonable basis and in good
faith and present fairly the historical and
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proposed transactions contemplated by the Preliminary Offering Memorandum and
the Offering Memorandum; and such pro forma financial statements comply as to
form in all material respects with the requirements applicable to pro forma
financial statements included in registration statements on Form S-1 under the
Act. The other pro forma financial and statistical information and data included
in the Offering Memorandum are, in all material respects, accurately presented
and prepared on a basis consistent with the pro forma financial statements.
(dd) The Company and each of its subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(ee) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which they
are engaged; and neither the Company nor any of its subsidiaries (i) has
received notice from any insurer or agent of such insurer that substantial
capital improvements or other material expenditures will have to be made in
order to continue such insurance or (ii) has any reason to believe that it will
not be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers at a cost that would
not have a Material Adverse Effect.
(ff) The Company is not and, after giving effect to the
offering and sale of the Series A Notes and the application of the net proceeds
thereof as described in the Offering Memorandum will not be, an "investment
company," as such term is defined in the Investment Company Act of 1940, as
amended.
(gg) Except for the Registration Rights Agreement (attached as
Exhibit A hereto), there are no contracts, agreements or understandings between
the Company or any Guarantor and any person granting such person the right to
require the Company or such Guarantor to file a registration statement under the
Act with respect to any securities of the Company or such Guarantor or to
require the Company or such Guarantor to include such securities with the Notes
and Subsidiary Guarantees registered pursuant to any Registration Statement.
(hh) Neither the Company, Old Stanadyne, nor any of their
subsidiaries nor any agent thereof acting on the behalf of them has taken, and
none of them will take, any action that might cause this Agreement, the Bank
Agreement or the issuance or sale of the Series A Notes to violate Regulation G
(12 C.F.R. Part 207), Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R.
Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors of the
Federal Reserve System.
(ii) No "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2) under the
Act (i) has imposed (or has informed the
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<PAGE> 17
Company or any Guarantor that it is considering imposing) any condition
(financial or otherwise) on the Company's or any Guarantor's retaining any
rating assigned to the Company or any Guarantor, or any securities of the
Company or any Guarantor, or (ii) has indicated to the Company or any Guarantor
that it is considering (a) the downgrading, suspension, or withdrawal of, or any
review for a possible change that does not indicate the direction of the
possible change in, any rating so assigned or (b) any change in the outlook for
any rating of the Company, any Guarantor or any securities of the Company or any
Guarantor.
(jj) Since the respective dates as of which information is
given in the Offering Memorandum other than as set forth in the Offering
Memorandum (exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement), (i) there has not occurred any material adverse change
or any development involving a prospective material adverse change in the
condition, financial or otherwise, or the earnings, business, management or
operations of the Company and its subsidiaries, taken as a whole, (ii) there has
not been any material adverse change or any development involving a prospective
material adverse change in the capital stock or in the long-term debt of the
Company or any of its subsidiaries and (iii) neither the Company nor any of its
subsidiaries has incurred any material liability or obligation, direct or
contingent.
(kk) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, contains all the information specified in,
and meeting the requirements of, Rule 144A(d)(4) under the Act.
(ll) When the Series A Notes and the Subsidiary Guarantees are
issued and delivered pursuant to this Agreement, neither the Series A Notes nor
the Subsidiary Guarantees will be of the same class (within the meaning of Rule
144A under the Act) as any security of the Company or the Guarantors 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 inter-dealer
quotation system.
(mm) No form of general solicitation or general advertising
(as defined in Regulation D under the Act) was used by any of the Issuers or any
of their respective representatives (other than the Initial Purchaser, as to
whom the Issuers make no representation) in connection with the offer and sale
of the Series A Notes contemplated hereby, including, but not limited to,
articles, notices or other communications published in any newspaper, magazine,
or similar medium or broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general solicitation or general
advertising. No securities of the same class as the Series A Notes have been
issued and sold by the Company within the six-month period immediately prior to
the date hereof.
(nn) Prior to the effectiveness of any Registration Statement,
the Indenture is not required to be qualified under the TIA.
(oo) None of the Issuers nor any of their respective
affiliates or any person acting on its or their behalf (other than the Initial
Purchaser, as to whom the Issuers make no representation) has engaged or will
engage in any directed selling efforts within the meaning of Regulation S under
the Act ("REGULATION S") with respect to the Series A Notes or the Subsidiary
Guarantees.
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<PAGE> 18
(pp) There is no substantial U.S. market interest (as defined
in Rule 902(n) under the Act) in any debt security of any of the Issuers.
(qq) Neither of the Issuers is a "foreign issuer," as defined
in Rule 902 under the Act.
(rr) The sale of the Series A Notes pursuant to Regulation S
is not part of a plan or scheme to evade the registration provisions of the Act.
(ss) No registration under the Act of the Series A Notes or
the Subsidiary Guarantees is required for the sale of the Series A Notes and the
Subsidiary Guarantees to the Initial Purchaser as contemplated hereby or for the
Exempt Resales assuming the accuracy of the Initial Purchaser's representations
and warranties and agreements set forth in Section 7 hereof.
(tt) Each certificate signed by any officer of the Company or
any Guarantor and delivered to the Initial Purchaser or counsel for the Initial
Purchaser shall be deemed to be a representation and warranty by the Company or
such Guarantor to the Initial Purchaser as to the matters covered thereby.
The Company acknowledges that the Initial Purchaser and, for
purposes of the opinions to be delivered to the Initial Purchaser pursuant to
Section 9 hereof, counsel to the Company and counsel to the Initial Purchaser
will rely upon the accuracy and truth of the foregoing representations and
hereby consents to such reliance.
7. INITIAL PURCHASER'S REPRESENTATIONS AND WARRANTIES. The Initial
purchaser represents and warrants to, and agrees with, the Issuers:
(a) Such Initial Purchaser is a QIB, with such knowledge and
experience in financial and business matters as is necessary in order to
evaluate the merits and risks of an investment in the Series A Notes.
(b) Such Initial Purchaser (A) is not acquiring the Series A
Notes with a view to any distribution thereof or with any present intention of
offering or selling any of the Series A Notes in a transaction that would
violate the Act or the securities laws of any state of the United States or any
other applicable jurisdiction and (B) will be reoffering and reselling the
Series A Notes only to (x) QIBs in reliance on the exemption from the
registration requirements of the Act provided by Rule 144A, and (y) in offshore
transactions in reliance upon Regulation S under the Act.
(c) Such Initial Purchaser agrees that no form of general
solicitation or general advertising (within the meaning of Regulation D under
the Act) has been or will be used by such Initial Purchaser in connection with
the offer and sale of the Series A Notes pursuant hereto, including, but not
limited to, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
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<PAGE> 19
(d) Such Initial Purchaser agrees that, in connection with
Exempt Resales, such Initial Purchaser will solicit offers to buy the Series A
Notes only from, and will offer to sell the Series A Notes only to, Eligible
Purchasers. The Initial Purchaser further agrees that it will offer to sell the
Series A Notes only to, and will solicit offers to buy the Series A Notes only
from (A) Eligible Purchasers that the Initial Purchaser reasonably believes are
QIBs, and (B) Regulation S Purchasers, in each case, that agree that (x) the
Series A Notes purchased by them may be resold, pledged or otherwise transferred
within the time period referred to under Rule 144(k) (taking into account the
provisions of Rule 144(d) under the Act, if applicable) under the Act, as in
effect on the date of the transfer of such Series A Notes, only (I) to the
Company or any of its subsidiaries, (II) to a person whom the seller reasonably
believes is a QIB purchasing for its own account or for the account of a QIB in
a transaction meeting the requirements of Rule 144A under the Act, (III) in an
offshore transaction (as defined in Rule 902 under the Act) meeting the
requirements of Rule 904 of the Act, (IV) in a transaction meeting the
requirements of Rule 144 under the Act, (V) to an Accredited Institution that,
prior to such transfer, furnishes the Trustee a signed letter containing certain
representations and agreements relating to the registration of transfer of such
Series A Note (the form of which is substantially the same as Annex A to the
Offering Memorandum) and, if such transfer is in respect of an aggregate
principal amount of Series A Notes less than $250,000, an opinion of counsel
acceptable to the Company that such transfer is in compliance with the Act, (VI)
in accordance with another exemption from the registration requirements of the
Act (and based upon an opinion of counsel acceptable to the Company) or (VII)
pursuant to an effective registration statement and, in each case, in accordance
with the applicable securities laws of any state of the United States or any
other applicable jurisdiction and (y) they will deliver to each person to whom
such Series A Notes or an interest therein is transferred a notice substantially
to the effect of the foregoing.
(e) None of such Initial Purchaser nor any of its affiliates
or any person acting on its or their behalf has engaged or will engage in any
directed selling efforts within the meaning of Regulation S with respect to the
Series A Notes or the Subsidiary Guarantees.
(f) The Series A Notes offered and sold by such Initial
Purchaser pursuant hereto in reliance on Regulation S have been and will be
offered and sold only in offshore transactions.
(g) The sale of the Series A Notes offered and sold by such
Initial Purchaser pursuant hereto in reliance on Regulation S is not part of a
plan or scheme to evade the registration provisions of the Act.
(h) Such Initial Purchaser further represents and agrees that
(1) it has not offered or sold and will not offer or sell any Series A Notes to
persons in the United Kingdom prior to the expiration of the period of six
months from the issue date of the Series A Notes, except to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their business or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995, (ii) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Series A Notes in, from or otherwise
involving the United Kingdom and (iii) it
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<PAGE> 20
has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issuance of the
Series A Notes to a person who is of a kind described in Article 11(3) of the
Financial Services Act of 1986 (Investment Advertisements) (Exemptions) Order
1996 or is a person to whom the document may otherwise lawfully be issued or
passed on.
(i) Such Initial Purchaser agrees that it will not offer, sell
or deliver any of the Series A Notes in any jurisdiction outside the United
States except under circumstances that will result in compliance with the
applicable laws thereof, and that it will take at its own expense whatever
action is required to permit its purchase and resale of the Series A Notes in
such jurisdictions. Such Initial Purchaser understands that no action has been
taken to permit a public offering in any jurisdiction outside the United States
where action would be required for such purpose.
The Initial Purchaser acknowledges that the Issuers and, for
purposes of the opinions to be delivered to each Initial Purchaser pursuant to
Section 9 hereof, counsel to the Issuers and counsel to the Initial Purchaser
will rely upon the accuracy and truth of the foregoing representations and the
Initial Purchaser hereby consents to such reliance.
8. INDEMNIFICATION.
(a) Each Issuer agrees, jointly and severally, to indemnify
and hold harmless the Initial Purchaser, its directors, its officers and each
person, if any, who controls such Initial Purchaser within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, from and against any
and all losses, claims, damages, liabilities and judgments (including, without
limitation, any legal or other expenses incurred in connection with
investigating or defending any matter, including any action, that could give
rise to any such losses, claims, damages, liabilities or judgments) caused by
any untrue statement or alleged untrue statement of a material fact contained in
the Offering Memorandum (or any amendment or supplement thereto), the
Preliminary Offering Memorandum or any Rule 144A Information provided by any
Issuer to any holder or prospective purchaser of Series A Notes pursuant to
Section 5(h) or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or judgments are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to the
Initial Purchaser furnished in writing to the Company by such Initial Purchaser.
(b) The Initial Purchaser agrees to indemnify and hold
harmless the Issuers, and their respective directors and officers and 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 Issuers, to the same extent as the
foregoing indemnity from Issuers to the Initial Purchaser but only with
reference to information relating to the Initial Purchaser furnished in writing
to the Company by the Initial Purchaser expressly for use in the Preliminary
Offering Memorandum or the Offering Memorandum.
(c) In case any action shall be commenced involving any person
in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b)
(the "INDEMNIFIED PARTY"), the
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<PAGE> 21
indemnified party shall promptly notify the person against whom such indemnity
may be sought (the "INDEMNIFYING PARTY") in writing and the indemnifying party
shall assume the defense of such action, including the employment of counsel
reasonably satisfactory to the indemnified party and the payment of all fees and
expenses of such counsel, as incurred (except that in the case of any action in
respect of which indemnity may be sought pursuant to both Sections 8(a) and
8(b), the Initial Purchaser shall not be required to assume the defense of such
action pursuant to this Section 8(c), but may employ separate counsel and
participate in the defense thereof, but the fees and expenses of such counsel,
except as provided below, shall be at the expense of the Initial Purchaser). Any
indemnified party 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 the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one 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 fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by Donaldson, Lufkin
& Jenrette Securities Corporation, in the case of the parties indemnified
pursuant to Section 8(a), and by the Company, in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall indemnify and hold
harmless the indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any action (i)
effected with its written consent or (ii) effected without its written consent
if the settlement is entered into more than twenty business days after the
indemnifying party shall have received a request from the indemnified party for
reimbursement for the fees and expenses of counsel (in any case where such fees
and expenses are at the expense of the indemnifying party) and, prior to the
date of such settlement, the indemnifying party shall have failed to comply with
such reimbursement request. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement or compromise
of, or consent to the entry of judgment with respect to, any pending or
threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this
Section 8 is unavailable to an indemnified party or insufficient in respect of
any losses, claims, damages, liabilities or judgments referred to therein, 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
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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
Series A Notes or (ii) if the allocation provided by clause 8(d)(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 8(d)(i) above but also the
relative fault of the Issuers, on the one hand, and the Initial Purchaser, 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 benefits received by the
Issuers, on the one hand and the Initial Purchaser, on the other hand, shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Series A Notes (before deducting expenses) received by the Company, and
the total discounts and commissions received by the Initial Purchaser bear to
the total price to investors of the Series A Notes, in each case as set forth in
the table on the cover page of the Offering Memorandum. The relative fault of
the Issuers, on the one hand, and 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 any of the Issuers,
on the one hand, or 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.
The Issuers, and the Initial Purchaser agree that it would not
be just and equitable if contribution pursuant to this Section 8(d) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses incurred
by such indemnified party in connection with investigating or defending any
matter, including any action, that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, the Initial Purchaser shall not be required to contribute any amount
in excess of the amount by which the total discounts and commissions received by
such Initial Purchaser 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.
(e) The remedies provided for in this Section 8 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
9. CONDITIONS OF INITIAL PURCHASER'S OBLIGATIONS. The obligations of
the Initial Purchaser to purchase the Series A Notes under this Agreement are
subject to the satisfaction of each of the following conditions:
(a) There have been no amendments, alterations, modifications,
or waivers of any provisions of the Transaction Documents, except such
amendments, alterations, modifications or waivers which, in the judgment of the
Company, as evidenced by a certificate signed by the Chairman of the Board, the
President, an Executive Vice President, Vice President or Secretary of
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<PAGE> 23
the Company, were necessitated by a materially adverse change in the business,
operations or financial condition of the Company or its subsidiaries, and do not
modify the maturities of or security arrangements for other indebtedness being
incurred to consummate the transactions contemplated by the Transaction
Documents. You shall have received a certificate dated the Closing Date and
signed by the Chairman of the Board, the President, an Executive Vice President,
Vice President or Secretary of the Company to such effect.
(b) The following events shall have taken place at the time of
the purchase of the Notes by the Initial Purchaser (i) Old Holdings will have
merged with and into Old Stanadyne, which will be the surviving corporation of
the merger and (ii) the Company will have merged with and into Old Stanadyne,
which will be the surviving corporation of the merger.
(c) On or before the Closing Date, the Initial Purchaser and
Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Initial Purchaser,
shall have received such further documents, opinions, certificates and schedules
or instruments relating to the business, corporate, legal and financial affairs
of the Company and Old Stanadyne.
(d) All the representations and warranties of the Company
contained in this Agreement shall be true and correct on the Closing Date with
the same force and effect as if made on and as of the Closing Date.
(e) On or after the date hereof, (i) there shall not have
occurred any downgrading, suspension or withdrawal of, nor shall any notice have
been given of any potential or intended downgrading, suspension or withdrawal
of, or of any review (or of any potential or intended review) for a possible
change that does not indicate the direction of the possible change in, any
rating of any of the Issuers or any securities of any of the Issuers (including,
without limitation, the placing of any of the foregoing ratings on credit watch
with negative or developing implications or under review with an uncertain
direction) by any "nationally recognized statistical rating organization" as
such term is defined for purposes of Rule 436(g)(2) under the Act, (ii) there
shall not have occurred any change, nor shall any notice have been given of any
potential or intended change, in the outlook for any rating of any of the
Issuers or any securities of any of the Issuers by any such rating organization
and (iii) no such rating organization shall have given notice that it has
assigned (or is considering assigning) a lower rating to the Notes than that on
which the Notes were marketed.
(f) Since the respective dates as of which information is
given in the Offering Memorandum, other than as set forth in the Offering
Memorandum (exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement) (i) there shall not have occurred any change or any
development involving a prospective change in the condition, financial or
otherwise, or the earnings, business, management, prospects or operations of the
Company and its subsidiaries, taken as a whole, (ii) there shall not have been
any change or any development involving a prospective change in the capital
stock or in the long-term debt of the Company or any of its subsidiaries and
(iii) neither the Company nor any of its subsidiaries shall have incurred any
liability or obligation, direct or contingent, the effect of which, in any such
case described in clause 9(f)(i), 9(f)(ii) or 9(f)(iii), in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Series A Notes on the terms and in the manner contemplated in the Offering
Memorandum.
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(g) You shall have received on the Closing Date a certificate
dated such date, signed by the President and the Chief Financial Officer of the
Issuers, confirming the matters set forth in Sections 6(ah), 9(d) and 9(e) and
stating that the Issuers have complied with all the agreements and satisfied all
of the conditions herein contained and required to be complied with or satisfied
on or prior to such date.
(h) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Initial Purchaser), dated the Closing
Date, of Kirkland & Ellis, counsel for the Company, to the effect that:
(i)the Company and its subsidiaries and Old Stanadyne,
to the extent each is a party thereto, have all requisite
corporate power and authority to execute, deliver and perform
their respective obligations under each of the Transaction
Documents to which it is a party; each of the Transaction
Documents, and the transactions contemplated thereby, has been
and upon completion of the Acquisition Transactions, will be
duly and validly authorized, executed and delivered by each of
the Company and Old Stanadyne and, to the extent it is a party
thereto, each constitutes a valid and legally binding
agreement of each of the Company and Old Stanadyne enforceable
against the Company and Old Stanadyne in accordance with its
terms (assuming due authorization, execution and delivery of
each Transaction Document by any other party thereto) except
that enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or
in equity); except as set forth in the Offering Memorandum, no
consent, approval, authorization or order of any court or
governmental agency or body is required for the performance of
any of the Transaction Documents by, to the extent each is a
party thereto, or the consummation by the Company and Old
Stanadyne of any of the transactions contemplated thereby,
except such as may be required and have been obtained, or upon
effectiveness of the Registration Statements, will have been
obtained, under the Act, the Trust Indenture Act or state
securities or "Blue Sky" laws in connection with the purchase
and distribution of the Notes by the Initial Purchaser; and
neither the Company, Old Stanadyne, nor any of the Guarantors,
is (i) in violation of its certificate of incorporation or
bylaws, (ii) in violation of any statute, judgment, decree,
order, rule or regulation applicable to any of them or any of
their respective properties or assets, which violation would
have a Material Adverse Effect, or (iii) in default in the
performance or observance of any obligation, agreement,
covenant or condition contained in any of the Transaction
Documents or any other contract, indenture, mortgage, deed of
trust, loan agreement, note, lease, license, franchise
agreement, permit, certificate or agreement or instrument to
which any of them is a party or to
23
<PAGE> 25
which any of them is subject, which default would have a
Material Adverse Effect;
(ii)the execution, delivery and performance by the
Company and Old Stanadyne to the extent each is a party
thereto, of each of the Transaction Documents, and the
consummation by the Company and Old Stanadyne of the
transactions contemplated thereby, will not violate, conflict
with or constitute or result in a breach of or a default under
(or an event which, with notice or lapse of time, or both,
would constitute a breach of or a default under) any of (i)
the terms or provisions of any of the Transaction Documents or
any other indenture, mortgage, deed of trust, loan agreement,
note, lease, license, franchise agreement, or agreement or
instrument to which the Company or Old Stanadyne, is a party
or to which any of their respective properties or assets are
subject, which violation, conflict, breach or default would
have a Material Adverse Effect, (ii) the certificate of
incorporation or bylaws of the Company or Old Stanadyne, or
(iii) (assuming compliance with all applicable state
securities and "Blue Sky" laws) any statute, judgment, decree,
order, rule or regulation of any court or governmental agency
or other body applicable to the Company or Old Stanadyne, or
any of their respective properties or assets, which violation,
conflict, breach or default would have a Material Adverse
Effect;
(iii) the Company has delivered to the Initial Purchaser
a true and correct copy of each of the Transaction Documents
that have been executed and delivered prior to the date of
this Agreement and each other Transaction Document in the form
substantially as it will be executed and delivered on or prior
to the Closing Date, together with all related agreements and
all schedules and exhibits thereto, and there have been no
amendments, alterations, modifications or waivers of any of
the provisions of any of the Transaction Documents since their
date of execution or from the form in which it has been
delivered to the Initial Purchaser; there exists as of the
date hereof (after giving effect to the transactions
contemplated by each of the Transaction Documents) no event or
condition which would constitute a default or an event of
default (in each case as defined in each of the Transaction
Documents) under any of the Transaction Documents which would
result in a Material Adverse Effect or materially adversely
effect the ability of the Company and Old Stanadyne to
consummate the Acquisition Transactions and the transactions
contemplated by the Purchase Agreement;
(iv)the Acquisition Documents and the Banking Agreements
conform in all material respects to the descriptions thereof
contained in the Offering Memorandum and are valid, duly
authorized and enforceable agreements against the Company and
Old Stanadyne;
(v)each of the Company and its subsidiaries has been
duly incorporated, is validly existing as a corporation in
good standing under the
24
<PAGE> 26
laws of its jurisdiction of incorporation and has the
corporate power and authority to carry on its business as
described in the Offering Memorandum and to own, lease and
operate its properties;
(vi)each of the Company and its subsidiaries is duly
qualified and is in good standing as a foreign corporation
authorized to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property
requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect;
(vii) all the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are
fully paid, non-assessable and not subject to any preemptive
or similar rights; after giving effect to the Acquisition
Transactions, all of the outstanding shares of capital stock
of the Company will be owned by New Holdings, and all of the
outstanding shares of capital stock of New Holdings will be
owned by AIP, in each case free and clear of any security
interest, claim, lien pledge or other encumbrance (except as
may arise pursuant to the Bank Agreements) and except as set
forth in the Offering Memorandum there are no outstanding
rights (including without limitation pre-emptive rights,
warrants or options to acquire, or instruments convertible
into to exchangeable for, any shares of capital stock or other
equity interest in the Company or any of its direct or
indirect subsidiaries (including without limitation the
Guarantors), or any contract, commitment, agreement,
understanding or arrangement of any kind relating to the
issuance of any capital stock of the Company or any such
subsidiary, any such convertible or exchangeable securities or
any such rights, warrants or options;
(viii) the Series A Notes have been duly authorized and,
when executed and authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by
the Initial Purchaser in accordance with the terms of this
Agreement, will be entitled to the benefits of the Indenture
and will be valid and binding obligations of the Company,
enforceable in accordance with their terms except as (x) the
enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights
generally and (y) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles
of general applicability;
(ix) the Subsidiary Guarantees have been duly authorized
and, when the Series A Notes are executed and authenticated in
accordance with the provisions of the Indenture and delivered
to and paid for by the Initial Purchaser in accordance with
the terms of this Agreement, the Subsidiary Guarantees
endorsed thereon will be entitled to the benefits of the
Indenture and will be valid and binding obligations of the
Guarantors, enforceable in accordance with their terms except
as (x) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors'
rights
25
<PAGE> 27
generally and (y) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles
of general applicability;
(x) the Indenture has been duly authorized, validly
executed and delivered by each of the Issuers and is a valid
and binding agreement of each of the Issuers, enforceable
against each of the Issuers in accordance with its terms
except as (x) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (y) rights of acceleration and the
availability of equitable remedies may be limited by equitable
principles of general applicability;
(xi) this Agreement has been duly authorized, executed
and delivered by the Issuers;
(xii) the Registration Rights Agreement has been duly
authorized, executed and delivered by the Issuers and is a
valid and binding agreement of each of the Issuers,
enforceable against each of the Issuers in accordance with its
terms, except as (x) the enforceability thereof may be limited
by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (y) rights of acceleration and the
availability of equitable remedies may be limited by equitable
principles of general applicability;
(xiii) the Series B Notes have been duly authorized;
(xiv) such counsel is of the opinion ascribed to it in
the Offering Memorandum under the caption "Certain United
States Federal Income Tax Considerations For Non-United States
Holders";
(xv) the execution, delivery and performance of this
Agreement and the other Operative Documents by the Issuers,
the compliance by the Issuers with all provisions hereof and
thereof and the consummation of the transactions contemplated
hereby and thereby will not (i) require any consent, approval,
authorization or other order of, or qualification with, any
court or governmental body or agency (except such as may be
required under the securities or Blue Sky laws of the various
states), (ii) conflict with or constitute a breach of any of
the terms or provisions of, or a default under, the charter or
by-laws of the Company or any of its subsidiaries or any
indenture, loan agreement, mortgage, lease or other agreement
or instrument that is material to the Company and its
subsidiaries, taken as a whole, to which the Company or any of
its subsidiaries is a party or by which the Company or any of
its subsidiaries or any of their respective property is bound,
(iii) violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any
governmental body or agency having jurisdiction over the
Company, any of its subsidiaries or any of their respective
property, (iv) result in the imposition or creation of (or the
obligation to create or impose) a Lien under, any agreement or
instrument to which the Company or
26
<PAGE> 28
any of its subsidiaries is a party or by which the Company or
any of its subsidiaries or any of their respective property is
bound, or (v) result in the termination, suspension or
revocation of any Authorization (as defined below) of the
Company or any of its subsidiaries or result in any other
impairment of the rights of the holder of any such
Authorization;
(xvi) after due inquiry, such counsel does not know of
any legal or governmental proceedings pending or threatened to
which the Company or any of its subsidiaries is or could be a
party or to which any of their respective property is or could
be subject, which might result, singly or in the aggregate, in
a Material Adverse Effect;
(xvii) the Company is not and, after giving effect to
the offering and sale of the Series A Notes and the
application of the net proceeds thereof as described in the
Offering Memorandum, will not be, an "investment company" as
such term is defined in the Investment Company Act of 1940, as
amended;
(xviii) the Indenture complies as to form in all
material respects with the requirements of the TIA, and the
rules and regulations of the Commission applicable to an
indenture which is qualified thereunder. It is not necessary
in connection with the offer, sale and delivery of the Series
A Notes to the Initial Purchaser in the manner contemplated by
this Agreement or in connection with the Exempt Resales to
qualify the Indenture under the TIA;
(xix) such counsel has no reason to believe that, as of
the date of the Offering Memorandum or as of the Closing Date,
the Offering Memorandum, as amended or supplemented, if
applicable (except for the financial statements and other
financial data included therein, as to which such counsel need
not express any belief) contains any untrue statement of a
material fact or omits to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
The opinion of Kirkland & Ellis described in Section 9(e) above
shall be rendered to you at the request of the Issuers and shall so state
therein. In giving such opinion with respect to the matters covered by Section
9(h)(xxvii) Kirkland & Ellis, may state that their opinion and belief are based
upon their participation in the preparation of the Offering Memorandum and any
amendments or supplements thereto and review and discussion of the contents
thereof, but are without independent check or verification except as specified.
(i) The Initial Purchaser shall have received on the Closing
Date an opinion, dated the Closing Date, of Skadden, Arps, Slate, Meagher & Flom
LLP, counsel for the Initial Purchaser, in form and substance reasonably
satisfactory to the Initial Purchaser.
27
<PAGE> 29
(j) The Initial Purchaser shall have received, at the time
this Agreement is executed and at the Closing Date, letters dated the date
hereof or the Closing Date, as the case may be, in form and substance
satisfactory to the Initial Purchaser from Deloitte & Touche LLP, independent
public accountants, containing the information and statements of the type
ordinarily included in accountants' "comfort letters" to the Initial Purchaser
with respect to the financial statements and certain financial information
contained in the Offering Memorandum.
(k) The Series A Notes shall have been approved by the NASD
for trading and duly listed in PORTAL.
(l) The Initial Purchaser shall have received a counterpart,
conformed as executed, of the Indenture which shall have been entered into by
the Issuers and the Trustee.
(m) The Issuers shall have executed the Registration Rights
Agreement and the Initial Purchaser shall have received an original copy
thereof, duly executed by the Company and the Guarantors.
(n) Neither of the Issuers shall have failed at or prior to
the Closing Date to perform or comply with any of the agreements herein
contained and required to be performed or complied with by the either of the
Issuers, as the case may be, at or prior to the Closing Date.
10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement shall
become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the
Closing Date by the Initial Purchaser by written notice to the Company if any of
the following has occurred: (i) any outbreak or escalation of hostilities or
other national or international calamity or crisis or change in economic
conditions or in the financial markets of the United States or elsewhere that,
in the Initial Purchaser's judgment, is material and adverse and, in the Initial
Purchaser's judgment, makes it impracticable to market the Series A Notes on the
terms and in the manner contemplated in the Offering Memorandum, (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade or
the Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of any of the Issuers on any exchange or
in the over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which in your opinion materially and
adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, (v) the declaration of a banking moratorium by
either federal or New York State authorities or (vi) the taking of any action by
any federal, state or local government or agency in respect of its monetary or
fiscal affairs which in your opinion has a material adverse effect on the
financial markets in the United States.
11. MISCELLANEOUS. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to any of the Issuers, to
Stanadyne Automotive Corp., 92
28
<PAGE> 30
Deerfield Road, Windsor, CT 06095, Attention: Mike Boyer and (ii) if to the
Initial Purchaser, Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park
Avenue, New York, New York 10172, Attention: Syndicate Department, or in any
case to such other address as the person to be notified may have requested in
writing.
The respective indemnities, contribution agreements,
representations, warranties and other statements of the Issuers and the Initial
Purchaser set forth in or made pursuant to this Agreement shall remain operative
and in full force and effect, and will survive delivery of and payment for the
Series A Notes, regardless of (i) any investigation, or statement as to the
results thereof, made by or on behalf of the Initial Purchaser, the officers or
directors of the Initial Purchaser, any person controlling the Initial
Purchaser, any of the Issuers, the officers or directors of any of the Issuers,
or any person controlling any of the Issuers, (ii) acceptance of the Series A
Notes and payment for them hereunder and (iii) termination of this Agreement.
If for any reason the Series A Notes are not delivered by or on
behalf of the Company as provided herein (other than as a result of any
termination of this Agreement pursuant to Section 10), the Issuers, jointly and
severally, agree to reimburse the Initial Purchaser for all out-of-pocket
expenses (including the fees and disbursements of counsel) incurred by them.
Notwithstanding any termination of this Agreement, the Company shall be liable
for all expenses which it has agreed to pay pursuant to Section 5(i) hereof.
Each Issuer also agree, jointly and severally, to reimburse the Initial
Purchaser and its officers, directors and each person, if any, who controls such
Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act for any and all fees and expenses (including without limitation
the fees and expenses of counsel) incurred by them in connection with enforcing
their rights under this Agreement (including without limitation its rights under
Section 8).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Issuers, the Initial
Purchaser, the Initial Purchaser's directors and officers, any controlling
persons referred to herein, the directors of the Issuers and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Series A Notes from the Initial Purchaser merely because of such
purchase.
This Agreement shall be governed and construed in accordance with
the laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
29
<PAGE> 31
Please confirm that the foregoing correctly sets forth the agreement
among the Issuers and the Initial Purchaser.
Very truly yours,
STANADYNE AUTOMOTIVE CORP.
By: /s/ Michael H. Boyer
-----------------------------------------------
Name: Michael H. Boyer
Title: Chief Financial Officer
PRECISION ENGINE PRODUCTS CORP.
By: /s/ Michael H. Boyer
-----------------------------------------------
Name: Michael H. Boyer
Title: Chief Financial Officer
DSD INTERNATIONAL CORP.
By: /s/ Michael H. Boyer
-----------------------------------------------
Name: Michael H. Boyer
Title: Chief Financial Officer
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Michael K. Hooks
-------------------------------------
Name: Michael K. Hooks
Title: Managing Director
30
<PAGE> 32
SCHEDULE A
GUARANTORS
1. Precision Engine Products Corp.
2. DSD International Corp.
<PAGE> 33
SCHEDULE B
SUBSIDIARIES
1. Precision Engine Products Corp.
2. DSD International Corp.
3. Stanadyne Automotive S.p.A.
4. Stanadyne Automotive Foreign Sales Corp.
<PAGE> 34
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE> 1
Exhibit 4.3
REGISTRATION RIGHTS AGREEMENT
Dated as of December 11, 1997
by and among
STANADYNE AUTOMOTIVE CORP.
and
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
<PAGE> 2
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of December 11, by and among Stanadyne Automotive Corp., a
Delaware corporation (the "COMPANY") and Donaldson, Lufkin & Jenrette Securities
Corporation (the "INITIAL PURCHASER") who has agreed to purchase the Company's
10 1/4% Senior Subordinated Notes due 2007 (the "SERIES A NOTES") pursuant to
the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated
December 4, (the "PURCHASE AGREEMENT"), by and among the Company and the Initial
Purchaser. In order to induce the Initial Purchaser to purchase the Series A
Notes, the Company has agreed to provide the registration rights set forth in
this Agreement. The execution and delivery of this Agreement is a condition to
the obligations of the Initial Purchaser set forth in Section 9 of the Purchase
Agreement. Capitalized terms used herein and not otherwise defined shall have
the meaning assigned to them in the Indenture, dated December 11, 1997, between
the Company and United States Trust Company of New York, as Trustee, relating to
the Series A Notes and the Series B Notes (the "INDENTURE").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended.
AFFILIATE: As defined in Rule 144 of the Act.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
CERTIFICATED SECURITIES: Definitive Notes, as defined in the Indenture.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (b) the
maintenance of such Exchange Offer Registration Statement continuously effective
and the keeping of the Exchange Offer open for a period not less than the period
required pursuant to Section 3(b) hereof, (c) the delivery by the Company to the
Trustee under the Indenture of Series B Notes in the same aggregate principal
amount as the aggregate principal amount of Series A Notes tendered by Holders
thereof pursuant to the Exchange Offer, and (d) the authentication and delivery
by the Trustee of such Series B Notes to such tendering Holders pursuant to the
Exchange Offer.
2
<PAGE> 3
EFFECTIVENESS DEADLINE: As defined in Section 3(a) and 4(a) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE OFFER: The exchange and issuance by the Company of a principal
amount of the Series B Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
Series A Notes that are tendered by such Holders in connection with such
exchange and issuance.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial Purchaser
proposes to sell the Series A Notes to certain "qualified institutional buyers,"
as such term is defined in Rule 144A under the Act and pursuant to Regulation S
under the Act.
FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
HOLDERS: As defined in Section 2 hereof.
INDENTURE: The Indenture, dated as of the date hereof, by and among the
company and United States Trust Company of New York, as trustee, pursuant to
which the Notes are being issued, as amended or supplemented from time to time
in accordance with the terms thereof.
PROSPECTUS: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company and
the Guarantors relating to (a) an offering of Series B Notes pursuant to the
Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, in each case, (i) that
is filed pursuant to the provisions of this Agreement and (ii) including the
Prospectus included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
REGULATION S: Regulation S promulgated under the Act.
3
<PAGE> 4
RESTRICTED BROKER-DEALER: Any Broker-Dealer that holds Series B Notes
that were acquired in the Exchange Offer in exchange for Series A Notes that
such Broker-Dealer acquired for its own account as a result of market making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any of its affiliates).
RULE 144: Rule 144 promulgated under the Act.
SERIES B NOTES: The Company's __% Series B Senior Subordinated Notes
due 2007 to be issued pursuant to the Indenture: (i) in the Exchange Offer or
(ii) as contemplated by Section 4 hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
SUSPENSION NOTICE: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each Series A Note, until the earliest
of the date on which (i) such Series A Note is exchanged in the Exchange Offer
for a Series B Note that is entitled to be resold to the public by the Holder
thereof without complying with the prospectus delivery requirements of the Act,
(ii) such Series A Note has been disposed of in accordance with the Shelf
Registration Statement, (iii) such Series A Note is disposed of by a
Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the Prospectus
contained therein) or (iv) such Series A Note is distributed to the public
pursuant to Rule 144 under the Act.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "HOLDER") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
complied with), the Company and the Guarantors shall (i) cause the Exchange
Offer Registration Statement to be filed with the Commission as soon as
practicable after the Closing Date (the "EXCHANGE OFFER FILING DATE"), but in no
event later than 60 days after the Closing Date (such 60th day being the "FILING
DEADLINE"), (ii) use its best efforts to cause such Exchange Offer Registration
Statement to become effective at the earliest possible time, but in no event
later than 150 days after the Closing Date (such 150th day being the
"EFFECTIVENESS DEADLINE"), (iii) in connection with the foregoing, (A) file all
pre-effective amendments to such Exchange Offer Registration Statement as may be
necessary in order to cause
4
<PAGE> 5
it to become effective, (B) file, if applicable, a post-effective amendment to
such Exchange Offer Registration Statement pursuant to Rule 430A under the Act
and (C) cause all necessary filings, if any, in connection with the registration
and qualification of the Series B Notes to be made under the Blue Sky laws of
such jurisdictions as are necessary to permit Consummation of the Exchange
Offer, and (iv) upon the effectiveness of such Exchange Offer Registration
Statement, commence and Consummate the Exchange Offer. The Exchange Offer shall
be on the appropriate form permitting registration of the Series B Notes to be
offered in exchange for Series A Notes that are Transfer Restricted Securities
and to permit resales of Series B Notes by Broker-Dealers that tendered into the
Exchange Offer Series A Notes that such Broker-Dealer acquired for its own
account as a result of market making activities or other trading activities
(other than Series A Notes acquired directly from the Company or any of its
Affiliates) as contemplated by Section 3(c) below.
(b) The Company and the Guarantors shall use their respective best
efforts to cause the Exchange Offer Registration Statement to be effective
continuously, and shall keep the Exchange Offer open for a period of not less
than the minimum period required under applicable federal and state securities
laws to Consummate the Exchange Offer; provided, however, that in no event shall
such period be less than 20 Business Days. The Company and the Guarantors shall
cause the Exchange Offer to comply with all applicable federal and state
securities laws. No securities other than the Series B Notes shall be included
in the Exchange Offer Registration Statement. The Company and the Guarantors
shall use their respective best efforts to cause the Exchange Offer to be
Consummated on the earliest practicable date after the Exchange Offer
Registration Statement has become effective, but in no event later than 30
Business Days thereafter (such 30th day being the "CONSUMMATING DEADLINE").
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Transfer Restricted
Securities acquired directly from the Company or any Affiliate of the Company),
may exchange such Transfer Restricted Securities pursuant to the Exchange Offer;
however, such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Act and must, therefore, deliver a prospectus to be provided by
the Company, meeting the requirements of the Act in connection with its initial
sale of any Series B Notes received by such Broker-Dealer in the Exchange Offer
and that the Prospectus contained in the Exchange Offer Registration Statement
may be used by such Broker-Dealer to satisfy such prospectus delivery
requirement. Such "Plan of Distribution" section shall also contain all other
information with respect to such sales by such Broker-Dealers that the
Commission may require in order to permit such sales pursuant thereto, but such
"Plan of Distribution" shall not name any such Broker-Dealer or disclose the
amount of Transfer Restricted Securities held by any such Broker-Dealer, except
to the extent required by the Commission as a result of a change in policy,
rules or regulations after the date of this Agreement. See the Shearman &
Sterling no-action letter (available July 2, 1993).
To the extent necessary to ensure that the Prospectus contained in the
Exchange Offer
5
<PAGE> 6
Registration Statement is continuously available for sales of Series B Notes by
Broker-Dealers, the Company and the Guarantors agree to use their respective
best efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented and amended as required by the provisions of Section
6(c) hereof and in conformity with the requirements of this Agreement, the Act
and the policies, rules and regulations of the Commission as announced from time
to time, for a period of one year from the Consummation Deadline, or such
shorter period as will terminate when all Transfer Restricted Securities covered
by such Registration Statement have been sold pursuant thereto. The Company
shall promptly provide sufficient copies of the latest version of such
Prospectus to such Broker-Dealer promptly upon request, and in no event later
than one day after such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) (A) the Exchange Offer is not permitted
by applicable law or Commission policy (after the Company and the Guarantors
have complied with the procedures set forth in Section 6(a)(i) below) or (B) for
any other reason the Exchange Offer is not Consummated within 180 days after the
Closing Date or (ii) if any Holder of Transfer Restricted Securities notifies
the Company prior to the 20th business day following the Consummation Deadline
that (A) such Holder was prohibited by law or Commission policy from
participating in the Exchange Offer or (B) such Holder may not resell the Series
B Notes acquired by it in the Exchange Offer to the public without delivering a
prospectus and the Prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such Holder or (C)
such Holder is a Broker-Dealer and holds Series A Notes acquired directly from
the Company or any of its Affiliates, then the Company and the Guarantors shall
as promptly as practicable deliver to the Holders and the Trustee written notice
thereof (the "Shelf Notice"), and the Company shall:
(x) cause to be filed, on or prior to 30 days after the earlier of (i) the
date on which the Company determines that the Exchange Offer Registration
Statement cannot be filed as a result of clause (a)(i) above, and (ii) the date
on which the Company receives the notice specified in clause (a) (ii) above,
(such earlier date, the "FILING DEADLINE"), a shelf registration statement
pursuant to Rule 415 under the Act (which may be an amendment to the Exchange
Offer Registration Statement (the "SHELF REGISTRATION STATEMENT")), relating to
all Transfer Restricted Securities, and
(y) shall use their respective best efforts to cause such Shelf
Registration Statement to become effective on or prior to 60 days after the
Filing Deadline (such 60th day the "EFFECTIVENESS DEADLINE").
If, after the Company has filed an Exchange Offer Registration
Statement that satisfies the requirements of Section 3(a) above, the Company is
required to file and make effective a Shelf Registration Statement solely
because the Exchange Offer is not permitted under applicable federal law (i.e.
clause (a)(i)(A) above), then the filing of the Exchange Offer Registration
Statement shall be deemed to satisfy the requirements of clause (x) above;
provided that, in such event, the Company shall remain obligated to meet the
Effectiveness Deadline set forth in clause (y).
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<PAGE> 7
The Company and the Guarantors shall use their respective best efforts
to keep any Shelf Registration Statement required by this Section 4(a)
continuously effective, supplemented and amended as required by and subject to
the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure
that it is available for sales of Transfer Restricted Securities by the Holders
thereof entitled to the benefit of this Section 4(a), and to ensure that it
conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least two years (as extended pursuant to Section 6(c)(i)) following
the Closing Date or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Shelf Registration Statement have been
sold pursuant thereto (the "Effectiveness Period"). No securities other than
Transfer Restricted Securities shall be included in any Shelf Registration
Statement.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. 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 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act 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 Liquidated Damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Filing Deadline, (ii)
any such Registration Statement has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated on or prior to the Consummation Deadline
or (iv) any Registration Statement required by this Agreement is filed and
declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded immediately by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself declared effective immediately (each such event referred to
in clauses (i) through (iv), a "REGISTRATION DEFAULT"), then the Company and the
Guarantors hereby jointly and severally agree to pay to each Holder of Transfer
Restricted Securities affected thereby liquidated damages in an amount equal to
$.05 per week per $1,000 in principal amount of Transfer Restricted Securities
held by such Holder for each week or portion thereof that the Registration
Default continues for the first 90-day period immediately following the
occurrence of such Registration Default. The amount of the liquidated damages
shall increase by an additional $.05 per week per $1,000 in principal amount of
Transfer Restricted Securities with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
liquidated damages of $.50 per week per $1,000 in principal amount of Transfer
Restricted Securities; provided that the Company
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<PAGE> 8
shall in no event be required to pay liquidated damages for more than one
Registration Default at any given time. Notwithstanding anything to the contrary
set forth herein, (1) upon filing of the Exchange Offer Registration Statement
(and/or, if applicable, the Shelf Registration Statement), in the case of (i)
above, (2) upon the effectiveness of the Exchange Offer Registration Statement
(and/or, if applicable, the Shelf Registration Statement), in the case of (ii)
above, (3) upon Consummation of the Exchange Offer, in the case of (iii) above,
or (4) upon the filing of a post-effective amendment to the Registration
Statement or an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration Statement)
to again be declared effective or made usable in the case of (iv) above, the
liquidated damages payable with respect to the Transfer Restricted Securities as
a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued liquidated damages shall be paid by the Company to the
Holders entitled thereto, in the manner provided for the payment of interest in
the Indenture, on each Interest Payment Date, as more fully set forth in the
Indenture and the Notes. All obligations of the Company and the Guarantors set
forth in the preceding paragraph that are outstanding with respect to any
Transfer Restricted Security at the time such security ceases to be a Transfer
Restricted Security shall survive until such time as all such obligations with
respect to such security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company and the Guarantors shall (x) comply with all
applicable provisions of Section 6(c) below, (y) use their respective best
efforts to effect such exchange and to permit the resale of Series B Notes by
Broker-Dealers that tendered Notes in the Exchange Offer Series A Notes that
such Broker-Dealer acquired for its own account as a result of its market making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any of its Affiliates) being sold in accordance
with the intended method or methods of distribution thereof, and (z) comply with
all of the following provisions:
(i) If, following the date hereof there has been announced a change
in Commission policy with respect to exchange offers such as the Exchange
Offer, that in the reasonable opinion of counsel to the Company raises a
substantial question as to whether the Exchange Offer is permitted by
applicable federal law, the Company and the Guarantors hereby agree to seek
a no-action letter or other favorable decision from the Commission allowing
the Company and the Guarantors to Consummate an Exchange Offer for such
Transfer Restricted Securities. The Company and the Guarantors hereby agree
to pursue the issuance of such a decision to the Commission staff level. In
connection with the foregoing, the Company and the Guarantors hereby agree
to take all such other actions as may be requested by the Commission or
otherwise required in connection with the issuance of such decision,
including without limitation (A) participating in telephonic conferences
with the Commission, (B) delivering to the Commission staff an analysis
prepared by counsel to the Company setting forth the legal bases, if any,
upon which such counsel has concluded that such an Exchange Offer should be
permitted and (C)
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<PAGE> 9
diligently pursuing a resolution (which need not be favorable) by the
Commission staff.
(ii) As a condition to its participation in the Exchange Offer,
each Holder of Transfer Restricted Securities (including, without
limitation, any Holder who is a Broker Dealer) shall furnish, upon the
request of the Company, prior to the Consummation of the Exchange Offer, a
written representation to the Company and the Guarantors (which may be
contained in the letter of transmittal contemplated by the Exchange Offer
Registration Statement) to the effect that (A) it is not an Affiliate of
the Company, (B) it is not engaged in, and does not intend to engage in,
and has no arrangement or understanding with any person to participate in,
a distribution of the Series B Notes to be issued in the Exchange Offer and
(C) it is acquiring the Series B Notes in its ordinary course of business.
Each Holder using the Exchange Offer to participate in a distribution of
the Series B Notes hereby acknowledges and agrees that, if the resales are
of Series B Notes obtained by such Holder in exchange for Series A Notes
acquired directly from the Company or an Affiliate thereof, it (1) could
not, under Commission policy as in effect on the date of this Agreement,
rely on the position of the Commission enunciated in Morgan Stanley and
Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation
(available May 13, 1988), as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and similar no-action letters
(including, if applicable, any no-action letter obtained pursuant to clause
(i) above), and (2) must comply with the registration and prospectus
delivery requirements of the Act in connection with a secondary resale
transaction and that such a secondary resale transaction must be covered by
an effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall provide a supplemental
letter to the Commission (A) stating that the Company and the Guarantors
are registering the Exchange Offer in reliance on the position of the
Commission enunciated in Exxon Capital Holdings Corporation (available May
13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) as
interpreted in the Commission's letter to Shearman & Sterling dated July 2,
1993, and, if applicable, any no-action letter obtained pursuant to clause
(i) above, (B) including a representation that neither the Company nor any
Guarantor has entered into any arrangement or understanding with any Person
to distribute the Series B Notes to be received in the Exchange Offer and
that, to the best of the Company's and the Guarantors information and
belief, each Holder participating in the Exchange Offer is acquiring the
Series B Notes in its ordinary course of business and has no arrangement or
understanding with any Person to participate in the distribution of the
Series B Notes received in the Exchange Offer and (C) any other undertaking
or representation required by the Commission as set forth in any no-action
letter obtained pursuant to clause (i) above, if applicable.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and the Guarantors shall (x) comply with all
the provisions of Section 6(c) below and (y) use their respective best efforts
to effect such registration to permit the sale of the Transfer Restricted
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<PAGE> 10
Securities being sold in accordance with the intended method or methods of
distribution thereof (as indicated in the information furnished to the Company
pursuant to Section 4(b) hereof), and pursuant thereto the Company will prepare
and file with the Commission a Registration Statement relating to the
registration on any appropriate form under the Act, which form shall be
available for the sale of the Transfer Restricted Securities in accordance with
the intended method or methods of distribution thereof within the time periods
and otherwise in accordance with the provisions hereof.
(c) General Provisions. In connection with any Registration Statement
and any related Prospectus required by this Agreement, the Company and the
Guarantors shall:
(i) use their respective best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this Agreement, as
applicable. Upon the occurrence of any event that would cause any such
Registration Statement or the Prospectus contained therein (A) to contain a
material misstatement or omission or (B) not to be effective and usable for
resale of Transfer Restricted Securities during the period required by this
Agreement, the Company and the Guarantors shall file promptly an
appropriate amendment to such Registration Statement curing such defect,
and, if Commission review is required, use their best efforts to cause such
amendment to be declared effective as soon as practicable.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as may
be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may be;
cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under
the Act, and to comply fully with Rules 424, 430A and 462, as applicable,
under the Act in a timely manner; and comply with the provisions of the Act
with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof set forth
in such Registration Statement or supplement to the Prospectus;
(iii) advise the selling Holders promptly and, if requested by such
Persons, confirm such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to any applicable Registration Statement or any post-effective
amendment thereto, when the same has become effective, (B) of any request
by the Commission for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional information
relating thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the Act or
of the suspension by any state securities commission of the qualification
of the Transfer Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the preceding
purposes, (D) of the existence of any fact or the happening of any event
that makes any statement of a material fact made in the Registration
Statement, the Prospectus, any amendment or supplement thereto or any
document incorporated by reference
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<PAGE> 11
therein untrue, or that requires the making of any additions to or changes
in the Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes in
the Prospectus in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If at any time
the Commission shall issue any stop order suspending the effectiveness of
the Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Transfer Restricted Securities under
state securities or Blue Sky laws, the Company and the Guarantors shall use
their respective best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event contemplated
by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(v) furnish to the Initial Purchaser and each selling Holder named
in any Registration Statement or Prospectus in connection with such
exchange or sale, if any, before filing with the Commission, copies of any
Registration Statement or any Prospectus included therein or any amendments
or supplements to any such Registration Statement or Prospectus (including
all documents incorporated by reference after the initial filing of such
Registration Statement), which documents will be subject to the review and
comment of such selling Holders in connection with such sale, if any, for a
period of at least five Business Days, and the Company will not file any
such Registration Statement or Prospectus or any amendment or supplement to
any such Registration Statement or Prospectus (including all such documents
incorporated by reference) to which such selling Holders shall reasonably
object within five Business Days after the receipt thereof. A selling
Holder shall be deemed to have reasonably objected to such filing if such
Registration Statement, amendment, Prospectus or supplement, as applicable,
as proposed to be filed, contains a material misstatement or omission or
fails to comply with the applicable requirements of the Act;
(vi) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the selling Holders in connection with
such exchange or sale, if any, make the Company's and the Guarantors
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such selling Holders may reasonably
request;
(vii) make available at reasonable times for inspection by the
selling Holders participating in any disposition pursuant to such
Registration Statement and any attorney or
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<PAGE> 12
accountant retained by such selling Holders, all financial and other
records, pertinent corporate documents of the Company and the Guarantors
and cause the Company's and the Guarantors' officers, directors and
employees to supply all information reasonably requested by any such
selling Holder, attorney or accountant in connection with such Registration
Statement or any post-effective amendment thereto subsequent to the filing
thereof and prior to its effectiveness;
(viii) if requested by any selling Holders in connection with such
exchange or sale, promptly include in any Registration Statement or
Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such selling Holders may reasonably request
to have included therein, including, without limitation, information
relating to the "Plan of Distribution" of the Transfer Restricted
Securities, and make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Company is
notified of the matters to be included in such Prospectus supplement or
post-effective amendment;
(ix) furnish to each selling Holder in connection with such
exchange or sale, without charge, at least one copy of the Registration
Statement, as first filed with the Commission, and of each amendment
thereto, including all documents incorporated by reference therein and all
exhibits (including exhibits incorporated therein by reference);
(x) deliver to each selling Holder, without charge, as many copies
of the Prospectus (including each preliminary prospectus) and any amendment
or supplement thereto as such Persons reasonably may request; the Company
and the Guarantors hereby consent to the use (in accordance with law) of
the Prospectus and any amendment or supplement thereto by each of the
selling Holders in connection with the offering and the sale of the
Transfer Restricted Securities covered by the Prospectus or any amendment
or supplement thereto;
(xi) in the case of a Shelf Registration Statement only, upon the
request of any selling Holder, enter into such agreements (including
underwriting agreements) and make such representations and warranties and
take all such other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities pursuant
to such Registration Statement contemplated by this Agreement as may be
reasonably requested by any Holder of Transfer Restricted Securities in
connection with any sale or resale pursuant to such Registration Statement.
In such connection, the Company and the Guarantors shall:
(A) upon request of any selling Holder, furnish (or in the case of
paragraphs (2) and (3), use its best efforts to cause to be furnished)
to each selling Holder, upon Consummation of the Exchange Offer or upon
the effectiveness of the Shelf Registration Statement, as the case may
be:
(1) a certificate, dated such date, signed on behalf of the
Company and the Guarantors by (x) the President or any Vice
President and (y) a principal financial or accounting officer of
the Company and such Guarantor, confirming, as of the date
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<PAGE> 13
thereof, the matters set forth in paragraphs (a) and (ee) of
Section 6 and (a) and (b) of Section 9 of the Purchase Agreement
and such other similar matters as the selling Holders may
reasonably request;
(2) an opinion, dated the date of Consummation of the Exchange
Offer or the date of effectiveness of the Shelf Registration
Statement, as the case may be, of counsel for the Company and the
Guarantors covering matters similar to those set forth in paragraph
(j) of Section 9 of the Purchase Agreement and such other matter as
the selling Holders may reasonably request, and in any event
including a statement to the effect that such counsel has
participated in conferences with officers and other representatives
of the Company and the Guarantors, representatives of the
independent public accountants for the Company and the Guarantors
and have considered the matters required to be stated therein and
the statements contained therein, although such counsel has not
independently verified the accuracy, completeness or fairness of
such statements; and that such counsel advises that, on the basis
of the foregoing (relying as to materiality to the extent such
counsel deems appropriate upon the statements of officers and other
representatives of the Company and the Guarantors and without
independent check or verification), no facts came to such counsel's
attention that caused such counsel to believe that the applicable
Registration Statement, at the time such Registration Statement or
any post-effective amendment thereto became effective and, in the
case of the Exchange Offer Registration Statement, as of the date
of Consummation of the Exchange Offer, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the
opinion dated the date of Consummation of the Exchange Offer, as of
the date of Consummation, contained an untrue statement of a
material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Without
limiting the foregoing, such counsel may state further that such
counsel assumes no responsibility for, and has not independently
verified, the accuracy, completeness or fairness of the financial
statements, notes and schedules and other financial data included
in any Registration Statement contemplated by this Agreement or the
related Prospectus; and
(3) a customary comfort letter, dated the date of Consummation
of the Exchange Offer, or as of the date of effectiveness of the
Shelf Registration Statement, as the case may be, from the
Company's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort letters
to underwriters in connection with underwritten offerings, and
affirming the matters set forth in the comfort letters delivered
pursuant to Section 9(1) of the Purchase Agreement; and
(B) deliver such other documents and certificates as may be
reasonably requested by the selling Holders to evidence compliance with
clause (A) above and with any customary
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<PAGE> 14
conditions contained in the any agreement entered into by the Company
and the Guarantors pursuant to this clause (xi);
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the
applicable Registration Statement; provided, however, that neither the
Company nor any Guarantor shall be required to register or qualify as a
foreign corporation where it is not now so qualified or to take any action
that would subject it to the service of process in suits or to taxation,
other than as to matters and transactions relating to the Registration
Statement, in any jurisdiction where it is not now so subject;
(xiii) issue, upon the request of any Holder of Series A Notes
covered by any Shelf Registration Statement contemplated by this Agreement,
Series B Notes having an aggregate principal amount equal to the aggregate
principal amount of Series A Notes surrendered to the Company by such
Holder in exchange therefor or being sold by such Holder; such Series B
Notes to be registered in the name of such Holder or in the name of the
purchaser(s) of such Series B Notes, as the case may be; in return, the
Series A Notes held by such Holder shall be surrendered to the Company for
cancellation;
(xiv) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the selling Holders to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and to
register such Transfer Restricted Securities in such denominations and such
names as the selling Holders may request at least two Business Days prior
to such sale of Transfer Restricted Securities;
(xv) use their respective best efforts to cause the disposition of
the Transfer Restricted Securities covered by the Registration Statement to
be registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof to
consummate the disposition of such Transfer Restricted Securities, subject
to the proviso contained in clause (xii) above;
(xvi) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering such
Transfer Restricted Securities and provide the Trustee under the Indenture
with printed certificates for the Transfer Restricted Securities which are
in a form eligible for deposit with the Depository Trust Company;
(xvii) otherwise use their respective best efforts to comply with
all applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any applicable
Registration Statement, as soon as practicable, a consolidated earnings
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<PAGE> 15
statement meeting the requirements of Rule 158 (which need not be audited)
covering a twelve-month period beginning after the effective date of the
Registration Statement (as such term is defined in paragraph (c) of Rule
158 under the Act);
(xix) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement and, in connection therewith, cooperate with the Trustee and
the Holders to effect such changes to the Indenture as may be required for
such Indenture to be so qualified in accordance with the terms of the TIA;
and execute and use its best efforts to cause the Trustee to execute, all
documents that may be required to effect such changes and all other forms
and documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner; and
(xx) use their respective best efforts to cause the Transfer
Restricted Securities or the Series B Notes, as applicable, covered by an
effective registration statement required by Section 3 or Section 4 hereof to be
rated by one or two rating agencies, if and as so requested by the Holders of a
majority in aggregate principal amount of Transfer Restricted Securities
relating to such registration statement or the managing underwriters in
connection therewith, if any;
(xxi) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(xxii) use their respective best efforts to take all other steps
necessary to effect the registration of the Transfer Restricted Securities
covered by a Registration Statement contemplated hereby.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until (i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is
advised in writing by the Company that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus (in each case, the "RECOMMENCEMENT
DATE"). Each Holder receiving a Suspension Notice hereby agrees that it will
either (i) destroy any Prospectuses, other than permanent file copies, then in
such Holder's possession which have been replaced by the Company with more
recently dated Prospectuses or (ii) deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, then in such Holder's
possession of the Prospectus covering such Transfer Restricted Securities that
was current at the time of receipt of the Suspension Notice. The time period
regarding the effectiveness of such Registration Statement set forth in Section
3 or 4 hereof, as applicable, shall be extended by a number of days equal to the
number of days in the period from and including the date of delivery of the
Suspension Notice to the date of delivery of the Recommencement Date.
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<PAGE> 16
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantors'
performance of or compliance with this Agreement will be borne by the Company,
regardless of whether a Registration Statement becomes effective, including
without limitation: (i) all registration and filing fees and expenses; (ii) all
fees and expenses of compliance with federal securities and state Blue Sky or
securities laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Transfer Restricted Securities or Series B Notes); (iii) all expenses of
printing (including printing certificates for the Series B Notes to be issued in
the Exchange Offer and printing of Prospectuses, messenger and delivery services
and telephone expenses; (iv) all fees and disbursements of counsel for the
Company, the Guarantors and the Holders of Transfer Restricted Securities; (v)
all application and filing fees in connection with listing the Series B Notes on
a national securities exchange or automated quotation system pursuant to the
requirements hereof (vi) the fees and expenses of any "qualified independent
underwriter" or other independent appraiser participating in an offering
pursuant to the NASD's Rules of Fair Practice; (vii) any rating agency fees; and
(viii) all fees and disbursements of independent certified public accountants of
the Company and the Guarantors (including the expenses of any special audit and
comfort letters required by or incident to such performance).
The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company and the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantors
will reimburse the Initial Purchaser and the Holders of Transfer Restricted
Securities being tendered in the Exchange Offer and/or resold pursuant to the
"Plan of Distribution" contained in the Exchange Offer Registration Statement or
the Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be Skadden, Arps, Slate,
Meagher & Flom LLP, unless another firm shall be chosen by the Holders of a
majority in principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantors, jointly and severally, agree to
indemnify and hold harmless each Holder, its directors, its officers and each
Person, if any, who controls such Holder (within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act), from and against any and all losses,
claims, damages, liabilities, judgments, (including without limitation, any
legal or other expenses incurred in connection with investigating or defending
any matter, including any action that could give rise to any such losses,
claims, damages, liabilities or judgments) caused by any untrue statement or
alleged untrue statement of a material fact contained in any Registration
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<PAGE> 17
Statement, preliminary prospectus or Prospectus (or any amendment or supplement
thereto) provided by the Company to any holder or any prospective purchaser of
Series B Notes, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or judgments are caused by an untrue statement or omission or
alleged untrue statement or omission that is based upon information relating to
any of the Holders furnished in writing to the Company by any of the Holders.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company and the Guarantors and
their respective directors and officers, and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company, or the Guarantors to the same extent as the foregoing indemnity
from the Company and the Guarantors to each of the Indemnified Holders, but only
with reference to information relating to such Indemnified Holder furnished in
writing to the Company by such Indemnified Holder expressly for use in any
Registration Statement. In no event shall any Indemnified Holder be liable or
responsible for any amount in excess of the amount by which the total amount
received by such Indemnified Holder with respect to its sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Indemnified Holder for such Transfer Restricted Securities
and (ii) the amount of any damages that such Indemnified Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing
(provided that the failure to give such notice shall not relieve the
indemnifying party of its obligations under Section 8 (a) or (b) unless and only
to the extent that the indemnifying party is materially prejudiced by the
failure to notify) and the indemnifying party shall assume the defense of such
action, including the employment of counsel reasonably satisfactory to the
indemnified party and the payment of all fees and expenses of such counsel, as
incurred (except that in the case of any action in respect of which indemnity
may be sought pursuant to both Sections 8(a) and 8(b), an Indemnified Holder
shall not be required to assume the defense of such action pursuant to this
Section 8(c), but may employ separate counsel and participate in the defense
thereof, but the fees and expenses of such counsel, except as provided below,
shall be at the expense of the Indemnified Holder). Any indemnified party 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 the indemnified party unless (i) the employment of such counsel shall
have been specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to promptly assume the defense of such
action or employ counsel reasonably satisfactory to the indemnified party or
(iii) the named parties to any such action (including any impleaded parties)
include both the indemnified party and the indemnifying party, and the
indemnified party shall have been advised by such separate counsel that there
may be one or more legal defenses available to it which are different from or
additional to those available to the indemnifying party (in which case the
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<PAGE> 18
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one 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 fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by a majority of the
Indemnified Holders, in the case of the parties indemnified pursuant to Section
8(a), and by the Company, in the case of parties indemnified pursuant to Section
8(b). The indemnifying party shall indemnify and hold harmless the indemnified
party from and against any and all losses, claims, damages, liabilities and
judgments by reason of any settlement of any action (i) effected with its
written consent or (ii) effected without its written consent if the settlement
is entered into more than twenty business days after the indemnifying party
shall have received a request from the indemnified party for reimbursement for
the fees and expenses of counsel (in any case where such fees and expenses are
at the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with such
reimbursement request. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement or compromise of, or
consent to the entry of judgment with respect to, any pending or threatened
action in respect of which the indemnified party is or could have been a party
and indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section
8 is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, 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 or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Guarantors, on the one hand, and the Holders, on the other hand, from their sale
of Transfer Restricted Securities or (ii) if the allocation provided by clause
8(d)(i) is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause 8(d)(i) above
but also the relative fault of the Company and the Guarantors, on the one hand,
and of the Indemnified Holder, 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 Company and the Guarantors, on the one
hand, and of the Indemnified Holder, 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 Company and the Guarantors, on the one
hand, or by the Indemnified Holder, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and judgments referred to above shall
be deemed to include, subject to the
18
<PAGE> 19
limitations set forth in the second paragraph of Section 8(a), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company, the Guarantors and each Holder agree that it would not be
just and equitable if contribution pursuant to this Section 8(d) were determined
by pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 8, no Holder or its
related Indemnified Holders shall be required to contribute, in the aggregate,
any amount in excess of the amount by which the total received by such Holder
with respect to the sale of its Transfer Restricted Securities pursuant to a
Registration Statement exceeds the sum of (A) the amount paid by such Holder for
such Transfer Restricted Securities plus (B) the amount of any damages which
such Holder 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. The Holders' obligations to contribute pursuant to
this Section 8(c) are several in proportion to the respective principal amount
of Transfer Restricted Securities held by each of the Holders hereunder and not
joint.
SECTION 9. RULE 144 AND RULE 144A
The Company agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any Holder of Transfer Restricted Securities, to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to
Section 13 or 15 (d) of the Exchange Act, to make all filings required thereby
in a timely manner in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company and the Guarantors acknowledge and agree that
any failure by the Company and/or the Guarantors to comply with their respective
obligations under Sections 3 and 4 hereof may result in material irreparable
injury to the Initial Purchaser or the Holders for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of any such failure, the Initial Purchaser or
any Holder may
19
<PAGE> 20
obtain such relief as may be required to specifically enforce the Company's and
the Guarantor's obligations under Sections 3 and 4 hereof. The Company and the
Guarantors further agree to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any Guarantor
will, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor the Guarantor has previously entered into any agreement
granting any registration rights with respect to its securities to any Person.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's and
the Guarantors securities under any agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company of its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose securities are being tendered pursuant to the Exchange Offer
and that does not affect directly or indirectly the rights of other Holders
whose securities are not being tendered pursuant to such Exchange Offer may be
given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities subject to such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchaser, on the other hand, and
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect its rights or the rights
of Holders hereunder.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or the Guarantors:
Stanadyne Automotive Corp.
92 Deerfield Road
20
<PAGE> 21
Windsor, CT 06095
Telecopier No.: (860) 683-4500
Attention:
With a copy to:
Kirkland & Ellis
655 15 Street, N.W.
Washington, D.C. 20005
Telecopier No.: (202) 879-5200
Attention: Jack M. Feder
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; provided, that nothing
herein shall be deemed to permit any assignment, transfer or other disposition
of Transfer Restricted Securities in violation of the terms hereof or of the
Purchase Agreement or the Indenture. If any transferee of any Holder shall
acquire Transfer Restricted Securities in any manner, whether by operation of
law or otherwise, such Transfer Restricted Securities shall be held subject to
all of the terms of this Agreement, and by taking and holding such Transfer
Restricted Securities such Person shall be conclusively deemed to have agreed to
be bound by and to perform all of the terms and provisions of this Agreement,
including the restrictions on resale set forth in this Agreement and, if
applicable, the Purchase Agreement, and such Person shall be entitled to receive
the benefits hereof.
(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) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
21
<PAGE> 22
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
22
<PAGE> 23
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
STANADYNE AUTOMOTIVE CORP.
By: /s/ Michael H. Boyer
Name: Michael H. Boyer
Title: Chief Financial Officer
PRECISION ENGINE PRODUCTS CORP.
By: /s/ Michael H. Boyer
Name: Michael H. Boyer
Title: Chief Financial Officer
DSD INTERNATIONAL CORP.
By: /s/ Michael H. Boyer
Name: Michael H. Boyer
Title: Chief Financial Officer
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Michael K. Hooks
Name: Michael K. Hooks
Title: Managing Director
23
<PAGE> 24
EXHIBIT A
NOTICE OF FILING OF
EXCHANGE OFFER REGISTRATION STATEMENT
To: Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Attention: Louise Guarneri (Compliance Department)
Fax: (212) 892-7272
From: Stanadyne Automotive Holding Corp.
10 1/4% Senior Subordinated Notes due 2007
Date: ___, 199_
For your information only (NO ACTION REQUIRED):
Today, ______, 199_, we filed [an Exchange Registration Statement/a
Shelf Registration Statement] with the Securities and Exchange Commission. We
currently expect this registration statement to be declared effective within __
business days of the date hereof.
24
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF KIRKLAND & ELLIS]
To Call Writer Direct:
202 879-5000
[DATE]
Stanadyne Automotive Corp.
92 Deerfield Road
Windsor, CT 06095
Re: 10 1/4% Series B Senior Subordinated Notes due 2007
---------------------------------------------------
Ladies and Gentlemen:
We are acting as special counsel to Stanadyne Automotive Corp. a Delaware
corporation (the "Company"), in connection with the proposed registration by
the Company of up to $100,000,000 in aggregate principal amount of the
Company's 10 1/4% Series B Senior Subordinated Notes due 2007 (the "Exchange
Notes"), pursuant to a Registration Statement on Form S-4 filed with the
Securities and Exchange Commission (the "Commission") on February 6, 1998 under
the Securities Act of 1933, as amended (the "Securities Act") (such
Registration Statement, as amended or supplemented, is hereinafter referred to
as the "Registration Statement"), for the purpose of effecting an exchange
offer (the "Exchange Offer") for the Company's 10 1/4% Series A Senior
Subordinated Notes due 2007 (the "Notes"). The Exchange Notes are to be issued
pursuant to the Indenture (the "Indenture"), dated as of December 11, 1997
between the Company, as Issuer, DSD International Corp. and Precision Engine
Products Corp., as Guarantors, and the United States and Trust Company, as
Trustee, in exchange for and in replacement of the Company's outstanding Notes,
of which $100,000,000 in aggregate principal amount is outstanding.
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary for the purposes of this
opinion, including (i) the corporate and organizational documents of the
Company, (ii) minutes and records of the corporate proceedings of the Company
with respect to the issuance of the Exchange Notes, (iii) the Registration
Statement and exhibits thereto and (iv) the Registration Rights Agreement,
dated as of December 11, 1997, between the Company and Donaldson, Lufkin &
Jenrette Securities Corporation.
For purposes of this opinion, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to the originals of all
documents submitted to us as copies and the
<PAGE> 2
Stanadyne Automotive Corp.
[DATE]
Page 2
authenticity of the originals of all documents submitted to us as copies. We
have also assumed the genuineness of the signatures of persons signing all
documents in connection with which this opinion is rendered, the authority of
such persons signing on behalf of the parties thereto other than the Company,
and the due authorization, execution and delivery of all documents by the
parties thereto other than the Company. As to any facts material to the
opinions expressed herein which we have not independently established or
verified, we have relied upon statements and representations of officers and
other representatives of the Company and others.
Based upon and subject to the foregoing qualifications, assumptions and
limitations and the further limitations set forth below, we are of the opinion
that:
(1) The Company is a corporation existing and in good standing under the
General Corporation Law of the State of Delaware.
(2) The sale and issuance of the Exchange Notes has been validly
authorized by the Company.
(3) When, as and if (i) the Registration Statement shall have become
effective pursuant to the provisions of the Securities Act, (ii) the Indenture
shall have been qualified pursuant to the provisions of the Trust Indenture Act
of 1939, as amended, (iii) the Notes shall have been validly tendered to the
Company, (iv) the Exchange Notes shall have been duly executed and
authenticated in accordance with the provisions of the Indenture and duly
delivered to the purchasers thereof in exchange for the Notes, (v) the Board of
Directors and the appropriate officers of the Company have taken all necessary
action to fix and approve the terms of the Exchange Notes, and (vi) any legally
required consents, approvals, authorizations or other order of the Commission
or any other regulatory authorities have been obtained, the Exchange Notes when
issued pursuant to the Exchange Offer will be legally issued, fully paid and
nonassessable and will constitute valid and binding obligations of the Company.
Our opinions expressed above are subject to the qualifications that we
express no opinion as to the applicability of, compliance with, or effect of
(i) any bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent
conveyance, moratorium or other similar law affecting the enforcement of
creditors' rights generally, (ii) general principles of equity (regardless of
whether
<PAGE> 3
Stanadyne Automotive Corp.
[DATE]
Page 3
enforcement is considered in a proceeding in equity or at law), (iii) public
policy considerations which may limit the rights of parties to obtain certain
remedies and (iv) any laws except the laws of the State of New York and the
General Corporation Law of the State of Delaware. We advise you that issues
addressed by this letter may be governed in whole or in part by other laws, but
we express no opinion as to whether any relevant difference exists between the
laws upon which our opinions are based and any other laws which may actually
govern. For purposes of the opinion in paragraph 1, we have relied exclusively
upon recent certificates issued by the Delaware Secretary of State and such
opinion is not intended to provide any conclusion or assurance beyond that
conveyed by such certificates. We have assumed without investigation that
there has been no relevant change or development between the respective dates
of such certificates and the date of this letter.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement. We also consent to the reference to our firm under the
heading "Legal Matters" in the Registration Statement. In giving this consent,
we do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of the rules and regulations of
the Commission.
We do not find it necessary for the purposes of this opinion, and
accordingly we do not purport to cover herein, the application of the
securities or "Blue Sky" laws of the various states to the issuance of the
Exchange Notes.
This opinion is limited to the specific issues addressed herein, and no
opinion may be inferred or implied beyond that expressly stated herein. We
assume no obligation to revise or supplement this opinion should the present
laws of the States of Delaware or New York be changed by legislative action,
judicial decision or otherwise.
This opinion is furnished to you in connection with the filing of the
Registration Statement, and is not to be used, circulated, quoted or otherwise
relied upon for any other purposes.
Yours very truly,
KIRKLAND & ELLIS
<PAGE> 1
Execution Copy
================================================================================
U.S. $85,000,000
CREDIT AGREEMENT
DATED AS OF DECEMBER 11, 1997
AMONG
SAC AUTOMOTIVE, INC.,
STANADYNE AUTOMOTIVE CORP.,
THE LENDERS LISTED HEREIN,
AS LENDERS,
DLJ CAPITAL FUNDING, INC.,
AS SYNDICATION AGENT,
THE FIRST NATIONAL BANK OF CHICAGO,
AS ADMINISTRATIVE AGENT.
ARRANGED BY:
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
<PAGE> 2
EXHIBIT 10.1
SAC AUTOMOTIVE, INC.
STANADYNE AUTOMOTIVE CORP.
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of December 11, 1997 and
entered into by and among SAC AUTOMOTIVE, INC., a Delaware corporation ("SAC"),
STANADYNE AUTOMOTIVE CORP., a Delaware corporation as borrower after the
consummation of the Acquisition, THE LENDERS LISTED ON THE SIGNATURE PAGES
HEREOF (each individually referred to herein as a "LENDER" and collectively as
"LENDERS"), DLJ CAPITAL FUNDING, INC. ("DLJ"), as syndication agent hereunder
for Lenders (in such capacity, "SYNDICATION AGENT"), and THE FIRST NATIONAL BANK
OF CHICAGO ("FNBC"), as administrative agent for Lenders (in such capacity,
"ADMINISTRATIVE AGENT").
R E C I T A L S
WHEREAS, on the Closing Date (this and other capitalized terms
used in these recitals without definition being used as defined in subsection
1.1) (i) SAC, Inc. ("HOLDINGS"), all the capital stock of which is owned by
American Industrial Partners Capital Fund II, L.P. ("AIP"), its related
investors and certain members of management of Stanadyne, will purchase 100% of
the capital stock of Stanadyne Automotive Holding Corp. ("SAHC"), which as of
the Closing Date before the Acquisition owns 100% of Stanadyne Automotive Corp.
("STANADYNE"), (ii) SAHC will be merged with and into STANADYNE with Stanadyne
being the surviving corporation, (iii) SAC will be merged into Stanadyne with
Stanadyne being the surviving corporation and (iv) Holdings will change its name
to Stanadyne Automotive Holding Corp.
WHEREAS, Company will receive $100,000,000 of gross proceeds
from an offering of Senior Subordinated Notes, Holdings will receive $60,000,000
contributed by AIP, its related investors and certain members of management in
exchange for the common equity of Holdings (the "EQUITY CONTRIBUTION") and
Company will loan $68,200,000 of the net proceeds from the issuance and sale of
the Senior Subordinated Notes, together with the proceeds of Loans made pursuant
hereto to Holdings pursuant to an intercompany note (the "INTERCOMPANY NOTE").
1
<PAGE> 3
WHEREAS, Lenders have agreed to extend certain credit
facilities to the Company, the proceeds of which together with the proceeds of
the Senior Subordinated Notes and the Equity Contribution will be used by
Holdings to purchase or redeem 100% of the issued and outstanding capital stock
of SAHC and by Company (i) to repay in full all indebtedness outstanding under
the Existing Credit Agreement (the "REFINANCING"), (ii) to pay the Transaction
Costs, and (iii) to provide for working capital and/or other general purposes of
Company and its Subsidiaries.
WHEREAS, Company desires to secure all of the Obligations
hereunder and under the other Loan Documents by granting to Administrative
Agent, on behalf of Lenders, a first priority Lien on substantially all of its
personal property and certain of its real property including a pledge of all of
the capital stock of its Domestic Subsidiaries and a pledge of 65% of the
capital stock of its Foreign Subsidiaries that are owned by Company or a
Domestic Subsidiary.
WHEREAS, Holdings and all of its Domestic Subsidiaries of the
Company have agreed to guarantee the obligations hereunder and under the other
Loan Documents and each Domestic Subsidiary has agreed to secure its guaranties
by granting to Administrative Agent on behalf of Lenders, a first priority lien
on substantially all of its respective personal property and certain of its
respective real property including a pledge of all of the capital stock of each
of its Domestic Subsidiaries and 65% of the capital stock of each of its Foreign
Subsidiaries that is owned by Company or a Domestic Subsidiary:
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, Company, Lenders,
Syndication Agent and Administrative Agent agree as follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS.
The following terms used in this Agreement shall have the
following meanings:
"ACCOUNTS RECEIVABLE" means, as at any date of determination
thereof, the unpaid portion of the obligations as stated on the respective
invoice issued to a customer of Company or the Subsidiary Guarantors with
respect to Inventory sold and shipped or services performed in the ordinary
course of business, net of any credits, rebates or offsets owed by Company or
the Subsidiary Guarantors to the respective customer and net of any commissions
payable by Company or the Subsidiary Guarantors to third parties; provided that
no intercompany account shall be an Account Receivable.
2
<PAGE> 4
"ACQUISITION" means the transaction whereby Holdings will own
directly or indirectly 100% of the capital stock of Stanadyne.
"ACQUISITION AGREEMENT" means that certain Stock Purchase
Agreement among the Old Holders, SAHC, and Holdings dated as of November 7,
1997.
"ADJUSTED EURODOLLAR RATE" means, for any Interest Rate
Determination Date with respect to an Interest Period for a Eurodollar Rate
Loan, the rate per annum obtained by dividing (i) the offered quotation (rounded
upward to the nearest 1/16 of one percent) to first class banks in the London
interbank market by FNBC for U.S. dollar deposits of amounts in same day funds
comparable to the principal amount of the Eurodollar Rate Loan of FNBC for which
the Adjusted Eurodollar Rate is then being determined (which principal amount
shall be deemed to be $1,000,000 in the event FNBC is not making, converting to
or continuing such a Eurodollar Rate Loan) with maturities comparable to such
Interest Period as of approximately 11:00 a.m. (New York time) on such Interest
Rate Determination Date by (ii) a percentage equal to 100% minus the stated
maximum rate of all reserve requirements (including any marginal, emergency,
supplemental, special or other reserves) applicable on such Interest Rate
Determination Date to any member bank of the Federal Reserve System in respect
of "Eurocurrency liabilities" as defined in Regulation D (or any successor
category of liabilities under Regulation D).
"ADMINISTRATIVE AGENT" has the meaning assigned to that term in
the introduction to this Agreement and also means and includes any successor
Administrative Agent appointed pursuant to subsection 9.5A.
"AFFECTED LENDER" has the meaning assigned to that term in
subsection 2.6C.
"AFFILIATE", as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"AGENTS" means, collectively, the Syndication Agent and the
Administrative Agent.
"AGREEMENT" means this Credit Agreement dated as of
December 11, 1997, as it may be amended, supplemented or otherwise modified from
time to time.
"AIP" has the meaning set forth in the recitals hereto.
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"ARRANGER" means Donaldson, Lufkin & Jenrette Securities
Corporation, as arranger of the credit facilities described herein.
"ASSET SALE" means the sale by Company or any of its
Subsidiaries to any Person other than Company or any of its wholly-owned
Subsidiaries of (i) any of the stock of any of Company's Subsidiaries,
(ii) substantially all of the assets of any division or line of business of
Company or any of its Subsidiaries, or (iii) any other assets (whether tangible
or intangible) of Company or any of its Subsidiaries (other than (a) inventory
sold in the ordinary course of business, (b) Cash Equivalents, (c) obsolete,
excess or surplus equipment sold for not in excess of $250,000 in the aggregate
for each Fiscal Year and (d) any such other assets to the extent that (i) the
aggregate value of such assets sold in any single transaction or related series
of transactions is equal to $200,000 or less and (ii) the aggregate value of
such assets sold in any Fiscal Year is equal to $2,000,000 or less).
"ASSIGNMENT AGREEMENT" means an Assignment Agreement in
substantially the form of Exhibit X annexed hereto.
"AUXILIARY PLEDGE AGREEMENT", means each pledge agreement or
similar instrument governed by the laws of a country other than the United
States executed in accordance with subsection 6.8 by Company or any Domestic
Subsidiary that owns capital stock of the Foreign Subsidiaries organized in such
country in form and substance satisfactory to Administrative Agent as such
Auxiliary Pledge Agreement may be amended, supplemented or otherwise modified
from time to time and "AUXILIARY PLEDGE AGREEMENTS" means all such pledge
agreements, collectively.
"BANKRUPTCY CODE" means Title 11 of the United States Code
entitled "Bankruptcy", as now and hereafter in effect, or any successor statute.
"BASE RATE" means, at any time, the higher of (x) the Prime
Rate or (y) the rate which is 1/2 of 1% in excess of the Federal Funds Effective
Rate.
"BASE RATE LOANS" means Loans bearing interest at rates
determined by reference to the Base Rate as provided in subsection 2.2A.
"BORROWING BASE" means, as at any date of determination, the
sum of (i) 50% of Eligible Inventory and (ii) 80% of Eligible Accounts
Receivable.
"BORROWING BASE CERTIFICATE" means a certificate substantially
in the form of Exhibit XXIII annexed hereto delivered to Administrative Agent
and Lenders by Borrower pursuant to subsection 6.1(v).
"BUSINESS DAY" means (i) for all purposes other than as covered
by clause (ii) below, any day excluding Saturday, Sunday and any day which is a
legal holiday
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under the laws of the State of New York or is a day on which banking
institutions located in such state are authorized or required by law or other
governmental action to close, and (ii) with respect to all notices,
determinations, fundings and payments in connection with the Adjusted Eurodollar
Rate or any Eurodollar Rate Loans, any day that is a Business Day described in
clause (i) above and that is also a day for trading by and between banks in
Dollar deposits in the London interbank market.
"CAPITAL LEASE", as applied to any Person, means any lease of
any property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"CASH" means money, currency or a credit balance in a Deposit
Account.
"CASH EQUIVALENTS" means, as at any date of determination, (i)
marketable securities (a) issued or directly and unconditionally guaranteed as
to interest and principal by the United States Government or (b) issued by any
agency of the United States the obligations of which are backed by the full
faith and credit of the United States, in each case maturing within one year
after such date; (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or any
public instrumentality thereof, in each case maturing within one year after such
date and having, at the time of the acquisition thereof, the highest rating
obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("MOODY'S"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any Lender or by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia that (a) is at least "adequately
capitalized" (as defined in the regulations of its primary Federal banking
regulator) and (b) has Tier 1 capital (as defined in such regulations) of not
less than $100,000,000; and (v) shares of any money market mutual fund that (a)
has at least 95% of its assets invested continuously in the types of investments
referred to in clauses (i) and (ii) above, (b) has net assets of not less than
$500,000,000, and (c) has the highest rating obtainable from either S&P or
Moody's.
"CERTIFICATE RE NON-BANK STATUS" means a certificate
substantially in the form of Exhibit XI annexed hereto delivered by a Lender to
Administrative Agent pursuant to subsection 2.7B(iii).
"CLOSING DATE" means December 11, 1997.
"COLLATERAL" means, collectively, all of the real, personal and
mixed property (including capital stock) in which Liens are purported to be
granted pursuant to the Collateral Documents as security for the Obligations.
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"COLLATERAL DOCUMENTS" means the Holdings Pledge Agreement,
Company Copyright Security Agreement, the Company Pledge Agreement, the Company
Security Agreement, the Company Trademark Security Agreement, the Company Patent
Security Agreement the Subsidiary Pledge Agreements, the Auxiliary Pledge
Agreements, the Subsidiary Security Agreements, the Subsidiary Trademark
Security Agreements, the Mortgages and all other instruments or documents
delivered by any Loan Party pursuant to this Agreement or any of the other Loan
Documents in order to grant to Administrative Agent, on behalf of Lenders, a
Lien on any real, personal or mixed property of that Loan Party as security for
the Obligations.
"COMMERCIAL LETTER OF CREDIT" means any letter of credit or
similar instrument, including those listed on Schedule 3.1, issued for the
purpose of providing the primary payment mechanism in connection with the
purchase of any materials, goods or services by Company or any of its
Subsidiaries in the ordinary course of business of Company or such Subsidiary.
"COMMITMENTS" means the commitments of Lenders to make Loans as
set forth in subsection 2.1A.
"COMPANY" means (i) prior to the consummation of the
Acquisition, SAC Automotive, Inc. and (ii) after the consummation of the
Acquisition, Stanadyne Automotive Corp.
"COMPANY COPYRIGHT SECURITY AGREEMENT" means the Company
Copyright Security Agreement executed and delivered by Company on the Closing
Date, substantially in the form of Exhibit XII annexed hereto, as such Company
Copyright Security Agreement may thereafter be amended, supplemented or
otherwise modified from time to time.
"COMPANY PATENT SECURITY AGREEMENT" means the Company Patent
Security Agreement executed and delivered by Company on the Closing Date, in
substantially the form of Exhibit XXIV annexed hereto, as such Company Patent
Security Agreement may thereafter be amended, supplemented or otherwise modified
from time to time.
"COMPANY PLEDGE AGREEMENT" means the Company Pledge Agreement
executed and delivered by Company on the Closing Date, substantially in the form
of Exhibit XIII annexed hereto, as such Company Pledge Agreement may thereafter
be amended, supplemented or otherwise modified from time to time.
"COMPANY SECURITY AGREEMENT" means the Company Security
Agreement executed and delivered by Company on the Closing Date, substantially
in the form of Exhibit XIV annexed hereto, as such Company Security Agreement
may thereafter be amended, supplemented or otherwise modified from time to time.
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<PAGE> 8
"COMPANY TRADEMARK SECURITY AGREEMENT" means the Company
Trademark Security Agreement executed and delivered by Company on the Closing
Date, substantially in the form of Exhibit XV annexed hereto, as such Company
Trademark Security Agreement may thereafter be amended, supplemented or
otherwise modified from time to time.
"COMPLIANCE CERTIFICATE" means a certificate substantially in
the form of Exhibit VII annexed hereto delivered to Agents and Lenders by
Company pursuant to subsection 6.1(iv).
"CONFORMING LEASEHOLD INTEREST" means any Recorded Leasehold
Interest as to which the lessor has agreed in writing for the benefit of
Administrative Agent (which writing has been delivered to Administrative Agent),
whether under the terms of the applicable lease, under the terms of a Landlord
Consent and Estoppel, or otherwise, to the matters described in the definition
of "Landlord Consent and Estoppel," which interest, if a subleasehold or
sub-subleasehold interest, is not subject to any contrary restrictions contained
in a superior lease or sublease.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the
sum of (i) the aggregate of all expenditures (whether paid in cash or other
consideration or accrued as a liability and including that portion of Capital
Leases which is capitalized on the consolidated balance sheet of Company and its
Subsidiaries) by Company and its Subsidiaries during that period that, in
conformity with GAAP, are included in "additions to property, plant or
equipment" or comparable items reflected in the consolidated statement of cash
flows of Company and its Subsidiaries plus (ii) to the extent not covered by
clause (i) of this definition, the aggregate of all expenditures by Company and
its Subsidiaries during that period to acquire (by purchase or otherwise) the
business, property or fixed assets of any Person, or the stock or other evidence
of beneficial ownership of any Person that, as a result of such acquisition,
becomes a Subsidiary of Company.
"CONSOLIDATED EBITDA" means, for any period, the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation, amortization and other non-cash charges required to be reflected
as expenses on the books and records of Company, (v) and Transaction Costs,
minus (vi) cash payments with respect to any non-recurring, non-cash charges
previously added back pursuant to clause (iv), excluding the impact of foreign
currency translations, all of the foregoing as determined on a consolidated
basis for Company and its Subsidiaries in conformity with GAAP.
"CONSOLIDATED EXCESS CASH FLOW" means, for any period, an
amount (if positive) equal to (i) Consolidated EBITDA for such period minus (ii)
the sum, without duplication, of the amounts for such period of (a) voluntary
and scheduled repayments of Consolidated Total Debt (excluding repayments of
Revolving Loans except to the extent the
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<PAGE> 9
Revolving Loan Commitments are permanently reduced in connection with such
repayments), (b) Consolidated Capital Expenditures (without duplication, net of
any proceeds of any related financings with respect to such expenditures), (c)
Consolidated Interest Expense, (d) taxes based on income of Company and its
Subsidiaries and payable in cash with respect to such period, (e) without
duplication, Restricted Junior Payments permitted by subsection 7.5, (f)
Transaction Costs and (g) EBITDA attributable to Stanadyne Italy.
"CONSOLIDATED FIXED CHARGES" means, for any period, the sum
(without duplication) of the amounts for such period of (i) Consolidated
Interest Expense and (ii) scheduled principal payments after the Closing Date in
respect of Consolidated Total Debt, all of the foregoing as determined on a
consolidated basis for Company and its Subsidiaries in conformity with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, total
interest expense (including that portion attributable to Capital Leases in
accordance with GAAP and capitalized interest) of Company and its Subsidiaries
on a consolidated basis with respect to all outstanding Indebtedness of Company
and its Subsidiaries (after giving effect to all Interest Rate Agreements),
including net costs under Interest Rate Agreements. For purposes of calculating
Consolidated Fixed Charges pursuant to subsection 7.6A, Consolidated Interest
Expense for the four Fiscal Quarter period ending (i) March 31, 1998 shall equal
four times Consolidated Interest Expense for the Fiscal Quarter ending March 31,
1998; (ii) June 30, 1998 shall equal two times Consolidated Interest Expense for
the two Fiscal Quarters ending June 30, 1998; and (iii) September 30, 1998 shall
equal (A) four times Consolidated Interest Expense for the three Fiscal Quarters
ending September 30, 1998 divided by (B) three.
"CONSOLIDATED LEVERAGE RATIO" means, for any Fiscal Quarter,
the ratio of (a) Consolidated Total Debt as of the last day of such Fiscal
Quarter to (b) Consolidated EBITDA for the consecutive four Fiscal Quarters
ending on the last day of such Fiscal Quarter.
"CONSOLIDATED NET INCOME" means, for any period, the net income
(or loss) of Company and its Subsidiaries on a consolidated basis for such
period taken as a single accounting period determined in conformity with GAAP;
provided that there shall be excluded (i) the income (or loss) of any Person
(other than a Subsidiary of Company) in which any other Person (other than
Company or any of its Subsidiaries) has a joint interest, except to the extent
of the amount of dividends or other distributions actually paid to Company or
any of its Subsidiaries by such Person during such period, (ii) the income (or
loss) of any Person accrued prior to the date it becomes a Subsidiary of Company
or is merged into or consolidated with Company or any of its Subsidiaries or
that Person's assets are acquired by Company or any of its Subsidiaries,
(iii) the income of any Subsidiary of Company to the extent that the declaration
or payment of dividends or similar distributions
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<PAGE> 10
by that Subsidiary of that income is not at the time permitted by operation of
the terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary provided
that the income of Stanadyne Italy shall be included without regard to this
clause (iii), (iv) any after-tax gains or losses attributable to Asset Sales or
returned surplus assets of any Pension Plan, and (v) (to the extent not included
in clauses (i) through (iv) above) any net extraordinary gains or net
extraordinary losses.
"CONSOLIDATED NET WORTH" means, as at any date of
determination, the sum of the capital stock and additional paid-in capital plus
retained earnings (or minus accumulated deficits) of Company and its
Subsidiaries on a consolidated basis determined in conformity with GAAP and
before giving effect to any adjustment pertaining to carryover or predecessor
basis accounting, such adjustment not to exceed $7,500,000, that may be required
by Accounting Principles Board Opinions Nos. 16 and 17 (or any similar
adjustment required by the rules, regulations, pronouncements and opinions of
the Financial Accounting Standards Board, the American Institute of Certified
Public Accountants or similar authoritative bodies) as a result of the
Acquisition.
"CONSOLIDATED TOTAL DEBT" means, as at any date of
determination, the aggregate stated balance sheet amount of all Indebtedness of
Company and its Subsidiaries, determined on a consolidated basis in accordance
with GAAP.
"CONTINGENT OBLIGATION", as applied to any Person, means any
direct or indirect liability, contingent or otherwise, of that Person (i) with
respect to any Indebted ness, lease, dividend or other obligation of another if
the primary purpose or intent thereof by the Person incurring the Contingent
Obligation is to provide assurance to the obligee of such obligation of another
that such obligation of another will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected (in whole or in part) against loss in respect
thereof, (ii) with respect to any letter of credit issued for the account of
that Person or as to which that Person is otherwise liable for reimbursement of
drawings, or (iii) under Hedge Agreements. Contingent Obligations shall include
(a) the direct or indirect guaranty, endorsement (otherwise than for collection
or deposit in the ordinary course of business), co-making, discounting with
recourse or sale with recourse by such Person of the obligation of another, (b)
the obligation to make take-or-pay or similar payments if required regardless of
non-performance by any other party or parties to an agreement, and (c) any
liability of such Person for the obligation of another through any agreement
(contingent or otherwise) (X) to purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise) or (Y) to maintain the solvency
or any balance sheet item, level of income or financial condition of another if,
in the case of any agreement described under subclauses (X) or (Y) of this
sentence, the primary purpose or intent thereof is as described in the preceding
sentence. The amount of
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any Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if less, the amount to which such
Contingent Obligation is specifically limited.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any
provision of any Security issued by that Person or of any material indenture,
mortgage, deed of trust, contract, undertaking, agreement or other instrument to
which that Person is a party or by which it or any of its properties is bound or
to which it or any of its properties is subject.
"CURRENCY AGREEMENT" means any foreign exchange contract,
currency swap agreement, futures contract, option contract, synthetic cap or
other similar agreement or arrangement to which Company or any of its
Subsidiaries is a party.
"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or
like account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"DLJ" has the meaning assigned to that term in the introduction
to this Agreement.
"DOLLARS" and the sign "$" mean the lawful money of the United
States of America.
"DOMESTIC SUBSIDIARY" means a Subsidiary of Company which is
incorporated in a state of the United States or in the District of Columbia.
"ELIGIBLE ACCOUNTS RECEIVABLE" means, as at any date of
determination, the aggregate dollar value of all Accounts Receivable; provided,
however, that unless otherwise agreed by Administrative Agent, the following
Accounts Receivable are not Eligible Accounts Receivable:
(i) Accounts Receivable (other than Accounts Receivable of
Perkins Engines) which, at the date of issuance of the respective
invoice therefor, were payable more than sixty (60) days after the date
of issuance of such invoice and Accounts Receivable of Perkins Engines,
which, at the date of issuance of the respective invoice therefor were
payable more than ninety (90) days after the date of issuance of such
income;
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(ii) Accounts Receivable which remain unpaid for more than
sixty (60) days after the due date specified in the original invoice or
for more than one hundred and twenty (120) days after invoice date if
no due date was specified;
(iii) Accounts Receivable with respect to which the customer is
the United States of America or any department, agency or
instrumentality thereof unless, with respect to such Accounts
Receivable, the Federal Assignment of Claims Act (31 U.S.C. Section
3727) has been complied with;
(iv) Accounts Receivable with respect to which the customer is
an Affiliate of Company or a director, officer, agent, stockholder or
employee of Company or any of its Affiliates, other than Accounts
Receivable resulting from arms-length transactions in the ordinary
course of business;
(v) Accounts Receivable due from a customer if more than
twenty-five percent (25%) of the aggregate amount of Accounts of such
customer have at the time remained unpaid for more than ninety (90)
days after invoice date or sixty (60) days after the due date specified
in the original invoice;
(vi) Accounts Receivable evidenced by an instrument (as defined
in Article 9 of the UCC) not in the possession of Administrative Agent;
(vii) Accounts Receivable with respect to which Administrative
Agent does not have a valid, First Priority Lien, including, without
limitation, Accounts Receivable of Stanadyne Italy and its
Subsidiaries, in which Administrative Agent does not have a valid,
First Priority Lien, and Accounts subject to any Lien except those in
favor of Administrative Agent and Permitted Encumbrances junior to the
Liens in favor of Administrative Agent;
(viii) Accounts Receivable with respect to which the customer
is the subject of any bankruptcy or other insolvency proceeding;
(ix) Accounts Receivable due from a customer other than
Chrysler Corporation, General Motors Corporation, Deere & Company, Ford
Motor Company or Perkins Engines, to the extent that such Accounts
Receivable exceed in the aggregate an amount equal to twenty-five
percent (25%) of the aggregate of all
Accounts Receivable at said date;
(x) Accounts Receivable with respect to which the customer's
obligation to pay is conditional or subject to a repurchase obligation
or contractual right to return, including bill and hold sales,
guaranteed sales, sale or return transactions, sales on approvals or
consignment sales;
(xi) Accounts Receivable with respect to which there is any
unresolved dispute with the respective customer (but only to the extent
of such dispute) involving more than $100,000 in the aggregate for all
customers;
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(xii) Accounts Receivable with respect to which the customer
other than Chrysler Corporation, General Motors Corporation, Deere &
Company, Ford Motor Company or Perkins Engines, is located in New
Jersey, Minnesota or any other state denying creditors access to its
courts in the absence of a Notice of Business Activities Report or
other similar filing, unless Company has either qualified as a foreign
corporation authorized to transact business in such state or has filed
a Notice of Business Activities Report or similar filing with the
applicable state agency for the then current year; and
(xiii) Accounts Receivable which Requisite Lenders determine in
their reasonable discretion to be unacceptable for borrowing purposes.
"ELIGIBLE ASSIGNEE" means (A) (i) a commercial bank organized
under the laws of the United States or any state thereof; (ii) a savings and
loan association or savings bank organized under the laws of the United States
or any state thereof; (iii) a commercial bank organized under the laws of any
other country or a political subdivision thereof; provided that (x) such bank is
acting through a branch or agency located in the United States or (y) such bank
is organized under the laws of a country that is a member of the Organization
for Economic Cooperation and Development or a political subdivision of such
country; and (iv) any other entity which is an "accredited investor" (as defined
in Regulation D under the Securities Act) which extends credit or buys loans as
one of its businesses including insurance companies, mutual funds and lease
financing companies; and (B) any Lender and any Affiliate of any Lender;
provided that no Affiliate of Company shall be an Eligible Assignee.
"ELIGIBLE INVENTORY" means as at any date of determination, the
value (determined at the lower of cost or market on a first-in, first-out basis)
of all Inventory (including raw materials, purchased parts and work-in-process
Inventory) owned by Company and any Subsidiary Guarantor and located in the
United States of America; provided, however that unless otherwise agreed by
Administrative Agent, the following Inventory is not Eligible Inventory:
(i) finished goods which do not meet specifications of the
purchase order for such goods in any material respect;
(ii) Inventory with respect to which Administrative Agent does
not have a valid, First Priority Lien, including, without limitation,
all Inventory of Stanadyne Italy and its Subsidiaries, in which
Administrative Agent does not have a valid, First Priority Lien;
(iii) Inventory with respect to which there exists any Lien in
favor of any Person other than Administrative Agent, except Permitted
Encumbrances junior to the Liens in favor of Administrative Agent;
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(iv) Inventory produced in violation of the Fair Labor
Standards Act or subject to the so-called "hot goods" provisions
contained in Title 29 U.S.C. 215(a)(i); and
(v) Inventory which Requisite Lenders determine, in their
reasonable discretion, to be unacceptable for borrowing purposes.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as
defined in Section 3(3) of ERISA which is or was maintained or contributed to by
Company, any of its Subsidiaries or any of their respective ERISA Affiliates.
"ENVIRONMENTAL CLAIM" means any notice, notice of violation,
claim, action, suit, proceeding, demand, abatement order or other order or
directive (conditional or otherwise), by any governmental authority or any other
Person, arising (i) pursuant to or in connection with any violation of any
Environmental Law, (ii) in connection with any Hazardous Materials Activity, or
(iii) in connection with any damage, injury, threat or harm to health, safety,
natural resources or the environment.
"ENVIRONMENTAL LAWS" means any and all current or future
statutes, ordinances, orders, rules, regulations, judgments, Governmental
Authorizations, or any other requirements of governmental authorities relating
to (i) environmental matters, including those relating to any Hazardous
Materials Activity, (ii) the generation, use, storage, transportation or
disposal of Hazardous Materials, or (iii) occupational safety and health,
industrial hygiene or the protection of human, plant or animal health or welfare
from environmental hazards, in any manner applicable to Company or any of its
Subsidiaries or any Facility, including the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.), the Clean
Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15
U.S.C. Section 2601 et seq.), the Federal Insecticide, Fungicide and Rodenticide
Act (7 U.S.C. Section 136 et seq.), the Occupational Safety and Health Act (29
U.S.C. Section 651 et seq.), the Oil Pollution Act (33 U.S.C. Section 2701 et
seq) and the Emergency Planning and Community Right-to-Know Act (42 U.S.C.
Section 11001 et seq.), each as amended or supplemented, any analogous present
or future state or local statutes or laws, and any regulations promulgated
pursuant to any of the foregoing.
"EQUITY CONTRIBUTION" has the meaning assigned to that term in
the Recitals hereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor thereto.
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"ERISA AFFILIATE" means, as applied to any Person, (i) any
corporation which is a member of a controlled group of corporations within the
meaning of Section 414(b) of the Internal Revenue Code of which that Person is a
member; (ii) any trade or business (whether or not incorporated) which is a
member of a group of trades or businesses under common control within the
meaning of Section 414(c) of the Internal Revenue Code of which that Person is a
member; and (iii) any member of an affiliated service group within the meaning
of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above is a member.
"ERISA EVENT" means (i) a "reportable event" within the meaning
of Section 4043 of ERISA and the regulations issued thereunder with respect to
any Pension Plan (excluding those for which the provision for 30-day notice to
the PBGC has been waived by regulation); (ii) the failure to meet the minimum
funding standard of Section 412 of the Internal Revenue Code with respect to any
Pension Plan (whether or not waived in accordance with Section 412(d) of the
Internal Revenue Code) or the failure to make by its due date a required
installment under Section 412(m) of the Internal Revenue Code with respect to
any Pension Plan or the failure to make any required contribution to a
Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan
pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such
plan in a distress termination described in Section 4041(c) of ERISA; (iv) the
withdrawal by Company, any of its Subsidiaries or any of their respective ERISA
Affiliates from any Pension Plan with two or more contributing sponsors or the
termination of any such Pension Plan resulting in liability pursuant to Section
4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to
terminate any Pension Plan, or the occurrence of any event or condition which
might constitute grounds under ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan; (vi) the imposition of liability
on Company, any of its Subsidiaries or any of their respective ERISA Affiliates
pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of
Section 4212(c) of ERISA; (vii) the withdrawal of Company, any of its
Subsidiaries or any of their respective ERISA Affiliates in a complete or
partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from
any Multiemployer Plan if there is any potential liability therefor, or the
receipt by Company, any of its Subsidiaries or any of their respective ERISA
Affiliates of notice from any Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to
terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the
occurrence of an act or omission which could give rise to the imposition on
Company, any of its Subsidiaries or any of their respective ERISA Affiliates of
material fines, penalties, taxes or related charges under Chapter 43 of the
Internal Revenue Code or under Section 409, Section 502(c), (i) or (l), or
Section 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the
assertion of a material claim (other than routine claims for benefits) against
any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof,
or against Company, any of its Subsidiaries or any of their respective ERISA
Affiliates in connection with any Employee Benefit Plan; (x)
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receipt from the Internal Revenue Service of notice of the failure of any
Pension Plan (or any other Employee Benefit Plan intended to be qualified under
Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of
the Internal Revenue Code, or the failure of any trust forming part of any
Pension Plan to qualify for exemption from taxation under Section 501(a) of the
Internal Revenue Code; or (xi) the imposition of a Lien pursuant to Section
401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with
respect to any Pension Plan.
"EURODOLLAR RATE LOANS" means Loans bearing interest at rates
determined by reference to the Adjusted Eurodollar Rate as provided in
subsection 2.2A.
"EVENT OF DEFAULT" means each of the events set forth in
Section 8.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute.
"EXCHANGE RATE" means, on any date when an amount expressed in
a currency other than Dollars is to be determined with respect to any Letter of
Credit, the nominal rate of exchange of the applicable Issuing Lender in the New
York foreign exchange market for the purchase by such Issuing Lender (by cable
transfer) of such currency in exchange for Dollars at 12:00 noon (New York time)
one Business Day prior to such date, expressed as a number of units of such
currency per one Dollar.
"EXISTING CREDIT AGREEMENT" means that certain Credit Agreement
dated as of February 2, 1995 among Stanadyne, the financial institutions party
thereto and The Bank of New York, as Agent, as from time to time amended and in
effect on the date hereof.
"FACILITIES" means any and all real property (including all
buildings, fixtures or other improvements located thereon) now, hereafter or
heretofore owned, leased, operated or used by Company or any of its Subsidiaries
or any of their respective predecessors or Affiliates.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a
fluctuating interest rate equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by Administrative Agent from three Federal funds
brokers of recognized standing selected by Administrative Agent.
"FINANCIAL CONDITION CERTIFICATE" means the certificate
substantially in the form of Exhibit XXI annexed hereto.
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"FINANCIAL PLAN" has the meaning assigned to that term in
subsection 6.1(xii).
"FIRST PRIORITY" means, with respect to any Lien purported to
be created in any Collateral pursuant to any Collateral Document, that (i) such
Lien has priority over any other Lien on such Collateral (other than Permitted
Encumbrances and Liens permitted pursuant to subsection 7.2A) and (ii) such Lien
is the only Lien (other than Permitted Encumbrances and Liens permitted pursuant
to subsection 7.2A) to which such Collateral is subject.
"FISCAL QUARTER" means a fiscal quarter of any Fiscal Year.
"FISCAL YEAR" means the fiscal year of Company and its
Subsidiaries ending on December 31 of each calendar year.
"FLOOD HAZARD PROPERTY" means a Mortgaged Property located in
an area designated by the Federal Emergency Management Agency as having special
flood or mud slide hazards.
"FNBC" has the meaning assigned to that term in the
introduction to this Agreement.
"FOREIGN SUBSIDIARY" means a direct or indirect Subsidiary of
Company which is incorporated in a jurisdiction other than the states of the
United States and the District of Columbia.
"FUNDED DEBT", as applied to any Person, means all Indebtedness
of that Person (including any current portions thereof) which by its terms or by
the terms of any instrument or agreement relating thereto matures more than one
year from, or is directly renewable or extendable at the option of that Person
to a date more than one year from (including an option of that Person under a
revolving credit or similar agreement obligating the lender or lenders to extend
credit over a period of one year or more from), the date of the creation
thereof.
"FUNDING AND PAYMENT OFFICE" means (i) the office of
Administrative Agent and Swing Line Lender located at 1 First National Plaza,
Chicago, Illinois 60670, Attention: Nanette, or (ii) such other office of
Administrative Agent and Swing Line Lender as may from time to time hereafter be
designated as such in a written notice delivered by Administrative Agent and
Swing Line Lender to Company and each Lender.
"FUNDING DATE" means the date of the funding of a Loan.
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"GAAP" means, subject to the limitations on the application
thereof set forth in subsection 1.2, generally accepted accounting principles
set forth in opinions and pro nouncements 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, in each case as the same are applicable to the
circumstances as of the date of determination.
"GOVERNMENTAL AUTHORIZATION" means any permit, license,
authorization, plan, directive, consent order or consent decree of or from any
federal, state or local governmental authority, agency or court.
"GUARANTIES" means the Holdings Guaranty and the Subsidiary
Guaranties.
"HAZARDOUS MATERIALS" means (i) any chemical, material or
substance at any time defined in any statute or regulation as "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely hazardous
waste", acutely hazardous waste", "radioactive waste", "biohazardous waste",
"pollutant", "toxic pollutant", "contaminant", "restricted hazardous waste",
"infectious waste", "toxic substances", or any other term or expression intended
to define, list or classify substances by reason of properties harmful to
health, safety or the indoor or outdoor environment (including harmful
properties such as ignitability, corrosivity, reactivity, carcinogenicity,
toxicity, reproductive toxicity, "TCLP toxicity" or "EP toxicity" or words of
similar meaning and regulatory effect under any applicable Environmental Laws);
(ii) any oil, petroleum, petroleum fraction or petroleum derived substance;
(iii) any drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas or geothermal
resources; (iv) any flammable substances or explosives; (v) any radioactive
materials; (vi) any asbestos-containing materials; (vii) urea formaldehyde foam
insulation; (viii) electrical equipment which contains any oil or dielectric
fluid containing polychlorinated biphenyls; (ix) pesticides; and (x) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any governmental authority because it could pose a hazard to the
health and safety of the owners, occupants or any Persons in the vicinity of any
Facility or could contaminate the indoor or outdoor environment.
"HAZARDOUS MATERIALS ACTIVITY" means any use, manufacture,
possession, storage, holding, Release, threatened Release, discharge,
generation, transportation, processing, treatment, abatement, removal,
remediation, disposal, disposition or handling of any Hazardous Materials, and
any corrective action or response action with respect to any of the foregoing.
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"HEDGE AGREEMENT" means an Interest Rate Agreement or a
Currency Agreement designed to hedge against fluctuations in interest rates or
currency values, respectively.
"HOLDINGS" means (i) prior to the consummation of the
Acquisition SAC, Inc. and (ii) after the consummation of the Acquisition and the
effectuation of the name change Stanadyne Automotive Holding Corp.
"HOLDINGS GUARANTY" means the Holdings Guaranty executed and
delivered by Holdings on the Closing Date, substantially in the form of Exhibit
XIX annexed hereto, as such Holdings Guaranty may be amended, supplemented or
otherwise modified from time to time.
"HOLDINGS PLEDGE AGREEMENT" means the Holdings Pledge Agreement
executed and delivered by Holdings on the Closing Date, substantially in the
form of Exhibit XXV annexed hereto, as such Holdings Pledge Agreement may be
amended, supplemented or otherwise modified from time to time.
"INDEBTEDNESS", as applied to any Person, means without
duplication (i) all indebtedness for borrowed money (including without
limitation unreimbursed drawings under Letters of Credit), (ii) that portion of
obligations with respect to Capital Leases that is properly classified as a
liability on a balance sheet in conformity with GAAP, (iii) notes payable and
drafts accepted representing extensions of credit whether or not representing
obligations for borrowed money, (iv) any obligation owed for all or any part of
the deferred purchase price of property or services (excluding any such
obligations incurred under ERISA, wages, salaries, accrued vacations, deferred
compensation (including option plans, dental and medical plans)), which purchase
price is (a) due more than six months from the date of incurrence of the
obligation in respect thereof or (b) evidenced by a note or similar written
instrument, and (v) all indebtedness secured by any Lien on any property or
asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to the
credit of that Person. Obligations under Interest Rate Agreements and Currency
Agreements constitute (X) in the case of Hedge Agreements, Contingent
Obligations, and (Y) in all other cases, Investments, and in neither case
constitute Indebtedness.
"INDEMNITEE" has the meaning assigned to that term in
subsection 10.3.
"INITIAL REVOLVING LOANS" means the Revolving Loans to be made
on the Closing Date in connection with the Acquisition, which shall not exceed
[$2.8] million in principal amount.
"INTELLECTUAL PROPERTY" means all patents, trademarks, trade
names, copyrights, technology, know-how and processes used in or necessary for
the conduct of
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<PAGE> 20
the business of Company and its Subsidiaries as currently conducted that are
material to the condition (financial or otherwise), business or operations of
Company and its Subsidiaries, taken as a whole.
"INTERCOMPANY NOTE" has the meaning set forth in the recitals
hereto.
"INTEREST PAYMENT DATE" means (i) with respect to any Base Rate
Loan, the last day of each March, June, September and December of each year,
commencing on the first such date to occur after the Closing Date, and (ii) with
respect to any Eurodollar Rate Loan, the last day of each Interest Period
applicable to such Loan; provided that in the case of each Interest Period of
longer than three months "Interest Payment Date" shall also include each date
that is three months, or an integral multiple thereof, after the commencement of
such Interest Period.
"INTEREST PERIOD" has the meaning assigned to that term in
subsection 2.2B.
"INTEREST RATE AGREEMENT" means any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement or arrangement to which Company or any of its Subsidiaries is
a party.
"INTEREST RATE DETERMINATION DATE" means, with respect to any
Interest Period, the second Business Day prior to the first day of such Interest
Period.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of
1986, as amended to the date hereof and from time to time hereafter, and any
successor statute.
"INVENTORY" means, on a consolidated basis, all goods,
merchandise and other personal property which are held by Company and its
Subsidiaries for sale or lease, including raw materials and work in process.
"INVESTMENT" means (i) any direct or indirect purchase or other
acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person (including any Subsidiary of
Company), (ii) any direct or indirect redemption, retirement, purchase or other
acquisition for value, by any Subsidiary of Company from any Person other than
Company or any of its Subsidiaries, of any equity Securities of such Subsidiary,
(iii) any direct or indirect loan, advance (other than advances to employees for
moving, entertainment and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business) or capital contribution by
Company or any of its Subsidiaries to any other Person (other than a
wholly-owned Subsidiary of Company), including all indebtedness and accounts
receivable from that other Person that are not current assets or did not arise
from sales to that other Person in the ordinary course of business, or (iv) net
obligations under Interest Rate Agreements or Currency Agreements not
constituting Hedge Agreements. The amount of any Investment shall be the
original cost of
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such Investment plus the cost of all additions thereto, less dispositions and
other returns of capital without any adjustments for increases or decreases in
value, or write-ups, write-downs or write-offs with respect to such Investment.
"IP COLLATERAL" means, collectively, the Collateral under the
Company Copyright Security Agreement, the Company Patent Security Agreement, the
Company Trademark Security Agreement and the Subsidiary IP Security Agreements.
"ISSUING LENDER" means, with respect to any Letter of Credit,
the Lender which agrees or is otherwise obligated to issue such Letter of
Credit, determined as provided in subsection 3.1B(ii).
"JOINT VENTURE" means a joint venture, partnership or other
similar arrange ment, whether in corporate, partnership or other legal form;
provided that in no event shall any corporate Subsidiary of any Person be
considered to be a Joint Venture to which such Person is a party.
"LANDLORD CONSENT AND ESTOPPEL" means, with respect to any
Leasehold Property, a letter, certificate or other instrument in writing from
the lessor under the related lease, reasonably satisfactory in form and
substance to Agents, pursuant to which such lessor agrees, for the benefit of
Administrative Agent, (i) that without any further consent of such lessor or any
further action on the part of the Loan Party holding such Leasehold Property,
such Leasehold Property may be encumbered pursuant to a Mortgage and may be
assigned to the purchaser at a foreclosure sale or in a transfer in lieu of such
a sale (and to a subsequent third party assignee if any Agent, any Lender, or an
Affiliate of either so acquires such Leasehold Property), (ii) that such lessor
shall not terminate such lease as a result of a default by such Loan Party
thereunder without first giving Agents notice of such default and at least 60
days (or, if such default cannot reasonably be cured by Agents within such
period, such longer period as may reasonably be required) to cure such default,
and (iii) to such other matters relating to such Leasehold Property as Agents
may reasonably request.
"LEASEHOLD PROPERTY" means any leasehold interest of any Loan
Party as lessee under any lease of real property located in the United States of
America.
"LENDER" and "LENDERS" means the persons identified as
"Lenders" and listed on the signature pages of this Agreement, together with
their successors and permitted assigns pursuant to subsection 10.1, and the term
"Lenders" shall include Swing Line Lender unless the context otherwise requires.
"LETTER OF CREDIT" or "LETTERS OF CREDIT" means Commercial
Letters of Credit and Standby Letters of Credit issued or to be issued by
Issuing Lenders for the account of Company pursuant to subsection 3.1.
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"LETTER OF CREDIT USAGE" means, as at any date of
determination, the sum of (i) the maximum aggregate amount which is or at any
time thereafter may become available for drawing under all Letters of Credit
then outstanding plus (ii) the aggregate amount of all drawings under Letters of
Credit honored by Issuing Lenders and not theretofore reimbursed by Company
(including any such reimbursement out of the proceeds of Revolving Loans
pursuant to subsection 3.3B).
"LIEN" means any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing.
"LOAN" or "LOANS" means one or more of the Tranche A Term
Loans, Tranche B Term Loans, Revolving Loans or Swing Line Loans or any
combination thereof.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Letters
of Credit (and any applications for, or reimbursement agreements or other
documents or certificates executed by Company in favor of an Issuing Lender
relating to, the Letters of Credit), the Guaranties, and the Collateral
Documents.
"LOAN PARTY" means each of Company, Holdings and any of
Company's Subsidiaries from time to time executing a Loan Document, and "LOAN
PARTIES" means all such Persons, collectively.
"MARGIN DETERMINATION CERTIFICATE" means an Officer's
Certificate of Company delivered pursuant to 6.1(iv) setting forth in reasonable
detail the Consolidated Leverage Ratio for the four-fiscal quarter period ending
as of the last day of the fiscal quarter during which such Officer's Certificate
is delivered.
"MARGIN STOCK" has the meaning assigned to that term in
Regulation U of the Board of Governors of the Federal Reserve System as in
effect from time to time.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect
upon the business, operations, properties, assets, condition (financial or
otherwise) or prospects of Company and its Subsidiaries taken as a whole
(excluding effects to the extent arising solely from matters of a general
economic or general industry nature) or (ii) the material impairment of the
ability of any Loan Party to perform, or of Administrative Agent or Lenders to
enforce, the Obligations.
"MATERIAL CONTRACT" means any contract or other arrangement to
which Company or any of its Subsidiaries is a party (other than the Loan
Documents) that accounts for more than 5% of sales of Company and its
Subsidiaries on a consolidated basis
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for the most recent fiscal year for which audited financial statements have been
delivered to Lenders for which breach, nonperformance, cancellation or failure
to renew could reasonably be expected to have a Material Adverse Effect.
"MATERIAL LEASEHOLD PROPERTY" means a Leasehold Property
reasonably determined by Agents to be of material value as Collateral and of
material importance to the operations of Company or any of its Subsidiaries.
"MATERIAL REAL PROPERTY" means real property reasonably
determined by Agents to be of material value as collateral and of material
importance to the operations of Company or any of its Subsidiaries.
"MORTGAGE" means (i) a security instrument (whether designated
as a deed of trust or a mortgage or by any similar title) executed and delivered
by any Loan Party, substantially in the form of Exhibit XX annexed hereto or in
such other form as may be approved by Agents in their sole discretion, in each
case with such changes thereto as may be recommended by Administrative Agent's
local counsel based on local laws or customary local mortgage or deed of trust
practices, or (ii) at the option of Agents, in the case of an Additional
Mortgaged Property (as defined in subsection 6.9), an amendment to an existing
Mortgage, in form satisfactory to Agents, adding such Additional Mortgaged
Property to the Real Property Assets encumbered by such existing Mortgage, in
either case as such security instrument or amendment may be amended,
supplemented or otherwise modified from time to time. "MORTGAGES" means all such
instruments, including the Assigned Mortgages and any Additional Mortgages (as
defined in subsection 6.9), collectively.
"MORTGAGED PROPERTY" means a Closing Date Mortgaged Property
(as defined in subsection 4.2H) or an Additional Mortgaged Property (as defined
in subsection 6.9).
"MULTIEMPLOYER PLAN" means any Employee Benefit Plan which is a
"multiemployer plan" as defined in Section 3(37) of ERISA.
"NET ASSET SALE PROCEEDS" means, with respect to any Asset
Sale, Cash payments (including any Cash received by way of deferred payment
pursuant to, or by monetization of, a note receivable or otherwise, but only as
and when so received) received from such Asset Sale, net of any bona fide direct
costs incurred in connection with such Asset Sale, including (i) income taxes
reasonably estimated to be actually paid or payable within two years of the date
of such Asset Sale as a result of any gain recognized in connection with such
Asset Sale, (ii) payment of the outstanding principal amount of, premium or
penalty, if any, and interest on any Indebtedness (other than the Loans) that is
secured by a Lien on the stock or assets in question and that is required to be
repaid under the terms thereof as a result of such Asset Sale and (iii) sales
and other commissions and reasonable legal and other expenses.
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"NET INSURANCE/CONDEMNATION PROCEEDS" means any Cash payments
or proceeds received by Company or any of its Subsidiaries (i) under any
business interruption or casualty insurance policy in respect of a covered loss
thereunder or (ii) as a result of the taking of any assets of Company or any of
its Subsidiaries by any Person pursuant to the power of eminent domain,
condemnation or otherwise, or pursuant to a sale of any such assets to a
purchaser with such power under threat of such a taking, in each case net of any
actual and reasonable documented costs (including commissions and reasonable
attorneys fees) incurred by Company or any of its Subsidiaries in connection
with the adjustment or settlement of any claims of Company or such Subsidiary in
respect thereof.
"NOTES" means one or more of the Tranche A Term Notes, Tranche
B Term Notes, Revolving Notes or Swing Line Note or any combination thereof.
"NOTICE OF BORROWING" means a notice substantially in the form
of Exhibit I annexed hereto delivered by Company to Administrative Agent
pursuant to subsection 2.1B with respect to a proposed borrowing.
"NOTICE OF CONVERSION/CONTINUATION" means a notice
substantially in the form of Exhibit II annexed hereto delivered by Company to
Administrative Agent pursuant to subsection 2.2D with respect to a proposed
conversion or continuation of the applicable basis for determining the interest
rate with respect to the Loans specified therein.
"NOTICE OF ISSUANCE OF LETTER OF CREDIT" means a notice
substantially in the form of Exhibit III annexed hereto delivered by Company to
Administrative Agent pursuant to subsection 3.1B(i) with respect to the proposed
issuance of a Letter of Credit.
"OBLIGATIONS" means all obligations of every nature of each
Loan Party from time to time owed to Arranger, Agents, Lenders or any of them
under the Loan Documents, whether for principal, interest, reimbursement of
amounts drawn under Letters of Credit, fees, expenses, indemnification or
otherwise.
"OFFICER'S CERTIFICATE" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its president or its chief
financial officer (or if there is no chief financial officer, its chief
accounting officer); provided that every Officer's Certificate with respect to
the compliance with a condition precedent to the making of any Loans hereunder
shall include (i) a statement that the officer or officers making or giving such
Officer's Certificate have read such condition and any definitions or other
provisions contained in this Agreement relating thereto, (ii) a statement that,
in the opinion of the signers, they have made or have caused to be made such
examination or investigation as is reasonably necessary to enable them to
express an informed opinion as to whether or not such condition has been
complied with, and (iii) a statement as to whether, in the opinion of the
signers, such condition has been complied with.
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"OLD HOLDERS" means the holders of the capital stock of SAHC
prior to the consummation of the Acquisition.
"OPERATING LEASE" means, as applied to any Person, any lease
(including leases that may be terminated by the lessee at any time) of any
property (whether real, personal or mixed) that is not a Capital Lease in
accordance with GAAP other than any such lease under which that Person is the
lessor.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"PENSION PLAN" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code
or Section 302 of ERISA.
"PERMITTED ENCUMBRANCES" means the following types of Liens
(excluding any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the
Internal Revenue Code or by ERISA, any such Lien relating to or imposed in
connection with any Environmental Claim, and any such Lien expressly prohibited
by any applicable terms of any of the Collateral Documents):
(i) Liens for taxes, assessments or governmental charges or
claims the payment of which is not, at the time, required by subsection
6.3;
(ii) statutory Liens of landlords, statutory Liens of banks and
rights of set-off, statutory Liens of carriers, warehousemen,
mechanics, repairmen, workmen and materialmen, and other Liens imposed
by law, in each case incurred in the ordinary course of business (a)
for amounts not yet overdue or (b) for amounts that are overdue and
that are being contested in good faith by appropriate proceedings, so
long as (1) such reserves or other appropriate provisions, if any, as
shall be required by GAAP shall have been made for any such contested
amounts, and (2) in the case of a Lien with respect to any portion of
the Collateral, such contest proceedings conclusively operate to stay
the sale of any portion of the Collateral on account of such Lien;
(iii) 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, government contracts, trade contracts, performance and
return-of-money bonds and other similar obligations (exclusive of
obligationsfor the payment of borrowed money), so long as no
foreclosure, sale or similar proceedings have been commenced with
respect to any portion of the Collateral on account thereof;
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(iv) any attachment or judgment Lien not constituting an Event
of Default under subsection 8.8;
(v) leases or subleases granted to third parties in accordance
with any applicable terms of the Collateral Documents and not
interfering in any material respect with the ordinary conduct of the
business of Company or any of its Subsidi aries or resulting in a
material diminution in the value of any Collateral as security for the
Obligations;
(vi) easements, rights-of-way, restrictions, encroachments, and
other minor defects or irregularities in title, in each case which do
not and will not interfere in any material respect with the ordinary
conduct of the business of Company or any of its Subsidiaries or result
in a material diminution in the value of any Collateral as security for
the Obligations;
(vii) any (a) interest or title of a lessor or sublessor under
operating leases, (b) restriction or encumbrance that the interest or
title of such lessor or sublessor may be subject to, or
(c) subordination of the interest of the lessee or sublessee under such
lease to any restriction or encumbrance referred to in the preceding
clause (b), so long as the holder of such restriction or encumbrance
agrees to recognize the rights of such lessee or sublessee under such
lease;
(viii) Liens arising from filing UCC financing statements
relating solely to leases not prohibited by this Agreement;
(ix) 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;
(x) any zoning or similar law or right reserved to or vested in
any governmental office or agency to control or regulate the use of any
real property;
(xi) Liens securing obligations (other than obligations
representing Indebtedness for borrowed money) under operating,
reciprocal easement or similar agreements entered into in the ordinary
course of business of Company and its Subsidiaries; and
(xii) licenses of patents, trademarks and other intellectual
property rights granted by Company or any of its Subsidiaries in the
ordinary course of business and not interfering in any material respect
with the ordinary conduct of the business of Company or such
Subsidiary;
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(xiii) Liens on property hereafter acquired; provided that any
such Lien is not created pursuant to or in contemplation of the
acquisition of such property and provided further that no such Lien
shall extend or attach to property other than the property so acquired;
(xiv) Liens in respect of Capital Leases;
(xv) Liens under the Existing Credit Agreement so long as
released substantially simultaneously herewith;
(xvi) Set-off rights of depository banks; and
(xvii) Liens of banks arising under Article 4 of the UCC on
items in collection and accompanying documents and proceeds.
"PERSON" means and includes natural persons, corporations,
limited partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments (whether federal,
state or local, domestic or foreign, and including political subdivisions
thereof) and agencies or other administrative, regulatory, judicial or
quasi-judicial bodies thereof.
"PLEDGED COLLATERAL" means, collectively, the "Pledged
Collateral" as defined in the Company Pledge Agreement, the Subsidiary Pledge
Agreements and the Auxiliary Pledge Agreements.
"POTENTIAL EVENT OF DEFAULT" means a condition or event that,
after notice or lapse of time or both, would constitute an Event of Default.
"PRIME RATE" means the rate per annum equal to the corporate
base rate of interest announced by FNBC from time to time, changing when and as
said corporate base rate changes. FNBC or any other Lender may make commercial
loans or other loans at rates of interest at, above or below the Prime Rate.
"PRO RATA SHARE" means, with respect to a Lender (i) with
respect to all payments, computations and other matters relating to the Tranche
A Term Loan Commitment or the Tranche A Term Loan of any Lender, the percentage
obtained by dividing (x) the Tranche A Term Loan Exposure of that Lender by
(y) the aggregate Tranche A Term Loan Exposure of all Lenders, (ii) with respect
to all payments,computations and other matters relating to the Tranche B Term
Loan Commitment or the Tranche B Term Loan of any Lender, the percentage
obtained by dividing (x) the Tranche B Term Loan Exposure of that Lender by (y)
the aggregate Tranche B Term Loan Exposure
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of all Lenders, (iii) with respect to all payments, computations and other
matters relating to the Revolving Loan Commitment or the Revolving Loans of any
Lender or any Letters of Credit issued or participations therein purchased by
any Lender or any participations in any Swing Line Loans purchased or deemed
purchased by any Lender, the percentage obtained by dividing (x) the Revolving
Loan Exposure of that Lender by (y) the aggregate Revolving Loan Exposure of all
Lenders, and (iv) for all other purposes with respect to each Lender, the
percentage obtained by dividing (x) the sum of the Tranche A Term Loan Exposure
of that Lender plus the Tranche B Term Loan Exposure of that Lender plus the
Revolving Loan Exposure of that Lender by (y) the sum of the aggregate Tranche A
Term Loan Exposure of all Lenders plus the sum of the aggregate Tranche B Term
Loan Exposure of all Lenders plus the aggregate Revolving Loan Exposure of all
Lenders, in any such case as the applicable percentage may be adjusted by
assignments permitted pursuant to subsection 10.1. The initial Pro Rata Share of
each Lender for purposes of each of clauses (i), (ii) and (iii) of the preceding
sentence is set forth opposite the name of that Lender in Schedule 2.1 annexed
hereto.
"PTO" means the United States Patent and Trademark Office or
any successor or substitute office in which filings are necessary or, in the
opinion of Administrative Agent, desirable in order to create or perfect Liens
on any IP Collateral.
"REAL PROPERTY ASSET" means, at any time of determination, any
interest then owned by any Loan Party in any real property.
"RECORDED LEASEHOLD INTEREST" means a Leasehold Property with
respect to which a Record Document (as hereinafter defined) has been recorded in
all places necessary or desirable, in the reasonable judgment of Agents, to give
constructive notice of such Leasehold Property to third-party purchasers and
encumbrancers of the affected real property. For purposes of this definition,
the term "RECORD DOCUMENT" means, with respect to any Leasehold Property, (a)
the lease evidencing such Leasehold Property or a memorandum thereof, executed
and acknowledged by the owner of the affected real property, as lessor, or (b)
if such Leasehold Property was acquired or subleased from the holder of a
Recorded Leasehold Interest, the applicable assignment or sublease document,
executed and acknowledged by such holder, in each case in form sufficient to
give such constructive notice upon recordation and otherwise in form reasonably
satisfactory to Agents.
"REFINANCING" has the meaning assigned to that term in the
Recitals hereof.
"REFUNDED SWING LINE LOANS" has the meaning assigned to that
term in subsection 2.1A(iii).
"REGULATION D" means Regulation D of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
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"REIMBURSEMENT DATE" has the meaning assigned to that term in
subsection 3.3B.
"RELATED AGREEMENTS" means collectively the Acquisition
Agreement and documents related to the Senior Subordinated Notes.
"RELEASE" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping,
leaching or migration of Hazardous Materials into the indoor or outdoor
environment (including the abandonment or disposal of any barrels, containers or
other closed receptacles containing any Hazardous Materials), including the
migration of any Hazardous Materials through the air, soil, surface water or
groundwater.
"REQUISITE LENDERS" means Lenders having or holding more than
51% of the sum of (i) the aggregate Tranche A Term Loan Exposure of all Lenders,
(ii) plus the aggregate Tranche B Term Loan Exposure of all Lenders plus (iii)
the aggregate Revolving Loan Exposure of all Lenders.
"RESPONSIBLE OFFICERS" means any of the President, the Chief
Executive Officer, Chief Financial Officer, Treasurer, Vice President and
General Manager of Precision Engine Products Corp., Vice President of
Engineering and Marketing, Diesel Systems Division, or other officer having
similar responsibilities.
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of Company now or hereafter outstanding, except a dividend payable solely in
shares of that class of stock to the holders of that class, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of stock of Company now or
hereafter outstanding, (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of Company now or hereafter outstanding, and
(iv) any payment or prepayment of principal of, premium, if any, or interest on,
or redemption, purchase, retirement, defeasance (including in-substance or legal
defeasance), sinking fund or similar payment with respect to, any Subordinated
Indebtedness that is not approved by Agents and Requisite Lenders.
"REVOLVING LENDER" means any Lender who is committed to make
Revolving Loans to the Company.
"REVOLVING LOAN COMMITMENT" means the commitment of a Revolving
Lender to make Revolving Loans to Company pursuant to subsection 2.1A(ii), and
"REVOLVING LOAN COMMITMENTS" means such commitments of all Revolving Lenders in
the aggregate.
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"REVOLVING LOAN COMMITMENT TERMINATION DATE" means December 11,
2003.
"REVOLVING LOAN EXPOSURE" means, with respect to any Revolving
Lender as of any date of determination (i) prior to the termination of the
Revolving Loan Commitments, that Revolving Lender's Revolving Loan Commitment
and (ii) after the termination of the Revolving Loan Commitments, the sum of
(a) the aggregate outstanding principal amount of the Revolving Loans of that
Revolving Lender plus (b) in the event that Revolving Lender is an Issuing
Lender, the aggregate Letter of Credit Usage in respect of all Letters of Credit
issued by that Revolving Lender (in each case net of any participations
purchased by other Lenders in such Letters of Credit or any unreimbursed
drawings thereunder) plus (c) the aggregate amount of all participations
purchased by that Lender in any outstanding Letters of Credit or any
unreimbursed drawings under any Letters of Credit plus (d) in the case of Swing
Line Lender, the aggregate outstanding principal amount of all Swing Line Loans
(net of any participations therein purchased by other Lenders) plus (e) the
aggregate amount of all participations purchased by that Lender in any
outstanding Swing Line Loans.
"REVOLVING LOANS" means the Loans made by Revolving Lenders to
Company pursuant to subsection 2.1A(ii).
"REVOLVING NOTES" means (i) the promissory notes of Company
issued pursuant to subsection 2.1D(ii) on the Closing Date and (ii) any
promissory notes issued by Company pursuant to the last sentence of subsection
10.1B(i) in connection with assignments of the Revolving Loan Commitments and
Revolving Loans of any Revolving Lenders, in each case substantially in the form
of Exhibit V annexed hereto, as they may be amended, supplemented or otherwise
modified from time to time.
"SAC" has the meaning assigned to that term in the introduction
to this Agreement.
"SAHC" has the meaning set forth in the recitals hereto.
"SECURITIES" means any stock, shares, partnership interests,
voting trust certificates, certificates of interest or participation in any
profit-sharing agreement or arrangement, options, warrants, bonds, debentures,
notes, or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities" or any certificates of interest, shares or
participations in temporary or interim certificates for the purchase or
acquisition of, or any right to subscribe to, purchase or acquire, any of the
foregoing.
"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time, and any successor statute.
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"SENIOR SUBORDINATED NOTES" means the senior subordinated notes
issued by Company pursuant to that certain Indenture dated December 11, 1997
between Stanadyne, as Issuer and United States Trust Company of New York, as
Trustee.
"SOLVENT" means, with respect to any Person, that as of the
date of determination both (A) (i) the then fair saleable value (determined on a
going concern basis) of the property of such Person is (y) greater than the
total amount of liabilities (including contingent liabilities) of such Person
and (z) not less than the amount that will be required to pay the probable
liabilities on such Person's then existing debts as they become absolute and
matured considering all financing alternatives and potential asset sales
reasonably available to such Person; (ii) such Person's capital is not
unreasonably small in relation to its business or any contemplated or undertaken
transaction; and (iii) such Person does not intend to incur, or believe (nor
should it reasonably believe) that it will incur, debts beyond its ability to
pay such debts as they become due; and (B) such Person is "solvent" within the
meaning given that term and similar terms under applicable laws relating to
fraudulent transfers and conveyances. For purposes of this definition, the
amount of any contingent liability at any time shall be computed as the amount
that, in light of all of the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.
"STANADYNE" means Stanadyne Automotive Corp., a Delaware
corporation.
"STANADYNE ITALY" means Stanadyne Automotive S.p.A., an Italian
corporation and a wholly-owned Subsidiary of Company.
"STANDBY LETTER OF CREDIT" means any standby letter of credit
or similar instrument, including those listed on Schedule 3.1, issued for the
purpose of supporting (i) Indebtedness of Company or any of its Subsidiaries in
respect of industrial revenue or development bonds or financings, (ii) workers'
compensation liabilities of Company or any of its Subsidiaries, (iii) the
obligations of third party insurers of Company or any of its Subsidiaries,
(iv) obligations with respect to Capital Leases or Operating Leases of Company
or any of its Subsidiaries, and (v) performance, payment, deposit or surety
obligations of Company or any of its Subsidiaries, in any case if required by
law or governmental rule or regulation or in accordance with custom and practice
in the industry; provided that Standby Letters of Credit may not be issued for
the purpose of supporting (a) trade payables or (b) any Indebtedness
constituting "antecedent debt" (as that term is used in Section 547 of the
Bankruptcy Code).
"SUBORDINATED INDEBTEDNESS" means Indebtedness of Company
subordinated in right of payment to the Obligations pursuant to documentation
containing maturities, amortization schedules, covenants, defaults, remedies,
subordination provisions and other material terms in form and substance
satisfactory to Agents and Requisite Lenders.
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"SUBSIDIARY" means, with respect to any Person, any
corporation, partnership, limited liability company, association, joint venture
or other business entity of which more than 50% of the total voting power of
shares of stock or other ownership interests entitled (without regard to the
occurrence of any contingency) to vote in the election of the Person or Persons
(whether directors, managers, trustees or other Persons performing similar
functions) having the power to direct or cause the direction of the management
and policies thereof is at the time owned or controlled, directly or indirectly,
by that Person or one or more of the other Subsidiaries of that Person or a
combination thereof.
"SUBSIDIARY GUARANTOR" means any Subsidiary of Company that
executes and delivers a counterpart of the Subsidiary Guaranty on the Closing
Date or from time to time thereafter pursuant to subsection 6.8.
"SUBSIDIARY GUARANTY" means the Subsidiary Guaranty executed
and delivered by existing Domestic Subsidiaries of Company on the Closing Date
and to be executed and delivered by additional Domestic Subsidiaries of Company
from time to time thereafter in accordance with subsection 6.8, substantially in
the form of Exhibit XVI annexed hereto, as such Subsidiary Guaranty may
hereafter be amended, supplemented or otherwise modified from time to time.
"SUBSIDIARY IP SECURITY AGREEMENT" means each trademark
security agreement, copyright security agreement, patent security agreement or
other security agreement executed and delivered by a Subsidiary Guarantor in
accordance with subsection 6.8.
"SUBSIDIARY PLEDGE AGREEMENT" means each Subsidiary Pledge
Agreement executed and delivered by the Domestic Subsidiaries on the Closing
Date and any other pledge agreement substantially in the form of such Pledge
Agreements executed from time to time thereafter in accordance with subsection
6.8, in each case substantially in the form of Exhibit XVII annexed hereto, as
such Subsidiary Pledge Agreement may be amended, supplemented or otherwise
modified from time to time, and "SUBSIDIARY PLEDGE AGREEMENTS" means all such
Subsidiary Pledge Agreements, collectively.
"SUBSIDIARY SECURITY AGREEMENT" means each Subsidiary Security
Agreement executed and delivered by an existing Subsidiary Guarantor on the
Closing Date or executed and delivered by any additional Subsidiary Guarantor
from time to time thereafter in accordance with subsection 6.8, in each case
substantially in the form ofExhibit XVIII annexed hereto, as such Subsidiary
Security Agreement may be amended, supplemented or otherwise modified from time
to time, and "SUBSIDIARY SECURITY AGREEMENTS" means all such Subsidiary Security
Agreements, collectively.
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"SUPPLEMENTAL COLLATERAL AGENT" has the meaning assigned to
that term in subsection 9.1B.
"SWING LINE LENDER" means FNBC, or any Person serving as a
successor Administrative Agent hereunder, in its capacity as Swing Line Lender
hereunder.
"SWING LINE LOAN COMMITMENT" means the commitment of Swing Line
Lender to make Swing Line Loans to Company pursuant to subsection 2.1A(iii)
"SWING LINE LOANS" means the Loans made by Swing Line Lender to
Company pursuant to subsection 2.1A(iii).
"SWING LINE NOTE" means (i) the promissory note of Company
issued pursuant to subsection 2.1D(iii) on the Closing Date and (ii) any
promissory note issued by Company to any successor Administrative Agent and
Swing Line Lender pursuant to the last sentence of subsection 9.5B, in each case
substantially in the form of Exhibit VI annexed hereto, as it may be amended,
supplemented or otherwise modified from time to time.
"SYNDICATION AGENT" has the meaning assigned to that term in
the introduction to this Agreement.
"TAX" or "TAXES" means any present or future tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature and whatever called,
by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld
or assessed; provided that "TAX ON THE OVERALL NET INCOME" of a Person shall be
construed as a reference to a tax imposed by the jurisdiction in which that
Person is organized or in which that Person's principal office (and/or, in the
case of a Lender, its lending office) is located or in which that Person
(and/or, in the case of a Lender, its lending office) is deemed to be doing
business on all or part of the net income, profits or gains (whether worldwide,
or only insofar as such income, profits or gains are considered to arise in or
to relate to a particular jurisdiction, or otherwise) of that Person (and/or, in
the case of a Lender, its lending office).
"TERM LOAN COMMITMENT" means the commitment of a Term Loan
Lender to make a Term Loan to Company pursuant to subsection 2.1A(i), and "TERM
LOAN COMMITMENTS" means such commitments of all Term Loan Lenders in the
aggregate.
"TERM LOAN LENDERS" means collectively the Tranche A Term Loan
Lenders and the Tranche B Loan Lenders.
"TERM LOANS" means, collectively, the Tranche A Term Loans and
the Tranche B Term Loans.
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"TITLE COMPANY" means one or more title insurance companies
selected by Company and reasonably satisfactory to Agents.
"TOTAL UTILIZATION OF REVOLVING LOAN COMMITMENTS" means, as at
any date of determination, the sum of (i) the aggregate principal amount of all
outstanding Revolving Loans (other than Revolving Loans made, but not yet
applied, for the purpose of repaying any Refunded Swing Line Loans or
reimbursing the applicable Issuing Lender for any amount drawn under any Letter
of Credit) plus (ii) the aggregate principal amount of all outstanding Swing
Line Loans plus (iii) the Letter of Credit Usage.
"TRANCHE A TERM LOAN COMMITMENT" means the commitment of a
Lender to make a Tranche A Term Loan to Company pursuant to subsection
2.1A(i)(a), and "TRANCHE A TERM LOAN COMMITMENTS" means such commitments of all
Lenders in the aggregate.
"TRANCHE A TERM LOAN EXPOSURE" means, with respect to any
Lender as of any date of determination (i) prior to the funding of the Tranche A
Term Loans, that Lender's Tranche A Term Loan Commitment and (ii) after the
funding of the Tranche A Term Loans, the outstanding principal amount of the
Tranche A Term Loan of that Lender.
"TRANCHE A TERM LOAN LENDER" means any Lender who is committed
to make Tranche A Loans to Company.
"TRANCHE A TERM LOANS" means the Tranche A Term Loans made by
Lenders to Company pursuant to subsection 2.1A(i)(a).
"TRANCHE A TERM NOTES" means (i) the promissory notes of
Company issued pursuant to subsection 2.1D(i)(a) on the Closing Date and (ii)
any promissory notes issued by Company pursuant to the last sentence of
subsection 10.1B(i) in connection with assignments of the Tranche A Term Loan
Commitments or Tranche A Term Loans of any Lenders, in each case substantially
in the form of Exhibit IV-A annexed hereto, as they may be amended, supplemented
or otherwise modified from time to time.
"TRANCHE B TERM LOAN COMMITMENT" means the commitment of a
Lender to make a Tranche B Term Loan to Company pursuant to subsection
2.1A(i)(b), and "TRANCE B TERM LOAN COMMITMENTS" means such commitments of all
Lenders in the aggregate.
"TRANCHE B TERM LOAN EXPOSURE" means, with respect to any
Lender as of any date of determination (i) prior to the funding of the Tranche B
Term Loans, that Lender's Tranche B Term Loan Commitment and (ii) after the
funding of the Tranche B Term Loans, the outstanding principal amount of the
Tranche B Term Loan of that Lender.
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"TRANCHE B TERM LOAN LENDER" means any Lender who is committed
to make Tranche B Loans to Company.
"TRANCHE B TERM LOANS" means the Tranche B Term Loans made by
Lenders to Company pursuant to subsection 2.1A(i)(b).
"TRANCHE B TERM NOTES" means (i) the promissory notes of
Company issued pursuant to subsection 2.1D(i)(b) on the Closing Date and (ii)
any promissory notes issued by Company pursuant to the last sentence of
subsection 10.1B(i) in connection with assignments of the Tranche B Term Loan
Commitments or Tranche B Term Loans of any Lenders, in each case substantially
in the form of Exhibit IV-B annexed hereto, as they may be amended, supplemented
or otherwise modified from time to time.
"TRANSACTION COSTS" means the fees, costs and expenses payable
by Company or Holdings on or before the Closing Date in connection with the
transactions contemplated by any of the Loan Documents or Related Agreements.
"UCC" means the Uniform Commercial Code (or any similar or
equivalent legislation) as in effect in any applicable jurisdiction.
1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS
UNDER AGREEMENT.
Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. Financial statements and other information
required to be delivered by Company to Lenders pursuant to clauses (ii), (iii)
and (xii) of subsection 6.1 shall be prepared in accordance with GAAP as in
effect at the time of such preparation. Calculations in connection with the
definitions, covenants and other provisions of this Agreement shall utilize
accounting principles and policies in conformity with GAAP as in effect on the
Closing Date.
1.3 OTHER DEFINITIONAL PROVISIONS AND RULES OF CONSTRUCTION.
A. Any of the terms defined herein may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference.
B. References to "Sections" and "subsections" shall be to
Sections and subsections, respectively, of this Agreement unless otherwise
specifically provided.
C. The use in any of the Loan Documents of the word "include"
or "including", when following any general statement, term or matter, shall not
be construed to limit such statement, term or matter to the specific items or
matters set forth immediately following such word or to similar items or
matters, whether or not nonlimiting language
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(such as "without limitation" or "but not limited to" or words of similar
import) is used with reference thereto, but rather shall be deemed to refer to
all other items or matters that fall within the broadest possible scope of such
general statement, term or matter.
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 COMMITMENTS; MAKING OF LOANS; NOTES.
A. COMMITMENTS. Subject to the terms and conditions of this Agreement
and in reliance upon the representations and warranties of Company herein set
forth, each Tranche A Term Loan Lender hereby severally agrees to make the Loans
described in subsection 2.1A(i)(a), each Tranche B Term Loan Lender hereby
severally agrees to make the Loans described in subsection 2.1(A)(i)(b), each
Revolving Lender hereby severally agrees to make the Loans described in
subsection 2.1A(ii) and Swing Line Lender hereby agrees to make the Loans
described in subsection 2.1A(iii).
(i) (a) Tranche A Term Loans. Each Tranche A Term Loan Lender
severally agrees to lend to Company on the Closing Date an amount not
exceeding its Pro Rata Share of the Tranche A Term Loan Commitments to
be used for the purposes identified in subsection 2.5A. The amount of
each Tranche A Term Loan Lender's Tranche A Term Loan Commitment is set
forth opposite its name on Schedule 2.1 annexed hereto and the Tranche
A Term Loan Commitments is $30,000,000; provided that the Tranche A
Term Loan Commitments of the Tranche A Term Loan Lenders shall be
adjusted to give effect to any assignments of the Tranche A Term Loan
Commitments pursuant to subsection 10.1B. Each Tranche A Term Loan
Lender's Tranche A Term Loan Commitment shall expire immedi ately and
without further action on December 11, 1997 if the Tranche A Term Loans
are not made on or before that date. Company may make only one
borrowing under the Tranche A Term Loan Commitments. Amounts borrowed
under this subsection 2.1A(i)(a) and subsequently repaid or prepaid may
not be reborrowed.
(b) Tranche B Term Loans. Each Tranche B Term Loan
Lender severally agrees to lend to Company on the Closing Date, an
amount not exceeding its Pro Rata Share of the Tranche B Term Loan
Commitments to be used for the purposes identified in subsection 2.5A.
The amount of each Tranche B Term Loan Lender's Tranche B Term Loan
Commitment is set forth opposite its name on Schedule 2.1 annexed
hereto and the Tranche B Term Loan Commitments is $25,000,000; provided
that the Tranche B Term Loan Commitments of the Tranche B Term Loan
Lenders shall be adjusted to give effect to any assignments of the
Tranche B Term Loan Commitments pursuant to subsection 10.1B. Each
Tranche B Term Loan Lender's Tranche B Term Loan Commitment shall
expire immediately and without further action on December 11, 1997 if
the Tranche B Term Loans are
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not made on or before that date. Company may make only one borrowing
under the Tranche B Term Loan Commitments. Amounts borrowed under this
subsection 2.1A(i)(b) and subsequently repaid or prepaid may not be
reborrowed,
(ii) Revolving Loans. Each Revolving Lender severally agrees,
subject to the limitations set forth below with respect to the maximum
amount of Revolving Loans permitted to be outstanding from time to
time, to lend to Company from time to time during the period from the
Closing Date to but excluding the Revolving Loan Commitment Termination
Date an aggregate amount not exceeding its Pro Rata Share of the
Revolving Loan Commitments to be used for the purposes identified in
subsection 2.5B. The original amount of each Revolving Lender's
Revolving Loan Commitment is set forth opposite its name on
Schedule 2.1 annexed hereto and the original amount of the Revolving
Loan Commitments is $30,000,000; provided that the Revolving Loan
Commitments of Revolving Lenders shall be adjusted to give effect to
any assignments of the Revolving Loan Commitments pursuant to
subsection 10.1B; and provided, further that the amount of the
Revolving Loan Commitments shall be reduced from time to time by the
amount of any reductions thereto made pursuant to subsections 2.4B(ii)
and 2.4B(iii). Each Revolving Lender's Revolving Loan Commitment shall
expire on the Revolving Loan Commitment Termination Date and all
Revolving Loans and all other amounts owed hereunder with respect to
the Revolving Loans and the Revolving Loan Commitments shall be paid in
full no later than that date; provided that each Revolving Lender's
Revolving Loan Commitment shall expire immediately and without further
action on December 11, 1997 if the Term Loans and the Initial Revolving
Loans are not made on or before that date. Amounts borrowed under this
subsection 2.1A(ii) may be prepaid, repaid and reborrowed to but
excluding the Revolving Loan Commitment Termination Date.
Anything contained in this Agreement to the contrary
notwithstanding, the Revolving Loans and the Revolving Loan Commitments
shall be subject to the limitation that in no event shall the Total
Utilization of Revolving Loan Commitments at any time exceed the lesser
of the Revolving Loan Commitments then in effect and (subject to
subsection 2.4B(iii)(i)) the then applicable Borrowing Base.
(iii) Swing Line Loans. Swing Line Lender hereby agrees,
subject to the limitations set forth below with respect to the maximum
amount of Swing Line Loans permitted to be outstanding from time to
time, to make a portion of the Revolving Loan Commitments available to
Company from time to time during the period from the Closing Date to
but excluding the Revolving Loan Commitment Termination Date by making
Swing Line Loans to Company in an aggregate amount not exceeding the
amount of the Swing Line Loan Commitment to be used for the purposes
identified in subsection 2.5B, notwithstanding the fact that such Swing
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Line Loans, when aggregated with Swing Line Lender's outstanding
Revolving Loans and Swing Line Lender's Pro Rata Share of the Letter of
Credit Usage then in effect, may exceed Swing Line Lender's Revolving
Loan Commitment. The original amount of the Swing Line Loan Commitment
is $5,000,000; provided that any reduction of the Revolving Loan
Commitments made pursuant to subsection 2.4B(ii) or 2.4B(iii) which
reduces the Revolving Loan Commitments to an amount less than the then
current amount of the Swing Line Loan Commitment shall result in an
automatic corresponding reduction of the Swing Line Loan Commitment to
the amount of the Revolving Loan Commitments, as so reduced, without
any further action on the part of Company, Administrative Agent or
Swing Line Lender. The Swing Line Loans shall have a final maturity
date acceptable to the Swing Line Lender. The Swing Line Loan
Commitment shall expire on the Revolving Loan Commitment Termination
Date and all Swing Line Loans and all other amounts owed hereunder with
respect to the Swing Line Loans shall be paid in full no later than
that date; provided that the Swing Line Loan Commitment shall expire
immediately and without further action on December 11, 1997 if the Term
Loans and the initial Revolving Loans are not made on or before that
date. Amounts borrowed under this subsection 2.1A(iii) may be prepaid,
repaid and reborrowed to but excluding the Revolving Loan Commitment
Termination Date.
Anything contained in this Agreement to the contrary
notwithstanding, the Swing Line Loans and the Swing Line Loan
Commitment shall be subject to the limitation that in no event shall
the Total Utilization of Revolving Loan Commitments at any time exceed
the lesser of the Revolving Loan Commitments then in effect and
(subject to subsection 2.4B(iii)(h)) the then applicable Borrowing
Base.
With respect to any Swing Line Loans which have not been
voluntarily prepaid by Company pursuant to subsection 2.4B(i), Swing
Line Lender may, at any time in its sole and absolute discretion,
deliver to Administrative Agent (with a copy to Company), no later than
11:00 A.M. (New York City time) on the first Business Day in advance of
the proposed Funding Date, a notice (which shall be deemed to be a
Notice of Borrowing given by Company) requesting Revolving Lenders to
make Revolving Loans that are Base Rate Loans on such Funding Date in
an amount equal to the amount of such Swing Line Loans (the "REFUNDED
SWING LINE LOANS") outstanding on the date such notice is given which
Swing Line Lender requests Revolving Lenders to prepay. Anything
contained in this Agreement to the contrary notwithstanding, (i) the
proceeds of such Revolving Loans made by Lenders other than Swing Line
Lender shall be immediately delivered by Administrative Agent to Swing
Line Lender (and not to Company) and applied to repay a corresponding
portion of the Refunded Swing Line Loans and (ii) on the day such
Revolving Loans are made, Swing Line Lender's Pro Rata Share of the
Refunded Swing Line Loans shall be deemed to be paid with the proceeds
of a Revolving Loan made by Swing
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Line Lender, and such portion of the Swing Line Loans deemed to be so
paid shall no longer be outstanding as Swing Line Loans and shall no
longer be due under the Swing Line Note of Swing Line Lender but shall
instead constitute part of Swing Line Lender's outstanding Revolving
Loans and shall be due under the Revolving Note of Swing Line Lender.
Company hereby authorizes Administrative Agent and Swing Line Lender to
charge Company's accounts with Administrative Agent and Swing Line
Lender (up to the amount available in each such account) in order to
immediately pay Swing Line Lender the amount of the Refunded Swing Line
Loans to the extent the proceeds of such Revolving Loans made by
Revolving Lenders, including the Revolving Loan deemed to be made by
Swing Line Lender, are not sufficient to repay in full the Refunded
Swing Line Loans. If any portion of any such amount paid (or deemed to
be paid) to Swing Line Lender should be recovered by or on behalf of
Company from Swing Line Lender in bankruptcy, by assignment for the
benefit of creditors or otherwise, the loss of the amount so recovered
shall be ratably shared among all Revolving Lenders in the manner
contemplated by subsection 10.5.
If for any reason (a) Revolving Loans are not made upon the
request of Swing Line Lender as provided in the immediately preceding
paragraph in an amount sufficient to repay any amounts owed to Swing
Line Lender in respect of any outstanding Swing Line Loans or (b) the
Revolving Loan Commitments are terminated at a time when any Swing Line
Loans are outstanding, each Revolving Lender shall be deemed to, and
hereby agrees to, have purchased a participation in such outstanding
Swing Line Loans in an amount equal to its Pro Rata Share (calculated,
in the case of the foregoing clause (b), immediately prior to such
termination of the Revolving Loan Commitments) of the unpaid amount of
such Swing Line Loans together with accrued interest thereon. Upon one
Business Day's notice from Swing Line Lender, each Revolving Lender
shall deliver to Swing Line Lender an amount equal to its respective
participation in same day funds at the Funding and Payment Office. In
order to further evidence such participation (and without prejudice to
the effectiveness of the participation provisions set forth above),
each Revolving Lender agrees to enter into a separate participation
agreement at the request of Swing Line Lender in form and substance
reasonably satisfactory to Swing Line Lender and the other Revolving
Lenders. In the event any Revolving Lender fails to make available to
Swing Line Lender the amount of such Revolving Lender's participation
as provided in this paragraph, Swing Line Lender shall be entitled to
recover such amount on demand from such Revolving Lender together with
interest thereon at the Federal Funds Effective Rate for three
Business Days and thereafter at the Base Rate. In the event Swing Line
Lender receives a payment of any amount in which other Revolving
Lenders have purchased participations as provided in this paragraph,
Swing Line Lender shall promptly distribute to each such other Lender
its Pro Rata Share of such payment.
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<PAGE> 40
Anything contained herein to the contrary notwithstanding, each
Revolving Lender's obligation to make Revolving Loans for the purpose
of repaying any Refunded Swing Line Loans pursuant to the second
preceding paragraph and each Revolving Lender's obligation to purchase
a participation in any unpaid Swing Line Loans pursuant to the
immediately preceding paragraph shall be absolute and unconditional and
shall not be affected by any circumstance, including (a) any set-off,
counterclaim, recoupment, defense or other right which such Lender may
have against Swing Line Lender, Company or any other Person for any
reason what soever; (b) the occurrence or continuation of an Event of
Default or a Potential Event of Default; (c) any adverse change in the
business, operations, properties, assets, condition (financial or
otherwise) or prospects of Company or any of its Subsidiaries; (d) any
breach of this Agreement or any other Loan Document by any party
thereto; or (e) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing; provided that such
obligations of each Revolving Lender are subject to the condition that
(X) Swing Line Lender believed in good faith that all conditions under
Section 4 to the making of the applicable Refunded Swing Line Loans or
other unpaid Swing Line Loans, as the case may be, were satisfied at
the time such Refunded Swing Line Loans or unpaid Swing Line Loans were
made or (Y) the satisfaction of any such condition not satisfied had
been waived in accordance with subsection 10.6 prior to or at the time
such Refunded Swing Line Loans or other unpaid Swing Line Loans were
made.
B. BORROWING MECHANICS. Term Loans or Revolving Loans made on any
Funding Date (other than Revolving Loans made pursuant to a request by Swing
Line Lender pursuant to subsection 2.1A(iii) for the purpose of
repaying any Refunded Swing Line Loans or Revolving Loans made pursuant to
subsection 3.3B for the purpose of reimbursing any Issuing Lender for the amount
of a drawing under a Letter of Credit issued by it) shall be in an aggregate
minimum amount of $500,000 and integral multiples of $100,000 in excess of that
amount; provided that Term Loans or Revolving Loans made on any Funding Date as
Eurodollar Rate Loans with a particular Interest Period shall be in an aggregate
minimum amount of $500,000 and integral multiples of $100,000 in excess of that
amount. Swing Line Loans made on any Funding Date shall be in an aggregate
minimum amount of $100,000 and integral multiples of $25,000 in excess of that
amount. Whenever Company desires that Lenders make Term Loans or Revolving Loans
it shall deliver to Administrative Agent a Notice of Borrowing no later than
12:00 Noon (New York City time) at least three Business Days in advance of the
proposed Funding Date (in the case of a Eurodollar Rate Loan) or at least one
Business Day in advance of the proposed Funding Date (in the case of a Base Rate
Loan). Whenever Company desires that Swing Line Lender make a Swing Line Loan,
it shall deliver to Administrative Agent a Notice of Borrowing no later than
12:00 Noon (New York City time) on the proposed Funding Date. The Notice of
Borrowing shall specify (i) the proposed Funding Date (which shall be a Business
Day), (ii) the amount and type of Loans requested, (iii) in the case of Swing
Line Loans and any Loans made on the Closing Date, that such Loans shall be Base
Rate Loans,
39
<PAGE> 41
(iv) in the case of Revolving Loans not made on the Closing Date, whether such
Loans shall be Base Rate Loans or Eurodollar Rate Loans, (v) in the case of any
Loans requested to be made as Eurodollar Rate Loans, the initial Interest Period
requested therefor and (vi) after giving effect to the proposed borrowing, the
Total Utilization of Revolving Loan Commitments will not exceed the applicable
Borrowing Base. Term Loans and Revolving Loans may be continued as or converted
into Base Rate Loans and Eurodollar Rate Loans in the manner provided in
subsection 2.2D. In lieu of delivering the above-described Notice of Borrowing,
Company may give Administrative Agent telephonic notice by the required time of
any proposed borrowing under this subsec tion 2.1B; provided that such notice
shall be promptly confirmed in writing by delivery of a Notice of Borrowing to
Administrative Agent on or before the applicable Funding Date.
Neither Administrative Agent nor any Lender shall incur any
liability to Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to borrow on behalf of Company or
for otherwise acting in good faith under this subsection 2.1B, and upon funding
of Loans by Lenders in accordance with this Agreement pursuant to any such
telephonic notice Company shall have effected Loans hereunder.
Company shall notify Administrative Agent prior to the funding
of any Loans in the event that any of the matters to which Company is required
to certify in the applicable Notice of Borrowing is no longer true and correct
as of the applicable Funding Date, and the acceptance by Company of the proceeds
of any Loans shall constitute a re-certification by Company, as of the
applicable Funding Date, as to the matters to which Company is required to
certify in the applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B, 2.6C and
2.6G, a Notice of Borrowing for a Eurodollar Rate Loan (or telephonic notice in
lieu thereof) shall be irrevocable on and after the related Interest Rate
Determination Date, and Company shall be bound to make a borrowing in accordance
therewith.
C. DISBURSEMENT OF FUNDS. All Term Loans and Revolving Loans under this
Agreement shall be made by Lenders simultaneously and proportionately to their
respective Pro Rata Shares, it being understood that no Lender shall be
responsible for any default by any other Lender in that other Lender's
obligation to make a Loan requested hereunder nor shall the Commitment of any
Lender to make the particular type of Loan requested be increased or decreased
as a result of a default by any other Lender in that other Lender's obligation
to make a Loan requested hereunder. Promptly after receipt by Administrative
Agent of a Notice of Borrowing pursuant to subsection 2.1B (or telephonic notice
in lieu thereof), Administrative Agent shall notify each Lender or Swing Line
Lender, as the case may be, of the proposed borrowing. Each Lender shall make
the amount of its Loan available to Administrative Agent not later than 11:00
A.M. (New York City time) on the applicable Funding Date, and Swing Line Lender
shall make the amount of its Swing Line
40
<PAGE> 42
Loan available to Administrative Agent not later than 2:00 P.M.(New York City
time) on the applicable Funding Date, in each case in same day funds in Dollars,
at the Funding and Payment Office. Except as provided in subsection 2.1A(iii) or
subsection 3.3B with respect to Revolving Loans used to repay Refunded Swing
Line Loans or to reimburse any Issuing Lender for the amount of a drawing under
a Letter of Credit issued by it, upon satisfaction or waiver of the conditions
precedent specified in subsections 4.1 (in the case of Term Loans and Initial
Revolving Loans), 4.2 (in the case of all other Loans) and 4.3 (in the case of
all Loans), Administrative Agent shall make the proceeds of such Loans available
to Company on the applicable Funding Date by causing an amount of same day funds
in Dollars equal to the proceeds of all such Loans received by Administrative
Agent from Lenders or Swing Line Lender, as the case may be, to be credited to
the account of Company at the Funding and Payment Office.
Unless Administrative Agent shall have been notified by any
Lender prior to the Funding Date for any Loans that such Lender does not intend
to make available to Administrative Agent the amount of such Lender's Loan
requested on such Funding Date, Administrative Agent may assume that such Lender
has made such amount available to Administrative Agent on such Funding Date and
Administrative Agent may, in its sole discretion, but shall not be obligated to,
make available to Company a corresponding amount on such Funding Date. If such
corresponding amount is not in fact made available to Administrative Agent by
such Lender, Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest thereon,
for each day from such Funding Date until the date such amount is paid to
Administrative Agent, at the Federal Funds Effective Rate for three Business
Days and thereafter at the Base Rate. If such Lender does not pay such
corresponding amount forthwith upon Administrative Agent's demand therefor,
Administrative Agent shall promptly notify Company and Company shall immediately
pay such corresponding amount to Administrative Agent together with interest
thereon, for each day from such Funding Date until the date such amount is paid
to Administrative Agent, at the rate payable under this Agreement for Base Rate
Loans. Nothing in this subsection 2.1C shall be deemed to relieve any Lender
from its obligation to fulfill its Commitments hereunder or to prejudice any
rights that Company may have against any Lender as a result of any default by
such Lender hereunder.
D. NOTES. Company shall execute and deliver on the Closing Date (i) (a)
to each Tranche A Term Loan Lender (or to Administrative Agent for that Lender)
a Tranche A Term Note substantially in the form of Exhibit IV-A annexed hereto
to evidence that Tranche A Term Loan Lender's Tranche A Term Loan, in the
principal amount of that Tranche A Term Loan Lender's Tranche A Term Loan and
with other
41
<PAGE> 43
appropriate inser tions, (b) to each Tranche B Term Loan Lender (or to
Administrative Agent for that Lender) a Tranche B Term Note substantially in the
form of Exhibit IV-B annexed hereto to evidence that Tranche B Term Loan
Lender's Tranche B Term Loan, in the principal amount of that Tranche B Term
Loan Lender's Tranche B Term Loan and with other appropriate insertions, (ii) to
each Revolving Lender (or to Administrative Agent for that Lender) a Revolving
Note substantially in the form of Exhibit V annexed hereto to evidence that
Revolving Lender's Revolving Loans, in the principal amount of that Revolving
Lender's Revolving Loan Commitment and with other appropriate insertions, and
(iii) to Swing Line Lender (or to Administrative Agent for Swing Line Lender) a
Swing Line Note substantially in the form of Exhibit VI annexed hereto to
evidence Swing Line Lender's Swing Line Loans, in the principal amount of the
Swing Line Loan Commitment and with other appropriate insertions.
Administrative Agent may deem and treat the payee of any Note
as the owner thereof for all purposes hereof unless and until an Assignment
Agreement effecting the assignment or transfer thereof shall have been accepted
by Administrative Agent as provided in subsection 10.1B(ii). Any request,
authority or consent of any person or entity who, at the time of making such
request or giving such authority or consent, is the holder of any Note shall be
conclusive and binding on any subsequent holder, assignee or transferee of that
Note or of any Note or Notes issued in exchange therefor.
2.2 INTEREST ON THE LOANS.
A. RATE OF INTEREST. Subject to the provisions of subsections 2.6 and
2.7, each Term Loan and each Revolving Loan shall bear interest on the unpaid
principal amount thereof from the date made through maturity (whether by
acceleration or otherwise) at a rate determined by reference to the Base Rate or
the Adjusted Eurodollar Rate. Subject to the provisions of subsection 2.7, each
Swing Line Loan shall bear interest on the unpaid principal amount thereof from
the date made through maturity (whether by acceleration or otherwise) at a rate
determined by reference to the Base Rate. The applicable basis for determining
the rate of interest with respect to any Term Loan or any Revolving Loan shall
be selected by Company initially at the time a Notice of Borrowing is given with
respect to such Loan pursuant to subsection 2.1B, and the basis for determining
the interest rate with respect to any Term Loan or any Revolving Loan may be
changed from time to time pursuant to subsection 2.2D. If on any day a Term Loan
or Revolving Loan is outstanding with respect to which notice has not been
delivered to Administrative Agent in accordance with the terms of this Agreement
specifying the applicable basis for determining the rate of interest, then for
that day that Loan shall bear interest determined by reference to the Base Rate.
(i) (a) Subject to the provisions of subsections 2.2E and 2.7,
the Tranche A Term Loans and the Revolving Loans shall bear interest through
maturity as follows:
(I) if a Base Rate Loan, then at the sum of the Base Rate
plus the Base Rate Margin set forth in the table below opposite the
Consolidated Leverage Ratio for the four-fiscal quarter period for
which the applicable Margin Determination Certificate has been
delivered pursuant to subsection 6.1(iv); or
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<PAGE> 44
(II) if a Eurodollar Rate Loan, then at the sum of the
Adjusted Eurodollar Rate plus the Eurodollar Rate Margin set forth in
the table below opposite the Consolidated Leverage Ratio for the
four-fiscal quarter period for which the applicable Margin
Determination Certificate has been delivered pursuant to subsection
6.1(iv):
<TABLE>
<CAPTION>
Applicable
Eurodollar Rate Applicable Base
Consolidated Leverage Ratio Margin Rate Margin
--------------------------- -------- ------------
<S> <C> <C> <C>
Greater than
or equal to 4.50:1.00 2.25% 1.25%
Greater than
or equal to 4.00:1.00
but less than 4.50:1.00 2.00% 1.00%
Greater than
or equal to 3.50:1.00
but less than 4.00:1.00 1.75% 0.75%
Less than 3.50:1.00 1.50% 0.50%
</TABLE>
provided that, for the first six months after the Closing Date, the applicable
margin for Tranche A Term Loans and Revolving Loans that are Eurodollar Rate
Loans shall be 2.25% per annum and for Tranche A Term Loans and Revolving Loans
that are Base Rate Loans shall be 1.25% per annum.
(b) Subject to the provisions of subsections 2.2E and 2.7, the
Tranche B Term Loans shall bear interest through maturity as follows:
(I) if a Base Rate Loan, then at the sum of the Base Rate
plus the Base Rate Margin set forth in the table below opposite the
Consolidated Leverage Ratio for the four-fiscal quarter period for
which the applicable Margin Determination Certificate has been
delivered pursuant to subsection 6.1(iv); or
(II) if a Eurodollar Rate Loan, then at the sum of the
Adjusted Eurodollar Rate plus the Eurodollar Rate Margin set forth in
the table below opposite the Consolidated Leverage Ratio for the
four-fiscal quarter period for which the applicable Margin
Determination Certificate has been delivered pursuant to subsection
6.1(iv):
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<PAGE> 45
<TABLE>
<CAPTION>
Applicable
Eurodollar Rate Applicable Base
Consolidated Leverage Ratio Margin Rate Margin
--------------------------- -------- ------------
<S> <C> <C> <C>
Greater than
or equal to 4.50:1.00 2.50% 1.50%
Greater than
or equal to 4.00:1.00
but less than 4.50:1.00 2.25% 1.25%
Greater than
or equal to 3.50:1.00
but less than 4.00:1.00 2.00% 1.00%
Less than 3.50:1.00 1.75% 0.75%
</TABLE>
provided that, for the first six months after the Closing Date, the applicable
margin for Tranche B Term Loans that are Eurodollar Rate Loans shall be 2.50%
per annum and for Tranche B Term Loans that are Base Rate Loans shall be 1.50%
per annum.
Upon delivery of the Margin Determination Certificate by Company to
Administrative Agent pursuant to subsection 6.1(iv), the Applicable Base Rate
Margin and the Applicable Eurodollar Rate Margin shall automatically be adjusted
in accordance with such Margin Determination Certificate, such adjustment to
become effective on the next succeeding Business Day following the receipt by
Administrative Agent of such Margin Determination Certificate; provided that, if
at any time a Margin Determination Certificate is not delivered at the time
required pursuant to subsection 6.1(iv), from the time such Margin Determination
Certificate was required to be delivered until delivery of such Margin
Determination Certificate, such applicable margins shall be the maximum
percentage amount for the relevant Loan set forth above.
(ii) Subject to the provisions of subsections 2.2E and 2.7, the
Swing Line Loans shall bear interest through maturity at the sum of the Base
Rate plus the Applicable Base Rate Margin for Revolving Loans minus a rate equal
to the Commitment Fee percentage then in effect as determined pursuant to
subsection 2.3A.
B. INTEREST PERIODS. In connection with each Eurodollar Rate Loan,
Company may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/ Continuation, as the case may be, select an interest period (each an
"INTEREST PERIOD") to be applicable to such Loan, which Interest Period shall
be, at Company's option, either a one, two, three or six month period or, if
available, and at the Administrative Agent's reasonable discretion, a twelve
month period; provided that:
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<PAGE> 46
(i) the initial Interest Period for any Eurodollar Rate Loan
shall commence on the Funding Date in respect of such Loan, in the case
of a Loan initially made as a Eurodollar Rate Loan, or on the date
specified in the applicable Notice of Conversion/Continuation, in the
case of a Loan converted to a Eurodollar Rate Loan;
(ii) in the case of immediately successive Interest Periods
applicable to a Eurodollar Rate Loan continued as such pursuant to a
Notice of Conversion/ Continuation, each successive Interest Period
shall commence on the day on which the next preceding Interest Period
expires;
(iii) if an Interest Period would otherwise expire on a day
that is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day; provided that, if any Interest Period
would otherwise expire on a day that is not a Business Day but is a day
of the month after which no further Business Day occurs in such month,
such Interest Period shall expire on the next preceding Business Day;
(iv) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (v) of this subsection 2.2B, end on
the last Business Day of a calendar month;
(v) no Interest Period with respect to any portion of the
Tranche A Term Loans shall extend beyond December 11, 2003, no interest
period with respect to any portion of the Tranche B Term Loans shall
extend beyond December 11, 2004 and no Interest Period with respect to
any portion of the Revolving Loans shall extend beyond the Revolving
Loan Commitment Termination Date;
(vi) no Interest Period with respect to any portion of the
Tranche A Term Loans shall extend beyond a date on which Company is
required to make a scheduled payment of principal of the Tranche A Term
Loans unless the sum of (a) the aggregate principal amount of Tranche A
Term Loans that are Base Rate Loans plus (b) the aggregate principal
amount of Tranche A Term Loans that are Eurodollar Rate Loans with
Interest Periods expiring on or before such date equals or exceeds the
principal amount required to be paid on the Tranche A Term Loans on
such date;
(vii) no Interest Period with respect to any portion of the
Tranche B Term Loans shall extend beyond a date on which Company is
required to make a scheduled payment of principal of the Tranche B Term
Loans unless the sum of (a) the aggregate principal amount of Tranche B
Term Loans that are Base Rate Loans plus (b) the aggregate principal
amount of Tranche B Term Loans that are
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<PAGE> 47
Eurodollar Rate Loans with Interest Periods expiring on or before such
date equals or exceeds the principal amount required to be paid on the
Tranche B Term Loans on such date;
(viii) there shall be no more than eight Interest Periods
outstanding at any time; and
(ix) in the event Company fails to specify an Interest Period
for any Eurodollar Rate Loan in the applicable Notice of Borrowing or
Notice of Conversion/Continuation, Company shall be deemed to have
selected an Interest Period of one month.
C. INTEREST PAYMENTS. Subject to the provisions of subsection 2.2E,
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity); provided that in the event any Revolving Loans that are Base Rate
Loans are prepaid pursuant to subsection 2.4B(i), interest accrued on such
Revolving Loans through the date of such prepayment shall be payable on the next
succeeding Interest Payment Date applicable to Base Rate Loans (or, if earlier,
at final maturity).
D. CONVERSION OR CONTINUATION. Subject to the provisions of subsection
2.6, Company shall have the option (i) to convert at any time all or any part of
its outstanding Tranche A Term Loans, Tranche B Term Loans or Revolving Loans
(with the exception of any Swing Line Loans) equal to $500,000 and integral
multiples of $100,000 in excess of that amount from Loans bearing interest at a
rate determined by reference to one basis to Loans bearing interest at a rate
determined by reference to an alternative basis or (ii) upon the expiration of
any Interest Period applicable to a Eurodollar Rate Loan, to continue all or any
portion of such Loan equal to $500,000 and integral multiples of $100,000 in
excess of that amount as a Eurodollar Rate Loan; provided, however, that a
Eurodollar Rate Loan may only be converted into a Base Rate Loan on the
expiration date of an Interest Period applicable thereto.
Company shall deliver a Notice of Conversion/Continuation to
Administrative Agent no later than 12:00 Noon (New York City time) at least one
Business Day in advance of the proposed conversion date (in the case of a
conversion to a Base Rate Loan) and at least three Business Days in advance of
the proposed conversion/continuation date (in the case of a conversion to, or a
continuation of, a Eurodollar Rate Loan). A Notice of Conversion/Continuation
shall specify (i) the proposed conversion/continuation date (which shall be a
\Business Day), (ii) the amount and type of the Loan to be converted/ continued,
(iii) the nature of the proposed conversion/continuation, (iv) in the case of a
conversion to, or a continuation of, a Eurodollar Rate Loan, the requested
Interest Period, and (v) in the case of a conversion to, or a continuation of, a
Eurodollar Rate Loan, that no
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<PAGE> 48
Potential Event of Default or Event of Default has occurred and is continuing.
In lieu of delivering the above-described Notice of Conversion/Continuation,
Company may give Administrative Agent telephonic notice by the required time of
any proposed conversion/ continuation under this subsection 2.2D; provided that
such notice shall be promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to Administrative Agent on or before the proposed
conversion/continuation date. Upon receipt of written or telephonic notice of
any proposed conversion/continuation under this subsection 2.2D, Administrative
Agent shall promptly transmit such notice by telefacsimile or telephone to each
Lender.
Neither Administrative Agent nor any Lender shall incur any
liability to Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to act on behalf of Company or for
otherwise acting in good faith under this subsection 2.2D, and upon conversion
or continuation of the applicable basis for determining the interest rate with
respect to any Loans in accordance with this Agreement pursuant to any such
telephonic notice Company shall have effected a conversion or continuation, as
the case may be, hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and
2.6G, a Notice of Conversion/Continuation for conversion to, or continuation of,
a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be
irrevocable on and after the related Interest Rate Determination Date, and
Company shall be bound to effect a conversion or continuation in accordance
therewith.
E. DEFAULT RATE. Upon the occurrence and during the continuation of any
Event of Default and at the request of the Requisite Lenders, the outstanding
principal amount of all Loans and, to the extent permitted by applicable law,
any interest payments thereon not paid when due and any fees and other amounts
then due and payable hereunder, shall thereafter bear interest (including
post-petition interest in any proceeding under the Bankruptcy Code or other
applicable bankruptcy laws) payable upon demand at a rate that is 2% per annum
in excess of the interest rate otherwise payable under this Agreement with
respect to the applicable Loans (or, in the case of any such fees and other
amounts, at a rate which is 2% per annum in excess of the interest rate
otherwise payable under this Agreement for Tranche B Term Loans that are Base
Rate Loans); provided that, in the case of Eurodollar Rate Loans, upon the
expiration of the Interest Period in effect at the time any such increase in
interest rate is effective such Eurodollar Rate Loans shall thereupon become
Base Rate Loans and shall thereafter bear interest payable upon demand at a rate
which is 2% per annum in excess of the interest rate otherwise payable under
this Agreement for Tranche B Terms Loans that are Base Rate Loans. Payment or
acceptance of the increased rates of interest provided for in this
subsection 2.2E is not a permitted alternative to timely payment and shall not
constitute a waiver of any Event of Default or otherwise prejudice or limit any
rights or remedies of any Agent or any Lender.
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<PAGE> 49
F. COMPUTATION OF INTEREST. Interest on the Loans shall be computed
(i) in the case of Base Rate Loans, on the basis of a 365-day, and (ii) in the
case of Eurodollar Rate Loans, on the basis of a 360-day year, in each case for
the actual number of days elapsed in the period during which it accrues. In
computing interest on any Loan, the date of the making of such Loan or the first
day of an Interest Period applicable to such Loan or, with respect to a Base
Rate Loan being converted from a Eurodollar Rate Loan, the date of conversion of
such Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be
included, and the date of payment of such Loan or the expiration date of an
Interest Period applicable to such Loan or, with respect to a Base Rate Loan
being converted to a Eurodollar Rate Loan, the date of conversion of such Base
Rate Loan to such Eurodollar Rate Loan, as the case may be, shall be excluded;
provided that if a Loan is repaid on the same day on which it is made, one day's
interest shall be paid on that Loan.
2.3 FEES.
A. COMMITMENT FEES. Company agrees to pay to Administrative Agent, for
distribution to each Lender in proportion to that Lender's Pro Rata Share,
commitment fees for the period from and including the Closing Date to and
excluding the Revolving Loan Commitment Termination Date equal to the average of
the daily excess of the Revolving Loan Commitments over the aggregate principal
amount of outstanding Revolving Loans (but not including any outstanding Swing
Line Loans) and Letter of Credit Usage multiplied by the commitment fee
percentage set forth in the table below opposite the Consolidated Leverage Ratio
for the four-fiscal quarter period for which the applicable Margin Determination
Certificate has been delivered pursuant to subsection 6.1(iv):
<TABLE>
<CAPTION>
Commitment Fee
Consolidated Leverage Ratio Percentage
- ------------------------------------- ------------------------
<S> <C> <C>
Greater than or
equal to 4.50:1.00 0.45%
Greater than or
equal to but 4.00:1.00
less than 4.50:1.00 0.40%
Greater than or
equal to but 3.50:1.00
less than 4.00:1.00 0.375%
less than 3.50:1.00 0.35%
</TABLE>
such commitment fees to be calculated on the basis of a 360-day year and the
actual number of days elapsed and to be payable quarterly in arrears on March
31, June 30, September 30
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<PAGE> 50
and December 31 of each year, commencing on the first such date to occur after
the Closing Date, and on the Commitment Termination Date; provided that for the
first six months after the Closing Date the applicable commitment fee percentage
shall be 0.45%. Upon delivery of the Margin Determination Certificate by Company
to Administrative Agent pursuant to subsection 6.1(iv), the applicable
commitment fee percentage shall automatically be adjusted in accordance with
such Margin Determination Certificate, such adjustment to become effective on
the next succeeding Business Day following the receipt by Administrative Agent
of such Margin Determination Certificate; provided that in the event that
Company fails to deliver a Margin Determination Certificate timely in accordance
with the provisions of subsection 6.1(iv), from the time such Margin
Determination Certificate should have been delivered until such date as such a
Margin Determination Certificate is actually delivered, the applicable
commitment fee percentage shall be the maximum percentage amount set forth above
per annum.
B. OTHER FEES. Company agrees to pay to Arranger and
Administrative Agent such other fees in the amounts and at the times
separately agreed upon between Company and Administrative Agent and Arranger.
2.4 REPAYMENTS, PREPAYMENTS AND REDUCTIONS IN REVOLVING LOAN COMMITMENTS;
GENERAL PROVISIONS REGARDING PAYMENTS.
A. SCHEDULED PAYMENTS OF TERM LOANS.
(i) Tranche A Term Loans. Company shall make principal payments
on the Tranche A Term Loans in installments on the dates and in the
amounts set forth below:
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<PAGE> 51
<TABLE>
<CAPTION>
Scheduled Repayment
Date of Tranche A Term Loans
---- -----------------------
<S> <C>
March 31, 1999 $750,000
June 30, 1999 $750,000
September 30, 1999 $750,000
December 31, 1999 $750,000
March 31, 2000 $750,000
June 30, 2000 $750,000
September 30, 2000 $750,000
December 31, 2000 $750,000
March 31, 2001 $1,500,000
June 30, 2001 $1,500,000
September 30, 2001 $1,500,000
December 31, 2001 $1,500,000
March 31, 2002 $1,875,000
June 30, 2002 $1,875,000
September 30, 2002 $1,875,000
December 31, 2002 $1,875,000
March 31, 2003 $2,625,000
June 30, 2003 $2,625,000
September 30, 2003 $2,625,000
December 11, 2003 $2,625,000
------------
Total $30,000,000
</TABLE>
provided that the scheduled installments of principal of the Tranche A
Term Loans set forth above shall be reduced in connection with any
voluntary or mandatory prepayments of the Tranche A Term Loans in
accordance with subsection 2.4B(iv)(b); and provided, further that the
Tranche A Term Loans and all other amounts owed hereunder with respect
to the Tranche A Term Loans shall be paid in full no later than
December 11, 2003 and the final installment payable by Company in
respect of the Tranche A Term Loans on such date shall be in an amount,
if such amount is different from that specified above, sufficient to
repay all amounts owing by Company under this Agreement with respect to
the Tranche A Term Loans.
(ii) Tranche B Term Loans. Company shall make principal payments
on the Tranche B Term Loans in installments on the dates and in the
amounts set forth below:
50
<PAGE> 52
<TABLE>
<CAPTION>
Scheduled Repayment
Date of Tranche B Term Loans
---- -----------------------
<S> <C>
March 31, 1999 $ 62,500
June 30, 1999 $ 62,500
September 30, 1999 $ 62,500
December 31, 1999 $ 62,500
March 31, 2000 $ 62,500
June 30, 2000 $ 62,500
September 30, 2000 $ 62,500
December 31, 2000 $ 62,500
March 31, 2001 $ 62,500
June 30, 2001 $ 62,500
September 30, 2001 $ 62,500
December 31, 2001 $ 62,500
March 31, 2002 $ 62,500
June 30, 2002 $ 62,500
September 30, 2002 $ 62,500
December 31, 2002 $ 62,500
March 31, 2003 $ 62,500
June 30, 2003 $ 62,500
September 30, 2003 $ 62,500
December 31, 2003 $ 62,500
March 31, 2004 $ 62,500
June 30, 2004 $ 62,500
September 30, 2004 $ 62,500
December 11, 2004 $23,562,500
-------------
Total $25,000,000
</TABLE>
provided that the scheduled installments of principal of the Tranche B
Term Loans set forth above shall be reduced in connection with any
voluntary or mandatory prepayments of the Tranche B Term Loans in
accordance with subsection 2.4B(iv); and provided, further that the
Tranche B Term Loans and all other amounts owed hereunder with respect
to the Tranche B Term Loans shall be paid in full no later than
December 11, 2004 and the final installment payable by Company in
respect of the Tranche B Term Loans on such date shall be in an amount,
if such amount is different from that specified above, sufficient to
repay all amounts owing by Company under this Agreement with respect to
the Tranche B Term Loans.
51
<PAGE> 53
B. PREPAYMENTS AND UNSCHEDULED REDUCTIONS IN REVOLVING LOAN
COMMITMENTS.
(i) Voluntary Prepayments. Company may, upon written or
telephonic notice to Administrative Agent on or prior to 12:00 Noon
(New York City time) on the date of prepayment, which notice, if
telephonic, shall be promptly confirmed in writing, at any time and
from time to time prepay any Swing Line Loan on any Business Day in
whole or in part in an aggregate minimum amount of $100,000 and
integral multiples of $25,000 in excess of that amount. Company may,
upon not less than one Business Day's prior written or telephonic
notice, in the case of Base Rate Loans, and three Business Days' prior
written or telephonic notice, in the case of Eurodollar Rate Loans, in
each case given to Administrative Agent by 12:00 Noon (New York City
time) on the date required and, if given by telephone, promptly
confirmed in writing to Administrative Agent (which original written or
telephonic notice Administrative Agent will promptly transmit by
telefacsimile or telephone to each Lender), at any time and from time
to time prepay any Term Loans or Revolving Loans on any Business Day in
whole or in part in an aggregate minimum amount of $500,000 and
integral multiples of $100,000 in excess of that amount; provided,
however, that a Eurodollar Rate Loan may only be prepaid on the
expiration of the Interest Period applicable thereto unless Company
complies with subsection 2.6D with respect to any breakage costs
resulting from such prepayment being made on a date prior to the
expiration of the applicable Interest Period. Notice of prepayment
having been given as aforesaid, the principal amount of the Loans
specified in such notice shall become due and payable on the prepayment
date specified therein. Any such voluntary prepayment shall be applied
as specified in subsection 2.4B(iv).
(ii) Voluntary Reductions of Revolving Loan Commitments.
Company may, upon not less than three Business Days' prior written or
telephonic notice confirmed in writing to Administrative Agent (which
original written or telephonic notice Administrative Agent will
promptly transmit by telefacsimile or telephone to each Lender), at any
time and from time to time terminate in whole or permanently reduce in
part, without premium or penalty, the Revolving Loan Commitments in an
amount up to the amount by which the Revolving Loan Commitments exceed
the Total Utilization of Revolving Loan Commitments at the time of such
proposed termination or reduction; provided that any such partial
reduction of the Revolving Loan Commitments shall be in an aggregate
minimum amount of $500,000 and integral multiples of $100,000 in excess
of that amount. Company's notice to Administrative Agent shall
designate the date (which shall be a Business Day) of such termination
or reduction and the amount of any partial reduction, and such
termination or reduction of the Revolving Loan Commitments shall be
effective on the date specified in Company's notice and shall reduce
the Revolving Loan Commitment of each Revolving Lender proportionately
to its Pro Rata Share.
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<PAGE> 54
(iii) Mandatory Prepayments and Mandatory Reductions of
Revolving Loan Commitments. The Loans shall be prepaid and/or the
Revolving Loan Commitments shall be permanently reduced in the amounts
and under the circumstances set forth below, all such prepayments
and/or reductions to be applied as set forth below or as more
specifically provided in subsection 2.4B(iv):
(a) Prepayments and Reductions From Net Asset Sale
Proceeds. No later than the first Business Day following the
date of receipt by Company or any of its Domestic Subsidiaries
of any Net Asset Sale Proceeds in respect of any Asset Sale,
Company shall prepay the Loans and/or the Revolving Loan
Commitments shall be permanently reduced in an aggregate amount
equal to such Net Asset Sale Proceeds; provided, however, that
so long as no Event of Default has occurred and is continuing,
no such prepayment shall be required to the extent Company
determines to utilize an amount of such Net Asset Sale Proceeds
from one or more Asset Sales not to exceed $10,000,000 in the
aggregate during the term of this Agreement to replace the
assets so sold and Company so utilizes or contractually commits
to utilize (and thereafter so utilizes pursuant to such
contract) such Net Asset Sale Proceeds within six months of the
receipt thereof.
(b) Prepayments and Reductions from Net Insurance/
Condemnation Proceeds. No later than the five Business Days
following the date of receipt by Administrative Agent or by
Company or any of its Domestic Subsidiaries of any Net
Insurance/Condemnation Proceeds in excess of $250,000, Company
shall prepay the Loans and/or the Revolving Loan Commitments
shall be permanently reduced in an aggregate amount equal to
the amount of such Net Insurance/Condemnation Proceeds;
provided, however, that so long as no Event of Default has
occurred and is continuing, no such prepayment shall be
required to the extent Company determines to utilize such Net
Insurance/Condemnation Proceeds to replace, rebuild or repair
the asset damaged, destroyed or taken, and Company so utilizes
or contractually commits to utilize such Net
Insurance/Condemnation Proceeds within 18 months of the receipt
thereof.
(c) Prepayments and Reductions Due to Reversion of
Surplus Assets of Pension Plans. Within five Business Days of
the date of return to Company or any of its Domestic
Subsidiaries of any surplus assets of any pension plan of
Company or any of its Domestic Subsidiaries, Company shall
prepay the Loans and/or the Revolving Loan Commitments shall be
permanently reduced in an aggregate amount (such amount being
the "NET PENSION PROCEEDS") equal to 100% of such returned
surplus assets, net of transaction costs and expenses incurred
in obtaining such return, including taxes and penalties payable
as a result thereof.
53
<PAGE> 55
(d) Prepayments and Reductions Due to Issuance of Debt
Securities. On the date of receipt by Holdings, Company or any
of its Domestic Subsidiaries of the Cash proceeds (any such
proceeds, net of underwriting discounts and commissions and
other reasonable costs and expenses associated therewith,
including reasonable legal fees and expenses, being "NET DEBT
SECURITIES PROCEEDS") from the issuance of debt Securities of
Holdings, Company or any of its Domestic Subsidiaries after the
Closing Date, Company shall prepay the Loans and/or the
Revolving Loan Commitments shall be permanently reduced in an
aggregate amount equal to 100% of such Net Debt Securities
Proceeds; provided, however, that for purposes of this clause
(d), Capital Leases and purchase money Indebtedness shall not
be deemed to be debt Securities.
(e) Prepayment and Reductions Due to Issuance of
Equity Securities. On the date of receipt by Holdings, Company
or any of its Domestic Subsidiaries of the cash proceeds (any
such proceeds, net of underwriting discounts and commissions
and other reasonable costs and expenses associated therewith,
including reasonable legal fees and expenses, being "NET EQUITY
SECURITIES PROCEEDS") from the issuance of equity securities of
Holdings, Company or any of such Subsidiaries after the Closing
Date (other than the proceeds of the issuance of equity
securities to AIP), Company shall prepay the Loans and/or the
Revolving Loan Commitments shall be permanently reduced in an
aggregate amount equal to 50% of such Net Equity Securities
Proceeds; provided, that at any time that the most current
Compliance Certificate delivered pursuant to subsection 6.1(iv)
indicates that the Consolidated Leverage Ratio is less than
3.50:1.00, no such prepayment shall be required; provided
further that at any time a Compliance Certificate has not been
delivered at the time required pursuant to subsection 6.1(iv),
from the time such Compliance Certificate was required to be
delivered until delivery of such Compliance Certificate, the
first proviso hereto shall not be in effect.
(f) Prepayments and Reductions from Consolidated
Excess Cash Flow. In the event that there shall be Consolidated
Excess Cash Flow for any Fiscal Year (commencing with the
Fiscal Year beginning January 1, 1998), Company shall, no later
than 110 days after the end of such Fiscal Year, prepay the
Loans and/or the Revolving Loan Commitments shall be
permanently reduced in an aggregate amount equal to 50% of such
Consolidated Excess Cash Flow; provided, that any time that the
most current Compliance Certificate delivered pursuant to
subsection 6.1(iv) indicates that the Consolidated Leverage
Ratio is less than 3.50:1.00, no such prepayment shall be
required, provided further that at any time a Compliance
Certificate has not been delivered at the time required
pursuant to subsection
54
<PAGE> 56
6.1(iv), from the time such Compliance Certificate was required
to be delivered until delivery of such Compliance Certificate,
the first proviso shall not be in effect.
(g) Change of Control. On the date which is the
earlier of (x) 30 days after the date on which a "change of
control" (as defined in the Senior Subordinated Indenture)
occurs and (y) the date on which Company shall have offered to
repurchase the Senior Subordinated Notes, as a result of such
change of control (i) Company shall prepay in full the Loans,
(ii) the Revolving Loan Commitments shall be terminated in full
and (iii) Company shall cash collateralize any outstanding
Letters of Credit on terms reasonably satisfactory to the
Administrative Agent.
(h) Calculations of Net Proceeds Amounts; Additional
Prepayments and Reductions Based on Subsequent Calculations.
Concurrently with any prepayment of the Loans and/or reduction
of the Revolving Loan Commitments pursuant to subsections
2.4B(iii)(a)-(g), Company shall deliver to Agents an Officer's
Certificate demonstrating the calculation of the amount (the
"NET PROCEEDS AMOUNT") of the applicable Net Asset Sale
Proceeds, the applicable Net Insurance/Condemnation Proceeds,
the applicable Net Pension Proceeds, the applicable Net Debt
Securities Proceeds, the applicable Net Equity Securities
Proceeds (as such terms are defined in subsections
2.4B(iii)(c), (d) and (e)) or the applicable Consolidated
Excess Cash Flow that gave rise to such prepayment and/or
reduction. In the event that Company shall subsequently
determine that the actual Net Proceeds Amount was greater than
the amount set forth in such Officer's Certificate, Company
shall promptly make an additional prepayment of the Loans
(and/or, if applicable, the Revolving Loan Commit ments shall
be permanently reduced) in an amount equal to the amount of
such excess, and Company shall concurrently therewith deliver
to Agents an Officer's Certificate demonstrating the derivation
of the additional Net Proceeds Amount resulting in such excess.
(i) Prepayments Due to Reductions or Restrictions of
Revolving Loan Commitments. Company shall from time to time
prepay first the Swing Line Loans and second the Revolving
Loans to the extent necessary (1) so that the Total Utilization
of Revolving Loan Commitments shall not at any time exceed the
Revolving Loan Commitments then in effect and (2) to give
effect to the limitations set forth in the second paragraph of
subsection 2.1A(ii) and the second paragraph of subsection
2.1A(iii); provided that if the Total Utilization of Revolving
Loan Commitments exceeds the then applicable Borrowing Base
solely by reason of a reduction in the Borrowing Base
subsequent to the making of Revolving Loans or Swing Line
Loans,
55
<PAGE> 57
which Loans did not result in a violation of the second
paragraph of subsection 2.1A(ii) or the second paragraph of
subsection 2.1A(iii), then Company may prepay the Swing Line
Loans or Revolving Loans, as aforesaid, within five Business
Days of the date of reduction of the Borrowing Base.
(iv) Application of Prepayments.
(a) Application of Voluntary Prepayments by Type of
Loans and Order of Maturity. Any voluntary prepayments pursuant
to subsection 2.4B(i) shall be applied as specified by Company
in the applicable notice of prepayment; provided that in the
event Company fails to specify the Loans to which any such
prepayment shall be applied, such prepayment shall be applied
first to repay outstanding Swing Line Loans to the full extent
thereof, second to repay outstanding Term Loans to the full
extent thereof, and third to repay outstanding Revolving Loans
to the full extent thereof. Any voluntary prepayments of the
Term Loans pursuant to subsection 2.4B(i) (whether the
application thereof is specified by Company or not) shall be
applied to prepay the Tranche A Term Loans and Tranche B Term
Loans on a pro rata basis (in accordance with the respective
outstanding principal amounts thereof) and to reduce the
scheduled installments of principal of the Term Loans set forth
in subsection 2.4A pro rata, provided, however, that with
respect to prepayments pursuant to subsection 2.4B(iii)(a), if
the Borrowing Base is reduced by the applicable Asset Sale,
Company may, at its option, permanently reduce the Revolving
Loan Commitment in any amount up to the amount of the reduction
in the Borrowing Base and shall not be required to prepay the
Term Loans to the amount of such Revolving Loan Commitment
reduction.
(b) Application of Mandatory Prepayments by Type of
Loans. Any amount (the "APPLIED AMOUNT") required to be applied
as a mandatory prepayment of the Loans and/or a reduction of
the Revolving Loan Commitments pursuant to subsections
2.4B(iii)(a)-(g) shall be applied first to prepay the Tranche A
Term Loans and Tranche B Term Loans to the full extent thereof,
on a pro rata basis (in accordance with the respective
outstanding principal amounts thereof) and to reduce the
scheduled installments of principal of the Tranche A Term Loans
and Tranche B Term Loans set forth in subsection 2.4A pro rata,
second, to the extent of any remaining portion of the Applied
Amount, to prepay the Swing Line Loans to the full extent
thereof and to permanently reduce the Revolving Loan
56
<PAGE> 58
Commitments by the amount of such prepayment, third, to the
extent of any remaining portion of the Applied Amount, to
prepay the Revolving Loans to the full extent thereof and to
further permanently reduce the Revolving Loan Commitments by
the amount of such prepayment, and fourth, to the extent of any
remaining portion of the Applied Amount, to further permanently
reduce the Revolving Loan Commitments to the full extent
thereof; provided that the Revolving Loan Commitments shall not
be reduced below $15,000,000 in the aggregate by reason of any
mandatory prepayments.
(c) Application of Prepayments to Base Rate Loans and
Eurodollar Rate Loans. Considering Tranche A Term Loans,
Tranche B Term Loans and Revolving Loans being prepaid
separately, any prepayment thereof shall be applied first to
Base Rate Loans to the full extent thereof before applica tion
to Eurodollar Rate Loans, in each case in a manner which
minimizes the amount of any payments required to be made by
Company pursuant to subsection 2.6D.
C. GENERAL PROVISIONS REGARDING PAYMENTS.
(i) Manner and Time of Payment. All payments by Company of
principal, interest, fees and other Obligations hereunder and under the
Notes shall be made in Dollars in same day funds, without defense,
setoff or counterclaim, free of any restriction or condition, and
delivered to Administrative Agent not later than 12:00 Noon (New York
City time) on the date due at the Funding and Payment Office for the
account of Lenders; funds received by Administrative Agent after that
time on such due date shall be deemed to have been paid by Company on
the next succeeding Business Day. Company hereby authorizes
Administrative Agent to charge its accounts with Administrative Agent
in order to cause timely payment to be made to Administrative Agent of
all principal, interest, fees and expenses due hereunder (subject to
sufficient funds being available in its accounts for that purpose).
(ii) Application of Payments to Principal and Interest. Except
as provided in subsection 2.2C, all payments in respect of the
principal amount of any Loan shall include payment of accrued interest
on the principal amount being repaid or prepaid, and all such payments
(and, in any event, any payments in respect of any Loan on a date when
interest is due and payable with respect to such Loan) shall be applied
to the payment of interest before application to principal. (iii)
Apportionment of Payments. Aggregate principal and interest payments in
respect of Tranche A Term Loans, Tranche B Term Loans and Revolving
Loans shall be apportioned among all outstanding Loans to which such
payments relate, in each case proportionately to Lenders' respective
Pro Rata Shares. Administrative Agent shall promptly distribute to each
Lender, at its primary address set forth below its name on the
appropriate signature page hereof or at such other address as such
Lender may request, its Pro Rata Share of all such
57
<PAGE> 59
payments received by Administrative Agent and the commitment fees of
such Lender when received by Administrative Agent pursuant to
subsection 2.3. Notwithstanding the foregoing provisions of this
subsection 2.4C(iii), if, pursuant to the provisions of subsection
2.6C, any Notice of Conversion/Continuation is withdrawn as to any
Affected Lender or if any Affected Lender makes Base Rate Loans in lieu
of its Pro Rata Share of any Eurodollar Rate Loans, Administrative
Agent shall give effect thereto in apportioning payments received
thereafter, except in the case of Swing Line Loans.
(iv) Payments on Business Days. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business
Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall be included in the computation of the
payment of interest hereunder or of the commitment fees hereunder, as
the case may be.
(v) Notation of Payment. Each Lender agrees that before
disposing of any Note held by it, or any part thereof (other than by
granting participations therein), that Lender will make a notation
thereon of all Loans evidenced by that Note and all principal payments
previously made thereon and of the date to which interest thereon has
been paid; provided that the failure to make (or any error in the
making of) a notation of any Loan made under such Note shall not limit
or otherwise affect the obligations of Company hereunder or under such
Note with respect to any Loan or any payments of principal or interest
on such Note.
D. APPLICATION OF PROCEEDS OF COLLATERAL AND PAYMENTS UNDER
GUARANTIES
(i) Application of Proceeds of Collateral. Except as provided
in subsection 2.4B(iii)(a) with respect to prepayments from Net Asset
Sale Proceeds, all proceeds received by Administrative Agent in respect
of any sale of, collection from, or other realization upon all or any
part of the Collateral under any Collateral Document may, in the
discretion of Administrative Agent, be held by Administrative Agent as
Collateral for, and/or (then or at any time thereafter) applied in full
or in part by Administrative Agent against, the applicable Secured
Obligations (as defined in such Collateral Document) in the following
order of priority:
(a) To the payment of all costs and expenses of such
sale, collection or other realization, including reasonable
compensation to Administrative Agent and its agents and
counsel, and all other expenses, liabilities and advances made
or incurred by Administrative Agent in connection therewith,
and all amounts for which Administrative Agent is entitled to
indemnification under such Collateral Document and all advances
made by Administrative Agent thereunder for the account of the
applicable Loan Party, and to the payment of all costs and
expenses paid or incurred by
58
<PAGE> 60
Administrative Agent in connection with the exercise of any
right or remedy under such Collateral Document, all in
accordance with the terms of this Agreement and such Collateral
Document;
(b) thereafter, to the extent of any excess such
proceeds, to the payment of all other such Secured Obligations
for the ratable benefit of the holders thereof;
(c) thereafter, to the extent of any excess such
proceeds, to the payment of cash collateral for Letters of
Credit for the ratable benefit of the Issuing Lenders thereof
and holders of participations therein; and
(d) thereafter, to the extent of any excess such
proceeds, to the payment to or upon the order of such Loan
Party or to whosoever may be lawfully entitled to receive the
same or as a court of competent jurisdiction may direct.
(ii) Application of Payments Under Guaranties. All payments
received by Administrative Agent under any of the Guaranties shall be
applied promptly from time to time by Administrative Agent in the
following order of priority:
(a) To the payment of the costs and expenses of any
collection or other realization under any of the Guaranties,
including reasonable compensation to Administrative Agent and
its agents and counsel, and all expenses, liabilities and
advances made or incurred by Administrative Agent in connection
therewith, all in accordance with the terms of this Agreement
and such Guaranty;
(b) thereafter, to the extent of any excess such
payments, to the payment of all other Guarantied Obligations
(as defined in such Guaranty) for the ratable benefit of the
holders thereof;
(c) thereafter, to the extent of any excess such
payment, to the payment of cash collateral for Letters of
Credit for the ratable benefit of the Issuing Lenders thereof
and holders of participations therein; and
(d) thereafter, to the extent of any excess such
payments, to the payment to the applicable Subsidiary Guarantor
or to whosoever may be lawfully entitled to receive the same or
as a court of competent jurisdiction may direct.
59
<PAGE> 61
2.5 USE OF PROCEEDS.
A. TERM LOANS. The proceeds of the Term Loans, together with other
funds available to Company and Holdings and approximately $6,800,000 of the
proceeds of the Revolving Loans, shall be applied (i) by Holdings (pursuant to
the Intercompany Note) to purchase or redeem 100% of issued and outstanding
capital stock of SAHC from the Old Holders for approximately $125,500,000 and
(ii) by Company to refinance approximately $83,000,000 of senior indebtedness
under the Existing Credit Agreement, and to pay Transaction Costs of
approximately $12,000,000.
B. REVOLVING LOANS; SWING LINE LOANS. In addition to the purpose
specified in subsection 2.5A, the proceeds of the Revolving Loans and any Swing
Line Loans shall also be applied by Company for working capital and/or general
corporate purposes.
C. MARGIN REGULATIONS. No portion of the proceeds of any borrowing
under this Agreement shall be used by Company or any of its Subsidiaries in any
manner that might cause the borrowing or the application of such proceeds to
violate Regulation G, Regulation U, Regulation T or Regulation X of the Board of
Governors of the Federal Reserve System or any other regulation of such Board or
to violate the Exchange Act, in each case as in effect on the date or dates of
such borrowing and such use of proceeds.
2.6 SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS.
Notwithstanding any other provision of this Agreement to the
contrary, the following provisions shall govern with respect to Eurodollar Rate
Loans as to the matters covered:
A. DETERMINATION OF APPLICABLE INTEREST RATE. As soon as practicable
after 12:00 Noon (New York City time) on each Interest Rate Determination Date,
Administrative Agent shall determine (which determination shall, absent manifest
error, be final, conclusive and binding upon all parties) the interest rate that
shall apply to the Eurodollar Rate Loans for which an interest rate is then
being determined for the applicable Interest Period and shall promptly give
notice thereof (in writing or by telephone confirmed in writing) to Company and
each Lender.
B. INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In the event that
Administrative Agent shall have determined (which determination shall, absent
manifest error, be final and conclusive and binding upon all parties hereto), on
any Interest Rate Determination Date with respect to any Eurodollar Rate Loans,
that by reason of circum stances affecting the London interbank market adequate
and fair means do not exist for ascertaining the interest rate applicable to
such Loans on the basis provided for in the definition of Adjusted Eurodollar
Rate, Administrative Agent shall on such date give notice (by telefacsimile or
by telephone confirmed in writing) to Company and each Lender of
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<PAGE> 62
such determination, whereupon (i) no Loans may be made as, or converted to,
Eurodollar Rate Loans until such time as Administrative Agent notifies Company
and Lenders that the circumstances giving rise to such notice no longer exist
and (ii) any Notice of Borrowing or Notice of Conversion/Continuation given by
Company with respect to the Loans in respect of which such determination was
made shall be deemed to be rescinded by Company.
C. ILLEGALITY OR IMPRACTICABILITY OF EURODOLLAR RATE LOANS. In the event
that on any date any Lender shall have determined (which determination shall,
absent manifest error, be final and conclusive and binding upon all parties
hereto but shall be made only after consultation with Company and Administrative
Agent) that the making, maintaining or continuation of its Eurodollar Rate Loans
(i) has become unlawful as a result of compliance by such Lender in good faith
with any law, treaty, governmental rule, regulation, guideline or order (or
would conflict with any such treaty, governmental rule, regulation, guideline or
order not having the force of law even though the failure to comply therewith
would not be unlawful) or (ii) has become impracticable, or would cause such
Lender material hardship, as a result of contingencies occurring after the date
of this Agreement which materially and adversely affect the London interbank
market or the position of such Lender in that market, then, and in any such
event, such Lender shall be an "AFFECTED LENDER" and it shall on that day give
notice (by telefacsimile or by telephone confirmed in writing) to Company and
Administrative Agent of such determination (which notice Administrative Agent
shall promptly transmit to each other Lender). Thereafter (a) the obligation of
the Affected Lender to make Loans as, or to convert Loans to, Eurodollar Rate
Loans shall be suspended until such notice shall be withdrawn by the Affected
Lender, (b) to the extent such determination by the Affected Lender relates to a
Eurodollar Rate Loan then being requested by Company pursuant to a Notice of
Borrowing or a Notice of Conversion/Continuation, the Affected Lender shall make
such Loan as (or convert such Loan to, as the case may be) a Base Rate Loan, (c)
the Affected Lender's obligation to maintain its outstanding Eurodollar Rate
Loans (the "AFFECTED LOANS") shall be terminated at the earlier to occur of the
expiration of the Interest Period then in effect with respect to the Affected
Loans or when required by law, and (d) the Affected Loans shall automatically
convert into Base Rate Loans on the date of such termination. Notwithstanding
the foregoing, to the extent a determination by an Affected Lender as described
above relates to a Eurodollar Rate Loan then being requested by Company pursuant
to a Notice of Borrowing or a Notice of Conversion/Continuation, Company shall
have the option, subject to the provisions of subsection 2.6D, to rescind such
Notice of Borrowing or Notice of Conversion/Continuation as to all Lenders by
giving notice (by telefacsimile or by telephone confirmed in writing) to
Administrative Agent of such rescission on the date on which the Affected Lender
gives notice of its determination as described above (which notice of rescission
Administrative Agent shall promptly transmit to each other Lender). Except as
provided in the immediately preceding sentence, nothing in this subsection 2.6C
shall affect the obligation of any Lender other than an Affected Lender to make
or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in
accordance with the terms of this Agreement.
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D. COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST PERIODS.
Company shall compensate each Lender, upon written request by that Lender (which
request shall set forth the basis for requesting such amounts), for all
reasonable losses, expenses and liabilities (including any interest paid by that
Lender to lenders of funds borrowed by it to make or carry its Eurodollar Rate
Loans and any loss, expense or liability sustained by that Lender in connection
with the liquidation or re-employment of such funds) which that Lender may
sustain: (i) if for any reason (other than a default by that Lender) a borrowing
of any Eurodollar Rate Loan does not occur on a date specified therefor in a
Notice of Borrowing or a telephonic request for borrowing, or a conversion to or
continuation of any Eurodollar Rate Loan does not occur on a date specified
therefor in a Notice of Conversion/Continuation or a telephonic request for
conversion or continuation, (ii) if any prepayment (including any prepayment
pursuant to subsection 2.4B(i)) or other principal payment or any conversion of
any of its Eurodollar Rate Loans occurs on a date prior to the last day of an
Interest Period applicable to that Loan, (iii) if any prepayment of any of its
Eurodollar Rate Loans is not made on any date specified in a notice of
prepayment given by Company, or (iv) as a consequence of any other default by
Company in the repayment of its Eurodollar Rate Loans when required by the terms
of this Agreement.
E. BOOKING OF EURODOLLAR RATE LOANS. Any Lender may make, carry or
transfer Eurodollar Rate Loans at, to, or for the account of any of its branch
offices or the office of an Affiliate of that Lender.
F. ASSUMPTIONS CONCERNING FUNDING OF EURODOLLAR RATE LOANS. Calculation
of all amounts payable to a Lender under this subsection 2.6 and under
subsection 2.7A shall be made as though that Lender had actually funded each of
its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit
bearing interest at the rate obtained pursuant to clause (i) of the definition
of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar
Rate Loan and having a maturity comparable to the relevant Interest Period and
through the transfer of such Eurodollar deposit from an offshore office of that
Lender to a domestic office of that Lender in the United States of America;
provided, however, that each Lender may fund each of its Eurodollar Rate Loans
in any manner it sees fit and the foregoing assumptions shall be utilized only
for the purposes of calculating amounts payable under this subsection 2.6 and
under subsection 2.7A.
G. EURODOLLAR RATE LOANS AFTER DEFAULT. After the occurrence of and
during the continuation of a Potential Event of Default or an Event of Default,
(i) Company may not elect to have a Loan be made or maintained as, or converted
to, a Eurodollar Rate Loan after the expiration of any Interest Period then in
effect for that Loan and (ii) subject to the provisions of subsection 2.6D, any
Notice of Borrowing or Notice of Conversion/Continuation given by Company with
respect to a requested borrowing or
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conversion/continuation that has not yet occurred shall be deemed to be
rescinded by Company.
2.7 INCREASED COSTS; TAXES; CAPITAL ADEQUACY.
A. COMPENSATION FOR INCREASED COSTS AND TAXES. Subject to the
provisions of subsection 2.7B (which shall be controlling with respect to the
matters covered thereby), in the event that any Lender shall reasonably
determine (which determination shall, absent manifest error, be final and
conclusive and binding upon all parties hereto) that any law, treaty or
governmental rule, regulation or order, or any change therein or in the
interpretation, administration or application thereof (including the
introduction of any new law, treaty or governmental rule, regulation or order),
or any determination of a court or governmental authority, in each case that
becomes effective after the date hereof, or compliance by such Lender with any
guideline, request or directive issued or made after the date hereof by any
central bank or other governmental or quasi-governmental authority (whether or
not having the force of law):
(i) subjects such Lender (or its applicable lending office) to
any additional Tax (other than any Tax on the overall net income of
such Lender) with respect to this Agreement or any of its obligations
hereunder or any payments to such Lender (or its applicable lending
office) of principal, interest, fees or any other amount payable
hereunder;
(ii) imposes, modifies or holds applicable any reserve
(including any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement against assets held by, or deposits or other liabilities in
or for the account of, or advances or loans by, or other credit
extended by, or any other acquisition of funds by, any office of such
Lender (other than any such reserve or other requirements with respect
to Eurodollar Rate Loans that are reflected in the definition of
Adjusted Eurodollar Rate); or
(iii) imposes any other condition (other than with respect to a
Tax matter) on or affecting such Lender (or its applicable lending
office) or its obligations hereunder or the London interbank market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Loans hereunder or to reduce any amount
received or receivable by such Lender (or its applicable lending office) with
respect thereto; then, in any such case, Company shall promptly pay to such
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
sole discretion shall determine) as may be necessary to compensate such Lender
for any such increased cost or reduction in amounts received or receivable
hereunder. Such
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Lender shall deliver to Company (with a copy to Administrative Agent) a written
statement, setting forth in reasonable detail the basis for calculating the
additional amounts owed to such Lender under this subsection 2.7A, which
statement shall be conclusive and binding upon all parties hereto absent
manifest error.
B. WITHHOLDING OF TAXES.
(i) Payments to Be Free and Clear. All sums payable by Company
under this Agreement and the other Loan Documents shall (except to the
extent required by law) be paid free and clear of, and without any
deduction or withholding on account of, any Tax (other than a Tax on
the overall net income of any Lender) imposed, levied, collected,
withheld or assessed by or within the United States of America or any
political subdivision in or of the United States of America or any
other jurisdiction from or to which a payment is made by or on behalf
of Company or by any federation or organization of which the United
States of America or any such jurisdiction is a member at the time of
payment.
(ii) Grossing-up of Payments. If Company or any other Person is
required by law to make any deduction or withholding on account of any
such Tax from any sum paid or payable by Company to Administrative
Agent or any Lender under any of the Loan Documents:
(a) Company shall notify Administrative Agent of any
such requirement or any change in any such requirement as soon
as Company becomes aware of it;
(b) Company shall pay any such Tax before the date on
which penalties attach thereto, such payment to be made (if the
liability to pay is imposed on Company) for its own account or
(if that liability is imposed on Administrative Agent or such
Lender, as the case may be) on behalf of and in the name of
Administrative Agent or such Lender;
(c) the sum payable by Company in respect of which the
relevant deduction, withholding or payment is required shall be
increased to the extent necessary to ensure that, after the
making of that deduction, withholding or payment,
Administrative Agent or such Lender, as the case may be,
receives on the due date a net sum equal to what it would
have received had no such deduction, withholding or payment
been required or made; and
(d) within 30 days after paying any sum from which it
is required by law to make any deduction or withholding, and
within 30 days after the due date of payment of any Tax which
it is required by clause (b) above to pay, Company shall
deliver to Administrative Agent evidence satisfactory to
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the other affected parties of such deduction, withholding or
payment and of the remittance thereof to the relevant taxing or
other authority;
provided that no such additional amount shall be required to be paid to
any Lender under clause (c) above except to the extent that any change
after the date hereof (in the case of each Lender listed on the
signature pages hereof) or after the date of the Assignment Agreement
pursuant to which such Lender became a Lender (in the case of each
other Lender) in any such requirement for a deduction, withholding or
payment as is mentioned therein shall result in an increase in the rate
of such deduction, withholding or payment from that in effect at the
date of this Agreement or at the date of such Assignment Agreement, as
the case may be, in respect of payments to such Lender.
(iii) Evidence of Exemption from U.S. Withholding Tax.
(a) Each Lender that is organized under the laws of
any jurisdiction other than the United States or any state or
other political subdivision thereof (for purposes of this
subsection 2.7B(iii), a "NON-US LENDER") shall deliver to
Administrative Agent for transmission to Company, on or prior
to the Closing Date (in the case of each Lender listed on the
signature pages hereof) or on or prior to the date of the
Assignment Agreement pursuant to which it becomes a Lender (in
the case of each other Lender), and at such other times as may
be necessary in the determination of Company or Administrative
Agent (each in the reasonable exercise of its discretion),
(1) two original copies of Internal Revenue Service Form 1001
or 4224 (or any successor forms), properly completed and duly
executed by such Lender, together with any other certificate or
statement of exemption required under the Internal Revenue Code
or the regulations issued thereunder to establish that such
Lender is not subject to deduction or withholding of United
States federal income tax with respect to any payments to such
Lender of principal, interest, fees or other amounts payable
under any of the Loan Documents or (2) if such Lender is not a
"bank" or other Person described in Section 881(c)(3) of the
Internal Revenue Code and cannot deliver either Internal
Revenue Service Form 1001 or 4224 pursuant to clause (1) above,
a Certificate re Non-Bank Status together with two original
copies of Internal Revenue Service Form W-8 (or any successor
form), properly completed and duly executed by such Lender,
together with any other certificate or statement of exemption
required under the Internal Revenue Code or the regulations
issued thereunder to establish that such Lender is not
subject to deduction or withholding of United States federal
income tax with respect to any payments to such Lender of
interest payable under any of the Loan Documents.
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(b) Each Lender required to deliver any forms,
certificates or other evidence with respect to United States
federal income tax withholding matters pursuant to subsection
2.7B(iii)(a) hereby agrees, from time to time after the initial
delivery by such Lender of such forms, certificates or other
evidence, whenever a lapse in time or change in circumstances
renders such forms, certificates or other evidence obsolete or
inaccurate in any material respect, that such Lender shall
promptly (1) deliver to Administrative Agent for transmission
to Company two new original copies of Internal Revenue Service
Form 1001 or 4224, or a Certificate re Non-Bank Status and two
original copies of Internal Revenue Service Form W-8, as the
case may be, properly completed and duly executed by such
Lender, together with any other certificate or statement of
exemption required in order to confirm or establish that such
Lender is not subject to deduction or withholding of United
States federal income tax with respect to payments to such
Lender under the Loan Documents or (2) notify Administrative
Agent and Company of its inability to deliver any such forms,
certificates or other evidence.
(c) Company shall not be required to pay any
additional amount to any Non-US Lender under clause (c) of
subsection 2.7B(ii) if such Lender shall have failed to satisfy
the requirements of clause (a) or (b)(1) of this subsection
2.7B(iii); provided that if such Lender shall have satisfied
the requirements of subsection 2.7B(iii)(a) on the Closing Date
(in the case of each Lender listed on the signature pages
hereof) or on the date of the Assignment Agreement pursuant to
which it became a Lender (in the case of each other Lender),
nothing in this subsection 2.7B(iii)(c) shall relieve Company
of its obligation to pay any additional amounts pursuant to
clause (c) of subsection 2.7B(ii) in the event that, as a
result of any change in any applicable law, treaty or
governmental rule, regulation or order, or any change in the
interpretation, administration or application thereof, such
Lender is no longer properly entitled to deliver forms,
certificates or other evidence at a subsequent date
establishing the fact that such Lender is not subject to
withholding as described in subsection 2.7B(iii)(a).
C. CAPITAL ADEQUACY ADJUSTMENT. If any Lender shall have
determined that the adoption, effectiveness, phase-in or applicability after the
date hereof of any law, rule or regulation (or any provision thereof) regarding
capital adequacy, or any change therein 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 any Lender (or its applicable lending office) with any guideline, request or
directive regarding capital adequacy (whether or not having the force of law) of
any such governmental authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on the capital of such Lender or
any corporation controlling such Lender as a consequence of, or with reference
to, such Lender's Loans or Commitments or
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Letters of Credit or participations therein or other obligations hereunder with
respect to the Loans or the Letters of Credit to a level below that which such
Lender or such controlling corporation could have achieved but for such
adoption, effectiveness, phase-in, applicability, change or compliance (taking
into consideration the policies of such Lender or such controlling corporation
with regard to capital adequacy), then from time to time, within five Business
Days after receipt by Company from such Lender of the statement referred to in
the next sentence, Company shall pay to such Lender such additional amount or
amounts as will compensate such Lender or such controlling corporation on an
after-tax basis for such reduction. Such Lender shall deliver to Company (with a
copy to Administrative Agent) a written statement, setting forth in reasonable
detail the basis of the calculation of such additional amounts, which statement
shall be conclusive and binding upon all parties hereto absent manifest error.
2.8 OBLIGATION OF LENDERS AND ISSUING LENDERS TO MITIGATE; REPLACEMENT OF
LENDER.
A. OBLIGATIONS OF LENDERS AND ISSUING LENDERS TO MITIGATE. Each Lender
and Issuing Lender agrees that, as promptly as practicable after the officer of
such Lender or Issuing Lender responsible for administering the Loans or Letters
of Credit of such Lender or Issuing Lender, as the case may be, becomes aware of
the occurrence of an event or the existence of a condition that would cause such
Lender to become an Affected Lender or that would entitle such Lender or Issuing
Lender to receive payments under subsection 2.7 or subsection 3.6, it will, to
the extent not inconsistent with the internal policies of such Lender or Issuing
Lender and any applicable legal or regulatory restrictions, use reasonable
efforts (i) to make, issue, fund or maintain the Commitments of such Lender or
the affected Loans or Letters of Credit of such Lender or Issuing Lender through
another lending or letter of credit office of such Lender or Issuing Lender, or
(ii) take such other measures as such Lender or Issuing Lender may deem
reasonable, if as a result thereof the circumstances which would cause such
Lender to be an Affected Lender would cease to exist or the additional amounts
which would otherwise be required to be paid to such Lender or Issuing Lender
pursuant to subsection 2.7 or subsection 3.6 would be materially reduced and if,
as determined by such Lender or Issuing Lender in its sole discretion, the
making, issuing, funding or maintaining of such Commitments or Loans or Letters
of Credit through such other lending or letter of credit office or in accordance
with such other measures, as the case may be, would not otherwise materially
adversely affect such Commitments or Loans or Letters of Credit or the interests
of such Lender or Issuing Lender; provided that such Lender or Issuing Lender
will not be obligated to utilize such other lending or letter of credit office
pursuant to this subsection 2.8 unless Company agrees to pay all incremental
expenses incurred by such Lender or Issuing Lender as a result of utilizing such
other lending or letter of credit office as described in clause (i) above. A
certificate as to the amount of any such expenses payable by Company pursuant to
this subsection 2.8 (setting forth in reasonable detail the basis for requesting
such amount) submitted by such Lender or Issuing Lender to Company (with a copy
to Administrative Agent) shall be conclusive absent manifest error.
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B. REPLACEMENT OF LENDER. If Company receives a notice of amounts due
pursuant to subsection 2.7A or subsection 2.7C from a Lender, a Lender defaults
in its obligations hereunder, a Lender refuses to consent to an amendment,
modification or waiver of this Agreement that, pursuant to subsection 10.6,
requires consent of 100% of the Lenders or a Lender becomes an Affected Lender
(any such Lender, a "SUBJECT LENDER"), so long as (i) no Potential Event of
Default or Event of Default shall have occurred and be continuing and Company
has obtained a commitment from another Lender or an Eligible Assignee to
purchase at par the Subject Lender's Loans and assume the Subject Lender's
Commitments and all other obligations of the Subject Lender hereunder, (ii) such
Lender is not an Issuing Lender with respect to any Letters of Credit
outstanding (unless all such Letters of Credit are terminated or arrangements
acceptable to such Issuing Lender (such as a "back-to-back" letter of credit)
are made) and (iii) the Subject Lender is unwilling to withdraw the notice
delivered to Company pursuant to subsections 2.7A or 2.7C, is unwilling to
remedy its default and/or is no longer an Affected Lender, upon 10 days prior
written notice to the Subject Lender and Administrative Agent, Company may
require the Subject Lender to assign all of its Loans and Commitments to such
other Lender or Eligible Assignee pursuant to the provisions of subsection
10.1B; provided that, prior to or concurrently with such replacement (i) Company
has paid to the Lender giving such notice all amounts under subsections 2.6D and
2.7 (if applicable) through such date of replacement, (ii) Company or the
applicable assignee have paid to Agent the processing fee required to be paid by
subsection 10.1B(i) and (iii) all of the requirements for such assignment
contained in subsection 10.1B, including, without limitation, the consent of
Administrative Agent (if required) and the receipt by Administrative Agent of an
executed Assignment Agreement and other supporting documents, have been
fulfilled.
SECTION 3. LETTERS OF CREDIT
3.1 ISSUANCE OF LETTERS OF CREDIT AND LENDERS' PURCHASE OF PARTICIPATIONS
THEREIN.
A. LETTERS OF CREDIT. In addition to Company requesting that Revolving
Lenders make Revolving Loans pursuant to subsection 2.1A(ii) and that Swing Line
Lender make Swing Line Loans pursuant to subsection 2.1A(iii), Company may
request, in accordance with the provisions of this subsection 3.1, from time to
time during the period from the Closing Date to but excluding the Revolving Loan
Commitment Termination Date, that one or more Lenders issue Letters of Credit
for the account of Company for the purposes specified in the definitions of
Commercial Letters of Credit and Standby Letters of Credit. Subject to the terms
and conditions of this Agreement and in reliance upon the representations and
warranties of Company herein set forth, any one or more Lenders may, but (except
as provided in subsection 3.1B(ii)) shall not be obligated to, issue such
Letters of Credit in accordance with the provisions of this subsection 3.1;
provided that Company shall not request that any Lender issue (and no Lender
shall issue):
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(i) any Letter of Credit if, after giving effect to such
issuance, the Total Utilization of Revolving Loan Commitments would
exceed the Revolving Loan Commitments then in effect;
(ii) any Letter of Credit if, after giving effect to such
issuance, the Letter of Credit Usage would exceed $15,000,000;
(iii) any Letter of Credit denominated in a currency other than
Dollars (which foreign currency must be acceptable to Administrative
Agent) if, after giving effect to such issuance, the Letter of Credit
Usage would exceed $5,000,000 calculated by reference to the Exchange
Rate;
(iv) any Letter of Credit if, after giving effect to such
issuance, the Total Utilization of Revolving Loan Commitments would
exceed the Borrowing Base;
(v) any Standby Letter of Credit having an expiration date
later than the earlier of (a) two Business Days prior to the Revolving
Loan Commitment Termination Date and (b) the date which is one year
from the date of issuance of such Standby Letter of Credit; provided
that the immediately preceding clause (b) shall not prevent any Issuing
Lender from agreeing that a Standby Letter of Credit will automatically
be extended for one or more successive periods not to exceed one year
each unless such Issuing Lender elects not to extend for any such
additional period; and provided, further that such Issuing Lender shall
elect not to extend such Standby Letter of Credit if it has knowledge
that an Event of Default has occurred and is continuing (and has not
been waived in accordance with subsection 10.6) at the time such
Issuing Lender must elect whether or not to allow such extension; or
(vi) any Commercial Letter of Credit having an expiration date
(a) later than the earlier of (X) the date which is 30 days prior to
the Revolving Loan Commitment Termination Date (provided that this
clause (X) shall not be applicable with respect to any Commercial
Letter of Credit that is fully supported by cash collateral on terms
satisfactory to, and if such later expiration date shall have been
agreed to by, the Issuing Lender) and (Y) the date which is 180 days
from the date of issuance of such Commercial Letter of Credit or
(b) that is otherwise unacceptable to the applicable Issuing Lender in
its reasonable discretion.
B. MECHANICS OF ISSUANCE.
(i) Notice of Issuance. Whenever Company desires the issuance
of a Letter of Credit, it shall deliver to Administrative Agent a
Notice of Issuance of Letter of Credit substantially in the form of
Exhibit III annexed hereto no later than 5:00 P.M. (New York City time)
at least three Business Days (in the case of Standby Letters of Credit)
or five Business Days (in the case of Commercial Letters of
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Credit), or in each case such shorter period as may be agreed to by
the Issuing Lender in any particular instance, in advance of the
proposed date of issuance. The Notice of Issuance of Letter of Credit
shall specify (a) the proposed date of issuance (which shall be a
Business Day), (b) whether the Letter of Credit is to be a Standby
Letter of Credit or a Commercial Letter of Credit, (c) the face amount
of the Letter of Credit, (d) the expiration date of the Letter of
Credit, (e) the name and address of the beneficiary, and (f) either
the verbatim text of the proposed Letter of Credit or the proposed
terms and conditions thereof, including a precise description of any
documents to be presented by the beneficiary which, if presented by
the beneficiary prior to the expiration date of the Letter of Credit,
would require the Issuing Lender to make payment under the Letter of
Credit; provided that the Issuing Lender, in its reasonable
discretion, may require changes in the text of the proposed Letter of
Credit or any such documents; and provided, further that no Letter of
Credit shall require payment against a conforming draft to be made
thereunder on the same business day (under the laws of the
jurisdiction in which the office of the Issuing Lender to which such
draft is required to be presented is located) that such draft is
presented if such presentation is made after 12:00 Noon (in the time
zone of such office of the Issuing Lender) on such business day.
Company shall notify the applicable Issuing Lender
(and Administrative Agent, if Administrative Agent is not such Issuing
Lender) prior to the issuance of any Letter of Credit in the event that
any of the matters to which Company is required to certify in the
applicable Notice of Issuance of Letter of Credit is no longer true and
correct as of the proposed date of issuance of such Letter of Credit,
and upon the issuance of any Letter of Credit Company shall be deemed
to have re-certified, as of the date of such issuance, as to the
matters to which Company is required to certify in the applicable
Notice of Issuance of Letter of Credit.
(ii) Determination of Issuing Lender. Upon receipt by
Administrative Agent of a Notice of Issuance of Letter of Credit
pursuant to subsection 3.1B(i) requesting the issuance of a Letter of
Credit, in the event Administrative Agent elects to issue such Letter
of Credit, Administrative Agent shall promptly so notify
Company, and Administrative Agent shall be the Issuing Lender with
respect thereto. In the event that Administrative Agent, in its sole
discretion, elects not to issue such Letter of Credit, Administrative
Agent shall promptly so notify Company, whereupon Company may request
any other Lender to issue such Letter of Credit by delivering to such
Lender a copy of the applicable Notice of Issuance of Letter of Credit.
Any Lender so requested to issue such Letter of Credit shall promptly
notify Company and Administrative Agent whether or not, in its sole
discretion, it has elected to issue such Letter of Credit, and any such
Lender which so elects to issue such Letter of Credit shall be the
Issuing Lender with respect thereto. In the event that all other
Lenders shall have declined to issue such Letter of Credit,
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notwithstanding the prior election of Administrative Agent not to issue
such Letter of Credit, Administrative Agent shall be obligated to issue
such Letter of Credit and shall be the Issuing Lender with respect
thereto, notwithstanding the fact that the Letter of Credit Usage with
respect to such Letter of Credit and with respect to all other Letters
of Credit issued by Administrative Agent, when aggregated with
Administrative Agent's outstanding Revolving Loans and Swing Line
Loans, may exceed Administrative Agent's Revolving Loan Commitment then
in effect.
(iii) Issuance of Letter of Credit. Except as set forth in
clause (vi) below, upon satisfaction or waiver (in accordance with
subsection 10.6) of the conditions set forth in subsection 4.4, the
Issuing Lender shall issue the requested Letter of Credit in accordance
with the Issuing Lender's standard operating procedures.
(iv) Notification to Lenders. Upon the issuance of any Letter
of Credit the applicable Issuing Lender shall promptly notify
Administrative Agent (which shall notify) each other Lender of such
issuance, which notice shall be accompanied by a copy of such Letter of
Credit. Promptly after receipt of such notice (or, if Administrative
Agent is the Issuing Lender, together with such notice), Administrative
Agent shall notify each Lender of the amount of such Lender's
respective participation in such Letter of Credit, determined in
accordance with subsection 3.1C.
(v) Reports to Lenders. Within 15 days after the end of each
calendar quarter ending after the Closing Date, so long as any Letter
of Credit shall have been outstanding during such calendar quarter,
each Issuing Lender shall deliver to each other Lender a report setting
forth for such calendar quarter the daily aggregate amount available to
be drawn under the Letters of Credit issued by such Issuing Lender that
were outstanding during such calendar quarter.
(vi) Letters of Credit Outstanding Under Existing Credit
Agreement. The letters of credit issued pursuant to the Existing Credit
Agreement that are outstanding on the Closing Date and listed on
Schedule 3.1 shall be deemed Letters of Credit issued pursuant hereto
and the Issuing Lender shall be the Lender identified on Schedule 3.1.
C. LENDERS' PURCHASE OF PARTICIPATIONS IN LETTERS OF CREDIT.
Immediately upon the issuance of each Letter of Credit and, in respect of
Letters of Credit referred to in subsection 3.1B(vi) on the Closing Date, upon
satisfaction of the conditions set forth in subsections 4.1 and 4.2, each Lender
shall be deemed to, and hereby agrees to, have irrevocably purchased from the
Issuing Lender a participation in such Letter of Credit and any drawings honored
thereunder in an amount equal to such Lender's Pro Rata Share of the maximum
amount which is or at any time may become available to be drawn thereunder.
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3.2 LETTER OF CREDIT FEES.
Company agrees to pay the following amounts with respect to
Letters of Credit issued hereunder:
(i) with respect to each Standby Letter of Credit, (a) a
fronting fee, payable directly to the applicable Issuing Lender for its
own account, equal to 0.25% per annum of the daily amount available to
be drawn under such Standby Letter of Credit and (b) a letter of credit
fee, payable to Administrative Agent for the account of Lenders (based
upon their respective Pro Rata Shares), equal to (x) the applicable
Eurodollar Rate Margin set forth in subsection 2.2A hereof for
Eurodollar Rate Loans multiplied by (y) the daily amount available from
time to time to be drawn under such Standby Letter of Credit, each such
fronting fee or letter of credit fee to be payable in arrears on and to
(but excluding) the last day of each March, June, September and
December of each year and computed on the basis of a 360-day year for
the actual number of days elapsed;
(ii) with respect to each Commercial Letter of Credit, (a) a
fronting fee, payable directly to the applicable Issuing Lender for its
own account, equal to 0.25% per annum of the daily amount available to
be drawn under such Commercial Letter of Credit and (b) a letter of
credit fee, payable to Administrative Agent for the account of Lenders
(based upon their respective Pro Rata Shares), equal to 1.75% per annum
of the daily amount available to be drawn under such Commercial Letter
of Credit, each such fronting fee or letter of credit fee to be payable
in arrears on and to (but excluding) the last day of each March, June,
September and December of each year and computed on the basis of a
360-day year for the actual number of days elapsed; and
(iii) with respect to the issuance, amendment or transfer of
each Letter of Credit and each payment of a drawing made thereunder
(without duplication of the fees payable under clauses (i) and (ii)
above), documentary and processing charges payable directly to the
applicable Issuing Lender for its own account in accordance with such
Issuing Lender's standard schedule for such charges in effect at the
time of such issuance, amendment, transfer or payment, as the case may
be.
For purposes of calculating any fees payable under clauses (i) and (ii) of this
subsection 3.2, the daily amount available to be drawn under any Letter of
Credit shall be determined as of the close of business on any date of
determination. Promptly upon receipt by Administrative Agent of any amount
described in clause (i)(b) or (ii)(b) of this subsection 3.2, Administrative
Agent shall distribute to each Lender its Pro Rata Share of such amount.
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3.3 DRAWINGS AND REIMBURSEMENT OF AMOUNTS PAID UNDER LETTERS OF CREDIT.
A. RESPONSIBILITY OF ISSUING LENDER WITH RESPECT TO DRAWINGS. In
determining whether to honor any drawing under any Letter of Credit by the
beneficiary thereof, the Issuing Lender shall be responsible only to examine the
documents delivered under such Letter of Credit with reasonable care so as to
ascertain whether they appear on their face to be in accordance with the terms
and conditions of such Letter of Credit.
B. REIMBURSEMENT BY COMPANY OF AMOUNTS PAID UNDER LETTERS OF CREDIT.
In the event an Issuing Lender has determined to honor a drawing under a Letter
of Credit issued by it, such Issuing Lender shall immediately notify Company and
Administrative Agent, and Company shall reimburse such Issuing Lender on or
before the Business Day immediately following the date on which such drawing is
honored (the "REIMBURSEMENT DATE") in an amount in Dollars (which amount, in the
case of a drawing under the Letter of Credit which is denominated in a currency
other than Dollars, shall be calculated by reference to the applicable Exchange
Rate) or, at the request of the Issuing Bank, in the currency in which the
Letter of Credit was issued and in same day funds equal to the amount of such
honored drawing; provided that, anything contained in this Agreement to the
contrary notwithstanding, (i) unless Company shall have notified Administrative
Agent and such Issuing Lender prior to 10:00 A.M. (New York City time) on the
date such drawing is honored that Company intends to reimburse such Issuing
Lender for the amount of such honored drawing with funds other than the proceeds
of Revolving Loans, Company shall be deemed to have given a timely Notice of
Borrowing to Administrative Agent requesting Revolving Lenders to make Revolving
Loans that are Base Rate Loans on the Reimbursement Date in an amount in Dollars
(which amount, in the case of a drawing under the Letter of Credit which is
denominated in a currency other than Dollars, shall be calculated by reference
to the applicable Exchange Rate) equal to the amount of such honored drawing and
(ii) subject to satisfaction or waiver of the conditions specified in subsection
4.3B, Lenders shall, on the Reimbursement Date, make Revolving Loans that are
Base Rate Loans in the amount of such honored drawing, the proceeds of which
shall be applied directly by Administrative Agent to reimburse such Issuing
Lender for the amount of such honored drawing; and provided, further that if for
any reason proceeds of Revolving Loans are not received by such Issuing Lender
on the Reimbursement Date in an amount equal to the amount of such honored
drawing, Company shall reimburse such Issuing Lender, on demand, in an amount in
same day funds equal to the excess of the amount of such honored drawing over
the aggregate amount of such Revolving Loans, if any, which are so received.
Nothing in this subsection 3.3B shall be deemed to relieve any Revolving Lender
from its obligation to make Revolving Loans on the terms and conditions set
forth in this Agreement, and Company shall retain any and all rights it may have
against any Revolving Lender resulting from the failure of such Revolving Lender
to make such Revolving Loans under this subsection 3.3B.
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C. PAYMENT BY LENDERS OF UNREIMBURSED AMOUNTS PAID UNDER LETTERS
OF CREDIT.
(i) Payment by Lenders. In the event that Company shall fail
for any reason to reimburse any Issuing Lender as provided in
subsection 3.3B in an amount (calculated, in the case of a drawing
under a Letter of Credit denominated in a currency other than Dollars,
by reference to the applicable Exchange Rate) equal to the amount of
any drawing honored by such Issuing Lender under a Letter of Credit
issued by it, such Issuing Lender shall promptly notify each other
Revolving Lender of the unreimbursed amount of such honored drawing and
of such other Revolving Lender's respective participation therein based
on such Revolving Lender's Pro Rata Share. Each Revolving Lender shall
make available to such Issuing Lender an amount equal to its respective
participation, in Dollars and in same day funds, at the office of such
Issuing Lender specified in such notice, not later than 12:00 Noon (New
York City time) on the first business day (under the laws of the
jurisdiction in which such office of such Issuing Lender is located)
after the date notified by such Issuing Lender. In the event that any
Revolving Lender fails to make available to such Issuing Lender on such
business day the amount of such Lender's participation in such Letter
of Credit as provided in this subsection 3.3C, such Issuing Lender
shall be entitled to recover such amount on demand from such Revolving
Lender together with interest thereon at the Federal Funds Effective
Rate for three Business Days and thereafter at the Base Rate. Nothing
in this subsection 3.3C shall be deemed to prejudice the right of any
Revolving Lender to recover from any Issuing Lender any amounts made
available by such Revolving Lender to such Issuing Lender pursuant to
this subsection 3.3C in the event that it is determined by the final
judgment of a court of competent jurisdiction that the payment with
respect to a Letter of Credit by such Issuing Lender in respect of
which payment was made by such Revolving Lender constituted gross
negligence or willful misconduct on the part of such Issuing Lender.
(ii) Distribution to Lenders of Reimbursements Received From
Company. In the event any Issuing Lender shall have been reimbursed by
other Revolving Lenders pursuant to subsection 3.3C(i) for all or any
portion of any drawing honored by such Issuing Lender under a Letter of
Credit issued by it, such Issuing Lender shall distribute to each other
Revolving Lender which has paid all amounts payable by it under
subsection 3.3C(i) with respect to such honored drawing such other
Revolving Lender's Pro Rata Share of all payments subsequently received
by such Issuing Lender from Company in reimbursement of such honored
drawing when such payments are received. Any such distribution shall be
made to a Revolving Lender at its primary address set forth below its
name on the appropriate signature page hereof or at such other address
as such Revolving Lender may request.
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D. INTEREST ON AMOUNTS PAID UNDER LETTERS OF CREDIT.
(i) Payment of Interest by Company. Company agrees to pay to
each Issuing Lender, with respect to drawings honored under any Letters
of Credit issued by it, interest on the amount paid by such Issuing
Lender in respect of each such honored drawing from the date such
drawing is honored to but excluding the date such amount is reimbursed
by Company (including any such reimbursement out of the proceeds of
Revolving Loans pursuant to subsection 3.3B) at a rate equal to (a) for
the period from the date such drawing is honored to but excluding the
Reimbursement Date, the rate then in effect under this Agreement with
respect to Revolving Loans that are Base Rate Loans and (b) thereafter,
a rate which is 2% per annum in excess of the rate of interest
otherwise payable under this Agreement with respect to Revolving Loans
that are Base Rate Loans. Interest payable pursuant to this subsection
3.3D(i) shall be computed on the basis of a 365-day year for the actual
number of days elapsed in the period during which it accrues and shall
be payable on demand or, if no demand is made, on the date on which the
related drawing under a Letter of Credit is reimbursed in full.
(ii) Distribution of Interest Payments by Issuing Lender.
Promptly upon receipt by any Issuing Lender of any payment of interest
pursuant to subsection 3.3D(i) with respect to a drawing honored under
a Letter of Credit issued by it, (a) such Issuing Lender shall
distribute to each other Revolving Lender, out of the interest received
by such Issuing Lender in respect of the period from the date such
drawing is honored to but excluding the date on which such Issuing
Lender is reimbursed for the amount of such drawing (including any such
reimbursement out of the proceeds of Revolving Loans pursuant to
subsection 3.3B), the amount that such other Revolving Lender would
have been entitled to receive in respect of the letter of credit fee
that would have been payable in respect of such Letter of Credit for
such period pursuant to subsection 3.2 if no drawing had been honored
under such Letter of Credit, and (b) in the event such Issuing Lender
shall have been reimbursed by other Revolving Lenders pursuant to
subsection 3.3C(i) for all or any portion of such honored drawing, such
Issuing Lender shall distribute to each other Revolving Lender which
has paid all amounts payable by it under subsection 3.3C(i)
with respect to such honored drawing such other Revolving Lender's Pro
Rata Share of any interest received by such Issuing Lender in respect
of that portion of such honored drawing so reimbursed by other
Revolving Lenders for the period from the date on which such Issuing
Lender was so reimbursed by other Revolving Lenders to but excluding
the date on which such portion of such honored drawing is reimbursed by
Company. Any such distribution shall be made to a Revolving Lender at
its primary address set forth below its name on the appropriate
signature page hereof or at such other address as such Lender may
request.
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3.4 OBLIGATIONS ABSOLUTE.
The obligation of Company to reimburse each Issuing Lender for
drawings honored under the Letters of Credit issued by it and to repay any
Revolving Loans made by Revolving Lenders pursuant to subsection 3.3B and the
obligations of Revolving Lenders under subsection 3.3C(i) shall be unconditional
and irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances including any of the following circumstances:
(i) any lack of validity or enforceability of any Letter of
Credit;
(ii) the existence of any claim, set-off, defense or other
right which Company or any Revolving Lender may have at any time
against a beneficiary or any transferee of any Letter of Credit (or any
Persons for whom any such transferee may be acting), any Issuing Lender
or other Revolving Lender or any other Person or, in the case of a
Revolving Lender, against Company, whether in connection with this
Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between Company or
one of its Subsidiaries and the beneficiary for which any Letter of
Credit was procured);
(iii) any draft or other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect;
(iv) payment by the applicable Issuing Lender under any Letter
of Credit against presentation of a draft or other document which does
not substantially comply with the terms of such Letter of Credit;
(v) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Company or
any of its Subsidiaries;
(vi) any breach of this Agreement or any other Loan Document by
any party thereto;
(vii) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential Event
of Default shall have occurred and be continuing;
provided, in each case, that payment by the applicable Issuing Lender under the
applicable Letter of Credit shall not have constituted gross negligence or
willful misconduct of such
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Issuing Lender or constituted a failure to satisfy requirements under the UCC as
in effect in the State of New York under the circumstances in question (as
determined by a final judgment of a court of competent jurisdiction); and
provided, further, that reimbursement by Company of an Issuing Lender shall not
constitute a waiver by Company of any claim against the Issuing Lender based
upon any of the circumstances described above.
3.5 INDEMNIFICATION; NATURE OF ISSUING LENDERS' DUTIES.
A. INDEMNIFICATION. In addition to amounts payable as provided in
subsection 3.6, Company hereby agrees to protect, indemnify, pay and save
harmless each Issuing Lender from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which such Issuing Lender may incur or be subject to as a consequence,
direct or indirect, of (i) the issuance of any Letter of Credit by such Issuing
Lender, other than as a result of (a) the gross negligence or willful misconduct
of such Issuing Lender as determined by a final judgment of a court of competent
jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor
by such Issuing Lender of a proper demand for payment made under any Letter of
Credit issued by it or (ii) the failure of such Issuing Lender to honor a
drawing under any such Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
government or governmental authority (all such acts or omissions herein called
"GOVERNMENTAL ACTS").
B. NATURE OF ISSUING LENDERS' DUTIES. As between Company and any
Issuing Lender, Company assumes all risks of the acts and omissions of, or
misuse of the Letters of Credit issued by such Issuing Lender by, the respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation of
the foregoing, such Issuing Lender shall not be responsible for: (i) the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
any such Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) failure of the beneficiary of
any such Letter of Credit to comply fully with any conditions required in order
to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any such
Letter of Credit or of the proceeds thereof; (vii) the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of any drawing under
such Letter of Credit; or (viii) any consequences arising from causes beyond the
control of such Issuing Lender,
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including any Governmental Acts, and none of the above shall affect or impair,
or prevent the vesting of, any of such Issuing Lender's rights or powers
hereunder.
In furtherance and extension and not in limitation of the
specific provisions set forth in the first paragraph of this subsection 3.5B,
any action taken or omitted by any Issuing Lender under or in connection with
the Letters of Credit issued by it or any documents and certificates delivered
thereunder, if taken or omitted to be taken in good faith, shall not put such
Issuing Lender under any resulting liability to Company.
Notwithstanding anything to the contrary contained in this
subsection 3.5, Company shall retain any and all rights it may have against any
Issuing Lender for any liability arising solely out of the gross negligence or
willful misconduct of such Issuing Lender, as determined by a final judgment of
a court of competent jurisdiction.
3.6 INCREASED COSTS AND TAXES RELATING TO LETTERS OF CREDIT.
Subject to the provisions of subsection 2.7B (which shall be
controlling with respect to the matters covered thereby), in the event that any
Issuing Lender or Lender shall reasonably determine (which determination shall,
absent manifest error, be final and conclusive and binding upon all parties
hereto) that any law, treaty or governmental rule, regulation or order, or any
change therein or in the interpretation, administration or application thereof
(including the introduction of any new law, treaty or governmental rule,
regulation or order), or any determination of a court or governmental authority,
in each case that becomes effective after the date hereof, or compliance by any
Issuing Lender or Lender with any guideline, request or directive issued or made
after the date hereof by any central bank or other governmental or
quasi-governmental authority (whether or not having the force of law):
(i) subjects such Issuing Lender or Lender (or its applicable
lending or letter of credit office) to any additional Tax (other than
any Tax on the overall net income of such Issuing Lender or Lender)
with respect to the issuing or maintaining of any Letters of Credit or
the purchasing or maintaining of any participations therein or any
other obligations under this Section 3, whether directly or by such
being imposed on or suffered by any particular Issuing Lender;
(ii) imposes, modifies or holds applicable any reserve
(including any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement in respect of any Letters of Credit issued by any Issuing
Lender or participations therein purchased by any Lender; or
(iii) imposes any other condition (other than with respect to a
Tax matter) on or affecting such Issuing Lender or Lender (or its
applicable lending or letter
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of credit office) regarding this Section 3 or any Letter of Credit or
any participation therein;
and the result of any of the foregoing is to increase the cost to such Issuing
Lender or Lender of agreeing to issue, issuing or maintaining any Letter of
Credit or agreeing to purchase, purchasing or maintaining any participation
therein or to reduce any amount received or receivable by such Issuing Lender or
Lender (or its applicable lending or letter of credit office) with respect
thereto; then, in any case, Company shall promptly pay to such Issuing Lender or
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts as may be necessary to compensate such Issuing
Lender or Lender for any such increased cost or reduction in amounts received or
receivable hereunder. Such Issuing Lender or Lender shall deliver to Company a
written statement, setting forth in reasonable detail the basis for calculating
the additional amounts owed to such Issuing Lender or Lender under this
subsection 3.6, which statement shall be conclusive and binding upon all parties
hereto absent manifest error.
SECTION 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT
The obligations of Lenders to make Loans and the issuance of
Letters of Credit hereunder are subject to the satisfaction of the following
conditions.
4.1 CONDITIONS TO TERM LOANS AND INITIAL REVOLVING LOANS.
The obligations of Lenders to make the Term Loans and the
Initial Revolving Loans to be made on the Closing Date are, in addition to the
conditions precedent specified in subsection 4.3, subject to prior or concurrent
satisfaction of the following conditions:
A. LOAN PARTY DOCUMENTS. On or before the Closing Date, Company shall,
and shall cause each other Loan Party to, deliver to Lenders (or to Agents for
Lenders with sufficient originally executed copies, where appropriate, for each
Lender and its counsel) the following with respect to Company or such Loan
Party, as the case may be, each, unless otherwise noted, dated the Closing Date:
(i) Certified copies of the Certificate or Articles of
Incorporation of such Person, together with a good standing certificate
from the Secretary of State of its jurisdiction of incorporation and
each other state in which such Person is qualified as a foreign
corporation to do business and, to the extent generally available, a
certificate or other evidence of good standing as to payment of any
applicable franchise or similar taxes from the appropriate taxing
authority of each of such jurisdictions, each dated a recent date prior
to the Closing Date;
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(ii) Copies of the Bylaws of such Person, certified as of the
Closing Date by such Person's corporate secretary or an assistant
secretary;
(iii) Resolutions of the Board of Directors of SAC and of
Holdings approving and authorizing the execution, delivery and
performance of the Loan Documents and Related Agreements to which it is
a party, certified as of the Closing Date by the corporate secretary or
an assistant secretary of such Person as being in full force and effect
without modification or amendment;
(iv) Signature and incumbency certificates of the officers of
SAC and of Holdings executing the Loan Documents to which it is a
party;
(v) Executed originals of the Loan Documents to which SAC
and Holdings is a party; and
(vi) Such other documents as Agents may reasonably request.
B. NO MATERIAL ADVERSE EFFECT. Since December 31, 1996, no
Material Adverse Effect (in the reasonable opinion of Arranger and Agents)
shall have occurred.
C. OPINIONS OF COUNSEL TO LOAN PARTIES. Lenders and their
respective counsel shall have received (i) originally executed copies of one or
more favorable written opinions of Kirkland & Ellis, counsel for Loan Parties,
in form and substance reasonably satisfactory to Agents and their counsel,
dated as of the Closing Date and setting forth substantially the matters in the
opinions designated in Exhibit VIII annexed hereto and as to such other matters
as Agents acting on behalf of Lenders may reasonably request, and (ii) evidence
satisfactory to Agents that Company has requested such counsel to deliver such
opinions to Lenders.
D. OPINIONS OF SYNDICATION AGENT'S COUNSEL. Lenders shall have received
originally executed copies of one or more favorable written opinions of
O'Melveny & Myers LLP, counsel to Syndication Agent, dated as of the Closing
Date, substantially in the form of Exhibit IX annexed hereto and as to such
other matters as Syndication Agent acting on behalf of Lenders may reasonably
request.
E. FEES. Company shall have paid to Administrative Agent and Arranger
the fees payable on the Closing Date referred to in subsection 2.3.
F. ENVIRONMENTAL MATTERS. Arranger and Agents shall have received
reports and other information in form, scope and substance reasonably
satisfactory to Arranger and Agents regarding environmental matters related to
the facilities.
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G. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS. SAC shall
have delivered to Agents an Officer's Certificate, in form and substance
satisfactory to Agents, to the effect that the representations and warranties in
Section 5 hereof are true, correct and complete in all material respects on and
as of the Closing Date to the same extent as though made on and as of that date
(or, to the extent such representations and warranties specifically relate to an
earlier date, that such representations and warranties were true, correct and
complete in all material respects on and as of such earlier date) and that SAC
shall have performed in all material respects all agreements and satisfied all
conditions which this Agreement provides shall be performed or satisfied by it
on or before the Closing Date except as otherwise disclosed to and agreed to in
writing by Agents and Requisite Lenders.
H. SATISFACTION WITH ACQUISITION; FINANCING. Arranger and Agents shall
have received and reviewed a description of (i) the final structure of the
Acquisition and (ii) the services and uses of proceeds to consummate the
transactions contemplated by the Loan Documents and the Related Agreements and
shall be satisfactory to the Arranger and Agents.
I. CORPORATE STRUCTURE, OWNERSHIP, MANAGEMENT, ETC.
(i) Corporate Structure. The corporate organizational
structure of Holdings and its Subsidiaries both before and
after the Acquisition occurs and of SAHC before the Acquisition
occurs, shall be set forth on Schedule 4.1I annexed hereto and
shall be satisfactory to the Arranger and Agents.
(ii) Capital Structure and Ownership. The capital
structure and ownership of Company both before and after giving
effect to the Acquisition shall be as set forth on Schedule
4.1I annexed hereto, and shall be satisfactory to Arranger and
Agents.
(iii) Senior Management; Employment Contracts. The
senior management of Company after giving effect to the
Acquisition shall be as set forth on Schedule 4.1I annexed
hereto, and Arranger and Agents shall have received copies of,
and shall be satisfied with the form and substance of, any and
all employment contracts and equity arrangements with senior
management of Company.
J. RELATED AGREEMENTS. Arranger and Agents shall have received a
fully executed copy or photocopy of each Related Agreement and any documents
executed in connection therewith, and each Related Agreement shall be in full
force and effect and shall be satisfactory to the Arranger and Agents and no
provision thereof shall have been modified or waived in any respect determined
by Arranger and Agents to be material, in each case without the consent of
Agents and Requisite Lenders.
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K. PROCEEDS OF SENIOR SUBORDINATED NOTES; EQUITY CONTRIBUTION.
(i) SAC shall have received gross proceeds of at least $100,000,000 from the
offering of the Senior Subordinated Notes and (ii) Holdings shall have received
the Equity Contribution.
L. ACQUISITION.
(i) All conditions to the Acquisition set forth in Articles 6
and 7 of the Acquisition Agreement shall have been satisfied or the
fulfillment of any such conditions shall have been waived with the
consent of Agents and Requisite Lenders;
(ii) The initial cash consideration to be paid to the Seller in
respect of the capital stock of Company in connection with the
Acquisition shall not exceed $125,500,000;
(iii) Transaction Costs shall not exceed $12,000,000, and
Arranger and Agents shall have received evidence to its satisfaction to
such effect; and
(iv) Arranger and Agents shall have received an Officer's
Certificate of SAC to the effect set forth in clauses (i)-(iii) above
and stating that SAC will proceed to consummate the Acquisition upon
the making of the initial Loans.
M. NECESSARY GOVERNMENTAL AUTHORIZATIONS AND CONSENTS; EXPIRATION
OF WAITING PERIODS, ETC. SAC and Stanadyne shall have obtained all Governmental
Authorizations and all consents of other Persons, in each case that are
necessary or advisable in connection with the Acquisition, the other
transactions contemplated by the Loan Documents and the Related Agreements and
each of the foregoing shall be in full force and effect, in each case other than
those the failure to obtain or maintain which, either individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
All applicable waiting periods shall have expired without any action being taken
or threatened by any competent authority which would restrain, prevent or
otherwise impose adverse conditions on the Acquisition or the financing thereof.
No action, request for stay, petition for review or rehearing, reconsideration,
or appeal with respect to any of the foregoing shall be pending, and the time
for any applicable agency to take action to set aside its consent on its own
motion shall have expired.
N. DUE DILIGENCE. The results of the continuing financial, legal,
tax, environmental and accounting due diligence investigations with respect to
Company and its Subsidiaries shall be satisfactory in all respects to Arranger,
Agents and Lenders, and any supplemental business or financial due diligence
that Arranger or Syndication Agent reasonably determines has become necessary
shall not have disclosed information not previously disclosed to Arranger or
Syndication Agent which causes the results of such investigations not to be
satisfactory to Arranger, Agents and Lenders in all respects.
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Arranger, Agents and Lenders shall have received any information reasonably
necessary to conduct their continuing due diligence.
O. FINANCIAL STATEMENTS. The Lenders shall have received (i) audited
financial statements of Stanadyne and its Subsidiaries for the Fiscal Years
ended December 31, 1994, December 31, 1995 and December 31, 1996 and (ii)
unaudited financial statements of Stanadyne and its Subsidiaries for the nine
months ended September 30, 1997, (iii) unaudited financial statements of
Stanadyne and its Subsidiaries for each month subsequent to the most recently
ended Fiscal Quarter (if available) and (iv) a pro forma unaudited balance sheet
of Company (based upon the September 30, 1997 balance sheet of Company) prepared
in accordance with GAAP and reflecting the consummation of the Acquisition, the
related financings and the other transactions contemplated by the Loan Documents
and Related Agreements. Any of Arranger, Agents and Lenders shall have had the
opportunity, at their option, to review any such unaudited financial statements
with Company's independent public accountants at Company's cost.
P. SECURITY INTERESTS IN PERSONAL PROPERTY. On the Closing Date,
Company shall have taken or caused to be taken all such actions, executed and
delivered or caused to be executed and delivered all such agreements, documents
and instruments, and made or caused to be made all such filings and recordings
(other than the filing or recording of items described in clause (iii) below)
that may be necessary or, in the opinion of Agents, desirable in order to create
in favor of Administrative Agent, for the benefit of Lenders, a valid and (upon
such filing and recording) perfected First Priority security interest in the
entire personal Collateral. Such actions shall include the following:
(i) Collateral Documents. Company shall and shall cause
Holdings to deliver to Lenders (or to Agents for Lenders) executed
originals of the Collateral Documents to which such Person is a party.
(ii) Schedules to Collateral Documents. Delivery to Agents of
accurate and complete schedules to all of the applicable Collateral
Documents.
(iii) Stock Certificates and Instruments. Delivery to
Administrative Agent of (a) certificates (which certificates shall be
accompanied if permitted by applicable law by irrevocable undated stock
powers, duly endorsed in blank and otherwise satisfactory in form and
substance to Agents) representing all capital stock pledge pursuant
to the Holdings Pledge Agreement and (b) all promissory notes or other
instruments (duly endorsed, where appropriate, in a manner
satisfactory to Agents) evidencing any Collateral.
Q. COMPLETION OF PROCEEDINGS. All corporate and other proceedings taken
or to be taken in connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable by each Agent,
acting on behalf of
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Lenders, and its counsel shall be satisfactory in form and substance to Agents
and such counsel, and Agents and such counsel shall have received all such
counterpart originals or certified copies of such documents as Agents may
reasonably request.
4.2 CONDITIONS TO REVOLVING LOANS AND SWINGLINE LOANS AFTER INITIAL
REVOLVING LOANS.
The obligations of Lenders to make Revolving Loans (other than
the Initial Revolving Loans) and Swing Line Loans on and after the Closing Date
are, in addition to the conditions precedent specified in subsection 4.1 and
subsection 4.3, subject to prior or concurrent satisfaction of the following
conditions:
A. LOAN PARTY DOCUMENTS. On or before the Closing Date, Company shall,
and shall cause each other Loan Party to, deliver to Lenders (or to Agents for
Lenders with sufficient originally executed copies, where appropriate, for each
Lender and its counsel) the following with respect to Company or such Loan
Party, as the case may be, each, unless otherwise noted, dated the Closing Date
(to the extent not previously delivered pursuant to subsection 4.1A):
(i) Resolutions of the Board of Directors of such Person
approving and authorizing the execution, delivery and performance of
the Loan Documents and Related Agreements to which it is a part,
certified as of the Closing Date by the corporate secretary or an
assistant secretary of such Person as being in full force and effect
without modification or amendment;
(ii) Signature and incumbency certificates of the officers of
such Person executing the Loan Documents to which it is a party;
(iii) Executed originals of the Loan Documents to which such
Person is a party; and
(iv) Such other documents as Agents may reasonably request.
B. TERMINATION OF EXISTING CREDIT AGREEMENT AND RELATED LIENS,
EXISTING LETTERS OF CREDIT. On the Closing Date, Company shall have (a) repaid
in full all Indebtedness outstanding under the Existing Credit Agreement (the
aggregate principal amount of which Indebtedness shall not exceed $83,000,000),
(b) terminated any commitments to lend or make other extensions of credit
thereunder, (c) delivered to Administrative Agent all documents or instruments
necessary to release all Liens securing Indebtedness or other obligations of
Stanadyne thereunder, and (d) made arrangements satisfactory to Administrative
Agent with respect to the cancellation of any letters of credit outstanding
thereunder or the issuance of Letters of Credit to support the obligations of
Company with respect thereto.
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C. EVIDENCE OF INSURANCE. Administrative Agent shall have received a
certificate from Company's insurance broker or other evidence satisfactory to it
that all insurance required to be maintained pursuant to subsection 6.4 is in
full force and effect and that Administrative Agent on behalf of Lenders has
been named as additional insured and/or loss payee thereunder to the extent
required under subsection 6.4.
D. [RESERVED].
E. SOLVENCY ASSURANCES. Company shall have delivered to Arranger and
Agents a Financial Condition Certificate dated the Closing Date substantially in
the form of Exhibit XXI annexed hereto and with appropriate attachments, in each
case demonstrating that, after giving effect to the consummation of the
Acquisition, the related financings and the other transactions contemplated by
the Loan Documents and the Related Agreements, Company will be Solvent.
F. CONSUMMATION OF ACQUISITION. The Acquisition shall have become
effective in accordance with the terms of the Acquisition Agreement and the laws
of the state of New York.
G. BORROWING BASE CERTIFICATE. Administrative Agent shall have received
a Borrowing Base Certificate dated as of October 31, 1997.
H. CLOSING DATE MORTGAGES; MORTGAGE POLICIES, ETC.. On the Closing
Date, but after the consummation of the Acquisition, Company and each applicable
Subsidiary Guarantor shall deliver to Administrative Agent:
(i) Closing Date Mortgages. Fully executed and notarized
Mortgages (each a "Closing Date Mortgage" and collectively the "Closing
Date Mortgages") duly recorded in all appropriate places in all
applicable jurisdictions, encumbering each Real Property Asset listed
in Schedule 4.2H annexed hereto (each a "Closing Date Mortgaged
Property", and collectively, the "Closing Date Mortgaged Properties").
(ii) Opinions of Local Counsel. An opinion of counsel (which
counsel shall be reasonably satisfactory to Agents) in each state in
which a Closing Date Mortgaged Property is located with respect to the
enforceability of the form(s) of Closing Date Mortgages to be recorded
in such state and such other matters as Agents may reasonably request,
in each case in form and substance reasonably satisfactory to Agents
dated as of the Closing Date and setting forth substantially the
matters in the opinion attached hereto as Exhibit XXII and as to such
other matters as Agents may reasonably require;
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(iii) Title Insurance. As determined by Syndication Agent in
its sole discretion, (a) unconditional commitments for mortgagee title
insurance policies (the "Closing Date Mortgage Policies") issued by the
Title Company with respect to the Closing Date Mortgaged Properties in
amounts not less than the respective amounts designated therein with
respect to any particular Closing Date Mortgaged Properties, insuring
Administrative Agent that the applicable Assigned Mortgages create
valid and enforceable First Priority mortgage Liens on the respective
Closing Date Mortgaged Properties encumbered thereby, subject only to a
standard survey exception, and such other exceptions approved by
Agents, which Closing Date Mortgage Policies (1) shall include a
lenders aggregation endorsement, an endorsement for future advances
under this Agreement and for any other matters reasonably requested by
Agents and (2) shall provide for affirmative insurance and such
reinsurance as Agents may reasonably request, all of the foregoing in
form and substance reasonably satisfactory to Agents; and (b) evidence
satisfactory to Agents that such Loan Party has (i) delivered to the
Title Company all certificates and affidavits required by the Title
Company in connection with the issuance of the Closing Date Mortgage
Policies and (ii) paid to the Title Company or to the appropriate
governmental authorities all expenses and premiums of the Title Company
in connection with the issuance of the Closing Date Mortgage Policies
and all recording and stamp taxes (including mortgage recording and
intangible taxes) payable in connection with recording the Assigned
Mortgages in the appropriate real estate records;
(iv) Title Reports. With respect to each Closing Date Mortgaged
Property, a title report issued by the Title Company with respect
thereto, dated not more than 30 days prior to the Closing Date and
satisfactory in form and substance to Agents;
(v) Copies of Documents Relating to Title Exceptions. Copies of
all recorded documents listed as exceptions to title or otherwise
referred to in the Closing Date Mortgage Policies or in the title
reports delivered pursuant to subsection 4.2H(iv);
(vi) Matters Relating to Flood Hazard Properties. (a) Evidence,
which may be in the form of a letter from an insurance broker or a
municipal engineer, as to whether (1) any Closing Date Mortgaged
Property is a Flood Hazard Property and (2) the community in which any
such Flood Hazard Property is located is participating in the National
Flood Insurance Program, (b) if there are any such Flood Hazard
Properties, such Loan Party's written acknowledgement of receipt of
written notification from Administrative Agent (1) as to the existence
of each such Flood Hazard Property and (2) as to whether the community
in which each such Flood Hazard Property is located is participating in
the National Flood Insurance Program, and (c) in the event any such
Flood Hazard Property is located in a
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community that participates in the National Flood Insurance
Program, evidence that Company has obtained flood insurance in respect
of such Flood Hazard Property to the extent required under the
applicable regulations of the Board of Governors of the Federal Reserve
System; and
(vii) Environmental Indemnity. If Agents reasonably determine
that, due to the operation, interpretation or application of state or
federal laws or requirements, or due to any other reason, Agents or
Lenders are or, under certain circumstances, may not be adequately
indemnified under the terms of this Agreement, an environmental
indemnity agreement, satisfactory in form and substance to Agents and
their counsel, with respect to the indemnification of Agents and
Lenders for any liabilities that may be imposed on or incurred by any
of them as a result of any Hazardous Materials Activity; provided that
Company shall not have any obligation to an Agent or a Lender to the
extent such liabilities arise from gross negligence or willful
misconduct of that Agent or Lender as determined by a final judgment of
a court of competent jurisdiction.
I. SECURITY INTERESTS IN PERSONAL AND MIXED PROPERTY. On the Closing
Date, but after the Acquisition has been consummated, Company and its
Subsidiaries shall have taken or caused to be taken all such actions, executed
and delivered or caused to be executed and delivered all such agreements,
documents and instruments, and made or caused to be made all such filings and
recordings (other than the filing or recording of items described in clauses
(iii), (iv) and (v) below) that may be necessary or, in the opinion of Agents,
desirable in order to create in favor of Administrative Agent, for the benefit
of Lenders, a valid and (upon such filing and recording) perfected First
Priority security interest in the entire personal and mixed property Collateral.
Such actions shall include the following:
(i) Collateral Documents. Company shall and shall cause each
other Loan Party to deliver to Lenders (or to Agents for Lenders)
executed originals of the Collateral Documents to which such Person is
a party (to the extent not delivered pursuant to subsection 4.1P).
(ii) Schedules to Collateral Documents. Delivery to Agents of
accurate and complete schedules to all of the applicable Collateral
Documents (to the extent not delivered pursuant to subsection 4.1P).
(iii) Stock Certificates and Instruments. To the extent not
delivered pursuant to subsection 4.1P, delivery to Administrative Agent
of (a) certificates (which certificates shall be accompanied if
permitted by applicable law by irrevocable undated stock powers, duly
endorsed in blank and otherwise satisfactory in form and substance to
Agents) representing all capital stock pledged pursuant to the Company
Pledge Agreement, the Subsidiary Pledge Agreements and the
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Auxiliary Pledge Agreements and (b) all promissory notes or
other instruments (duly endorsed, where appropriate, in a manner
satisfactory to Agents) evidencing any Collateral;
(iv) Lien Searches and UCC Termination Statements. Delivery to
Agents of (a) the results of a recent search, by a Person satisfactory
to Agents, of all effective UCC financing statements and fixture
filings and all judgment and tax lien filings which may have been made
with respect to any personal or mixed property of any Loan Party,
together with copies of all such filings disclosed by such search, and
(b) UCC termination statements duly executed by all applicable Persons
for filing in all applicable jurisdictions as may be necessary to
terminate any effective UCC financing statements or fixture filings
disclosed in such search (other than any such financing statements or
fixture filings in respect of Liens permitted to remain outstanding
pursuant to the terms of this Agreement).
(v) UCC Financing Statements and Fixture Filings. Delivery to
Administrative Agent of UCC financing statements and, where
appropriate, fixture filings, duly executed by each applicable Loan
Party with respect to all personal and mixed property Collateral of
such Loan Party, for filing in all jurisdictions as may be necessary
or, in the opinion of Agents, desirable to perfect the security
interests created in such Collateral pursuant to the Collateral
Documents;
(vi) PTO Cover Sheets, Etc. Delivery to Administrative Agent of
all cover sheets or other documents or instruments required to be filed
with the PTO in order to create or perfect Liens in respect of any IP
Collateral;
(vii) Opinions of Local Counsel. Delivery to Agents of an
opinion of counsel (which counsel shall be reasonably satisfactory to
Agents) under the laws of each jurisdiction in which any Loan Party or
any personal or mixed property Collateral is located with respect to
the creation and perfection of the security interests in favor of
Administrative Agent in such Collateral and such other matters governed
by the laws of such jurisdiction regarding such security interests as
Agents may reasonably request, in each case in form and substance
reasonably satisfactory to Agents dated as of the Closing Date and
setting forth substantially the matters in the form of opinion annexed
hereto as Exhibit XXII and as to such other matters as Agents may
reasonably require.
J. GUARANTIES. On the Closing Date, but after the Acquisition has been
consummated, Company shall and shall cause each other Loan Party to deliver to
Lenders (or to Agents for Lenders) executed originals of the Guaranties to which
such Person is a party.
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K. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS. On the
Closing Date, but after the Acquisition has been consummated, Company shall have
delivered an Officer's Certificate, in form and substance satisfactory to
Agents, to the effect that the representations and warranties in Section 5
hereof are true, correct and complete in all material respects on and as of the
Closing Date to the same extent as though made on and as of that date (or, to
the extent such representations and warranties specifically relate to an earlier
date, that such representations and warranties were true, correct and complete
in all material respects on and as of such earlier date) and that Company shall
have performed in all material respects all agreements and satisfied all
conditions which this Agreement provides shall be performed or satisfied by it
on or before the Closing Date except as otherwise disclosed to and agreed to in
writing by Agents and Requisite Lenders.
L. COMPLETION OF PROCEEDINGS. All corporate and other proceedings taken
or to be taken in connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable by each Agent,
acting on behalf of Lenders, and its counsel shall be satisfactory in form and
substance to Agents and such counsel, and Agents and such counsel shall have
received all such counterpart originals or certified copies of such documents as
Agents may reasonably request.
4.3 CONDITIONS TO ALL LOANS.
The obligations of Lenders to make Loans on each Funding Date
are subject to the following further conditions precedent:
A. Administrative Agent shall have received before that Funding
Date, in accordance with the provisions of subsection 2.1B, an originally
executed Notice of Borrowing, in each case signed by the chief executive
officer, the chief financial officer or the treasurer of Company or by any
executive officer of Company designated by any of the above-described officers
on behalf of Company in a writing delivered to Administrative Agent.
B. As of that Funding Date:
(i) The representations and warranties contained herein and in
the other Loan Documents shall be true, correct and complete in all
material respects on and as of that Funding Date to the same extent as
though made on and as of that date, except to the extent such
representations and warranties specifically relate to an earlier date,
in which case such representations and warranties shall have been true,
correct and complete in all material respects on and as of such earlier
date;
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(ii) No event shall have occurred and be continuing or would
result from the consummation of the borrowing contemplated by such
Notice of Borrowing that would constitute an Event of Default or a
Potential Event of Default;
(iii) Each Loan Party shall have performed in all material
respects all agreements and satisfied all conditions which this
Agreement provides shall be performed or satisfied by it on or before
that Funding Date;
(iv) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender
from making the Loans to be made by it on that Funding Date;
(v) The making of the Loans requested on such Funding Date
shall not violate any law including Regulation G, Regulation T,
Regulation U or Regulation X of the Board of Governors of the Federal
Reserve System; and
(vi) There shall not be pending or, to the knowledge of
Company, threatened, any action, suit, proceeding, governmental
investigation or arbitration against or affecting Company or any of its
Subsidiaries or any property of Company or any of its Subsidiaries that
has not been disclosed by Company in writing pursuant to subsection 5.6
or 6.1(x) prior to the making of the last preceding Loans (or, in the
case of the initial Loans, prior to the execution of this Agreement),
and there shall have occurred no development not so disclosed in any
such action, suit, proceeding, governmental investigation or
arbitration so disclosed, that, in either event, in the reasonable
opinion of Agents or of Requisite Lenders, would be expected to have a
Material Adverse Effect.
4.4 CONDITIONS TO LETTERS OF CREDIT.
The issuance of any Letter of Credit hereunder (whether or not
the applicable Issuing Lender is obligated to issue such Letter of Credit) is
subject to the following conditions precedent:
A. On or before the date of issuance of the initial Letter of Credit
pursuant to this Agreement, the initial Loans shall have been made.
B. On or before the date of issuance of such Letter of Credit,
Administrative Agent shall have received, in accordance with the provisions of
subsection 3.1B(i), an originally executed Notice of Issuance of Letter of
Credit, in each case signed by the chief executive officer, the chief financial
officer or the treasurer of Company or by any executive officer of Company
designated by any of the above-described officers on behalf of Company in a
writing delivered to Administrative Agent, together with all other information
specified in subsection 3.1B(i) and such other documents or information as the
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applicable Issuing Lender may reasonably require in connection with the issuance
of such Letter of Credit.
C. On the date of issuance of such Letter of Credit, all conditions
precedent described in subsection 4.3B shall be satisfied to the same extent as
if the issuance of such Letter of Credit were the making of a Loan and the date
of issuance of such Letter of Credit were a Funding Date.
SECTION 5. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders and the Agents to enter into this
Agreement and to make the Loans, to induce Issuing Lenders to issue Letters of
Credit and to induce other Lenders to purchase participations therein, Company
represents and warrants to each Lender and the Agents, on the date of this
Agreement, on each Funding Date and on the date of issuance of each Letter of
Credit, that the following statements are true, correct and complete:
5.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND
SUBSIDIARIES.
A. ORGANIZATION AND POWERS. Each Loan Party is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation as specified in Schedule 5.1 annexed hereto. Each
Loan Party has all requisite corporate power and authority to own and operate
its properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into the Loan Documents and the Related Agreements to which
it is a party and to carry out the transactions contemplated thereby.
B. QUALIFICATION AND GOOD STANDING. Each Loan Party is qualified to do
business and in good standing in every jurisdiction where its assets are located
and wherever necessary to carry out its business and operations, except in
jurisdictions where the failure to be so qualified or in good standing has not
had and will not have a Material Adverse Effect.
C. CONDUCT OF BUSINESS. Company and its Subsidiaries are engaged only
in the businesses permitted to be engaged in pursuant to subsection 7.14.
D. SUBSIDIARIES. All of the Subsidiaries of Company are identified in
Schedule 5.1 annexed hereto, as said Schedule 5.1 may be supplemented from time
to time pursuant to the provisions of subsection 6.1(xv). The capital stock of
each of the Subsidiaries of Company identified in Schedule 5.1 annexed hereto
(as so supplemented) is duly authorized, validly issued, fully paid and
nonassessable and none of such capital stock constitutes Margin Stock. Each of
the Subsidiaries of Company identified in Schedule 5.1
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annexed hereto (as so supplemented) is a corporation duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
incorporation set forth therein, has all requisite corporate power and authority
to own and operate its properties and to carry on its business as now conducted
and as proposed to be conducted, and is qualified to do business and in good
standing in every jurisdiction where its assets are located and wherever
necessary to carry out its business and operations, in each case except where
failure to be so qualified or in good standing or a lack of such corporate power
and authority has not had and will not have a Material Adverse Effect.
Schedule 5.1 annexed hereto (as so supplemented) correctly sets forth the
ownership interest of Company and each of its Subsidiaries in each of the
Subsidiaries of Company identified therein. After the consummation of the
Acquisition, Company will be a wholly-owned Subsidiary of Holdings.
5.2 AUTHORIZATION OF BORROWING, ETC.
A. AUTHORIZATION OF BORROWING. The execution, delivery and performance
of the Loan Documents and the Related Agreements have been duly authorized by
all necessary corporate action on the part of each Loan Party that is a party
thereto.
B. NO CONFLICT. Upon payment of obligations under and termination of
the Existing Credit Agreement, the execution, delivery and performance by Loan
Parties of the Loan Documents and the Related Agreements to which they are
parties and the consummation of the transactions contemplated by the Loan
Documents and such Related Agreements do not and will not (i) violate any
provision of any law or any governmental rule or regulation applicable to
Holdings, Company or any of its Subsidiaries, the Certificate or Articles of
Incorporation or Bylaws of Holdings, Company or any of its Subsidiaries or any
order, judgment or decree of any court or other agency of government binding on
Holdings, Company or any of its Subsidiaries, (ii) conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any Con tractual Obligation of Company or any of its Subsidiaries,
(iii) result in or require the creation or imposition of any Lien upon any of
the properties or assets of Holdings, Company or any of its Subsidiaries (other
than any Liens created under any of the Loan Documents in favor of
Administrative Agent on behalf of Lenders), or (iv) require any approval of
stockholders or any approval or consent of any Person under any Contractual
Obligation of Holdings, Company or any of its Subsidiaries, except for such
approvals or consents which will be obtained on or before the Closing Date and
disclosed in writing to Lenders.
C. GOVERNMENTAL CONSENTS. The execution, delivery and performance by
Loan Parties of the Loan Documents and the Related Agreements to which they are
parties and the consummation of the transactions contemplated by the Loan
Documents and such Related Agreements do not and will not require any
registration with, consent or approval
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of, or notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body.
D. BINDING OBLIGATION. Each of the Loan Documents and Related
Agreements has been duly executed and delivered by each Loan Party that is a
party thereto and is the legally valid and binding obligation of such Loan
Party, enforceable against such Loan Party in accordance with its respective
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability.
5.3 FINANCIAL CONDITION.
Company has heretofore delivered to Lenders, at Lenders'
request, the following financial statements and information: (i) the
consolidated balance sheet of Stanadyne and its Subsidiaries as at December 31,
1996 and related consolidated statements of income, changes in stockholders'
equity and cash flows of Stanadyne and its Subsidiaries for the Fiscal Year then
ended and (ii) the unaudited consolidated balance sheet of Stanadyne and its
Subsidiaries as at September 30, 1997 and the related unaudited consolidated
statements of income, changes in stockholders' equity and cash flows of
Stanadyne and its Subsidiaries for the nine months then ended. All such
statements were prepared in conformity with GAAP and fairly present, in all
material respects, the financial position (on a consolidated basis) of the
entities described in such financial statements as at the respective dates
thereof and the results of operations and cash flows (on a consolidated basis)
of the entities described therein for each of the periods then ended; any such
unaudited financial statements may be prepared without footnotes and other
presentation items and shall be subject to changes resulting from normal
year-end adjustments. Stanadyne does not (and will not following the funding of
the initial Loans) have any Contingent Obligation (except for Contingent
Obligations incurred in the ordinary course of business), contingent liability
or liability for taxes, long-term lease or unusual forward or long-term
commitment that is not reflected in the foregoing financial statements or the
notes thereto and which in any such case is material in relation to the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Stanadyne or any of its Subsidiaries.
5.4 NO MATERIAL ADVERSE CHANGE; NO RESTRICTED JUNIOR PAYMENTS.
Since December 31, 1996, except for the transactions
contemplated by the Acquisition Agreement, no event or change has occurred that
has caused or evidences and except as set forth on Schedule 5.11, either in any
case or in the aggregate, a Material Adverse Effect. Neither Company nor any of
its Subsidiaries has directly or indirectly declared, ordered, paid or made,
or set apart any sum or property for, any Restricted Junior Payment or agreed
to do so except as permitted by subsection 7.5.
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5.5 TITLE TO PROPERTIES; LIENS; REAL PROPERTY.
A. TITLE TO PROPERTIES; LIENS. Company and its Subsidiaries
have (i) good, sufficient and legal title to (in the case of fee interests in
real property), (ii) valid leasehold interests in (in the case of leasehold
interests in real or personal property), or (iii) good title to (in the case of
all other personal property), all of their respective properties and assets
reflected in the financial statements referred to in subsection 5.3 or in the
most recent financial statements delivered pursuant to subsection 6.1, in each
case except for assets disposed of since the date of such financial statements
in the ordinary course of business or as otherwise permitted under subsection
7.7. Except as permitted by this Agreement, all such properties and assets are
free and clear of Liens.
B. REAL PROPERTY. As of the Closing Date, Schedule 5.5 annexed
hereto contains a true, accurate and complete list of (i) all real property
owned by Company or any Subsidiary and (ii) all leases, subleases or assignments
of leases (together with all amendments, modifications, supplements, renewals or
extensions of any thereof) affecting each Real Property Asset of any Loan Party,
regardless of whether such Loan Party is the landlord or tenant (whether
directly or as an assignee or successor in interest) under such lease, sublease
or assignment. Except as specified in Schedule 5.5 annexed hereto, each
agreement listed in clause (ii) of the immediately preceding sentence is in full
force and effect and Company does not have knowledge of any default that has
occurred and is continuing thereunder, and each such agreement constitutes the
legally valid and binding obligation of each applicable Loan Party, enforceable
against such Loan Party in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable principles.
5.6 LITIGATION; ADVERSE FACTS.
Except as set forth in Schedule 5.6 annexed hereto, there are
no actions, suits, proceedings, arbitrations or governmental investigations
(whether or not purportedly on behalf of Company or any of its Subsidiaries) at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign (including any Environmental Claims) that are pending or, to
the knowledge of Company, threatened against or affecting Company or any of its
Subsidiaries or any property of Company or any of its Subsidiaries and that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. Neither Company nor any of its Subsidiaries (i) is in
violation of any applicable laws (including Environmental Laws) that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect, or (ii) is subject to or in default with respect to any
final judgments, writs, injunctions, decrees, rules or regulations of any court
or any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, that,
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individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.
5.7 PAYMENT OF TAXES.
Except to the extent permitted by subsection 6.3, all tax
returns and reports of Company and its Subsidiaries required to be filed by any
of them have been timely filed, and all taxes shown on such tax returns to be
due and payable and all assessments, fees and other governmental charges upon
Company and its Subsidiaries and upon their respective properties, assets,
income, businesses and franchises which are due and payable have been paid when
due and payable. Company knows of no proposed tax assessment against Company or
any of its Subsidiaries which is not being actively contested by Company or such
Subsidiary in good faith and by appropriate proceedings; provided that such
reserves or other appropriate provisions, if any, as shall be required in
conformity with GAAP shall have been made or provided therefor.
5.8 PERFORMANCE OF AGREEMENTS; MATERIALLY ADVERSE AGREEMENTS; MATERIAL
CONTRACTS.
A. Neither Company nor any of its Subsidiaries is in default in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a Material Adverse Effect.
B. Neither Company nor any of its Subsidiaries is a party to or
is otherwise subject to any agreements or instruments or any charter or other
internal restrictions which, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect.
C. Schedule 5.8 contains a true, correct and complete list of
all the Material Contracts in effect on the Closing Date. Except as described on
Schedule 5.8, all such Material Contracts are in full force and effect and no
material defaults currently exist thereunder.
5.9 GOVERNMENTAL REGULATION.
Neither Company nor any of its Subsidiaries is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act or the Investment Company Act of 1940 or
under any other federal or state statute or regulation which may limit its
ability to incur Indebtedness or which may otherwise render all or any portion
of the Obligations unenforceable.
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5.10 SECURITIES ACTIVITIES.
A. Neither Company nor any of its Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock.
B. Following application of the proceeds of each Loan, not more
than 25% of the value of the assets (either of Company only or of Company and
its Subsidiaries on a consolidated basis) subject to the provisions of
subsection 7.2 or 7.7 or subject to any restriction contained in any agreement
or instrument, between Company and any Lender or any Affiliate of any Lender,
relating to Indebtedness and within the scope of subsection 8.2, will be Margin
Stock.
5.11 EMPLOYEE BENEFIT PLANS.
A. Company, each of its Subsidiaries and each of their
respective ERISA Affiliates are in material compliance with all applicable
provisions and requirements of ERISA and the regulations and published
interpretations thereunder with respect to each Employee Benefit Plan, and have
performed in all material respects their obligations under each Employee Benefit
Plan. Except as set forth on Schedule 5.11, each Employee Benefit Plan which is
intended to qualify under Section 401(a) of the Internal Revenue Code is so
qualified.
B. Except as set forth in Schedule 5.11, no ERISA Event has
occurred or is reasonably expected to occur.
C. Except as set forth on Schedule 5.11 and except to the
extent required under Section 4980B of the Internal Revenue Code, no Employee
Benefit Plan provides health or welfare benefits (through the purchase of
insurance or otherwise) for any retired or former employee of Holdings, any of
its Subsidiaries or any of their respective ERISA Affiliates.
D. As of the most recent valuation date for any Pension Plan,
the amount of the excess of the benefit liabilities (as defined in Section
4001(a)(16) of ERISA) over the current value of the assets, individually or in
the aggregate for all Pension Plans (excluding for purposes of such computation
any Pension Plans with respect to which assets exceed benefit liabilities),
does not exceed $2,000,000.
E. Neither Company, any Subsidiary nor any of their respective
ERISA Affiliates is or was a party to, or has obligations under, any
Multiemployer Plan.
F. Neither Company, nor Subsidiary nor any of their respective
ERISA Affiliates has any liability under Sections 401(a)(29) or 412(m) of the
Internal Revenue
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Code, or Title IV of ERISA, with respect to any of their respective former
ERISA Affiliates.
5.12 CERTAIN FEES.
No broker's or finder's fee or commission will be payable with
respect to this Agreement or any of the transactions contemplated hereby, with
the exception of any broker's or finder's fee or commission which may be payable
to DLJ or its affiliates, and Company hereby indemnifies Lenders against, and
agrees that it will hold Lenders harmless from, any claim, demand or liability
for any such broker's or finder's fees alleged to have been incurred in
connection herewith or therewith and any expenses (including reasonable fees,
expenses and disbursements of counsel) arising in connection with any such
claim, demand or liability.
5.13 ENVIRONMENTAL PROTECTION.
Except as set forth in Schedule 5.13 annexed hereto:
(i) neither Company nor any of its Subsidiaries nor any of
their respective Facilities or operations are subject to any
outstanding written order, consent decree or settlement agreement with
any Person relating to any Environmental Claim;
(ii) neither Company nor any of its Subsidiaries has
received any letter or written request for information properly
requested under Section 104 of the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. Section 9604) or
any comparable state law;
(iii) to Company's knowledge, there are no, and have been no,
conditions, occurrences, or Hazardous Materials Activities which could
reasonably be expected to form the basis of an Environmental Claim
against Company or any of its Subsidiaries, where such Environmental
Claim could reasonably be expected to result in liabilities or costs to
Company of $100,000 or more;
(iv) neither Company nor any of its Subsidiaries nor, to
Company's knowledge, any predecessor of Company or any of its
Subsidiaries (where Company is or would be subject to the liabilities
of such predecessor) has filed any notice under any Environmental Law
indicating past or present treatment of Hazardous Materials at any
Facility, and none of Company's or any of its Subsidiaries' operations
involves the generation, transportation, treatment, storage or disposal
of hazardous waste, as such terms are defined under 40 C.F.R. Parts
260-270 or any state equivalent; and
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(v) compliance with all current or reasonably foreseeable
future Environmental Laws will not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
Notwithstanding anything in this subsection 5.13 to the
contrary and except as disclosed in Schedule 5.13, no event or condition has
occurred or is occurring with respect to Company or any of its Subsidiaries
relating to any Environmental Law, any Release of Hazardous Materials, or any
Hazardous Materials Activity, which individually or in the aggregate has had or
could reasonably be expected to have a Material Adverse Effect.
5.14 EMPLOYEE MATTERS.
There is no strike or work stoppage in existence or threatened
involving Company or any of its Subsidiaries that could reasonably be expected
to have a Material Adverse Effect.
5.15 SOLVENCY.
Upon completion of the Acquisition, each Loan Party is and,
upon the incurrence of any Obligations by such Loan Party on any date on which
this representation is made, will be, Solvent.
5.16 MATTERS RELATING TO COLLATERAL.
A. CREATION, PERFECTION AND PRIORITY OF LIENS. The execution and
delivery of the Collateral Documents by Loan Parties, together with (i) the
actions taken on or prior to the date hereof pursuant to subsections 6.1, 6.2,
6.8 and 6.9 and (ii) the delivery to Administrative Agent of any Pledged
Collateral not delivered to Administrative Agent at the time of execution and
delivery of the applicable Collateral Document (all of which Pledged Collateral
has been so delivered) are effective to create in favor of Administrative Agent
for the benefit of Lenders, as security for the respective Secured Obligations
(as defined in the applicable Collateral Document in respect of any Collateral),
a valid and perfected First Priority Lien on all of the Collateral, and all
filings and other actions necessary or desirable to perfect and maintain the
perfection and First Priority status of such Liens have been duly made or taken
and remain in full force and effect, other than (w) the filing of any UCC
financing statements delivered to Administrative Agent for filing (but not yet
filed) and the periodic filing of UCC continuation statements in respect of UCC
financing statements filed by or on behalf of Administrative Agent, (x) with
respect to Collateral as to which the Administrative Agent does not require
perfection of such Lien, (y) filings with the Patent and Trademark Office and
Copyright Office, and (z) the annotation of the pledge of 65% of the stock of
Stanadyne Italy on the stock certificate(s) and in the shareholders ledger of
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Stanadyne Italy, which will be signed by a director of Stanadyne Italy as soon
as practicable after Closing.
B. GOVERNMENTAL AUTHORIZATIONS. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the pledge or grant by any Loan Party
of the Liens purported to be created in favor of Administrative Agent pursuant
to any of the Collateral Documents or (ii) the exercise by Administrative Agent
of any rights or remedies in respect of any Collateral (whether specifically
granted or created pursuant to any of the Collateral Documents or created or
provided for by applicable law), except for filings or recordings contemplated
by subsection 5.16A and except as may be required, in connection with the
disposition of any Pledged Collateral, by laws generally affecting the offering
and sale of securities.
C. ABSENCE OF THIRD-PARTY FILINGS. Except such as may have been filed
in favor of Administrative Agent as contemplated by subsection 5.16A and except
as shall have been filed pursuant to the Existing Credit Agreement, (i) no
effective UCC financing statement, fixture filing or other instrument similar in
effect covering all or any part of the Collateral is on file in any filing or
recording office and (ii) no effective filing covering all or any part of the IP
Collateral is on file in the PTO.
D. MARGIN REGULATIONS. The pledge of the Pledged Collateral pursuant
to the Collateral Documents does not violate Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System.
E. INFORMATION REGARDING COLLATERAL. All information supplied to Agents
by or on behalf of any Loan Party with respect to any of the Collateral (in each
case taken as a whole with respect to any particular Collateral) is accurate and
complete in all material respects. In furtherance of the foregoing, Holdings
owns no assets except for all the capital stock of Company; all IP Collateral is
owned by Company or a Subsidiary.
5.17 DISCLOSURE.
No representation or warranty of any Loan Party contained in any
Loan Document, Related Agreement or in any other document, certificate or
written statement furnished to Lenders by or on behalf of Company or any of its
Subsidiaries for use in connection with the transactions contemplated by this
Agreement contains any untrue statement of a material fact or omits to state a
material fact (known to Company, in the case of any document not furnished by
it) necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. Any
projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by Company to be
reasonable at the time made, it being recognized by Lenders that such
projections as to future events are not
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to be viewed as facts and that actual results during the period or periods
covered by any such projections may differ from the projected results. There are
no facts known (or which should upon the reasonable exercise of diligence be
known) to any Responsible Officer (other than matters of a general economic
nature) that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect and that have not been disclosed herein or
in such other documents, certificates and statements furnished to Lenders for
use in connection with the transactions contemplated hereby.
SECTION 6. COMPANY'S AFFIRMATIVE COVENANTS
Company covenants and agrees that, so long as any of the
Commitments hereunder shall remain in effect and until payment in full of all of
the Loans and other Obligations and the cancellation or expiration of all
Letters of Credit, unless Requisite Lenders shall otherwise give prior written
consent, Company shall perform, and shall cause each of its Subsidiaries to
perform, all covenants in this Section 6.
6.1 FINANCIAL STATEMENTS AND OTHER REPORTS.
Company will maintain, and cause each of its Subsidiaries to
maintain, a system of accounting established and administered in accordance with
sound business practices to permit preparation of financial statements in
conformity with GAAP.
Company will deliver to Agents and Lenders:
(i) [Reserved];
(ii) Quarterly Financials: as soon as available and in any
event within 45 days and 90 days after the end of the last Fiscal
Quarter, after the end of each of the first three Fiscal Quarters, the
unaudited consolidated balance sheet of Company and its Subsidiaries as
at the end of such Fiscal Quarter and the related unaudited
consolidated statements of income, changes in stockholders' equity and
cash flows of Company and its Subsidiaries for such Fiscal Quarter and
for the period from the beginning of the then current Fiscal Year to
the end of such Fiscal Quarter, setting forth in each case in
comparative form the corresponding figures for the corresponding
periods of the previous Fiscal Year and the corresponding figures from
the Financial Plan for the current Fiscal Year, all in reasonable
detail and certified by the chief financial officer of Company that
they fairly present, in all material respects, the financial condition
of Company and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods
indicated, subject to changes resulting from audit and normal year-end
adjustments;
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(iii) Year-End Financials: as soon as available and in any
event within 105 days after the end of each Fiscal Year, the
consolidated balance sheet of Company and its Subsidiaries as at the
end of such Fiscal Year and the related consolidated statements of
income, changes in stockholders' equity and cash flows of Company and
its Subsidiaries for such Fiscal Year, setting forth in each case in
comparative form the corresponding figures for the previous Fiscal Year
and the corresponding figures from the Financial Plan for the Fiscal
Year covered by such financial statements, all in reasonable detail and
certified by the chief financial officer, chief accounting officer or
controller of Company that they fairly present, in all material
respects, the financial condition of Company and its Subsidiaries as at
the dates indicated and the results of their operations and their cash
flows for the periods indicated, and (b) in the case of such
consolidated financial statements, a report thereon of independent
certified public accountants of recognized national standing selected
by Company and reasonably satisfactory to Agents, which report shall
express no doubts about the ability of Company and its Subsidiaries to
continue as a going concern, and shall state that such consolidated
financial statements fairly present, in all material respects, the
consolidated financial position of Company and its Subsidiaries as at
the dates indicated and the results of their operations and their cash
flows for the periods indicated in conformity with GAAP applied on a
basis consistent with prior years (except as otherwise disclosed in
such financial statements) and that the examination by such accountants
in connection with such consolidated financial statements has been made
in accordance with generally accepted auditing standards;
(iv) Officer's and Compliance Certificates: together with each
delivery of financial statements of Company and its Subsidiaries
pursuant to subdivisions (ii) and (iii) above, (a) an Officer's
Certificate of Company stating that the signers have reviewed the terms
of this Agreement and have made, or caused to be made under their
supervision, a review in reasonable detail of the transactions and
condition of Company and its Subsidiaries during the accounting period
covered by such financial statements and that such review has not
disclosed the existence during or at the end of such accounting period,
and that the signers do not have knowledge of the existence as at the
date of such Officer's Certificate, of any condition or event that
constitutes an Event of Default or Potential Event of Default, or, if
any such condi tion or event existed or exists, specifying the nature
and period of existence thereof and what action Company has taken, is
taking and proposes to take with respect thereto; (b) a Margin
Determination Certificate demonstrating in reasonable detail the
Consolidated Leverage Ratio for the four consecutive fiscal quarters
ending on the last day of the accounting period covered by such
financial statements; and (c) a Compliance Certificate demonstrating in
reasonable detail Asset Sale Proceeds, Net Insurance/Condemnation
Proceeds and Consolidated Excess Cash Flow received during the period
and compliance during and at the end of the applicable accounting
periods with the restrictions contained in Section 7, in each case to
the extent
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compliance with such restrictions is required to be tested at the end
of the applicable accounting period;
(v) Borrowing Base Certificate: within fifteen (15) days after
the end of each fiscal month, from time to time upon the request of
Administrative Agent and at any other date Company may choose, a
Borrowing Base Certificate as of the last date of such period or the
date so requested, as the case may be;
(vi) Accountants' Certification: together with each delivery of
consolidated financial statements of Company and its Subsidiaries
pursuant to subdivision (iii) above, a written statement by the
independent certified public accountants giving the report thereon (a)
stating that their audit examination has included a review of the terms
of Section 7 of this Agreement as they relate to accounting matters,
(b) stating whether, in connection with their audit examination, any
condition or event that constitutes an Event of Default or Potential
Event of Default has come to their attention and, if such a condition
or event has come to their attention, specifying the nature and period
of existence thereof; provided that such accountants shall not be
liable by reason of any failure to obtain knowledge of any such Event
of Default or Potential Event of Default that would not be disclosed in
the course of their audit examination, and (c) stating that based on
their audit examination nothing has come to their attention that causes
them to believe either or both that the information contained in the
certificates delivered therewith pursuant to subdivision (iv) above is
not correct or that the matters set forth in the Compliance
Certificates delivered therewith pursuant to clause (c) of subdivision
(iv) above for the applicable Fiscal Year are not stated in accordance
with the terms of this Agreement;
(vii) Accountants' Reports: promptly upon receipt thereof
(unless restricted by applicable professional standards), copies of all
reports submitted to Company by independent certified public
accountants in connection with each annual, interim or special audit of
the financial statements of Company and its Subsidiaries made by such
accountants, including any comment letter submitted by such accountants
to management in connection with their annual audit;
(viii) SEC Filings and Press Releases: promptly upon their
becoming available, copies of (a) all financial statements, reports,
notices and proxy statements sent or made available generally by
Company to its security holders or by any Subsidiary of Company to its
security holders other than Company or another Subsidiary of Company,
(b) all regular and periodic reports and all registration statements
(other than on Form S-8 or a similar form) and prospectuses, if any,
filed by Company or any of its Subsidiaries with any securities
exchange or with the Securities and Exchange Commission or any
governmental or private regulatory authority, and (c) all press
releases and other statements made available generally by
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Company or any of its Subsidiaries to the public concerning
material developments in the business of Holdings or any of its
Subsidiaries;
(ix) Events of Default, etc.: promptly upon any Responsible
Officer of Company obtaining knowledge (a) of any condition or event
that constitutes an Event of Default or Potential Event of Default, or
becoming aware that any Lender has given any notice (other than to
Administrative Agent) or taken any other action with respect to a
claimed Event of Default or Potential Event of Default, (b) that any
Person has given any notice to Company or any of its Subsidiaries or
taken any other action with respect to a claimed default or event or
condition of the type referred to in subsection 8.2, (c) of any
condition or event that would be required to be disclosed in a current
report filed by Company with the Securities and Exchange Commission on
Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in effect on the date
hereof) if Company were required to file such reports under the
Exchange Act, or (d) of the occurrence of any event, facts or change
that has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officer's Certificate specifying the nature
and period of existence of such condition, event or change, or
specifying the notice given or action taken by any such Person and the
nature of such claimed Event of Default, Potential Event of Default,
default, event or condition, and what action Company has taken, is
taking and proposes to take with respect thereto;
(x) Litigation or Other Proceedings: promptly upon any
Responsible Officer of Company obtaining knowledge of (X) the
institution of any action, suit, proceeding (whether administrative,
judicial or otherwise), governmental investiga tion or arbitration
against or affecting Company or any of its Subsidiaries or any property
of Company or any of its Subsidiaries (collectively, "PROCEEDINGS") not
previously disclosed in writing by Company to Lenders or (Y) any
material development in any Proceeding that, in any case:
(1) would reasonably be expected to give rise to a
Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the
consummation of, or to recover any damages or obtain relief as
a result of, the transactions contemplated hereby;
written notice thereof together with such other information as may be
reasonably available to Company to enable Lenders and their respective
counsel to evaluate such matters;
(xi) ERISA Events: promptly upon becoming aware of the
occurrence of or forthcoming occurrence of any ERISA Event, a written
notice specifying the
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nature thereof, what action Company, any of its Subsidiaries or
any of their respective ERISA Affiliates has taken, is taking or
proposes to take with respect thereto and, when known, any action taken
or threatened by the Internal Revenue Service, the Department of Labor
or the PBGC with respect thereto;
(xii) Financial Plans: as soon as practicable and in any event
no later than ten days after the beginning of each Fiscal Year, a
consolidated plan and financial forecast for each Fiscal Quarter in
such Fiscal Year (the "FINANCIAL PLAN" for such Fiscal Year), including
a forecasted consolidated balance sheet and forecasted consolidated
statements of income and cash flows of Holdings and its Subsidiaries
for each such Fiscal Year, together with pro forma financial covenant
calculations for each such Fiscal Year determined in a manner
consistent with financial covenant calculations shown in a Compliance
Certificate and an explanation of the assumptions on which such
forecasts are based, excluding units, margins and prices by customer;
(xiii) Insurance: upon the request of any Lender, a report in
form and substance satisfactory to Administrative Agent outlining all
material insurance coverage maintained as of the date of such report by
Company and its Subsidiaries and all material insurance coverage
planned to be maintained by Company and its Subsidiaries in the twelve
months ending on the next succeeding March 31;
(xiv) Board of Directors: with reasonable promptness, written
notice of any change in the Board of Directors of Company or of
Holdings;
(xv) New Subsidiaries: promptly upon any Person becoming a
Subsidiary of Holdings or Company, a written notice setting forth with
respect to such Person (a) the date on which such Person became a
Subsidiary of Holdings or Company and (b) all of the data required to
be set forth in Schedule 5.1 annexed hereto with respect to all
Subsidiaries of Holdings (it being understood that such written notice
shall be deemed to supplement Schedule 5.1 annexed hereto for all
purposes of this Agreement);
(xvi) Material Contracts: promptly, and in any event within ten
Business Days after any Material Contract of Company or any of its
Subsidiaries is terminated or amended in a manner that is materially
adverse to Company or such Subsidiary, as the case may be, or any new
Material Contract is entered into, a written statement describing such
event, and an explanation of any actions being taken with respect
thereto;
(xvii) UCC Search Report: As promptly as practicable after the
date of delivery to Administrative Agent of any UCC financing statement
executed by any Loan Party pursuant to subsection 4.2I(v) or 6.8A,
copies of completed UCC
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searches evidencing the proper filing, recording and indexing
of all such UCC financing statement and listing all other effective
financing statements that name such Loan Party as debtor, together with
copies of all such other financing statements not previously delivered
to Administrative Agent by or on behalf of Company or such Loan Party;
and
(xviii) Other Information: with reasonable promptness, such
other information and data with respect to Company or any of its
Subsidiaries as from time to time may be reasonably requested by any
Lender.
6.2 CORPORATE EXISTENCE, ETC.
Except as permitted under subsection 7.7, Company will, and
will cause each of its Subsidiaries to, at all times preserve and keep in full
force and effect its corporate existence and all rights and franchises material
to its business; provided, however that neither Company nor any of its
Subsidiaries shall be required to preserve any such right or franchise if the
Board of Directors of Company or such Subsidiary shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
Company or such Subsidiary, as the case may be, and that the loss thereof is not
disadvantageous in any material respect to Company, such Subsidiary or Lenders.
6.3 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION.
A. Company will, and will cause each of its Subsidiaries to,
pay all material taxes, assessments and other governmental charges imposed upon
it or any of its properties or assets or in respect of any of its income,
businesses or franchises before any penalty accrues thereon, and all claims
(including claims for labor, services, materials and supplies) for sums that
have become due and payable and that by law have or may become a Lien upon any
of its properties or assets, prior to the time when any penalty or fine shall be
incurred with respect thereto so long as failure to pay would reasonably be
expected to have a Material Adverse Effect; provided that no such charge or
claim need be paid if it is being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted, so long as such
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor.
B. Company will not, nor will it permit any of its Subsidiaries
to, file or consent to the filing of any consolidated income tax return with any
Person (other than Company or any of its Subsidiaries).
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6.4 MAINTENANCE OF PROPERTIES; INSURANCE; APPLICATION OF NET INSURANCE/
CONDEMNATION PROCEEDS.
A. MAINTENANCE OF PROPERTIES. Company will, and will cause each
of its Subsidiaries to, maintain or cause to be maintained in good repair,
working order and condition, ordinary wear and tear excepted, all material
properties used or useful in the business of Company and its Subsidiaries
(including all Intellectual Property) (other than property that is replaced with
similar property) and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof.
B. INSURANCE. Company will maintain or cause to be maintained,
with financially sound and reputable insurers, such public liability insurance,
third party property damage insurance, business interruption insurance and
casualty insurance with respect to liabilities, losses or damage in respect of
the assets, properties and businesses of Company and its Subsidiaries as may
customarily be carried or maintained under similar circumstances by corporations
of established reputation engaged in similar businesses, in each case in such
amounts (giving effect to self-insurance), with such deductibles, covering such
risks and otherwise on such terms and conditions as shall be customary for
corporations similarly situated in the industry. Without limiting the generality
of the foregoing, Company will maintain or cause to be maintained (i) flood
insurance with respect to each Flood Hazard Property that is located in a
community that participates in the National Flood Insurance Program, in each
case in compliance with any applicable regulations of the Board of Governors of
the Federal Reserve System, and (ii) replacement value casualty insurance on the
Collateral under such policies of insurance, with such insurance companies, in
such amounts, with such deductibles, and covering such risks as are at all times
satisfactory to Agents in their commercially reasonable judgment. Each such
policy of insurance shall (a) name Administrative Agent for the benefit of
Lenders as an additional insured thereunder as its interests may appear and (b)
in the case of each business interruption and casualty insurance policy, contain
a loss payable clause or endorsement, satisfactory in form and substance to
Agents, that names Administrative Agent for the benefit of Lenders as the loss
payee thereunder for any covered loss in excess of $500,000 and provides for at
least 30 days prior written notice to Agents of any modification or cancellation
of such policy.
6.5 INSPECTION RIGHTS; AUDITS OF INVENTORY AND ACCOUNTS RECEIVABLE; LENDER
MEETING.
A. INSPECTION RIGHTS. Company shall, and shall cause each of
its Subsidiaries to, permit any authorized representatives designated by any
Lender (acting through the Administrative Agent) to visit and reasonably inspect
any of the properties of Company or of any of its Subsidiaries, to inspect its
and their financial and accounting records, and to discuss its and their
affairs, finances and accounts with its and their officers and independent
public accountants (provided that Company may, if it so chooses, be
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present at or participate in any such discussion), all upon reasonable notice
and at such reasonable times during normal business hours and, so long as no
Event of Default has occurred and is continuing, each Lender may conduct such an
inspection no more than two times in one year; provided that if an Event of
Default has occurred and is continuing, any Lender may conduct such an
inspection as often as may reasonably be requested.
In addition to, and not in limitation of the preceding
paragraph, a representative designated by Agents shall, at Company's expense,
and after reasonable notice and during normal business hours, be permitted to
audit and monitor Company's Inventory, Accounts Receivable and other assets and
liabilities, in order to, among other things, verify the calculation of the
Borrowing Base.
B. LENDER MEETING. Company will, upon the request of Agents or
Requisite Lenders, participate in a meeting of Agents and Lenders once during
each Fiscal Year to be held at Company's corporate offices (or at such other
location as may be agreed to by Company and Agents) at such time as may be
agreed to by Company and Agents.
6.6 COMPLIANCE WITH LAWS, ETC.
Company shall comply, and shall cause each of its Subsidiaries
to comply, with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority (including all Environmental Laws), except
for such noncompliance that could not reasonably be expected to cause,
individually or in the aggregate, a Material Adverse Effect.
6.7 ENVIRONMENTAL REVIEW AND INVESTIGATION, DISCLOSURE, ETC.; COMPANY'S
ACTIONS REGARDING HAZARDOUS MATERIALS ACTIVITIES, ENVIRONMENTAL CLAIMS
AND VIOLATIONS OF ENVIRONMENTAL LAWS.
A. ENVIRONMENTAL REVIEW AND INVESTIGATION. Company agrees that Agents
may, in their reasonable discretion (subject to the limitations set forth
below), (i) retain, at Company's expense, an independent professional consultant
to review any environmental audits, investigations, analyses and reports
relating to Hazardous Materials prepared by or for Company and (ii) conduct
their own investigation of any Facility; provided that, in the case of any
Facility no longer owned, leased, operated or used by Company or any of its
Subsidiaries, Company shall only be obligated to use its reasonable best efforts
to obtain permission for Agents' professional consultant to conduct an
investigation of such Facility. For purposes of conducting such a review and/or
investigation, Company hereby grants to Agents and their respective agents,
employees, consultants and contractors the right to enter into or onto any
Facilities currently owned, leased, operated or used by Company or any of its
Subsidiaries and to perform such tests on such property (including taking
samples of soil, groundwater and suspected asbestos- containing materials) as
are reasonably necessary in connection therewith (to the extent, at
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any Facility leased by Company or any of its Subsidiaries, such actions are
permitted by the owner of such Facility). Any such investigation of any Facility
shall be conducted, unless otherwise agreed to by Company and Agents, during
normal business hours and, to the extent reasonably practicable, shall be
conducted so as not to interfere with the ongoing operations at such Facility or
to cause any damage or loss to any property at such Facility. Company and Agents
hereby acknowledge and agree that any report of any investigation conducted at
the request of Agents pursuant to this subsection 6.7A will be obtained and
shall be used by Agents and Lenders for the purposes of Lenders' internal credit
decisions, to monitor and police the Loans and to protect Lenders' security
interests, if any, created by the Loan Documents. Agents agree to deliver a copy
of any such report to Company with the understanding that Company acknowledges
and agrees that (x) it will indemnify and hold harmless each Agent and each
Lender from any costs, losses or liabilities relating to Company's use of or
reliance on such report, (y) neither of the Agents nor any Lender makes any
representation or warranty with respect to such report, and (z) by delivering
such report to Company, neither of the Agents nor any Lender is requiring or
recommending the implementation of any suggestions or recommendations contained
in such report. Agents agree that they will not conduct a review pursuant to
clause (i) of this subsection 6.7A more than once per year unless Agents
reasonably believe that Company has breached any representation, warranty or
covenant contained in subsection 5.6, 5.13, 6.6 or 6.7, or that there has been a
material violation of Environmental Laws at any Facility or by Company or any of
its Subsidiaries at any other location or in the event an Event of Default has
occurred and is continuing. Agents further agree that they will not undertake an
investigation of a Facility pursuant to clause (ii) of this subsection 6.7A
unless and to the extent Agents reasonably believe a material violation of
Environmental Laws has occurred at such Facility or Agents reasonably believe
Company or any of its Subsidiaries has breached or defaulted under its
obligations, representations or warranties relating to compliance with
Environmental Laws with respect to such Facility, as set forth in this
Agreement; provided, however, Agents may undertake a new investigation of any
Facility pursuant to clause (ii) above for any reason in the event an Event of
Default has occurred and is continuing.
B. ENVIRONMENTAL DISCLOSURE. Company will deliver to
Agents and Lenders:
(i) Environmental Audits and Reports. As soon as practicable
following receipt thereof, copies of all environmental audits,
investigations, analyses and reports of any kind or character, whether
prepared by personnel of Company or any of its Subsidiaries or by
independent consultants, governmental authorities or any other Persons,
with respect to significant environmental matters at any Facility that
could reasonably be expected to have a Material Adverse Effect;
(ii) Notice of Certain Releases, Remedial Actions, Etc.
Promptly upon the occurrence thereof, written notice describing in
reasonable detail (a) any Release
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required to be reported to any federal, state or local governmental or
regulatory agency under any applicable Environmental Laws unless such
release could not reasonably be expected to have a Material Adverse
Effect, (b) any remedial action taken by Company or any other Person in
response to (1) any Hazardous Materials Activities the existence of
which could reasonably be expected to result in one or more
Environmental Claims having, individually or in the aggregate, a
Material Adverse Effect, or (2) any Environmental Claims that,
individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect, and (c) Company's discovery of any
occurrence or condition on any real property adjoining or in the
vicinity of any Facility that could reasonably be expected to result in
such Facility or any part thereof to be subject to any material
restrictions on the ownership, occupancy, transferability or use
thereof under any Environmental Laws.
(iii) Written Communications Regarding Environmental Claims,
Releases, Etc. As soon as practicable following the sending or receipt
thereof by Company or any of its Subsidiaries, a copy of any and all
written communications with respect to (a) any Environmental Claims
that, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect, (b) any Release required to be reported
to any federal, state or local governmental or regulatory agency, and
(c) any request for information from any governmental agency that
suggests such agency is investigating whether Company or any of its
Subsidiaries may be potentially responsible for any Hazardous Materials
Activity where such Hazardous Materials Activity could reasonably be
expected to have a Material Adverse Effect.
(iv) Notice of Certain Proposed Actions Having Environmental
Impact. Prompt written notice describing in reasonable detail (a) any
proposed acquisition of stock, assets, or property by Company or any of
its Subsidiaries that could reasonably be expected to (1) expose
Company or any of its Subsidiaries to, or result in, Environmental
Claims that could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect or (2) affect the ability of
Company or any of its Subsidiaries to maintain in full force and effect
all material Governmental Authorizations required under any
Environmental Laws for their respective operations and (b) any proposed
action to be taken by Company or any of its Subsidiaries to commence
manufacturing or other industrial operations or to modify current
operations in a manner that could reasonably be expected to subject
Company or any of its Subsidiaries to any additional obligations or
requirements under any Environmental Laws where such obligations or
requirements could reasonably be expected to have a Material Adverse
Effect.
(v) Other Information. With reasonable promptness, such other
documents and information as from time to time may be reasonably
requested by Agents in relation to any matters disclosed pursuant to
this subsection 6.7.
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C. COMPANY'S ACTIONS REGARDING HAZARDOUS MATERIALS
ACTIVITIES, ENVIRONMENTAL CLAIMS AND VIOLATIONS OF ENVIRONMENTAL LAWS.
(i) Remedial Actions Relating to Hazardous Materials
Activities. Company shall promptly undertake (acting directly or
through an indemnitor), and shall cause each of its Subsidiaries
promptly to undertake, any and all investigations, studies, sampling,
testing, abatement, cleanup, removal, remediation or other response
actions necessary to remove, remediate, clean up or abate any Hazardous
Materials Activity on, under or about any Facility that is in violation
in any material respect of any Environmental Laws or that presents a
material risk of giving rise to an Environmental Claim. Without
limiting the generality of the foregoing, Company agrees to provide
Agents with periodic updates, at least once every year, regarding the
status of (x) items indicated with an asterisk in Schedule 5.13, (y)
any items listed on Schedule 5.13 with respect to which Company's
projected liability or costs of compliance increase by more than
$250,000 (as reasonably determined from time to time) and (z) new items
involving any breach of Environmental Laws to the extent Company's
projected liability or costs of compliance (as reasonably determined
from time to time) equals or exceeds $150,000. In the event Company or
any of its Subsidiaries undertakes any such action with respect to any
Hazardous Materials, Company or such Subsidiary shall conduct and
complete such action in compliance with all applicable Environmental
Laws and in accordance with the policies, orders and directives of all
federal, state and local governmental authorities except when, and only
to the extent that, Company's or such Subsidiary's liability with
respect to such Hazardous Materials Activity is being contested in good
faith by Company or such Subsidiary.
(ii) Actions with Respect to Environmental Claims and
Violations of Environmental Laws. Company shall promptly take, and
shall cause each of its Subsidiaries promptly to take, any and all
actions necessary to (i) cure any violation of applicable Environmental
Laws by Company or its Subsidiaries where such violation could
reasonably be expected to have a Material Adverse Effect and (ii) make
an appropriate response to any Environmental Claim against Company or
any of its Subsidiaries where such Environmental Claim could
reasonably be expected to have a Material Adverse Effect and
discharge any obligations it may have to any Person thereunder.
6.8 EXECUTION OF SUBSIDIARY GUARANTY AND PERSONAL PROPERTY
COLLATERAL DOCUMENTS BY CERTAIN SUBSIDIARIES AND FUTURE
SUBSIDIARIES; EXECUTION OF AUXILIARY PLEDGE AGREEMENTS; IP
COLLATERAL.
A. EXECUTION OF SUBSIDIARY GUARANTY AND PERSONAL PROPERTY
COLLATERAL DOCUMENTS. In the event that any Person becomes a Subsidiary of
Company (or
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a Subsidiary of a Subsidiary of Company) after the date hereof,
Company will promptly notify Administrative Agent of that fact and cause such
Subsidiary, if it is a Domestic Subsidiary, to execute and deliver to
Administrative Agent a counterpart of the Subsidiary Guaranty and a Subsidiary
Security Agreement and to take all such further actions and execute all such
further documents and instruments (including actions, documents and instruments
comparable to those described in subsection 4.2I) as may be necessary or, in the
opinion of Agents, desirable to create in favor of Administrative Agent, for the
benefit of Lenders, a valid and perfected First Priority Lien on all of the
personal and mixed property assets of such Subsidiary described in the
applicable forms of Collateral Documents. With respect to any such Subsidiary
which is a Domestic Subsidiary, Company shall also deliver to Administrative
Agent a Subsidiary Pledge Agreement, granting to Administrative Agent on behalf
of Lenders a First Priority Lien in 100% of the capital stock of such Domestic
Subsidiary, and with respect to any such Subsidiary which is a Foreign
Subsidiary, if Company or a Domestic Subsidiary owns the capital stock of such
Foreign Subsidiary, Company shall deliver to Administrative Agent an Auxiliary
Pledge Agreement granting to Administrative Agent on behalf of Lenders a First
Priority Lien in 65% of the capital stock of such Foreign Subsidiary, and, in
each case, Company shall take, or cause to be taken, all such other actions as
Administrative Agent shall deem necessary or desirable to perfect such security
interest.
B. SUBSIDIARY CHARTER DOCUMENTS, LEGAL OPINIONS, ETC. Company
shall deliver to Administrative Agent, together with such Loan Documents, or
other organization documents (i) certified copies of such Subsidiary's
Certificate or Articles of Incorporation or other organizational documents,
together with a good standing certificate from the Secretary of State of the
jurisdiction of its incorporation and each other state in which such Person is
qualified as a foreign corporation to do business if such Subsidiary is a
Domestic Subsidiary and, to the extent generally available, a certificate or
other evidence of good standing as to payment of any applicable franchise or
similar taxes from the appropriate taxing authority of each of such
jurisdictions if such Subsidiary is a Domestic Subsidiary, each to be dated a
recent date prior to their delivery to Administrative Agent, (ii) a copy of such
Subsidiary's Bylaws or other organizational documents, certified by its
corporate secretary or an assistant secretary as of a recent date prior to their
delivery to Administrative Agent, (iii) a certificate executed by the secretary
or an assistant secretary of such Subsidiary as to (a) the fact that the
attached resolutions of the Board of Directors of such Subsidiary approving and
authorizing the execution, delivery and performance of such Loan Documents are
in full force and effect and have not been modified or amended and (b) the
incumbency and signatures of the officers of such Subsidiary Guarantor executing
such Loan Documents, and (iv) a favorable opinion of counsel to such Subsidiary
Guarantor, in form and substance satisfactory to Agents and their respective
counsel, as to (a) the due organization and good standing of such Subsidiary,
(b) the due authorization, execution and delivery by such Subsidiary of such
Loan Documents, (c) the enforceability of such Loan Documents against such
Subsidiary, (d) such other matters (including matters relating to the creation
and perfection of Liens in any Collateral pursuant to such Loan
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Documents) as Agents may reasonably request, all of the foregoing to be
satisfactory in form and substance to Agents and their respective counsel.
6.9 CONFORMING LEASEHOLD INTERESTS; MATTERS RELATING TO ADDITIONAL REAL
PROPERTY COLLATERAL.
A. CONFORMING LEASEHOLD INTERESTS. If Company or any of its
Subsidiaries acquires any Material Leasehold Property, Company shall, or shall
cause such Subsidiary to, cause such Material Leasehold Property to be a
Conforming Leasehold Interest.
B. ADDITIONAL MORTGAGES, ETC. From and after the Closing Date,
in the event that (i) Company or any Subsidiary Guarantor acquires any fee
interest in Material Real Property or any Material Leasehold Property or (ii) at
the time any Person becomes a Subsidiary Guarantor, such Person owns or holds
any fee interest in material real property or any Material Leasehold Property,
in either case excluding any such Real Property Asset the encumbrancing of which
requires the consent of any applicable lessor or (in the case of clause (ii)
above) then-existing senior lienholder, where Company and its Subsidiaries are
unable to obtain such lessor's or senior lienholder's consent (any such
non-excluded Real Property Asset described in the foregoing clause (i) or (ii)
being an "ADDITIONAL MORTGAGED PROPERTY"), Company or such Subsidiary Guarantor
shall deliver to Administrative Agent, as soon as practicable after such Person
acquires such Additional Mortgaged Property or becomes a Subsidiary Guarantor,
as the case may be, the following:
(i) Additional Mortgage. A fully executed and notarized
Mortgage (an "ADDITIONAL MORTGAGE"), duly recorded in all appropriate
places in all applicable jurisdictions, encumbering the interest of
such Loan Party in such Additional Mortgaged Property;
(ii) Opinions of Counsel. (a) A favorable opinion of counsel to
such Loan Party, in form and substance satisfactory to Agents and their
respective counsel, as to the due authorization, execution and delivery
by such Loan Party of such Additional Mortgage and such other matters
as Agents may reasonably request, and (b) if required by Agents, an
opinion of counsel (which counsel shall be reasonably satisfactory to
Agents) in the state in which such Additional Mortgaged Property is
located with respect to the enforceability of the form of Additional
Mortgage recorded in such state and such other matters (including any
matters governed by the laws of such state regarding personal property
security interests in respect of any Collateral) as Agents may
reasonably request, in each case in form and substance reasonably
satisfactory to Agents;
(iii) Landlord Consent and Estoppel; Recorded Leasehold
Interest. In the case of an Additional Mortgaged Property consisting of
a Leasehold Property, (a) a
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Landlord Consent and Estoppel, and (b) evidence that such Leasehold
Property is a Recorded Leasehold Interest;
(iv) Title Insurance. (a) If required by Agents, an ALTA
mortgagee title insurance policy or an unconditional commitment
therefor (an "ADDITIONAL MORTGAGE POLICY") issued by the Title Company
with respect to such Additional Mortgaged Property, in an amount
satisfactory to Agents, insuring fee simple title to, or a valid
leasehold interest in, such Additional Mortgaged Property vested in
such Loan Party and assuring Agents that such Additional Mortgage
creates a valid and enforceable First Priority mortgage Lien on such
Additional Mortgaged Property, subject only to a standard survey
exception, which Additional Mortgage Policy (1) shall include an
endorsement for mechanics' liens, for future advances under this
Agreement and for any other matters reasonably requested by Agents and
(2) shall provide for affirmative insurance and such reinsurance as
Agents may reasonably request, all of the foregoing in form and
substance reasonably satisfactory to Agents; and (b) evidence
satisfactory to Agents that such Loan Party has (i) delivered to the
Title Company all certificates and affidavits required by the Title
Company in connection with the issuance of the Additional Mortgage
Policy and (ii) paid to the Title Company or to the appropriate
governmental authorities all expenses and premiums of the Title Company
in connection with the issuance of the Additional Mortgage Policy and
all recording and stamp taxes (including mortgage recording and
intangible taxes) payable in connection with recording the Additional
Mortgage in the appropriate real estate records;
(v) Title Report. If no Additional Mortgage Policy is required
with respect to such Additional Mortgaged Property, a title report
issued by the Title Company with respect thereto, dated not more than
30 days prior to the date such Additional Mortgage is to be recorded
and satisfactory in form and substance to Agents;
(vi) Copies of Documents Relating to Title Exceptions. Copies
of all recorded documents listed as exceptions to title or otherwise
referred to in the Additional Mortgage Policy or title report delivered
pursuant to clause (v) or (vi) above;
(vii) Matters Relating to Flood Hazard Properties. (a)
Evidence, which may be in the form of a letter from an insurance broker
or a municipal engineer, as to (1) whether such Additional Mortgaged
Property is a Flood Hazard Property and (2) if so, whether the
community in which such Flood Hazard Property is located is
participating in the National Flood Insurance Program, (b) if such
Additional Mortgaged Property is a Flood Hazard Property, such Loan
Party's written acknowledgement of receipt of written notification from
Administrative Agent (1) that such Additional Mortgaged Property is a
Flood Hazard Property and (2) as to
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whether the community in which such Flood Hazard Property is located is
participating in the National Flood Insurance Program, and (c) in the
event such Additional Mortgaged Property is a Flood Hazard Property
that is located in a community that participates in the National Flood
Insurance Program, evidence that Company has obtained flood insurance
in respect of such Flood Hazard Property to the extent required under
the applicable regulations of the Board of Governors of the Federal
Reserve System; and
(viii) Environmental Audit. If required by Agents, reports and
other information, in form, scope and substance reasonably satisfactory
to Agents and prepared by environmental consultants reasonably
satisfactory to Agents, concerning any environmental hazards or
liabilities to which Company or any of its Subsidiaries may be subject
with respect to such Additional Mortgaged Property.
6.10 INTEREST RATE PROTECTION.
Within 90 days after the Closing Date and continuing for a
period of two years, Company shall at all times maintain in effect one or more
Interest Rate Agreements with respect to the Loans, in an aggregate notional
principal amount of not less than 331/3% of the aggregate principal amount of
the Term Loans outstanding from time to time, which Interest Rate Agreements
shall have the effect of establishing a maximum interest rate to the
satisfaction of Syndication Agent per annum with respect to such notional
principal amount, each such Interest Rate Agreement to be in form and substance
satisfactory to Syndication Agent and with a term of not less than two years.
6.11 CLOSING CONDITIONS.
On the Closing Date, Company shall deliver each of the
documents and comply with each of the other conditions specified in subsections
4.1 and 4.2, notwithstanding the funding of the Term Loans and the Initial
Revolving Loans by Lenders prior to the delivery of the documents and
compliance with the conditions specified in subsection 4.2.
SECTION 7. COMPANY'S NEGATIVE COVENANTS
Company covenants and agrees that, so long as any of the
Commitments hereunder shall remain in effect and until payment in full of all of
the Loans and other Obligations and the cancellation or expiration of all
Letters of Credit, unless Requisite Lenders shall otherwise give prior written
consent, Company shall perform, and shall cause each of its Subsidiaries to
perform, all covenants in this Section 7.
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7.1 INDEBTEDNESS.
Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume or guaranty, or otherwise
become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(i) Company may become and remain liable with respect to
the Obligations;
(ii) Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations permitted by subsection 7.4 and,
upon any matured obligations actually arising pursuant thereto, the
Indebtedness corre sponding to the Contingent Obligations so
extinguished;
(iii) Company and its Subsidiaries may become and remain liable
with respect to Indebtedness in respect of Capital Leases and
Indebtedness incurred or assumed to finance solely the acquisition of
real or personal property to be used in the business of Company or a
Subsidiary in an amount not in excess of 100% of the cost of such
property ("purchase money Indebtedness") in an aggregate amount not
exceeding $10,000,000 plus any Capital Lease and purchase money
Indebtedness in existence on the date hereof; provided that such
Capital Leases and purchase money Indebtedness are permitted under the
terms of subsections 7.6 and 7.8;
(iv) Company may become and remain liable with respect to
Indebtedness to any of its wholly-owned Domestic Subsidiaries, and any
wholly-owned Domestic Subsidiary of Company may become and remain
liable with respect to Indebtedness to Company or any other
wholly-owned Subsidiary of Company; provided that (a) all such
intercompany Indebtedness shall be evidenced by promissory notes,
(b) all such intercompany Indebtedness owed by Company to any of its
Subsidiaries shall be subordinated in right of payment to the payment
in full of the Obligations pursuant to the terms of the applicable
promissory notes or an intercompany subordination agreement, and
(c) any payment by any Subsidiary of Company under any guaranty of the
Obligations shall result in a pro tanto reduction of the amount of any
intercompany Indebtedness owed by such Subsidiary to Company or to any
of its Subsidiaries for whose benefit such payment is made;
(v) Company and its Subsidiaries, as applicable, may remain
liable with respect to Indebtedness described in Schedule 7.1 annexed
hereto and any refinancings, extensions, renewals or replacements
thereof; provided, however that in connection with any refinancing,
extension, renewal or replacement, the principal amount of such
Indebtedness shall not be increased over the principal amount
outstanding immediately prior to such refinancing, extension, renewal
or
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replacement and provided, further, that any such refinancing,
extension, renewal or replacement shall be on terms no less favorable
to Company than the Indebtedness so refinanced, extended, renewed or
replaced;
(vi) Company and its Subsidiaries may become and remain liable
with respect to other Indebtedness in an aggregate principal amount not
to exceed $2,000,000 at any time outstanding;
(vii) Stanadyne Italy may become and remain liable with respect
to Indebtedness (including Indebtedness described in clause (v)) in an
aggregate principal amount not to exceed $10,000,000 at any time
outstanding; provided that such Indebtedness shall not be guarantied by
Holdings or any Domestic Subsidiary of Holdings or the Company;
(viii) Company may become and remain liable with respect to
Subordinated Indebtedness (including Indebtedness described in clause
(v)) in an aggregate principal amount not to exceed $125,000,000 at any
time outstanding;
(ix) a Subsidiary may remain liable with respect to
Indebtedness incurred prior to the date that such Person became a
Subsidiary, provided that such Indebtedness was not incurred in
anticipation of such Person becoming a Subsidiary; provided, further
that Company delivers an Officer's Certificate demonstrating, assuming
such Person was a Subsidiary and such Indebtedness was outstanding as
of the first day of the applicable four-quarter period, Company was in
compliance with subsection 7.6B as of the end of the most recent
four-quarter period for which a Compliance Certificate has been
delivered pursuant to subsection 6.1(iv); and
(x) Company and its Domestic Subsidiaries may remain liable
with respect to Indebtedness secured by any asset acquired by Company
and such Subsidiary; provided that such Indebtedness was incurred prior
to the date such asset was acquired and provided further that such
Indebtedness was not incurred in anticipation of such asset being
acquired; and provided further that Company delivers an Officer's
Certificate demonstrating that, assuming such asset was acquired and
such Indebtedness was outstanding as of the first day of the applicable
four-quarter period, Company was in compliance with subsection 7.6B as
of the end of the most recent four-quarter period for which a
Compliance Certificate has been delivered pursuant to subsection
6.1(iv).
7.2 LIENS AND RELATED MATTERS.
A. PROHIBITION ON LIENS. Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, create, incur, assume
or permit to exist any Lien on or with respect to any property or asset of any
kind (including any document or instrument in respect of goods or accounts
receivable) of Company or any of its
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Subsidiaries, whether now owned or hereafter acquired, or any income or profits
therefrom, or file or permit the filing of, or permit to remain in effect, any
financing statement or other similar notice of any Lien with respect to any such
property, asset, income or profits under the Uniform Commercial Code of any
State or under any similar recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens granted pursuant to the Collateral Documents;
(iii) Liens described in Schedule 7.2 annexed hereto; and
(iv) Other Liens securing Indebtedness in an aggregate amount
not to exceed $1,000,000 at any time outstanding.
B. EQUITABLE LIEN IN FAVOR OF LENDERS. If Company or any of its
Subsidiaries shall create or assume any Lien upon any of its properties or
assets, whether now owned or hereafter acquired, other than Liens excepted by
the provisions of subsection 7.2A, it shall make or cause to be made effective
provision whereby the Obligations will be secured by such Lien equally and
ratably with any and all other Indebtedness secured thereby as long as any such
Indebtedness shall be so secured; provided that, notwithstanding the foregoing,
this covenant shall not be construed as a consent by Requisite Lenders to the
creation or assumption of any such Lien not permitted by the provisions of
subsection 7.2A.
C. NO FURTHER NEGATIVE PLEDGES. Except with respect to specific
property encumbered to secure payment of particular Indebtedness or to be sold
pursuant to an executed agreement with respect to an Asset Sale, neither Company
nor any of its Subsidiaries shall enter into any agreement (other than an
agreement prohibiting only the creation of Liens securing Subordinated
Indebtedness) prohibiting the creation or assumption of any Lien upon any of its
properties or assets, whether now owned or hereafter acquired.
D. NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO COMPANY OR OTHER
SUBSIDIARIES. Except as provided herein, Company will not, and will not permit
any of its Subsidiaries to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any such Subsidiary to (i) pay dividends or make any other
distributions on any of such Subsidiary's capital stock owned by Company or any
other Subsidiary of Company, (ii) repay or prepay any Indebtedness owed by such
Subsidiary to Company or any other Subsidiary of Company, (iii) make loans or
advances to Company or any other Subsidiary of Company, or (iv) transfer any of
its property or assets to Company or any other Subsidiary of Company.
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7.3 INVESTMENTS; JOINT VENTURES.
Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, make or own any Investment in any Person, including
any Joint Venture, except:
(i) Company and its Subsidiaries may make and own
Investments in Cash Equivalents;
(ii) Company and its Subsidiaries may make and own Investments
in any Subsidiary of Company existing on the Closing Date;
(iii) Company and its Subsidiaries may make intercompany loans
to the extent permitted under subsection 7.1(iv);
(iv) Company and its Subsidiaries may make Consolidated
Capital Expenditures permitted by subsections 7.6 and 7.8;
(v) Company and its Subsidiaries may continue to own the
Investments owned by them and described in Schedule 7.3 annexed hereto;
(vi) Company may purchase Holdings common stock from officers
of Company who are terminating employment with Company and Company may
continue to own such stock; and
(vii) Company and its Subsidiaries may make and own other
Investments in an aggregate amount not to exceed at any time:
(A) if the Company or its Subsidiaries owns 100% of such
Investment, an amount equal to the sum of (y) of any equity contributed
to Company by AIP, funds controlled by American Industrial Partners,
other current shareholders of Holdings or management of Company in
connection with the Acquisition or employee incentive arrangements,
after the Closing Date plus (y) up to $25,000,000 of proceeds of newly
issued Subordinated Indebtedness plus (z) the amount of Consolidated
Excess Cash Flow which is not required to be prepaid under subsection
2.4B(iii)(f);
(B) if the Company owns less than 100% of such Investment
but equal to or more than 51% of such Investment, $10,000,000; and
(C) if the Company owns less than 51% of such Investment,
$7,500,000.
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7.4 CONTINGENT OBLIGATIONS.
Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create or become or remain liable with respect to
any Contingent Obligation, except:
(i) Subsidiaries of Company may become and remain liable
with respect to Contingent Obligations in respect of the Subsidiary
Guaranty;
(ii) Company may become and remain liable with respect to
Contingent Obligations in respect of Letters of Credit and Company and
its Subsidiaries may become and remain liable with respect to
Contingent Obligations in respect of other letters of credit in an
aggregate amount at any time not to exceed $1,000,000;
(iii) Company may become and remain liable with respect to
Contingent Obligations under Hedge Agreements required under subsection
6.10;
(iv) Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations under guarantees in the ordinary
course of business of the obligations of suppliers, customers,
franchisees and licensees of Company and its Subsidiaries in an
aggregate amount not to exceed at any time $2,000,000;
(v) Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations in respect of any Indebtedness
of Company or any of its Domestic Subsidiaries permitted by
subsection 7.1;
(vi) Company and its Subsidiaries, as applicable, may remain
liable with respect to Contingent Obligations described in Schedule 7.4
annexed hereto;
(vii) Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations in the nature of endorsements of
instruments and similar items for collection;
(viii) Company may become and remain liable with respect to
Contingent Obligations relating to purchases of Holdings common stock
permitted by subsection 7.3(vi); and
(ix) Company and its Subsidiaries may become and remain liable
with respect to other Contingent Obligations; provided that the maximum
aggregate liability, contingent or otherwise, of Company and its
Subsidiaries in respect of all such Contingent Obligations shall at no
time exceed $2,000,000.
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7.5 RESTRICTED JUNIOR PAYMENTS.
Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, declare, order, pay, make or set apart any sum for
any Restricted Junior Payment; provided that any Subsidiary may pay dividends or
make other distributions to Company and provided, further, that, if no Event of
Default or Potential Event of Default has occurred and is continuing, Company
may (i) pay dividends to Holdings in an amount not to exceed the amount
necessary for Holdings to pay taxes imposed on Holdings when due, and pay
expenses of Holdings up to an amount not to exceed (a) Transaction Costs payable
by Holdings and (b) $200,000 per annum; (ii) purchase stock of Holdings as
contemplated by subsection 7.3(vi); (iii) pay management fees to AIP in an
amount not exceed $1.1 million per annum (the obligation to pay such fees to be
subordinated to the payment of all Obligations hereunder on terms satisfactory
to Agents); and (iv) make regularly scheduled payments of interest on
Subordinated Indebtedness.
7.6 FINANCIAL COVENANTS.
A. MINIMUM FIXED CHARGE COVERAGE RATIO. Company shall not permit the
ratio of (i) Consolidated EBITDA to (ii) Consolidated Fixed Charges for any
consecutive four-Fiscal Quarter period ending on the dates set forth below to be
less than the correlative ratio indicated:
MINIMUM
CONSOLIDATED FIXED
FISCAL QUARTER ENDING DATE CHARGE COVERAGE RATIO
-------------------------- ---------------------
March 31, 1998 1.70
June 30, 1998 1.70
September 30, 1998 1.75
December 31, 1998 1.75
March 31, 1999 1.80
June 30, 1999 1.80
September 30, 1999 1.80
December 31, 1999 1.80
March 31, 2000 and thereafter 1.90
June 30, 2000 1.90
September 30, 2000 1.90
December 1, 2000 and thereafter 2.00
B. MAXIMUM LEVERAGE RATIO. Company shall not permit the Consolidated
Leverage Ratio at the end of any of the periods set forth below to exceed the
correlative ratio indicated:
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MAXIMUM CONSOLIDATED
PERIOD LEVERAGE RATIO
----------------------------------- ---------------------
January 1, 1998 - March 31, 1998 5.50
April 1, 1998 - June 30, 1998 5.25
July 1, 1998 - September 30, 1998 5.00
October 1, 1998 - December 31, 1998 4.90
January 1, 1999 - March 31, 1999 4.70
April 1, 1999 - June 30, 1999 4.60
July 1, 1999 - September 30, 1999 4.50
October 1, 1999 - December 31, 1999 4.40
January 1, 2000 - March 31, 2000 4.25
April 1, 2000 - June 30, 2000 4.25
July 1, 2000 - December 31, 2000 4.00
January 1, 2001 - March 31, 2001 4.00
April 1, 2001 - September 30, 2001 3.75
October 1, 2001 and thereafter 3.50
C. MINIMUM CONSOLIDATED EBITDA. Company shall not permit Consolidated
EBITDA for the consecutive four-Fiscal Quarter period ending on the date
indicated below to be less than the correlative amount indicated:
MINIMUM CONSOLIDATED
FISCAL QUARTER ENDING DATE EBITDA
----------------------------------- --------------------
$ in millions
March 31, 1998 30
June 30, 1998 30
September 30, 1998 30
December 31, 1998 30
March 31, 1999 32
June 30, 1999 32
September 30, 1999 33
December 31, 1999 33
March 31, 2000 34
June 30, 2000 34
September 30, 2000 35
December 31, 2000 35
March 31, 2001 39
June 30, 2001 39
September 30, 2001 39
thereafter 42
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D. MINIMUM CONSOLIDATED NET WORTH. Company shall not permit Con
solidated Net Worth at the end of any period ending on the dates set forth below
to be less than the correlative amount indicated:
MINIMUM
CONSOLIDATED NET WORTH
PERIOD ENDING ($ in millions)
------------------------ ------------------------
March 31, 1998 45
June 30, 1998 45
September 30, 1998 45
December 31, 1998 45
March 31, 1999 45
June 30, 1999 45
September 30, 1999 45
December 31, 1999 45
March 31, 2000 50
June 30, 2000 50
September 30, 2000 50
December 31, 2000 50
March 31, 2001 and
thereafter 55
7.7 RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES AND ACQUISITIONS.
Except as contemplated by the Acquisition Agreement, Holdings
and Company shall not, and shall not permit any of Company's Subsidiaries to,
alter the corporate, capital or legal structure of Holdings or Company or any of
Company's Subsidiaries, or enter into any transaction of merger or
consolidation, or liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease or sublease (as lessor or
sublessor), transfer or otherwise dispose of, in one transaction or a series of
transactions, all or substantially all of its business, property or assets, with
the exception of Inventory sold in the ordinary course of business, whether now
owned or hereafter acquired, or acquire by purchase or otherwise all or
substantially all the business, property or fixed assets of, or stock or other
evidence of beneficial ownership of, any Person or any division or line of
business of any Person, except:
(i) any Subsidiary of Company may be merged with or into
Company or any wholly-owned Subsidiary Guarantor, or be liquidated,
wound up or dissolved, or all or any part of its business, property or
assets may be conveyed, sold, leased, transferred or otherwise disposed
of, in one transaction or a series of transactions, to Company or any
wholly-owned Subsidiary Guarantor if no Potential Event of Default or
Event of Default shall have occurred and be continuing at the time of,
or
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as a result of, such transaction; provided that, in the case of such a
merger, Company or such wholly-owned Subsidiary Guarantor shall be the
continuing or surviving corporation;
(ii) Company and its Subsidiaries may make Consolidated Capital
Expenditures permitted under subsection 7.8 and may make Investments
permitted under subsection 7.3;
(iii) Company and its Subsidiaries may dispose of obsolete,
worn out or surplus property in the ordinary course of business;
(iv) Company and its Subsidiaries may sell, license or
otherwise dispose of assets in transactions that do not constitute
Asset Sales; provided that the consideration received for such assets
shall be in an amount at least equal to the fair market value thereof;
and
(v) Company and its Subsidiaries may make Asset Sales if the
Net Asset Sale Proceeds are applied pursuant to section 2.4(B)(iii)(a);
provided that this clause (v) shall not apply to a sale of all or
substantially all of the assets of Company, Precision Engine Company
and any other asset the Net Asset Sale Proceeds of which exceed $10
million.
7.8 CONSOLIDATED CAPITAL EXPENDITURES.
Company shall not, and shall not permit its Subsidiaries to,
make or incur Consolidated Capital Expenditures in any Fiscal Year in an
aggregate amount exceeding $20,000,000 plus the amount of Consolidated Excess
Cash Flow which is not required to be prepaid under subsection 2.4B(iii)(f),
plus the amount of Net Asset Sale Proceeds not required to be prepaid under
subsection 2.4B(iii)(a), plus the amount of Net Insurance/Condemnation Proceeds
not required to be prepaid under subsection 2.4B(iii)(b), plus the amount of
equity contributed to Company by AIP after the Closing Date; provided that such
amount for any Fiscal Year shall be increased by an amount equal to the excess,
if any, of the amount permitted for the preceding Fiscal Year over the actual
amount of Consolidated Capital Expenditures for such previous Fiscal Year (but
such increase shall not exceed $5,000,000).
7.9 FISCAL YEAR
Company shall not change its Fiscal Year-end from December 31
of each calendar year.
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7.10 SALES AND LEASE-BACKS.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, become or remain liable as lessee or as a guarantor or
other surety with respect to any lease, whether an Operating Lease or a Capital
Lease, of any property (whether real, personal or mixed), whether now owned or
hereafter acquired, (i) which Company or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other than Company or
any of its Subsidiaries) or (ii) which Company or any of its Subsidiaries
intends to use for substantially the same purpose as any other property which
has been or is to be sold or transferred by Company or any of its Subsidiaries
to any Person (other than Company or any of its Subsidiaries) in connection with
such lease; provided that Company and its Subsidiaries may become and remain
liable as lessee, guarantor or other surety with respect to any such lease with
respect to any such lease if and to the extent that Company or any of its
Subsidiaries would be permitted to enter into, and remain liable under, such
lease to the extent that the transaction would be permitted under subsection
7.1, assuming the sale and lease back transaction constituted Indebtedness in a
principal amount equal to the gross proceeds of the sale.
7.11 SALE OR DISCOUNT OF RECEIVABLES.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, sell with recourse, or discount or otherwise sell for
less than the face value thereof, any of its domestic notes or domestic accounts
receivable.
7.12 TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES.
Except for payment of the management fee to AIP as described in
subsection 7.5, the transactions contemplated by the Acquisition Agreement and
the transactions described on Schedule 7.12, Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, enter into or permit
to exist any transaction (including the purchase, sale, lease or exchange of any
property or the rendering of any service) with any holder of 5% or more of any
class of equity Securities of Company or with any Affiliate of Company or of any
such holder, on terms that are less favorable to Company or that Subsidiary, as
the case may be, than those that might be obtained at the time from Persons who
are not such a holder or Affiliate; provided that the foregoing restriction
shall not apply to (i) any transaction between Company and any of its
wholly-owned Subsidiaries or between any of its wholly-owned Subsidiaries or
(ii) reasonable and customary fees paid to members of the Boards of Directors of
Company and its Subsidiaries.
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7.13 DISPOSAL OF SUBSIDIARY STOCK.
Company shall not:
(i) directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of capital stock or other equity
Securities of any of its Subsidiaries, except to qualify directors or
provide for ownership by foreign Persons, in either case if required by
applicable law; or
(ii) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity Securities of any of its Subsidiaries (including such
Subsidiary), except to Company, another Subsidiary of Company, or to qualify
directors or provide for ownership by foreign Persons, in either case if
required by applicable law.
Notwithstanding the foregoing, Company may sell 100% of the shares
of capital stock or other equity securities of any of its Subsidiaries so long
as such a sale is not prohibited by such section 6.2 or section 7.7 of this
Agreement. In the event Company does sell 100% of the shares of capital stock or
other equity securities of any of its Subsidiaries as permitted by this
subsection, Administrative Agent shall release all Collateral held in such
Subsidiary upon such sale and such Subsidiary shall be released from all its
obligations under any Loan Document.
7.14 CONDUCT OF BUSINESS.
From and after the Closing Date, Company shall not, and shall not
permit any of its Subsidiaries to, engage in any business other than
(i) businesses of the type engaged in by Company and its Subsidiaries on the
Closing Date and similar or related businesses and (ii) such other lines of
business as may be consented to by Requisite Lenders.
7.15 AMENDMENTS OF DOCUMENTS RELATING TO SUBORDINATED INDEBTEDNESS.
Company shall not, and shall not permit any of its Subsidiaries to,
amend or otherwise change the terms of any Subordinated Indebtedness, or make
any payment consistent with an amendment thereof or change thereto, if the
effect of such amendment or change is to increase the interest rate on such
Subordinated Indebtedness, change (to earlier dates) any dates upon which
payments of principal or interest are due thereon, change any event of default
or condition to an event of default with respect thereto (other than to
eliminate any such event of default or increase any grace period related
thereto), change the redemption, prepayment or defeasance provisions thereof,
change the subordination provisions thereof (or of any guaranty thereof), or
change any collateral therefor (other than to release such collateral), or if
the effect of such amendment or change, together with all other amendments or
changes made, is to increase materially the obligations of the obligor
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thereunder or to confer any additional rights on the holders of such
Subordinated Indebtedness (or a trustee or other representative on their behalf)
which would be adverse to Company or Lenders.
SECTION 8. EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default")
shall occur:
8.1 FAILURE TO MAKE PAYMENTS WHEN DUE.
Failure by Company to pay any installment of principal of any Loan
when due, whether at stated maturity, by acceleration, by notice of voluntary
prepayment, by mandatory prepayment or otherwise; failure by Company to pay
within two Business Days when due any amount payable to an Issuing Lender in
reimbursement of any drawing under a Letter of Credit; or failure by Company to
pay any interest on any Loan or any fee or any other amount due under this
Agreement within five days after the date due; or
8.2 DEFAULT IN OTHER AGREEMENTS.
(i) Failure of Company or any of its Subsidiaries to pay when due
any principal of or interest on or any other amount payable in respect of one or
more items of Indebtedness (other than Indebtedness referred to in subsection
8.1) or Contingent Obligations in either an individual or an aggregate principal
amount of $5,000,000 or more, in each case beyond the end of any grace period
provided therefor; or (ii) breach or default by Company or any of its
Subsidiaries with respect to any other material term of (a) one or more items of
Indebtedness or Contingent Obligations in the individual or aggregate principal
amounts referred to in clause (i) above or (b) any loan agreement, mortgage,
indenture or other agreement relating to such item(s) of Indebtedness or
Contingent Obligation(s) if the effect of such breach or default is to cause, or
to permit the holder or holders of that Indebtedness or Contingent Obligation(s)
(or a trustee on behalf of such holder or holders) to cause, that Indebtedness
or Contingent Obligation(s) to become or be declared due and payable prior to
its stated maturity or the stated maturity of any underlying obligation, as the
case may be (upon the giving or receiving of notice, lapse of time, both, or
otherwise); or
8.3 BREACH OF CERTAIN COVENANTS.
Failure of Company to perform or comply with any term or condition
contained in subsection 2.5, 6.2 or 6.11 or Section 7 of this Agreement; or
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8.4 BREACH OF WARRANTY.
Any representation, warranty, certification or other statement made
by Company or any of its Subsidiaries in any Loan Document or in any statement
or certificate at any time given by Company or any of its Subsidiaries in
writing pursuant hereto or thereto or in connection herewith or therewith shall
be false in any material respect on the date as of which made; or
8.5 OTHER DEFAULTS UNDER LOAN DOCUMENTS.
Any Loan Party shall default in the performance of or compliance
with any term contained in this Agreement or any of the other Loan Documents,
other than any such term referred to in any other subsection of this Section 8,
and such default shall not have been remedied or waived within 20 days after the
earlier of (i) an officer of Company or such Loan Party becoming aware of such
default or (ii) receipt by Company and such Loan Party of notice from any Agent
or any Lender of such default; or
8.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) A court having jurisdiction in the premises shall enter a decree
or order for relief in respect of Holdings or any of its Subsidiaries in an
involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, which decree
or order is not stayed; or any other similar relief shall be granted under any
applicable federal or state law; or (ii) an involuntary case shall be commenced
against Holdings or any of its Subsidiaries under the Bankruptcy Code or under
any other applicable bankruptcy, insolvency or similar law now or hereafter in
effect; or a decree or order of a court having jurisdiction in the premises for
the appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Holdings or any of its Subsidiaries, or
over all or a substantial part of its property, shall have been entered; or
there shall have occurred the involuntary appointment of an interim receiver,
trustee or other custodian of Holdings or any of its Subsidiaries for all or a
substantial part of its property; or a warrant of attachment, execution or
similar process shall have been issued against any substantial part of the
property of Holdings or any of its Subsidiaries, and any such event described in
this clause (ii) shall continue for 60 days unless dismissed, bonded or
discharged; or
8.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) Holdings or any of its Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the
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appointment of or taking possession by a receiver, trustee or other custodian
for all or a substantial part of its property; or Holdings or any of its
Subsidiaries shall make any assignment for the benefit of creditors; or
(ii) Holdings or any of its Subsidiaries shall be unable, or shall fail
generally, or shall admit in writing its inability, to pay its debts as such
debts become due; or the Board of Directors of Holdings or any of its
Subsidiaries (or any committee thereof) shall adopt any resolution or otherwise
authorize any action to approve any of the actions referred to in clause (i)
above or this clause (ii); or
8.8 JUDGMENTS AND ATTACHMENTS.
Any money judgment, writ or warrant of attachment or similar process
involving either in any individual case or in the aggregate at any time an
amount in excess of $5,000,000 (in either case not adequately covered by
insurance as to which a solvent and unaffiliated insurance company has
acknowledged coverage) shall be entered or filed against Company or any of its
Subsidiaries or any of their respective assets and shall remain undischarged,
unvacated, unbonded or unstayed for a period of 60 days; or
8.9 DISSOLUTION.
Any order, judgment or decree shall be entered against Company or
any of its Subsidiaries decreeing the dissolution or split up of Company or that
Subsidiary and such order shall remain undischarged or unstayed for a period in
excess of 30 days; or
8.10 EMPLOYEE BENEFIT PLANS.
There shall occur one or more ERISA Events which individually or in
the aggregate results in or might reasonably be expected to result in liability
of Company, any of its Subsidiaries or any of their respective ERISA Affiliates
in excess of $5,000,000 during the term of this Agreement; or there shall exist
an amount of the excess of the benefit liabilities (as defined in Section
4001(a)(16) of ERISA) over the current value of the assets, individually or in
the aggregate for all Pension Plans (excluding for purposes of such computation
any Pension Plans with respect to which assets exceed benefit liabilities),
which exceeds $5,000,000; or
8.11 CHANGE IN CONTROL.
Any Person or any two or more Persons (other than shareholders of
Holdings on the Closing Date) acting in concert shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Exchange Act), directly or indirectly, of Securities of
Company (or other Securities convertible into such Securities) representing 49%
or more of the combined voting power of all Securities of Company entitled to
vote in the election of directors, other than Securities having such power only
by reason of the happening of a contingency; or
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8.12 INVALIDITY OF GUARANTIES; FAILURE OF SECURITY; REPUDIATION OF
OBLIGATIONS.
At any time after the execution and delivery thereof, (i) any
Guaranty for any reason, other than the satisfaction in full of all Obligations,
shall cease to be in full force and effect (other than in accordance with its
terms) or shall be declared to be null and void, (ii) any Collateral Document
shall cease to be in full force and effect (other than by reason of a release of
Collateral thereunder in accordance with the terms hereof or thereof, the
satisfaction in full of the Obligations or any other termination of such
Collateral Document in accordance with the terms hereof or thereof) or shall be
declared null and void, or Administrative Agent shall not have or shall cease to
have a valid and perfected First Priority Lien in any Collateral purported to be
covered thereby, in each case for any reason other than the failure of any Agent
or any Lender to take any action within its control, or (iii) any Loan Party
shall contest the validity or enforceability of any Loan Document in writing or
deny in writing that it has any further liability, including with respect to
future advances by Lenders, under any Loan Document to which it is a party:
THEN (i) upon the occurrence of any Event of Default described in subsection 8.6
or 8.7, each of (a) the unpaid principal amount of and accrued interest on the
Loans, (b) an amount equal to the maximum amount that may at any time be drawn
under all Letters of Credit then outstanding (whether or not any beneficiary
under any such Letter of Credit shall have presented, or shall be entitled at
such time to present, the drafts or other documents or certificates required to
draw under such Letter of Credit), and (c) all other Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by Company, and the obligation of each Lender to make any Loan, the
obligation of Administrative Agent to issue any Letter of Credit and the right
of any Lender to issue any Letter of Credit hereunder shall thereupon terminate,
and (ii) upon the occurrence and during the continuation of any other Event of
Default, Administrative Agent shall, upon the written request or with the
written consent of Requisite Lenders, by written notice to Company, declare all
or any portion of the amounts described in clauses (a) through (c) above to be,
and the same shall forthwith become, immediately due and payable, and the
obligation of each Lender to make any Loan, the obligation of Administrative
Agent to issue any Letter of Credit, the right of any Lender to issue any Letter
of Credit hereunder and the Commitments shall thereupon terminate; provided that
the foregoing shall not affect in any way the obligations of Lenders under
subsection 3.3C(i) or the obligations of Lenders to purchase participations in
any unpaid Swing Line Loans as provided in subsection 2.1A(iii).
Any amounts described in clause (b) above, when received by
Administrative Agent, shall be held by Administrative Agent and applied as
follows:
If for any reason the aggregate amount delivered by Company as aforesaid is less
than the amount described in clause (b) above (the "AGGREGATE AVAILABLE
AMOUNT"), the aggregate amount so delivered shall be apportioned among all
outstanding Letters of Credit in
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accordance with the ratio of the maximum amount available for drawing under each
such Letter of Credit (as to such Letter of Credit, the "MAXIMUM AVAILABLE
AMOUNT") to the Aggregate Available Amount. Upon any drawing under any
outstanding Letters of Credit in respect of which Company has delivered to
Administrative Agent any amounts described above, Administrative Agent shall
apply such amounts to reimburse the Issuing Lender for the amount of such
drawing. In the event of cancellation or expiration of any Letter of Credit in
respect of which Company has any amounts described above, or in the event of any
reduction in the Maximum Available Amount under such Letter of Credit,
Administrative Agent shall apply the amount then on deposit with it in respect
of such Letter of Credit (less, in the case of such a reduction, the Maximum
Available Amount under such Letter of Credit immediately after such reduction)
first, to the extent of any excess, to the cash collateralization of any
outstanding Letters of Credit in respect of which Company has failed to pay all
or a portion of the amounts described above (such cash collateralization to be
apportioned among all such Letters of Credit in the manner described above),
second, to the extent of any further excess, to the payment of any other
outstanding Obligations in such order as Administrative Agent shall elect, and
third, to the extent of any further excess, to the payment to whomsoever shall
be lawfully entitled to receive such funds.
Notwithstanding anything contained in the second preceding
paragraph, if at any time within 60 days after an acceleration of the Loans
pursuant to clause (ii) of such paragraph Company shall pay all arrears of
interest and all payments on account of principal which shall have become due
otherwise than as a result of such acceleration (with interest on principal and,
to the extent permitted by law, on overdue interest, at the rates specified in
this Agreement) and all Events of Default and Potential Events of Default (other
than non-payment of the principal of and accrued interest on the Loans, in each
case which is due and payable solely by virtue of acceleration) shall be
remedied or waived pursuant to subsection 10.6, then Requisite Lenders, by
written notice to Company, may at their option rescind and annul such
acceleration and its consequences; but such action shall not affect any
subsequent Event of Default or Potential Event of Default or impair any right
consequent thereon. The provisions of this paragraph are intended merely to bind
Lenders to a decision which may be made at the election of Requisite Lenders and
are not intended, directly or indirectly, to benefit Company, and such
provisions shall not at any time be construed so as to grant Company the right
to require Lenders to rescind or annul any acceleration hereunder or to preclude
Administrative Agent or Lenders from exercising any of the rights or remedies
available to them under any of the Loan Documents, even if the conditions set
forth in this paragraph are met.
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SECTION 9. THE AGENTS
9.1 APPOINTMENT.
A. APPOINTMENT OF AGENTS. FNBC is hereby appointed Administrative Agent here
under and under the other Loan Documents and each Lender hereby authorizes
Administrative Agent to act as its agent in accordance with the terms of this
Agreement and the other Loan Documents. DLJ is hereby appointed Syndication
Agent hereunder and under the other Loan Documents and each Lender hereby
authorizes Syndication Agent to act as its agent in accordance with the terms of
this Agreement and the other Loan Documents. Each of Syndication Agent and
Administrative Agent agrees to act upon the express conditions contained in this
Agreement and the other Loan Documents, as applicable. The provisions of this
Section 9 are solely for the benefit of each of Syndication Agent and
Administrative Agent, and Lenders and Company shall have no rights as a third
party beneficiary of any of the provisions thereof. In performing its functions
and duties under this Agreement, each of Syndication Agent and Administrative
Agent shall act solely as an agent of Lenders and does not assume and shall not
be deemed to have assumed any obligation towards or relationship of agency or
trust with or for Company or any of its Subsidiaries.
B. APPOINTMENT OF SUPPLEMENTAL COLLATERAL AGENTS. It is the purpose of this
Agreement and the other Loan Documents that there shall be no violation of any
law of any jurisdiction denying or restricting the right of banking corporations
or associations to transact business as agent or trustee in such jurisdiction.
It is recognized that in case of litigation under this Agreement or any of the
other Loan Documents, and in particular in case of the enforcement of any of the
Loan Documents, or in case Administrative Agent deems that by reason of any
present or future law of any jurisdiction it may not exercise any of the rights,
powers or remedies granted herein or in any of the other Loan Documents or take
any other action which may be desirable or necessary in connection therewith, it
may be necessary that Administrative Agent appoint an additional individual or
institution as a separate trustee, co-trustee, collateral agent or collateral
co-agent (any such additional individual or institution being referred to herein
individually as a "SUPPLEMENTAL COLLATERAL AGENT" and collectively as
"SUPPLEMENTAL COLLATERAL AGENTS").
In the event that Administrative Agent appoints a Supplemental
Collateral Agent with respect to any Collateral, (i) each and every right,
power, privilege or duty expressed or intended by this Agreement or any of the
other Loan Documents to be exercised by or vested in or conveyed to
Administrative Agent with respect to such Collateral shall be exercisable by and
vest in such Supplemental Collateral Agent to the extent, and only to the
extent, necessary to enable such Supplemental Collateral Agent to exercise such
rights, powers and privileges with respect to such Collateral and to perform
such duties with respect to such Collateral, and every covenant and obligation
contained in the Loan Documents and necessary to the exercise or performance
thereof by such Supplemental
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Collateral Agent shall run to and be enforceable by either Administrative Agent
or such Supplemental Collateral Agent, and (ii) the provisions of this Section 9
and of subsections 10.2 and 10.3 that refer to Administrative Agent shall inure
to the benefit of such Supplemental Collateral Agent and all references therein
to Administrative Agent shall be deemed to be references to Administrative Agent
and/or such Supplemental Collateral Agent, as the context may require.
Should any instrument in writing from Company or any other Loan
Party be required by any Supplemental Collateral Agent so appointed by
Administrative Agent for more fully and certainly vesting in and confirming to
him or it such rights, powers, privileges and duties, Company shall, or shall
cause such Loan Party to, execute, acknowledge and deliver any and all such
instruments promptly upon request by Administrative Agent. In case any
Supplemental Collateral Agent, or a successor thereto, shall die, become
incapable of acting, resign or be removed, all the rights, powers, privileges
and duties of such Supplemental Collateral Agent, to the extent permitted by
law, shall vest in and be exercised by Administrative Agent until the
appointment of a new Supplemental Collateral Agent.
9.2 POWERS AND DUTIES; GENERAL IMMUNITY.
A. POWERS; DUTIES SPECIFIED. Each Lender irrevocably authorizes each
Agent to take such action on such Lender's behalf and to exercise such powers,
rights and remedies hereunder and under the other Loan Documents as are
specifically delegated or granted to such Agent by the terms hereof and thereof,
together with such powers, rights and remedies as are reasonably incidental
thereto. Each Agent shall have only those duties and responsibilities that are
expressly specified in this Agreement and the other Loan Documents. Each Agent
may exercise such powers, rights and remedies and perform such duties by or
through its agents or employees. No Agent shall have, by reason of this
Agreement or any of the other Loan Documents, a fiduciary relationship in
respect of any Lender; and nothing in this Agreement or any of the other Loan
Documents, expressed or implied, is intended to or shall be so construed as to
impose upon any Agent any obligations in respect of this Agreement or any of the
other Loan Documents except as expressly set forth herein or therein.
B. NO RESPONSIBILITY FOR CERTAIN MATTERS. No Agent shall be
responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectibility, sufficiency, creation, perfection or
priority of this Agreement or any other Loan Document, or for any
representations, warranties, recitals or statements made herein or therein or
made in any written or oral statements or in any financial or other statements,
instruments, reports or certificates or any other documents furnished or made
by such Agent to Lenders or by or on behalf of Company to such Agent or any
Lender in connection with the Loan Documents and the transactions contemplated
thereby or for the financial condition or business affairs of Company or any
other Person liable for the
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payment of any Obligations, nor shall such Agent be required to ascertain or
inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained in any of the Loan Documents or as
to the use of the proceeds of the Loans or the use of the Letters of Credit or
as to the existence or possible existence of any Event of Default or Potential
Event of Default. Anything contained in this Agreement to the contrary
notwithstanding, Administrative Agent shall not have any liability arising from
confirmations of the amount of outstanding Loans or the Letter of Credit Usage
or the component amounts thereof.
C. EXCULPATORY PROVISIONS. Neither of the Agents nor any of their respective
officers, directors, employees or agents shall be liable to Lenders for any
action taken or omitted to be taken by any such Agent under or in connection
with any of the Loan Documents except to the extent caused by such Agent's gross
negligence or willful misconduct. Each Agent shall be entitled to refrain from
any act or the taking of any action (including the failure to take an action) in
connection with this Agreement or any of the other Loan Documents or from the
exercise of any power, discretion or authority vested in it hereunder or
thereunder unless and until such Agent shall have received instructions in
respect thereof from Requisite Lenders (or such other Lenders as may be required
to give such instructions under subsection 10.6) and, upon receipt of such
instructions from Requisite Lenders (or such other Lenders, as the case may be),
such Agent shall be entitled to act or (where so instructed) refrain from
acting, or to exercise such power, discretion or authority, in accordance with
such instructions. Without prejudice to the generality of the foregoing,
(i) each Agent shall be entitled to rely, and shall be fully protected in
relying, upon any communication, instrument or document believed by it to be
genuine and correct and to have been signed or sent by the proper person or
persons, and shall be entitled to rely and shall be protected in relying on
opinions and judgments of attorneys (who may be attorneys for Company and its
Subsidiaries), accountants, experts and other professional advisors selected by
it; and (ii) no Lender shall have any right of action whatsoever against any
Agent as a result of such Agent acting or (where so instructed) refraining from
acting under this Agreement or any of the other Loan Documents in accordance
with the instructions of Requisite Lenders (or such other Lenders as may be
required to give such instructions under subsection 10.6).
D. AGENTS ENTITLED TO ACT AS LENDER. The agency hereby created shall in no
way impair or affect any of the rights and powers of, or impose any duties or
obligations upon, any Agent in its individual capacity as a Lender hereunder.
With respect to its par ticipation in the Loans and the Letters of Credit, each
Agent shall have the same rights and powers hereunder as any other Lender and
may exercise the same as though it were not performing the duties and functions
delegated to it hereunder, and the term "Lender" or "Lenders" or any similar
term shall, unless the context clearly otherwise indicates, include such Agent
in its individual capacity. Any Agent and its Affiliates may accept deposits
from, lend money to and generally engage in any kind of banking, trust,
financial advisory or other business with Company or any of its Affiliates as if
it were not performing the duties specified
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herein, and may accept fees and other consideration from Company for services in
connection with this Agreement and otherwise without having to account for the
same to Lenders.
9.3 REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR APPRAISAL OF
CREDIT WORTHINESS.
Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of Company and
its Subsidiaries in connection with the making of the Loans and the issuance of
Letters of Credit hereunder and that it has made and shall continue to make its
own appraisal of the creditworthiness of Company and its Subsidiaries. No Agent
shall have any duty or responsibility, either initially or on a continuing
basis, to make any such investigation or any such appraisal on behalf of Lenders
or to provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before the making of the Loans or at
any time or times thereafter, and no Agent shall have any responsibility with
respect to the accuracy of or the completeness of any information provided to
Lenders.
9.4 RIGHT TO INDEMNITY.
Each Lender, in proportion to its Pro Rata Share, severally agrees
to indemnify each Agent, to the extent that such Agent shall not have been
reimbursed by Company, for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
(including counsel fees and disbursements) or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against such
Agent in exercising its powers, rights and remedies or performing its duties
hereunder or under the other Loan Documents or otherwise in its capacity as
Administrative Agent or Syndication Agent, as the case may be, in any way
relating to or arising out of this Agreement or the other Loan Documents;
provided that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from any Agent's gross negligence or willful
misconduct. If any indemnity furnished to such Agent for any purpose shall, in
the opinion of such Agent, be insufficient or become impaired, such Agent may
call for additional indemnity and cease, or not commence, to do the acts indem
nified against until such additional indemnity is furnished.
9.5 SUCCESSOR AGENTS AND SWING LINE LENDER.
A. SUCCESSOR AGENTS. The Syndication Agent may resign at any time
upon one Business Days' prior notice thereof to Company and Administrative
Agent. Administrative Agent may resign at any time by giving 30 days' prior
written notice thereof to Syndication Agent, Lenders and Company, and
Administrative Agent may be removed at any time with or without cause by an
instrument or concurrent instruments in writing delivered to Company and
Administrative Agent and signed by Requisite Lenders. Upon
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any such notice of resignation of Syndication Agent or Administrative Agent or
any such removal of Administrative Agent, Requisite Lenders shall have the
right, upon five Business Days' notice to Company, and subject to consent of
Company (which shall not unreasonably be withheld), to appoint a successor
Syndication Agent or Administrative Agent, as the case may be. If for any reason
Requisite Lenders cannot agree on a successor Administrative Agent or successor
Syndication Agent, the resigning Administrative Agent or Syndication Agent shall
have the right to designate a successor Administrative Agent or Syndication
Agent, respectively, after consulting with Company. Upon the acceptance of any
appointment as Administrative Agent or Syndication Agent, as the case may be,
hereunder by a successor Administrative Agent or Syndication Agent, as the case
may be, that successor Administrative Agent or Syndication Agent, as the case
may be, shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring or removed Administrative Agent or
Syndication Agent, as the case may be, and the retiring or removed
Administrative Agent or Syndication Agent, as the case may be, shall be
discharged from its duties and obligations under this Agreement. After any
retiring or removed Administrative Agent's or Syndication Agent's resignation or
removal hereunder as Administrative Agent or Syndication Agent, as the case may
be, the provisions of this Section 9 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Administrative Agent or
Syndication Agent, as the case may be, under this Agreement.
B. SUCCESSOR SWING LINE LENDER. Any resignation or removal of
Administrative Agent pursuant to subsection 9.5A shall also constitute the
resignation or removal of FNBC or its successor as Swing Line Lender, and any
successor Administrative Agent appointed pursuant to subsection 9.5A shall, upon
its acceptance of such appointment, become the successor Swing Line Lender for
all purposes hereunder. In such event (i) Company shall prepay any outstanding
Swing Line Loans made by the retiring or removed Administrative Agent in its
capacity as Swing Line Lender, (ii) upon such prepayment, the retiring or
removed Administrative Agent and Swing Line Lender shall surrender the Swing
Line Note held by it to Company for cancellation, and (iii) Company shall issue
a new Swing Line Note to the successor Administrative Agent and Swing Line
Lender substantially in the form of Exhibit VI annexed hereto, in the principal
amount of the Swing Line Loan Commitment then in effect and with other
appropriate insertions.
9.6 COLLATERAL DOCUMENTS AND GUARANTIES.
Each Lender hereby further authorizes Administrative Agent, on
behalf of and for the benefit of Lenders, to enter into each Collateral Document
as secured party and to be the agent for and representative of Lenders under
each Guaranty, and each Lender agrees to be bound by the terms of each
Collateral Document and Guaranty; provided that Administrative Agent shall not
(i) enter into or consent to any material amendment, modification, termination
or waiver of any provision contained in any Collateral Document or Guaranty or
(ii) release any Collateral (except as otherwise expressly permitted or
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required pursuant to the terms of this Agreement or the applicable Collateral
Document), in each case without the prior consent of Requisite Lenders (or, if
required pursuant to subsection 10.6, all Lenders); provided further, however,
that, without further written consent or authorization from Lenders,
Administrative Agent may execute any documents or instruments necessary to
(a) release any Lien encumbering any item of Collateral that is the subject of a
sale or other disposition of assets permitted by this Agreement or to which
Requisite Lenders have otherwise consented or (b) release any Subsidiary
Guarantor from the Subsidiary Guaranty if all of the capital stock of such
Subsidiary Guarantor is sold to any Person (other than an Affiliate of Company)
pursuant to a sale or other disposition permitted hereunder or to which
Requisite Lenders have otherwise consented. Anything contained in any of the
Loan Documents to the contrary notwithstanding, Company, each Agent and each
Lender hereby agree that (X) no Lender shall have any right individually to
realize upon any of the Collateral under any Collateral Document or to enforce
any Guaranty, it being understood and agreed that all rights and remedies under
the Collateral Documents and the Guaranties may be exercised solely by
Administrative Agent for the benefit of Lenders in accordance with the terms
thereof, and (Y) in the event of a foreclosure by Administrative Agent on any of
the Collateral pursuant to a public or private sale, any Agent or any Lender may
be the purchaser of any or all of such Collateral at any such sale and
Administrative Agent, as agent for and representative of Lenders (but not any
Lender or Lenders in its or their respective individual capacities unless
Requisite Lenders shall otherwise agree in writing) shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold at any such public sale, to use and
apply any of the Obligations as a credit on account of the purchase price for
any collateral payable by Administrative Agent at such sale.
SECTION 10. MISCELLANEOUS
10.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS AND LETTERS OF CREDIT.
A. GENERAL. Subject to subsection 10.1B, each Lender shall have the right at
any time to (i) sell, assign or transfer to any Eligible Assignee, or (ii) sell
participations to any Person in, all or any part of its Commitments or any Loan
or Loans made by it or its Letters of Credit or participations therein or any
other interest herein or in any other Obligations owed to it; provided that no
such sale, assignment, transfer or participation shall, without the consent of
Company, require Company to file a registration statement with the Securities
and Exchange Commission or apply to qualify such sale, assignment, transfer or
participation under the securities laws of any state; provided, further that no
such sale, assignment, transfer or participation of any Letter of Credit or any
participation therein may be made separately from a sale, assignment, transfer
or participation of a corresponding interest in the Revolving Loan Commitment
and the Revolving Loans of the Revolving Lender effecting such sale, assignment,
transfer or participation; and provided, urther that, anything contained herein
to the contrary notwithstanding, the Swing Line
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Loan Commitment and the Swing Line Loans of Swing Line Lender may not be sold,
assigned or transferred as described in clause (i) above to any Person other
than a successor Administrative Agent and Swing Line Lender to the extent
contemplated by subsection 9.5. Except as otherwise provided in this subsection
10.1, no Lender shall, as between Company and such Lender, be relieved of any of
its obligations hereunder as a result of any sale, assignment or transfer of, or
any granting of participations in, all or any part of its Commitments or the
Loans, the Letters of Credit or participations therein, or the other Obligations
owed to such Lender.
B. ASSIGNMENTS.
(i) Amounts and Terms of Assignments. Each Commitment, Loan, Letter
of Credit or participation therein, or other Obligation may (a) be assigned
in any amount to another Lender, or to an Affiliate of the assigning Lender
or another Lender, with the giving of notice to Company and Administrative
Agent or (b) be assigned in an aggregate amount of not less than $2,000,000
(or such lesser amount as shall constitute the aggregate amount of the
Commitments, Loans, Letters of Credit and participations therein, and other
Obligations of the assigning Lender or as may be consented to by Company
and Agents) to any other Eligible Assignee with the consent of Company
(which consent shall only be required so long as no Event of Default has
occurred and is continuing) and, with respect to all Lenders other than
DLJ, Syndication Agent and Administrative Agent (which consent of Company,
Syndication Agent and Administrative Agent shall not be unreasonably
withheld or delayed); provided that any such assignment in accordance with
either clause (a) or (b) above shall effect a pro rata assignment (based on
the respective principal amounts thereof then outstanding or in effect) of
the (i) Tranche A Term Loan Commitment or the Tranche A Term Loan, (ii) the
Tranche B Term Loan Commitment or the Tranche B Term Loan and (iii) the
Revolving Loan Commitment and the Revolving Loans in each case of the
assigning Lender; provided, further that the minimum aggregate amount
specified in clause (b) above shall not apply to the Commitment, Loans,
Letters of Credit or participations therein or other Obligations of DLJ. To
the extent of any such assignment in accordance with either clause (a) or
(b) above, the assigning Lender shall be relieved of its obligations with
respect to its Commitments, Loans, Letters of Credit or participations
therein, or other Obligations or the portion thereof so assigned. The
parties to each such assignment shall execute and deliver to Administrative
Agent, for its acceptance, an Assignment Agreement, together with, if the
assignee is not a Lender prior to such assignment, a processing fee of
$3,000 (to be assessed at Administrative Agent's election) and such forms,
certificates or other evidence, if any, with respect to United States
federal income tax withholding matters as the assignee under such
Assignment Agreement may be required to deliver to Administrative Agent
pursuant to subsection 2.7B(iii)(a). Upon such execution, delivery and
acceptance from and after the effective date specified in such Assignment
Agreement, (y) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned
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to it pursuant to such Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and (z) the assigning Lender thereunder
shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment Agreement, relinquish its rights
(other than any rights which survive the termination of this Agreement
under subsection 10.9B) and be released from its obligations under this
Agreement (and, in the case of an Assignment Agreement covering all or the
remaining portion of an assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto; provided
that, anything contained in any of the Loan Documents to the contrary
notwithstanding, if such Lender is the Issuing Lender with respect to any
outstanding Letters of Credit such Lender shall continue to have all rights
and obligations of an Issuing Lender with respect to such Letters of Credit
until the cancellation or expiration of such Letters of Credit and the
reimbursement of any amounts drawn thereunder). The Commitments hereunder
shall be modified to reflect the Commitment of such assignee and any
remaining Commitment of such assigning Lender and, if any such assignment
occurs after the initial issuance of the Notes hereunder, the assigning
Lender shall, upon the effectiveness of such assignment or as promptly
thereafter as practicable, surrender its applicable Notes to Administrative
Agent for cancellation, and thereupon new Notes shall be issued to the
assignee and to the assigning Lender, substantially in the form of Exhibit
IV-A, Exhibit IV-B or Exhibit V annexed hereto, as the case may be, with
appropriate insertions, to reflect the new Commitments and/or outstanding
Term Loans, as the case may be, of the assignee and the assigning Lender.
(ii) Acceptance by Administrative Agent. Upon its receipt of an
Assignment Agreement executed by an assigning Lender and an assignee
representing that it is an Eligible Assignee, together with the processing
fee referred to in subsection 10.1B(i) and any forms, certificates or other
evidence with respect to United States federal income tax withholding
matters that such assignee may be required to deliver to Administrative
Agent pursuant to subsection 2.7B(iii)(a), Administrative Agent shall, if
Administrative Agent and Company have consented to the assignment evidenced
thereby (in each case to the extent such consent is required pursuant to
subsection 10.1B(i)), (a) accept such Assignment Agreement by executing a
counterpart thereof as provided therein (which acceptance shall evidence any
required consent of Administrative Agent to such assignment) and (b) give
prompt notice thereof to Company. Administrative Agent shall maintain a copy
of each Assignment Agreement delivered to and accepted by it as provided in
this subsection 10.1B(ii).
C. PARTICIPATIONS. The holder of any participation, other than an
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
directly affecting (i) the extension of the scheduled final maturity date of
any Loan allocated to such participation or (ii) a reduction of the principal
amount of or the rate of interest payable on any Loan allocated to such
participation, and all amounts payable by Company hereunder (including amounts
payable
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to such Lender pursuant to subsections 2.6D, 2.7 and 3.6) shall be determined as
if such Lender had not sold such participation. Company and each Lender hereby
acknowledge and agree that, solely for purposes of subsections 10.4 and 10.5,
(a) any participation will give rise to a direct obligation of Company to the
participant and (b) the participant shall be considered to be a "Lender".
D. ASSIGNMENTS TO FEDERAL RESERVE BANKS. In addition to the assignments and
participations permitted under the foregoing provisions of this subsection 10.1,
any Lender may assign and pledge all or any portion of its Loans, the other
Obligations owed to such Lender, and its Notes to any Federal Reserve Bank as
collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any operating circular issued by such Federal Reserve
Bank; provided that (i) no Lender shall, as between Company and such Lender, be
relieved of any of its obligations hereunder as a result of any such assignment
and pledge and (ii) in no event shall such Federal Reserve Bank be considered to
be a "Lender" or be entitled to require the assigning Lender to take or omit to
take any action hereunder.
E. INFORMATION. Each Lender may furnish any information concerning Company
and its Subsidiaries in the possession of that Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject to subsection 10.19.
F. REPRESENTATIONS OF LENDERS. Each Lender listed on the signature pages
hereof hereby represents and warrants (i) that it is an Eligible Assignee
described in clause (A) of the definition thereof; (ii) that it has experience
and expertise in the making of loans such as the Loans; and (iii) that it will
make its Loans for its own account in the ordinary course of its business and
without a view to distribution of such Loans within the meaning of the
Securities Act or the Exchange Act or other federal securities laws (it being
understood that, subject to the provisions of this subsection 10.1, the
disposition of such Loans or any interests therein shall at all times remain
within its exclusive control). Each Lender that becomes a party hereto pursuant
to an Assignment Agreement shall be deemed to agree that the representations and
warranties of such Lender contained in Section 2(c) of such Assignment Agreement
are incorporated herein by this reference.
10.2 EXPENSES.
Whether or not the transactions contemplated hereby shall be
consummated, Company agrees to pay promptly (i) all the actual and reasonable
out-of-pocket costs and expenses of preparation of the Loan Documents and any
consents, amendments, waivers or other modifications thereto; (ii) all the costs
of furnishing all opinions by counsel for Company (including any opinions
requested by Agents or Lenders as to any legal matters arising hereunder and
including fees and expenses of local counsel retained by Company) and of
Company's performance of and compliance with all agreements and conditions on
its part to be performed or complied with under this Agreement and the other
Loan Documents
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including with respect to confirming compliance with environmental, insurance
and solvency requirements; (iii) the reasonable fees, expenses and disbursements
of counsel to Arranger, Syndication Agent and Administrative Agent (including
allocated costs of internal counsel) in connection with the negotiation,
preparation, execution and administra tion of the Loan Documents and any
consents, amendments, waivers or other modifications thereto and any other
documents or matters requested by Company; provided that Company shall only be
obligated to pay the reasonable fees and expenses of O'Melveny & Myers LLP, and
no other counsel retained by any Agent or any Lender, in connection with the
negotiation and preparation of the Loan Documents; (iv) all the actual costs and
reasonable expenses of creating and perfecting Liens in favor of Administrative
Agent on behalf of Lenders pursuant to any Collateral Document, including filing
and recording fees, expenses and taxes, stamp or documentary taxes, search fees,
title insurance premiums, and reasonable fees, expenses and disbursements of
counsel to each of Syndication Agent and Administrative Agent and of counsel
providing any opinions that Syndication Agent, Administrative Agent or Requisite
Lenders may request in respect of the Collateral Documents or the Liens created
pursuant thereto; (v) all the actual out of pocket costs and reasonable expenses
(including the reasonable fees, expenses and disbursements of any auditors,
accountants or appraisers and any environmental or other consultants, advisors
and agents employed or retained by Syndication Agent, Administrative Agent or
their respective counsel) of obtaining and reviewing any environmental audits or
reports provided for under subsection 4.1F or 6.9B(viii) and any audits or
reports provided for under subsection 6.5A with respect to Inventory and
Accounts Receivable of Company and its Subsidiaries; (vi) all reasonable costs
in connection with the custody or preservation of any of the Collateral;
(vii) all other actual and reasonable costs and out of pocket expenses incurred
by Arranger, Syndication Agent or Administrative Agent in connection with the
syndication of the Commitments and the negotiation, preparation and execution of
the Loan Documents and any consents, amendments, waivers or other modifications
thereto and the transactions contemplated thereby; and (viii) after the
occurrence of an Event of Default, all costs and out of pocket expenses,
including reasonable attorneys' fees (including allocated costs of internal
counsel) and costs of settlement, incurred by Agents and Lenders in enforcing
any Obligations of or in collecting any payments due from any Loan Party
hereunder or under the other Loan Documents by reason of such Event of Default
(including in connection with the sale of, collection from, or other realization
upon any of the Collateral or the enforcement of the Guaranties or in connection
with any refinancing or restructuring of the credit arrangements provided under
this Agreement in the nature of a "work-out" or pursuant to any insolvency or
bankruptcy proceedings).
10.3 INDEMNITY.
In addition to the payment of expenses pursuant to subsection 10.2,
whether or not the transactions contemplated hereby shall be consummated,
Company agrees to defend (subject to Indemnitees' selection of counsel),
indemnify, pay and hold harmless Arranger, Agents and Lenders, and the officers,
directors, trustees, employees, agents and affiliates of
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Arranger, Agents and Lenders (collectively called the "INDEMNITEES"), from and
against any and all Indemnified Liabilities (as hereinafter defined); provided
that Company shall not have any obligation to any Indemnitee hereunder with
respect to any Indemnified Liabilities to the extent such Indemnified
Liabilities arise from the gross negligence or willful misconduct of that
Indemnitee as determined by a final judgment of a court of competent
jurisdiction.
As used herein, "INDEMNIFIED LIABILITIES" means, collectively, any
and all liabilities, obligations, losses, damages (including natural resource
damages), penalties, actions, judgments, suits, claims (including Environmental
Claims), costs (including the costs of any investigation, study, sampling,
testing, abatement, cleanup, removal, remediation or other response action
necessary to remove, remediate, clean up or abate any Hazardous Materials
Activity), expenses and disbursements of any kind or nature whatsoever
(including the reasonable fees and disbursements of counsel for Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened by any Person, whether or not any such Indemnitee shall
be designated as a party or a potential party thereto, and any fees or expenses
incurred by Indemnitees in enforcing this indemnity), whether direct, indirect
or consequential and whether based on any federal, state or foreign laws,
statutes, rules or regulations (including securities and commercial laws,
statutes, rules or regulations and Environmental Laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or
arising out of (i) this Agreement, the other Loan Documents or the Related
Agreements or the transactions contemplated hereby or thereby (including
Lenders' agreement to make the Loans hereunder or the use or intended use of the
proceeds thereof or the issuance of Letters of Credit hereunder or the use or
intended use of any thereof, or any enforcement of any of the Loan Documents
(including any sale of, collection from, or other realization upon any of the
Collateral or the enforcement of the Guaranties), (ii) the statements contained
in the commitment letter delivered by any Lender to Company with respect
thereto, or (iii) any Environmental Claim or any Hazardous Materials Activity
relating to or arising from, directly or indirectly, any past or present
activity, operation, land ownership, or practice of Company or any of its
Subsidiaries; provided that Indemnified Liabilities shall not include
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses or disbursements relating to information provided in
writing by any Agent or any Lender.
To the extent that the undertakings to defend, indemnify, pay and
hold harmless set forth in this subsection 10.3 may be unenforceable in whole or
in part because they are violative of any law or public policy, Company shall
contribute the maximum portion that it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified Liabilities
incurred by Indemnitees or any of them.
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10.4 SET-OFF; SECURITY INTEREST IN DEPOSIT ACCOUNTS.
In addition to any rights now or hereafter granted under applicable
law and not by way of limitation of any such rights, upon the occurrence and
during the continuation of any Event of Default, each Lender is hereby
authorized by Company at any time or from time to time, without notice to
Company or to any other Person, any such notice being hereby expressly waived,
to set off and to appropriate and to apply any and all deposits (general or
special, including Indebtedness evidenced by certificates of deposit, whether
matured or unmatured, but not including trust accounts) and any other
Indebtedness at any time held or owing by that Lender to or for the credit or
the account of Company against and on account of the obligations and liabilities
of Company to that Lender under this Agreement, the Letters of Credit and
participations therein and the other Loan Documents, including all claims of any
nature or description arising out of or connected with this Agreement, the
Letters of Credit and participations therein or any other Loan Document,
irrespective of whether or not (i) that Lender shall have made any demand
hereunder or (ii) the principal of or the interest on the Loans or any amounts
in respect of the Letters of Credit or any other amounts due hereunder shall
have become due and payable pursuant to Section 8 and although said obligations
and liabilities, or any of them, may be contingent or unmatured. Company hereby
further grants to each Agent and each Lender a security interest in all deposits
and accounts maintained with such Agent or such Lender as security for the
Obligations.
10.5 RATABLE SHARING.
Lenders hereby agree among themselves that if any of them shall,
whether by voluntary payment (other than a voluntary prepayment of Loans made
and applied in accordance with the terms of this Agreement), by realization upon
security, through the exercise of any right of set-off or banker's lien, by
counterclaim or cross action or by the enforcement of any right under the Loan
Documents or otherwise, or as adequate protection of a deposit treated as cash
collateral under the Bankruptcy Code, receive payment or reduction of a
proportion of the aggregate amount of principal, interest, amounts payable in
respect of Letters of Credit, fees and other amounts then due and owing to that
Lender hereunder or under the other Loan Documents (collectively, the "AGGREGATE
AMOUNTS DUE" to such Lender) which is greater than the proportion received by
any other Lender in respect of the Aggregate Amounts Due to such other Lender,
then the Lender receiving such proportionately greater payment shall (i) notify
Administrative Agent and each other Lender of the receipt of such payment and
(ii) apply a portion of such payment to purchase participations (which it shall
be deemed to have purchased from each seller of a participation simultaneously
upon the receipt by such seller of its portion of such payment) in the Aggregate
Amounts Due to the other Lenders so that all such recoveries of Aggregate
Amounts Due shall be shared by all Lenders in proportion to the Aggregate
Amounts Due to them; provided that if all or part of such proportionately
greater payment received by such purchasing Lender is thereafter recovered from
such Lender upon the bankruptcy or
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reorganization of Company or otherwise, those purchases shall be rescinded and
the purchase prices paid for such participations shall be returned to such
purchasing Lender ratably to the extent of such recovery, but without interest.
Company expressly consents to the foregoing arrangement and agrees that any
holder of a participation so purchased may exercise any and all rights of
banker's lien, set-off or counterclaim with respect to any and all monies owing
by Company to that holder with respect thereto as fully as if that holder were
owed the amount of the participation held by that holder.
10.6 AMENDMENTS AND WAIVERS.
No amendment, modification, termination or waiver of any provision
of this Agreement or of the Notes, and no consent to any departure by Company
therefrom, shall in any event be effective without the written concurrence of
Requisite Lenders; provided that any such amendment, modification, termination,
waiver or consent which: increases the amount of any of the Commitments or
reduces the principal amount of any of the Loans; changes in any manner the
definition of "Pro Rata Share" or the definition of "Requisite Lenders"; changes
in any manner any provision of this Agreement which, by its terms, expressly
requires the approval or concurrence of all Lenders; postpones the scheduled
final maturity date (but not the date of any scheduled installment of principal)
of any of the Loans; postpones the date on which any interest or any fees are
payable; decreases the interest rate borne by any of the Loans (other than any
waiver of any increase in the interest rate applicable to any of the Loans
pursuant to subsection 2.2E) or the amount of any fees payable hereunder;
increases the maximum duration of Interest Periods permitted hereunder; reduces
the amount or postpones the due date of any amount payable in respect of, or
extends the required expiration date of, any Letter of Credit; changes in any
manner the obligations of Lenders relating to the purchase of participations in
Letters of Credit; releases any Lien granted in favor of Administrative Agent
with respect to 25% or more in aggregate fair market value of the Collateral,
other than in accordance with the Loan Documents; releases any Subsidiary
Guarantor or Holdings from its obligations under the Subsidiary Guaranty or the
Holdings Guaranty respectively other than in accordance with the terms of the
Loan Documents; or changes in any manner the provisions contained in subsection
8.1, or this subsection 10.6 shall be effective only if evidenced by a writing
signed by or on behalf of all Lenders; provided, further, that if any matter
described in the foregoing proviso relates only to a Revolving Loan, a Tranche A
Term Loan or a Tranche B Term Loan the approval of all Revolving Lenders,
Tranche A Term Loan Lenders or Tranche B Term Loan Lenders, respectively, shall
be sufficient; provided, further, that any amendment or modification of the
terms Consolidated Leverage Ratio Consolidated Total Debt and Consolidated
EBITDA, including insofar as any such change may affect the amount of interest
or fees payable hereunder, shall be effective if evidenced by a writing signed
by Requisite Lenders; and provided further that any amendment, modification or
waiver of subsection 2.4B(iii)(a)-(g) shall be effective if evidenced by a
writing signed by Lenders holding 66 2/3% of the sum of the Tranche A Term Loan
Exposure of all Lenders plus the Tranche B Term Loan Exposure of all Lenders
plus the Revolving Loan Exposure
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of all Lenders. In addition, (i) any amendment, modification, termination or
waiver of any of the provisions contained in Section 4 shall be effective only
if evidenced by a writing signed by or on behalf of Agents and Requisite
Lenders, (ii) no amendment, modification, termination or waiver of any provision
of any Note shall be effective without the written concurrence of the Lender
which is the holder of that Note, (iii) no amendment, modification, termination
or waiver of any Letter of Credit or any provision thereof shall be effective
without the written concurrence of Issuing Lender and Requisite Lenders, (iv) no
amendment, modification, termination or waiver of any provision of subsection
2.1A(iii) or of any other provision of this Agreement relating to the Swing Line
Loan Commitment or the Swing Line Loans shall be effective without the written
concurrence of Swing Line Lender, and (v) no amendment, modification,
termination or waiver of any provision of Section 9 or of any other provision of
this Agreement which, by its terms, expressly requires the approval or
concurrence of Agents shall be effective without the written concurrence of
Agents. Administrative Agent may, but shall have no obligation to, with the
concurrence of any Lender, execute amendments, modifications, waivers or
consents on behalf of that Lender. Any waiver or consent shall be effective only
in the specific instance and for the specific purpose for which it was given. No
notice to or demand on Company in any case shall entitle Company to any other or
further notice or demand in similar or other circumstances. Any amendment,
modification, termination, waiver or consent effected in accordance with this
subsection 10.6 shall be binding upon each Lender at the time outstanding, each
future Lender and, if signed by Company, on Company.
10.7 INDEPENDENCE OF COVENANTS.
All covenants hereunder shall be given independent effect so that if
a particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or would otherwise be within
the limitations of, another covenant shall not avoid the occurrence of an Event
of Default or Potential Event of Default if such action is taken or condition
exists.
10.8 NOTICES.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed; provided that notices to Agents shall not be effective
until received. For the purposes hereof, the address of each party hereto shall
be as set forth under such party's name on the signature pages hereof or (i) as
to Company and Agents, such other address as shall be designated by such Person
in a written notice delivered to the other parties hereto and (ii) as to each
other party, such other address as shall be designated by such party in a
written notice delivered to Administrative Agent.
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10.9 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
A. All representations, warranties and agreements made herein shall
survive the execution and delivery of this Agreement and the making of the Loans
and the issuance of the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied by law to
the contrary, the agreements of Company set forth in subsections 2.6D, 2.7,
3.5A, 3.6, 5.12, 10.2 and 10.3 and the agreements of Lenders set forth in
subsections 9.2C, 9.4, 10.5 and 10.19 shall survive the payment of the Loans,
the cancellation or expiration of the Letters of Credit and the reimbursement of
any amounts drawn thereunder, and the termination of this Agreement.
10.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of any Agent or any Lender in the
exercise of any power, right or privilege hereunder or under any other Loan
Document shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other power, right or privilege. All rights and
remedies existing under this Agreement and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
10.11 MARSHALLING; PAYMENTS SET ASIDE.
None of Agents or Lenders shall be under any obligation to marshal
any assets in favor of Company or any other party or against or in payment of
any or all of the Obligations. To the extent that Company makes a payment or
payments to Administrative Agent or Lenders (or to Administrative Agent for the
benefit of Lenders), or any of Agents or Lenders enforce any security interests
or exercise their rights of setoff, and such payment or payments or the proceeds
of such enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, any
other state or federal law, common law or any equitable cause, then, to the
extent of such recovery, the obligation or part thereof originally intended to
be satisfied, and all Liens, rights and remedies therefor or related thereto,
shall be revived and continued in full force and effect as if such payment or
payments had not been made or such enforcement or setoff had not occurred.
10.12 SEVERABILITY.
In case any provision in or obligation under this Agreement or the
Notes shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability
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of the remaining provisions or obligations, or of such provision or obligation
in any other jurisdiction, shall not in any way be affected or impaired thereby.
10.13 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS.
The obligations of Lenders hereunder are several and no Lender shall
be responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.
10.14 HEADINGS.
Section and subsection headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
10.15 APPLICABLE LAW.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
10.16 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders (it being understood that
Lenders' rights of assignment are subject to subsection 10.1). Neither Company's
rights or obligations hereunder nor any interest therein may be assigned or
delegated by Company without the prior written consent of all Lenders.
10.17 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS
THEREUNDER, MAY BE
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BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE,
COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT,
COMPANY, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE
NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO COMPANY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SUBSECTION
10.8;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III)
ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER
COMPANY IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND
OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN
EVERY RESPECT;
(V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING
PROCEEDINGS AGAINST COMPANY IN THE COURTS OF ANY OTHER
JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 10.17 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR
OTHERWISE.
10.18 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver
is intended to be all-encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this transaction, including
contract claims, tort claims, breach of duty claims and all other common law
and statutory claims. Each party hereto acknowledges that this waiver is a
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material inducement to enter into a business relationship, that each has already
relied on this waiver in entering into this Agreement, and that each will
continue to rely on this waiver in their related future dealings. Each party
hereto further warrants and represents that it has reviewed this waiver with its
legal counsel and that it knowingly and voluntarily waives its jury trial rights
following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL
WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 10.18 AND EXECUTED BY
EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE
LOANS MADE HEREUNDER. In the event of litigation, this Agreement may be filed as
a written consent to a trial by the court.
10.19 CONFIDENTIALITY.
Each Lender shall hold all non-public information obtained pursuant
to the requirements of this Agreement which has been identified as confidential
by Company in accordance with such Lender's customary procedures for handling
confidential information of this nature and in accordance with safe and sound
banking practices, it being understood and agreed by Company that in any event a
Lender may make disclosures to Affiliates and professional advisors of such
Lender or disclosures reasonably required by (a) any bona fide assignee,
transferee or participant in connection with the contemplated assignment or
transfer by such Lender of any Loans or any participations therein, provided
that such assignee, transferee or participant agrees in writing to keep such
information confidential to the same extent required of the Lenders hereunder,
or (b) by any direct or indirect contractual counterparties in swap agreements
or such contractual counterparties' professional advisors provided that such
contractual counterparty or professional advisor to such contractual
counterparty agrees in writing to keep such information confidential to the same
extent required of the Lenders hereunder, or disclosures required or requested
by any governmental agency or representative thereof or pursuant to legal
process; provided that, unless specifically prohibited by applicable law or
court order, each Lender shall notify Company of any request by any governmental
agency or representative thereof (other than any such request in connection with
any examination of the financial condition of such Lender by such governmental
agency) for disclosure of any such non-public information prior to disclosure of
such information provided, that such Lender shall have no liability for any
failure to so notify; and provided, further that in no event shall any Lender be
obligated or required to return any materials furnished by Company or any of its
Subsidiaries.
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10.20 COUNTERPARTS; EFFECTIVENESS.
This Agreement and any amendments, waivers, consents or supplements
hereto or in connection herewith may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by Company and
Agents of written or telephonic notification of such execution and authorization
of delivery thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
SAC: SAC AUTOMOTIVE, INC.
By: /s/ Kenneth Diekroeger
---------------------------------
Title:
------------------------------
STANADYNE:
Stanadyne shall have no obligations hereunder until completion of
the acquisition of the capital stock of SAHC by Holdings pursuant to the terms
of the Acquisition Agreement. Prior to that time, the obligations of Company
pursuant to the Credit Agreement and the other Loan Documents shall be solely
those of SAC. Upon consummation of such acquisition pursuant to the terms of the
Acquisition Agreement, Stanadyne shall assume, and hereby assumes, all the
obligations and other liabilities of SAC under the Credit Agreement and all
references to Company contained in the Credit Agreement and other Loan Documents
shall be deemed to refer to Stanadyne.
STANADYNE AUTOMOTIVE CORP.
By: /s/ Michael H. Boyer
----------------------------------
Title:
-------------------------------
Notice Address:
with copy to:
Jack Feder, Esq.
Kirkland & Ellis
655 Fifteenth Street, N.W.
Washington, D.C. 20005
S-1
<PAGE> 152
LENDERS:
DLJ CAPITAL FUNDING, INC., individually
and as Syndication Agent
By: /s/ Stephen C. Hawly
----------------------------------
Title:
-------------------------------
Notice Address:
2121 Avenue of the Stars
Los Angeles, CA 90067-5014
Attention: Mr. Eric Swanson
S-2
<PAGE> 153
ABN AMRO BANK N.V.
/s/ Jim Adelsheim
By: Jim Adelsheim
----------------------------------
Title: Vice President
-------------------------------
/s/ Brian M. Horgan
By: Brian M. Horgan
----------------------------------
Title: Vice President
-------------------------------
Notice Address:
One Post Office Square, 39th Floor
Boston, MA 02109
Attention: Jim Adelsheim
S-3
<PAGE> 154
BANK OF SCOTLAND
/s/ Annie Chin Tat
By: Annie Chin Tat
----------------------------------
Title: Vice President
-------------------------------
Notice Address:
565 Fifth Avenue
New York, NY 10017
Attention: Mr. Andy Chamberlain
S-4
<PAGE> 155
BANKBOSTON, N.A.
/s/ Garth J. Collins
By: Garth J. Collins
----------------------------------
Title: Vice President
Notice Address:
81 West Main Street
Waterbury, CT 06702
Attention: Mr. Garth J. Collins
S-5
<PAGE> 156
THE FIRST NATIONAL BANK OF CHICAGO
/s/ Juan J. Duarte
By: Juan J. Duarte
----------------------------------
Title: Assistant Vice President
-------------------------------
Notice Address:
153 West 51st St.
New York, NY 10019
Attention: Mr. Randy Faust
S-6
<PAGE> 157
THE BANK OF NEW YORK
/s/ Edward J. Moriarty
By: Edward J. Moriarty
----------------------------------
Title: Assistant Vice President
-------------------------------
Notice Address:
10 Mason Street
Greenwich, CT 06830
Attention: Ms. Melinda White
S-7
<PAGE> 158
NATIONAL CITY BANK
/s/ Lisa Beth Lisi
By: Lisa Beth Lisi
----------------------------------
Title: AVP
-------------------------------
Notice Address:
1900 East 9th St.
Cleveland, OH 44114
Attention: Ms. Lisa Lisi
S-8
<PAGE> 159
DRESDNER BANK AG
NEW YORK AND GRAND CAYMAN BRANCHES
/s/ Brigitte Sacin
By: Brigitte Sacin
----------------------------------
Title: Assistant Treasurer
-------------------------------
/s/ John W. Sweeney
By: John W. Sweeney
----------------------------------
Title: Assistant Vice President
-------------------------------
Notice Address:
75 Wall Street
New York, NY 10005-2889
Attention: Mr. Thomas Nadaramia
S-9
<PAGE> 160
PEOPLE'S BANK
/s/ Michael Schweighoffer
By: Michael Schweighoffer
----------------------------------
Title: Vice President
-------------------------------
Notice Address:
1 Financial Plaza
Hartford, CT 06103
Attention: Mr. Michael Schweighoffer
S-10
<PAGE> 161
SUMMIT BANK
/s/ L. David Lyons
By: L. David Lyons
-----------------------------
Title: Vice President
-----------------------------
Notice Address:
750 Walnut Avenue
Cranford, NJ 07016
Attention: Mr. Wayne Trotman
S-11
<PAGE> 162
S-13
<PAGE> 163
STANADYNE AUTOMOTIVE CORP. INC.
CREDIT AGREEMENT
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.................................................... 2
1.1 Certain Defined Terms.......................................... 2
1.2 Accounting Terms; Utilization of GAAP for Purposes of
Calculations Under Agreement...................................35
1.3 Other Definitional Provisions and Rules of Construction........35
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS.....................36
2.1 Commitments; Making of Loans; Notes............................36
2.2 Interest on the Loans..........................................43
2.3 Fees...........................................................49
2.4 Repayments, Prepayments and Reductions in Revolving
Loan Commitments; General Provisions Regarding Payments....... 51
2.5 Use of Proceeds................................................61
2.6 Special Provisions Governing Eurodollar Rate Loans.............62
2.7 Increased Costs; Taxes; Capital Adequacy.......................64
2.8 Obligation of Lenders and Issuing Lenders to Mitigate;
Replacement of Lender......................................... 69
SECTION 3. LETTERS OF CREDIT..............................................70
3.1 Issuance of Letters of Credit and Lenders' Purchase
of Participations Therein..................................... 70
3.2 Letter of Credit Fees..........................................74
3.3 Drawings and Reimbursement of Amounts Paid Under
Letters of Credit............................................. 75
3.4 Obligations Absolute...........................................78
3.5 Indemnification; Nature of Issuing Lenders' Duties.............79
3.6 Increased Costs and Taxes Relating to Letters of Credit........80
SECTION 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT......................81
4.1 Conditions to Term Loans and Initial Revolving Loans...........81
4.2 Conditions to Revolving Loans and Swingline Loans
After Initial Revolving Loans..................................86
4.3 Conditions to All Loans........................................92
4.4 Conditions to Letters of Credit................................93
SECTION 5. COMPANY'S REPRESENTATIONS AND WARRANTIES.......................93
5.1 Organization, Powers, Qualification, Good Standing,
Business and Subsidiaries......................................94
5.2 Authorization of Borrowing, etc................................95
(i)
<PAGE> 164
Page
5.3 Financial Condition............................................ 95
5.4 No Material Adverse Change; No Restricted Junior Payments...... 96
5.5 Title to Properties; Liens; Real Property...................... 96
5.6 Litigation; Adverse Facts...................................... 97
5.7 Payment of Taxes............................................... 97
5.8 Performance of Agreements; Materially Adverse
Agreements; Material Contracts................................. 98
5.9 Governmental Regulation........................................ 98
5.10 Securities Activities.......................................... 98
5.11 Employee Benefit Plans......................................... 99
5.12 Certain Fees................................................... 99
5.13 Environmental Protection.......................................100
5.14 Employee Matters...............................................101
5.15 Solvency.......................................................101
5.16 Matters Relating to Collateral.................................101
5.17 Disclosure.....................................................102
SECTION 6. COMPANY'S AFFIRMATIVE COVENANTS.............................103
6.1 Financial Statements and Other Reports.........................103
6.2 Corporate Existence, etc.......................................108
6.3 Payment of Taxes and Claims; Tax Consolidation.................108
6.4 Maintenance of Properties; Insurance; Application of
Net Insurance/Condemnation Proceeds............................108
6.5 Inspection Rights; Audits of Inventory and Accounts Receivable;
Lender Meeting.................................................109
6.6 Compliance with Laws, etc......................................110
6.7 Environmental Review and Investigation, Disclosure, Etc.;
Company's Actions Regarding Hazardous Materials Activities,
Environmental Claims and Violations of Environmental Laws......110
6.8 Execution of Subsidiary Guaranty and Personal Property
Collateral Documents by Certain Subsidiaries and Future
Subsidiaries; Execution of Auxiliary Pledge Agreements; IP
Collateral.....................................................113
6.9 Conforming Leasehold Interests; Matters Relating to
Additional Real Property Collateral............................115
7.10 Sales and Lease-Backs..........................................128
7.11 Sale or Discount of Receivables................................128
7.12 Transactions with Shareholders and Affiliates..................128
7.13 Disposal of Subsidiary Stock...................................129
7.14 Conduct of Business............................................129
7.15 Amendments of Documents Relating to Subordinated Indebtedness..129
(ii)
<PAGE> 165
Page
SECTION 8. EVENTS OF DEFAULT...........................................130
8.1 Failure to Make Payments When Due..............................130
8.2 Default in Other Agreements....................................130
8.3 Breach of Certain Covenants....................................130
8.4 Breach of Warranty.............................................131
8.5 Other Defaults Under Loan Documents............................131
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc...........131
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc.............131
8.8 Judgments and Attachments......................................132
8.9 Dissolution....................................................132
8.10 Employee Benefit Plans.........................................132
8.11 Change in Control..............................................132
8.12 Invalidity of Guaranties; Failure of Security; Repudiation
of Obligations.................................................133
SECTION 9. THE AGENTS..................................................135
9.1 Appointment....................................................135
9.2 Powers and Duties; General Immunity............................136
9.3 Representations and Warranties; No Responsibility For Appraisal
of Credit worthiness...........................................138
9.4 Right to Indemnity.............................................138
9.5 Successor Agents and Swing Line Lender.........................139
9.6 Collateral Documents and Guaranties............................140
SECTION 10. MISCELLANEOUS...............................................141
10.1 Assignments and Participations in Loans and Letters of Credit..141
10.2 Expenses.......................................................144
10.3 Indemnity......................................................145
10.4 Set-Off; Security Interest in Deposit Accounts.................146
10.5 Ratable Sharing................................................147
10.6 Amendments and Waivers.........................................147
(iii)
<PAGE> 1
Exhibit 10.2
_______________________________________________________________________________
STOCK PURCHASE AGREEMENT
for the Purchase of STANADYNE AUTOMOTIVE HOLDING CORP.
among
SAC, Inc.
a wholly owned subsidiary of
AMERICAN INDUSTRIAL PARTNERS CAPITAL FUND II, L.P.
STANADYNE AUTOMOTIVE HOLDING CORP.
and
Stanadyne Automotive Holding Corp. Shareholders
______________________
November 7, 1997
______________________
_______________________________________________________________________________
<PAGE> 2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (which, together with the Schedules and Exhibits
attached hereto or incorporated herein by reference, and amendments and
supplements hereto, all being referred to as this "Agreement") is made and
entered into as of the 7th day of November, 1997, by and among SAC, Inc. (the
"Buyer"), a Delaware corporation and wholly owned subsidiary of AMERICAN
INDUSTRIAL PARTNERS CAPITAL FUND II, L.P. ("AIP"), STANADYNE AUTOMOTIVE HOLDING
CORP., a Delaware corporation (the "Company"), Metromedia Company
("Metromedia") and, subject to Section 5.17, all of the other holders of
securities of the Company, which security holders are listed on Schedule
1.2.3 hereof (each, a "Seller" and collectively the "Sellers"). All
capitalized words and terms contained in this Agreement shall have the meanings
set forth in Section 12.1 herein.
R E C I T A L S
WHEREAS, the Sellers are the beneficial and record owners of all of the
issued and outstanding shares of capital stock of the Company and warrants to
purchase capital stock of the Company (the "Warrants"); and
WHEREAS, the Sellers wish to sell to the Buyer and the Buyer wishes to
purchase from the Sellers the shares of capital stock of the Company which they
own and will own upon the exercise of the Warrants and the conversion of the
Preferred Stock (together, the "Shares") upon the terms and subject to the
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, conditions and agreements hereinafter set forth,
the parties hereto agree as follows:
1. Sale and Purchase of Shares.
1.1 Sale of Shares. At the Closing (as defined in Section 2), the Sellers
shall sell the Shares to the Buyer and the Buyer shall purchase the Shares for
the purchase price provided in Section 1.2.
1.2 Purchase Price and Payment for Shares.
1.2.1 Purchase Price The aggregate purchase price for the Shares (the
"Purchase Price") is Two Hundred and Ten Million Dollars ($210,000,000), less
the sum of all Debt outstanding on the Closing Date, net of cash on hand (as
determined in accordance with GAAP) of the Company and its
2
<PAGE> 3
Subsidiaries on the Closing Date, as adjusted pursuant to Section 1.2.2.
1.2.2 Determination of Purchase Price; Adjustment to Purchase Price and
Preliminary Statement;
(a) At least three Business Days prior to the Closing Date, the Sellers
shall in good faith prepare a statement (the "Preliminary Statement")
containing an estimate of (i) the consolidated Working Capital of the Company
and the Subsidiaries ("Estimated Working Capital") immediately prior to the
Closing (ii) a schedule of total Debt anticipated to be outstanding immediately
prior to the Closing ("Preliminary Closing Debt") and (iii) an estimate of
cash that would be reflected on a consolidated balance sheet of the Company and
its Subsidiaries prepared immediately prior to the Closing ("Preliminary
Closing Cash"). For purposes of this Section 1.2.2, "Working Capital" means
the current assets of the Company and its Subsidiaries (excluding cash) less
the current liabilities of the Company and its Subsidiaries (excluding the
current portion of long-term Debt), all in accordance with GAAP, provided that
the Weber Liability shall be treated as a current liability without regard to
GAAP. Based upon the Preliminary Statement, a preliminary determination of the
Purchase Price shall be made (the "Preliminary Purchase Price"), which
Preliminary Purchase Price shall be an amount equal to $210,000,000 less
Preliminary Closing Debt, plus Preliminary Closing Cash, plus or minus the
Estimated Working Capital Allowance determined pursuant to subsection 1.2.2(b).
(b) If Estimated Working Capital is greater than Working Capital as of
August 31, 1997 ("Baseline Working Capital") by more than $1,035,000, the
amount calculated in Subsection 1.2.2(b) shall be increased by the amount by
which Estimated Working Capital exceeds Baseline Working Capital and if
Estimated Working Capital is less than Baseline Working Capital by more than
$1,035,000, the amount calculated in Subsection 1.2.2(b) shall be reduced by
the amount by which Estimated Working Capital is less than Baseline Working
Capital. The amount of such excess or shortfall is referred to as the
"Estimated Working Capital Allowance." Such adjustment to the Purchase Price
shall be reflected in the Preliminary Purchase Price. The Company's (i)
calculation of Baseline Working Capital and (ii) specification of the
methodology and components for calculating the Preliminary Purchase Price, in
each case of (i) and (ii), as agreed to by the parties, are attached hereto as
Schedule 1.2.2(b).
(c) As promptly as practicable following the Closing Date, but in any
event within 90 days thereof, the Buyer shall prepare and deliver to the
Sellers an audited consolidated balance sheet of the Company and the
Subsidiaries as of the Closing (the "Closing Balance Sheet") and a statement
based thereon (the "Closing Statement") setting forth (i) actual Working
Capital ("Actual Working Capital") immediately prior to the Closing, (ii) a
schedule of total Debt outstanding immediately prior to the Closing ("Closing
Debt"), (iii) a calculation of cash on hand that would be reflected on a
consolidated balance sheet of the Company and its Subsidiaries
3
<PAGE> 4
prepared immediately prior to the Closing ("Closing Cash") and (iv) a
calculation of the Purchase Price. The Closing Balance Sheet and Closing
Statement shall be prepared in accordance with GAAP. The Sellers and their
representatives shall have reasonable access to the Company's and the
Subsidiaries' books and records and the accountants' work papers related to the
preparation of the Closing Balance Sheet and the Closing Statement. The Buyer
shall pay for all costs and expenses incurred in connection with the
preparation of the Closing Balance Sheet and Closing Statement.
(d) The Purchase Price shall be an amount equal to $210,000,000 less
Closing Debt, plus Closing Cash (the "Final Pre-Adjustment Amount"), plus or
minus the amounts determined below by comparing Actual Working Capital to
Baseline Working Capital. If Actual Working Capital exceeds Baseline Working
Capital by more than $1,035,000, the Final Pre-Adjustment Amount shall be
increased by the amount by which Actual Working Capital exceeds Baseline
Working Capital. If Actual Working Capital is less than Working Capital by
more than $1,035,000, the Final Pre-Adjustment Amount shall be reduced by the
amount by which Actual Working Capital is less than Baseline Working Capital.
(e) If the Preliminary Purchase Price is less than the Purchase Price
(such difference being referred to herein as the "Unpaid Balance"), then, in
addition to the Preliminary Purchase Price payable to the Sellers under
Section 1.2.1, within five (5) Business Days after the final determination of
the Closing Statement and the Purchase Price (whether such determination is
made by agreement of the Sellers and the Buyer or by the Auditor, as provided
herein), the Buyer shall deliver to the Sellers an amount equal to the Unpaid
Balance, together with interest thereon at the Reference Rate (as defined in
Section 12.1) in effect from time to time from the Closing Date until the date
of such payment, in cash in immediately available funds by wire transfer to a
bank account designated in writing by the Sellers prior to the Closing Date.
If the Preliminary Purchase Price is greater than the Purchase Price (such
difference being referred to herein as the "Overpayment"), then, within five
(5) Business Days after the final determination of the Closing Statement and
the Purchase Price (whether such determination is made by agreement of the
Sellers and the Buyer or by the Auditor, as provided herein), the Sellers shall
reimburse to the Buyer an amount equal to the Overpayment, together with
interest thereon at the Reference Rate in effect from time to time from the
Closing Date until the date of such payment, in cash in immediately available
funds by wire transfer to a bank account designated in writing by the Buyer
prior to the Closing Date.
(f) The Closing Statement and the calculation of the Purchase Price shall
be binding upon the parties unless the Sellers give written notice of
disagreement therewith to the Buyer within thirty (30) days after their receipt
of the Closing Statement, specifying in reasonable detail the nature and extent
of such disagreement. If the Sellers disagree with any item on the Closing
Statement, the Sellers shall notify the Buyer of such disagreement in writing
within 30 days after delivery of the Closing
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Statement, which notice shall set forth the basis for such disagreement in
reasonable detail. The Sellers and the Buyer shall thereafter negotiate in
good faith to resolve any such disagreements. If the Buyer and the Sellers
mutually agree upon the Closing Statement and the calculation of the Purchase
Price within thirty (30) days after Sellers' receipt of such notice, such
agreement shall be binding upon the parties. If the Sellers and the Buyer are
unable to resolve any disagreements within thirty (30) days, the Sellers and
the Buyer shall select an Auditor to resolve the disagreements over accounting
matters in accordance with the provision of this Section 1.2.2.
(g) The "Auditor" shall be an independent nationally recognized certified
public accounting firm mutually selected by the Sellers and the Buyer, provided
that if the Sellers and the Buyer are unable to mutually agree upon an Auditor,
the Sellers and the Buyer shall select one of the "big six" accounting firms by
lot after eliminating one firm designated unacceptable by the Sellers and one
firm designated as unacceptable by the Buyer. The Auditor shall have
reasonable access to the Company's and the Subsidiaries' books and records
required to resolve the disputes, and the Auditor shall be directed to address
and resolve solely the individual disputed line items on the Closing Statement.
The Sellers and the Buyer shall use their reasonable efforts to cause the
Auditor to resolve all disagreements over individual line items as soon as
practicable. The resolution of such disagreements by the Auditor shall be in
writing and shall be final and binding on the Sellers and the Buyer. The fees
and expenses of the Auditor shall be paid by the party whose position is, ruled
as by the Auditor, most incorrect.
1.2.3 Payment of Purchase Price. (a) The Purchase Price shall be paid by
the Buyer as follows:
(i) at the Closing, the Buyer shall pay to the Sellers in cash an amount
equal to the Preliminary Purchase Price, which amount shall be paid to the
Sellers in proportion to the number of shares of common stock of the Company
identified on Schedule 1.2.3. (as provided to the Buyer) as owned (or to be
owned through the exercise of the Warrants or the conversion of the Preferred
Stock) by each Seller (the "Share Ownership").
(ii) at the time set forth in Section 1.2.2, the Buyer shall pay to the
Sellers, or the Sellers shall pay to the Buyer, as the case may be, the
payments required to be made under Section 1.2.2 in proportion to their Share
Ownership.
(iii) in the event that the Preferred Stock is not converted to common
shares in accordance with the terms of the Certificate of Designation of the
Preferred Stock, the holders of the Preferred Stock shall receive the amount
required to be paid to such holders upon a redemption of the Preferred Stock
due to a Change of Control (as defined in the Certificate of Designation) and
the balance of this amount payable under Section 1.2.3(i) and (ii) shall be
paid to the owners of common stock and
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Warrants in proportion to the Ownership Percentages.
(iv) in the event that the Signing Condition (as defined in Section 5.17)
has not occurred as provided in Section 5.17 and Metromedia has exercised the
Redemption Option (as defined in Section 5.17), the Company (by sending a
notice of redemption) and the Buyer shall cause the Company to exercise and
diligently pursue all of the Company's rights to redeem and, as applicable,
purchase pursuant to the "Bring-Along" right of the Company as set forth in the
applicable Shareholders' Agreements (the "Bring-Along Right") the Shares of
those Sellers who have not met the Signing Condition (the "Redeemed Shares"),
in accordance with the Subscription Agreement or, as applicable, the
Shareholders' Agreements of such Sellers (the "Redemption"). Any amount
payable to the holder of Redeemed Shares shall reduce the amount payable to the
Sellers pursuant to Section 1.2.3(i) and (ii), and such reduced amount shall be
distributed among the Sellers who have met the Signing Condition, in proportion
to their Share Ownership (subject to the provisions of Section 1.2.3(iii)).
(v) each Seller agrees that the ownership of securities set forth in
respect of such Seller on Schedule 1.2.3.1 is correct and that upon payment of
the amounts as set forth in Section 1.2.3(i), (ii) and (iii), such Seller
shall have no further right to payment in respect of the Purchase Price as
finally determined.
1.3 Delivery of Shares. At the Closing, the Sellers shall deliver to the
Buyer stock certificates representing all of the Shares, duly endorsed in blank
or accompanied by stock powers duly executed in blank, in proper form for
transfer.
2. Closing: Closing Date. The closing of the sale and purchase of the
Shares contemplated hereby (the "Closing") shall take place at the offices of
Kirkland & Ellis, Citicorp Center, 153 East 53rd Street, New York, New York, at
10:00 a.m. local time, on December 8, 1997, or at such other place or such
other time or date as the Buyer and the Sellers agree in writing but in no case
later than December 31, 1997 (the "Scheduled Closing Date"). The time and date
upon which the Closing occurs is herein called the "Closing Date."
3. Representations and Warranties of the Sellers. The Sellers severally
represent and warrant to the Buyer as follows (except that each Seller other
than Metromedia makes only the representations and warranties in Sections 3.2,
3.4, 3.5 and 3.7 and only to the extent that such representations and
warranties pertain to each such Seller individually):
3.1 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and it
and the Subsidiaries have all requisite corporate power and authority to carry
on their respective businesses as they are now being conducted and to own,
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lease and operate all of their respective properties and assets. The Company
and the Subsidiaries are duly qualified and in good standing to do business in
each jurisdiction in which the nature of their respective businesses or the
ownership, operation or leasing of their respective properties makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified or in good standing has not had, or may not reasonably be expected
to have, in the aggregate, a Company Material Adverse Effect. Section 3.1 of
the disclosure schedule attached hereto (the "Disclosure Schedule") lists the
directors and officers of the Company and each of the Subsidiaries. The
Company has made available to the Buyer the minute books (containing the
records of meetings of the stockholders, the board of directors, and any
committees of the board of directors) and such minute books are correct and
complete in all material respects. The Company has made available to the Buyer
the stock record books of each of the Company and the Subsidiaries and such
stock record books are true and complete. The Company and the Subsidiaries
have complied in all material respects with their respective Articles of
Incorporation, Certificate of Incorporation and By-laws, as applicable.
Metromedia Company is a general partnership organized under the laws of the
State of Delaware and its general partners are Stuart Subotnick and the
following trust: John W. Kluge, Chemical Bank and Stuart Subotnick, Trustees
under Trust Agreement between John W. Kluge as Grantor and John W. Kluge and
Manufacturers Hanover Trust Company as Trustees dated May 30, 1984, as Amended
and Restated.
3.2 Corporate Power and Authority; Effect of Agreement. Each of the
Sellers and the Company (i) has the requisite authority and power to execute,
deliver and perform this Agreement and consummate the transactions contemplated
hereby; (ii) the execution, delivery and performance by the Company and such
Seller of this Agreement and the consummation by the Company and such Seller of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company and such Seller; (iii) this
Agreement has been duly and validly executed and delivered by the Company and
such Seller and constitutes the valid and binding obligation of the Company and
such Seller, enforceable in accordance with its terms, subject to (a)
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights generally, and (b) general principles of equity. Except as
set forth in Section 3.2 of the Disclosure Schedule, the execution, delivery
and performance by the Company and each Seller of this Agreement and the
consummation by the Company and such Seller of the transactions contemplated
hereby will not, with or without the giving of notice or the lapse of time, or
both, (w) result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both), a default (or give rise to any right of
termination, cancellation or acceleration) under, or require any consent,
waiver, approval or authorization under, any indenture, license, lease,
contract, agreement or other instrument or obligation to which such Seller, the
Company or any Subsidiary, as the case maybe, is a party or by which any of
them or any of their respective properties or assets are bound, (x) violate any
provision of law, rule, regulation, statute, ordinance, governmental or
judicial order, or any other provision having the force or
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<PAGE> 8
effect of law ("Law") to which such Seller or the Company or any Subsidiary, as
the case may be, or any of their respective properties or assets, is subject,
(y) violate any writ, injunction, order, judgment or decree applicable to such
Seller, the Company or any Subsidiary, as the case may be, or any of their
respective properties or assets, or (z) violate any provision of the
Certificate of Incorporation or the By-laws of such Seller (if applicable), the
Company or any Subsidiary, as the case may be; except, in case of (w) (x) and
(y) for events or violations which would not be likely to have a Company
Material Adverse Effect.
3.3 Absence of Certain Changes or Events with Respect to the Company.
Except as set forth in Section 3.3 of the Disclosure Schedule, since December
31, 1996, the Company has not (a) suffered a Company Material Adverse Effect or
(b) materially changed the Company's accounting principles, practices, articles
or methods, except as required by GAAP or applicable Law.
3.4 Litigation. Except as set forth in Section 3.4 of the Disclosure
Schedule, there is no litigation, action, suit, or legal, administrative or
arbitral proceeding or investigation (excluding those relating to Taxes, which
are covered by Section 3.11) ("Action") pending or, to the Knowledge of any
Seller or the Company, threatened against such Seller, the Company or any of
the Subsidiaries to which there is a reasonable likelihood of a determination
which, individually or in the aggregate, would (a) have a Company Material
Adverse Effect, (b) materially hinder or impair the ability of such Seller or
the Company to consummate the transactions contemplated hereby or (c) result in
Liability in excess of $500,000 in the aggregate to the Company or any
Subsidiary. There is no Action pending, or to the Knowledge of any Seller or
the Company, threatened against such Seller, the Company or any of the
Subsidiaries with respect to the consummation of the transactions contemplated
hereby. Section 3.4 of the Disclosure Schedule lists all Actions or series of
related Actions against the Company or any Subsidiary or any predecessor
(whether arising out of similar facts or circumstances, a consistent or
pervasive course of conduct or practice or otherwise) which have been settled
in the last five years in which the Company or any Subsidiary made payments
for amounts in excess of $500,000 (and the amounts paid in settlement thereof)
or settlements which have had or are reasonably likely to have a Company
Material Adverse Effect. Except as set forth in Section 3.4 of the Disclosure
Schedule, neither the Company nor any Subsidiary is a party or subject to or in
default under any order of a Governmental Body.
3.5 Consents. Except as set forth in Section 3.5 of the Disclosure
Schedule, no consent, permit, approval or authorization of, or exemption by, or
filing with, any Governmental Body (other than pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act")) is required in connection with the execution, delivery and performance
by the Company and each Seller of this Agreement or the consummation of the
transactions contemplated hereby, excluding, however, consents, approvals,
authorizations, exemptions and filings, if any,
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which the Buyer (as opposed to any other third party) is required to obtain or
make.
3.6 Subsidiaries. All of the Company's direct and indirect subsidiaries
(the "Subsidiaries") are identified on Section 3.6 of the Disclosure Schedule.
Except as disclosed on the Disclosure Schedule, the Company does not control,
directly or indirectly, any capital stock or other proprietary interest
(whether equity or debt) in, any other Person.
3.7 Outstanding Capital Stock. Section 3.7 of the Disclosure Schedule
(Subsection 3.7E of which regarding the individual stock ownership of owners of
the Class A Common Stock of the Company is not being disclosed to such owners
for reasons of confidentiality) sets forth the authorized capital stock of the
Company and each of the Subsidiaries. All of the shares of capital stock of
the Company and the Subsidiaries are duly authorized and are validly issued,
fully paid and non-assessable. Each of the Sellers owns beneficially and of
record, free and clear of any Lien, or owns of record and has full power and
authority to convey free and clear of any Lien, the Shares set forth opposite
its name on the Disclosure Schedule The consummation of the transactions
contemplated hereby will convey to the Buyer good title to such Seller's
Shares, free and clear of all Liens, except for those created by the Buyer or
arising out of the ownership of the Shares by the Buyer (as opposed to any
other third party).
3.8 Options or Other Rights. Except as set forth in Section 3.8 of the
Disclosure Schedule and the Shares, there is not now, and as of Closing there
will not be (including those set forth in Section 3.8 of the Disclosure
Schedule), any capital stock or other equity interests in the Company or any
Subsidiary issued or outstanding, or any right, subscription, right of first
refusal, warrant, call, unsatisfied preemptive right, option or other agreement
of any kind to purchase or otherwise to receive from the Company or any
Subsidiary any of the outstanding, authorized but unissued, unauthorized or
treasury shares of the capital stock or any other security of the Company or
any Subsidiary, and there is no outstanding security of any kind convertible
into such capital stock or right to purchase or otherwise receive such capital
stock.
3.9 Certificate of Incorporation and By-laws. The Sellers have heretofore
delivered to the Buyer a true and complete copy of the Certificate of
Incorporation and By-laws of the Company and each Subsidiary.
3.10 Financial Statements. The audited consolidated statements of
operations, changes in stockholders' equity and cash flows of the Company and
the Subsidiaries for the years ended as of December 31, 1996, December 31, 1995
and December 31, 1994 and the audited consolidated balance sheets of the
Company and the Subsidiaries as of December 31, 1996, December 31, 1995 and
December 31, 1994 (the "Audited Financials"), which have been delivered to the
Buyer, fairly present
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the financial position, results of operations, changes in stockholders' equity
and cash flows of the Company and the Subsidiaries as of the respective dates
thereof, and for the periods covered thereby, in accordance with GAAP applied
on a consistent basis for the periods involved, except as noted therein. The
unaudited consolidated balance sheet of the Company and the Subsidiaries as of
September 30, 1997 and the unaudited consolidated statements of operations,
changes in stockholders' equity and cash flows of the Company and the
Subsidiaries for the nine (9) month period ended September 30, 1997, which have
been delivered to the Buyer, fairly present the financial position, results of
operations, change in stockholders' equity and cash flows of the Company and
the Subsidiaries as of the respective dates thereof, in accordance with GAAP
applied on a consistent basis during the periods involved, except for the
manner of presentation, normally recurring year-end adjustments, which
adjustments will not be material either individually or in the aggregate to the
Company and the Subsidiaries taken as a whole, and the absence of any notes
thereto.
3.11 Tax Matters.
3.11.1 Except as set forth on Schedule 3.11 of the Disclosure Schedule,
(i) the Company and each of its Subsidiaries have paid all federal, state,
county, local, foreign and other taxes, including, without limitation, income
taxes, estimated taxes, excise taxes, sales taxes, use taxes, gross receipts
taxes, franchise taxes, employment and payroll related taxes, social security
contribution payments, property taxes and import duties, whether or not
measured in whole or in part by net income including all deficiencies or other
additions to tax, interest and penalties owed by it, in connection with any
such taxes and social security contributions and any liability of the Company
or any of its Subsidiaries for payment of any of the aforementioned taxes and
social security contributions as a result of any express or implied obligation
to indemnify or otherwise assume or succeed to the liability of another Person
(hereinafter, "Taxes" or, individually, a "Tax") required to be paid by it
through the date hereof and shall timely pay any such Taxes, including
additions, interest and penalties, required to be paid by it after the date
hereof and on or before the Closing Date, except to the extent such Taxes are
adequately provided for on the Audited Financials; (ii) the Company and each of
its Subsidiaries have timely filed all returns for all Taxes that it is
required to file through the date hereof; (iii) the Company shall prepare and
file all returns for all Taxes required to be filed after the date hereof and
on or before the Closing Date; (iv) there are no material ongoing federal,
state, local or foreign audits or examinations of any Tax returns of the
Company or any of its Subsidiaries; (v) there are no outstanding written
requests, agreements, consents or waivers to extend the statutory period of
limitations applicable to the assessment of any Taxes or deficiencies against
the Company or any of its Subsidiaries; (vi) neither the Company nor any of its
Subsidiaries are a party to any agreement with any person other than the
Subsidiaries providing for the allocation or sharing of Taxes; (vii) there are
no liens for Taxes upon the assets of the Company or any of its Subsidiaries,
except liens for Taxes not yet due; (viii) the Company and all of its
Subsidiaries have
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withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party; (ix) neither the Company nor any of
its Subsidiaries have made any election under Section 341(f) of the Internal
Revenue Code of 1986, as amended (the "Code") (or any corresponding provision
of state, local, or foreign income tax law); (x) no deficiency or proposed
adjustment which has not been settled or otherwise resolved for a material
amount of Tax has been proposed, asserted, or assessed by any taxing authority
against the Company or any of its Subsidiaries, and there is no action, suit,
taxing authority proceeding, or audit now in progress, pending, or, to the
Company's or any of its Subsidiaries' knowledge, threatened against or with
respect to the Company or any of its Subsidiaries; (xi) the Buyer will not be
required to deduct and withhold any amount pursuant to Section 1445(a) of the
Code upon the transfer of the Shares to the Buyer; (xii) neither the Company
nor any of its Subsidiaries will be required to include any item of income in,
or exclude any item of deduction from, taxable income for any taxable period
(or portion thereof) ending after the Closing Date as a result of (A) any
change in method of accounting for a taxable period ending on or prior to the
Closing Date, (B) any closing agreement described in Section 7121 of the Code
(or any corresponding provision of state, local or foreign income Tax law), (C)
any deferred intercompany gain or any excess loss account described in Treasury
Regulations under Section 1502 of the Code (or any corresponding or similar
provision or administrative rule of federal, state, local or foreign income Tax
law) arising prior to the Closing Date, or (D) any installment sale made prior
to the Closing Date; (xiii) neither the Company nor any of its Subsidiaries has
been a member of an affiliated group other than one of which the Company was
the common parent, or filed or been included in a combined, consolidated or
unitary income Tax return, other than one filed by the Company; and (xiv)
neither the Company nor any of the Subsidiaries is obligated (under any
contract entered into on or before the Closing Date) to make any payments that
will be non-deductible under Section 280G of the Code (or any corresponding
provision of state, local or foreign income Tax law).
3.11.2 A certification, dated not more than 30 days prior to the Closing
Date, issued by the Company pursuant to Treasury Regulation Section 1.897-2(h)
that the stock of the Company is not a "United States real property interest"
as defined in Section 897 of the Code shall be delivered to the Buyer prior to
the Closing.
3.12 Real Estate. Section 3.12 of the Disclosure Schedule sets forth (i)
the address and legal description of all real property owned by the Company or
any Subsidiary and all buildings and other structures located on such real
property; (ii) all leases, subleases or other agreements, including all
amendments and other modifications, under which the Company or a Subsidiary is
lessor or lessee of any real property (the "Leases"); (iii) all options held by
the Company or a Subsidiary to purchase or acquire any interest in real
property; and (iv) all options granted by the Company or a Subsidiary to sell
or dispose of any interest in real property. The Company or a Subsidiary is
the owner of record, lessee under the Leases or holder of
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the options, as the case may be, of each of the items set forth on the
Disclosure Schedule free and clear of all Liens, defects, claims, rights of
possession or other encumbrances (except Permitted Liens), and the Company or a
Subsidiary, as applicable, has good and marketable title in and to all owned
real property set forth on the Disclosure Schedule subject to no Liens except
Permitted Liens and Liens in favor of the Banks pursuant to the Credit
Agreement. Such Leases and other agreements are in full force and effect and
the Company and the Subsidiaries have not received notice of any default
thereunder, nor of any condition which would become a default with the giving
of notice, the passage of time, or both. Except as described on Section 3.12
of the Disclosure Schedule, no consent, waiver, approval or authorization is
required from the landlord under any Lease as a result of the execution of this
Agreement or the consummation of the transactions contemplated hereby. There
is no pending or, to the Knowledge of the Sellers or the Company, any
threatened condemnation proceeding affecting any portion of the real property
owned or leased by the Company or any Subsidiary.
3.13 Assets of the Company. Except (i) as set forth in Section 3.13 of
the Disclosure Schedule and (ii) as contemplated by this Agreement, the assets
of the Company and the Subsidiaries include all of the assets and properties
used by the Company and the Subsidiaries in, and material to, the conduct of
the businesses of the Company and the Subsidiaries as currently conducted.
Such assets are in working condition, except where the failure of such assets
to be in working condition will not be reasonably expected to have a Company
Material Adverse Effect.
3.14 Compliance with Law. The conduct of the Company's and the
Subsidiaries' respective businesses and their use of their respective assets
has not violated or conflicted and does not violate or conflict with any Law,
which violation or conflict would be reasonably expected to cause a Company
Material Adverse Effect or, be likely to result in financial penalties in
excess of $1,000,000 in the aggregate to the Company and the Subsidiaries.
Except as set forth in Section 3.14 of the Disclosure Schedule, neither the
Company nor any Subsidiary has received any written communication since June
30, 1994 from any Governmental Body that alleges that either the Company or any
Subsidiary is not in compliance in any material respect with any applicable
Law, except where such noncompliance would not be reasonably expected to have a
Company Material Adverse Effect. All material permits, approvals or other
authorizations required to be obtained and maintained by the Company or each
Subsidiary to conduct their businesses have been obtained, are in full force
and effect and have been complied with and are being complied with in all
material respects, except where such non-compliance would not be reasonably
expected to have a Company Material Adverse Effect.
3.15 Employee Benefit Plans.
3.15.1 Whenever any of the terms set forth below is used in
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this Section 3.15 it shall have the following meaning: (i) "Benefit Plan"
shall mean any plan, agreement, arrangement or commitment which is an
employment, consulting or deferred compensation agreement, or an executive
compensation, incentive bonus, employee pension, profit-sharing, savings,
retirement, stock option, stock purchase or severance pay plan, or a life,
health, disability or accident insurance plan, or a holiday, vacation,
Christmas or other bonus practice or other employee benefit plan, agreement,
arrangement or commitment, including, without limitation, any "employee benefit
plan", as defined in Section 3(3) of ERISA, maintained by or with respect to
which the Company or any Subsidiary has any liability or obligation with
respect to any current or former employee of the Company or any Subsidiary;
(ii) "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended and the regulations promulgated thereunder; (iii) "PBGC" shall mean the
Pension Benefit Guaranty Corporation; and (iv) "Pension Plan" shall mean a
Benefit Plan which is a "pension plan", as defined in Section 3(2) of ERISA.
3.15.2 Section 3.15 of the Disclosure Schedule sets forth a true and
complete list of all Benefit Plans (except for employment agreements required
to be disclosed pursuant to Section 3.17(f) and set forth in Section 3.17(f) of
the Disclosure Schedule).
3.15.3 With respect to each Benefit Plan: Sellers have delivered or made
available to Buyer true and complete copies, if any, of: (i) all plan texts,
related trust agreements or annuity contracts (or other funding instruments)
and other agreements, arrangements and commitments set forth in the Disclosure
Schedule; (ii) all summary plan descriptions (including summaries of material
modifications thereto) and other material employee communications; (iii) the
most recent annual report (Form 5500 series, including all schedules thereto);
(iv) the most recent annual audited financial statements and opinion; (v) the
most recent actuarial valuation; and (vi) the most recent determination letter,
if any, received from the Internal Revenue Service.
3.15.4 All Benefit Plans, related trust agreements or annuity contracts
(or other funding instruments) are legally valid and binding and in full force
and effect.
3.15.5 With respect to each Benefit Plan, except as set forth in the
Disclosure Schedule: (i) The Company and the Subsidiaries have made all
contributions or other payments (including premiums payable to PBGC) due from
them to date on a timely basis and all amounts properly accrued to date as
liabilities of the Company and the Subsidiaries which have not been paid have
been properly recorded on the books of the Company and the Subsidiaries; (ii)
no such Benefit Plan which is subject to Section 302 of ERISA or Section 412 of
the Code has incurred an "accumulated funding deficiency" (as defined in either
such section), whether or not waived; (iii) each such Benefit Plan, related
trust agreement or other funding instrument
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conforms to, and its administration is and has been in material compliance with
(both as to form and operation), the terms of such Benefit Plan all applicable
laws, rules and regulations, including but not limited to ERISA and the Code;
(iv) except as set forth in Section 3.15 of the Disclosure Schedule, each such
Benefit Plan which is intended to qualify under Section 401(a) or 403(a) of the
Code has received a favorable determination letter from the Internal Revenue
Service with respect to its initial qualification (and with respect to all
material subsequent plan amendments), and its related trust has been determined
to be exempt from taxation under Section 501(a) of the Code, and nothing has
occurred since the date of the latest determination letter that would adversely
affect such qualification or exemption; (v) there are no actions, suits, liens
(statutory or otherwise) or claims pending (other than routine claims for
benefits) or, to the Knowledge of Sellers, threatened against or with respect
to the assets of the Company, any Subsidiary or any such Benefit Plan; and (vi)
to the best of Sellers' Knowledge, all Benefit Plans have complied with Title
I, Subtitle B, Part 6 of ERISA and Section 4980B of the Code.
3.15.6 Except as set forth in Section 3.15 of the Disclosure Schedule, no
Pension Plan that is or was subject to Title IV of ERISA has been terminated
within the last six years; no filing of a notice to terminate such a Pension
Plan has been made by the Company or any Subsidiary, no proceeding has been
initiated by PBGC to terminate any such Pension Plan; and neither the Company
nor any Subsidiary has incurred, or reasonably expects to incur, any liability
with respect to any plan termination, whether to the PBGC or otherwise. No
event has occurred, and there exists no condition or set of circumstances which
presents a material risk of a partial termination (within the meaning of
Section 411(d) (3) of the Code) of any Benefit Plan.
3.15.7 Except as set forth in the Benefit Plans identified in Section 3.15
of the Disclosure Schedule, no Benefit Plan provides medical or death benefits
(whether or not insured) with respect to current or former employees of the
Company or any Subsidiary beyond their retirement or other termination of
service, other than (i) coverage mandated by law or (ii) death benefits
provided under any Pension Plan.
3.15.8 There are no reserves, assets, surplus or prepaid premiums under
any Benefit Plan which is a "welfare plan" (as defined in Section 3(1) of
ERISA).
3.15.9 No Benefit Plan is a "multiple employer plan," or a "multiemployer
plan" within the meaning of the Code or ERISA and neither the Company nor any
Subsidiary has any Liability or potential Liability with respect to any such
multiple employer plan or multiemployer plan.
3.15.10 Neither the Company nor any Subsidiary has
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any Liability with respect to any "employee benefit plan" (as defined in
section 3(3) of ERISA) solely by reason of being treated as a single employer
under Section 414 of the Code with any trade, business or entity other than the
Company or any Subsidiary.
3.15.11 The termination of the "Precision Engine Products Corp.
Tallahassee Hourly Pension Plan" ("PEPC Pension Plan") is being and will be
conducted in all respects in compliance with the terms of the PEPC Pension Plan
and the requirements of ERISA and the Code.
3.16 Absence of Undisclosed Liabilities. Except as disclosed in the
Financial Statements (including the notes thereto) or Section 3.16 of the
Disclosure Schedule, the Company and the Subsidiaries do not have any
Liabilities except for (i) those incurred during the ordinary course of
business and consistent with past practice since December 31, 1996 (none of
which results from, arises out of, relates to, is in the nature of, or was
caused by any breach of contract, breach of warranty, tort, infringement or
violation of Law), (ii) obligations under executory agreements which are of a
type that would not be required to be reflected on the face of a balance sheet
prepared in accordance with GAAP and (iii) Liabilities (other those described
in clauses (i) and (ii) above) not exceeding $1,000,000 in the aggregate, and
there is no Basis for any such Liability (other those described in clauses (i)
and (ii) above).
3.17 Contracts. Section 3.17 of the Disclosure Schedule lists the
following agreements currently in effect to which the Company or any Subsidiary
is a party or by which the Company or any Subsidiary or any of their respective
properties or assets are bound:
(a) any lease, sublease, license or sublicense of personal property from
or to any third parties providing for payments in excess of $500,000
individually or $1,000,000 in the aggregate;
(b) any sales or purchase orders, commitments, distribution or other
agreements for the purchase or sale of raw materials, commodities, supplies,
goods, products, or other personal property or for the furnishing or receipt of
services which involves consideration of more than the sum of $500,000
individually or $1,000,000 in the aggregate provided, however, for sales or
purchase orders, Section 3.17 of the Disclosure Schedule lists only orders for
customers whose annual purchases exceed $4,000,000;
(c) any partnership, limited liability company or joint venture agreement;
(d) any indenture, mortgage, note, bond or other evidence of Debt (other
than capitalized leases, which are disclosed on Schedule 3.17(a) of the
Disclosure Schedule), any loan, security, credit, factoring or similar
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agreement under which the Company or any Subsidiary has borrowed or may borrow
money or issued any note, bond, indenture or other evidence of Debt for more
than $500,000 individually or $1,000,000 in the aggregate or under which the
Company or any Subsidiary has imposed (or may impose) a Lien on any of its
respective assets, tangible or intangible;
(e) any confidentiality, non-solicitation or non-competition agreement
(other than any confidentiality agreement relating to the proposed sale of the
assets or stock of the Company and/or any Subsidiary) or any agreement which
restricts, limits or prohibits the Company or a Subsidiary from entering into
any new, or expanding any existing line of business or any agreement which
contains geographic or other limitations, prohibitions or restrictions on its
ability to conduct business activities;
(f) any employment, consulting or severance agreement between the Company
or any Subsidiary and any current or former director, officer, consultant or
employee other than any such agreement that does not provide for the payment of
more than $200,000 in the aggregate in any year;
(g) any agreement whereby the Company or any Subsidiary grants any other
person a power of attorney (other than in the ordinary course of business
consistent with past practice which are not material), guarantees the Debt or
Liabilities, in whole or in part, of any other person or indemnifies any other
person against loss or Liability (except for such indemnification which is (i)
made in the ordinary course of business or (ii) would not be reasonably
expected to have a Company Material Adverse Effect);
(h) any agreement under which the Company or any Subsidiary could have
Liabilities in the future relating to the acquisition or disposition of any
material asset or property of the Company' or any Subsidiary for consideration
in excess of $5,000,000, by way of merger, consolidation, purchase, sale or
otherwise, or granting to any person a right at such person's option to
purchase or acquire all or substantially all of the Company's or any
Subsidiary's assets or properties;
(i) any agreement for the construction, acquisition or modification of any
land, building, structure, improvement, fixture or other fixed asset, or for
the incurrence of any other capital expenditure by the Company or any
Subsidiary where the outstanding balance exceeds $100,000 individually or
$250,000 in the aggregate;
(j) any agreement with any manufacturer's representative, distributor or
other independent sales agent that is not terminable by the Company or any
Subsidiary, as applicable, without penalty or payment of compensation on at
least six (6) months' or less notice;
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(k) any agreement with the Company or any Subsidiary, on the one hand, and
one of the Sellers or any officer, director, employee or affiliate of the
Company, any Subsidiary or any Seller or any of any of the Sellers' affiliates,
on the other hand (other than those required to be disclosed pursuant to clause
(d) or (f) of this Section 3.17);
(l) any agreement not otherwise required to be disclosed pursuant to this
Section 3.17 the consequences of a default or termination thereunder would be
reasonably expected to have any Company Material Adverse Effect; and
(m) any agreement not otherwise required to be disclosed pursuant to this
Section 3.17 either involving (i) consideration of more than $500,000
individually or $1,000,000 in the aggregate not entered into the ordinary
course of business or (ii) which is otherwise material to the business of the
Company or any Subsidiary.
The Company and the Subsidiaries have made available to the Buyer a
correct and complete copy of each written agreement required to be listed in
Section 3.17 of the Disclosure Schedule and a written summary setting forth the
terms and conditions of each oral agreement listed in Section 3.17 of the
Disclosure Schedule. Except as set forth in Section 3.17 of the Disclosure
Schedule and except for agreements which, as contemplated by this Agreement,
will be terminated at the Closing, all such agreements are (assuming due
authorization, execution, capacity and delivery by the parties thereto, other
than the Company and any Subsidiary), valid, binding and enforceable
obligations of the parties hereto, in accordance with their terms, except to
the extent that enforceability would not have a Company Material Adverse
Effect, or as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws effecting creditors' rights
generally. Neither the Company nor any Subsidiary is in default in the
observance or the performance of any material term or obligation to be
performed by it under any such agreement, which default has had, or in the
future could be reasonably expected to have a Company Material Adverse Effect,
and to the Knowledge of the Sellers or the Company, no other person is in
default in the observance or the performance of any material term or obligation
to be performed by such Person under any such agreement, which default has had,
or in the future could be reasonably expected to have a Company Material
Adverse Effect.
3.18 Intellectual Property.
(a) Section 3.18 of the Disclosure Schedule sets forth a complete and
correct list of all the following that are owned, used by, licensed to, issued
to or filed by the Company or any Subsidiary:
(i) patented or registered Intellectual Property Rights and
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pending applications for the foregoing;
(ii) material unregistered trademarks, material unregistered service
marks, trade dress, trade names, corporate names, and Internet domain names;
(iii) computer software (other than readily available software or software
purchased or licensed for less than a total cost of $5,000);
(iv) all material licenses or similar agreements or arrangements covering
Intellectual Property Rights to which the Company or a Subsidiary is a party,
either as licensee or licensor, or as a third-party beneficiary;
(v) Except for those Intellectual Property Rights which the Company or any
Subsidiary has, in the exercise of its business judgment, decided not to
register or to terminate or allow to be terminated or expire, the Company or a
Subsidiary has taken and will continue to take commercially reasonable efforts
to maintain and protect all of the Company's Intellectual Property Rights
listed on Section 3.18 of the Disclosure Schedule so as not to adversely affect
the validity or the enforceability thereof; and
(vi) From and after the Closing, at the written request of the Buyer, the
Sellers shall cooperate with the Buyer to cause any Intellectual Property
Rights listed on Section 3.18(a)(i) of the Disclosure Schedule, the transfer of
ownership to the Company or a Subsidiary of which shall not have been, prior to
the Closing, officially recorded with appropriate authorities in any applicable
jurisdiction, to be so officially recorded in the name of the Company, the cost
of which shall be borne by the Sellers, except that Sellers shall bear no such
costs for those Intellectual Property Rights which the Company or any
Subsidiary in the exercise of its reasonable business judgment, decided not to
record.
(b) Except as set forth in Section 3.18 of the Disclosure Schedule:
(i) the Company or a Subsidiary owns and possesses all right, title and
interest in and to, or has a valid and enforceable written license to use, free
and clear of all Liens (other than Permitted Liens which shall be extinguished
at the Closing), all of the Intellectual Property Rights set forth in Section
3.18 of the Disclosure Schedule and all other Intellectual Property Rights
necessary for the operation of their respective businesses as presently
conducted (collectively, the "Company's Intellectual Property Rights");
(ii) no claim by any third party contesting the validity, enforceability,
use or ownership of any of the Company's Intellectual Property Rights
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has been made to the Company or any Subsidiary, is currently outstanding or to
the Knowledge of the Sellers or the Company is threatened, and there are no
grounds for the same;
(iii) no loss or expiration of any of the Company's Intellectual Property
Rights is threatened, pending or reasonably foreseeable, except for patents
expiring at the end of their statutory terms;
(iv) to the Knowledge of the Sellers, or the Company, no third party has
infringed, misappropriated or otherwise conflicted with any of the Company's
Intellectual Property Rights and the Company and the Sellers do not have
Knowledge of any facts that indicate a likelihood of any of the foregoing;
(v) neither the Company nor a Subsidiary has infringed, misappropriated or
otherwise conflicted with, any Intellectual Property Rights of any third party,
which conflict would be reasonably expected to have a Company Material Adverse
Effect, and neither the Company nor the Sellers have Knowledge of any facts
that indicate a likelihood of any of the foregoing;
(vi) no material information relating to the registrability of any of the
Company's Intellectual Property Rights has been withheld from the United States
Patent and Trademark Office or from similar offices in foreign countries;
(vii) with respect to each license or similar agreement or arrangement
covering the Company's Intellectual Property Rights, neither the Company nor
any Subsidiary, nor, to the Knowledge of the Sellers or the Company, any other
party to such license or similar agreement or arrangement, is in material
breach or has repudiated any material provision thereof, and neither the
Company nor the Sellers have Knowledge of any facts that indicate a likelihood
of any of the foregoing; and
(viii) immediately subsequent to the Closing, the Company's Intellectual
Property Rights will be owned or available for use by Buyer on terms and
conditions identical to those under which the Company or a Subsidiary owned or
used the Company's Intellectual Property Rights prior to the Closing, provided,
that Buyer makes any and all governmental filings required to be made by Buyer,
as the owner of the Company.
3.19 Insurance. Section 3.19 of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) currently maintained by or for the benefit of the
Company or any Subsidiary (i) the name of the insurer, (ii) the name of the
policyholder, (iii) the name of each covered insured, (iv) the policy number
and the period of coverage, (v) the scope (including an indication of whether
the coverage was on a claims made,
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occurrence, or other basis) and amount (including a description of how
deductibles and ceilings are calculated and operate) of coverage, and (vi) a
description of any retroactive premium adjustments or other loss-sharing
arrangements. Neither the Company nor any Subsidiary, nor to the Knowledge of
the Company or the Sellers, any other party to any such policy, is in breach or
default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification,
or acceleration, under the policy, and no party to any such policy has
repudiated any provision thereof. Section 3.19 describes any self-insurance
arrangements affecting the Company or any Subsidiary.
3.20 [Intentionally Omitted]
3.21 Labor. Except as set forth in Section 3.21 of the Disclosure
Schedule, the Company has not received notice of and has no Knowledge of any
organizational effort presently being made or, to the Knowledge of the Company
or the Sellers, threatened by or on behalf of any labor union with respect to
any employees of the Company or any Subsidiary and none of the Company's or any
Subsidiary's employees are represented by any labor union. Except as set forth
in Section 3.21 of the Disclosure Schedule, the Company and each Subsidiary is
in compliance with all applicable Laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, except for
such non-compliance as would not be reasonably expected to have a Company
Material Adverse Effect, and is not engaged in any unfair labor practice and,
to the Knowledge of the Company or the Sellers, there is no reasonable Basis
for any unfair labor practice complaint or claim to be asserted against the
Company or any Subsidiary which would reasonably be expected to have a Company
Material Adverse Effect, and there is no labor strike, dispute, slowdown or
stoppage actually pending or, to the Knowledge of the Company or the Sellers,
threatened, against the Company or any Subsidiary. Except as set forth in
Section 3.21 of the Disclosure Schedule, none of the Company or any
Subsidiaries have any labor contracts with any representative of any of the
Company's or any Subsidiary's employees, as applicable. All vacation pay,
severance indemnity (T.F.R.), bonuses, commissions, pension plan and other
employee benefit payments and all social security contributions related thereto
are reflected and have been accrued in the books and records of the Company or
a Subsidiary (as applicable). No Cassa Integrazione Guardagni Ordinania or
Cassa Integrazione Guadagni Straordinaria proceedings have been applied for
(and no such applications by the Company or any Subsidiary (as applicable) are
pending.
3.22 Terminated Officers. Section 3.22 of the Disclosure Schedule lists
all corporate officers (including directors) of the Company or any Subsidiary
whose employment has been terminated, voluntarily or involuntarily, since
October 1, 1996, together with all claims or Actions that have been filed, or,
to the Knowledge of the Company or the Sellers, threatened with respect to such
employment
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or termination.
3.23 Affiliated Transactions. Except for (a) those agreements or
transactions listed in Section 3.17 of the Disclosure Schedule or contemplated
by this Agreement, (b) fees paid to directors and (c) salaries paid to
officers, neither the Company nor any Subsidiary has, since October 1, 1996,
(i) paid, loaned or advanced any amount to, (ii) sold, transferred or leased
any properties or assets to, or (iii) entered into or continued any agreement,
arrangement, or understanding (written or otherwise) with, any of any of the
Sellers or the Company's, any Subsidiary's or any Seller's officers, directors,
stockholders or affiliates.
3.24 Accounts Receivable and Inventory.
(a) The inventory of the Company and the Subsidiaries is, in all material
respects taken as a whole, merchantable and fit for the purpose for which it
was procured or manufactured, and none of which is slow-moving, obsolete,
damaged or defective, except to the extent appropriate reserves on the audited
consolidated balance sheet of the Company and the Subsidiaries as of December
31, 1996, and the unaudited consolidated balance sheet of the Company and the
Subsidiaries as of September 30, 1997, have been established to reduce the
carrying value of such inventory to the lower of (i) actual costs and (ii) net
realizable value, except where the failure to establish such reserves would not
be reasonably expected to have a Company Material Adverse Effect.
(b) All accounts and notes receivable of the Company and the Subsidiaries
have arisen in the ordinary course of business and the accounts receivable
reserve reflected in the audited consolidated balance sheet of the Company and
the subsidiaries as of December 31, 1996, and the unaudited consolidated
balance sheet of the Company and the Subsidiaries as of September 30, 1997,
were as of a such respective dates adequate and established in accordance with
GAAP consistently applied.
3.25 Disclaimer. EXCEPT AS SPECIFICALLY SET FORTH HEREIN, SELLERS MAKE NO
WARRANTY, EXPRESS OR IMPLIED. IN ANY EVENT, EXCEPT AS SPECIFICALLY PROVIDED
HEREIN, SELLERS MAKE NO WARRANTY OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR
A PARTICULAR PURPOSE, OR QUALITY, AS TO THE ASSETS OF THE COMPANY, OR ANY PART
THEREOF, OR AS TO THE CONDITION OR WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY
DEFECTS THEREIN, WHETHER LATENT OR PATENT. EXCEPT AS SET FORTH IN SECTION
10.2, SELLERS MAKE NO REPRESENTATION OR WARRANTY REGARDING ENVIRONMENTAL
MATTERS, INCLUDING BUT NOT LIMITED TO COMPLIANCE WITH ENVIRONMENTAL
REQUIREMENTS (AS DEFINED IN SECTION 12.1).
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4. Representations and Warranties of the Buyer. The Buyer hereby
represents and warrants to the Sellers as follows:
4.1 Organization. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of Delaware and has the requisite
corporate power and authority to execute, deliver and perform this Agreement
and to consummate the transactions contemplated hereby.
4.2 Corporate Power and Authority; Effect of Agreement. The execution,
delivery and performance by the Buyer of this Agreement and the consummation by
the Buyer of the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of the Buyer. This Agreement has
been duly and validly executed and delivered by the Buyer and constitutes a
valid and binding obligation of the Buyer, enforceable in accordance with its
terms, subject to (a) applicable bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights generally and (b) general principles
of equity. The execution, delivery and performance by the Buyer of this
Agreement and the consummation by the Buyer of the transactions contemplated
hereby will not, with or without the giving of notice or the lapse of time, or
both, subject to obtaining any required consents, approvals, authorizations,
exemptions or waivers, (a) violate any provision of Law to which the Buyer is
subject, (b) violate any order, judgment or decree applicable to the Buyer or
(c) violate any provision of the Certificate of Incorporation or the By-laws of
the Buyer; except, in each case, for violations which would not materially
hinder or impair the consummation of the transactions contemplated hereby.
4.3 Consents. No consent, permit, approval or authorization of, or
exemption by, or filing with, any Governmental Body (other than pursuant to the
HSR Act) is required in connection with the execution, delivery and performance
by the Buyer of this Agreement or the taking of any other action contemplated
hereby, excluding, however, consents, approvals, authorizations, exemptions,
waivers and filings, if any, which the Sellers are, or the Company is, required
to obtain or make.
4.4 Sufficiency of Funds. The Buyer has obtained in good faith a letter
from DLJ Capital Funding, Inc. stating that, subject to the satisfaction of
certain conditions, it will lend to the Buyer $30.0 Million (the "Bank Debt"),
and the Buyer has obtained in good faith a letter from Donaldson, Lufkin &
Jenrette Securities Corporation stating that it is highly confident that,
subject to the satisfaction of certain conditions, it can place notes in an
amount equal to at least $ 100.0 Million (the "Securities") in order to finance
the transaction contemplated herein. Copies of such letters are attached
hereto as Exhibit 4.4a and Exhibit 4.4b. The Buyer represents and warrants
that it has no reason to believe that the Bank Debt and the Securities cannot
be closed at or prior to Closing, subject to agreements on terms and conditions
satisfactory to the Buyer in its sole discretion.
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4.5 Litigation. There is no Action pending (i) or to the Buyer's
Knowledge, threatened against the Buyer with respect to which there is a
reasonable likelihood of a determination which would have a material adverse
effect on the ability of the Buyer to perform its obligations under this
Agreement or (ii) which seeks to enjoin or obtain damages in respect of the
consummation of the transactions contemplated hereby.
4.6 Purchase for Investment. The Buyer is purchasing the Shares for
investment and not for resale or distribution.
5. Covenants and Agreements. The parties covenant and agree as follows:
5.1 Conduct of Business. From the date hereof through the Closing Date,
unless the Buyer previously consents in writing to the contrary, the Company
and the Subsidiaries shall, and Metromedia shall cause the Company and the
Subsidiaries to:
(a) conduct their businesses only in the ordinary course consistent with
past practice;
(b) make commercially reasonable efforts consistent with past practices to
keep their respective businesses and properties substantially intact and to
preserve existing relationships with customers, suppliers, lessors, licensors,
employees and others with whom the Company and the Subsidiaries deal;
(c) not amend their respective Certificates of Incorporation or By-laws or
similar organizational documents;
(d) not (i) split, combine or reclassify any of their respective capital
stock, (ii) other than dividends (1) required to be paid to the holders of the
Company's Preferred Stock pursuant to any Certificate of Designation or the
Company's Certificate of Incorporation or (2) payable by any Subsidiary to the
Company or any Subsidiary, declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to their
respective capital stock, (iii) except pursuant to the exercise of options,
warrants, conversion rights or other contractual rights existing on the date
hereof and disclosed in Section 3.8 of the Disclosure Schedule, issue or sell
any additional shares of, or securities convertible into or exchangeable for,
or options, warrants, calls, commitments or rights of any kind to acquire,
shares of their respective capital stock, or (iv) except pursuant to agreements
existing on the date hereof, redeem, purchase or otherwise acquire directly or
indirectly any of their respective capital stock;
(e) not, except in the ordinary course of business and
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consistent with past practice or pursuant to agreements disclosed in Section
3.17 of the Disclosure Schedule or pursuant to agreements not required to be
disclosed in Section 3.17 of the Disclosure Schedule, (i) acquire, sell,
license, lease or dispose of any property , or (ii) enter into any commitment
or transaction which individually or in the aggregate would be material to the
Company and the Subsidiaries;
(f) not (i) incur or assume any Debt (other than Company Debt), except in
the ordinary course of business consistent with past practice, (ii) except as
otherwise provided in this Agreement, make any material loans, advances or
capital contributions to, or investments in, any other person (other than to a
Subsidiary), (iii) except in the ordinary course of business consistent with
past practice or pursuant to the Credit Agreement, pledge or otherwise encumber
shares of their respective capital stock, or (iv) except in the ordinary course
of business consistent with past practice or pursuant to the Credit Agreement,
mortgage or pledge any of their respective property, or create any Liens with
respect to such property (other than Permitted Liens);
(g) not (i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof or any equity interest therein, (ii) except in the ordinary course of
business consistent with past practice or pursuant to agreements disclosed in
Section 3.17 of the Disclosure Schedule or pursuant to agreements not required
to be disclosed in Section 3.17 of the Disclosure Schedule, enter into any
contract or agreement which would be material to the Company and its
Subsidiaries taken as a whole, or (iii) other than capital expenditures made
pursuant to any Contract listed on Schedule 3.17 of the Disclosure Schedule or
provided for in the Company's 1997 capital expenditures budget, which budget
has been delivered or made available to the Buyer, authorize any new capital
expenditure or expenditures which, individually, is in excess of $500,000 or,
in the aggregate, are in excess of $2,000,000;
(h) not change any of the accounting methods used unless required by GAAP;
(i) settle or compromise any Action which after insurance reimbursement is
material individually or in the aggregate to the Company and the Subsidiaries,
without the prior written consent of the Buyer, which consent shall not be
unreasonably withheld;
(j) not adopt or amend in any material respect any collective bargaining
agreement;
(k) not, except for intercompany transactions in the ordinary course of
business and consistent with past practice and payments pursuant to existing
contracts, pay, loan or advance any amount to, or sell, transfer or lease any
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of its assets to, or enter into any arrangement or agreement with any director,
officer, stockholder or Affiliate (other than the Company and any of the
Subsidiaries);
(l) not enter into any lease of real property, except any renewals of
existing leases in the ordinary course of business and consistent with past
practice;
(m) except in the ordinary course of business consistent with past
practice, continue to maintain and protect the Company's Intellectual Property
Rights as not to adversely affect the validity or enforceability of any of the
Company's Intellectual Property Rights;
(n) not slow down the Company's rate of spending for capital expenditures;
and
(o) not authorize or enter into an agreement, whether in writing or
otherwise, to do any of the foregoing.
5.2 Litigation. From the date hereof through the Closing Date, the
Sellers shall notify promptly the Buyer of any Actions that from the date
hereof are threatened or commenced against the Company, any Subsidiary or any
of the Sellers or against any officer or director of the Company, any
Subsidiary or any of the Sellers, and of any requests for additional
information or documentary materials by any Governmental Body pursuant to the
provisions of the HSR Act and the rules promulgated thereunder in the event and
for so long as any party hereto actively is contesting or defending against any
Action, the other party will cooperate with the contesting or defending party
and its counsel in the contest or defense, make available its personnel, and
provide such testimony and access to its books and records as shall be
reasonably necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending party (unless the contesting or
defending party is entitled to indemnification therefor hereunder).
5.3 Consent to Jurisdiction and Service of Process. Except as provided in
Sections 9.3.3 and 10.5.11, any legal Action arising out of or relating to this
Agreement or the transactions contemplated hereby may be instituted in any
state or federal court located in New York County, State of New York, and each
party agrees not to assert, by way of motion, as a defense, or otherwise, in
any such action, suit or proceeding, any claim that it is not subject
personally to the jurisdiction of such court, that its property is exempt or
immune from attachment or execution, that the action, suit or proceeding is
brought in an inconvenient forum, that the venue of the action, suit or
proceeding is improper or that this Agreement or the subject matter hereof may
not be enforced in or by such court, and hereby waives any offsets or
counterclaims in any such action, suit or proceeding. Each party further
irrevocably submits to the jurisdiction of any such court in any such action,
suit or proceeding. Any and all service of process and any other notice in any
such action, suit or proceeding shall be effective
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against any party if given personally or by registered or certified mail,
return receipt requested, or by any other means of mail that requires a signed
receipt, postage prepaid. Nothing herein contained shall be deemed to affect
the right of any party to serve process in any manner permitted by law or to
commence legal proceedings or otherwise proceed against any other party in any
jurisdiction other than New York.
5.4 Expenses. If the transactions contemplated hereby are not consummated,
the parties to this Agreement shall, except as otherwise specifically provided
herein, bear their respective expenses incurred in connection with the
preparation, execution and performance of this Agreement and the transactions
contemplated hereby, including, without limitation, all fees and expenses of
agents, representatives, counsel and accountants. If the transactions
contemplated hereby are consummated, the Buyer shall be entitled to receive
reimbursement from the Sellers (proportionate to their Share Ownership) for the
Seller Expenses which are paid or payable after the Closing, provided that such
reimbursement shall not be made if the following two conditions are satisfied:
(i) the amounts payable for such Seller Expense is reflected in the Closing
Statement and (ii) there is an adjustment to the Final Pre-Adjustment Amount
based on Actual Working Capital, as determined pursuant to Section 1.2.2.
5.5 Indemnification of Brokerage. The Buyer on the one hand and each of
the Sellers and the Company on the other hand represents and warrants to the
other that no broker, finder, agent or similar intermediary has acted on its
behalf in connection with this Agreement or the transactions contemplated
hereby, and that there are no brokerage commissions, finders' fees or similar
fees or commissions payable in connection therewith based on any agreement,
arrangement or understanding with it or any action taken by it, except for
customary transaction fees payable to certain stockholders of the Buyer by the
Company at Closing and a fee payable to American Industrial Partners by the
Buyer. Except as provided in the preceding sentence, each of the Buyer and the
Sellers agrees to indemnify and save the other from any claim or demand for
commission or other compensation by any broker, finder, agent or similar
intermediary claiming to have been employed by or on behalf of such person and
to bear the cost of reasonable legal expenses incurred in defending against any
such claim.
5.6 Further Assurances. Each of the parties shall execute such documents
and other papers and take such further actions as may be reasonably required or
desirable to carry out the provisions hereof and the transactions contemplated
hereby. Each party shall use its commercially reasonable efforts to fulfill or
obtain the fulfillment of the conditions to the Closing. Without limiting the
generality of the foregoing, the parties will use their commercially reasonable
efforts to file with the Federal Trade Commission and the Antitrust Division of
the Department of Justice complete and accurate notification and report forms
with respect to the transactions contemplated hereby pursuant to the HSR Act
and the rules promulgated thereunder,
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and to file such additional information and documentary materials as may be
requested pursuant to such Act, sufficiently in advance of the Closing Date to
allow the period of time specified by such Act and rules, and any extensions
thereof, to expire prior to the Closing Date.
5.7 Confidentiality. The terms of the letter agreement regarding
confidentiality heretofore entered into between Stanadyne Automotive Corp. and
the Buyer, dated July 10, 1997 (the "Confidentiality Agreement"), are herewith
incorporated by reference and shall continue in full force and effect until the
Closing. After the Closing, the Sellers will treat and hold as such all
Confidential Information, refrain from using any Confidential Information
except in connection with this Agreement, and deliver promptly to the Buyer or
destroy, at the request and option of the Buyer, all tangible embodiments (and
all copies) of Confidential Information which are in any of the Sellers'
possession, provided, however, that Sellers shall be able to retain, for tax,
financial, litigation or other reasonable purpose, such Confidential
Information as Sellers shall reasonably deem necessary. In the event that any
Seller is requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential Information, such
Seller will notify the Buyer promptly of the request or requirement so that the
Buyer may seek an appropriate protective order or waive compliance with the
provisions of this Section 5.7. If, in the absence of a protective order or
the receipt of a waiver hereunder, such Seller is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else
stand liable for contempt, such Seller may disclose the Confidential
Information to the tribunal; provided, however, that such Seller shall use its
commercially reasonable efforts to obtain, at the request of the Buyer, an
order or other assurance that confidential treatment will be accorded to such
portion of the Confidential Information required to be disclosed as the Buyer
shall designate. If this Agreement is, for any reason, terminated prior to the
Closing, the Confidentiality Agreement shall continue in full force and effect.
5.8 Establishment of Defined Contribution Plan. Buyer shall establish (or
cause the Company to establish) effective January 1, 1998 a defined
contribution plan ("Buyer's Hourly Savings Plan") for the benefit of those
employees of the Company or its Subsidiaries who were participants in the PEPC
Pension Plan on the date of termination thereof and who, on the Closing Date,
became employees of the Buyer or any of its affiliates ("Transferred Hourly
Savings Participants"). Buyer's Hourly Savings Plan shall provide, to the
extent not inconsistent with Section 401(a)(4) and Section 410(b) of the Code,
benefits pursuant to the requirements listed on Section 5.8 of the Disclosure
Schedule. The Buyer's Hourly Savings Plan shall provide Transferred Hourly
Savings Participants credit for service with the Company, its Subsidiaries,
their affiliates and their respective predecessors prior to the Closing Date
for purposes of vesting and participation.
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5.9 Access to Information. From the date hereof to the Closing, the
Company and the Subsidiaries shall, and the Sellers shall cause the Company and
the Subsidiaries to, (a) give the Buyer and its authorized representatives
reasonable access to all books, records, personnel, officers and other
facilities and properties of the Company and the Subsidiaries and their
respective accountants at reasonable times and upon reasonable prior notice,
(b) permit the Buyer to make such copies and inspections thereof as the Buyer
may reasonably request and (c) cause the Company's and the Subsidiaries'
officers (including dirigenti) to furnish the Buyer with such financial and
operating data and other information with respect to the business and
properties of the Company and the Subsidiaries as the Buyer may from time to
time reasonably request.
5.10 Tax Matters. Neither the Company nor any of its Subsidiaries shall
file any amended Tax return, surrender any right to claim a refund of Taxes or
take any similar action, or omit to take any action relating to the filing of
any Tax return or the payment of any Tax, if such election, adoption, change,
amendment, agreement, settlement, surrender, consent, or other action or
omission would have the effect of materially increasing the present or future
tax liability or materially decreasing any present or future Tax asset (i.e.
net operating loss carry forwards, tax credit carry-forwards or the Tax basis
of depreciable assets) of the Company or any of the Subsidiaries, the Buyer or
any affiliate of the Buyer.
5.11. No Solicitation. From and after the date of this Agreement until the
earlier of (a) the Closing or (b) the termination of this Agreement pursuant to
Section 11.1 hereof, the Sellers shall not, and shall not permit any officer,
director, agent, representative or affiliate of the Company, any Subsidiary or
any Seller to, directly or indirectly: (i) enter into any written or oral
agreement or understanding with any Person (other than the Buyer or its
affiliates) regarding Another Transaction (as defined below); (ii) enter into
or continue any negotiations or discussions with any Person (other than the
Buyer or its affiliates) regarding the possibility of Another Transaction;
(iii) submit, solicit, initiate, encourage, participate in, or facilitate any
proposal or offer (other than a proposal or offer of the Buyer or its
affiliates) regarding Another Transaction; or (iv) except as otherwise required
by Law, provide any non-public financial or other Confidential Information
(including this Agreement and any other materials containing the Buyer's
acquisition proposal and any other financial information, projections or
proposals regarding the Company) to any Person (other than to the Buyer, its
affiliates or their respective representatives) who to the Knowledge of the
Company or the Sellers Know, or who the Company or the Sellers has reason to
believe, would have any interest in participating in Another Transaction. As
used herein, the term "Another Transaction" means the sale of any material
assets of the Company or any Subsidiary (other than the sale of inventory in
the ordinary course) or any sale, merger, consolidation, public offering,
reorganization, dissolution, recapitalization, business combination or similar
transaction involving any of the Company or any of the Company's capital stock
(or rights to acquire such capital
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stock), including, without limitation, the Shares. The Sellers will notify the
Buyer promptly if any third party makes any proposal, offer, inquiry or contact
in respect of Another Transaction.
5.12 Covenant Not to Compete.
(a) Metromedia agrees that for a period of three years from and after the
Closing Date (the "Non-Compete Period"), it will not engage directly or
indirectly in the manufacture of diesel fuel injection systems, fuel system
products, automotive engine components, automotive and truck maintenance
products or fuel additives business similar to that historically engaged in by
the Company (collectively, the "Business") anywhere in the world; provided,
however, that nothing herein shall prohibit Metromedia from (i) being a passive
owner of not more than 5% of the outstanding stock of any class of any other
corporation that engages in the Business, so long as Metromedia has no active
participation in the business of such corporation or (ii) engaging in any
business in which it is currently engaged, either directly or indirectly.
(b) During the Non-Compete Period, Metromedia shall not directly or
indirectly through another entity, induce or attempt to induce any employee of
the Company or any Subsidiary to leave the employ of the Company or any
Subsidiary, or in any way interfere with the relationship among the Buyer, the
Company, the Subsidiaries and any employee thereof.
(c) If, at the time of enforcement of this Section 5.12, a court shall
hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum
period, scope and area permitted by law. Metromedia hereby agrees that the
restrictions contained in this Section 5.13 are reasonable.
(d) In the event of the breach or a threatened breach by Metromedia of
any of the provisions of this Section 5.12, the Buyer, in addition and
supplementary to other rights and remedies existing in its favor, may apply to
any court of law or equity of competent jurisdiction for specific performance
and/or injunctive or other relief in order to enforce or prevent any violations
of the provisions hereof (without posting a bond or other security). In
addition, in the event of an alleged breach or violation by Metromedia of this
Section 5.12, the Non-Compete Period for Metromedia shall be tolled until such
breach or violation has been duly cured.
5.13 FIRPTA Certificate. The Company will provide the Buyer with a
certificate in accordance with Treasury Regulation Section 1.1445-2(c)(3)
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certifying that the capital stock of the Company does not constitute a U.S.
real property interest.
5.14 Delivery of Monthly Financial Statements. Prior to the Closing, the
Company shall deliver to the Buyer financial statements for each fiscal month
ending after the date of this Agreement (the "Monthly Financial Statements")
within thirty (30) days after the end of such fiscal month. All Monthly
Financial Statements delivered pursuant to this Section 5.14 shall be prepared
in a manner consistent with past practice.
5.15 Company Debt. Metromedia covenants that at or prior to Closing, the
Company or the Subsidiaries, as applicable, (i) will have the right to repay
contemporaneously with the Closing, all of the Company Debt, and (ii) upon
payment of such Company Debt by the Buyer at Closing, the Company and the
Subsidiaries, as applicable, will be immediately able to obtain the release of
all Liens on the assets or capital stock of the Company and the Subsidiaries
securing such Company Debt. Seller shall provide or arrange to be provided to
the Buyer releases and other customary documents from the Banks and other
lenders of Company Debt in form and substance reasonably satisfactory to the
Buyer relating to the repayment of Company Debt.
5.16 Exercise of Warrants, Options or Other Rights. The Company and
each Seller shall take all actions necessary to exercise all options, and
warrants and exercise and covert the Preferred Stock into common stock of the
Company or exercise other rights set forth in Section 3.8 of the Disclosure
Schedule on or prior to Closing.
5.17 Merger or Redemption. The parties covenant that in the event that, at
least twenty-three (23) days prior to the Scheduled Closing Date, all of the
Sellers have not executed this Agreement either personally or by a valid,
enforceable power of attorney (the "Signing Condition"), they shall either, at
the election of Metromedia (i) take all action necessary to cause a merger (the
"Merger") of the Buyer with and into the Company (assuming that the Buyer will
and does take all action required of the Buyer to effect the Merger), effective
as of the Closing and the parties shall amend this Agreement to conform this
Agreement to a merger transaction or (ii) fulfill their respective obligations,
as set forth in Section 1.2.3, to cause the Redemption of the Shares of the
Sellers who have not met the Signing Condition to occur on the Closing and, as
applicable, Metromedia shall cause the Company to exercise the Bring-Along
Right (together, the Redemption Option"). In the event the Redemption Option
is exercised, this Agreement shall be effective as to those Sellers who met the
Signing Condition and, as applicable, had their Shares purchased pursuant to
the Bring-Along Right. Metromedia agrees to indemnify and hold harmless the
Buyer Indemnitees from (1) In the event that the Merger is consummated or the
Redemption Option is exercised, any additional costs, expenses, loss or
Liabilities (including reasonable attorneys' fees) incurred by the Buyer
Indemnitees which would
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not have been incurred if all the Sellers had executed this Agreement and a
stock purchase transaction had been consummated in accordance with the terms of
this Agreement and (2) any Damages incurred as a result of the invalidity or
enforceability of any power of attorney granted to Metromedia by any Seller,
provided, however, that Buyer shall pay, and Metromedia shall have no
obligation to indemnify Buyer Indeminitees for, any attorneys' fees of Buyer
related to the negotiation, preparation and execution of the documents
necessary to cause the Merger or the Redemption, including but not limited to
the Merger agreement. The parties agree that the Merger agreement shall be on
the same terms and conditions as this Agreement, including but not limited to
the Purchase Price, representations and warranties, covenants, and
indemnification, with the only modification being the changes related to the
mechanism for perfecting the Merger and paying the Purchase Price to the holder
of the Shares. The parties further agree that they will act reasonably and in
good faith to effect the Merger, if the Merger is required.
5.18 Sellers' Representative. Each of the Sellers shall appoint
Metromedia as its lawful representative (the "Seller Representative") to take
such actions on behalf of the Sellers as are authorized by this Agreement and
as otherwise may be necessary following the Closing to more effectively
consummate the transactions contemplated by this Agreement. The Seller
Representative shall be authorized, in the name and on behalf of each Seller in
his, her or its capacity as such, to (i) dispute or refrain from disputing any
claim made by the Sellers under this Agreement and the agreements contemplated
hereby, (ii) negotiate or compromise any dispute which may arise under and
exercise or refrain from exercising remedies available under, and made any
determination under, this Agreement and the agreements contemplated hereby, and
sign any releases or other documents with respect to such dispute or remedy,
(iii) waive any condition contained in this Agreement and the agreements
contemplated hereby, (iv) give any and all consents under this Agreement and
the agreements contemplated hereby, and (v) give such instructions and do such
other things and refrain from doing such other things as the Seller
Representative shall deem appropriate to carry out the provisions of this
Agreement and the agreements contemplated hereby. Each of the Sellers agrees
that it shall be bound by all actions taken or omitted to be taken by the
Seller Representatives, all notices received, and agreements and determinations
made, and documents executed and delivered by the Seller Representative under
this Agreement and the agreements contemplated hereby. The Parties shall
acknowledge and agree that the Seller Representative shall have no liability
for acting in its capacity as such, except for such liabilities arising our of
its gross negligence or willful misconduct. Each of the Sellers shall agree to
indemnify and hold the Seller Representative harmless from any claims,
liabilities, costs and expenses (including reasonable attorneys' fees) arising
out of or relating to its actions as Seller Representative hereunder, other
than any such claims, liabilities, costs and expenses finally determined by a
court of competent jurisdiction to have arisen out of such Seller
Representative's gross negligence or willful misconduct. The Sellers agree
that the Buyer shall be entitled to deal exclusively with the Seller
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Representative in respect of all interactions, notices, disputes and other
matters relating to the Seller's obligations under this Agreement and the
Seller Representative agrees to act on behalf of the Sellers in respect of all
such matters.
6. Conditions Precedent to the Obligation of the Buyer to Close. The
obligation of the Buyer to enter into and complete the Closing is subject, at
the option of the Buyer acting in accordance with the provisions of this
Agreement with respect to termination hereof, to the fulfillment on or prior to
the Closing Date of the following conditions, any one or more of which may be
waived by the Buyer:
6.1 Representations and Covenants. The representations and warranties of
the Company, the Subsidiaries and the Sellers contained in this Agreement shall
be true in all material respects on and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date, except for
representations and warranties that speak as of a specific date or time other
than the Closing Date, which shall be true as of such date or time. For
purposes of determining whether a representation or warranty is true for the
purposes of the condition set forth in the first sentence of this Section 6.1,
any requirements in any representation or warranty that an event, fact, or
circumstance be or not be material or cause or not cause a Company Material
Adverse Effect shall be ignored, provided, however, that such representations
and warranties shall be deemed to be true where the failure of such
representations and warranties to be true shall not be materially adverse to
the business, assets, liabilities, financial condition or results of operations
of the Company or the Subsidiaries, taken as a whole. The Sellers shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by it
on, prior to or as of the Closing Date. The Company and the Sellers shall have
delivered to the Buyer certificates, dated the Closing Date and signed by an
officer of the Company, each of the Sellers and Subsidiary as the case may be,
to the foregoing effect; provided however, that in the event that (a) the
condition of this Section 6.1 shall not be satisfied because one or more
specific representations or warranties of the Company, the Subsidiaries or the
Sellers are not true as of the Closing Date and (b) the Buyer agrees to waive
satisfaction of such condition so that the transactions contemplated herein
will be consummated, then the Company, the Subsidiaries and the Sellers, as the
case may be, shall nevertheless provide the certificates referred to in this
Section 6.1, but such certificates shall exclude those specific representations
and warranties which were not true as of the Closing Date.
6.2 Opinion of Counsel to the Sellers and the Company. The Buyer shall
have received the opinion of counsel of the Company and the Sellers, dated the
date of the Closing, addressed to the Buyer, in form and substance reasonably
satisfactory to the Buyer.
6.3 Litigation. No Action shall have been instituted before any
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Governmental Body, or instituted or threatened by any Governmental Body, to
restrain, modify or prevent the carrying out of the transactions contemplated
hereby, or to seek damages or a discovery order in connection with such
transactions.
6.4 Directors. The Company and the Sellers shall have caused such of the
directors and statutory auditors of the Company and the Subsidiaries as have
been designated by the Buyer to have tendered to the Company or such
Subsidiaries their resignations as directors of the Company and or of such
Subsidiaries, effective as of the Closing Date. The Sellers undertake that
the Shareholders' meetings of Stanadyne Automotive S.p.A. shall be held duly
called on the Closing Date as required to replace the directors and statutory
auditors of Stanadyne Automotive S.p.A. who have resigned and the Sellers shall
have granted to a representative of the Buyer a proxy to attend such meeting
and vote thereon.
6.5 Delivery of Stock Certificates. The Sellers shall have delivered to
the Buyer at the Closing stock certificates representing all of the Shares duly
endorsed in blank or accompanied by stock powers duly executed in blank, in
proper form for transfer.
6.6 Hart-Scott-Rodino. The parties shall have filed with the Federal
Trade Commission and the Antitrust Division of the Department of Justice
complete and accurate notification and report forms with respect to the
transactions contemplated hereby, pursuant to the HSR Act and the rules
promulgated thereunder, and the waiting period required to expire under such
Act and rules, including any extension thereof, shall have expired prior to the
Closing Date.
6.7 Consents. All authorizations, approvals or consents listed in Exhibit
6.7 and those required to permit (i) the consummation of the transaction
contemplated hereby and (ii) the Company and the Subsidiaries to conduct their
respective business after the Closing Date on the same basis as conducted prior
to the date hereof shall have been obtained and be in full force and effect,
except where the failure to have obtained any such authorizations, approvals or
consents would not reasonably be expected to result in a Liability in excess of
$500,000 to the Company and the Subsidiaries, or materially interfere with the
business of the Company or any Subsidiary, taken as a whole.
6.8 No Company Material Adverse Change. Between January 1, 1997 and the
Closing Date there shall have been no Company Material Adverse Change (other
than those disclosed hereunder), provided that a Company Material Adverse
Change shall be deemed to have occurred if, to the knowledge of the Company, an
event, fact or circumstance has occurred which is substantially likely to
result in a Company Material Adverse Change within 21 months after the date
hereof.
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6.9 Financing. The Buyer shall have obtained financing, acceptable to the
Buyer in its sole discretion, to consummate the transactions contemplated
hereby.
6.10 Title Insurance. A title insurance company selected by the Buyer (the
"Title Company") shall be willing to insure at standard rates the Company's and
the Subsidiary's (as applicable) marketable title in and to any owned real
property in fee simple, free and clear of all Liens (other than Permitted Liens
and matters disclosed in Section 3.12 of the Disclosure Schedule) including
such endorsements and affirmative coverages as the Buyer shall reasonably
require including without limitation non-imputation endorsements. The Sellers
shall provide all such affidavits and indemnities as the Title Company
reasonably shall require in order to afford such coverages. The Sellers shall
have timely paid any and all real property transfer, transfer gains, stamp and
other similar taxes, if any, assessed in connection with the transactions
contemplated by this Agreement and shall have delivered evidence satisfactory
to the Buyer and the Title Company of the payment of such taxes. The Buyer
shall have received a survey of all real property owned by the Company or any
Subsidiary, conforming to the minimum Standard Detail Requirements jointly
established and approved in 1992 by ALTA and ACSM certified to the Company and
the Title Company and showing no defects, encroachments or encumbrances other
than other than the matters disclosed in Section 3.12 of the Disclosure
Schedule. Such real property shall be in substantially the same condition and
repair as that on the date of this Agreement, reasonable wear and tear
excepted. If required pursuant to the terms of any lease described in Section
3.12 of the Disclosure Schedule, the Buyer shall have received from each
landlord under such lease a consent to the transactions contemplated by this
Agreement, in form and substance reasonably satisfactory to the Buyer.
6.11 Certificates. The Buyer shall have received from the Company or the
Subsidiaries, as applicable:
(a) certificates executed by the secretary of the Company certifying as to
the resolutions of the board of directors of the Company and the Shareholders
authorizing the execution, delivery and consummation of the transaction
contemplated by this Agreement;
(b) a certificate of the secretary of the Company certifying as to the
incumbency of the officers of the Company and as to the signatures of such
officers who have executed documents delivered at the Closing on behalf of the
Company;
(c) a certificate, dated within three Business Days of the Closing Date,
of the Secretary of State of the State of Delaware establishing that the
Company is in existence and otherwise is in good standing to transact business
in its
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state of incorporation, and certificates, dated within three business Days of
the Closing Date, of the Secretary of State of the states of incorporation of
each of the Subsidiaries establishing that each of the Subsidiaries is in
existence and otherwise is in good standing to transact business is its state
of incorporation; and
(d) a certificate, dated within twenty-one days of the Closing Date, of
the Secretaries of State of the States in which the Company is qualified to do
business, to the effect that the Company is qualified to do business and is in
good standing as a foreign corporation in each of such states, and
certificates, dated within twenty-one days of the Closing Date, of the
Secretaries of State of the states in which each of the Subsidiaries is
qualified to do business, to the effect that each of the Subsidiaries is
qualified to do business and is in good standing as a foreign corporation in
each of such states.
6.12 Execution of Agreement by All Sellers or Merger. Either (a) this
Agreement shall have been executed by all of the Sellers, either individually
or by Metromedia on behalf of any non-individual signing Seller, as authorized
pursuant to a valid power of attorney for such purpose executed by such Seller
in favor of Metromedia or (b) the Merger shall have occurred.
7. Conditions Precedent to the Obligation of the Sellers to Close. The
obligation of the Sellers to enter into and complete the Closing is subject, at
the option of the Sellers acting in accordance with the provisions of this
Agreement with respect to termination hereof, to the fulfillment of the
following conditions, any one or more of which may be waived:
7.1 Representations and Covenants. The representations and warranties of
the Buyer contained in this Agreement shall be true in all material respects on
and as of the Closing Date with the same force and effect as though made on and
as of the Closing Date. For purposes of determining whether a representation
and warranty is true for the purposes of the condition set forth in the first
sentence of this Section 7.1, any requirements in the representations and
warranties that an event, fact or circumstance be or not be material shall be
ignored provided, however, that such representations and warranties shall be
deemed to be true where the failure of such representations and warranties to
be true shall not be material to any Seller. The Buyer shall have performed
and complied in all material respects with all covenants and agreements
required by this Agreement to be performed or complied with by it on, or prior
to, or as of, the Closing Date. The Buyer shall have delivered to the Sellers
a certificate, dated the Closing Date and signed by an officer of the Buyer to
the foregoing effect; provided however, that in the event that (A) the
condition in this Section 7.1 shall not be satisfied because one or more
specific representations or warranties of the Buyer are not true as of the
Closing Date and (B) the Sellers agree to waive satisfaction of such condition
so that the transactions contemplated herein will be consummated, then the
Buyer shall nevertheless provide the certificates referred to in
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this Section 7.1, but such certificates shall exclude those specific
representations and warranties which were not true as of the Closing Date.
7.2 Opinion of Counsel to the Buyer. The Sellers shall have received the
opinion of Kirkland & Ellis, counsel to the Buyer, dated the date of the
Closing, addressed to the Sellers, in form and substance reasonably
satisfactory to the Sellers.
7.3 Litigation. No Action shall have been instituted before any
Governmental Body, or instituted or threatened by any Governmental Body, to
restrain, modify or prevent the carrying out of the transactions contemplated
hereby, or to seek damages or a discovery order in connection with such
transaction.
7.4 Hart-Scott-Rodino The parties shall have filed with the Federal Trade
Commission and the Antitrust Division of the Department of Justice complete and
accurate notification and report forms with respect to the transactions
contemplated hereby, pursuant to the HSR Act and the rules promulgated
thereunder, and the waiting period required to expire under such Act and rules,
including any extension thereof, shall have expired prior to the Closing Date.
7.5 Payment. The Buyer shall have delivered to the Sellers at the Closing
the Preliminary Purchase Price by wire transfer of immediately available funds.
7.6 Certificates. The Sellers shall have received from the Buyer the
following:
(a) certificates executed by the secretary of the Buyer, certifying as to
the resolutions of the board of directors of the Buyer and the stockholders of
the Buyer authorizing the execution, delivery and consummation of the
transaction contemplated by this Agreement;
(b) a certificate of the secretary of the Buyer certifying as to the
incumbency of the officers of the Buyer, and as to the signatures of such
officers who have executed documents delivered at the Closing on behalf of the
Buyer;
(c) a certificate, dated within three Business Days of the Closing Date,
of the Secretary of State of the State of Delaware establishing that the Buyer
is in existence and otherwise is in good standing to transact business in its
state of incorporation; and
(d) a certificate from AICF, certifying that it has contributed the equity
portion of the Purchase Price to Buyer.
8. Survival of Representations, Warranties and Covenants. Except
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as otherwise expressly provided in this Agreement, all representations and
warranties of the parties made in this Agreement or in any certificate or other
document delivered pursuant hereto or in connection herewith shall expire at
the Closing; provided, however that notwithstanding anything to the contrary
contained herein the representations and warranties of the parties contained in
this Agreement shall survive until eighteen (18) months subsequent to the
Closing Date, except that (a) the representations and warranties contained in
Sections 3.7 (relating to outstanding capital stock), 3.8 (relating to options
or other rights), and 3.11 (relating to Tax matters) and 3.21 (relating to
Labor) shall survive indefinitely and not expire (except pursuant to applicable
statutes of limitations) and (b) representations and warranties contained in
Section 10 (relating to environmental matters) shall survive until, and expire
on, the third anniversary of the Closing Date; and, provided further, however,
that the covenants contained herein shall survive without limitation as to time
(except pursuant to applicable statutes of limitations).
9. Indemnification.
9.1 General Indemnification of Buyer. From and after the Closing Date and
subject to the terms and conditions of this Section 9.1, Buyer and its
directors, officers, employees, affiliates, controlling persons, stockholders,
agents, and representatives, and their successors and assigns (collectively,
the "Buyer Indemnitees") shall be indemnified and held harmless to the extent
set forth in this Section 9 by Sellers (proportionate to their ownership of
shares) in respect of any damage, loss, Liability and expense (including
reasonable attorneys' fees) (collectively, "Damages") asserted against or
actually incurred by any Buyer Indemnitee as a result of any misrepresentation
in or breach of or failure to perform any representation, warranty, covenant
and/or agreement made by Sellers or the Company (for covenants of the Company,
solely with respect to pre-Closing matters only) in this Agreement; provided,
however, that the Sellers' obligation to indemnify the Buyer Indemnitees
pursuant to Section 9.1 hereof in respect of breaches of representations and
warranties (other than representations and warranties made in Sections 3.2, 3.7
or 3.8) is subject to the following limitations:
(i) the Buyer Indemnitees shall not be entitled to recover from the
Sellers in respect of any claim for Damages resulting from a single inaccuracy
or breach unless such Damages equal or exceed $150,000; provided, however that
all claims for Damages directly arising out of the same facts or events
resulting in such inaccuracy or breach shall be treated as a single claim. For
the purposes of determining whether there has been a breach or an inaccuracy in
respect of any representation or warranty for the purpose of Section 9.1, any
requirement that an event or fact be or not be material or cause, or fail to
cause, a Company Material Adverse Effect shall be ignored; and
(ii) the Sellers shall have no obligation under this Section 9.1
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unless and until the aggregate amount of Damages so incurred by Buyer
Indemnitees in the aggregate for which Buyer Indemnitees are entitled to
indemnification under this Section 9.1 plus the aggregate amount for which
Buyer Indemnitees are entitled to indemnification under Section 10.3.3 exceeds
$2,000,000, whereupon Sellers shall be liable to indemnify the Buyer
Indemnitees for all such Damages in excess of such amount up to a maximum
amount equal to $35,000,000;
The indemnification provisions of this Section 9 shall be the sole and
exclusive remedy of the Buyer Indemnitees, except as provided in Sections 10
and 11. The Sellers shall be obligated to indemnify the Buyer Indemnitees only
for those claims giving rise to Damages as to which the Buyer Indemnitees have
given the Sellers written notice of the basis of such claim thereof prior to
the end of the Survival Period.
Notwithstanding the foregoing, the indemnification obligations of Buyer
under Section 9.5 and Section 10 shall be set forth in such sections and shall
not be subject to the provisions of this Section 9.1. Notwithstanding anything
to the contrary set forth in this Agreement, the Buyer Indemnitees shall be
indemnified and held harmless by the Sellers (proportionate to their Share
Ownership) for (i) any Damages asserted against or actually incurred by any
Buyer Indemnitee arising out of any requirements imposed by the Internal
Revenue Service as a condition of issuing determinations that the Precision
Engine Products Tallahassee Hourly Pension Plan and the Stanadyne Automotive
Corp. Pension Plan are qualified under Section 401(a) of the Code as amended
for the provisions of the Tax Reform Act of 1986 and subsequent legislation and
(ii) the aggregate amount of the Weber Liability, if any, which the Company
actually pays to Weber. Notwithstanding that the Buyer Indemnitees shall be
indemnified and held harmless by the Sellers proportionate to their Share
Ownership, the Buyer Indemnitees shall be entitled to recover from Metromedia
any and all Damages for which the Buyer Indemnitees are entitled to
indemnification under this Agreement (other than Damages asserted against or
actually incurred by any Buyer Indemnitee as a result of any misrepresentation
in or breach of any Several Representation by any Seller other than Metromedia)
without having to seek any recourse first against the other Sellers. For
purpose of this Agreement "Several Representation" shall mean any
representation or warranty in Sections 3.2, 3.4, 3.5 or 3.7 which pertain to a
Seller individually. Notwithstanding anything to the contrary set forth in
this Agreement, Buyer shall not be indemnified by Metromedia for any Damages
asserted against or actually incurred by the Buyer as a result of any
misrepresentation in or breach of any Several Representation by any Seller
other than Metromedia. Each Seller agrees that Metromedia may elect to seek,
and is entitled to contribution and recovery from such Seller, proportionate to
such Seller's Share Ownership, for any and all Damages recovered from
Metromedia by the Buyer Indemnitees pursuant to this Agreement (except for
Damages recovered as a result of any misrepresentation in or breach of or
failure to perform by Metromedia any Several Representation), provided,
however, that in the event that Metromedia elects not to
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seek such contribution and recovery, this provision shall be of no effect.
9.2 Indemnification of Sellers. From and after the Closing Date, Sellers
and their respective directors, officers, employees, affiliates, controlling
persons, stockholders, agents, and representatives, and their successors and
assigns (collectively, the "Seller Indemnitees") shall each be indemnified and
held harmless to the extent set forth in this Section 9 by Buyer in respect of
any and all Damages asserted against or actually incurred by Sellers
Indemnities (i) as a result of any misrepresentation in or breach of or failure
to perform any representation, warranty, covenant or agreement made by Buyer in
this Agreement or (ii) except as may be limited by Section 10, resulting from
Buyer's operation of the Company and is subsidiaries or ownership of the Shares
after the Closing Date, provided, that the foregoing clause (ii) shall not be
deemed to modify the obligations of Sellers under Section 9.1 and provided,
further, that in the event of a conflict between this clause (ii) and Section
9.1, the provisions of Section 9.1 shall prevail. Buyer's obligation to
indemnify the Sellers Indemnitees pursuant to Section 9.2 hereof is subject to
the following limitations:
(i) the indemnification provisions of this section 9 shall be the sole and
exclusive remedy of the Sellers Indemnitees, except as provided in Sections 10
and 11; and
(ii) the Buyer shall be obligated to indemnify the Sellers Indemnitees
only for those claims giving rise to Damages as to which the Sellers
Indemnitees have given the Buyer written notice of the basis of such claim
thereof prior to the end of the Survival Period.
9.3 Claims for Indemnification; Arbitration.
9.3.1. If any party shall believe that it is entitled to indemnification
pursuant to this Section 9 in respect of any Damages (an "Indemnitee"), such
Indemnitee shall promptly give the appropriate indemnifying party notice of
such claim (a "Notice of Claim"). Any such Notice of Claim shall set forth in
reasonable detail and to the extent then known the basis for such claim for
indemnification and the amount of the claim, to the extent specified or
otherwise known. The failure of such Indemnitee to give the Notice of Claim
for indemnification promptly shall not adversely affect such Indemnitee's right
to indemnity hereunder except to the extent that the defense of any claim is
prejudiced by such failure.
9.3.2. No Person shall have any claim or cause of action as a result of
any misrepresentation in or breach of or failure to perform any representation,
warranty, covenant, agreement or obligation of any Indemnifying Party referred
to in this Section 9 against any affiliate, stockholder, director, officer,
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employee, consultant or agent of such Indemnifying Party, unless any of the
foregoing is a successor or assign of such Indemnifying Party. Nothing set
forth in this Section 9 shall be deemed to prohibit or limit any Indemnitee's
right at any time before, on or after the Closing Date, to seek injunctive or
other equitable relief for the failure of any Indemnifying Party to perform any
covenant or agreement contained herein.
9.3.3 (a) All claims, disputes, controversies and other matters relating
to the parties respective indemnification obligations under this Agreement
(including the parties' respective indemnification obligations pursuant to
Section 10) shall be settled by preliminary negotiation between the Buyer on
the one hand and the Sellers on the other hand. If such preliminary
negotiation is unsuccessful within 30 business days, then either party may
refer the dispute to binding arbitration in accordance with procedures set
forth in this Section 9.3.3. Without limiting the mandatory arbitration
provision set forth in this Section 9.3.3, each party hereby (i) waives the
right to bring an action in any court of competent jurisdiction with respect to
any such claims, controversies and disputes (other than any such action to
enforce the award or other remedy resulting from any arbitration pursuant to
this Section 9.3.3), and (ii) waives the right to trial by jury in any suit,
action or other proceeding brought on, with respect to or in connection with
this Agreement.
(b) Upon filing of a notice of demand for binding arbitration by either
party, arbitration with the American Arbitration Association, or comparable
association if the American Arbitration Association is no longer in existence,
shall be commenced and conducted as follows:
(i) All claims, disputes, controversies and other matters in question
shall be referred to and decided and settled by a standing panel of three
arbitrators, one selected by the Buyer, one by the Sellers and the third by the
two arbitrators so selected. Selection of arbitrators shall be made within
thirty days after the date of the first notice of demand given pursuant to this
Section 9.3.3(b) and within thirty days after any resignation, disability or
other removal of such arbitrator. Following appointment, each arbitrator shall
remain a member of the standing panel, subject to refusal only for just cause
or resignation disability. Each of the Sellers hereby agrees that such
standing panel shall hear all claims, whether or not all Sellers have the same
interest in each claim, and that the Seller Representative shall select the
arbitrator on behalf of all of the Sellers.
(ii) The cost of each arbitration proceeding, including without limitation
the arbitrator's compensation and expenses, hearing room charges, court
reporter transcript charges, shall be borne by the parties as determined by the
arbitrators in accordance with the terms of this Agreement. The arbitrators
are specifically instructed to award attorneys' fees for instances of abuse of
the discovery process.
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(iii) The site of the arbitration shall be in New York, New York unless
the Buyer and the Sellers agree otherwise.
(iv) The arbitrators shall have the power and authority to, and to the
fullest extent practicable shall, abbreviate arbitration discovery in a manner
that is fair to the Buyer and the Sellers in order to expedite the conclusion
of each alternative dispute resolution proceeding.
(v) The arbitration shall be governed by, and all rights and obligations
specifically enforceable under and pursuant to, the Federal Arbitration Act.
(vi) The arbitrators are empowered to render an award of general
compensatory damages and equitable relief (including, without limitation,
injunctive relief). The award rendered by the arbitrators (i) shall be final,
(ii) shall not constitute a basis for collateral estoppel as to any issue and
(iii) shall not be subject to vacation or modification. The arbitrators shall
render any award or otherwise conclude the arbitration no later than 90 days
after the date notice is given pursuant to this Section 9.3.3, and shall submit
a written report providing the basis, in reasonable detail, for its decision.
9.4 Defense of Claims.
9.4.1 In connection with any claim which may give rise to indemnity under
this Section 9 resulting from or arising out of any claim or proceeding against
an Indemnitee by a person that is not a party hereto, the Indemnifying Party
may (unless such Indemnitee elects not to seek indemnity hereunder for such
claim), upon written notice to the relevant Indemnitee, assume the defense of
any such claim or Proceeding if all Indemnifying Parties with respect to such
claim or proceeding jointly acknowledge in writing to the Indemnitee its right
to indemnity pursuant hereto in respect of the entirety of such claim (as such
claim may have been modified through written agreement of the parties) and
provide in writing assurances, reasonably satisfactory to such Indemnitee, that
the Indemnifying parties will be financially able to satisfy such claim in full
if such claim or proceeding is decided adversely. If the Indemnifying parties
assume the defense of any such claim or proceeding, the Indemnifying Party
shall select counsel reasonably acceptable to such Indemnitee to conduct the
defense of such claim or proceeding, shall take all steps necessary in the
defense or settlement thereof and shall at all times reasonably diligently and
promptly pursue the resolution thereof. If the Indemnifying Parties shall have
assumed the defense of any claim or proceeding in accordance with this Section
9.4, the Indemnifying Parties shall be authorized to consent to a settlement
of, or the entry of any judgment arising from, any such claim or proceeding,
with the consent of the Indemnitee, which consent will be not unreasonably
withheld or delayed; provided, that no such consent shall be required from such
Indemnitee if the Indemnifying Parties
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shall pay or cause to be paid all amounts arising out of such settlement or
judgment concurrently with the effectiveness thereof; provided, further, that
the Indemnifying Parties shall not be authorized to encumber any of the assets
of any Indemnitee or to agree to any restriction that would apply to any
Indemnitee or to its conduct of business; and provided, further, that a
condition to any such settlement shall be a complete release of such Indemnitee
and its affiliates, officers, employees and, if named as a defendant,
consultants and agents with respect to such claim. Each Indemnitee shall be
entitled to participate in the defense of any such action at its own cost and
expense. Each Indemnitee shall, and shall cause each of its affiliates,
officers, employees, consultants and agents to, cooperate fully with the
Indemnifying Parties in the defense of any claim or Proceeding being defended
by the Indemnifying Parties pursuant to this Section 9.4.
9.4.2 If the Indemnifying Parties do not assume the defense of any claim
or proceeding resulting therefrom in accordance with the terms of this Section
9.4.1, such Indemnitee may defend against such claim or proceeding in the
manner as it may deem appropriate, including settling such claim or proceeding
after giving notice of the same to the Indemnifying Parties, on such terms as
such Indemnitee may deem appropriate. If the Indemnifying Parties seek to
question the manner in which such Indemnitee defended such claim or proceeding
or the amount of or nature of any such settlement, the Indemnifying Parties
shall have the burden to prove by a preponderance of the evidence that such
Indemnitee did not defend such claim or proceeding in a reasonably prudent
manner.
9.5 Tax Indemnity.
9.5.1 Subject to the provisions of Section 9.5.3, the Sellers shall be
liable for, and shall hold the Buyer and the Company and each of its
Subsidiaries harmless from and against, any and all Taxes due or payable by, or
on behalf of, the Company and each of its Subsidiaries for any taxable year or
tax period ending on or before the Closing Date.
9.5.2 Subject to the provisions of Section 9.5.3, for any taxable year or
tax period beginning after the Closing Date, the Buyer and the Company shall be
liable for, and shall hold the Sellers harmless from and against, any and all
Taxes due or payable by the Company and each of its Subsidiaries or by the
Sellers with respect to the Company and each of its Subsidiaries.
9.5.3 Any Taxes for a tax period beginning before the Closing Date and
ending after the Closing Date shall be apportioned between the Sellers and the
Buyer in the case of real and personal property taxes, on a per diem basis and,
in the case of other Taxes, based on the actual operations of the Company
during the portion of such period ending on the Closing Date and the portion of
such period beginning on the day following the Closing Date, and each such
portion of such
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period shall be deemed to be a tax period subject to the provisions of
Sections 9.5.1 and 9.5.2, above.
9.5.4 Any refunds or credits of Taxes relating to a taxable year or tax
period (including a period deemed to be a tax period under Section 9.5.3) (i)
shall be for the account of the Buyer if such refund is attributable to the
carry back of a loss to such period from any period ending after the Closing
Date or if such period ends after the Closing Date, and (ii) shall be for the
account of the Sellers in all other cases. The Buyer shall, and shall cause
the Company to, use its best efforts to seek and shall cause the Company to
forward to or to reimburse the Sellers for any such refunds or credits due the
Sellers after receipt thereof, and the Sellers shall promptly forward or
reimburse the Buyer for any refunds or credits due the Buyer after receipt
thereof.
9.5.5 If the Buyer or the Company becomes aware of any assessment,
official inquiry, examination or proceeding that could give rise to an official
determination with respect to Taxes due or payable for any taxable year or tax
period ending on or before the Closing Date (including a period deemed to be a
tax period ending on or before the Closing Date under Section 9.5.3), the Buyer
shall promptly so notify the Sellers in writing. If the Sellers become aware
of any official inquiry, examination or proceeding that could result in an
official determination with respect to Taxes due or payable by the Buyer or the
Company, the Sellers shall promptly so notify the Buyer in writing.
9.5.6 The Sellers shall have the right, at the Sellers' expense, to
conduct the contest and/or settlement of any issue raised in any official
inquiry, examination or proceeding that could give rise to an official
determination with respect to Taxes due or payable for any taxable year or tax
period ending on or before the Closing Date (including a period deemed to be a
tax period ending on or before the Closing Date under Section 9.5.3). The
Buyer shall cooperate with the Sellers, as the Sellers may reasonably request,
in any such inquiry, examination or proceeding.
9.5.7 Any contest and/or settlement of any issue raised in an official
inquiry, examination or proceeding that could result in an official
determination with respect to Taxes due or payable that relate to a period
deemed to be a tax period ending on or before the Closing Date under Section
9.5.3 and to a period deemed to be a tax period beginning after the Closing
Date under Section 9.5.3 shall be conducted jointly by the Buyer and the
Sellers and a settlement (at the administrative level or during the course of
judicial proceedings) may only be entered into with the consent of both the
Buyer and the Sellers, which consent shall not be unreasonably withheld.
9.5.8 Notwithstanding anything in this Agreement to the contrary, the
provisions of this Section 9 (and the representations and warrants set
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forth in Section 3.11) shall survive until the expiration of the applicable
statute of limitations.
10. Environmental Indemnity
10.1 Representations and Warranties and Covenant of Buyer.
10.1.1 To the Knowledge of Buyer, except as set forth on Schedule 10.3.2
("Schedule 10.3.2 Matters") or as set forth on Schedule 10 ("Known
Environmental Matters"), there are no matters, conditions, situations, or
remedial or compliance obligations which individually could reasonably be
expected to give rise to Environmental Liabilities of the Company or the
Subsidiaries of $150,000 or more. For the purposes of this Section 10, Consent
Order No. HM-786 shall not be deemed one individual matter, condition,
situation, or remedial or compliance obligation.
10.1.2 Buyer has provided Sellers with a complete list and description of
all environmental issues related to the Company and the Subsidiaries that were
provided to Buyer by Environ Corporation, Buyer's environmental consultant,
pursuant to Environ Corporation's environmental due diligence of the Company
and the Subsidiaries.
10.1.3 No environmental investigations (except visual observations) of the
soil, sediments, surface water, groundwater, or the subsurface or any intrusive
environmental investigations with respect to the Company or the Subsidiaries
are currently planned or being undertaken by Buyer.
10.1.4 The Company shall serve as responsible party, certifier, and
signatory to all documents related to any so-called "transaction-triggered" or
"responsible party transfer" Environmental Requirements, including, but not
limited to the requirements of Section 22a-134 et seq. of the Connecticut
General Statutes, provided that Sellers acknowledge that certain
transaction-triggered requirements may ultimately be subject to Sellers'
indemnification under this Agreement. In particular, for purposes of Sections
22a-134 et seq. of the Connecticut General Statutes, the Company shall serve as
"Certifying Party," Sellers shall serve as "transferor," and Buyer shall serve
as "transferee." Prior to the Closing Date, Sellers shall prepare, or arrange
for the Company to prepare, the required Property Transfer Program Form and the
Environmental Condition Assessment Form, provided that, prior to the Closing
Date, Sellers shall permit Buyer a reasonable opportunity to comment on draft
versions of such forms, and the final versions of such forms shall be
reasonably satisfactory to Buyer. Within 10 days following the Closing Date,
Buyer shall ensure that the Company submits the completed forms to the
Connecticut Department of Environmental Protection, as required. Nothing in
this Section 10.1.4 shall limit, restrict or otherwise affect the
indemnification obligations of the Sellers under this Agreement.
10.2 Representation and Warranty of Sellers.
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10.2.1 To the Knowledge of Sellers and the Company, except as set forth on
Schedule 10.3.2 ("Schedule 10.3.2 Matters") or as set forth on Schedule 10
("Known Environmental Matters"), there are no matters, conditions, situations,
or remedial or compliance obligations which individually could reasonably be
expected to give rise to Environmental Liabilities of the Company or the
Subsidiaries of $150,000 or more. For purposes of this Section 10, Consent
Order No. HM-786 shall not be deemed one individual matter, condition,
situation, or remedial or compliance obligation. In addition, characterization
of a matter, condition, situation, or remedial or compliance obligation as a
"Known Environmental Matter" or a "Schedule 10.3.2 Matter" is not an admission
that such matter will give rise to Environmental Liabilities of the Company or
the Subsidiaries of $150,000 or more.
10.3 Environmental Indemnification of Buyer.
10.3.1. In accordance with the terms and provisions of this Section 10,
Sellers shall indemnify and hold harmless the Buyer Indemnitees for all
Environmental Liabilities arising from Known Environmental Matters.
10.3.2 In accordance with the terms and provisions of this Section 10,
Sellers shall indemnify and hold harmless the Buyer Indemnitees and assume
Principal Management for Environmental Liabilities arising from Schedule 10.3.2
Matters, provided that, Sellers' obligation to indemnify the Buyer Indemnitees
under this Section 10.3.2 is subject to the following limitations:
(i) Sellers shall conduct and pay for all pre-remedial costs of
investigating each Schedule 10.3.2 Matter;
(ii) Buyer shall pay for, and Sellers shall have no liability or
obligation to pay for any costs (including the costs of any additional
investigation that is required after remedial efforts have begun) arising
from a Schedule 10.3.2 Matter until Buyer has paid the first $20,000 of
such remedial costs arising from such Schedule 10.3.2 Matter (the "Buyer
Remediation Obligation");
(iii) Additional remediation costs arising from each Schedule 10.3.2
Matter in excess of the Buyer Remediation Obligation in respect of such
matter shall be shared equally by Buyer and Sellers on a dollar-for-dollar
basis provided that the maximum expenditure by Buyer for all such
additional remediation costs arising from 10.3.2 Matters in excess of the
Buyer Remediation Obligation shall not exceed $300,000 in the aggregate
excluding the Buyer Remediation Obligation. Any such additional
remediation costs arising from Schedule 10.3.2 Matters in excess of such
amount shall be the responsibility of Sellers.
10.3.3 In accordance with the terms and provisions of this Section
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10 and subject to certain other provisions of this Agreement, Sellers shall
indemnify and hold harmless the Buyer Indemnitees for Other Environmental
Liabilities, provided that, Sellers shall have no indemnification obligation
for any Other Environmental Liability unless (a) any such Other Environmental
Liability constitutes or results from a Required or Prudent Environmental
Action, (b) a Notice of Claim describing the basis for the Other Environmental
Liability is received by Sellers on or before the third anniversary of the
Closing Date, and (c) before the third anniversary of the Notice of Claim,
Required or Prudent Environmental Action is necessary with respect to the Other
Environmental Liability that is described in the Notice of Claim.
Notwithstanding anything to the contrary, Sellers shall have no obligation to
indemnify the Buyer Indemnitees for any Buyer Exacerbation. In addition,
Sellers' obligation to indemnify the Buyer Indemnitees for Other Environmental
Liabilities is subject to the following limitations:
(i) Sellers shall have no obligation to indemnify the Buyer Indemnitees
for an indemnification claim in respect of any Other Environmental
Liabilities arising from any single matter unless such Other Environmental
Liabilities arising from such matter equal or exceed $150,000, provided
that all claims for indemnification for Other Environmental Liabilities
arising out of the same facts, events, or conditions shall be treated as a
single matter. For purposes of this obligation, a single order, directive,
or Connecticut Transfer Act obligation that addresses or requires to be
addressed multiple issues that do not arise out of the same facts, events,
or conditions shall not be considered a single matter.
(ii) Sellers shall have no obligation under this Section 10.3.3 unless and
until the aggregate amount of Other Environmental Liabilities incurred by
the Buyer Indemnitees and the aggregate amount of Damages incurred by Buyer
Indemnities under Section 9.1 exceed $2,000,000, whereupon Sellers shall be
liable to indemnify the Buyer Indemnitees for all such Other Environmental
Liabilities in excess of such amount up to a maximum amount equal to
$35,000,000, less any amounts for which Sellers have indemnified the Buyer
Indemnitees pursuant to Section 9.1 of this Agreement.
10.3.4 In the event that Buyer assigns its rights and delegates its
obligations hereunder pursuant to Section 12.7, such assignment shall not be
permitted unless such assignee agrees to be bound by Buyer's obligations and
responsibilities under this Section 10. Should such assignment occur, for
purposes of this Section 10, "Buyer" shall be read to include such assignee.
10.3.5 Environmental Liabilities arising from the matters set forth on
Schedule 10.3.5 shall constitute Other Environmental Liabilities.
10.4 Environmental Indemnification of Seller.
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10.4.1 Buyer shall hold harmless and indemnify the Seller Indemnitees for
any Buyer Exacerbation.
10.5 Procedures and Conditions Pertaining to Indemnification of Buyer or
Sellers for Environmental Matters.
10.5.1 The following procedures and conditions shall pertain to the
indemnification of Buyer Indemnitees or Seller Indemnitees for Environmental
Liabilities. In the event of a conflict between this Section 10 and any other
Section of this Agreement, this Section 10 shall control.
10.5.2 If any party shall believe that it is entitled to indemnification
with respect to Environmental Liabilities (an "Indemnitee"), it shall submit a
Notice of Claim to the Indemnifying Party. Any such Notice of Claim shall set
forth in reasonable detail and to the extent then known, the basis of such
claim for indemnification and the amount of the claim to the extent specified
or otherwise known. The failure of such Indemnitee to give the Notice of Claim
for indemnification promptly shall not adversely affect such Indemnitee's right
to indemnity hereunder except to the extent that the recipient is prejudiced by
such failure or in the case of a Notice of Claim by Buyer, or to the extent
there has been Buyer Exacerbation. Notwithstanding the foregoing, Sellers shall
have no indemnification obligation for any Other Environmental Liability unless
a Notice of a Claim describing the basis for the Other Environmental Liability
is received by Sellers on or before the third anniversary of the Closing Date.
10.5.3 Upon receipt of a Notice of Claim and after all applicable dollar
thresholds for indemnification have been met, the Indemnifying Party shall be
entitled to assume Principal Management of all or a portion of the claim. To
assume Principal Management, the Indemnifying Party must provide to the
Indemnitee within 30 days of said notice, or such shorter period as may be
dictated by exigent circumstances, written notice (i) that it intends to assume
primary responsibility for all or a portion of the claim (to the extent Sellers
assume Principle Management it shall be on behalf of the Company or its
Subsidiaries), (ii) that the Indemnitee has a right to indemnity pursuant
hereto in respect of all or a portion of such claim, and (iii) that the
Indemnifying Party will be financially able to fully satisfy such claim. In
the event the Indemnifying Party does not elect to undertake Principal
Management of all or a portion of such claim, the Indemnitee shall assume
Principal Management. Any acknowledgment by the Indemnifying Party that the
Indemnitee is entitled to indemnification shall be without prejudice to any of
the Indemnifying Party's rights to seek indemnity or contribution from any
third parties (as well as from the Indemnitee, to the extent such indemnity or
contribution right is provided for under this Agreement). As of the Closing
Date, Sellers are deemed to have received notice of, and assumed Principal
Management with respect to the matters designated with an asterisk on the Known
Environmental Matters Schedule.
10.5.4 The party not exercising Principal Management with respect
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to a particular claim or portion thereof shall be entitled, at its sole cost and
expense, to reasonably participate with the party exercising Principal
Management. Such participation may include, without limitation: (i) the right
to receive copies of all reports, workplans and analytical data submitted to
Governmental Bodies, all notices or other letters or documents received from
Governmental Bodies, any other documentation and correspondence material to
the claim, and notices of material meetings; (ii) the opportunity to attend and
participate in such material meetings, provided that at such meetings the party
not exercising Principal Management shall not impair or impede the good faith
efforts and objectives of the party exercising Principal Management to address,
complete and resolve the claim; and (iii) the right of reasonable consultation
with the party exercising Principal Management. In addition, during the period
when either party is undertaking Principal Management, such party shall: (iv)
give the other party reasonable advance notice of, and a reasonable opportunity
to participate in, material decisions with respect thereto, (v) obtain the other
party's consent prior to undertaking any material action, provided that such
consent shall not be unreasonably withheld or delayed.
10.5.5 Unless a Required or Prudent Environmental Action, Indemnitee shall
not (i) take any action which could reasonably be expected to initiate or
encourage a claim by a third party, including any Governmental Body, concerning
an Environmental Matter that is subject to indemnification pursuant to this
Section 10, or (ii) offer unsolicited information to Governmental Bodies
regarding such Environmental Matter or otherwise initiate, advance, or
encourage any additional inspections or claims or expand the scope of any
inspection or claim regarding such Environmental Matter. During the period a
party is undertaking Principal Management with respect to an Environmental
Matter, the other party shall not, except to the extent it is a Required or
Prudent Environmental Action, initiate contact or engage in communications with
any Governmental Body concerning such Environmental Matter without first
obtaining the other party's consent, provided that such consent shall not be
unreasonably withheld or delayed. Provided Buyer undertakes good faith efforts
to promptly notify Sellers and to allow Sellers to undertake Principal
Management, Buyer may take such action as is reasonable under the circumstances
to respond to an imminent and substantial threat to human health or the
environment arising from such Environmental Matter that is subject to
indemnification pursuant to this Section 10, and such action shall be included
as Environmental Liabilities arising from such Environmental Matter. Buyer
shall not initiate or conduct any environmental investigations (except for
visual observations) of the soil, sediments, surface water, groundwater, or the
subsurface or any intrusive environmental investigations with respect to the
Company or the Subsidiaries (iii) related to Known Environmental Matters, and
(iv) prior to the third anniversary of the Closing Date, without Sellers'
consent, which shall not be unreasonably withheld or delayed, Buyer shall not
initiate or conduct any environmental investigations (except for visual
observations) of the soil, sediments, surface water, groundwater, or the
subsurface or any intrusive environmental investigations with respect to the
Company or the Subsidiaries related to Other Environmental Liabilities or
Schedule 10.3.2
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Matters. Notwithstanding the above but subject to the other applicable
provisions of this Agreement, Buyer may initiate and conduct environmental
investigations of the soil, sediments, surface water, groundwater, or the
subsurface or any intrusive environmental investigations with respect to (v) a
matter for which Buyer has Principal Management, (vi) a matter for which
Sellers have Principal Management, and such investigations are a Required or
Prudent Environmental Action, provided that Buyer shall not undertake such
investigations if Sellers are exercising good faith with respect to its
Principal Management of such Matter unless Buyer believes, in Buyer's
reasonable judgment, that Buyer's failure to conduct such investigations would
cause Buyer to violate the law or would result in a material increase in
Environmental Liabilities that would not be subject to indemnification of Buyer
Indemnitees by Sellers with respect to such matter or (vii) a matter for which
the dollar thresholds or other conditions for indemnification have not been
met, and such investigations are a Required or Prudent Environmental Action,
provided that Buyer shall initiate or conduct any such investigation under
subsection (vi) or (vii) of this Section 10.5.5 in good faith and in a
responsible and reasonable manner, and provided that prior to initiating or
conducting any such investigation Buyer shall notify Sellers and allow the
Sellers to reasonably participate in such investigation at Sellers' expense.
Such reasonable participation may include, at Sellers' option, without
limitation: (1) the right of reasonable consultation with Buyer and such
entity performing such investigation on behalf of Buyer regarding the
scope, nature, and advisability of such investigation; (2) the right to
promptly receive all material information, copies of all workplans, reports,
and analytical data with respect to such investigation, any other documentation
and correspondence material to the investigation, and notices of material
meetings; (3) reasonable opportunity to attend and participate in such material
meetings, provided that at such meetings Seller not impair or impede the good
faith efforts and objectives of Buyer to initiate, conduct, or complete the
investigation; and (4) the right to receive reasonable advance notice of and
reasonable opportunity to participate in material decisions with respect
thereto with the understanding that Sellers shall not have a veto right with
respect to such decisions; and (5) reasonable opportunity to attend and
participate in such investigation, including, but not limited to, collecting
split samples, at Sellers' expense.
10.5.6 The party undertaking Principal Management for any matter hereunder
shall manage the matter in good faith and in a responsible and reasonably cost
effective manner, and any activities conducted in connection therewith shall be
commenced reasonably promptly and pursued reasonably diligently and in a
commercially reasonable and technically feasible manner, subject to the
schedules and approvals required by the applicable Governmental Body. If the
party undertaking Principal Management fails to comply with these requirements,
the other party shall have the right to take Principal Management of the
matter. The parties agree to reasonably cooperate with one another in
connection with addressing any environmental matter that is subject to
indemnification under this Agreement, including but not limited to cooperating
to obtain contribution or indemnification or other funding
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with respect to such matter from third parties or a Governmental Body and
cooperating with the efforts of the party undertaking Principal Management to
obtain any consents required to secure maximum flexibility that is reasonably
practicable under federal and state remediation standard regulations and
achieve a reasonably cost effective investigation and remediation (including
institutional controls including but not limited to certain deed restrictions)
that will not unreasonably interfere with the operations of the Company, unless
or to the extent such interference or impairment is caused by Buyer's
misconduct or negligence. In particular, remediation may include deed
restrictions that prohibit use of the property for residential or commercial
purposes, limit the property to industrials uses, limit or restrict the use of
groundwater beneath the property (provided that such groundwater was not
previously being used) or limit or restrict the use of soils beneath the
existing buildings at the property. Except with respect to the "Southeast
Corner" as provided for in detail below, such remediation may not include deed
restrictions that require that a cap or cover be maintained over a portion of
the property, or that otherwise unreasonably interfere with or unreasonably
limit the ability or opportunity to expand existing buildings, parking lots, or
other structures on the property, or construct additional structures on the
property. Notwithstanding the foregoing, Buyer agrees that Sellers are
permitted to record such deed restrictions as may be desirable to reduce the
cost or need for investigation or remediation in the Southeast Corner Project
Area as set forth on Schedule 10.5.6.
10.5.7 In the event it undertakes Principal Management of any
Environmental Matter, Sellers shall, upon reasonable notice to Buyer, have
reasonable access to the relevant facility of Buyer. Buyer shall also provide
Sellers reasonable access to its employees, and relevant non-privileged records
and documents. Buyer shall also allow Sellers the reasonable incidental use of
electricity at its premises. Sellers shall be responsible for the pro rata
cost of any sustained use of electricity by Sellers, such as for a groundwater
remediation system. Sellers shall undertake all activities that it conducts or
coordinates hereunder in accordance with Environmental Requirements, and in a
manner that does not unreasonably interfere with the day-to-day operation of
the relevant facility of Buyer. Notwithstanding the foregoing, Buyer
understands that certain remediation actions could be subject to technical
limitations, or mandated under Environmental Requirements, or otherwise be
required by a Governmental Body, which might require relocating machinery
and/or disrupting operations temporarily without materially impairing such
operations. The parties agree to cooperate with and use reasonable efforts to
reduce any such relocation or disruption costs. Sellers shall take such
precautions as may reasonably be necessary to minimize physical damage to
Buyer's facility or property, and shall indemnify Buyer with respect to such
damage, unless or to the extent such damage is caused by Buyer's misconduct or
negligence. Buyer is aware and agrees to permit Sellers to utilize a portion of
the Warehouse Building at the Company's Windsor, Connecticut facility for the
installation, maintenance and operation of groundwater and soil remediation
systems, an area more fully described as being approximately the 45 foot by 60
foot portion of the Warehouse Building located immediately to the east and
northeast of that
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portion of the building labeled "Waste Storage" in an attachment to a letter
dated July 8, 1997 from Kathy Golas to Donna Seresin in response to a letter
dated June 17, 1997 from Ms. Seresin to Ms. Golas regarding Consent Order No.
HM-786 (as shown on Schedule 10.5.7, with cross-hatch markings indicating the
approximately 45-foot by 60-foot portion) without cost to Sellers.
10.5.8 An Environmental Matter shall be deemed to have been adequately
completed, resolved, and discharged to the extent that: (i) any investigation,
removal, remedial, cleanup, corrective, or compliance action ("Remedial
Action") reasonably mitigates the threats to human health or the environment
that were the basis for the Remedial Action and achieves compliance with
Environmental Requirements as reasonably interpreted and applied, taking into
account all relevant facts and circumstances, including without limitation,
reasonable and customary interpretation by the local business community and the
same or similar industry or complies with any written directive or order of any
Governmental Body (subject to either party's right to challenge or negotiate
with such Governmental Body regarding the appropriateness or scope of such
directive or order in good faith and in compliance with law), (ii) all assessed
fines, penalties, and damages have been paid, settled, or resolved, except
where none are assessed, and (iii) all alleged related governmental and third
party actions have been paid, settled, or resolved, except where none are
imposed. Sellers shall not be required to render any affected industrial
facility suitable for use beyond use as a industrial property, provided that
any Remedial Action undertaken with respect to an Environmental Matter shall
meet all lawful requirements imposed by a Governmental Body. Sellers shall be
responsible for any costs arising out of changes in Environmental Requirements,
including changes in action levels or cleanup standards promulgated thereunder,
during the period from the Closing Date until the completion of a Remedial
Action. Any costs arising out of changes in Environmental Requirements after
the completion of a Remedial Action an Environmental Matter shall be the
responsibility of the Buyer.
10.5.9 Within 45 days after the Closing Date, Sellers and Buyer shall each
provide the other written notice of a primary and authorized contact for
communications regarding environmental matters subject to indemnification
pursuant to this Agreement. Written notice shall be provided if a party's
contact is changed.
10.5.10 To the extent Seller assumes Principal Management with respect to
an Environmental Matter it shall be on behalf of the Company or the
Subsidiaries.
10.5.11 All claims, disputes, controversies, and other matters related to
an Environmental Matter subject to indemnification under this Agreement
(including without limitation the management, investigation, remediation,
completion, settlement, or resolution of such matter) or related to the
respective indemnification obligations of the parties with respect to an
Environmental Matter (collectively "Environmental
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Indemnification Disputes") shall be subject to arbitration pursuant to Section
9.3.3, as supplemented and modified by this Section 10.5.11. In the event of a
conflict between Section 9.3.3 and this Section 10.5.11, this Section 10.5.11
shall control. To reduce the cost of arbitration and to accelerate the
arbitration process, a single arbitrator shall be used for Environmental
Indemnification Disputes. The arbitrator shall be selected in accordance with
the rules of the American Arbitration Association. The arbitrator shall be
knowledgeable with respect to Environmental Requirements in the state or
jurisdiction in which the matter is located that gave rise to the Environmental
Indemnification Dispute. The same arbitrator shall arbitrate subsequent
Environmental Indemnification Disputes in the same jurisdiction, unless a party
requests within seven days after the filing of the demand for arbitration with
respect to the subsequent Environmental Indemnification Dispute that a
different arbitrator be selected. If, as a result of exigent circumstances,
deadlines imposed by a Governmental Body, or other circumstances outside the
control of the parties, an Environmental Indemnification Dispute must be
resolved on an expedited schedule, the time frames set forth in Section 9.3.3
shall be shortened, as appropriate and permitted by the arbitrator or as
mutually agreed to by the parties. To the extent reasonably practicable, all
related or similar Environmental Indemnification Disputes shall be consolidated
so as to avoid duplicative, or similar and repetitive arbitration proceedings.
In order to speed up the resolution of any Environmental Indemnification
Disputes that may arise with respect to the Company's Windsor, Connecticut
facility, within 90 days after the Closing Date the parties shall arrange for
an arbitrator for such matters to be selected in accordance with the rules of
the American Arbitration Association, regardless of whether any Environmental
Indemnification Disputes have arisen during such time, and such arbitrator
shall arbitrate Environmental Indemnification Disputes that may arise with
respect to the Company's Windsor, Connecticut facility, unless a party requests
that a different arbitrator be selected in accordance with the procedures
herein.
11. Termination of Agreement.
11.1 Termination. This Agreement may be terminated prior to the Closing
as follows:
(i) at the election of the Sellers, if any one or more of the conditions
to the obligation of the Sellers to close has not been fulfilled as of the
Scheduled Closing Date; provided, however that such conditions have not
occurred because of a breach of this Agreement by the Sellers, the Company or
any Subsidiary;
(ii) at the election of the Buyer, if any one or more of the conditions to
the obligation of the Buyer to close has not been fulfilled as of the Scheduled
Closing Date; provided, however that such conditions have not occurred because
of a breach of this Agreement by the Buyer;
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(iii) at the election of the Sellers, if the Buyer (A) has materially
breached any representation, warranty, covenant or agreement contained in this
Agreement and such breach would have materially affected the Buyer's ability to
consummate the transactions contemplated hereby or (B) has breached or failed
in any material respect to perform or comply with any of its material covenants
and agreements contained herein; provided, however that if any such breach or
failure is curable by the Buyer through the exercise of its commercially
reasonable efforts and for so long as the Buyer shall be so using its
commercially reasonable efforts to cure such breach or failure, the Sellers may
not terminate this Agreement pursuant to this Section 11.1(iii) unless such
breach or failure is not cured within 30 days after notice by the Sellers;
(iv) at the election of the Buyer, if the Sellers, the Company or any
Subsidiary (A) have materially breached any representation, warranty, covenant
or agreement contained in this Agreement and such breach would have caused a
Company Material Adverse Effect or (B) have breached or failed in any material
respect to perform or comply with any of its material covenants and agreements
contained herein; provided, however that if any such breach of failure is
curable by the Sellers, the Company or the Subsidiaries, as applicable, through
the exercise of their respective commercially reasonable efforts and for so
long as the Sellers, the Company or the Subsidiaries, as applicable, shall be
so using its commercially reasonable efforts to cure such breach or failure,
the Buyer may not terminate this Agreement pursuant to this Section 11.1(iv)
unless such breach or failure is not cured within 30 days after notice by the
Buyer;
(v) at the election of the Sellers or the Buyer if any Governmental Body
shall have issued an order, decree or ruling or taken any other action (which
order, decree, ruling or other action the parties hereto shall use their
commercially reasonable best efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the material transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and non-appealable; or
(vi) at any time on or prior to the Closing Date, by mutual written
consent of the Sellers and the Buyer.
If this Agreement so terminates, it shall become null and void and have no
further force or effect, except as provided in Section 11.2. Notwithstanding
anything herein to the contrary, if this Agreement is terminated pursuant to
Section 11.1 (i) or (ii) (to the extent that such termination under Section
11.1(i) or (ii) is based on a breach of covenant, agreement, representation or
warranty by a party hereto), or (iii) or (iv), the Sellers (if the Agreement is
so terminated pursuant to Section 11.1(i) or terminated pursuant to Section
11.1(iii)) and the Buyer (if the Agreement is so terminated pursuant to Section
11.1(ii) or terminated pursuant to Section 11.1(iv)) shall be liable to any
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Buyer Indemnitee or any Seller Indemnitee, as applicable, (x) for all Damages
actually incurred by such party (which Damages, for purposes of this provision
shall be deemed to include any Damages incurred by the Company or any
Subsidiary, each of which shall, for purposes of this provision, be deemed to
be a Seller Indemnitee) as a result of a breach by the other party of any
covenant or other agreement contained in this Agreement (with respect to
Sellers' breach, other than breaches of Sections 5.2 and 5.10 and breaches of
Section 5.1(a) with respect to which Seller does not have Knowledge) and (y)
for all Damages actually incurred by such party as a result of a breach by the
other party of any representation or warranty contained in this Agreement,
provided that such Damages shall be limited to an amount equal to the
reasonable out-of-pocket fees and expenses actually incurred by such party
(which, in the case of the Sellers, shall include such fees and expenses
actually incurred by the Company or any Subsidiary) in connection with the
transactions contemplated by this Agreement, including, without limitation,
investigation of the Company, the negotiation and preparation of this
Agreement and the obtaining of financing for the transaction contemplated by
this Agreement. In addition, nothing contained in this Section 11.1 shall
impair the right of any party to compel specific performance by the other
party of its obligations under this Agreement. In addition, nothing contained
in this Section 11 shall be deemed to impair the right of any party to compel
specific performance by the other party of its obligations under this Agreement.
11.2 Effect of Termination. If this Agreement is terminated and the
transactions contemplated hereby are not consummated as described above, this
Agreement shall become void and of no further force and effect, except for the
continuing obligation of the Buyer pursuant to Section 5.7 to keep certain
matters confidential and not to use any information and data obtained by it
from the Company and except for the provisions of Sections 5.3, 5.4, 5.5 and
12.2 which shall continue in full force and effect.
12. Miscellaneous.
12.1 Certain Definitions. As used in this Agreement, the following terms
have the following meanings unless the context otherwise requires:
(i) "Affiliate" with respect to any Person, means any other Person
controlling, controlled by or under common control with such Person.
(ii) "Banks" means all of the banks who are parties to the Credit
Agreement.
(iii) "Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
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(iv) "Business Day" means any day other than Saturday, Sunday or public
holiday on which commercial banks in New York, New York are required to be
closed.
(v) "Company Debt" means any outstanding indebtedness of the Company,
including without limitation accrued interest, fees, penalties and premiums or
payments in addition to principal, which is outstanding under (i) the Credit
Agreement dated as of February 2, 1995, as amended by, and among Stanadyne
Automotive Corp., the Company, The Bank of New York and Kleinwort Benson
Limited (as Agent) (the "Credit Agreement"), or (ii) the existing overdraft
facility of Stanadyne S.P.A.
(vi) "Company Material Adverse Change" means a material adverse change in
the business, assets, liabilities, financial condition or results of operations
of the Company or the Subsidiaries, taken as a whole, provided that any event,
occurrence, development or state of circumstances or facts or changes which is
applicable to or resulting from changes to the United States economy or the
industry in which the Company and/or its subsidiaries operate generally shall
be excluded from such determination.
(vii) "Company Material Adverse Effect" means a material adverse effect on
the business, assets, liabilities, financial condition or results of operations
of the Company or the Subsidiaries, taken as a whole.
(viii) "Confidential Information" means any proprietary, confidential or
non-public information concerning the Company or any Subsidiary.
(ix) "Contracts and other Agreements" means all contracts, agreements,
understandings, indentures, notes, bonds, loans, instruments, leases,
mortgages, franchises, licenses, commitments or other binding arrangements,
express or implied.
(x) "Debt" means, without duplication, (a) any outstanding indebtedness of
the Company or Subsidiaries in respect of borrowed money (including, without
limitation, accrued interest, fees, penalties and premiums or payments in
addition to principal) evidenced by bonds, notes, debentures or other similar
instruments or letters of credit (or reimbursement obligations in respect
thereof), banker's acceptance or any overdraft facility, (b) outstanding
capitalized indebtedness under any lease which, in accordance with GAAP, would
be required to be shown as a liability on the face of a balance sheet of the
Company or any Subsidiary on such date, (c) the balance deferred and unpaid of
the purchase price of any property or services which is not a current liability
included in the definition of Working Capital and would be required to be shown
as a liability on the face of a balance sheet of the Company or
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any Subsidiary on such date, in each case in accordance with GAAP (e.g. that
portion of any purchased equipment which, as part of the purchase price, was
paid by giving a note with a term of greater than one year to the seller of such
equipment; a fee for services which have been fully performed but which is
payable on a long term basis, such as in installments over a three-year period),
except any such balance that constitutes an accrued expense or account payable,
in each case incurred in the ordinary course of business. "Debt" shall not
include, without limitation, (i) the amount of the deferred purchase price for
assets acquired by Stanadyne SpA in 1991 from Weber associated with the Bari,
Italy operations, which amount is included in the current accrued expense
accounts of the Company and which amount, as of August 31, 1997 was $813,000
(the "Weber Liability") or (ii) any accumulated post-retirement, post-employment
or pension benefit obligation, post-employment or pension as required to be
reported under GAAP.
(xi) "Document or other papers" means any document, agreement, instrument,
certificate, notice, consent, affidavit, letter, telegram, telex, statement,
schedule (including any to this Agreement), exhibit (including any Exhibit to
this Agreement) or any other paper whatsoever.
(xii) "GAAP" means United States generally accepted accounting principles.
(xiii) "Governmental Body" means any government or political subdivision
thereof, whether federal, state, local or foreign, or any agency or
instrumentality of any such government or political subdivision, or any
judicial, quasi-judicial or regulatory body.
(xiv) "Intellectual Property Rights" means any and all patents, patent
applications, trademarks, service marks, trademark or service mark applications
and registrations, trade and corporate names, Internet domain names,
copyrights, copyright applications and registrations, trade secrets, know-how
(including but not limited to ideas, formulae, compositions, manufacturing and
production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, and technical data),
technology, computer software and software systems, business and marketing
plans, customer and supplier lists, confidential information and all other
proprietary property, rights and interests.
(xv) "Knowledge" means with respect to the Sellers or the Company, the
knowledge after due inquiry of any Seller or any officer, director or
management level employee of any of the Company, any Subsidiary or any Seller,
and with respect to the Buyer, the knowledge after due inquiry of any officer,
director or management level employee of the Buyer.
(xvi) "Liability" means any liability or obligation (whether
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known or unknown, whether absolute or contingent, whether liquidated or
unliquidated, and whether due or to become due).
(xvii) "Lien" means any lien, pledge, mortgage, security interest, claim,
lease, license, charge, option, right of first refusal, easement, servitude,
transfer restriction under any shareholder or similar agreement, encumbrance or
any other restriction or limitation whatsoever.
(xviii) "Permitted Liens" means (i) Liens for Taxes or other governmental
charges or levies which are not delinquent or are being contested in good faith
and by appropriate proceedings, and, if required by GAAP, with respect to which
adequate reserves have been established, and are being maintained in accordance
with GAAP, (ii) mechanic's, worker's, materialmen's and other like Liens
arising in the ordinary course of business in respect of obligations which are
not delinquent or which are being contested in good faith and by appropriate
proceedings, and, if required by GAAP, with respect to which adequate reserves
have been established, and are being maintained, in accordance with GAAP, and
(iii) Liens arising in the ordinary course of business for sums being contested
in good faith and by appropriate proceedings, and, if required by GAAP, with
respect to which adequate reserves have been established, and are being
maintained, in accordance with GAAP.
(xix) "Person" means any individual, corporation, limited liability
company, general, limited or limited liability partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated organization,
Governmental Body or other entity.
(xx) "Preferred Stock" means the Cumulative Convertible Preferred Stock
issued by the Company pursuant to the Certificate of Designation of the Company
dated as of February 8, 1989, as amended (the "Certificate of Designation").
(xxi) "Property" means real, personal or mixed property, tangible or
intangible.
(xxii) "Reference Rate" means the amount which the Chase Manhattan Bank
announces from time to time as its reference rate.
(xxiii) "Seller Expenses" means any out-of-pocket fee, expense or cost
incurred by the Company, any of the Sellers or any of their Subsidiaries or
Affiliates prior to Closing which is paid by the Company in connection with the
transactions or actions contemplated in this Agreement, including without
limitation, out-of-pocket fees, expenses, or costs for the repayment of Debt at
the Closing, the preparation of Financial Statements as required by the
Agreement (except as expressly provided to the contrary in this Agreement) and
the negotiation,
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preparation and execution of this Agreement and any other closing documents
"Seller Expenses" shall also include any bonuses or similar amounts payable
to employees of the Company or its Subsidiaries for reducing the Debt of the
Company or its Subsidiaries.
In addition to the aforementioned terms, the following terms have the
following meanings unless the context otherwise requires:
(v) "Environmental Requirements" means all federal, state, local, and
foreign statutes, regulations, ordinances and other provisions having the force
or effect of law, all final judicial and administrative orders, all contractual
obligations and all common law concerning pollution or protection of the
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, hazardous
substances or hazardous wastes, pesticides, petroleum, asbestos, or
polychlorinated biphenyls, as in effect on or prior to the Closing Date.
(vi) "Environmental Liabilities" means any Damages (excluding for this
purpose consequential damages, which includes, but is not limited to, damages
associated with business disruption, diminution of value, or lost profits) with
respect to any liabilities or any investigatory, remedial or corrective
obligations, arising from Environmental Requirements.
(vii) "Other Environmental Liabilities" shall mean Environmental
Liabilities arising from Schedule 10.3.5 Matters and Environmental Liabilities
(other than Environmental Liabilities arising from a Known Environmental Matter
or a Schedule 10.3.2 Matter) which arise from facts, events, conditions or
matters occurring or in existence prior to the Closing Date, but excluding any
Buyer Exacerbation.
(viii) "Buyer Exacerbation" shall mean any Environmental Liabilities (1)
caused by Buyer through its negligent or its willful or wanton misconduct (2)
arising from a condition or matter that was reasonably within the knowledge of
Buyer at the Closing Date and exacerbated by Buyer after the Closing Date (by
action or inaction or a change in the operation of the business or use of the
premises or facility), unless exacerbated as a result of the constraints set
forth in Sections 10.5.4, 10.5.5, and 10.5.6, or (3) caused by Buyers active
use, management or disposal of hazardous materials or hazardous wastes.
(ix) "Required or Prudent Environmental Action" shall mean any action
(including the payment of fines, penalties, or damages) that is (1)
specifically imposed or required by any written directive or order of any
Governmental
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Body (2) reasonably necessary to address an imminent and substantial threat to
human health or the environment or (3) required by Environmental Requirements
as reasonably interpreted and applied, taking into account all relevant facts
and circumstances, including without limitation, reasonable and customary
interpretation by the local business community and the same or similar industry.
(x) "Environmental Matter" shall mean Known Environmental Matters,
Schedule 10.3.2 Matters, and any matter that gives rise to Other Environmental
Liabilities.
(xi) "Principal Management" shall mean the right to (1) hire and discharge
consultants, contractors, and experts, (2) obtain any tests, reports, and
surveys necessary to define and delineate the extent of any contamination or
regulatory noncompliance, (3) contact, communicate with, negotiate with, and
challenge Governmental Bodies, make any reports to such Bodies, submit any
remediation or compliance plans to such Bodies, negotiate with such Bodies, and
otherwise deal with such Bodies, (4) select and implement remedial measures,
(5) prepare work plans for any remediation of contamination or correction of
noncompliance, and (6) conduct or direct any such remediation of contamination
or correction of noncompliance.
12.2 Publicity. No publicity release or announcement concerning this
Agreement or the transactions contemplated hereby shall be made without advance
approval thereof by the Sellers and the Buyer.
12.3 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission
or, if mailed, two days after the date of deposit in the United States mails,
as follows:
(i) if to the Buyer, to: SAC, Inc.
One Maritime Plaza
Suite 2525
San Francisco, CA 94111
Fax No.415-788-5302
Attention: Kenneth Diekroger
(ii) if to the Sellers, to: Metromedia Company
One Meadowlands Plaza
East Rutherford, NJ 07073
Attention: General Counsel
Fax No. 201-531-2803
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<TABLE>
<S> <C> <C> <C>
(iii) if to the Company, to: Stanadyne Automotive Holding
Corp. c/o Metromedia Company
One Meadowlands Plaza
East Rutherford, NJ 07073
Attention: General Counsel
Fax No. 201-535-2803
</TABLE>
Any party may by notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
12.4 Entire Agreement. This Agreement and the collateral agreements
executed in connection with the consummation of the transactions contemplated
herein, along with the Confidentiality Agreement, contain the entire agreement
among the parties with respect to the purchase of the Shares and related
transactions, and supersede all prior agreements, written or oral, with respect
thereto.
12.5 Waivers and Amendments; Non-Contractual Remedies; Preservation of
Remedies. This Agreement may be amended, superseded, canceled, renewed or
extended, and the terms hereof may be waived, only by a written instrument
signed by the parties or, in the case of a waiver, by the party waiving
compliance. No delay on the part of any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof, nor shall any waiver
on the part of any party of any such right, power or privilege, nor any single
or partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
The rights and remedies herein provided are cumulative and are not exclusive of
any rights or remedies that any party may otherwise have at law or in equity.
The rights and remedies of any party based upon, arising out of or otherwise in
respect of any inaccuracy in or breach of any representation, warranty,
covenant or agreement contained in this Agreement shall in no way be limited by
the fact that the act, omission, occurrence or other state of facts upon which
any claim of any such inaccuracy or breach is based may also be the subject
matter of any other representation, warranty, covenant or agreement contained
in this Agreement (or in any other agreement between the parties) as to which
there is no inaccuracy or breach.
12.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely within such State.
12.7 Binding Effect; No Assignment; No Third Party Rights. This Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and legal representatives. This Agreement is not
assignable except by operation of Law (including a merger of Buyer into an
Affiliate); provided, however, that the Buyer may assign its rights and
delegate its obligations hereunder (i)
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to any Affiliate, in which case Buyer shall remain liable under this Agreement,
(ii) to any person in connection with a sale of all or substantially all of the
assets of the Buyer, (iii) to any person who acquires all of the capital stock
of Buyer, and (iv) to any person providing financing to the Buyer or its
Affiliates. This Agreement is made solely for the benefit of the Buyer and the
Sellers and shall not give rise to any rights of any kind to third parties.
12.8 Variations in Pronouns. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the context
may require.
12.9 Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof
each signed by less than all, but together signed by all of the parties hereto.
12.10 Exhibits and Schedules. The Exhibits and Schedules are a part of
this Agreement as if fully set forth herein. All references herein to
sections, subsections, clauses, Exhibits and Schedules shall be deemed
references to such parts of this Agreement, unless the context shall otherwise
require. Seller shall be entitled to supplement or revise the Disclosure
Schedule from time to time prior to the Closing Date (provided that any changes
made shall not be material) and such Disclosure Schedule, as so supplemented or
revised shall be deemed to be the Disclosure Schedule, provided that for
purposes of determining the existence of a breach of any representation or
warranty or covenant for purposes of Section 9, no such supplement of or
revision to the Disclosure Schedule shall be effective.
12.11 Headings. The headings in this Agreement are for reference only,
and shall not affect the interpretation of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SAC, Inc.
/s/ Kenneth Diekroeger
By____________________________
Name: Kenneth J. Diekroeger
Title: President
STANADYNE AUTOMOTIVE HOLDING CORP.
/s/ Mike Boyer
By____________________________
Name: Michael H. Boyer
Title: Vice President, Chief
Financial Officer
SELLERS: METROMEDIA COMPANY
/s/ Sylvia Kessel
BY:______________________________
Name: Sylvia Kessel
Title: CFO, Senior Vice President
and Treasurer
[ADDITIONAL SIGNATURE PAGES TO BE ADDED
FOR EACH SIGNING SELLER]
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AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 (THIS "AMENDMENT") dated as of December 8, 1997 to
Stock Purchase Agreement dated as of November 7, 1997 (the "Agreement") by and
between Stanadyne Automotive Holding Corp., a Delaware corporation (the
"Company"), SAC, Inc., a Delaware corporation, Metromedia Company, a Delaware
general partnership and the holders of the securities of the Company.
WHEREAS, the parties desire to amend the Agreement, on the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereby agree as follows:
1. CAPITALIZED TERMS. All capitalized terms used but not defined herein shall
have the meanings ascribed to them in the Agreement.
2. AMENDMENTS.
2.1 Subsection 1.2.2(a) of the Agreement is hereby amended by adding the
following immediately prior to the end of the second sentence of Subsection
1.2.2(a):
"and provided further that Working Capital shall be calculated without
regard to any direct or indirect impact resulting from the vesting of or
payments in respect of those previously unvested "promote" shares of the
Sellers who are employees of the Company which are being vested by
Amendment No. 1 to the Amended and Restated Management Equity
Participation Promotion Agreement of each such Seller".
2.2 Subsection 1.2.3(a) of the Agreement is hereby amended as follows:
a. The following language is added immediately prior to the end of
Subsection 1.2.3(a)(i):
", provided, however that the Buyer shall, upon written instruction
from Metromedia, as Seller Representative, pay, on behalf of
Sellers, the expenses of Sellers in connection with this
transaction as designated by Metromedia, to such account(s)
designated by Metromedia. The Preliminary Purchase Price and
Purchase Price shall be reduced by an amount equal to the amount of
such expenses of Sellers paid by the Buyer as provided above".
b. The term "Schedule 1.2.3.1" in Subsection 1.2.3(a)(v) is replaced
by the term "Schedule 1.2.3".
<PAGE> 64
c. The following language is added immediately after Subsection 1.2.3(a)(v):
"(vi) Notwithstanding anything herein to the contrary, no
payments of Preliminary Purchase Price, or payments under Section
1.2.3(ii), shall be payable by Buyer in respect of shares of
Common Stock transferred by employees of the Company to Buyer
prior to the Closing."
2.3 Section 3 of the Agreement is hereby amended by deleting the word
"each" from the last line of Section 3.
2.4 Section 5 of the Agreement is hereby amended by adding the following
immediately prior to the introduction to Section 5:
"(except that each Seller other than Metromedia makes only the
covenants and agreements set forth in this Section 5 which pertain to
such Seller individually)".
2.5 Section 5.4 of the Agreement is hereby amended by replacing the
second sentence with the following language:
"If the transactions contemplated hereby are consummated, the Buyer
shall be entitled to receive reimbursement from Metromedia (who is
making such reimbursement on behalf of all of the Sellers proportionate
to their Share Ownership) for the Seller Expenses which are paid or
payable after the Closing (the "Seller Expense Reimbursement"), provided
that the Seller Expense Reimbursement shall not be made if the following
two conditions are satisfied: (i) the amounts payable for such Seller
Expense are reflected in the Closing Statement and (ii) there is an
adjustment to the Final Pre-Adjustment Amount based on Actual Working
Capital, as determined pursuant to Section 1.2.2. In the event that the
Buyer is entitled to the Seller Expense Reimbursement and there is an
Unpaid Balance to be paid to the Sellers pursuant to Section 1.2.2(e),
the Seller Expense Reimbursement shall be made by reducing the Unpaid
Balance payment by the amount of the Seller Expense Reimbursement. If
the Seller Expense Reimbursement exceeds the Unpaid Balance, the Seller
Expense Reimbursement shall be paid to the Buyer by (x) a reduction of
the Unpaid Balance in its entirety and (y) the payment by Metromedia (on
behalf of the Sellers proportionate to their Share Ownership) equal to
the amount by which the Seller Expense Reimbursement exceeds the Unpaid
Balance."
2.6 Section 5.5 of the Agreement is hereby amended as follows:
a. In the first sentence, second line, the phrase "the Sellers" is
replaced by "Metromedia."
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b. In the first sentence, the phrase "and a fee payable to American
Industrial Partners by the Buyer" is replaced by the phrase ",a
fee payable to American Industrial Partners by the Buyer and a fee
payable by the Sellers to Donaldson, Lufkin & Jenrette Securities
Corporation (which fee shall be paid by the Buyer on behalf of the
Sellers and which shall reduce the Preliminary Purchase Price and
Purchase Price by the amount of such fee, as provided in Section
1.2.3(i))".
c. In the last sentence, the phrase "the Sellers" is replaced by
"Metromedia".
2.7 Section 5.16 of the Agreement is hereby amended by adding the following
immediately after the first sentence thereof :
"In the event that a Warrant is not exercised or a share of the
preferred stock of the Company ("Preferred Stock") is not converted into
common stock of the Company ("Common Stock"), the holder thereof shall
be entitled to receive the amount of Preliminary Purchase Price and
Purchase Price that it would have been entitled to receive had the
Warrant been exercised or the Preferred Stock converted into Common
Stock, provided that the holder surrenders the security to the Buyer or
the Company at or prior to the Closing or otherwise take steps,
reasonably satisfactory to the Buyer, to extinguish its rights under
such security, and upon such payments of Purchase Price, such holder
shall have no further right to receive any payments in respect of such
securities."
2.8 Section 6.12 of the Agreement is hereby amended by adding the phrase "or
Redemption" immediately after the phrase "(b) the Merger".
2.9 Section 9.1 of the Agreement is hereby amended as follows:
a. the phrase "the Sellers (proportionate to their ownership of
shares)" in the sixth line of the first paragraph of Section 9.1 is
replaced by "Metromedia" and the phrase "the Sellers" in the
twelfth line of the first paragraph of Section 9.1 is replaced by
"Metromedia's".
b. the terms "the Sellers" and "The Sellers" are replaced, in each
instance in which either term appears from (and including)
Subsection (i) of Section 9.1 to the end of the paragraph
immediately preceding the last paragraph of Section 9.1, by
"Metromedia".
c. The term "Sellers" is replaced by "Metromedia" in the fifth line of
Subsection (ii) of Section 9.1.
d. The phrase ",less any amounts for which Metromedia has indemnified
the d.
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<PAGE> 66
Buyer Indemnitees pursuant to Section 10.3.3 of this Agreement" is
added immediately prior to the end of Subsection (ii) of Section
9.1.
e. The phrase "the Sellers (proportionate to their Share Ownership)" is
replaced by "Metromedia" in the second sentence of the last paragraph
of Section 9.1.
f. The third sentence of the last paragraph of Section 9.1 is deleted in
its entirety.
g. The last two sentences of the last paragraph of Section 9.1 are
amended in their entirety to read as follows:
"Notwithstanding anything to the contrary set forth in this
Agreement, each Seller shall indemnify Buyer Indemnitees for any
Damages asserted against or actually incurred by the Buyer
Indemnitees as a result of any misrepresentation in or breach of
any Several Representation by such Seller, but no Seller shall
have any Indemnification obligation to Buyer Indemnitees with
respect to any Several Representation of any other Seller."
h. The last paragraph of Section 9.1 is hereby amended by adding the
following sentence immediately after the end of such paragraph:
"The limitations set forth in Section 9.1(i) shall not apply to any
indemnification obligation of Metromedia to Buyer Indemnitees
relating to Section 6.10, which obligation arises from any payments
made by any Buyer Indemnitee with respect to the two mechanic's liens
(or indemnification therefor) filed in Leon County against the
Company's Tallahassee site (identified in Book number 2014, Page 0253
and Book number 2024, Page 1945)."
2.10 Section 9.2 of the Agreement is hereby amended by changing the word
"Indemnities" to "Indemnitees" in the first sentence thereof.
2.11 Subsection 9.5.1 is hereby amended by changing the phrase "the
Sellers" to "Metromedia" in the first sentence thereof and by adding the
following new sentence immediately following the first sentence thereof:
"Each of the Sellers agrees that any payments made by Metromedia to
Buyer pursuant to this Section 9.5 are being paid by Metromedia on
behalf of all of the Sellers and each Seller agrees to reimburse
Metromedia, in proportion to such Seller's Share Ownership, for such
payments. Such reimbursement shall be made by each Seller within
fifteen (15) days of such Seller's receipt of a written notice from
Metromedia setting forth in reasonable detail the basis for, and
amount of, such Seller's reimbursement obligation."
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2.12 Subsection 9.5.4 is hereby amended by changing the phrase "the
Sellers" to Metromedia" in the last sentence thereof.
2.13 Subsection 10.3.3 is hereby amended by changing the word "Indemnities"
to "Indemnitees" in the first sentence of part (ii) thereof.
2.14 Section 10 is hereby amended by adding the following language
immediately after Section 10.5:
"10.6 For purposes of (i) the indemnification provisions of this
Section 10 and (ii) Section 10.2.1, the term "Sellers" shall mean only
Metromedia."
2.15 The Disclosure Schedule to the Agreement is hereby amended by
replacing the first page of the Disclosure Schedule, Schedules 1.2.3, 3.1, 3.7,
3.8, 3.11 and the last pages of Schedules 3.17(b) and 3.18(a)(ii) thereto with,
respectively, the first page of the Disclosure Schedule, Schedules 1.2.3, 3.1,
3.7, 3.8 and 3.11 and the last pages of Schedules 3.17(b) and 3.18(a)(ii)
attached hereto.
3. MISCELLANEOUS.
3.1. Except as specifically provided herein, nothing contained in this
Amendment shall be deemed to modify in any respect the terms, provisions or
conditions of the Agreement, and such terms, provisions and conditions shall
remain in full force and effect. The Agreement, as amended by this Amendment,
contains the entire agreement of the parties with respect to the subject matter
hereof and may be changed only by a written agreement signed by the parties
hereto.
3.2. This Amendment shall be binding upon and inure to the benefit of the
parties hereto and their respective permitted successors and assigns.
[space intentionally omitted ]
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
STANADYNE AUTOMOTIVE HOLDING CORP.
/s/ Sylvia Kessel
By:__________________________
By: Sylvia Kessel
Title: CFO, Senior Vice President
and Treasurer
SAC, INC.
/s/ Kenneth J. Diekroeger
By:__________________________
By: Kenneth J. Diekroeger
Title: President
METROMEDIA COMPANY
/s/ Sylvia Kessel
By:__________________________
By: Sylvia Kessel
Title: Senior Vice President
[OTHER SELLERS ON SEPARATE SIGNATURE PAGE]
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<PAGE> 1
Exhibit 10.3
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT by and between STANADYNE
AUTOMOTIVE CORP. (the "Company"), and ________________ (the "Executive"), dated
as of July 22, 1996 (this "Agreement"), amends and restates in its entirety
that certain Employment Agreement, dated as of February 10, 1989, between
Stanadyne Automotive Corp. (the "Company") and Michael H. Boyer (the
"Executive"), as amended by Amendment No. 1 to Employment Agreement dated as of
October 1, 1992.
RECITALS:
The Company, on behalf of itself and its shareholders, wishes to assure
that the Company will have the continued dedication of the Executive,
undiminished by fear of insecurity as to his position. The Board of Directors
of the Company (the "Board") believes it is imperative to eliminate such
distraction of the Executive and to encourage his attention and dedication to
his assigned duties. The Board also considers it to be in the best interests
of the Company to foster the continued employment of the Executive in the event
of a possible change in control of the Company. The Board has determined that
appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of the Executive to his assigned duties without
distraction, and the Board has determined, and the Executive has agreed, that
he shall receive certain severance benefits in the event his employment with
the Company is terminated subsequent to a change in control of the Company.
Therefore, the Board has caused the Company to enter into this
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<PAGE> 2
Agreement (i) to provide the Executive with a measure of protection against
such fears, (ii) to provide such protection in a manner competitive with that
of other major corporations, and (iii) to make other changes in the terms of
the aforementioned Employment Agreement and Amendment No. 1 to Employment
Agreement which the Board believes necessary.
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Operation of Agreement. The "Effective Date" shall be the actual
closing date of the Agreement of Purchase and Sale relating to the purchase of
substantially all of the business and assets of the Diesel Systems Division and
Precision Products Division of Stanadyne, Inc., dated as of February 10, 1989,
between Stanadyne Automotive Corp. Inc., and Stanadyne, Inc. If such closing
does not occur, the Company and the Executive shall have no obligations
hereunder and this Agreement shall terminate and be void and of no further
force or effect.
2. Employment Period. The Company hereby agrees to continue the Executive
in its employ, and the Executive hereby agrees to remain in the employ of the
Company, for the period commencing on the Effective Date and ending on the
earlier to occur of (i) the date twenty-four (24) months after such date; and
(ii) the day of the actual retirement of the Executive, under circumstances
entitling him to receive normal retirement benefits under the Company's
Salaried Pension Plan (the "Employment Period"); provided that the Employment
Period and any extended
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<PAGE> 3
period shall automatically extend for an additional one-year period unless the
Company, not later than thirty (30) days from the end of such period or
extended period, gives the Executive notice that such period or extended period
will not be extended. As hereinafter used in this Agreement, the term
"Employment Period" refers to the extended period of employment under this
Agreement as it may be extended pursuant to the proviso clause in the preceding
sentence.
3. Position and Duties.
(a) During the Employment Period, (i) the Executive's position (including
status, offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at Stanadyne, Inc.
at any time during the ninety (90) day period immediately preceding and
including the Effective Date or, if more favorable to the Executive, as in
effect at any time thereafter with respect to the Executive, and (ii) the
Executive's services shall be performed at the location where the Executive was
employed by Stanadyne, Inc. immediately preceding the Effective Date or any
office or location less than thirty-five (35) miles from such location, subject
to reasonable requirements of travel to other locations of the Company's
facilities.
(b) Excluding periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Company and, to the
extent necessary to discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform faithfully
and
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<PAGE> 4
efficiently such responsibilities.
4. Compensation.
(a) Base Salary. During the Employment Period, the Executive shall
receive an annual base salary at a monthly rate at least equal to the highest
monthly base salary paid to the Executive by Stanadyne, Inc., during the twelve
(12) month period immediately preceding the month in which the Effective Date
occurs. As hereinafter used in this Agreement, the term "Base Salary" refers
to the annual base salary of the Executive as it may be increased from time to
time during the Executive's employment by the Company. During the Employment
Period, the Base Salary shall be reviewed at least annually and shall be
increased at any time and from time to time as shall be consistent with
increases in base salary awarded in the ordinary course of business to other
key executives. Any increase in the Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement. The Base
Salary shall not be reduced after any such increase.
(b) Incentive, Savings and Retirement Plans. In addition to the Base
Salary payable as hereinabove provided, the Executive shall be entitled to
participate during the Employment Period in all incentive, savings and
retirement plans and programs generally applicable to other key executives
(including, but not limited to the Management Profit Sharing Plan for Executive
Personnel), and to participate in the Management Equity Participation Promotion
Plan.
(c) Welfare Benefit Plans. During the Employment Period, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under each welfare benefit plan
of the
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Company, including, without limitation, all medical, prescription, dental,
disability, salary continuance, executive life, group life, accidental death
and travel accident insurance plans and programs of the Company in each case
comparable to those plans of Stanadyne, Inc. in effect at any time during the
ninety (90) day period immediately preceding the Effective Date which would be
most favorable to the Executive or, if more favorable to the Executive, as in
effect at any time thereafter with respect to other key executives.
(d) Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies and procedures
of Stanadyne, Inc. in effect at any time during the ninety (90) day period
immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect at any time thereafter with respect to other key
executives.
(e) Office and Support Staff. During the Employment Period, the Executive
shall be entitled to an office or offices of a size and with furnishings and
other appointments, and to secretarial and other assistance, at least equal to
those provided to the Executive by Stanadyne, Inc. at any time during the
ninety (90) day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect at any time thereafter with respect to
the Executive.
(f) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable policies of
Stanadyne, Inc. as in effect at any time during the ninety (90) day period
immediately preceding the Effective Date or, if more favorable to the
Executive, as in
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effect at any time thereafter with respect to other key executives.
5. Termination.
(a) Death or Disability. This Agreement shall terminate automatically
upon the Executive's death. The Company may terminate this Agreement, after
having established the Executive's Disability (pursuant to the definition of
"Disability" set forth below), by giving to the Executive written notice of its
intention to terminate the Executive's employment. In such a case, the
Executive's employment with the Company shall terminate effective on the 180th
day after receipt of such notice (the "Disability Effective Date"), provided
that, within 180 days after such receipt, the Executive shall not have returned
to full-time performance of the Executive's duties. For purposes of this
Agreement, "Disability" means disability which, after the expiration of more
than twenty-six (26) weeks from its commencement, is determined to be total and
permanent by a physician selected by the Company or its insurers and acceptable
to the Executive or the Executive's legal representative (such agreement to
acceptability not to be withheld unreasonably).
(b) Cause. The Company may terminate the Executive's employment for
Cause. For purposes of this Agreement "Cause" means (i) an act or acts of
dishonesty taken by the Executive and intended to result in substantial
personal enrichment of the Executive at the expense of the Company or any of
its consolidated subsidiaries; (ii) repeated violations by the Executive of the
Executive's obligations to the Company or any of its consolidated subsidiaries
under Section 3 of this Agreement which are demonstrably willful and deliberate
on the Executive's part and which are not remedied after the receipt of notice
from the Company or any
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of its consolidated subsidiaries; or (iii) the conviction of the Executive of a
felony.
(c) Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason"
means:
(i) the assignment to the Executive of (A) any duties
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements), authority,
duties or responsibilities as contemplated by Section 3 of the
Agreement or as in effect immediately preceding a Change in Control
(as hereinafter defined); or (B) any other action by the Company
which results in a diminution in such position, authority, duties or
responsibilities, other than an insubstantial and inadvertent action
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of this Agreement, other than an insubstantial and
inadvertent failure which is remedied by the Company promptly after
receipt of notice by the Executive;
(iii) the Company's requiring the Executive to be based at any
office or location other than as described in Section 3(a)(ii)
hereof, except for travel reasonably required in the performance of
the Executive's responsibilities;
(iv) any purported termination by the Company of the
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Executive's employment otherwise than as permitted by this Agreement;
or
(v) any failure by the Company to comply with and satisfy
Section 10(c) of this Agreement.
(d) Termination of Employment Following a Change in Control. If a Change
in Control (as hereinafter defined) shall occur while the Executive is employed
by the Company, and the Executive's employment with the Company, whether
pursuant to this Agreement or otherwise, is terminated on or within three (3)
years after such a Change in Control (unless such termination is (i) because of
the death or retirement of the Executive, (ii) by the Company for Cause or
Disability, or (iii) by the Executive other than for Good Reason), then the
Executive shall be entitled to the benefits provided in Section 6(e) herein.
In the event that the Company gives the Executive notice pursuant to Section 2
of this Agreement that the extended period of the Executive's Employment
Period under this Agreement will not be extended, and the Agreement shall
terminate, but the Executive shall continue to be employed by the Company, the
provisions of Section 6(e) shall survive the termination of this Agreement and
shall continue to be applicable for so long as the Executive is employed by the
Company. If the Company gives such contract termination notice and, on or
within three (3) years after a Change of Control, the Executive's employment
with the Company is terminated (unless such termination is (i) because of the
death or retirement of the Executive, (ii) by the Company for Cause or
Disability, or (iii) by the Executive other than for Good Reason), the
Executive shall be entitled to the benefits provided in Section 6(e) herein,
provided that the
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Executive was employed by the Company at the time of such Change of Control.
For purposes of this Agreement, a "Change in Control" shall be deemed to have
occurred if (i) there is an acquisition by an unrelated party of 50% or more of
the voting securities of the Company or of any company or other business entity
which directly or indirectly controls the Company; or (ii) there is a merger or
consolidation of the Company with or into another entity whereby Metromedia
Company is no longer directly or indirectly the controlling shareholder of the
Company; or (iii) a plan of complete liquidation of the Company is instituted
or there is an agreement for the sale or disposition by the Company of all or
substantially all of its assets or stock; or (iv) there is an equity holder
with an interest in the Company or in any company or other business entity
which directly or indirectly controls the Company in excess of 20% (or a
company or other business entity with whom the Company has had discussions and
as a direct result thereof such company or other business entity expresses an
intent to take such an interest) and such holder, or company or other business
entity, as the case may be, (A) recommends the termination of the Executive
without Cause and as a direct result thereof the Company terminates the
Executive's employment without Cause or (B) recommends any action which would
constitute or result in Good Reason and as a direct result thereof the Company
takes an action which constitutes or results in Good Reason and the Executive
terminates his employment for Good Reason; or (v) a company or other business
entity has discussions with the Company and expresses an intent to take an
interest in excess of 20% in the Company or in any company or other business
entity which directly or indirectly controls the Company and, before such
discussions are
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terminated and as a direct result of such discussions, (A) the Company
recommends to such company or other business entity that the Company (x)
terminate the Executive's employment without Cause or (y) take an action which
constitutes or results in Good Reason, (B) such company or other business
entity agrees with the Company's recommendation and (C) the Company terminates
the Executive's employment without Cause or takes an action which constitutes
or results in Good Reason and the Executive terminates his employment for Good
Reason.
(e) Notice of Termination. Any termination by the Company for Cause or by
the Executive for Good Reason before or following a Change in Control shall be
communicated by Notice of Termination to the other party hereto in accordance
with Section 11(c) of this Agreement. For purposes of this Agreement, a
"Notice of Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated, and
(iii) if the termination date is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more than fifteen (15)
days after the giving of such notice).
(f) Date of Termination. "Date of Termination" means the date of receipt
of the Notice of Termination or any later date specified therein, as the case
may be. If the Executive's employment is terminated by the Company other than
for Cause or Disability, the Date of Termination shall be the date on which the
Company notifies the Executive of such termination. If the Company gives the
Executive notice pursuant to Section 2 of this Agreement that the Executive's
employment under this
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Agreement will not be extended, and the Executive's employment with the Company
does not continue beyond the date on which the extended period of employment
under this Agreement ends, the Date of Termination shall be the date on which
the extended period of employment under this Agreement ends. If the Company
gives the Executive notice pursuant to Section 2 of this Agreement that the
Executive's employment under this Agreement will not be extended, and the
Executive's employment with the Company continues beyond the date on which the
extended period of employment under this Agreement ends, the Date of
Termination shall be the date in which such continued employment ends.
6. Obligations of the Company Upon Termination.
(a) Death. If the Executive's employment is terminated by reason of the
Executive's death, this Agreement shall terminate without further obligations
to the Executive's legal representatives under this Agreement, other than those
obligations accrued or earned by the Executive hereunder at the date of the
Executive's death. Anything in this Agreement to the contrary notwithstanding,
the Executive's family shall be entitled to receive benefits at least equal to
the most favorable benefits provided by Stanadyne, Inc. to surviving families
of its executives under such plans, programs and policies relating to family
death benefits, if any, as in effect at any time during the ninety (90) day
period immediately preceding the Effective Date or, if more favorable to the
Executive and/or the Executive's family, as in effect on the date of the
Executive's death with respect to other key executives and their families.
(b) Disability. If the Executive's employment is terminated by reason
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of the Executive's Disability, this Agreement shall terminate without further
obligations to the Executive, other than those obligations accrued or earned by
the Executive hereunder as of the Disability Effective Date. Anything in this
Agreement to the contrary notwithstanding, the Executive shall be entitled
after the Disability Effective Date to receive disability and other benefits at
least equal to the most favorable of those provided by Stanadyne, Inc. to
disabled employees and/or their families in accordance with such plans,
programs and policies relating to disability, if any, as in effect at any time
during the ninety (90) day period immediately preceding the Effective Date or,
if more favorable to the Executive and/or the Executive's family, as in effect
at any time thereafter with respect to other key executives and their families.
(c) Cause. If the Executive's employment shall be terminated for Cause,
the Company shall pay the Executive his full Base Salary through the Date of
Termination at the rate in effect at the time the Notice of Termination is
given, and shall have no further obligations to the Executive under this
Agreement.
(d) Good Reason; Other Than for Cause or Disability. If, during the
Employment Period, the Company shall terminate the Executive's employment other
than for Cause or Disability, or the employment of the Executive shall be
terminated by the Executive for Good Reason:
(i) the Company shall, unless otherwise provided herein, pay to the
Executive in a lump sum in cash within thirty (30) days after the Date of
Termination the aggregate of the following amounts:
A) to the extent not theretofore paid, the Executive's Base
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Salary through the Date of Termination at the rate in
effect on the Date of Termination; and any bonus payments
earned during the last full fiscal year ending during the
Employment Period which are not payable until after the
Date of Termination, which shall be paid to the Executive
after the Date of Termination promptly and in accordance
with the Company's bonus plans.
B) an amount equal to the product of (i) the amount of any
cash bonus paid (or deferred) pursuant to the Company's
Management Profit Sharing Plan for Executive Personnel
plus the amount of any other cash bonus paid to the
Executive for the last full fiscal year ending during the
Employment Period (or, if applicable, the last full fiscal
year of Stanadyne, Inc. ending immediately prior to the
Employment Period) and (ii) a fraction, the numerator of
which is the Executive's number of days of employment in
the fiscal year ending on the Termination Date and the
denominator is 365;
C) an amount equal to the Executive's Base Salary at the rate
in effect on the Date of Termination;
D) in the case of compensation previously deferred by the
Executive, all amounts previously deferred and not yet
paid by the Company; and
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E) any amount due the Executive under any other separation or
severance pay plan of the Company; and
(ii) for the remainder of the Employment Period, the Company
shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have
been provided to them in accordance with the plans,
programs and policies described in Section 4(c) of this
Agreement if the Executive's employment had not been
terminated, other than salary continuation, if and as in
effect at Stanadyne, Inc. at any time during the ninety
(90) day period immediately preceding the Effective Date
or, if more favorable to the Executive, as in effect at any
time thereafter with respect to other key executives and
their families.
(e) Change in Control. If a Change in Control shall occur while the
Executive is employed by the Company, and the Executive's employment with the
Company, whether pursuant to this Agreement or otherwise, is terminated on or
within three (3) years after such a Change in Control (unless such termination
is (i) because of the death or retirement of the Executive, (ii) by the Company
for Cause or Disability, or (iii) by the Executive other than for Good Reason):
(i) The Company shall pay to the Executive the following
amounts on the Date of Termination, except as otherwise
specified below, and provide to the Executive the following
benefits:
(A) to the extent not theretofore paid, the Executive's Base
Salary through and including the Date of Termination at
the rate in effect on the Date of Termination; and any
bonus payments earned during the last full fiscal year
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ending during the Employment Period which are not payable
until after the Date of Termination, which shall be paid
to the Executive after the Date of Termination promptly
and in accordance with the Company's bonus plans.
(B) an amount equal to the product of (i) the amount of any
cash bonus paid (or deferred) pursuant to the Company's
Management Profit Sharing Plan for Executive Personnel
plus the amount of any other cash bonus paid to the
Executive for the last full fiscal year ending during the
Employment Period and (ii) a fraction, the numerator of
which is the Executive's number of days of employment in
the fiscal year ending on the Date of Termination and the
denominator is 365;
(C) an amount equal to three times the Executive's current Base
Salary, plus three times the average amount paid to the
Executive over the prior three (3) years in connection with
the Company's Management Profit Sharing Plan for Executive
Personnel. The aforementioned amounts shall be payable as
follows: one-third payable on the Date of Termination,
one-third payable on the first anniversary of the Date of
Termination and one-third payable on the second
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anniversary of the Date of Termination;
(D) in the case of compensation previously deferred by the
Executive, all amounts previously deferred and not yet paid
by the Company;
(E) For one year following the Date of Termination, the
Executive and/or the Executive's family, as the case may
be, shall be eligible for participation in and shall
receive at no increase in the rate or amount of
contribution by the Executive and/or his family (other than
an increase resulting from a change to the welfare benefit
plan(s) of the Company in which the Executive is a
participant) all benefits under each welfare benefit plan
of the Company, including, without limitation, all medical,
prescription, dental, disability, salary continuance,
executive life, group life, accidental death and travel
accident insurance plans and programs of the Company as in
effect on the Date of Termination; and
(F) for the shorter of one year or the remainder of the term of
the lease relating to the Executive's automobile, payments
with respect to the Executive's automobile. At such time,
the Executive will have the right to purchase such vehicle
for the residual value of the lease in accordance with the
terms and provisions of such lease
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agreement.
The provisions of this Section 6(e) shall be applicable on or after a
Change of Control has occurred but not prior thereto.
7. Non-Exclusivity of Rights; Non-Mitigation. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in
any benefit, bonus, incentive or other plan or program provided by the Company
and for which the Executive may qualify. Amounts which are vested benefits or
which the Executive is otherwise entitled to receive under any plan or program
of the Company, at or subsequent to the Date of Termination, shall be payable
in accordance with such plan or program. The Executive shall not be required
to mitigate the amount of any payments made to the Executive under this
Agreement by seeking other employment or otherwise.
8. Certain Reduction of Payments by the Company. Anything in this
Agreement to the contrary notwithstanding, in the event it shall be determined
that any payment or distribution by the Company to or for the benefit of the
Executive, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise (a "Payment") would be subject to the
excise tax ("Excise Tax") imposed by section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), then the aggregate present value of amounts
payable or distributable to or for the benefit of the Executive pursuant to
this Agreement (such payments or distributions pursuant to this Agreement are
hereinafter referred to as "Agreement Payments") shall be reduced (but not
below zero) if such reduction would result in the Executive retaining a larger
amount, after-taxes, including the Excise Tax, than if
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the Executive received all of the Agreement Payments, and the aggregate present
value of the Payments other than Agreement Payments ("Other Payments") shall
also be reduced (but not below zero) if such reduction would result in the
Executive retaining a larger amount after taxes, including the Excise Tax, than
if the Executive received all of the Other Payments.
All determinations required to be made under this Section 8 shall be made
by the Company's independent auditors (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the Executive
within fifteen (15) business days of the Date of Termination of employment of
the Executive or such earlier time as is requested by the Company. Any such
determination by the Accounting Firm shall be binding upon the Company and the
Executive. The Executive shall determine which and how much of the Agreement
Payments or Other Payments, as the case may be, shall be eliminated or reduced
consistent with the requirements of this Section 8, provided that, if the
Executive does not make such determination within ten (10) business days of the
receipt of the calculations made by the Accounting Firm, the Company shall
elect which and how much of the Agreement Payment or Other Payments, as the
case may be, shall be eliminated or reduced consistent with the requirements of
this Section 8 and shall notify the Executive promptly of such election.
Within five (5) business days after the determination by the Executive or the
Company, as applicable, the Company shall pay to or distribute to or for the
benefit of the Executive such amounts as are then due to the Executive under
this Agreement and shall promptly pay to or distribute for the benefit of the
Executive in the future such amounts, if any, as become due to the
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Executive under this Agreement.
As a result of the uncertainty in the application of section 280G of the
Code at the time of the initial determination by the Accounting Firm hereunder,
it is possible that Agreement Payments or Other Payments, as the case may be,
will have been made by the Company which should not have been made (an
"Overpayment") or that additional Agreement Payments or Other Payments, as the
case may be, which will have not been made by the Company could have been made
(an "Underpayment"), in each case, consistent with the calculations required to
be made hereunder. In the event that the Accounting Firm determines that an
Overpayment has been made, any such Overpayment shall be treated for all
purposes as a loan to the Executive which the Executive shall repay to the
Company together with interest at the applicable federal rate provided for in
section 1274(c) of the Code (the "Applicable Federal Rate"); provided, however,
that no amount shall be payable by the Executive to the Company (or if paid by
the Executive to the Company shall be returned to the Executive) if and to the
extent such payment would not reduce the amount which is subject to taxation
under section 4999 of the Code. In the event that the Accounting Firm
determines that an Underpayment has occurred, any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive together
with interest at the Applicable Federal Rate; provided, however, that no amount
shall be payable by the Executive to the Company (or if paid by the Executive
to the Company shall be returned to the Executive) if and to the extent such
payment would not reduce the amount which is subject to taxation under section
4999 of the Code.
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9. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company and its respective business which
shall have been obtained by the Executive during the Executive's employment by
the Company and which shall not be public knowledge (other than by acts by the
Executive or his representatives in violation of this Agreement). After
termination of the Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company, communicate or divulge
any such information, knowledge or data to anyone other than the Company and
those designated by it.
10. Successors.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive and the
Executive' s legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors.
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
As used in this Agreement, "Company" shall mean the Company as hereinbefore
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defined and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law or otherwise.
11. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without reference to principles of conflict
of laws. The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect.
(b) This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors
and legal representatives.
(c) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
Michael H. Boyer
36 Long Hill Drive
Somers, CT 06071
If to the Company:
Stanadyne Automotive Corp.
92 Deerfield Road
Windsor, Connecticut 06095
Attention: William D. Gurley
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
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(d) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(e) The Company may withhold from any amounts payable under this Agreement
such federal, state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation.
(f) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a waiver of such
provision or any other provision thereof.
(g) This Agreement contains the entire understanding of the Company and
the Executive with respect to the subject matter hereof.
(h) If the Executive or his legal representative institutes a law suit or
legal proceeding to enforce, or obtain damages for the breach of, any of the
Executive's or such legal representative's rights under this Agreement and
obtains a judgment in his or its favor, then the Company shall pay, in addition
to all amounts payable under such judgment, the reasonable attorneys' fees
incurred by the Executive or his legal representative in such law suit or other
legal proceeding.
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IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused this
Agreement to be executed in its name on its behalf, all as of the day and year
first above written.
EXECUTIVE
________________________
Name of Executive
STANADYNE AUTOMOTIVE CORP.
By: ______________________
Stuart Subotnick
Director
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Exhibit 10.4
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT by and between PRECISION ENGINE PRODUCTS CORP.
(the "Company"), and ARTHUR S. CARUSO (the "Executive"), is dated as of July
22, 1996 (this "Agreement") and is effective as of October 2, 1995.
RECITALS:
The Company, on behalf of itself and its shareholders, wishes to assure
that the Company will have the continued dedication of the Executive,
undiminished by fear of insecurity as to his position. The Board of Directors
of the Company (the "Board") believes it is imperative to eliminate such
distraction of the Executive and to encourage his attention and dedication to
his assigned duties. The Board also considers it to be in the best interests
of the Company to foster the continued employment of the Executive in the event
of a possible change in control of the Company. The Board has determined that
appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of the Executive to his assigned duties without
distraction, and the Board has determined, and the Executive has agreed, that
he shall receive certain severance benefits in the event his employment with
the Company is terminated subsequent to a change in control of the Company.
Therefore, the Board has caused the Company to enter into this Agreement (i) to
provide the Executive with a measure of protection against such fears, (ii) to
provide such protection in a manner competitive with that of other major
corporations, and (iii) to make other changes in the terms of the Executive's
employment which the Board believes necessary.
<PAGE> 2
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Operation of Agreement. The "Effective Date" shall be October 2, 1995.
2. Employment Period. The Company hereby agrees to continue the Executive
in its employ, and the Executive hereby agrees to remain in the employ of the
Company, for the period commencing on the Effective Date and ending on the
earlier to occur of (i) the date twelve (12) months after such date; and (ii)
the day of the actual retirement of the Executive, under circumstances entitling
him to receive normal retirement benefits under the Company's Salaried Pension
Plan (the "Employment Period"); provided that the Employment Period and any
extended period shall automatically extend for an additional one-year period
unless the Company, not later than thirty (30) days from the end of such period
or extended period, gives the Executive notice that such period or extended
period will not be extended. As hereinafter used in this Agreement, the term
"Employment Period" refers to the extended period of employment under this
Agreement as it may be extended pursuant to the proviso clause in the preceding
sentence.
3. Position and Duties.
(a) During the Employment Period, (i) the Executive's position (including
status, offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at the Company at
any time during
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<PAGE> 3
the ninety (90) day period immediately preceding and including the Effective
Date or, if more favorable to the Executive, as in effect at any time
thereafter with respect to the Executive, and (ii) the Executive's services
shall be performed at the location where the Executive was employed by the
Company immediately preceding the Effective Date or any office or location less
than thirty-five (35) miles from such location, subject to reasonable
requirements of travel to other locations of the Company's facilities.
(b) Excluding periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Company and, to the
extent necessary to discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities.
4. Compensation.
(a) Base Salary. During the Employment Period, the Executive shall
receive an annual base salary at a monthly rate at least equal to the highest
monthly base salary paid to the Executive by the Company, during the twelve
(12) month period immediately preceding the month in which the Effective Date
occurs. As hereinafter used in this Agreement, the term "Base Salary" refers
to the annual base salary of the Executive as it may be increased from time to
time during the Executive's employment by the Company. During the Employment
Period, the Base Salary shall be reviewed at least annually and shall be
increased at any time and from time to time as shall be consistent with
increases in base salary awarded in the
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ordinary course of business to other key executives. Any increase in the Base
Salary shall not serve to limit or reduce any other obligation to the Executive
under this Agreement. The Base Salary shall not be reduced after any such
increase.
(b) Incentive, Savings and Retirement Plans. In addition to the Base
Salary payable as hereinabove provided, the Executive shall be entitled to
participate during the Employment Period in all incentive, savings and
retirement plans and programs generally applicable to other key executives
(including, but not limited to the Management Profit Sharing Plan for Executive
Personnel), and to participate in the Management Equity Participation Promotion
Plan.
(c) Welfare Benefit Plans. During the Employment Period, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under each welfare benefit plan
of the Company, including, without limitation, all medical, prescription,
dental, disability, salary continuance, executive life, group life, accidental
death and travel accident insurance plans and programs of the Company in each
case comparable to those plans of the Company in effect at any time during the
ninety (90) day period immediately preceding the Effective Date which would be
most favorable to the Executive or, if more favorable to the Executive, as in
effect at any time thereafter with respect to other key executives.
(d) Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies and procedures
of the Company in effect at any time during the ninety (90) day period
immediately
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preceding the Effective Date or, if more favorable to the Executive, as in
effect at any time thereafter with respect to other key executives.
(e) Office and Support Staff. During the Employment Period, the Executive
shall be entitled to an office or offices of a size and with furnishings and
other appointments, and to secretarial and other assistance, at least equal to
those provided to the Executive by the Company at any time during the ninety
(90) day period immediately preceding the Effective Date or, if more favorable
to the Executive, as in effect at any time thereafter with respect to the
Executive.
(f) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable policies of the
Company as in effect at any time during the ninety (90) day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect at any time thereafter with respect to other key executives.
5. Termination.
(a) Death or Disability. This Agreement shall terminate automatically
upon the Executive's death. The Company may terminate this Agreement, after
having established the Executive's Disability (pursuant to the definition of
"Disability" set forth below), by giving to the Executive written notice of its
intention to terminate the Executive's employment. In such a case, the
Executive's employment with the Company shall terminate effective on the 180th
day after receipt of such notice (the "Disability Effective Date"), provided
that, within 180 days after such receipt, the Executive shall not have returned
to full-time performance of the Executive's duties. For purposes of this
Agreement, "Disability" means disability which, after the
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expiration of more than twenty-six (26) weeks from its commencement, is
determined to be total and permanent by a physician selected by the Company or
its insurers and acceptable to the Executive or the Executive's legal
representative (such agreement to acceptability not to be withheld
unreasonably).
(b) Cause. The Company may terminate the Executive's employment for
Cause. For purposes of this Agreement "Cause" means (i) an act or acts of
dishonesty taken by the Executive and intended to result in substantial
personal enrichment of the Executive at the expense of the Company or any of
its consolidated subsidiaries; (ii) repeated violations by the Executive of the
Executive's obligations to the Company or any of its consolidated subsidiaries
under Section 3 of this Agreement which are demonstrably willful and deliberate
on the Executive's part and which are not remedied after the receipt of notice
from the Company or any of its consolidated subsidiaries; or (iii) the
conviction of the Executive of a felony.
(c) Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason"
means:
(i) the assignment to the Executive of (A) any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section 3
of the Agreement or as in effect immediately preceding a Change in
Control (as hereinafter defined); or (B) any other action by the
Company which results in a diminution in such position, authority,
duties or responsibilities, other
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than an insubstantial and inadvertent action which is remedied by
the Company promptly after receipt of notice thereof given by the
Executive;
(ii) any failure by the Company to comply with any of the
provisions of this Agreement, other than an insubstantial and
inadvertent failure which is remedied by the Company promptly
after receipt of notice by the Executive;
(iii) the Company's requiring the Executive to be based at
any office or location other than as described in Section 3(a)(ii)
hereof, except for travel reasonably required in the performance
of the Executive's responsibilities;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as permitted by this
Agreement; or
(v) any failure by the Company to comply with and satisfy
Section 10(c) of this Agreement.
(d) Termination of Employment Following a Change in Control. If a Change
in Control (as hereinafter defined) shall occur while the Executive is employed
by the Company, and the Executive's employment with the Company, whether
pursuant to this Agreement or otherwise, is terminated on or within three (3)
years after such a Change in Control (unless such termination is (i) because of
the death or retirement of the Executive, (ii) by the Company for Cause or
Disability, or (iii) by the Executive other than for Good Reason), then the
Executive shall be entitled to the
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benefits provided in Section 6(e) herein. In the event that the Company gives
the Executive notice pursuant to Section 2 of this Agreement that the extended
period of the Executive's Employment Period under this Agreement will not be
extended, and the Agreement shall terminate, but the Executive shall continue
to be employed by the Company, the provisions of Section 6(e) shall survive the
termination of this Agreement and shall continue to be applicable for so long
as the Executive is employed by the Company. If the Company gives such
contract termination notice and, on or within three (3) years after a Change of
Control, the Executive's employment with the Company is terminated (unless such
termination is (i) because of the death or retirement of the Executive, (ii) by
the Company for Cause or Disability, or (iii) by the Executive other than for
Good Reason), the Executive shall be entitled to the benefits provided in
Section 6(e) herein, provided that the Executive was employed by the Company at
the time of such Change of Control. For purposes of this Agreement, a "Change
in Control" shall be deemed to have occurred if (i) there is an acquisition by
an unrelated party of 50% or more of the voting securities of the Company or of
any company or other business entity which directly or indirectly controls the
Company; or (ii) there is a merger or consolidation of the Company with or into
another entity whereby Metromedia Company is no longer directly or indirectly
the controlling shareholder of the Company; or (iii) a plan of complete
liquidation of the Company is instituted or there is an agreement for the sale
or disposition by the Company of all or substantially all of its assets or
stock; or (iv) there is an equity holder with an interest in the Company or in
any company or other business entity which directly or indirectly controls the
Company in excess of
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20% (or a company or other business entity with whom the Company has had
discussions and as a direct result thereof such company or other business
entity expresses an intent to take such an interest) and such holder, or
company or other business entity, as the case may be, (A) recommends the
termination of the Executive without Cause and as a direct result thereof the
Company terminates the Executive's employment without Cause or (B) recommends
any action which would constitute or result in Good Reason and as a direct
result thereof the Company takes an action which constitutes or results in Good
Reason and the Executive terminates his employment for Good Reason; or (v) a
company or other business entity has discussions with the Company and expresses
an intent to take an interest in excess of 20% in the Company or in any company
or other business entity which directly or indirectly controls the Company and,
before such discussions are terminated and as a direct result of such
discussions, (A) the Company recommends to such company or other business
entity that the Company (x) terminate the Executive's employment without
Cause or (y) take an action which constitutes or results in Good Reason, (B)
such company or other business entity agrees with the Company's recommendation
and (C) the Company terminates the Executive's employment without Cause or
takes an action which constitutes or results in Good Reason and the Executive
terminates his employment for Good Reason.
(e) Notice of Termination. Any termination by the Company for Cause or by
the Executive for Good Reason before or following a Change in Control shall be
communicated by Notice of Termination to the other party hereto in accordance
with Section 11(c) of this Agreement. For purposes of this Agreement, a
"Notice of
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Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated, and
(iii) if the termination date is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more than fifteen (15)
days after the giving of such notice).
(f) Date of Termination. "Date of Termination" means the date of receipt
of the Notice of Termination or any later date specified therein, as the case
may be. If the Executive's employment is terminated by the Company other than
for Cause or Disability, the Date of Termination shall be the date on which the
Company notifies the Executive of such termination. If the Company gives the
Executive notice pursuant to Section 2 of this Agreement that the Executive's
employment under this Agreement will not be extended, and the Executive's
employment with the Company does not continue beyond the date on which the
extended period of employment under this Agreement ends, the Date of
Termination shall be the date on which the extended period of employment under
this Agreement ends. If the Company gives the Executive notice pursuant to
Section 2 of this Agreement that the Executive's employment under this
Agreement will not be extended, and the Executive's employment with the Company
continues beyond the date on which the extended period of employment under this
Agreement ends, the Date of Termination shall be the date in which such
continued employment ends.
6. Obligations of the Company Upon Termination.
(a) Death. If the Executive's employment is terminated by reason of
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<PAGE> 11
the Executive's death, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this Agreement,
other than those obligations accrued or earned by the Executive hereunder at
the date of the Executive's death. Anything in this Agreement to the contrary
notwithstanding, the Executive's family shall be entitled to receive benefits
at least equal to the most favorable benefits provided by the Company to
surviving families of its executives under such plans, programs and policies
relating to family death benefits, if any, as in effect at any time during the
ninety (90) day period immediately preceding the Effective Date or, if more
favorable to the Executive and/or the Executive's family, as in effect on the
date of the Executive's death with respect to other key executives and their
families.
(b) Disability. If the Executive's employment is terminated by reason of
the Executive's Disability, this Agreement shall terminate without further
obligations to the Executive, other than those obligations accrued or earned by
the Executive hereunder as of the Disability Effective Date. Anything in this
Agreement to the contrary notwithstanding, the Executive shall be entitled
after the Disability Effective Date to receive disability and other benefits at
least equal to the most favorable of those provided by the Company to disabled
employees and/or their families in accordance with such plans, programs and
policies relating to disability, if any, as in effect at any time during the
ninety (90) day period immediately preceding the Effective Date or, if more
favorable to the Executive and/or the Executive's family, as in effect at any
time thereafter with respect to other key executives and their families.
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(c) Cause. If the Executive's employment shall be terminated for Cause,
the Company shall pay the Executive his full Base Salary through the Date of
Termination at the rate in effect at the time the Notice of Termination is
given, and shall have no further obligations to the Executive under this
Agreement.
(d) Good Reason; Other Than for Cause or Disability. If, during the
Employment Period, the Company shall terminate the Executive's employment other
than for Cause or Disability, or the employment of the Executive shall be
terminated by the Executive for Good Reason:
(i) the Company shall, unless otherwise provided herein, pay to the
Executive in a lump sum in cash within thirty (30) days after the Date of
Termination the aggregate of the following amounts:
(A) to the extent not theretofore paid, the Executive's
Base Salary through the Date of Termination at the rate
in effect on the Date of Termination; and any bonus
payments earned during the last full fiscal year ending
during the Employment Period which are not payable
until after the Date of Termination, which shall be
paid to the Executive after the Date of Termination
promptly and in accordance with the Company's bonus
plans.
(B) an amount equal to the product of
(i) the amount of any cash bonus paid (or deferred)
pursuant to the Company's Management Profit Sharing
Plan for Executive Personnel plus the amount of any
other cash
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bonus paid to the Executive for the last full fiscal
year ending during the Employment Period (or, if
applicable, the last full fiscal year of the Company
ending immediately prior to the Employment Period) and
(ii) a fraction, the numerator of which is the
Executive's number of days of employment in the fiscal
year ending on the Termination Date and the denominator
is 365;
(C) an amount equal to the Executive's Base Salary at the
rate in effect on the Date of Termination;
(D) in the case of compensation previously deferred by the
Executive, all amounts previously deferred and not yet
paid by the Company; and
(E) any amount due the Executive under any other
separation or severance pay plan of the Company; and
(ii) for the remainder of the Employment Period, the Company shall
continue benefits to the Executive and/or the Executive's family at least equal
to those which would have been provided to them in accordance with the plans,
programs and policies described in Section 4(c) of this Agreement if the
Executive's employment had not been terminated, other than salary continuation,
if and as in effect at the Company at any time during the ninety (90) day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect at any time thereafter with respect to other key
executives and their families.
(e) Change in Control. If a Change in Control shall occur while the
Executive
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is employed by the Company, and the Executive's employment with the Company,
whether pursuant to this Agreement or otherwise, is terminated on or within
three (3) years after such a Change in Control (unless such termination is (i)
because of the death or retirement of the Executive, (ii) by the Company for
Cause or Disability, or (iii) by the Executive other than for Good Reason):
(i) The Company shall pay to the Executive the following
amounts on the Date of Termination, except as otherwise specified
below, and provide to the Executive the following benefits:
(A) to the extent not theretofore
paid, the Executive's Base Salary through and
including the Date of Termination at the rate in
effect on the Date of Termination; and any bonus
payments earned during the last full fiscal year
ending during the Employment Period which are not
payable until after the Date of Termination, which
shall be paid to the Executive after the Date of
Termination promptly and in accordance with the
Company's bonus plans.
(B) an amount equal to the product of
(i) the amount of any cash bonus paid (or deferred)
pursuant to the Company's Management Profit Sharing
Plan for Executive Personnel plus the amount of any
other cash bonus paid to the Executive for the last
full fiscal year ending during the Employment Period
and (ii) a fraction,
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the numerator of which is the Executive's number of
days of employment in the fiscal year ending on the
Date of Termination and the denominator is 365;
(C) an amount equal to three times
the Executive's current Base Salary, plus three times
the average amount paid to the Executive over the
prior three (3) years in connection with the Company's
Management Profit Sharing Plan for Executive
Personnel. The aforementioned amounts shall be
payable as follows: one-third payable on the Date of
Termination, one-third payable on the first
anniversary of the Date of Termination and one-third
payable on the second anniversary of the Date of
Termination;
(D) in the case of compensation
previously deferred by the Executive, all amounts
previously deferred and not yet paid by the Company;
(E) For one year following the Date
of Termination, the Executive and/or the Executive's
family, as the case may be, shall be eligible for
participation in and shall receive at no increase in
the rate or amount of contribution by the Executive
and/or his family (other than an increase resulting
from a change to the welfare benefit plan(s) of the
Company in which the Executive is
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a participant) all benefits under each welfare benefit
plan of the Company, including, without limitation, all
medical, prescription, dental, disability, salary
continuance, executive life, group life, accidental
death and travel accident insurance plans and programs
of the Company as in effect on the Date of Termination;
and
(F) for the shorter of one year or
the remainder of the term of the lease relating to the
Executive's automobile, payments with respect to the
Executive's automobile. At such time, the Executive
will have the right to purchase such vehicle for the
residual value of the lease in accordance with the
terms and provisions of such lease agreement.
The provisions of this Section 6(e) shall be applicable on or after a
Change of Control has occurred but not prior thereto.
7. Non-Exclusivity of Rights; Non-Mitigation. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in
any benefit, bonus, incentive or other plan or program provided by the Company
and for which the Executive may qualify. Amounts which are vested benefits or
which the Executive is otherwise entitled to receive under any plan or program
of the Company, at or subsequent to the Date of Termination, shall be payable
in accordance with such plan or program. The Executive shall not be required
to mitigate the amount of any payments made to the Executive under this
Agreement
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by seeking other employment or otherwise.
8. Certain Reduction of Payments by the Company. Anything in this
Agreement to the contrary notwithstanding, in the event it shall be determined
that any payment or distribution by the Company to or for the benefit of the
Executive, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise (a "Payment") would be subject to the
excise tax ("Excise Tax") imposed by section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), then the aggregate present value of amounts
payable or distributable to or for the benefit of the Executive pursuant to
this Agreement (such payments or distributions pursuant to this Agreement are
hereinafter referred to as "Agreement Payments") shall be reduced (but not
below zero) if such reduction would result in the Executive retaining a larger
amount, after-taxes, including the Excise Tax, than if the Executive received
all of the Agreement Payments, and the aggregate present value of the Payments
other than Agreement Payments ("Other Payments") shall also be reduced (but not
below zero) if such reduction would result in the Executive retaining a larger
amount after taxes, including the Excise Tax, than if the Executive received
all of the Other Payments.
All determinations required to be made under this Section 8 shall be made
by the Company's independent auditors (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the Executive
within fifteen (15) business days of the Date of Termination of employment of
the Executive or such earlier time as is requested by the Company. Any such
determination by the Accounting Firm shall be binding upon the Company and the
Executive. The
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Executive shall determine which and how much of the Agreement Payments or Other
Payments, as the case may be, shall be eliminated or reduced consistent with
the requirements of this Section 8, provided that, if the Executive does not
make such determination within ten (10) business days of the receipt of the
calculations made by the Accounting Firm, the Company shall elect which and how
much of the Agreement Payment or Other Payments, as the case may be, shall be
eliminated or reduced consistent with the requirements of this Section 8 and
shall notify the Executive promptly of such election. Within five (5) business
days after the determination by the Executive or the Company, as applicable,
the Company shall pay to or distribute to or for the benefit of the Executive
such amounts as are then due to the Executive under this Agreement and shall
promptly pay to or distribute for the benefit of the Executive in the future
such amounts, if any, as become due to the Executive under this Agreement.
As a result of the uncertainty in the application of section 280G of the
Code at the time of the initial determination by the Accounting Firm hereunder,
it is possible that Agreement Payments or Other Payments, as the case may be,
will have been made by the Company which should not have been made (an
"Overpayment") or that additional Agreement Payments or Other Payments, as the
case may be, which will have not been made by the Company could have been made
(an "Underpayment"), in each case, consistent with the calculations required to
be made hereunder. In the event that the Accounting Firm determines that an
Overpayment has been made, any such Overpayment shall be treated for all
purposes as a loan to the Executive which the Executive shall repay to the
Company
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together with interest at the applicable federal rate provided for in section
1274(c) of the Code (the "Applicable Federal Rate"); provided, however, that no
amount shall be payable by the Executive to the Company (or if paid by the
Executive to the Company shall be returned to the Executive) if and to the
extent such payment would not reduce the amount which is subject to taxation
under section 4999 of the Code. In the event that the Accounting Firm
determines that an Underpayment has occurred, any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive together
with interest at the Applicable Federal Rate; provided, however, that no amount
shall be payable by the Executive to the Company (or if paid by the Executive
to the Company shall be returned to the Executive) if and to the extent such
payment would not reduce the amount which is subject to taxation under section
4999 of the Code.
9. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company and its respective business which
shall have been obtained by the Executive during the Executive's employment by
the Company and which shall not be public knowledge (other than by acts by the
Executive or his representatives in violation of this Agreement). After
termination of the Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company, communicate or divulge
any such information, knowledge or data to anyone other than the Company and
those designated by it.
10. Successors.
(a) This Agreement is personal to the Executive and without the prior
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written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive and the
Executive' s legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors.
(c) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
As used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law or otherwise.
11. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect.
(b) This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors
and legal representatives.
(c) All notices and other communications hereunder shall be in writing
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<PAGE> 21
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
Arthur S. Caruso
1953 Chatsworth Way
Tallahassee, FL 32308
If to the Company:
Precision Engine Products Corp.
92 Deerfield Road
Windsor, Connecticut 06095
Attention: William Gurley
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(d) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(e) The Company may withhold from any amounts payable under this Agreement
such federal, state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation.
(f) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a waiver of such
provision or any other provision thereof.
(g) This Agreement contains the entire understanding of the Company and
the Executive with respect to the subject matter hereof.
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(h) If the Executive or his legal representative institutes a law suit or
legal proceeding to enforce, or obtain damages for the breach of, any of the
Executive's or such legal representative's rights under this Agreement and
obtains a judgment in his or its favor, then the Company shall pay, in addition
to all amounts payable under such judgment, the reasonable attorneys' fees
incurred by the Executive or his legal representative in such law suit or other
legal proceeding.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused this
Agreement to be executed in its name on its behalf, all as of the day and year
first above written.
EXECUTIVE
/s/Arthur S. Caruso
__________________________
Arthur S. Caruso
PRECISION ENGINE PRODUCTS CORP.
By: /s/ Stuart Subotnick
Stuart Subotnick
Director
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<PAGE> 1
Exhibit 10.5
STANADYNE AUTOMOTIVE CORP.
--------------------------
PENSION PLAN
------------
Effective December 31, 1994
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<TABLE>
<S> <C>
ARTICLE I
DEFINITIONS.....................................................6
ARTICLE II
SERVICE AND PARTICIPATION.......................................16
ARTICLE III
NORMAL RETIREMENT DATE AND NORMAL RETIREMENT INCOME.........24
ARTICLE IV
EARLY RETIREMENT DATE AND EARLY RETIREMENT INCOME...........30
ARTICLE V
POSTPONED RETIREMENT DATE AND POSTPONED RETIREMENT INCOME...31
ARTICLE VI
TERMINATION OF EMPLOYMENT...................................33
ARTICLE VII
DEATH AND DISABILITY BENEFITS...............................35
ARTICLE VIII
PAYMENT OF RETIREMENT BENEFITS..............................36
ARTICLE IX
RETIREMENT PLAN COMMITTEE...................................43
ARTICLE X
FUNDING AND CONTRIBUTIONS...................................49
ARTICLE XI
FIDUCIARY RESPONSIBILITIES..................................51
ARTICLE XII
AMENDMENT AND TERMINATION...................................53
ARTICLE XIII
GENERAL PROVISIONS..........................................58
ARTICLE XIV
TOP-HEAVY PLAN REQUIREMENTS.................................64
</TABLE>
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<TABLE>
<S> <C>
ARTICLE XV
DIRECT ROLLOVERS............................................73
APPENDIX A
SPECIFIC PROVISIONS FOR PARTICIPANTS
ON THE HARTFORD HOURLY PAYROLL..............................74
APPENDIX B
SPECIFIC PROVISIONS FOR PARTICIPANTS
ON THE JACKSONVILLE HOURLY PAYROLL..........................83
APPENDIX C
SPECIFIC PROVISIONS FOR PARTICIPANTS
ON THE WASHINGTON FACTORY HOURLY PAYROLL....................92
APPENDIX D
SPECIFIC PROVISIONS FOR
STANADYNE SALARIED EMPLOYEES................................101
APPENDIX E
STANADYNE AUTOMOTIVE CORP.
HOURLY PENSION PLAN
CONTINGENT ANNUITANT OPTION REDUCTION FACTORS
NORMAL FORM LIFE ANNUITY....................................120
APPENDIX D-1
STANADYNE AUTOMOTIVE CORP.
PENSION PLAN
CONTINGENT ANNUITANT OPTION REDUCTION FACTORS
NORMAL FORM LIFE ANNUITY....................................121
APPENDIX D-2
STANADYNE AUTOMOTIVE CORP.
PENSION PLAN
UNITS COVERED BY THE PLAN AS REFERRED TO IN PARAGRAPH 1.20..122
</TABLE>
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PREAMBLE
--------
Effective February 10, 1989, Stanadyne Automotive Corp. (the "Company")
established a new retirement plan referred to as the Stanadyne Automotive Corp.
Hartford Hourly Pension Plan to provide Eligible Employees with periodic income
after retirement in addition to benefits under the Social Security Act.
Effective December 31, 1990, two other defined benefit retirement plans
maintained by the Company, the Stanadyne Automotive Corp. Washington Hourly
Pension Plan and the Stanadyne Automotive Corp. Jacksonville Hourly Pension
Plan were merged in their entirety into the Stanadyne Automotive Corp. Hartford
Hourly Pension Plan.
Effective January 1, 1993, the Stanadyne Automotive Corp. Hartford Hourly
Pension Plan was restated in its entirety and renamed the Stanadyne Automotive
Corp. Hourly Pension Plan (the "Plan"). The Northern Trust Company Master
Trust (the "Trust") had previously been adopted by the Company and formed a
part of the Plan.
Effective December 31, 1994, the Stanadyne Automotive Corp. Hourly Pension
Plan was merged with the Stanadyne Automotive Corp. Salaried Pension Plan, as
embodied herein and named the Stanadyne Automotive Corp. Pension Plan (the
"Plan").
It is intended that the Plan, as embodied herein, will meet the
requirements for qualification under Section 401(a) of the Internal Revenue
Code of 1986 (the "Code") as amended from time to time, that the Plan will be
construed in such a manner as to effect this intention and that the Trust will
be exempt from taxation as provided under Section 501(a) of the Code. As
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such, the Plan reflects the necessary provisions of the Tax Reform Act of 1986,
other pertinent statutes and pertinent governmental regulations.
The provisions of this restated Plan shall apply only to an Eligible
Employee who terminates employment with the Company on or after December 31,
1994. Except as otherwise specifically and expressly provided herein, a former
Employee's eligibility for and amount of benefits, if any, payable to or on
behalf of such former Employee, shall be determined in accordance with the
provisions of the Plan covering such Employee as in effect on his termination
date. The benefit payable to or on behalf of a Participant included under the
Plan in accordance with the following provisions shall not be affected by the
terms of any amendment to the Plan adopted after such Participant's employment
terminates, unless the amendment expressly provides otherwise.
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ARTICLE I
DEFINITIONS
-----------
I.1 "Accrued Benefit" shall mean the amount of monthly retirement income
payable as a life annuity beginning on the Participant's Normal Retirement
Date, or if applicable, his Postponed Retirement Date as determined in
accordance with the formula in Article III as of the date of calculation.
I.2 "Actuarial Equivalent" shall mean a benefit of equivalent value to another
benefit. For purposes of converting a life annuity to any of the
Contingent Annuitant payment forms described in Paragraphs 8.1(b)(i) and
8.3, the tables included as Appendix E to the Plan shall be used. For lump
sum payments made pursuant to Paragraph 13.6, the assumptions used to
determine an Actuarial Equivalent shall be the applicable interest rate,
either immediate or deferred that would be used by the Pension Benefit
Guaranty Corporation in effect on the first day of the Plan Year to
determine the present value of benefits under a terminating plan and the
mortality table shall be the 1971 Group Annuity Mortality Table for males.
Except as explicitly noted otherwise, for purposes of determining all other
Actuarial Equivalents under the Plan, the interest rate shall be 8% and the
mortality table shall be the 1971 Group Annuity Mortality Table for males.
I.3 "Actuary" shall mean an individual Actuary or firm of Actuaries selected
from time to time by the Committee which meets the standards and
qualifications established by the Joint Board for the Enrollment of
Actuaries.
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I.4 "Affiliate" shall mean any corporation which is a member of a controlled
group of corporations (as defined in Section 414(b) of the Code) which
includes the Company; any trade or business (whether or not incorporated)
which is under common control (as defined in Section 414(c) of the Code)
with the Company; any organization (whether or not incorporated) which is a
member of an affiliated service group (as defined in Section 414(m) of the
Code) which includes the Company; and any other entity required to be
aggregated with the Company pursuant to regulations under Section 414(o) of
the Code.
I.5 "Annuity Starting Date" shall mean:
(a) the first day of the first period for which a benefit is
payable to the Participant under the Plan as an annuity, (or to the
Spouse in the case of death before Plan benefits commence), or
(b) in the case of a benefit not payable in the form of an annuity,
the first day on which all events have occurred which entitle the
Participant (or Spouse) to such benefit.
For purposes of Section 402(f) of the Code and Section 411(a)(11) of the
Code, with respect to a benefit not payable in the form of an annuity, the
Annuity Starting Date is the date on which a benefit is distributed.
I.6 "Authorized Leave of Absence" shall mean any absence authorized by the
Company under the Company's standard personnel practices, provided that
all persons under similar circumstances are treated alike in the granting
of such Authorized Leaves of Absence, and provided further that the
Participant returns or retires within the period specified in the
Authorized Leave of Absence. An absence due to service in the Armed
Forces of the
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United States shall be considered an Authorized Leave of Absence provided
that the Employee complies with all of the requirements of federal law in
order to be entitled to reemployment and provided further that the
Employee returns to employment with the Company within the period provided
by such law. In addition, the phrase "Authorized Leave of Absence" shall
mean any period of leave under the Family and Medical Leave Act of 1993.
I.7 "Beneficiary" shall mean the Employee's Spouse.
I.8 "Board" shall mean the Board of Directors of Stanadyne Automotive Corp.
I.9 "Break in Service" shall mean a calendar year in which an Employee has
fewer than 501 Hours of Service.
I.10 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
I.11 "Committee" shall mean the persons appointed pursuant to Article X to
administer the Plan.
I.12 "Company" shall mean the Stanadyne Automotive Corp., a corporation
organized and existing under the laws of the state of
Delaware, or its successor or successors.
I.13 "Contingent Annuitant" shall mean the Employee's Spouse.
I.14 "Credited Service" shall mean the Participant's period of employment
considered in accordance with Paragraph 2.4 in the determination of the
amount of benefits payable to or on behalf of the Participant.
I.15 "Direct Rollover" means a payment by the Plan to the Eligible Retirement
Plan specified by the Distributee.
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I.16 "Disability" shall mean a condition defined in the Appendices as applicable
to the group of Employees to which the individual belongs on the date such
Disability is incurred.
I.17 "Distributee" means an Employee or former Employee. In addition, the
Employee's or former Employee's surviving Spouse and the Employee's or
former Employee's Spouse or former Spouse who is the alternate payee under
a qualified domestic relations order as defined in Section 414(p) of the
Code are Distributees with respect to the interest of a Spouse or former
Spouse.
I.18 "Early Retirement Date" shall mean the date on which a Participant becomes
eligible to retire with an early retirement benefit under the Plan, as
determined in accordance with Article IV.
I.19 "Eligible Employee" shall mean any person who is (a) receiving remuneration
for personal services rendered to the Company (or would be receiving
remuneration except for an Authorized Leave of Absence), (b) is included in
(i) the payroll commonly referred to as the Factory Hourly Payroll, (ii)
the payroll commonly referred to as the Jacksonville Hourly Payroll, (iii)
the payroll commonly referred to as the Washington Factory Hourly Payroll,
or (iv) as defined in Section D.1 of Appendix D, and (c) is not a leased
employee as described in Section 414(n)(2) of the Code.
I.20 "Eligible Retirement Plan" shall mean an individual retirement account
described in Section 408(a) of the Code, an individual retirement annuity
described in Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or a plan described in Section 401(a) of the
Code that accepts the Distributee's Eligible Rollover Distribution.
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However, in the case of an Eligible Rollover Distribution to a surviving
Spouse, an Eligible Retirement Plan is an individual retirement account or
individual retirement annuity.
I.21 "Eligible Rollover Distribution" means any distribution of all or any
portion of the balance to the credit of the Distributee,
except that an Eligible Rollover Distribution does not include any
distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life
(or life expectancy) of the Distributee and the
Distributee's designated Beneficiary, or for a specified period of ten
years or more, any distribution to the extent such
distribution is required under Section 401(a)(9) of the Code, and the
portion of any distribution that is not includible in
gross income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
I.22 "Employee" shall mean a common-law Employee of the Company or an
Affiliate. A leased employee shall only be considered an
Employee to the extent required under Paragraph 13.8.
I.23 "Fiduciary" shall mean any person who exercises any discretionary
authority or discretionary control respecting the management
of the Plan, assets held under the Plan, or disposition of Plan assets;
who renders investment advice for a fee or other
compensation, direct or indirect, with respect to assets held under the
Plan or has any authority or responsibility to do so;
or who has any discretionary authority or discretionary responsibility
in the administration of the Plan. Any person who
exercises authority or has
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responsibility of a fiduciary nature as described above shall be
considered a Fiduciary under the Plan.
I.24 "Fund" or "Trust Fund" shall mean the cash and other investments, and
income attributable thereto, held and administered by
the Trustee in accordance with the Trust.
I.25 "Hour of Service" shall mean:
(a) Each hour for which an Employee is directly or indirectly paid
or entitled to payment by the Company or by an Affiliate for the
performance of duties, including periods of vacation and holidays;
(b) Each hour for which an Employee is directly or indirectly paid
or entitled to payment by the Company or an Affiliate (including
payments made or due from a trust fund or insurer to which the
Company or Affiliate contributes or pays premiums) on account of a
period of time during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to illness,
incapacity, Disability, layoff, jury duty, military duty, or leave of
absence, provided that:
(i) No more than 501 Hours of Service shall be credited
under this paragraph (b) to an Employee on account of any single
continuous period during which the Employee performs no duties;
and
(ii) Hours of Service shall not be credited under this
paragraph (b) to an Employee for a payment which solely
reimburses the Employee for medically related expenses incurred
by the Employee or which is made or
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<PAGE> 13
due under a plan maintained solely for the purpose of complying
with applicable workers' compensation, unemployment
compensation or Disability insurance laws;
(c) Each hour not already included under (a) or (b) above for which
back pay, irrespective of mitigation of damages, is either awarded or
agreed to by the Company or an Affiliate, provided that crediting of
Hours of Service under this subparagraph (c) with respect to periods
described in (b) above shall be subject to the limitations therein
set forth; and
(d) Each hour for which an Employee is absent on account of
illness, incapacity, Disability, jury duty, military duty, leave of
absence, or layoff (for a period of up to six months) and is not
directly or indirectly paid or entitled to payment by the Company or
by an Affiliate; provided that the Employee returns to work
immediately upon the expiration of such period of absence or, in the
case of military duty, within 90 days after the date on which he is
first entitled to be released from active duty, or if later, within
the time prescribed by law for the protection of employment or
pension rights.
(e) An Employee shall be credited with up to 501 Hours of Service
for each single continuous period in which no duties are performed on
account of a period described in subparagraphs (a), (b), (c), or (d)
above. The number of Hours of Service to be credited under
subparagraphs (a), (b), (c), or (d) above on account of a period
during which an Employee performs no duties, and the computation
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<PAGE> 14
periods to which Hours of Service shall be credited under Paragraph
(a), (b), (c), or (d) above, shall be determined by the Committee in
accordance with Section 2530.200b-2(b) and (c) of the Regulations of
the U.S. Department of Labor. No duplicate Hours of Service shall be
credited for any single period.
An Employee who is absent from work due to a "maternity or paternity
leave" which commenced on or after January 1, 1985 shall be credited
with 501 Hours of Service during the first Plan Year in which he
would have otherwise worked less than 501 Hours of Service because of
such leave. For purposes of this Plan, an absence from work due to
"maternity or paternity leave" means an absence (i) by reason of the
pregnancy of the individual, (ii) by reason of a birth of a child of
the individual, (iii) by reason of the placement of a child with the
individual in connection with the adoption of such child by such
individual, or (iv) for purposes of caring for such child for a
period beginning immediately following such birth or placement.
I.26 "Normal Retirement Age" shall mean the day a Participant attains age 65
for an individual who was a member of either the Stanadyne Inc. Diesel
Systems Division Hartford Hourly Employees' Pension Plan or the Stanadyne,
Inc. Salaried Pension Plan as it existed on February 9, 1989, on December
31, 1987. For each other Participant, Normal Retirement Age shall mean
the later of the Participant's 65th birthday or the fifth anniversary of
the
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<PAGE> 15
date he became a Participant in the Plan, the Prior Hourly Plan, the Prior
Salaried Plan, the Prior Washington Plan or the Prior Jacksonville Plan.
I.27 "Normal Retirement Date" shall mean the date on which a Participant
becomes eligible to retire with a normal retirement
benefit under the Plan, as determined in accordance with Paragraph 3.1..
I.28 "Participant" shall mean an Eligible Employee who meets the eligibility
requirements set forth in Paragraph 2.1 for participation in the Plan.
I.29 "Plan" shall mean the Stanadyne Automotive Corp. Pension Plan as set
forth in this document and as it may be amended from time to time.
I.30 "Plan Year" shall mean each 12-month period thereafter beginning on
January 1 and ending on the following December 31.
I.31 "Postponed Retirement Date" shall mean the date after his Normal
Retirement Date on which a Participant retires with a
postponed retirement benefit under the Plan, as determined in accordance
with Article V.
I.32 "Prior Employer" shall mean Stanadyne, Inc.
I.33 "Prior Hartford Plan" shall mean the Stanadyne Automotive Corp. Hartford
Hourly Pension as in effect on December 31, 1990.
I.34 "Prior Hourly Plan" shall mean the Stanadyne Automotive Corp. Hourly
Pension Plan as in effect on December 30, 1994.
I.35 "Prior Jacksonville Plan" shall mean the Stanadyne Automotive Corp.
Jacksonville Hourly Pension Plan as in effect on December
31, 1990.
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I.36 "Prior Salaried Plan" shall mean the Stanadyne Automotive Corp. Salaried
Pension Plan as in effect on December 30, 1994.
I.37 "Prior Washington Plan" shall mean the Stanadyne Automotive Corp.
Washington Hourly Pension Plan as in effect on December 31, 1991.
I.38 "Spouse" shall mean the legal Spouse of a Participant to whom he is
married on his Annuity Starting Date. However, if the Participant should
die prior to the Annuity Starting Date, then Spouse shall mean the husband
or wife to whom the Participant has been married throughout the one-year
period preceding the date of his death. Whether a Spouse is a legal
Spouse shall be determined under the laws of the jurisdiction in which the
Participant was domiciled at the time the putative marriage was entered
into.
I.39 "Trust" shall mean the Trust created under the Northern Trust Company
Master Trust Agreement.
I.40 "Trustee" shall mean the Northern Trust Company and any successor
Trustee(s) duly appointed by the Board.
I.41 "Years of Credited Service" shall mean those years counted as Credited
Service pursuant to Paragraph 2.4.
I.42 "Years of Service" shall mean the period of an Employee's employment
described in Paragraph 2.3 for purposes of determining vesting in Plan
benefits and eligibility for Early or Disability Retirement. However,
with respect to Participants covered by Appendix B, (individuals on the
Jacksonville Hourly Payroll), Years of Service shall not include any
employment periods prior to January 1, 1977. With respect to Participants
covered by
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Appendix C (individuals on the Washington Hourly Payroll), Years of
Service shall not include any employment periods prior to January 1, 1979.
The masculine pronouns wherever used shall also include the feminine
pronouns and the singular shall include the plural.
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ARTICLE II
SERVICE AND PARTICIPATION
--------------------------
II.1 Eligibility Requirements.
------------------------------
(a) Each Eligible Employee on December 31, 1994 who was a
participant under the Prior Hourly Pension Plan or the Prior Salaried
Pension Plan on December 30, 1994 shall be a Participant of the Plan
on December 31, 1994.
(b) Each other Employee shall become a Participant in the Plan on
the earlier of the following dates, providing he is then an Eligible
Employee:
(i) the date his employment commences in a work pattern
expected to result in at least 1,000 Hours of Service in a
12-month period, and
(ii) the date as of which he has completed 1,000 Hours of
Service in one of the following 12-month periods:
(A) the 12 months following his date of
employment with the Company or an Affiliate, or
(B) any calendar year after his date of
employment.
(c) An individual who becomes an Eligible Employee after having
completed the requirements under subparagraph (b) shall become a
Participant on the date he first meets the requirements to be an
Eligible Employee.
(d) Leased employees as described in Paragraph 13.8 shall not be
eligible to participate in the Plan.
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II.2 Notification of Employees. Each Eligible Employee who meets the
requirements for participation in the Plan will be notified by the Company
of the provisions of the Plan and of his right to participate.
II.3 Years of Service. Years of Service shall determine a Participant's
eligibility for retirement benefits under the Plan, except that upon
reaching his Normal Retirement Age, he shall automatically be fully vested
in his Accrued Benefit irrespective of his Years of Service. Subject to
the Break in Service rules under Paragraphs 2.3(e) and (f) and the
transfer provisions of Paragraph 2.6, Years of Service shall be
accumulated as follows:
(a) on January 1, 1991, an Employee shall be credited hereunder
with the Years of Service which had been credited to such individual
under the provisions of the Prior Hourly Plan or the Prior Salaried
Plan, as applicable on December 30, 1994. Except as provided in
Paragraph 1.42, the Prior Hartford Plan, Prior Jacksonville Plan and
the Prior Washington Plan provided that all service rendered to the
Prior Employer shall count in the determination of Years of Service
hereunder for an individual who became an Employee on February 10,
1989. In no event shall an Employee receive duplicate service credit
for any period of employment;
(b) for periods not already counted in (a) above, one Year of
Service shall be credited to an Employee for any calendar year in
which he has 1,000 or more Hours of Service;
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(c) for periods not already counted in (a) or (b) above, a
fractional Year of Service calculated to the nearest 1/12th shall be
credited to an Employee for each calendar year in which he has less
than 1,000 Hours of Service;
(d) the determination of Years and fractional Years of Service
shall include:
(i) the first six months of a period of absence due to
sick leave, and
(ii) a period of Authorized Leave of Absence provided that
the Employee returns to employment within the period of
Authorized Leave of Absence, and
(iii) with respect to Participants covered under Appendix
A only (Hartford Hourly Payroll) the first six months of a
Disability period and thereafter, the portion of such continuing
Disability period which does not exceed the Participant's Years
of Service on the date the Disability began.
(e) if an Employee incurs a number of consecutive Breaks in Service
which exceeds the greater of five (5) or the number of his Years of
Service before such Breaks in Service, he shall lose his previously
accumulated Years of Service unless, prior to his initial Break in
Service, he was vested in retirement benefits under a defined benefit
plan maintained by the Prior Employer or under this Plan in
accordance with Paragraph 6.2.
Prior Years of Service shall only be restored under this Paragraph 2.3(e)
after the Employee has completed 1,000 Hours of Service in a 12-month period
following his Break in Service;
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<PAGE> 21
(f) if an individual:
(i) was employed by the Prior Employer,
(ii) terminated that employment before February 10, 1989,
and
(iii) becomes an Employee of Stanadyne Automotive Corp. after February
10, 1989, then upon employment with the Company or an Affiliate,
his prior Years of Service shall be determined under
subparagraph (a) above, subject to subparagraph (c), as follows:
(A) To determine whether or not prior Years
of Service shall be restored, the individual's Break in
Service period shall be measured from the calendar year in
which he terminated employment with the Prior Employer.
(B) If the individual completed more than 500
Hours of Service with the Prior Employer in the calendar
year of termination, the Break in Service period shall be
measured from the first calendar year after termination of
employment with the Prior Employer in which the individual
completes less than 501 Hours of Service. For purposes of
this paragraph, Hours of Service shall be deemed to
include such hours as performed by the individual for the
Prior Employer.
Prior Years of Service shall only be restored under this
Paragraph 2.3(f) after the Employee has completed 1,000 Hours of
Service in a 12-month period following his Break in Service.
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<PAGE> 22
II.4 Years of Credited Service:
(a) Years of Credited Service are determined in accordance with the
Appendix that covers the Employee group to which the individual
belongs.
(b) if an Employee incurs a number of consecutive Breaks in Service
which exceeds the greater of five (5) or the number of his Years of
Service before such Breaks in Service, he shall lose his previously
accumulated Years of Credited Service unless, prior to his initial
Break in Service, he was vested in retirement benefits under a
defined benefit plan maintained by the Prior Employer or under this
Plan in accordance with Paragraph 6.2.
Prior Years of Credited Service shall only be restored under this
Paragraph 2.4(b) after the Employee has completed 1,000 Hours of
Service in a 12-month period following his Break in Service.
II.5 Reemployment. Subject to Paragraphs 2.3 and 2.4, a Participant who
terminates employment with the Company shall receive no additional Years
of Service or Credited Service. Termination of employment may have
resulted from retirement, death, voluntary or involuntary termination of
employment, unauthorized absence, or by failure to return to active
employment with the Company by the date on which the Authorized Leave of
Absence expired.
The following rules shall apply if an Employee who has had a Break in
Service is subsequently reemployed for at least 1,000 hours during a 12-month
period:
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<PAGE> 23
(a) if the Employee was not eligible for retirement benefits under
the Prior Hourly Plan, Prior Salaried Plan, or a defined benefit plan
maintained by the Prior Employer, then upon reemployment after a
Break in Service, he shall be treated as a new Employee under the
Plan.
Prior Years of Service and Credited Service shall be restored if
applicable under Paragraphs 2.3(e), 2.3(f) and 2.4;
(b) if a former Employee who was not eligible for retirement
benefits under a defined benefit plan of the Prior Employer or under
this Plan pursuant to Paragraph 6.2 returns to employment with the
Company or an Affiliate prior to incurring a Break in Service, he
shall become a Participant on the date he first meets the
requirements of Paragraph 2. 1. For this purpose, all his Hours of
Service prior to his termination of employment shall count in the
determination of eligibility. His Years of Service and Credited
Service before his termination shall be added to any Years of Service
and Credited Service accumulated during subsequent employment;
(c) if the Employee was eligible for retirement benefits under any
provision of the Plan or a defined benefit plan of the Prior Employer
or the Prior Hartford Plan, Prior Jacksonville Plan or Prior
Washington Plan, but such benefits were not yet payable to him, upon
reemployment he shall become a Participant, provided he is then an
Eligible Employee. His Years of Service and Credited Service before
his termination shall be added to any Years of Service and Credited
Service accumulated during subsequent employment;
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<PAGE> 24
(d) if the Employee was eligible for retirement benefits under any
provision of the Plan, a defined benefit plan of the Prior Employer,
the Prior Hartford Plan, Prior Jacksonville Plan or Prior Washington
Plan and such benefits had become payable to him,
(i) his benefit payments from the Plan, if applicable, shall be
suspended upon proper notification, during any month in which he
is credited with 40 or more Hours of Service unless Paragraph
8.5(a) applies. Such benefits shall be resumed on the first day
of the month following the month in which he completes less than
40 Hours of Service, or if earlier, as required pursuant to
Paragraph 8.5(a);
(ii) he shall be eligible for additional Years of Service and
Credited Service as a result of his reemployment in accordance
with the provisions of the Plan, but any retirement benefit
subsequently paid shall be reduced to reflect the Actuarial
Equivalent of the benefits previously received with the
exception that Plan payments previously received due to
Disability shall not reduce subsequent retirement benefits; and
(iii) if he shall die during the period of subsequent employment,
retirement income shall be payable only in accordance with the
provisions of Article V and Article VIII and shall be reduced to
reflect the Actuarial Equivalent of the retirement benefits
previously paid with the exception that Plan
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<PAGE> 25
payments previously received due to Disability shall not reduce
subsequent retirement benefits;
(e) if an Employee has a Break in Service and his prior Credited
Service is subsequently reinstated in accordance with the provisions
of this Paragraph 2.5 and Paragraph 2.4, then his retirement income,
if any, based on his Years of Service and Credited Service related to
employment prior to the Break in Service shall be based upon the
Plan, Prior Hartford Plan, Prior Jacksonville Plan, or Prior
Washington Plan, as in effect when his Break in Service commenced,
and his retirement income, if any, related to employment after the
Break in Service shall be based upon the Plan in effect on his
subsequent retirement or termination of employment; and
(f) if an Employee changes from employment with the Company to
employment with an Affiliate, he shall not have a Break in Service.
II.6 Transfers. Any individual who ceases to be an Eligible Employee by
reason of a transfer to an ineligible class or to employment with an
Affiliate, either prior to or subsequent to commencement of his
participation in this Plan, shall be credited with Years of Service during
such period of employment pursuant to Paragraphs 2.3 and 2.5. All his
Hours of Service shall count in determining his eligibility to participate
in the Plan under Paragraph 2.1 at any later date if he becomes an
Eligible Employee once again. If he was a Participant in this Plan prior
to transfer, he shall be entitled only to benefits under the provisions of
the Plan as in effect while he is eligible to participate in the Plan.
Credited
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<PAGE> 26
Service shall only be earned for periods during which the Employee is
eligible to participate in the Plan except as provided in Paragraph
2.4.
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ARTICLE III
NORMAL RETIREMENT DATE AND NORMAL RETIREMENT INCOME
III.1 Normal Retirement Date. For a participant who was a member of the
Stanadyne, Inc. Salaried Pension Plan as it existed on February 8, 1989,
as of December 31, 1987, the Normal Retirement Date is the first day of
the month coincident with or next following the Participant's 65th
birthday. For each other Participant, the Normal Retirement Date is the
first day of the month next following the month in which the Participant
attains Normal Retirement Age.
III.2 Normal Retirement Income. A Participant who retires on his Normal
Retirement Date will be entitled to receive a monthly retirement income on
the life annuity basis (described in Paragraph 8.4) equal to the amount
determined in the Appendix applicable to the Employee group to which the
Participant belongs. If a Participant transfers among Employee groups
covered by this Plan, his benefit shall be the sum of the amounts accrued
for each discrete period of Credited Service.
For those Participants who have incurred a Break in Service, the
retirement income payable to such Participant shall be subject to
Paragraph 2.5(e).
The Participant's annual retirement income may be subject to a reduction
if a form of payment other than a life annuity is elected.
III.3 Maximum Benefit. Effective January 1, 1987, and notwithstanding any other
provision of the Plan to the contrary, in no event may a Participant's
annual retirement benefit under
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the Plan and any other defined benefit pension plan of the Company or
an Affiliate exceed the lesser of (a) or (b) below:
(a) The lesser of (i) or (ii) below, but subject to subparagraphs
(iii) through (x) below:
(i) 100% of his average compensation (as defined in Section 415 of
the Code and Regulation Section 1.415-2(d)(2)) in the three
consecutive highest paid calendar years while a Participant in
the Plan.
(ii) $90,000 (as adjusted for increases in the cost of living as
provided in rules and regulations adopted by the Secretary of
the Treasury).
(iii) the case where a benefit is payable prior to the Participant's
Social Security Retirement Age (defined below), the dollar
limitation in subparagraph (ii) above shall be adjusted so that
it is the Actuarial Equivalent of an annual benefit of $90,000,
beginning at the Social Security Retirement Age, multiplied by
an adjustment factor, as prescribed by the Secretary of the
Treasury. The adjustment provided for in the preceding sentence
shall be made in such manner as the Secretary of the Treasury
may prescribe, which is consistent with the reduction for
old-age insurance benefits commencing before the Social Security
Retirement Age under the Social Security Act. For purposes of
determining Actuarial Equivalence hereunder, the interest
assumption shall not be less than the greater of 5% per year or
the underlying rate specified in the Appendix applicable to the
Employee for determining the reduction in payments for Early
Retirement.
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<PAGE> 29
(iv) In the case where a benefit commences after a Participant has
attained Social Security Retirement Age, the dollar limitation
in subparagraph (ii) above shall be adjusted so that it is the
Actuarial Equivalent of an annual benefit of $90,000 beginning
at the Social Security Retirement Age, multiplied by an
adjustment factor as prescribed by the Secretary of the
Treasury. For purposes of determining actuarial equivalence
hereunder, the interest assumption shall not be greater than the
lesser of 5% per year or the rate specified in Paragraph 1.2.
(v) If a Participant has completed less than ten years of Plan
participation, the Participant's Accrued Benefit shall not
exceed the dollar limit in subparagraph (ii) above as adjusted
by multiplying such amount by a fraction, the numerator of which
is the Participant's number of years (or part thereof of
participation, and the denominator of which is ten.
(vi) If a Participant has completed less than ten Years of Service,
the limitations described in Sections 415(b)(1)(B), 415(b)(4),
and 415(e) of the Code shall be adjusted by multiplying such
amounts by a fraction, the numerator of which is the
Participant's number of Years of Service, or part thereof, and
the denominator of which is ten.
(vii) In no event shall subparagraphs (v) and (vi) above reduce the
limitations provided under Sections 415(b)(1) and 415(b)(4) of
the Code to an amount
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less than one-tenth of the applicable limitation (as determined
without regard to this Paragraph 3.3).
(viii) Unless subsection (vi) applies to a Participant, the limits of
subsections (i) and (ii) above shall be deemed met if:
(A) the annual benefit payable to the Participant from this
Plan and all other qualified defined benefit plans of the
Company and its Affiliates does not exceed $10,000; and
(B) the individual has never participated in a qualified
defined contribution plan sponsored by the Company or an
Affiliate.
(ix) Except in the case where a benefit is payable pursuant to
Paragraph 8.1(b)(1), or pursuant to Paragraph 8.3 with the
Participant's Spouse as the Contingent Annuitant, if a benefit is
payable in a benefit form other than a life annuity, the amount
otherwise determined under this subparagraph (a) shall be the
Actuarial Equivalent of the amount payable as a life annuity.
For this purpose, the interest rate assumption shall not be less
than the greater of 5% or the rate specified in Paragraph 1.2.
(x) For purposes of this Paragraph 3.3, Social Security Retirement
Age means the age specified under Section 415 of the Code for
application to qualified defined benefit plans.
(b) In the case of a Participant who has participated in a defined
contribution plan maintained by the Company or an Affiliate, the
amount determined pursuant to
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subparagraph (a) above shall be multiplied by 1.40 in the event
(a)(i) applies or by 1.25 in the event (a)(ii) applies and shall
further be multiplied by a fraction equal to one minus a
fraction with a numerator equal to (i) below and a denominator
equal to (ii) below:
(i) the sum of the annual additions made to the Participant's account
under all defined contribution plans maintained by the Company
and its Affiliates, where the annual additions are equal to the
sum of (a) Company contributions allocated to the Employee's
account, (b) any forfeitures allocated to the Employee's account,
(c) the portion of the Employee's after-tax contributions made
prior to January 1, 1987, that represented the lesser of one-half
of such contributions or the amount of such contributions in
excess of 6% of his compensation, (d) all Employee after-tax
contributions made after December 31, 1986 and (e) amounts
described in Sections 415(1)(1) and 419(A) (d)(2) of the Code.
(ii) the sum for each calendar year of the Participant's employment
with the Company and/or all Affiliates of the lesser of (a) 1.4
multiplied by 25% of the Participants' compensation for the
calendar year, or (b) 1.25 multiplied by $30,000, as adjusted
commencing in 1988 for increases in the cost of living as
provided under rules and regulations adopted by the Secretary of
the Treasury.
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<PAGE> 32
For the purpose of this Paragraph 3.3, an Affiliate shall be determined by
assuming the phrase "more than 50%" is substituted for the phrase "at least 80%"
wherever it appears in Section 1563 of the Code, as it may be amended from time
to time.
III.4 Continuing Employment. The retirement of any Participant under this
Article III shall not become effective while he is in the service of the
Company or an Affiliate. If an Employee continues to work for the
Company or an Affiliate beyond his Normal Retirement Date, the provisions
of Article V and Paragraph 8.5 shall be applicable.
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<PAGE> 33
ARTICLE IV
EARLY RETIREMENT DATE AND EARLY RETIREMENT INCOME
IV.1 Early Retirement Date. A Participant may retire prior to his Normal
Retirement Date on any day following his attainment of age 57 and his
completion of 10 or more Years of Service.
The date a Participant elects to retire under this Paragraph 4.1 shall be
his Early Retirement Date.
IV.2 Early Retirement Income. A Participant who retires on an Early Retirement
Date may elect in writing to receive either an immediate Early Retirement
Income or a deferred retirement income as indicated herein. Early
Retirement Income in the form of monthly payments from the Plan may
commence, at the Participant's written election, on the first day of any
calendar month coincident with or next following his Early Retirement
Date. However, benefits hereunder must commence no later than the
Participant's Normal Retirement Date. If paid prior to Normal Retirement
Date, the Participant's Accrued Benefit shall be reduced as specified in
the Appendix for the Employee group of which the Participant is a part.
For Participants who were former participants in the Prior Salaried
Plan or who meet the definition under Paragraph D.1 of Appendix D, Early
Retirement Income is governed by the provisions of Appendix D. Such
salaried Participant's Early Retirement Income shall be paid pursuant to
Article VIII.
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ARTICLE V
POSTPONED RETIREMENT DATE AND POSTPONED RETIREMENT INCOME
V.1 Postponed Retirement Date. The Postponed Retirement Date of a Participant
will be the day of his actual retirement after his Normal Retirement Date.
V.2 Postponed Retirement Income.
(a) If a Participant attained age 70 1/2 prior to January 1, 1988, or if
his Postponed Retirement Date occurs during or prior to the calendar
year in which he attained age 70 1/2, his Postponed Retirement Income
will be his Accrued Benefit calculated pursuant to Paragraph 3.2 and
the Appendix applicable to such Participant as of his Postponed
Retirement Date. The Participant's Postponed Retirement Income will
be subject to a reduction if he elects payment in a form other than a
life annuity as described in Paragraph 8.4.
(b) If a Participant's Postponed Retirement Date occurs after the calendar
year in which he attains age 70 1/2 and retirement income must
commence pursuant to Paragraph 8.5(a), then his retirement income
shall be his Accrued Benefit which shall be calculated under Paragraph
3.2 and the Appendix applicable to such Participant at the close of
the Plan Year in which he attains age 70 1/2. Such Accrued Benefit
shall be recalculated each Plan Year thereafter until his actual
Postponed Retirement Date. Each recalculation shall take into
account:
(i) his Years of Credited Service accrued to the end of such Plan
Year;
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(ii) the Actuarial Equivalent value of all Plan benefit payments made
to the Participant by the close of such Plan Year pursuant to
Paragraph 8.5(a) and this Paragraph; and
(iii) if applicable, his Average Monthly Earnings determined at the
end of such Plan Year.
(c) Any adjustment to the Participant's postponed retirement benefits due
to the mandatory commencement of benefits required under Paragraph 401
(a) (9) of the Code shall be made in accordance with regulations
prescribed by the Secretary of the Treasury.
(d) Postponed Retirement Income hereunder shall commence to the
Participant upon the earlier of
(i) his Postponed Retirement Date, or
(ii) if required, pursuant to Paragraph 8.5(a), the April 1 following
the calendar year in which he has attained age 70 1/2.
V.3 Death Prior to Postponed Retirement Date. If a Participant shall die after
his Normal Retirement Date, but prior to retiring on his Postponed
Retirement Date, his Spouse shall be entitled to benefits under the Plan in
accordance with Article VII.
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ARTICLE VI
TERMINATION OF EMPLOYMENT
VI.1 Non-Vested Termination. A Participant whose employment is terminated with
the Company and all Affiliates prior to:
(a) his attainment of Normal Retirement Age,
(b) his completion of five Years of Service, and
(c) the complete or partial termination of the Plan with respect to
such Participant, shall have no vested interest in his Accrued
Benefit and shall not be entitled to receive any retirement
income from the Plan.
Upon the termination of employment of a Participant who has no vested right
to his Accrued Benefit, the entire value of his vested benefit hereunder shall
be deemed to be distributed to him. In the event such Participant is credited
with an Hour of Service before incurring five consecutive Breaks in Service
following his termination, his vested benefit previously deemed to be
distributed hereunder will be deemed repaid to the Plan.
VI.2 Vested Termination. A Participant shall have a nonforfeitable right to his
Accrued Benefit upon the earliest of the following events:
(a) his attainment of Normal Retirement Age,
(b) his completion of five Years of Service,
(c) the complete or partial termination of the Plan with respect to
such Participant, and
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(d) a specified event entitling a Participant to Plan benefits but
only to the extent provided in an Appendix hereto.
A Participant whose employment is terminated with the Company and all
Affiliates before his Early or Normal Retirement Date shall be entitled to
receive a deferred amount of retirement income commencing on his Normal
Retirement Date equal to his Accrued Benefit if he is otherwise vested under
this Paragraph 6.2. For purposes of determining such Accrued Benefit, only the
provisions of the Plan in effect at the time of a Participant's termination of
employment shall be considered. The Participant's retirement income shall be
paid pursuant to Article VII.
VI.3 Early Payment. In lieu of the deferred benefit described in Paragraph
6.2, a Participant who ceases to be an Employee and has met the
requirements of Paragraph 6.2 may elect to receive a reduced benefit
commencing on the first day of any month between his 57th and 65th
birthdays, provided that he gives notice in writing of such election to
the Committee at least 60 days prior to the date on which the benefit is
to commence. If the Participant elects to receive his retirement benefit
before his Normal Retirement Date, the amount of the annual benefit on the
life annuity basis shall be equal to his Accrued Benefit permanently
reduced by .5%, multiplied by the number of months between his Annuity
Starting Date and his Normal Retirement Date.
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ARTICLE VII
DEATH AND DISABILITY BENEFITS
VII.1 Death Before An Annuity Starting Date. If a Participant who is vested in
his Accrued Benefit pursuant to Article VI dies prior to his Annuity
Starting Date, his surviving Spouse, if any, shall be entitled to a death
benefit. The amount of such benefit and attendant election rights and
procedures are described in the applicable Appendix covering the group of
Employees to which the Participant last belonged.
VII.2 Death Benefits After An Annuity Starting Date. After retirement income
has commenced to be paid to a Participant, upon the Participant's
subsequent death, benefits, if any, shall be payable to the
Participant's surviving Spouse strictly in accordance with the form of
benefit which had been in effect prior to the Participant's death,
except as may be provided in an Appendix hereto.
VII.3 Disability Benefits. Disability benefits may be provided under the Plan
in certain circumstances as described in the applicable Appendix
covering the group of Employees to which the Participant belongs at the
time Disability is incurred.
VII.4 Salaried Participant's Benefits. For Participants who were former
participants under the Prior Salaried Plan or who meet the description
in Paragraph D.1 of Appendix D, preretirement death benefits are
described in Appendix D.
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ARTICLE VIII
PAYMENT OF RETIREMENT BENEFITS
VIII.1 Payment of Retirement Benefits. The normal form of retirement income
shall be as follows:
(a) if the Actuarial Equivalent present value of a Benefit is $3,500
or less, prior to the Annuity Starting Date, a lump sum
distribution shall automatically be made pursuant to Paragraph
13.6.
(b) if the Actuarial Equivalent present value of a benefit is greater
than $3,500, then unless a Participant elects an optional form of
retirement income in accordance with Paragraph 8.2, the following
shall apply:
(i) a Participant who has a Spouse on the Annuity Starting Date
shall receive a reduced retirement income which shall be
the Actuarial Equivalent of the life annuity (described in
the following subparagraph (ii)). The benefit hereunder
shall be payable monthly commencing on the first day of the
month on or after the Participant's retirement, and if he
shall die leaving such Spouse, continuing in one-half the
reduced amount to the Spouse after the Participant dies and
ending with the first day of the month in which the death
of the Spouse occurs; and
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(ii) a Participant who does not have a Spouse on the Annuity
Starting Date shall receive his Accrued Benefit, payable
monthly, commencing on the first day of the month on or
after his retirement and ending with the first day of the
month in which his death occurs.
VIII.2 Election of Optional Forms. A Participant who has a Spouse on the
selected Annuity Starting Date and is otherwise eligible to commence a
benefit due to retirement may elect an optional form of payment available
under Paragraph 8.3 or 8.4. No other Participant may elect an optional
form of payment. No less than 30 days, nor more than 90 days before the
Annuity Starting Dates, written information concerning the normal form of
payment, the material features of optional forms of payment, the relative
values of each, the circumstances under which the qualified joint and
survivor annuity will be paid, and the relative financial impact of
optional forms of payment shall be provided to such Participant. This
information and the election forms used to effect retirement and
selection of a benefit form shall be written in plain, non-technical
language. Completed election forms must be returned to the Committee
prior to the ninety day period ending on the designated Annuity Starting
Date. In addition, the form will provide a description of the
Participant's right to reinstate coverage under the normal form of
benefit described in Paragraph 8.1 prior to his Annuity Starting Date by
revoking an election of an optional form of benefit. If a Participant
files a subsequent election form, the prior form shall be of no effect.
Election of optional forms of benefits under the following Paragraphs
8.3,
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and 8.4 shall be subject to the restrictions of Paragraph 8.5. Once
benefit payments have commenced no other option may be elected, changed or
revoked.
The Committee may, on a uniform and nondiscriminatory basis, provide for
such other election periods as comply with regulations issued under
Sections 401 (a) (11) and 417 of the Code. Subject to the provisions of
Paragraph 8.5, the Committee may defer a Participant's Annuity Starting
Date for a period of up to 90 days if the Committee determines that the
deferral is desirable in order to provide for an orderly election
procedure or if it necessary to do so in order to comply with applicable
regulations.
VIII.3 Contingent Annuitant Option.
(a) A Participant who has a Spouse and is otherwise eligible to select an
optional payment method pursuant to Paragraph 8.2, may elect, by
submitting a written election form to the Committee, to convert his
retirement income to an Actuarial Equivalent, payable during his life
with the provision that after his death, 100% or 75% of such reduced
retirement income will be payable to his Spouse during the remaining
life of such Spouse.
(b) Any such election whenever made may be altered, amended, or revoked by
the Participant prior to the date when the first payment of his
retirement income would normally be made, provided the Participant
gives notice in writing to the Committee.
(c) If a Participant elects a Contingent Annuitant Option and his
Spouse dies before such Participant's benefit actually commences and
the Participant does not change
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his election in accordance with Paragraph 8.3(b), the Participant,
after the commencement of benefits, will receive the retirement income
otherwise payable to him in accordance with the provisions of the
Plan.
(d) If a Participant elects a Contingent Annuitant Option and dies before
reaching his Early Retirement Date, Normal Retirement Date, or
Postponed Retirement Date, his Spouse will not be entitled to any
rights or benefits under the Plan except in accordance with Article
VII.
(e) If a Participant elects a Contingent Annuitant Option and his Spouse
dies before the Participant, but after the Plan benefits have
commenced to such Participant, the Participant will continue to
receive the reduced retirement income payable to him in accordance
with such option.
VIII.4 Life Annuity Option. Subject to Paragraph 8.5(b), a Participant who is
eligible to select an optional payment method pursuant to Paragraph 8.2
may elect, by submitting an election form to the Committee, to have his
retirement income payable during his life, and ending with the first day
of the month in which his death occurs. Any such election, whenever
made, may be altered, amended, or revoked by the Participant prior to the
date when the first payment of his retirement income would normally be
made, provided the Participant gives notice in writing to the Committee.
VIII.5 General Payment Provisions.
(a) Anything in the foregoing to the contrary notwithstanding, no method
of distribution of retirement income may be made under this Article
which would
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violate the requirements of Section 401(a)(9) and related regulations.
Distribution to Participants who attain age 70 1/2 in 1988 or 1989
must commence by April 1, 1990. Distribution to Participants who
attain age 70 1/2 in 1990 and calendar years thereafter must commence
by the April 1 following the year in which age 70 is attained.
Distribution to Participants who attained age 70 prior to January 1,
1988 may be deferred until the April 1 of the year next following the
close of the calendar year in which the Participant retires; provided,
however, that distribution of benefits to an Employee who owns 5% or
more of the outstanding stock of the Company may not be deferred
beyond the April 1 following the calendar year in which he attains age
70 1/2. Upon the death of a Participant, any remaining interest he
may have in the Plan shall be distributed within the later of five
years after his death or after the death of his Beneficiary, unless
another form of payment was already in effect at the time of his
death, in which case benefits may be made in accordance with such form
of payment. If the Actuarial Equivalent value of any Plan benefit is
in excess of $3,500, such benefit may not be immediately distributed
prior to the Participant's Normal Retirement Date unless the
Participant consents in writing.
(b) If a Participant who has a Spouse on the Annuity Starting Date elects
to receive his retirement income in the life annuity form described in
Paragraph 8.4 then such election shall not take effect unless either:
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(i) the Participant's Spouse consents in writing to such election
and the Spouse's consent acknowledges the effect of such
election and is witnessed by a notary public, or
(ii) it is established to the satisfaction of the Committee that the
Participant has no Spouse, or that the Spouse's consent cannot
be obtained because the Spouse cannot be located, or because of
such other circumstances as may be prescribed in regulations
issued pursuant to Section 417 of the Code.
(c) It is the intent of the Plan that all benefits be paid promptly when
due. In the absence of any inability to determine the amount of
benefit payable or the eligibility for a benefit due to the lack of
adequate information on date of birth of Participant or Spouse or the
date of marriage, the first benefit shall be paid no later than the
60th day after the close of the latest Plan Year in which:
(i) the Participant attains Normal Retirement Age;
(ii) the Participant reaches the 10th anniversary of his date of
commencement of participation in the Plan; or
(iii) the Participant's termination of employment occurs.
VIII.6 Restrictions on Distributions Upon Plan Termination. This Paragraph 8.6
shall apply, upon the Plan's termination, to the amount of "Benefits"
under this Plan for any Participant who is considered a "Restricted
Participant". Such "Benefits" shall be limited to an amount equal to the
payments that would have been made on behalf of the "Restricted
Participant" under the life annuity form of payment described in
Paragraph 9.4
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that is the Actuarial Equivalent of the "Restricted Participants" Accrued
Benefit under the Plan.
For purposes of this Paragraph, the term "Restricted Participant" shall
mean all highly compensated Employees as defined in Code Section 414(q) and
highly compensated former Employees. In any one Plan Year, the total number of
Participants whose benefits are subject to restriction under this Paragraph
shall be limited by the Plan to a group of not less than 25 highly compensated
Employees and highly compensated former Employees with the greatest
Compensation.
For purposes of this Paragraph, the term "Benefit" shall include
retirement income provided by the Plan plus loans in excess of the amounts set
forth in Code Section 72(p)(2)(A), any periodic income, any withdrawal values
payable to a living Participant and any death benefits not provided for by
insurance on the Participant's life.
The limitations set forth in this Paragraph shall not restrict the current
payment of the full amount of retirement income provided by the Plan if:
(a) after payment to a "Restricted Participant" of all of the
"Benefits" described above, the value of Plan assets equals or
exceeds 110% of the value of current liabilities, as defined in Code
Section 412(1)(7),
(b) the value of the "Benefits" described above for a "Restricted
Participant" is less than 1% of the value of current liabilities, as
defined in Code Section 412(1)(7), or
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(c) the value of the "Benefits" described above for a "Restricted
Participant" does not exceed $3,500 or such higher amount described
in Code Section 411(a)(11)(A).
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ARTICLE IX
RETIREMENT PLAN COMMITTEE
IX.1 Responsibility for Plan and Trust Administration. The Company shall have
the sole authority to appoint and remove the Trustee, members of the
Committee and any investment manager which may be provided for under the
Trust, and to amend or terminate, in whole or in part this Plan or the
Trust. The Company, through its Committee, shall have the responsibility
for the administration of this Plan, which is specifically described in
this Plan and the related Trust Agreement. The Company shall be the
"named Fiduciary" for purposes of the Code and the Employee Retirement
Income Security Act of 1974.
IX.2 Retirement Plan Committee. The Plan shall be administered by the Company
through a Committee consisting of at least three, but no more than five,
members, to be appointed by and to serve at the pleasure of the Company.
IX.3 Agents of the Committee. The Committee may delegate, at its discretion,
any or all of its powers to such persons or agents as the Committee deems
appropriate. The Committee may authorize one or more of their number, or
any agent, to execute or deliver any instrument or to make any payment in
their behalf. The Committee may employ and rely on the advice of counsel,
accountants, the Actuary, and such other persons as may be necessary in
administering the Plan.
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IX.4 Committee Procedures. The Committee may adopt such rules as it deems
necessary, desirable, or appropriate. All rules and decisions of the
Committee shall be uniformly and consistently applied to all Participants
in similar circumstances. When making a determination or calculation,
the Committee shall be entitled to rely upon information furnished by a
Participant or Beneficiary, the Company, the legal counsel of the
Company, the Actuary, or the Trustee. The Committee may act at a meeting
or in writing without a meeting. The Committee shall elect one of its
members as chairman, appoint a secretary, who may, or may not be a
Committee member, and advise the Trustee of such actions in writing. The
secretary shall keep a record of all meetings and forward all necessary
communications to the Company, the Trustee or the Actuary. The Committee
may adopt such bylaws and regulations as it deems desirable for the
conduct of its affairs. All decisions of the Committee shall be made by
the vote of the majority including actions in writing taken without a
meeting.
IX.5 Administrative Powers of the Committee. The Committee may from time to
time establish rules for the administration of the Plan. Except as
otherwise herein expressly provided, the Committee will have the
exclusive right to interpret the Plan to the fullest extent allowed by
law, and to decide any and all matters arising hereunder in the
administration and operation of the Plan. Any interpretations or
decisions so made by the Committee will be conclusive and binding on all
persons having an interest in the Plan; provided, however, that all such
interpretations and decisions will be applied in a uniform and
nondiscriminatory manner to all Employees. The Committee shall have no
right to modify
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any provision of the Plan as herein set forth, except that the Committee
shall be specifically empowered to amend the Plan to provide for
increases in the Normal Retirement benefit formula under Paragraph 3.2.
IX.6 Benefit Claims Procedures. All claims for benefits under the Plan shall be
in writing and shall be submitted to the Committee member designated as
Committee secretary by the Committee. If any application for payment of a
benefit under the Plan shall be denied, the Committee shall notify the
claimant within 90 days of such application setting forth the specific
reasons therefor and shall afford such claimant a reasonable opportunity
for a full and fair review of the decision denying his claim. If special
circumstances require an extension of time for processing the claim, the
claimant will be furnished with a written notice of the extension prior to
the termination of the initial 90-day period. In no event shall such
extension exceed a period of 90 days from the end of such initial period.
The extension notice shall indicate the special circumstances requiring an
extension of time and the date by which the Committee expects to render its
decision.
Notice of such denial shall set forth, in addition to the specific reasons
for the denial, the following:
(a) reference to pertinent provisions of the Plan;
(b) such additional information as may be relevant to the denial of
the claim;
(c) an explanation of the claims review procedure; and
(d) notice that such claimant may request the opportunity to review
pertinent Plan documents and submit a statement of issues and
comments.
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Within 90 days following notice of denial of his claim, upon written
request made by any claimant for a review of such denial to the Committee
Secretary, the Committee shall take appropriate steps to review its decision in
light of any further information or comments submitted by such claimant.
The Committee shall render a decision within 60 days after the claimant's
request for review and shall advise said claimant in writing of its decision on
such review, specifying its reasons and identifying appropriate provisions of
the Plan. If special circumstances require an extension of time for
processing, a decision will be rendered as soon as possible, but not later than
120 days after receipt of a request for the review. If the extension of time
for review is required because of special circumstances, written notice of the
extension shall be furnished to the claimant prior to the commencement of the
extension. If the decision is not furnished within such time, the claim shall
be deemed denied on review. The decision on review shall be in writing and
shall include specific reasons for the decision, written to the best of the
Committee's ability in a manner calculated to be understood by the claimant
without legal or actuarial counsel, as well as specific references to the
pertinent Plan provisions on which the decision is based. In the event of
continued disagreement, the claimant may thereafter appeal to the Company,
whose decision is final.
IX.7 Certification of Benefits. Subject to the provisions of this Plan, it
will be the duty of the Committee to compute and certify to the Trustees
the amount of retirement income payable hereunder to any Participant,
Spouse, Beneficiary, or Contingent Annuitant.
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IX.8 Designation of Actuary. The Committee will designate an Actuary to make
all actuarial calculations required in connection with the Plan.
IX.9 Reliance on Reports and Certificates. The Company (or the Committee if
so designated by the Company) will be entitled to rely conclusively upon
all tables, valuations, certificates, opinions, and reports which may be
furnished by the Actuary, or any accountant, controller, counsel, or
other person who is employed or engaged for such purposes and shall
exercise the authority and responsibility as it deems appropriate to
comply with all of the legal and governmental regulations affecting this
Plan.
IX.10 Other Committee Powers and Duties: The Committee shall have such duties
and powers as may be necessary to discharge its duties hereunder,
including, but not by way of limitation, the following:
(a) to prescribe written procedures to be followed by Participants or
Beneficiaries filing applications for benefits;
(b) to prepare and distribute, in such manner as the Committee
determines to be appropriate, information explaining the Plan;
(c) to receive from the Company and from Participants such
information as shall be necessary for the proper administration of
the Plan;
(d) to furnish the Company, upon request, such annual reports with
respect to the administration of the Plan as are reasonable and
appropriate;
(e) to receive and review the periodic valuation of the Plan made
by the Actuary;
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(f) to receive, review and keep on file (as it deems convenient or
proper) reports of benefit payments by the Trustee and reports of
disbursements for expenses directed by the Committee; and
(g) to amend the Plan as provided under Paragraph 9.5. The Committee
shall have no power to add to, subtract from or modify any of the
terms of the Plan, or to change or add to any benefits provided by
the Plan, or to waive or fail to apply any requirements of
eligibility for a benefit under the Plan, except as provided in
Paragraph 9.5.
IX.11 Compensation of Committee. No member of the Committee who is an
Employee will receive any compensation for his services as such, but
will be reimbursed for reasonable expenses incident to the performance
of such services. The reimbursement of expenses shall be paid in whole
or in part by the Company, and any expenses not paid by the Company
shall be paid by the Trustee out of the principal or income of the Trust
Fund.
IX.12 Member's Own Participation. No member of the Committee may act, vote,
or otherwise influence a decision of the Committee specifically relating
to his own participation under the Plan.
IX.13 Liability of Committee Members. No member of the Committee will be
liable for any act of omission or commission, except as provided by
federal law.
IX.14 Indemnification. The Board of Directors of the Company, the Committee
and the individual members thereof shall be indemnified by the Company
and not the Trust Fund against any and all expenses, costs, and
liabilities arising by reason of any act or failure
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to act, unless such act or failure to act is judicially determined to be
gross negligence or willful misconduct.
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ARTICLE X
FUNDING AND CONTRIBUTIONS
X.1 Establishment of Fund. The Fund shall be held and administered by the
Trustee in accordance with the terms of the Trust. The Fund shall hold all
contributions made by the Company and earnings and other income
attributable thereto. All benefits payable under the Plan shall be
disbursed from the Fund. The Board of Directors of the Company, in
consultation with the Actuary and the Committee, shall have the right to
change the method of funding, subject only to any contractual restrictions
of the existing method of funding.
X.2 Contribution to the Fund; Plan Expenses. The Company will contribute to
the Fund such sums and at such times as may be determined by the Board of
Directors of the Company in accordance with the funding method and policy
to be established by the Board which are consistent with Plan objectives.
Forfeitures arising from termination of service will be used to reduce
Company contributions and will not be applied to increase any benefits
under the Plan. Except as provided hereunder and in Paragraphs 10.3 and
13.4, all contributions when made to the Fund and all property and funds of
the Fund, including income from investments and from all other sources,
will be retained for the exclusive benefit of Participants, Spouses,
Beneficiaries, and Contingent Annuitants covered by the Plan and will be
used to pay benefits provided hereunder. However, the Fund may be
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used to pay expenses of administration of the Plan and the Fund to the
extent not paid by the Company.
X.3 Contributions Subject to Deductibility. Each Company contribution to the
Plan is expressly conditioned on its deductibility and the continued
qualification of the Plan under Code Section 401(a). If contributions are
made by the Company by a mistake of fact or are deemed nondeductible, then,
upon request by the Company, such contribution, reduced by investment
losses thereon but not increased from any investment gains thereon, if any,
shall be returned to the Company within one year of the date the
contribution was made to the Fund or the date of the disallowance of such
deduction, respectively.
X.4 Employee Contributions. No Employee will be required or permitted to
make any contributions under this Plan.
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ARTICLE XI
FIDUCIARY RESPONSIBILITIES
XI.1 Basic Responsibilities. Any Fiduciary under the Plan, whether
specifically designated or not, shall:
(a) discharge all duties solely in the interest of Participants,
Spouses, Beneficiaries, and Contingent Annuitants and for the
exclusive purpose of providing benefits and defraying reasonable
administrative expenses under the Plan;
(b) discharge his responsibilities with the care, skill, prudence, and
diligence a prudent man would use in similar circumstances; and
(c) conform with the provisions of the Plan. No person who is ineligible
by law will be permitted to serve as Fiduciary.
XI.2 Actions of Fiduciaries. Any Fiduciary:
(a) may serve in more than one fiduciary capacity with respect to the
Plan;
(b) may employ one or more persons to render advice with regard to or to
carry out any responsibility that such Fiduciary has under the Plan;
and
(c) may rely upon any discretion, information, or action of any other
Fiduciary, acting within the scope of its responsibilities under the
Plan, as being proper under the Plan.
XI.3 Fiduciary Liability. No Fiduciary shall be personally liable for any
losses resulting from his action except as provided by federal law. Each
Fiduciary shall have only the authority
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and duties which are specifically allocated to it, shall be responsible for
the proper exercise of its own authority and duties, and shall not be
responsible for any act or failure to act of any other Fiduciary, except
as may be provided by applicable law.
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ARTICLE XII
AMENDMENT AND TERMINATION
XII.1 Right to Amend or Terminate. The Company reserves the right to amend,
modify, suspend, or terminate the Plan in whole or in part at any time.
The Company may delegate its right to amend the Plan to the Committee. No
amendment will be effective unless the Plan as so amended is for the
exclusive benefit of Participants, Spouses, Contingent Annuitants, and
Beneficiaries, and no amendment will deprive any Participant without his
consent of any benefit to which he was theretofore entitled, provided that
any and all amendments may be made which are necessary to maintain the
qualification of the Plan under the Code and provided further that such
amendments may be retroactively effective. The Plan shall not be
automatically terminated by any Company's acquisition by or merger or
consolidation into any other corporation. In the event of reorganization,
consolidation, dissolution or merger of the Company, the Plan can be
continued by the successor, and the successor shall be substituted for the
Company and shall assume all of the Plan liabilities and all of the
powers, duties and responsibilities of the Company under the Plan.
XII.2 Partial Termination. Upon a partial termination of the Plan with respect
to a group of Participants, as determined by a ruling of the Internal
Revenue Service as to which all rights to appeal have expired, the Company
shall direct the Actuary to determine the proportionate share of the
Participants affected by such partial termination. After such
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proportionate share has been determined, the Trustees shall segregate the
assets of the Fund allocable to such group of Participants for payment of
benefits in accordance with the provisions of Paragraph 12.3.
XII.3 Vesting and Distribution of Funds Upon Termination. Upon termination of
the Plan by the Company, in whole or in part, all affected Participants
will become fully vested and entitled to their Accrued Benefits under the
Plan. In that event, the assets in the Fund (or the portion of the Fund
determined in accordance with Paragraph 12.2) will be allocated as
follows:
(a) There shall first be credited to each Participant who was
receiving retirement income or who was eligible to receive retirement
income at least three years prior to the date of Plan termination and
to each Spouse, Beneficiary, and Contingent Annuitant who was
receiving retirement income or who was eligible to receive retirement
income at least three years prior to the date of Plan termination an
amount which will provide for him the amount of retirement income
then accrued to him under the Plan, but not in excess of the benefit
insured by the Pension Benefit Guaranty Corporation.
(b) There shall next be credited to each Participant who was
receiving retirement income or who was eligible to receive retirement
income on the date of Plan termination and to each Spouse,
Beneficiary, and Contingent Annuitant who was receiving retirement
income or who was eligible to receive retirement income on the date
of Plan termination an amount which will provide for him the amount
of
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retirement income then accrued to him under the Plan, but not in
excess of the benefit insured by the Pension Benefit Guaranty
Corporation.
(c) There shall next be credited to each other Participant who, on the
date on which the Plan shall terminate, is eligible for retirement
income in accordance with Paragraph 6.2 an amount which will provide
for him the amount of the retirement income then accrued to him under
the Plan, but not in excess of the benefit insured by the Pension
Benefit Guaranty Corporation.
(d) There shall next be credited to each other Participant who would be
entitled to additional retirement income in accordance with (a), (b),
and (c) above, were such additional income not in excess of the amount
insured by the Pension Benefit Guaranty Corporation, an amount which
will provide for him the amount of retirement income then accrued to
him under the Plan.
(e) There shall next be credited to each other Participant an amount which
will provide for him the amount of retirement income then accrued to
him under the Plan.
Allocation in any of the above classes shall be adjusted for any allocation
made to the same Participant under a prior class.
XII.4 Determination of Funds Upon Termination. The application of the Fund on
the foregoing basis will be calculated as of the date on which the Plan
shall terminate. When the calculation has been completed, the respective
interest in the Fund will be distributed to or on behalf of the respective
Participants, Spouses, Beneficiaries, and Contingent Annuitants under the
Plan in the order stated in Paragraph 12.3, only after the Company
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has sent written notice to the Trustee that all of the applicable requirements
governing the termination of qualified retirement plans have been, or are being
complied with or that appropriate authorizations, waivers, exemptions or
variances have been, or are being, obtained. If the assets in the Fund on the
date the Plan is terminated are not sufficient to provide in full the amounts
required within classes (a), (b), (c), and (d) of Paragraph 12.3, any benefit in
excess of $10,000 paid within a 12-month period during the 36-month period
immediately preceding the date of termination of the Plan to a Participant,
Spouse, Beneficiary, or Contingent Annuitant who owns 10% or more of the
outstanding voting stock of any Company may be deemed a part of the Fund for
purposes of allocation. If the assets are not sufficient to provide in full for
the amounts required for a class in the order listed in Paragraph 12.3, the
balance of the assets shall be allocated to each member of a class in the
proportion which his amount bears to the total amount in such class.
Distribution may be in the form of an annuity contract, cash, or securities or
other assets in kind as determined by the Committee in a uniform and
nondiscriminatory manner and applicable to all Participants; provided, however,
that any funds remaining after the satisfaction of all liabilities to
Participants, Spouses, Beneficiaries, and Contingent Annuitants under the Plan
shall be returned to the respective Company.
XII.5 Disabled Participants. Any Participant who has a Disability on the date
of termination or discontinuance but who has not on such date begun to
receive retirement income, will participate in the foregoing allocation of
assets in the Fund as though he had been actively employed through the
date of termination or discontinuance.
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XII.6 Restriction on Benefits. In the event of plan termination, the benefit
of any highly compensated Employee as defined in Section 414(q) of the
Code and highly compensated former Employee is limited to a benefit that
is nondiscriminatory under Section 401(a)(4) of the Code, as provided in
Paragraph 8.6.
XII.7 Right to Accrued Benefits. Any other provision of the Plan
notwithstanding, upon termination or partial termination of the Plan, the
right of each Participant to benefits accrued to the date of such
termination or partial termination to the extent then funded or to the
extent guaranteed by the Pension Benefit Guaranty Corporation shall be
nonforfeitable.
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ARTICLE XIII
GENERAL PROVISIONS
XIII.1 Plan Voluntary. Although it is intended that the Plan shall be continued
and that contributions shall be made as herein provided, this Plan is
entirely voluntary on the part of the Company and the continuance of this
Plan and the payment of contributions hereunder are not to be regarded as
contractual obligations of the Company, and the Company does not
guarantee or promise to pay or to cause to be paid any of the benefits
provided by this Plan. Each person who shall claim the right to any
payment or benefit under this Plan shall be entitled to look only to the
Fund for any such payment or benefit and shall not have any right, claim,
or demand therefore against any Company, except as provided by federal
law. The Plan shall not be deemed to constitute a contract between the
Company and any Employee or to be a consideration for, or an inducement
for, the employment of any Employee by the Company. Nothing contained in
the Plan shall be deemed to give any Employee the right to be retained in
the service of the Company or to interfere with the right of the Company
to discharge or to terminate the service of any Employee at any time
without regard to the effect such discharge or termination may have on
any rights under the Plan.
XIII.2 Payments to Minors and Incompetents. If any Participant, Spouse,
Contingent Annuitant, or Beneficiary entitled to receive any benefits
hereunder is a minor or is deemed by the Committee or is adjudged to be
legally incapable of giving valid receipt and discharge for
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such benefits, they will be paid to such person or institution as the
Committee may designate or to the duly appointed guardian. Such payment
shall, to the extent made, be deemed a complete discharge of any
liability for such payment under the Plan.
XIII.3 Non-Alienation of Benefits. No amount payable to, or
held under the Plan for the account of, any Participant
shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt to so anticipate,
alienate, sell, transfer, assign, pledge, encumber, or
charge the same shall be void; nor shall any amount
payable to, or held under the Plan for the account of,
any Participant be in any manner liable for his debts,
contracts, liabilities, engagements, or torts, or be
subject to any legal process to levy upon or attach,
except as may be provided under a qualified domestic
relations order as defined in Paragraph 414(p) of the
Code or as otherwise required by law.
However, upon authority of any retired Employee and with the consent of
the Company, the Committee may direct the Trustee to withhold a portion of any
benefit payable to the retired Employee under this Plan for the purpose of
paying the costs or premiums by the retired Employee as a result of being
included in another plan of the Company, such as a hospital-surgical plan. The
Trust shall not in any manner be liable for, or subject to, the debts,
contracts, liabilities, engagements or torts of any person entitled to benefits
hereunder.
Under a qualified domestic relations order, an alternate payee who had
been married to the Participant for at least one year may be treated as a
Spouse with respect to the portion of the Participant's benefit in which such
alternate payee has an interest provided that the
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qualified domestic relations order provides for such treatment. However,
under no circumstances may the spouse of any alternate payee (who is not a
Participant hereunder) be treated as a Spouse under the terms of the Plan.
Upon receipt of any judgement, decree or order (including approval of a
property settlement agreement) relating to the provision of payment by the Plan
to an alternate payee pursuant to a state domestic relations law, the Committee
shall promptly notify the affected Participant and any alternate payee of the
receipt of such judgement, decree or order and shall notify the affected
Participant and any alternate payee of the Committee's procedure for
determining whether or not the judgement, decree or order is a qualified
domestic relations order.
The Committee shall establish a procedure to determine the status of a
judgement, decree or order as a qualified domestic relations order and to
administer Plan distributions in accordance with qualified domestic relations
orders. Such procedure shall be in writing, shall include a provision
specifying the notification requirements enumerated in the preceding paragraph,
shall permit an alternate payee to designate a representative for receipt of
communications from the Committee and shall include such other provisions as
the Committee shall determine, including provisions describing the interest
rate to be used in making present value determinations as well as provisions
required under regulations promulgated by the Secretary of the Treasury.
During any period in which the issue of whether a judgement, decree or
order is a qualified domestic relations order is being determined (by the
Committee, a court of competent jurisdiction or otherwise), the Committee shall
segregate in a separate account under the Plan the
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amount, if any, which would have been payable to the alternate payee
during such period if the judgement, decree or order had been determined to be
a qualified domestic relations order. Such segregated amount shall be held
separately invested in an escrow account during the determination period.
If the judgment, decree or order is determined by the Committee to be a
qualified domestic relations order before the first payments would otherwise be
due under such order, then payment of the appropriate amount shall be paid to
the alternate payee(s) as required under the order. If a domestic relations
order is determined by the Committee to be a qualified order within the
18-month period beginning on the date that the first payment would have been
due under such order, the separately accounted for amounts (plus reasonable
interest thereon) shall be retroactively paid to the alternate payee(s) named
in the order. Subsequent payments shall not include any interest component.
If the Committee first determines that the order is a qualified domestic
relations order after the 18-month period beginning on the date on which the
first payment would have been due under the order, then the provisions of such
order shall be applied on a prospective basis only.
XIII.4 Evidence of Survival. If the Committee, or the Trustees with the
assistance of the Committee, cannot make payment of any amount to, or on
behalf of, a Participant within five years after such amount becomes
payable because the identity or whereabouts of such Participant cannot be
ascertained, the Committee, at the end of such five-year period, will
direct that all unpaid amounts which would have been payable to or on
behalf of such Participant be paid to the legal spouse of the
Participant, if found and living at such time,
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or if such legal spouse cannot be found or is not living at such time, in
equal shares to such of the children of the Participant who can be found
and are living at such time, or if none of such children can be found or
if none are living at such time, to such other relative or relatives of
the Participant as the Committee may deem proper.
XIII.5 Use of Masculine and Feminine; Singular and Plural.
Wherever used in this Plan, the masculine gender will
include the feminine gender and the singular will include
the plural, unless the context indicates otherwise.
XIII.6 Small Payments. If the Actuarial Equivalent present
value of the retirement income due a Participant, Spouse,
Contingent Annuitant, or Beneficiary is $3,500 or less, a
lump sum payment of such Actuarial Equivalent value shall
automatically be made to the appropriate recipient as
soon as practicable following the Participant's
termination of employment, in lieu of all other benefits
hereunder.
XIII.7 Merger, Consolidation or Transfer. In the event that the
Plan is merged or consolidated with any other plan, or
should the assets or liabilities of the Plan be
transferred to any other plan, each Participant shall be
entitled to a benefit immediately after such merger,
consolidation or transfer if the Plan should then
terminate equal to or greater than the benefit he would
have been entitled to receive immediately before such
merger, consolidation or transfer if the Plan had then
terminated.
XIII.8 Leased Employees. Any individual who performs services
for the Company and who, by application of Paragraph
414(n)(2) of the Code and Regulations issued pursuant
thereto, would be considered a "leased employee", shall,
for purposes of determining the number
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of highly compensated Employees of the Company and for purposes of the
requirements enumerated in Paragraph 414(n)(3) of the Code, be
considered an Employee of the Company with regard to services performed
after December 31, 1986.
When the total of all leased employees constitutes less than 20% of the
Company's non-highly compensated work force within the meaning of
Paragraph 414(n)(5)(c)(ii) of the Code, however, a "leased employee"
shall not be considered an Employee of the Company if the organization
from which the individual is leased maintains a qualified safe harbor
plan (as defined in Paragraph 414(n)(5) of the Code) in which such
individual participates.
"Leased employees" who are deemed to be Employees of the Company for
purposes of this Paragraph 13.8 shall not be eligible to participate in
the Plan unless specifically provided for in Paragraph 2.1.
XIII.9 Governing Law. The Plan shall be administered, construed, and enforced
according to the laws of the State of Delaware other than its conflict
of law provisions and other than for the determination of whether a
Spouse is a lawful Spouse; provided, however, wherever applicable, the
provisions of the Employee Retirement Income Security Act of 1974 shall
govern and in such event the laws of the United States of America shall
be applied and to the extent necessary, its courts shall have competent
jurisdiction.
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ARTICLE XIV
TOP-HEAVY PLAN REQUIREMENTS
XIV.1 General Rule. For any Plan Year for which this Plan is a "top-heavy" Plan
as defined in Paragraph 14.6, any other provisions of the Plan to the
contrary notwithstanding, the Plan shall be subject to the following
provisions:
(a) The vesting provisions of Paragraph 14.2.
(b) The minimum benefit provisions of Paragraph 14.3.
(c) The limitation on benefits set by Paragraph 14.4.
XIV.2 Vesting Provisions. Each Participant who (a) has completed at least two
Years of Service and (b) has completed an Hour of Service during any Plan
Year in which the plan is "top-heavy", shall have a nonforfeitable right
to all or a portion of his Accrued Benefit under the Plan in accordance
with the vesting schedule listed below.
<TABLE>
<CAPTION>
Years of Service Vested Percentage
---------------- -----------------
<S> <C>
Less than 2 0
2 but less than 3 20
3 but less than 4 40
4 but less than 5 60
5 or more 100
</TABLE>
If the Plan ceases to be "top-heavy", each Participant with three or more
Years of Service, whether or not consecutive, shall have the right to elect to
remain under the vesting schedule hereunder or to have the vesting provisions
of Paragraph 6.2 be applicable. Each such Participant shall have the right to
elect the applicable schedule within 60 days after the day the
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Participant is issued written notice by the Committee, or as otherwise provided
in accordance with regulations issued under the provision of the Code, relating
to changes in the vesting schedule.
For all other Participants, the vesting provisions of Paragraph 6.2 shall
be applicable once the Plan ceases to be "top-heavy". This provision shall not
cause a Participant's vested percentage to be reduced.
XIV.3 Minimum Benefit Provisions. Each Participant who (a) is a "Non-Key
Employee" (as defined in Paragraph 14.7) and (b) has completed 1,000 Hours
of Service in any Plan Year shall be entitled to an annual retirement
income equal to 2% of the Participant's average annual compensation in the
"testing period" multiplied by his Years of Service during which the Plan
is "top-heavy," up to a maximum of 20%. For purposes of this Paragraph
14.3, "testing period" means the period of five consecutive years during
which the Participant had the highest aggregate compensation.
XIV.4 Limitation on Benefits. In the event that the Company also maintains a
defined contribution plan providing contributions on behalf of
Participants in this Plan, one of the two following provisions shall
apply:
(a) If for the Plan Year this Plan would be a "top-heavy" Plan (as
defined in Paragraph 14.5) if "90%" were substituted for "60%," then
the minimum benefit described in Paragraph 14.3 means the lesser of
3% of average annual compensation in the "testing period" multiplied
by the Participant's Years of Service during which the Plan is
"top-heavy", up to a maximum of 30%.
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(b) If for the Plan Year this Plan would continue to be a "top-heavy"
Plan (as defined in Paragraph 14.5) if "90%" were substituted for
"60%," then the denominator of both the defined contribution plan
fraction and the defined benefit plan fraction shall be calculated as
set forth in Paragraph 3.3(b) for such Plan Year by substituting
"1.0" for "1.25" in each place such figure appears, except with
respect to any individual for whom there are no Company
contributions, forfeitures or voluntary contributions allocated or
any accruals for such individual under the defined benefit plan.
XIV.5 Top-heavy Plan Definition. This Plan shall be "top-heavy" for any Plan
Year if, as of the determination date, the present value of the Accrued
Benefits under the Plan for Participants (including former Participants)
who are "Key Employees" (as defined in Paragraph 14.6) exceeds 60% of the
present value of Accrued Benefits for all Participants (excluding former
"Key Employees"), or if this Plan is required to be in an aggregation
group which for such Plan Year is a "top-heavy group". For purposes of
this Article XIV,
(a) "Determination date" shall mean for any Plan Year the last day of the
immediately preceding Plan Year (except that for the first Plan Year
the "determination date" means the last day of such Plan Year).
(b) "Present value of Accrued Benefits" shall be determined as of the
most recent valuation date that is within the 12-month period ending
on the "determination date" and as described under the Code.
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(c) "Aggregate of the Accounts" shall mean the sum of (i) the
Accounts determined as of the most recent Valuation Date that is
within the 12-month period ending on the "determination date," and
(ii) the adjustment for contributions due as of the "determination
date," and as described in the regulations under the Code.
(d) "Aggregation group" shall mean the group of plans, if any, that
includes both the group of plans that are required to be aggregated
and the group of plans that are permitted to be aggregated.
(i) The group of plans that are required to be aggregated (the
"required aggregation group") includes: each plan of the Company
in which a "Key Employee" is a Participant, including
collective-bargained plans; and each other plan of the Company
including collectively-bargained plans, which enables a plan in
which a "Key Employee" is a Participant to meet the requirements
of Sections 401(a)(4) and 410(b) of the Code.
(ii) The group of plans that are permitted to be aggregated (the
"permissive aggregation group") includes the "required
aggregation group" plus one or more plans of the Company that is
not part of the "required aggregation group" and that the
Committee certifies as constituting a plan within the "permissive
aggregation group". Such plan or plans may be added to the
"permissive aggregation group" only if, after the addition, the
aggregation group as a whole continues not to discriminate as to
contributions or
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benefits in favor of officers, shareholders or the highly-compensated
and to meet the minimum participation standards under the Code.
(e) "Top-heavy group" shall mean the aggregation group, if as of
the applicable "determination date," the sum of the present value of
the cumulative accrued benefits for "Key Employees" under all defined
benefit plans included in the aggregation group plus the "aggregate
of the accounts" of "Key Employees" under all defined contribution
plans included in the aggregation group exceeds 60% of the sum of the
present value of the cumulative accrued benefits for all Employees,
excluding former "Key Employees," under all such defined benefit
plans plus the aggregate accounts for all Employees, under such
defined contribution plans. If the aggregation group that is a
"top-heavy" group is a "required aggregation group," each plan in the
group will be "top-heavy". If the aggregation group that is a
"top-heavy group" is a "permissive aggregation group," only those
plans that are part of the "required aggregation group" will be
treated as "top-heavy". If the aggregation group is not a "top-heavy
group," no plan within such group will be "top-heavy."
(f) In determining whether this Plan constitutes a "top-heavy
plan", the Committee shall make the following adjustments in
connection therewith:
(i) When more than one plan is aggregated, the Committee
shall determine separately for each plan as of each plan's
"determination date" the present value of the Accrued Benefits
or account balance. The results shall then be
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aggregated by adding the results of each plan as of the
"determination dates" for such plans that fall within the same
calendar year.
(ii) In determining the present value of the Accrued Benefit or the
amount of the account of any Employee, such present value or
account shall include the dollar value of the aggregate
distributions made to such Employee under the applicable plan
during the five-year period ending on the determination date,
unless reflected in the value of the Accrued Benefit or account
balance as of the most recent valuation date. Such amounts shall
include distributions to Employees which represented the entire
amount credited to their accounts under the applicable plan.
(iii) Further, in making such determination, such present value or
such account shall include an rollover contribution (or similar
transfer), as follows:
(A) If the rollover contribution (or similar
transfer) is initiated by the Employee and made to or from
a plan maintained by another employer, the plan providing
the distribution shall include such distribution in the
value of such account; the plan accepting the distribution
shall not include such distribution in the value of such
account unless the plan accepted it before December 31,
1983.
(B) If the rollover contribution (or similar
transfer) is not initiated by the Employee or made from a
plan maintained by another employer, the plan accepting
the distribution shall include such distribution in
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the present value of such account, whether
the plan accepted the distribution before or after
December 31, 1983; the plan making the distribution shall
not include such distribution in the value of such
account.
(iv) Further, in making such determination, in any case where an
individual is a "Non-Key Employee" (as defined in Paragraph 14.7)
with respect to an applicable plan, but was a "Key Employee" with
respect to such plan for any prior plan year, any Accrued Benefit
and any account of such Employee shall be altogether disregarded.
For this purpose, to the extent that a "Key Employee" is deemed
to be a "Key Employee" if he met the definition thereof within
any of the four preceding plan years, this provision shall apply
following the end of such period of time.
(v) Further, in making such determination, the Accrued Benefit of an
Employee other than a "Key Employee" shall be determined under
(A) the method, if any, that uniformly applies for accrual
purposes under all plans maintained by the Company and its
Affiliates, or (B) if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate permitted
under the fractional accrual rule of Paragraph 411(b)(1)(C) of
the Code.
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XIV.6 Key Employee. The term "Key Employee" means any Employee or former
Employee under this plan who, at any time during the Plan Year containing
the "determination date" or during any of the four preceding Plan Years,
is or was one of the following:
(a) An officer of the Company, having annual compensation for such Plan
Year greater than 50% of the amount in effect under Paragraph
415(b)(1)(A) of the Code. Whether an individual is an officer shall
be determined by the Committee on the basis of all the facts and
circumstances, such as an individual's authority, duties and term of
office, and not on the mere fact that the individual has the title of
an officer. For any such Plan Year, they shall be treated as
officers no more than the lesser of:
(i) 50 Employees, or
(ii) the greater of three Employees or 10% of the Employees.
(b) One of the ten Employees owning (or considered as owning, within the
meaning of Section 318 of the Code) the largest interests in the
Company. However, an Employee will not be considered a top ten owner
for a Plan Year if the Employee earns less than the maximum dollar
limitation under the Code on contributions and other annual additions
to a Participant's account in a defined contribution plan for the
calendar year in which the "determination date" falls.
(c) Any person who owns (or is considered as owning within the meaning of
Section 318 of the Code) more than five percent of the outstanding
stock of the Company
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or stock possessing more than five percent of the combined total
voting power of all stock of the Company.
(d) Any person having annual compensation from the Company of more
than $150,000 and possessing more than one percent of the stock of
the Company or stock possessing more than one percent of the combined
total voting power of all stock of the Company.
For purposes of this Paragraph 14.6, "compensation" means all items
includible as compensation for purposes of applying the limitations,
contributions and other annual additions to a Participant's account in
a defined contribution plan under the Code, and a Beneficiary of a
"Key Employee" shall be treated as a "Key Employee". An individual
who has not performed services for the Company or any of its
Affiliates during the five-year period ending on a particular
"determination date", however, shall not be considered a "Key
Employee".
XIV.7 Non-Key Employee. The term "Non-Key Employee" means any Employee (and
any Beneficiary of an Employee) who is not a "Key Employee". An
individual who has not performed services for the Company or any of
its Affiliates during the five-year period ending on a particular
"determination date", however, shall not be considered a "Non-Key
Employee".
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ARTICLE XV
DIRECT ROLLOVERS
XV.1 Direct Rollover of Eligible Rollover Distributions. This section applies
to distributions made on or after January 1, 1993. Notwithstanding any
provision of the Plan to the contrary that would otherwise limit a
Distributee's election under this Article, a Distributee may elect, at
the time and in the manner prescribed by the Committee, to have any
portion of an Eligible Rollover Distribution paid directly to an Eligible
Retirement Plan specified by the Distributee in a Direct Rollover.
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APPENDIX A
SPECIFIC PROVISIONS FOR PARTICIPANTS
ON THE HARTFORD HOURLY PAYROLL
A.1 Introduction. This Appendix A describes provisions applicable to each
Participant paid under the Hartford Hourly Payroll, to
the extent such provisions differ from those in the body of this Plan
document and from other Appendices.
A.2 Appendix A Definitions. The definitions below are only applicable to
this Appendix A.
(a) "Appendix A Participant" shall mean for purposes of this
Appendix A, an Eligible Employee paid from the Company's Hartford
Hourly Payroll, providing such Employee has met the requirements of
Section 2.1 necessary to become a Participant.
(b) "Diesel Systems Hartford Plan" shall mean the Stanadyne, Inc.
Diesel Systems Division Hartford Hourly Employees Pension Plan as it
existed on February 9, 1989 (or on such other reference date
indicated in the following text).
(c) "Disability" shall mean with respect to an Appendix A
Participant only, that portion of any continuous absence from work
during which the Participant is receiving payments under the
Company's long-term disability plan prior to Normal Retirement Age.
(d) "Years of Service" shall mean Years of Service as defined in
the body of the Plan plus the first six months of a Disability period
and thereafter, the portion of such
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continuing Disability period which does not exceed the Participant's
Years of Service on the date the Disability began.
A.3 Years of Credited Service: Subject to the Break in Service provisions of
Paragraphs 2.3(e) and (f) and the transfer provisions of Paragraph 2.6, an
Appendix A Participant shall accrue Credited Service as follows:
(a) if an Employee became a Participant in the Prior Hartford Plan on
February 10, 1989 and was a member of the Diesel Systems Hartford Plan
on February 9, 1989, such Employee shall be credited hereunder with
the Years of Credited Service and fractions thereof he had accumulated
under the Diesel Systems Hartford Plan on February 9, 1989 in
accordance with the provisions of the Diesel Systems Hartford Plan on
such date. In no event will an Employee receive duplicate service
credit for any period of employment;
(b) for periods not already counted in (a) above, one Year of Credited
Service shall be earned by an Appendix A Participant for each calendar
year in which he has 1,800 or more Hours of Service;
(c) for periods not already counted in (a) and (b) above in which an
Appendix A Participant has less than 1,800 Hours of Service, a
fractional Year of Credited Service to the nearest 12th shall be
earned by such Employee for each calendar year in which he is a
Participant in this Plan or the Prior Hartford Plan;
(d) the determination of Years and fractional Years of Credited Service
shall also include (i) the first six months of a period of absence due
to sick leave, (ii) a
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period of Authorized Leave of Absence provided that the Participant
returns to employment within the period of Authorized Leave of
Absence, and (iii) the first six months of a Disability period and
thereafter, the portion of such continuing Disability period which
does not exceed the Participant's Years of Service on the date the
Disability began; and
(e) Credited Service earned prior to a Break in Service shall be
reinstated pursuant to the principles of Paragraph 2.4(b).
A.4 Normal Retirement Income. An Appendix A Participant who retires on his
Normal Retirement Date will be entitled to receive a monthly retirement
income on the life annuity basis described in Paragraph 8.4 equal to (a)
minus (b) where:
(a) is
(i) $14.00 multiplied by the Participant's Years of Credited Service
for Appendix A Participants who terminated employment prior to
July 1, 1989; or
(ii) $15 multiplied by the Participant's Years of Credited Service for
all other Appendix A Participants; and
(b) is the monthly benefit, if any, payable to the Participant on his
Normal Retirement Date on the life annuity basis under the Lincoln
National Group Annuity Contract Number GA-5844 issued to the Prior
Employer with respect to benefits accrued under the Diesel Systems
Hartford Plan. The offset hereunder shall not cause a Participant's
Accrued Benefit to be reduced below $0.
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For those Participants who have incurred a Break in Service under this
Plan, the retirement income payable to such Participant shall be subject
to Paragraph 2.5(e).
A.5 Early Retirement Income. The monthly income payable on the life annuity
basis to an Appendix A Participant who retires on an Early Retirement Date
shall be (a) multiplied by (b) minus (c), where:
(a) equals $15 ($14 for Participants who terminated employment prior to
July 1, 1989) multiplied by the Participant's Years of Credited
Service;
(b) equals 100% reduced by 1/2 of 1% for each month between the Annuity
Starting Date selected by the Participant and the first of the month
following his 62nd birthday; and
(c) equals the monthly Benefit, if any, that would be payable to
such Appendix A Participant on the life annuity basis from the
Lincoln National Group Annuity Contract Number GA-5844 issued to the
Prior Employer with respect to benefits accrued under the Diesel
Systems Hartford Plan on the same Annuity Starting Date selected for
the commencement of benefits under this Plan. The actual date of
benefit commencement from such annuity contract shall be of no
consequence in determining the offset under this subparagraph (c).
A.6 Pre-Retirement Death Benefits.
(a) Death Before Termination of Employment.
(i) If an Appendix A Participant who is an Employee has attained age
57, is vested in a benefit pursuant to Paragraph 6.2 and dies
before any Plan
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benefit commences to him, a monthly retirement benefit shall be
payable to his surviving Spouse. The amount of such benefit
shall be determined as if:
(A) the Participant had retired and elected retirement income
payments to begin on the first day of the month coinciding
with or next following his date of death, and
(B) his Accrued Benefit was payable in the normal form described
under Paragraph 8.1(b) with his Spouse as Contingent
Annuitant, entitled to receive 50% of the amount of the
Participant's retirement income subject to any applicable
early payment reductions under Paragraph 4.2 or this
Appendix A.
The monthly retirement income payable to the Spouse pursuant to this
paragraph shall not be less than $50 reduced by the monthly death benefit, if
any, payable to such Spouse from the Lincoln National Group Annuity Contract
Number GA5844 issued to the Prior Employer.
Unless the automatic lump sum provisions of Paragraph 13.6 are applicable,
payments hereunder shall begin to the Spouse on the first day of the month
following the Participant's death and shall continue to be made on the first
day of each month thereafter during the Spouse's lifetime.
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If a Participant dies after his Normal Retirement Date but prior to his
Postponed Retirement Date, his Spouse shall receive the benefit described
above. If a Spouse's benefit is payable in accordance with the preceding
sentence, no benefits will be payable under Article VIII.
(ii) If an Appendix A Participant who is an Employee, has not attained
age 57, is vested in a benefit pursuant to Paragraph 6.2 and dies
before any Plan benefit commences to him, a monthly benefit will
be payable to his surviving Spouse. The monthly retirement
income payable to the Spouse pursuant to this Paragraph shall not
be less than $50 reduced by the month death benefit, if any,
payable to such Spouse from the Lincoln Group Annuity Contract
Number GA-5844 issued to the Prior Employer. If greater, the
amount of such benefit shall be determined as follows:
(A) if the Employee dies after attaining age 50, his Accrued
Benefit as of his date of death shall be reduced by the sum
of (1) and (2) where
(1) is 1/3 of 1% for each month between the date the
benefit hereunder commences and the date the
Participant would have attained age 57; and
(2) is 30%.
The Accrued Benefit, reduced as indicated above, but not reduced in any
other manner for early commencement, shall be converted to the Actuarial
Equivalent normal form for a married Participant under Paragraph 8.1(b). Unless
the automatic lump sum provisions of
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Paragraph 13.6 are applicable, the 50% Contingent Annuitant's portion of
such benefit shall be payable monthly to the Spouse beginning with the month
following the Participant's death. Such benefit shall continue to be paid
until the beginning of the month in which the Spouse dies.
(B) if the Employee dies prior to age 50, his Accrued Benefit
as of his date of death shall be reduced in accordance with
paragraphs (1) and (2) of paragraph (A) above as if he had
attained age 50. The Accrued Benefit reduced as indicated
above, but not reduced in any other manner for early
commencement, shall be converted to the Actuarial
Equivalent normal form for a married Participant under
Paragraph 8.1(b). Unless the automatic lump sum provisions
of Paragraph 13.6 are applicable, the 50% Contingent
Annuitant's portion of such benefit shall be payable
monthly to the Spouse beginning with the month following
the month in which the Participant would have attained age
50. Such benefit shall continue to be paid until the
beginning of the month in which the Spouse dies.
(b) Death After Termination of Employment. If an Appendix A Participant
is vested in a benefit pursuant to Paragraph 6.2, terminates from the
Company for reasons other than death and dies before Plan benefits
commence, a monthly retirement benefit shall be payable to his Spouse.
The monthly retirement income payable to the Spouse, pursuant to this
Paragraph, shall not be less than $50 reduced by the monthly death
benefit, if any, payable to such Spouse from the Lincoln National
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Group Annuity Contract Number GA-5844 issued to the Prior Employer.
If greater, the amount of such benefit shall be determined as if:
(i) the Participant had survived to the later of age 57 or his
actual date of death;
(ii) retired electing immediate payment of his Accrued Benefit under
the normal form described in Paragraph 8.1(b), with his Spouse
as the Contingent Annuitant, entitled to receive 50% of the
amount of the Participant's retirement income; and then
(iii) died immediately.
The amount of the Participant's Accrued Benefit upon which the Spouse's
benefit is determined in accordance with this Paragraph shall be adjusted
pursuant to Paragraph A.5 or 6.3, as applicable, based on the age the
Participant would have attained on the date the Spouse's benefit commences to
be paid.
Unless the automatic lump sum provisions of Paragraph 13.6 are applicable,
payments hereunder shall begin to the Spouse on the first day of the month
following the later of the Participant's death or the date he would have
attained age 57, whichever is applicable, and shall continue to be made on the
first day of each month thereafter during the Spouse's lifetime.
If a benefit is payable under such subparagraph (a) above, no benefit
shall be payable under this subparagraph (b).
(c) Grandfathered Death Benefit. Notwithstanding the provisions of
subparagraphs (a) and (b) above, in the case of an Appendix A
Participant who was a member of the
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Diesel Systems Hartford Plan on December 31, 1983, and dies prior to
the commencement of benefits from the Plan or Diesel Systems Hartford
Plan, if the provisions of the second paragraph of Section 6.6 of the
Diesel Systems Hartford Plan as in effect on December 31, 1983, will
result in a greater benefit for such Participant's surviving Spouse
based on the Participant's Credited Service as of December 31, 1983,
then such surviving Spouse shall be entitled to such greater benefit
upon the Participant's death in lieu of the benefits provided under
(a) and (b) above.
(d) Special Minimum Death Benefit. Notwithstanding any other
provision of the Plan, if a Participant was a member of the Diesel
Systems Hartford Plan on December 31, 1983, and he commences to
receive his retirement income in the form of a single life annuity
described in Paragraph 8.4 and then dies, a special minimum death
benefit may apply. If the provisions of the third and fourth
paragraphs of Section 6.6 of the Diesel Systems Hartford Plan in
effect on December 31, 1983 will result in a death benefit for such
Participant's surviving Spouse based on such Participant's Credited
Service as of December 31, 1983, then such Spouse will be entitled to
such benefit hereunder upon the death of the Participant.
A.7 Grandfathered Payment Form for Certain Participants. Subject to the
provisions of Paragraph 8.1, if a Participant in this Plan who was a
member of the Diesel Systems Hartford Plan on December 31, 1983, made an
optional election under Section 8.1 of the Diesel Systems Hartford Plan,
as in effect on December 31, 1975, and did not revoke such
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election in accordance with the first paragraph of Section 6.6 of the
Diesel Systems Hartford Plan as in effect on December 31, 1983, then such
optional election shall be deemed a valid election under this Plan and
shall continue in effect or become effective and be revocable subject to
and in accordance with the first paragraph of Section 6.6 of the Diesel
Systems Hartford Plan as in effect on December 31, 1983.
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APPENDIX B
SPECIFIC PROVISIONS FOR PARTICIPANTS
ON THE JACKSONVILLE HOURLY PAYROLL
B.1 Introduction. This Appendix B describes provisions applicable to each
Participant paid under the Jacksonville Hourly Payroll,
to the extent such provisions differ from those in the body of this Plan
document and from other Appendices.
B.2 Appendix B Definitions. The definitions below are only applicable to
this Appendix B.
(a) "Appendix B Participant" shall mean for purposes of this
Appendix B, an Eligible Employee paid from the Company's Jacksonville
Hourly Payroll, providing such Employee has met the requirements of
Paragraph 2.1 necessary to become a Participant.
(b) "Diesel Systems Jacksonville Plan" shall mean the Stanadyne,
Inc. Diesel Systems Division Jacksonville Hourly Employees Pension
Plan as it existed on February 9, 1989 (or on such other reference
date indicated in the following text).
(c) "Disability" except as provided herein, shall mean a physical
or mental condition which totally and presumably permanently prevents
an Appendix B Participant from engaging in any substantially gainful
activity, based on a medical examination by a doctor or clinic
appointed by the Committee. For purposes of this Appendix B,
Disability shall not include any condition, which on the basis of
medical examination, is determined to have resulted from (i) chronic
alcoholism, (ii) addiction to narcotics, (iii) an injury suffered
while engaged in a felonious or
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criminal act or enterprise or (iv) service in the Armed Forces of the
United States which entitles the Participant to a veteran's
disability pension.
(d) "Years of Service" shall mean Years of Service as defined in
the body of the Plan except that Years of Service for an Appendix B
Participant shall be determined solely with respect to Hours of
Service rendered from and after January 1, 1977.
B.3 Years of Credited Service: The amount of the benefit payable to or on
behalf of an Appendix B Participant shall be determined on the basis of
his Credited Service from and after January 1, 1977.
Subject to the Break in Service provisions of Paragraphs 2.3(e) and (f)
and the transfer provisions of Paragraph 2.6, an Appendix B Participant
shall accrue Credited Service as follows:
(a) if an Employee became a Participant in the Prior Jacksonville
Plan on February 10, 1989 and was a member of the Diesel Systems
Jacksonville Plan on February 9, 1989, such Employee shall be
credited hereunder with the Years of Credited Service and fractions
thereof he had accumulated under the Diesel Systems Jacksonville Plan
on February 9, 1989 in accordance with the provisions of the Diesel
Systems Jacksonville Plan on such date. In no event will an Employee
receive duplicate service credit for any period of employment;
(b) for periods not already counted in (a) above, one Year of
Credited Service shall be earned by an Appendix B Participant for
each calendar year in which he has 1,800 or more Hours of Service;
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(c) for periods not already counted in (a) and (b) above in which
an Appendix B Participant has less than 1,800 Hours of Service, a
fractional Year of Credited Service to the nearest 12th shall be
earned by such Employee for each calendar year in which he is a
Participant in this Plan or the Prior Jacksonville Plan; and
(d) Credited Service shall also be granted for (i) the first six
months of a period of absence due to sick leave or Disability, and
(ii) a period of Authorized Leave of Absence provided that the
Participant returns to employment within the period of Authorized
Leave of Absence.
(e) Credited Service earned prior to a Break in Service shall be
reinstated pursuant to the principles of Paragraphs 2.4(b).
B.4 Normal Retirement Income. An Appendix B Participant who retires on his
Normal Retirement Date will be entitled to receive a monthly retirement
income on the life annuity basis described in Paragraph 8.4 equal to
$10.00 multiplied by the Participant's Years of Credited Service ($9.00
times Credited Service for Participants who terminated employment prior to
January 1, 1992, but after December 31, 1991, and $8.00 times Credited
Service for Participants who terminated employment prior to January 1,
1992.)
For those Participants who have incurred a Break in Service under this
Plan, the retirement income payable to such Participant shall be subject
to Paragraph 2.5(e).
The Participant's annual retirement income may be subject to a reduction
if a form of payment other than a life annuity is elected.
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B.5 Early Retirement Income. An Appendix B Participant who retires on an
Early Retirement Date may elect to receive either an immediate early
retirement income or a deferred retirement income as indicated below. The
annual amount of the early retirement income on the life annuity basis
described in Paragraph 8.4 shall be equal to either (a) or (b) below, as
applicable:
(a) If the Participant terminates on an Early Retirement Date and
elects to commence payment of his retirement income prior to his
attainment of age 62, his Accrued Benefit shall be payable reduced by
1/2 of 1% for each month between the selected Annuity Starting Date
and the first of the month following his 62nd birthday;
(b) If the Participant terminates on an Early Retirement Date and
elects to commence payment of his retirement income on or after his
62nd birthday, the Participant's Accrued Benefit shall be payable
unreduced for early commencement.
B.6 Permanent and Total Disability.
(a) Disability Retirement Date; Commencement of Benefit. If an
Appendix B Participant terminates employment due to a Disability
after he has completed 10 or more Years of Service, he shall be
eligible for Disability Retirement Benefits pursuant to (b) below
and, if applicable, (c) below. Payment of a Disability Retirement
Benefit shall commence as of the first day coincident with or next
following six (6) months from the date employment ceased due to
Disability. Except as provided in (d) below, Disability retirement
income shall be paid in lieu of other retirement income for which the
Participant may be eligible.
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(b) Disability Retirement Benefits. If an Appendix B Participant
has experienced a Disability, as defined in Paragraph B.2, the
Participant shall be eligible to receive a Disability Retirement
Benefit equal to his Accrued Benefit as of his date of termination
due to Disability. The Disability Retirement Benefit hereunder is
not subject to reduction for commencement prior to the Participant's
Normal Retirement Date, but is subject to reduction for a form of
benefit other than a life annuity.
(c) Additional Disability Retirement Benefit. Appendix B Participant who
is entitled to a Disability Retirement Benefit in accordance with (a)
above, may also be entitled to receive an "Additional Disability
Benefit" which is the equivalent of his Accrued Benefit as of his date
of termination due to Disability. If the Participant has applied for
and been denied Social Security disability benefits and the
Participant provides satisfactory proof of such denial of benefits,
the Additional Disability Benefit described hereunder shall be payable
to the Participant until the earliest of
(i) his death,
(ii) the end of his Disability,
(iii) his eligibility for Social Security disability benefits, and
(iv) his Normal Retirement Date.
The Additional Disability Benefit is not subject to reduction for
commencement prior to the Participant's Normal Retirement Date and is only
payable as a life annuity, as described in Paragraph 8.4.
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(d) Cessation of Disability. Disability shall be considered to
have ended and entitlement to Disability Retirement Benefits under
(b) and (c) hereof shall cease if, prior to his Normal Retirement
Date, the Participant
(i) is reemployed by the Company or an Affiliate,
(ii) engages in any substantially gainful activity, except for
such employment as is found by the Committee to be for the
primary purpose of rehabilitation or not incompatible with
a finding of total and permanent Disability, or
(iii) has sufficiently recovered, in the opinion of the
Committee based on a medical examination by a doctor or
clinic appointed by the Committee, to be able to engage in
regular employment with the Company and refuses an offer
of employment of the Company, or
(iv) refuses to undergo any medical examination requested by
the Committee, provided that a medical examination shall
not be required more frequently than twice in any calendar
year.
If entitlement to a Disability Retirement Benefit ceases in accordance
with the provisions of this Paragraph for a reason other than reemployment by
the Company, such a Participant shall not be prevented from qualifying for
retirement income under another provision of the Plan based on his Credited
Service prior to Disability. If a Participant recovers from Disability and
returns to employment with the Company or an Affiliate, subsequent entitlement
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to retirement income shall be determined in accordance with the provisions of
the Plan in effect on the date of subsequent retirement or other termination of
employment.
B.7 Pre-Retirement Death Benefits.
(a) Immediate Pre-Retirement Spouse's Benefit. If an Appendix B
Participant has attained age 57, is vested in a benefit pursuant
to Paragraph 6.2 and dies before any Plan benefit commences to
him, a monthly retirement benefit shall be payable to his Spouse.
In determining the amount payable to the Spouse under this
Paragraph, no Additional Disability Benefit shall be included in
making such a determination. Such amount shall be determined as
if:
(i) the Participant had retired and elected retirement income
payments to begin on the first day of the month coinciding
with or next following his date of death, and
(ii) his retirement income was payable in the normal form
described under Paragraph 8.1(a) with his Spouse as
Contingent Annuitant, entitled to receive 50% of the amount
of the Participant's retirement income and subject to any
applicable early payment reductions under Paragraph 6.3 or
B.5.
Unless the automatic lump sum provisions of Paragraph 13.6 are applicable,
payments hereunder shall begin to the Spouse on the first day of the month
following the
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Participant's death and shall continue to be made on the first day of each
month thereafter during the Spouse's lifetime.
If a Participant dies after his Normal Retirement Date, but prior to his
Postponed Retirement Date, his Spouse shall receive the benefit described
above. If a Spouse's benefit is payable in accordance with the preceding
sentence, no benefits will be payable under Article VIII.
(b) Deferred Pre-Retirement Spouse's Benefit. If an Appendix B
Participant is vested in a benefit pursuant to Paragraph 6.2,
dies before attaining age 57 and before any Plan benefits have
commenced to him, a monthly retirement benefit shall be payable
to his Spouse. Such amount shall be determined as if:
(i) the Participant terminated employment as of his date of
death (if he was still an Employee);
(ii) survived until age 57 or if he had terminated due to
Disability, the date he would have been eligible for
Disability Benefits under Paragraph B.6(b);
(iii) retired, electing immediate payment of benefits under the
normal form described under Paragraph 8.1(a), with his
Spouse as the Contingent Annuitant, entitled to receive
50% of the amount of the Participant's retirement income;
and then
(iv) died on the day after the date in (ii) above.
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The amount of the Participant's Accrued Benefit upon which the Spouse's
benefit is determined shall be adjusted pursuant to Paragraph 6.3, if
applicable, based on the age the Participant would have attained on the date
the Spouse's benefit commences to be paid.
In the case of a Participant who had incurred a Disability and dies before
Disability Benefits commence, however, the Spouse's benefit shall be determined
with regard to the Participant's Disability Benefit under Paragraph B.6(b).
Disability Benefits, if any, under Paragraph B.6(c), and the reductions under
Paragraph 6.3 shall not be applicable.
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APPENDIX C
SPECIFIC PROVISIONS FOR PARTICIPANTS
ON THE WASHINGTON FACTORY HOURLY PAYROLL
C.1 Introduction. This Appendix C describes provisions applicable to each
Participant paid under the Washington Factory Hourly Payroll, to the extent
such provisions differ from those in the body of this Plan document and
from other Appendices.
C.2 Appendix C Definitions. The definitions below are only applicable to
this Appendix C.
(a) "Appendix C Participant" shall mean for purposes of this
Appendix C, an Eligible Employee paid from the Company's Washington
Factory Hourly Payroll, providing such Employee has met the
requirements of Paragraph 2.1 necessary to become a Participant.
(b) "Diesel Systems Washington Plan" shall mean the Stanadyne, Inc. Diesel
Systems Division Washington Factory Hourly Employees Pension Plan as
it existed on February 9, 1989 (or on such other reference date
indicated in the following text).
(c) "Disability" except as provided herein, shall mean a physical
or mental condition which totally and presumably permanently prevents
an Appendix C Participant from engaging in any substantially gainful
activity, based on a medical examination by a doctor or clinic
appointed by the Committee. For purposes of this Appendix C,
Disability shall not include any condition, which on the basis of
medical examination, is determined to have resulted from (i) chronic
alcoholism, (ii)
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addiction to narcotics, (iii) an injury suffered while engaged in a
felonious or criminal act or enterprise, or (iv) service in the Armed
Forces of the United States which entitles the Participant to a
veteran's disability pension.
(d) "Years of Service" shall mean Years of Service as defined in
the body of the Plan except that Years of Service for an Appendix C
Participant shall be determined solely with respect to Hours of
Service rendered from and after January 1, 1979.
C.3 Years of Credited Service: The amount of the benefit payable to or on
behalf of an Appendix C Participant shall be determined on the basis of
his Credited Service from and after January 1, 1979.
Subject to the Break in Service provisions of Paragraphs 2.3(e) and (f) and
the transfer provisions of Paragraph 2.6, an Appendix C Participant shall accrue
Credited Service as follows:
(a) if an Employee became a Participant in the Prior Washington
Plan on February 10, 1989 and was a member of the Diesel Systems
Washington Plan on February 9, 1989, such Employee shall be credited
hereunder with the Years of Credited Service and fractions thereof he
had accumulated under the Diesel Systems Washington Factory Plan on
February 9, 1989 in accordance with the provisions of the Diesel
Systems Washington Factory Plan on such date. In no event will an
Employee receive duplicate service credit for any period of
employment;
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(b) for periods not already counted in (a) above, one Year of Credited
Service shall be earned by an Appendix C Participant for each calendar
year in which he has 1,800 or more Hours of Service;
(c) for periods not already counted in (a) and (b) above in which an
Appendix C Participant has less than 1,800 Hours of Service, a
fractional Year of Credited Service to the nearest 12th shall be
earned by such Employee for each calendar year in which he is a
Participant in this Plan or the Prior Washington Plan; and
(d) Credited Service shall also be granted for (i) the first six months of
a period of absence due to sick leave or Disability, and (ii) a period
of Authorized Leave of of Absence provided that the Participant
returns to employment within the period of Authorized Leave of
Absence.
C.4 Normal Retirement Income. An Appendix C Participant who retires on his
Normal Retirement Date will be entitled to receive a monthly retirement
income on the life annuity basis described in Paragraph 8.4 equal to $10.00
multiplied by the Participant's Years of Credited Service ($9.00 times
Credited Service for Participants who terminated employment prior to
January 1, 1992, but after December 31, 1991, and $8.00 times Credited
Service for Participants who terminated employment prior to January 1,
1992.)
For those Participants who have incurred a Break in Service under this
Plan, the retirement income payable to such Participant shall be subject to
Paragraph 2.5(c).
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The Participant's annual retirement income may be subject to a reduction
if a form of payment other than a life annuity is elected. In addition, the
retirement income will be reduced if the pre-retirement coverage described in
Paragraph C.7 had been in effect.
C.5 Early Retirement Income. An Appendix C Participant who retires on an
Early Retirement Date may elect to receive either an immediate Early
Retirement Income or a deferred retirement income as indicated below. The
annual amount of the Early Retirement Income on the life annuity basis
described in Paragraph 8.4 shall be equal to either (a) or (b) below, as
applicable:
(a) If the Participant terminates on an Early Retirement Date and
elects to commence payment of his retirement income prior to his
attainment of age 62, his Accrued Benefit shall be payable reduced by
1/2 of 1% for each month between the selected Annuity Starting Date
and the first of the month following his 62nd birthday;
(b) If the Participant terminates on an Early Retirement Date and
elects to commence payment of his retirement income on or after his
62nd birthday, the Participant's Accrued Benefit shall be payable
unreduced for early commencement.
C.6 Disability Retirement Benefits.
(a) Disability Retirement Date; Commencement of Benefit. If an
Appendix C Participant terminates employment due to a Disability
after he has completed 10 or more Years of Service, he shall be
eligible for Disability Retirement Benefits pursuant to (b) below
and, if applicable, (c) below. Payment of a Disability Retirement
Benefit shall commence as of the first day coincident with or next
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following six (6) months from the date employment ceased due to
Disability. Except as provided in (d) below, Disability Retirement
Income shall be paid in lieu of other retirement income for which the
Participant may be eligible.
(b) Disability Retirement Benefits. If an Appendix C Participant has
experienced a Disability, as defined in Paragraph C.2, the Participant
shall be eligible to receive a Disability Retirement Benefit equal to
his Accrued Benefit as of his date of termination due to Disability.
The Disability Retirement Benefit hereunder is not subject to
reduction for commencement prior to the Participant's Normal
Retirement Date, but is subject to reduction for a form of benefit
other than a life annuity.
(c) Additional Disability Retirement Benefit. An Appendix C Participant
who is entitled to a Disability Retirement Benefit in accordance with
(a) above, may also be entitled to receive an "Additional Disability
Benefit" which is the equivalent of his Accrued Benefit as of his date
of termination due to Disability. If the Participant has applied for
and been denied Social Security disability benefits and the
Participant provides satisfactory proof of such denial of benefits,
the Additional Disability Benefit described hereunder shall be payable
to the Participant until the earliest of:
(i) his death,
(ii) the end of his Disability,
(iii) his eligibility for Social Security disability benefits, and
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(iv) his Normal Retirement Date.
The Additional Disability Benefit is not subject to reduction for
commencement prior to the Participant's Normal Retirement Date and is only
payable as a life annuity, as described in Paragraph 8.4.
(d) Cessation of Disability. Disability shall be considered to have ended
and entitlement to Disability Retirement Benefits under (b) and (c)
above shall cease if, prior to his Normal Retirement Date, the
Participant
(i) is reemployed by the Company or an Affiliate,
(ii) engages in any substantially gainful activity, except for such
employment as is found by the Committee to be for the primary
purpose of rehabilitation or not incompatible with a finding of
total and permanent disability,
(iii) has sufficiently recovered, in the opinion of the Committee
based on a medical examination by a doctor or clinic appointed
by the Committee, to be able to engage in regular employment
with the Company and refuses an offer of employment of the
Company, or
(iv) refuses to undergo any medical examination requested by the
Committee, provided that a medical examination shall not be
required more frequently than twice in any calendar year.
If entitlement to a Disability Retirement Benefit ceases in accordance
with the provisions of this Paragraph for a reason other than reemployment by
the Company, such a Participant shall not be prevented from qualifying for
retirement income under another provision
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of the Plan based on his Credited Service prior to Disability. If a Participant
recovers from Disability and returns to employment with the Company or an
Affiliate, subsequent entitlement to retirement income shall be determined in
accordance with the provisions of the Plan in effect on the date of subsequent
retirement or other termination of employment.
C.7 Pre-Retirement Death Benefits.
(a) Immediate Pre-Retirement Spouse's Benefit. If an Appendix C
Participant has attained age 57, is vested in a benefit pursuant to
Paragraph 6.2 and dies before any Plan benefit commences to him, a
monthly retirement benefit shall be payable to his Spouse. In
determining the amount payable to the Spouse under this Paragraph, no
Additional Disability Benefit shall be included in making such a
determination. Such amount shall be determined as if:
(i) the Participant had retired and elected retirement income
payments to begin on the first day of the month coinciding with
or next following his date of death, and
(ii) his retirement income was payable in the normal form described
under Paragraph 8.1(a) with his Spouse as Contingent Annuitant,
entitled to receive 50% of the amount of the Participant's
retirement income and subject any applicable early payment
reductions under Paragraph C.5 or 6.3.
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Unless the automatic lump sum provisions of Paragraph 13.6 are
applicable, payments hereunder shall begin to the Spouse on the first
day of the month following the Participant's death and shall continue
to be made on the first day of each month thereafter during the
Spouse's lifetime. If a Participant dies after his Normal Retirement
Date but prior to his Postponed Retirement Date, his Spouse shall
receive the benefit described above. If a Spouse's benefit is payable
in accordance with the preceding sentence, no benefits will be payable
under Article VIII.
(b) Deferred Pre-Retirement Spouse's Benefit. If an Appendix C
Participant is vested in a benefit pursuant to Paragraph 6.2, dies
before attaining age 57 and before any Plan benefits have commenced to
him, a monthly retirement benefit shall be payable to his Spouse. Such
amount shall be determined as if:
(i) the Participant terminated employment as of his date of death
(if he was still an Employee);
(ii) survived until age 57 or if he had terminated due to Disability,
the date he would have been eligible for Disability Benefits
under Paragraph C.6(b);
(iii) retired, electing immediate payment of benefits under the normal
form described under Paragraph 8.1(a), with his Spouse as the
Contingent Annuitant, entitled to receive 50% of the amount of
the Participant's retirement income; and then
(iv) died on the day after the date in (ii) above.
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The amount of the Participant's Accrued Benefit upon which the
Spouse's benefit is determined shall be adjusted pursuant to
Paragraph 6.3, if applicable, based on the age the Participant would
have attained on the date the Spouse's benefit commences to be paid.
In the case of a Participant who had incurred a Disability and dies before
Disability Benefits commence, however, the Spouse's benefit shall be determined
with regard to the Participant's Disability Benefit under Paragraph C.6(b).
Disability Benefits, if any, under Paragraph C.6(c), and the reductions under
Paragraph 6.3 shall not be applicable.
Unless the automatic lump sum provisions of Paragraph 13.6 are applicable,
payments hereunder shall begin to the Spouse on the first day of the month
following the later of the Participant's death or the date he would have
attained age 57, and shall continue to be made on the first day of each month
thereafter during the Spouse's lifetime. Notwithstanding the foregoing, if a
Participant had incurred a Disability and was entitled to Disability Benefits
under Paragraph C.6(b), the Spouse's benefit hereunder shall commence on the
date the Participant's Disability Benefit would have commenced.
If a benefit is payable under Paragraph C.7(a), no benefit shall be
payable under this Paragraph C.7(b).
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APPENDIX D
SPECIFIC PROVISIONS FOR
STANADYNE SALARIED EMPLOYEES
D.1 Introduction. This Appendix D describes provisions applicable to each
Participant who is (a) receiving remuneration for personal services
rendered to an Employer (or would be receiving remuneration except for an
Authorized Leave of Absence), (b) classified as an executive,
administrative, sales supervisory, professional, technical, or office
Employee; (c) not included on a factory hourly payroll; (d) not covered by
a collective bargaining agreement; (e) employed at Stanadyne Automotive
Corporate Office, Tallahassee Plant, Jacksonville Plant, Washington Plant,
Garrett Plant, Melrose Park or the Windsor Plant; (f) not a participant in
any other qualified defined benefit plan sponsored by an Employer; (g) not
an independent contractor; and h) is not a leased employee as described in
Section 414(n)(2) of the Code, to the extent such provisions differ from
those in the body of this Plan document and from other Appendices.
D.2 Appendix Definitions. The definitions below are only applicable to this
Appendix D.
(a) "Average Monthly Earnings" shall mean one-sixtieth (1/60) of
the total Earnings paid or credited to an Employee in the five
successive calendar years of Credited Service which yield the highest
such average. If an Employee retires or receives a distribution of
benefits on account of Plan termination or on account of the required
minimum distribution rules under Section 401(a)(9) of the Code with
any
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<PAGE> 108
period of his Credited Service for which benefits are computed which
is less than 5 years, than his Average Monthly Earnings shall mean
one-twelfth (1/12) of the Employee's Earnings during the applicable
period of Credited Service for which his Accrued Benefit is being
computed divided by the number of Years (including fractional parts
of a year) of Credited Service.
(b) "Earnings" shall mean the sum of the following:
(i) the total compensation paid to a Participant by an Employer and
before February 10, 1989 by the Prior Employer for personal
services during periods of Credited Service, excluding any
Credited Service accrued under Paragraph 2.4(g), plus
(ii) any pre-tax contributions made at the Participant's election to
a qualified cash or deferred arrangement as defined in Section
401(k) of the Code and any pre-tax contributions made under a
cafeteria plan as defined under Section 125 of the Code
sponsored by an Employer or before February 10, 1989 by the
Prior Employer, plus
(iii) such considered compensation for a period of Authorized Leave of
Absence (if any) as shall be credited in accordance with the
rules of uniform application adopted by the Committee.
Compensation received by an Employee through an insured program
sponsored by an Employer shall be excluded from Earnings.
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<PAGE> 109
(iv) Notwithstanding the foregoing, a Participant's Earnings shall not
include the amount of any payments made to such Participant under
a management incentive program or agreement with the Employer
which by its own terms excludes payments therefrom from the
definition of Earnings under the Plan.
For all Plan Years, beginning after December 31, 1988, but prior to
January 1, 1994, Earnings shall not include any amount in excess of $200,000,
or such higher amount as permitted under Section 401(a)(17) of the Code and
related regulations. Notwithstanding the foregoing, the Accrued Benefit of a
Participant shall never be less than his or her Accrued Benefit determined as
of December 31, 1988.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Earnings of each Participant
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner of Internal Revenue for increases in the cost of
living in accordance with Section 401(a)(17)(B) of the Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding 12
months, over which Earnings are determined (determination period) beginning in
such calendar year. If a determination period consists of fewer than 12 months,
the OBRA '93 annual compensation limit will be multiplied by a fraction, the
numerator of which is the number of months in the determination period, and the
denominator of which is 12.
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For Plan Years beginning on or after January 1, 1994, any reference in this
Plan to the limitation under Section 401(a)(17) of the Code shall mean the OBRA
'93 annual compensation limit set forth in this provision.
If Earnings for any prior determination period is taken into account in
determining a Participant's benefits accruing in the current Plan Year, the
Earnings for that prior determination period is subject to the OBRA '93 annual
compensation limit in effect for that prior determination period. For this
purpose, for determination periods beginning before the first day of the first
Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
For those Participants who are affected by the limitations of Code Section
401(a)(17), his fresh-start benefit will be the sum of his accrued benefit,
determined as of December 31, 1993, plus his accrued benefit determined with
respect to the current benefit formula as applied to the Participant's years of
credited service after December 31, 1993.
(c) "Employer" shall mean Stanadyne Automotive Corp. and any other
Affiliate Company or successor Company that duly adopts the Plan with
the consent of the Board.
(d) "Primary Social Security Benefit" shall mean the monthly amount
available to the Participant at age 65 determined under the provisions
of Title II of the Social Security Act in effect at the time of his
termination of employment without regard to any increase in the wage
base or benefit levels that take effect after his date of termination
of employment, subject to the following:
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(i) If retirement is subsequent to age 65, the Participant's Primary
Social Security Benefit shall be determined without regard to
any increases in the wage base or benefit levels occurring after
his 65th birthday, or any increases resulting from the delayed
commencement of Social Security benefit payments beyond age 65.
(ii) If employment terminates prior to eligibility for Early
Retirement, the Participant's Primary Social Security Benefit
shall be calculated by assuming continuation of his Earnings
until age 65 at the same rate as in effect at termination of
employment. If employment terminates after eligibility for
Early Retirement, the Participant's Primary Social Security
Benefit shall be estimated by assuming no further Earnings.
However, if employment terminates because of Disability and the
Participant qualifies for a Disability Insurance Benefit under
the Social Security Act, the Primary Social Security Benefit
shall be the monthly amount payable as a Disability Insurance
Benefit.
(iii) If records of a Participant's compensation for any years prior
to termination of employment or retirement are not reasonably
accessible from the records of the Employer, then for the
purposes of calculating a Primary Social Security Benefit
hereunder, the amount of compensation for such years shall be
assumed. The assumed compensation for any given year shall be
equal to the Participant's compensation in the earliest calendar
year for
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<PAGE> 112
which compensation records are available, reduced on a
compounded basis by 6% for each year that the year in question
precedes the earliest year for which compensation records are
available. In lieu of such assumed compensation, actual wages
will be used if, within the time period described below, a
Participant furnishes the Committee with an accurate record of
his actual wages. The Committee shall notify a Participant of
his right to provide the Committee with an accurate record of
his actual wages and the Participant shall have 180 days from
the later of his termination of employment with all Employers
and Affiliates or the date of such Committee notification, to
furnish the accurate record of his actual wages.
(iv) The Committee may adopt rules which do not conflict with the
previous provisions of this subsection, but which govern the
computation of a Primary Social Security Benefit hereunder, and
the fact that an Employee does not actually receive such amount
from the Social Security Administration because of failure to
apply or continuance of work, or for any other reason, shall be
disregarded.
(e) "Prior Plan" shall mean the Stanadyne, Inc. Salaried Pension
Plan as it existed on February 9, 1989.
(f) "Retained Participant" shall mean a Participant who is not
covered by a collective bargaining agreement and had completed more
than 500 Hours of Service
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immediately preceding his temporary inclusion in a factory hourly
payroll of an Employer.
(g) "Transferred Participant" shall mean any person who immediately
preceding his becoming an Employee eligible for the Plan (a) was not
covered by a collective bargaining agreement, (b) was employed by an
Employer or Stanadyne Inc. ("Prior Employer") in a position ineligible
to participate in this Plan, and (c) had completed more than 500 Hours
of Service with such Employer or Prior Employer.
D.3 Service and Participation
(a) Each Eligible Employee on February 10, 1989, who was a Participant
under the Prior Plan on February 9, 1989, became a Participant of the
Prior Salaried Plan on February 10, 1989.
(b) Any Retained Participant shall continue to participate in this Plan
for a period of time not to exceed the period for which he accrues
Credited Service under Paragraph 2.4(g). Thereafter he shall not
participate in this Plan unless and until he again becomes eligible to
participate pursuant to the other provisions of Article II.
(c) Years of Service shall be accumulated for former participants of the
Prior Salaried Plan, in addition to Paragraph 2.3, as follows:
if an Employee became a participant in the Prior Salaried Plan
on February 10, 1989 and was a member of the Prior Plan of
February 9, 1989, such Employee was credited with the Years of
Service and fractions thereof he
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had accumulated under the Prior Plan on February 9, 1989 in
accordance with the provisions of the Prior Plan on such date.
In no event will an Employee receive duplicate service credit
for any period of employment.
(d) Years of Credited Service shall be accumulated for former participants
of the Prior Salaried Plan, in addition to Paragraph 2.4, as follows:
(i) if an Eligible Employee became a Participant on February 10,
1989 and was a member of the Prior Plan on February 9, 1989,
such Employee was credited with the Years of Credited Service
and fractions thereof he had accumulated under the Prior Plan on
February 9, 1989 in accordance with the provisions of the Prior
Plan on such date. In no event will an Employee receive
duplicate service credit for any period of employment;
(ii) for periods not already counted in (i) above, one Year of
Credited Service shall be earned by an Eligible Employee for
each calendar year in which he has 1,000 or more Hours of
Service;
(iii) for periods not already counted in (i) or (ii) above, a
fractional Year of Credited Service (the numerator of which
fraction is the number of Years of Service actually credited to
the Employee during the Year of Service, and the denominator of
which is 1,000 Hours of Service to the nearest 12th) shall be
earned by an Eligible Employee for each calendar year in which
he is a Participant and has less than 1,000 Hours of Service as
provided under Table A;
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(iv) the determination of Years and fractional Years of Credited
Service shall also include (1) the first six months of a period
of absence due to sick leave, (2) a period of Authorized Leave
of Absence provided that the Participant returns to employment
within the period of Authorized Leave of Absence, and (3) the
first six months of a Disability period and thereafter, the
portion of such continuing Disability period which does not
exceed the Participant's Years of Credited Service on the date
the Disability began;
(v) if an Employee incurs a number of consecutive Breaks in Service
which exceeds the greater of five (5) or the number of his Years
of Service before such Breaks in Service, he shall lose his
previously accumulated Years of Credited Service, prior to his
initial Break in Service, he was vested in retirement benefits
under a defined benefit plan maintained by the Prior Employer or
under this Plan in accordance with Paragraph 6.2. Prior Years of
Credited Service shall only be restored under this Paragraph
D.3(d)(v) after the Employee has completed 1,000 Hours of
Service in a 12 month period following his Break in Service;
(vi) a Transferred Participant shall be granted an additional Year of
Credited Service for each Year of Credited Service accrued under
subsections (i), (ii), (iii) and (iv) of this Paragraph D.3(d),
except that no such additional Year of Credited Service shall be
granted for any Year of Credited Service
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<PAGE> 116
accrued under this Plan for which the Transferred Participant
received Credited Service as a Retained Participant, nor shall
the Participant's total Years of Credited Service exceed in the
aggregate his Years of Service; and
(vii) a Retained Participant shall continue to accrue Credited Service
for a period of time not to exceed the number of Years of
Credited Service accrued under subsections (i), (ii), (iii) and
(iv) of this Paragraph D.3(d) reduced by any such Years of
Credited Service for which additional Credited Service was
granted under subsection (iv) of this Paragraph D.3(d).
D.4 Normal Retirement Income Participants who were former participants under
the Prior Salaried Plan or who meet the eligibility criteria under
Paragraph D.1, shall be eligible for a benefit as follows:
(a) Subject to the minimum benefit provisions of Paragraph D.4(b) and the
maximum benefits limitations under Paragraph 3.3, a Participant who
retires on his Normal Retirement Date will be entitled to receive a
monthly retirement income on the life annuity basis described in
Paragraph 8.4 equal to the greatest of (i), (ii) or (iii) below, each
of which shall be reduced by (iv) below, where
(i) is $15.00 multiplied by the Participant's Years of Credited
Service ($14.00 multiplied by the Participant's Years of Credited
Service for Participants who terminated employment prior to July
1, 1989);
(ii) is, but only with respect to a Participant who was a member of
the Prior Plan on December 31, 1984, 1.4% of the Participant's
Average Monthly
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Earnings multiplied by his Years of Credited Service, less 1-1/4
% of his Primary Social Security Benefit, multiplied by the
Years of Credited Service he would have had at Normal Retirement
Date (up to a maximum of 40 such years) multiplied by a
fraction, the numerator of which is his Years of Credited
Service and the denominator of which is the Credited Service he
would have had at Normal Retirement Date;
(iii) is 1.7% of the Participant's Average Monthly Earnings multiplied
by his Years of Credited Service up to a maximum of 30 such
years plus 1% of the Participant's Average Monthly Earnings,
multiplied by his years of Credited Service in excess of 30
years, less 1.667% of his Primary Social Security Benefit,
multiplied by his Years of Credited Service up to a maximum of
30 such years; and
(iv) is (I) plus (II) where
(I) is a portion of the monthly benefit payable to a
Transferred Participant on a single-life annuity basis at
his Normal Retirement Date from any other qualified defined
benefit pension plan sponsored by an Employer or Prior
Employer. Such portion shall be based on the number of
Years of Credited Service under such other plan which is
equal to the number of additional Years of Credited Service
granted to the Participant under Paragraph D.3(d)(vi),
provided however that if the amount determined under
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(i), (ii) or (iii) above for such additional Years of
Credited Service is less than the monthly pension from such
other plan, the amount under this subsection (a)(iv)((I)
shall be the amount credited under (i), (ii), or (iii)
above for such Credited Service; and
(II) is the monthly benefit, if any, payable to the Participant
on his Normal Retirement Date on the life annuity basis
from the Prior Plan under the Lincoln National Group
Annuity Contract Number GA-5844 issued to the Prior
Employer. The offset hereunder shall not cause a
Participant's Accrued Benefit to be reduced below $0.
For those Participants who have incurred a Break in Service under this Plan
or the Prior Plan, the retirement income payable to such Participant shall
be subject to Paragraph 2.5 (e). The Participant's annual retirement income
is subject to a reduction if a form of payment other than a life annuity is
elected.
(b) Minimum Benefits.
(i) Under no circumstances shall the benefit under this Plan for a
Retained Participant or Transferred Participant be less than the
benefit he would have been entitled to receive had he
participated in any other qualified defined benefit pension plan
adopted by an Employer in which he would otherwise have been
eligible to participate.
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<PAGE> 119
(ii) For any Participant who was a member of the Prior Plan on
December 31, 1978, the combined retirement income from the Plan
and the Prior Plan on the Participant's Normal Retirement Date
shall not be less than the accrued benefit under the Prior Plan
as of such date.
(iii) For any Participant who had attained age 57 and had completed at
least 10 Years of Service as of December 31, 1978, the combined
retirement income from the Plan and the Prior Plan on the
Participant's Normal Retirement Date shall not be less than the
benefit he would have received under the benefit formula in
effect under the Prior Plan on December 31, 1978.
D.5 Early Retirement Income
Participants who were former participants under the Prior Salaried Plan or
who meet the eligibility criteria under Paragraph D.1, shall be eligible
for a benefit as follows:
(a) A Participant who retires on an Early Retirement Date may elect to
receive either an immediate Early Retirement Income or a deferred
retirement income commencing on the first day of any month up to his
Normal Retirement Date. The annual amount of the Early Retirement
Income on the life annuity basis described in Paragraph 8.4 shall be
equal to (i) multiplied by (ii) minus (iii) where:
(i) is equal to the largest Normal Retirement Age benefit determined
under Paragraphs D.4(a)(i), (ii) or (iii) based on Credited
Service, Average
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<PAGE> 120
Monthly Earnings and Primary Social Security Benefit calculated
on the Early Retirement Date;
(ii) is 100% reduced by 1/2 of 1% for each month between the Annuity
Starting Date selected by the Participant and the first of the
month following his 62nd birthday; and
(iii) is the monthly benefit, if any, that would be payable to the
Participant on the life annuity basis from the Prior Plan under
the Lincoln National Group Annuity Contract Number GA-5844 if
such benefit commenced on the same Annuity Starting Date
selected for the commencement of benefits from this Plan. Such
determination shall be made irrespective of the actual starting
date of benefits under the Prior Plan or group annuity contract.
D.6 Vested Termination
For purpose of determining a Participant's Accrued Benefit upon
termination of employment, only the provisions of the Plan in effect at
the time of such termination shall be considered, except that the benefit
under Paragraphs 3.2 and D.4 of this Appendix shall be determined based on
the Average Monthly Earnings at the time of termination of employment, and
the Credited Service he would have had assuming he remained in employment
until his Normal Retirement Date, with such benefit multiplied by a
fraction, the numerator of which is Credited Service and the denominator
of which is the Credited Service he would have had if he remained in
employment to Normal Retirement Date.
D.7 Preretirement Death Benefits
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D.7.1 Death Before Termination of Employment.
(a) If a Participant, who is an Employee, has attained age 57, is vested
in a benefit pursuant to Paragraph 6.2 and dies before any Plan
benefit commences to him, a monthly retirement benefit shall be
payable to his surviving Spouse. The amount of such benefit shall be
determined as if:
(i) the Participant had retired and elected retirement income
payments to begin on the first day of the month coinciding with
or next following his date of death; and
(ii) his Accrued Benefit was payable in the normal form described
under Paragraph 8. 1 (b) with his Spouse as Contingent Annuitant,
entitled to receive 50% of the amount of the Participant's
retirement income subject to any applicable early payment
reductions under Paragraph D.5.
The monthly retirement income payable to the Spouse pursuant to this
Paragraph D.7.1 shall not be less than $50 reduced by any death benefits
payable to the Spouse from the Lincoln National Group Annuity Contract
Number GA-5844.
Unless the automatic lump sum provisions of Paragraph 13.6 are applicable,
payments hereunder shall begin to the Spouse on the first day of the month
following the Participant's death and shall continue to be paid until the
beginning of the month in which the Spouse dies.
If a Participant dies after his Normal Retirement Date, but prior to his
Postponed Retirement Date, his Spouse shall receive the benefit described
above. If a Spouse's
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benefit is payable in accordance with the preceding sentence, no benefits
will be payable under Article VIII.
(b) If a Participant who is an Employee has not attained age 57, is vested
in a benefit pursuant to Paragraph 6.2 and dies before any Plan
benefit commences to him, a monthly benefit will be payable to his
surviving Spouse. The monthly retirement income payable to the Spouse
pursuant to this Paragraph D.7.1(b) shall not be less than $50 reduced
by the monthly death benefit, if any, payable to such Spouse under the
Lincoln National Annuity Group Contract Number GA-5844. If greater,
the amount of such benefit shall be determined as follows:
(i) if the Employee dies after attaining age 50, his Accrued Benefit
shall be reduced by the sum of (A) and (B) where:
(A) is 1/3 of 1% for each month between the date the benefit
hereunder commences and the date the Participant would have
attained age 57; and
(B) is 30%.
The Accrued Benefit reduced as indicated above, but not reduced
in any other manner for early commencement, shall be converted to
the Actuarial Equivalent normal form for a married Participant
under Paragraph 8.1(b). Unless the automatic lump sum provisions
of Paragraph 13.6 are applicable, the 50% Contingent Annuitant's
portion of such benefit shall be payable monthly to the Spouse
beginning with the month following the
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Participant's death. Such benefit shall continue to be paid
until the beginning of the month in which the Spouse dies.
(ii) if the Employee dies prior to age 50, his Accrued Benefit as of
his date of death shall be reduced in accordance with paragraphs
(A) and (B) of paragraph (i) above as if he had attained age 50
on the date of his death. The Accrued Benefit shall not be
reduced in any other manner for early commencement but shall be
converted to the Actuarial Equivalent normal form for a married
Participant under Paragraph 8.1(b). Unless the automatic lump
sum provisions of Paragraph 13.6 are applicable, the 50%
Contingent Annuitant's portion of such benefit shall be payable
monthly to the Spouse beginning with the month following the
month in which the Participant would have attained age 50. Such
benefit shall continue to be paid until the beginning of the
month in which the Spouse dies.
D.7.2 Death After Termination of Employment. If a Participant is vested in a
benefit pursuant to Paragraph 6.2, terminates from the Employer for
reasons other than death and dies before Plan benefits commence, a monthly
retirement benefit shall be payable to his Spouse. The monthly retirement
income payable to the Spouse, pursuant to this Paragraph D.7.2, shall
never be less than $50 reduced by the death benefits, if any, payable to
such Spouse under the Lincoln National Group Annuity Contract Number
GA-5844. If greater, the amount of such benefit shall be determined as if:
(a) the Participant had survived to the later of age 57 or his
actual date of death;
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(b) retired electing immediate payment of his Accrued Benefit under the
normal form described in Paragraph 8.1(b), with his Spouse as the
Contingent Annuitant, entitled to receive 50% of the amount of the
Participant's retirement income; and then
(c) died.
The amount of the Participant's Accrued Benefit upon which the Spouse's
benefit is determined in accordance with Paragraph D.7.2(b) shall be
adjusted pursuant to Paragraph D.5 or 6.3, as applicable, based on the
age the Participant would have attained on the date the Spouse's benefit
commences to be paid. Unless the automatic lump sum provisions of
Paragraph 13.6 are applicable, payments hereunder shall begin to the
Spouse on the first day of the month following the later of the
Participant's death or the date he would have attained age 57, whichever
is applicable, and shall continue to be made on the first day of each
month thereafter during the Spouse's lifetime.
If a benefit is payable under Paragraph D.7.1, no benefit shall be
payable under this Paragraph D.7.2.
D.7.3 Grandfathered Death Benefit. Notwithstanding the provisions of
Paragraphs D.7.1 and D.7.2, in the case of a Participant who was a member
of the Prior Plan on December 31, 1983 and dies prior to the commencement
of benefits from the Plan or Prior Plan, if the provisions of the second
paragraph of Section 6.6 of the Prior Plan as in effect on December 31,
1983 will result in a greater benefit for such Participant's surviving
Spouse
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<PAGE> 125
based on the Participant's Credited Service as of December 31, 1983,
then such surviving Spouse shall be entitled to such greater benefit
upon the Participant's death in lieu of the benefits provided under
Paragraphs D.7.1 and D.7.2.
D.7.4 Death Benefits After Retirement Income Commences. If a Participant dies
after his Annuity Starting Date, death benefits, if any, shall be payable
to the Participant's surviving Spouse strictly in accordance with the form
of benefit which had been in effect prior to the Participant's death,
except as provided below.
Notwithstanding any other provision of the Plan, if a Participant was a
member of the Prior Plan on December 31, 1983 and he commences to receive
his retirement income in the form of a single life annuity described in
Paragraph 8.4 and then dies, a special minimum death benefit may apply. If
the provisions of the third and fourth paragraphs of Section 6.6 of the
Prior Plan in effect on December 31, 1983 will result in a death benefit
for such Participant's surviving Spouse based on such Participant's
Credited Service as of December 31, 1983, then such Spouse will be
entitled to such benefit hereunder upon the death of the Participant.
D.8 Grandfathered Optional Form of Payment for Certain Participants
Subject to the provisions of Paragraph 8.1, and to the extent consistent
with Code Section 401(a)(9) and the regulations thereunder if a
Participant in this Plan who was a Participant in the Prior Plan as of
December 31, 1983 made an optional election under Section 8.1 of the Prior
Plan as in effect on December 31, 1975 and did not revoke such election in
accordance with the first paragraph of Section 6.6 of the Prior Plan as in
effect on December 31, 1983, then such optional
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<PAGE> 126
election shall be deemed a valid election under this Plan and shall continue in
effect or become effective and be revocable subject to and in accordance with
the first paragraph of Section 6.6 of the Prior Plan as in effect on December
31, 1983.
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APPENDIX E
STANADYNE AUTOMOTIVE CORP.
HOURLY PENSION PLAN
CONTINGENT ANNUITANT OPTION REDUCTION FACTORS
NORMAL FORM LIFE ANNUITY
<TABLE>
<CAPTION>
Contingent Annuitant Option
---------------------------
100% 75% 50%
Continued Continued Continued
Optional Form to CA to CA to CA
<S> <C> <C> <C>
Factor to be used for Employee with a
Contingent Annuitant the same age as
the Participant .80 .84 .88
Increase (Decrease) for each year
Contingent Annuitant is older
(younger) than Participant .01 .008 .006
Minimum Factor .68 .74 .81
Maximum Factor .91 .93 .95
</TABLE>
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<PAGE> 128
APPENDIX D-1
------------
STANADYNE AUTOMOTIVE CORP.
PENSION PLAN
CONTINGENT ANNUITANT OPTION REDUCTION FACTORS
NORMAL FORM LIFE ANNUITY
<TABLE>
<CAPTION>
Contingent Annuitant Option
---------------------------
100% 75% 50%
Continued Continued Continued
Optional Form to CA to Ca to CA
<S> <C> <C> <C>
Factor to be used for Employee with a
Contingent Annuitant the same age as
the Participant .80 .84 .88
Increase (Decrease) for each year
Contingent Annuitant is older
(younger) than Participant .01 .008 .006
Minimum Factor .68 .74 .81
Maximum Factor .91 .93 .95
</TABLE>
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<PAGE> 129
APPENDIX D-2
------------
STANADYNE AUTOMOTIVE CORP.
PENSION PLAN
UNITS COVERED BY THE PLAN AS REFERRED TO IN PARAGRAPH 1.20
Stanadyne Automotive Corporate Office
Tallahassee Plant
Jacksonville Plant
Washington Plant
Garrett Plant
Melrose Park
Windsor Plant
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<PAGE> 130
TABLE A
FRACTIONAL YEAR TABLE
Benefit and Vesting Accrual
1,000 hours to the nearest 1/12 of a year
<TABLE>
<CAPTION>
SERVICE AND CREDITED SERVICE
----------------------------
Months Nearest Decimal
Worked Hours 1/2 of a Year Equivalent
------ ----- ------------- ----------
<S> <C> <C> <C>
1 190 1 .167
2 380 2 .417
3 570 3 .583
4 760 4 .750
5 950 5 .917
6 1,140 6 1.000
7 1,330 7 1.000
8 1,520 8 1.000
9 1,710 9 1.000
10 1,900 10 1.000
11 2,090 11 1.000
12 2,280 12 1.000
</TABLE>
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<PAGE> 1
EXHIBIT 10.6
STANADYNE AUTOMOTIVE CORP.
SAVINGS PLUS PLAN
RESTATED AS OF JANUARY 1, 1993
<PAGE> 2
PREAMBLE
Effective February 10, 1989, Stanadyne Automotive Corp. (the "Employer")
established a retirement plan referred to as the Stanadyne Automotive Corp.
Savings Plus Plan (the "Plan") as provided herein. This Plan is intended to be a
continuation of the Stanadyne, Inc. Savings Plus Plan for those employees of
Stanadyne, Inc. who became Employees of the Employer on February 10, 1989. A
Trust Agreement has been adopted by the Employer and is intended to form a part
of this Plan. The purpose of this Plan is to encourage Employee savings for
Retirement and to provide a tax qualified facility for accumulation of funds to
be used to provide benefits payable to an Employee upon his retirement, death,
termination of employment, or on certain other occasions. The benefits provided
by this Plan will be in addition to the benefits Employees are entitled to under
any other programs of the Employer.
This Plan constitutes an amendment to, restatement of, and continuation of the
Plan as it was effective February 10, 1989, and as amended from time to time
thereafter. This amendment and restatement is effective January 1, 1993, except
to the extent otherwise specifically provided herein.
It is intended that this Plan be qualified under Section 401(a) of the Internal
Revenue Code of 1986 (the "Code"), as amended from time to time, and meet the
requirements of Code Section 401(k) as a qualified cash or deferred arrangement.
It is also intended that the Trust be exempt from taxation as provided under
Code Section 501(a).
If the Plan shall fail to initially qualify as amended under the applicable Code
Sections, it shall be null and void, and all contributions which may have been
made hereunder shall be treated in accordance with Section 4.8.
<PAGE> 3
ARTICLE I
DEFINITIONS
The following words and phrases when used in the Plan shall have the following
meanings, unless a different meaning is plainly required by the context:
I.1 "ACCOUNT" shall mean the credit balance of a Member or Former Member in
the Trust Fund represented by his Before-Tax Contribution Account,
Employer Matching Contribution Account, and his Prior Plan Contribution
Account, if any.
I.2 "AFFILIATED EMPLOYER" shall mean any corporation which is included with
the Employer in a controlled group of corporations, as determined in
accordance with Code Section 414(b), any unincorporated trade or
business which, as determined under regulations of the Secretary of the
Treasury, is under common control of the Employer under Code Section
414(c), any organization that includes the Employer, which is a member
of an affiliated service group, as defined in Code Section 414(m), and
any other entity required to be aggregated with the Employer pursuant
to regulations under Code Section 414(o). For the purposes of Sections
4.5 and 4.6, Code Sections 414(b) and (c) shall be applied as modified
by Code Section 415(h).
I.3 "BEFORE-TAX CONTRIBUTION" shall mean a salary reduction contribution
made to the Plan on behalf of a Member pursuant to Article III.
I.4 "BEFORE-TAX CONTRIBUTION ACCOUNT" shall mean a Member's interest in the
Trust Fund attributable to Before-Tax Contributions made to the Plan,
including investment earnings thereon.
I.5 "BENEFICIARY" shall mean the person or persons designated by a Member
or Former Member to receive benefits under the Plan in the event of the
Member's death. If the Member is married and designates someone other
than his legal Spouse, his Beneficiary designation must include the
written consent of his legal Spouse at the time the designation is made
in order to be valid. A former Spouse's consent shall not be binding on
a subsequent Spouse.
Such written consent must approve the specific Beneficiary designated,
acknowledge the effect of such designation, and be witnessed by a
notary public or a Plan representative. If it is established to the
satisfaction of the Committee that the Member has no Spouse, or that
the Spouse's consent cannot be obtained because the Spouse cannot be
located, or because of such other circumstances as may be prescribed in
regulations issued pursuant to Code Section 417, such written consent
<PAGE> 4
shall not be required. If no valid Beneficiary designation is in effect
at the time of the Member's death, Section 7.4 shall apply.
I.6 "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any regulations issued thereunder. Reference to any
Code Section shall include any successor provision thereto.
I.7 "COMMITTEE" shall mean the person or persons designated by the Employer
to administer the Plan in accordance with Article XII.
I.8 "COMPENSATION" shall mean the total remuneration paid by a
Participating Employer to an Employee which would be reportable on the
Employee's Federal Income Tax Withholding Statement (Form W-2) during
the period considered Service while a Member in a Plan Year; plus for
any pay period during which a Member is making Before-Tax Contributions
hereunder, the Before-Tax Contributions made for such pay period and
salary deferrals made by the Employee to a plan maintained by a
Participating Employer which meets the requirements of Code Section 125
for such pay period. Such remuneration shall include base pay, bonuses,
commissions, short-term disability pay, shift differential premiums,
and incentive pay paid by the Employer, but shall exclude workers'
compensation amounts, severance pay, and token bonus amounts.
A Member's Compensation taken into account under the Plan for any Plan
Year shall not exceed $200,000, or such amount as indexed pursuant to
Code Sections 401(a)(17) and 415(d) and the applicable regulations
thereunder. For Plan Years beginning after December 31, 1993, a
Member's Compensation taken into account under the Plan for any Plan
Year shall not exceed $150,000, or such amount as indexed pursuant to
Code Section 401(a)(17).
I.9 "DIRECT ROLLOVER" means a payment by the Plan to the Eligible
Retirement Plan specified by the Member or Payee.
I.10 "EFFECTIVE DATE" shall mean January 1, 1993 for this restatement.
I.11 "ELIGIBLE EMPLOYEE" shall mean an Employee who is included in the
eligible class described in Section 2.1.
I.12 "ELIGIBLE RETIREMENT PLAN" means an individual retirement account
described in Code Section 408(a), an individual retirement annuity
described in Code Section 408(b), an annuity plan described in Code
Section 403(a), or a qualified trust described in Code Section 401(a),
that accepts the Member's or Payee's Eligible Rollover Distribution.
However, in the case of an Eligible Rollover Distribution to the
surviving Spouse, an Eligible Retirement Plan is an individual
retirement account or individual retirement annuity.
<PAGE> 5
I.13 "ELIGIBLE ROLLOVER DISTRIBUTION" means any distribution of all or any
portion of the balance to the credit of the Member, except that an
Eligible Rollover Distribution does not include (i) any distribution
that is one of a series of substantially equal periodic payments (not
less frequently than annually) made for the lives (or life
expectancies) of the Member and the Member's designated Beneficiary, or
for a specified period of 10 years or more; (ii) any distribution to
the extent such distribution is required under Code Section 401(a)(9);
and (iii) the portion of any distribution that is not includible in
gross income.
I.14 "EMPLOYEE" shall mean any common-law Employee of the Employer or an
Affiliated Employer.
A leased employee as described in Code Section 414(n)(2) shall be
considered an Employee only to the extent required by Section 16.6.
I.15 "EMPLOYER" shall mean Stanadyne Automotive Corp., a Delaware
corporation, or its successor or successors.
I.16 "EMPLOYER MATCHING CONTRIBUTION" shall mean a contribution by a
Participating Employer made to the Plan on behalf of a Member pursuant
to Article IV.
I.17 "EMPLOYER MATCHING CONTRIBUTION ACCOUNT" shall mean a Member's interest
in the Trust Fund attributable to Employer Matching Contributions made
to the Plan, including investment earnings thereon.
I.18 "EMPLOYMENT DATE" shall mean the first day for which an Employee
receives credit for an Hour of Service.
I.19 "ENTRY DATE" shall mean any January 1 and July 1.
I.20 "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time. References to any Section of ERISA shall
include any successor provision thereto.
I.21 "FIDUCIARY" shall mean any person who (i) exercises any discretionary
authority or discretionary control respecting the management of the
Plan, assets held under the Plan, or disposition of Plan assets; (ii)
renders investment advice for a fee or other compensation, direct or
indirect, with respect to assets held under the Plan or has any
authority or responsibility to do so; or (iii) has any discretionary
authority or discretionary responsibility in the administration of the
Plan. Any person who exercises authority or has responsibility of a
fiduciary nature as described above shall be considered a Fiduciary
under the Plan.
<PAGE> 6
I.22 "FORMER MEMBER" shall mean an individual who was a Member, has
terminated employment with the Employer and all Affiliated Employers,
and has not received a total distribution of his vested Account under
the Plan.
I.23 "HIGHLY COMPENSATED EMPLOYEE" shall mean each Employee who at any time
during the current or preceding Plan Year:
(a) was a 5% owner (as defined in Code Section 416(i)(1)) of the
Employer or an Affiliated Employer;
(b) received compensation from the Employer or an Affiliated Employer
in excess of $75,000 (as adjusted by the Secretary of the
Treasury at the same time and in the same manner as under Code
Section 415(d));
(c) received compensation from the Employer or an Affiliated Employer
in excess of $50,000 (as adjusted by the Secretary of the
Treasury at the same time and in the same manner as under Code
Section 415(d)) and was in the group consisting of the top 20% of
all Employees when ranked on the basis of compensation received
during such Plan Year; or
(d) was at any time an officer of the Employer or Affiliated Employer
who received compensation in excess of 50% of the amount in
effect under Code Section 415(b)(1)(A) for such Plan Year.
Notwithstanding the foregoing, an Employee not described in paragraph
(b), (c), or (d) above for the preceding Plan Year shall only be a
Highly Compensated Employee for the current Plan Year if he is
described in paragraph (b), (c) or (d) for the current Plan Year and is
one of the top 100 Employees when ranked by compensation for such Plan
Year. For purposes of this Section, compensation shall mean
compensation as defined in Code Section 414(q)(7).
I.24 "HIGHLY COMPENSATED GROUP" shall mean the group of Highly Compensated
Employees who are also Eligible Employees as defined herein.
I.25 "HOUR OF SERVICE" shall mean:
(a) each hour for which an Employee is directly or indirectly paid or
entitled to payment by the Employer or any Affiliated Employer
for the performance of duties;
(b) each hour for which an individual is directly or indirectly
paid or entitled to payment by the Employer or any Affiliated
Employer (including payments made or due from a trust fund or
insurer to which the Employer or Affiliated Employer
contributes or pays premiums) on account of a period of time
<PAGE> 7
during which no duties are performed (irrespective of whether
the employment relationship has terminated) due to periods of
vacation, holidays, illness, incapacity, disability, layoff,
jury duty, military duty, or leave of absence; provided that:
(i) no more than 501 Hours of Service shall be credited under
this paragraph (b) to an individual on account of any
single continuous period during which the individual
performs no duties; and
(ii) Hours of Service shall not be credited under this paragraph
(b) to an individual for a payment which solely reimburses
the individual for medically related expenses incurred by
the individual or which is made or due under a plan
maintained solely for the purpose of complying with
applicable workers' compensation, unemployment compensation
or disability insurance laws; and
(c) each hour not already included under paragraph (a) or (b) above
for which back pay, irrespective of mitigation of damages, is
either awarded or agreed to by the Employer or by an Affiliated
Employer; provided that crediting of Hours of Service under this
paragraph (c) with respect to periods described in paragraph (b)
above shall be subject to the limitation therein set forth.
The number of Hours of Service to be credited under paragraph (b) or
(c) above on account of a period during which an Employee performs no
duties, and the Plan Years to which Hours of Service shall be credited
under paragraph (a), (b), or (c) above shall be determined by the
Committee in accordance with Sections 2530.200b-2(b) and (c) of the
regulations of the U.S. Department of Labor.
Additionally, for purposes of Section 2.1, any period of leave under
the Family and Medical Leave Act of 1993 shall be treated as continued
Service to the extent necessary to prevent the occurrence of a One Year
Break in Service.
To the extent not credited above, Hours of Service will also be
credited at the rate of 8 hours for each day during periods of military
duty (as required by applicable law), layoff, and approved leave of
absence.
I.26 "MEMBER" shall mean an Employee who is either currently participating
in the Plan or who has an Account under the Plan.
I.27 "NONPARTICIPATING EMPLOYER" shall mean any Affiliated Employer which is
not a Participating Employer.
I.28 "ONE YEAR BREAK IN SERVICE" shall mean a computation period during
which an individual is credited with less than 501 Hours of Service.
For purposes of this
<PAGE> 8
Section 1.28, computation period shall mean the 12-month period
beginning on an Employee's Employment Date and ending on the
anniversary of such date, or any Plan Year which commences after his
Employment Date.
I.29 "PARENTAL ABSENCE" shall mean an Employee's absence from work which has
commenced after December 31, 1984 for any of the following reasons:
(a) the pregnancy of the Employee;
(b) the birth of the Employee's child;
(c) the adoption of a child by the Employee; or
(d) the need to care for the Employee's child immediately following
its birth or adoption.
I.30 "PARTICIPATING EMPLOYER" shall mean the specific locations of the
Employer and Affiliated Employers, as listed in Appendix A of the Plan.
I.31 "PAYEE" means a Member's or Former Member's surviving Spouse and a
Member's or Former Member's Spouse or former Spouse who is the
alternate payee under a qualified domestic relations order, as defined
in Code Section 414(p), are Payees with regard to the interest of the
Spouse or former Spouse.
I.32 "PLAN" shall mean the Stanadyne Automotive Corp. Savings Plus Plan, as
set forth in this document and as amended from time to time.
I.33 "PLAN YEAR" shall mean the period February 10, 1989 through December
31, 1989, and each 12-month period commencing on January 1 and ending
on the next following December 31 thereafter.
I.34 "PRIOR PLAN CONTRIBUTION ACCOUNT" shall mean a Member's interest in the
Trust Fund attributable to the account balance, if any, transferred
from the Stanadyne, Inc. Stock Ownership Plan to this Plan, including
investment earnings thereon.
I.35 "REEMPLOYMENT DATE" shall mean the day an Employee first completes an
Hour of Service following a Severance from Service, or, in the case of
an Employee on an approved leave of absence, the first day he returns
to work with the Employer or an Affiliated Employer.
I.36 "RETIREMENT" shall mean termination of employment for a reason other
than death after a Member has attained age 57 and has completed 10
Years of Service, as defined in the pension plan sponsored by the
Employer in which the Member participates.
<PAGE> 9
I.37 "SERVICE" shall mean all periods of employment with the Employer and
Affiliated Employers measured from the individual's Employment Date and
ending on such Employee's Severance from Service, and excluding any
period between his Severance from Service and his Reemployment Date, if
applicable, unless provided otherwise herein or in Section 1.38.
If an Employee leaves active Service to enter the Armed Forces of the
United States (i) through the operation of a compulsory military
service law; (ii) during a period of declared national emergency; or
(iii) pursuant to a military leave of absence granted by the Employer,
the period of his absence shall be counted as active Service; provided
the Employee returns to Service with the Employer within 90 days (or
such longer period as may be provided by law for the protection of
reemployment rights) after his discharge or release from active duty in
the Armed Forces of the United States, or within the period for which
such military leave of absence was granted by the Employer, as the case
may be.
An Employee who was employed by Stanadyne, Inc. on February 9, 1989,
who as of such date was either a member in the Stanadyne, Inc. Savings
Plus Plan, or was in a class of employees eligible to participate in
said plan, and who became an Employee of Stanadyne Automotive Corp.
prior to January 1, 1990, is eligible to become a Member hereunder
effective immediately upon employment with the Employer and service
under the Stanadyne, Inc. Savings Plus Plan for such an Employee shall
be considered Service under this Plan.
I.38 "SEVERANCE FROM SERVICE" shall mean the earliest of the following:
(a) the date on which the Employee resigns, is discharged, or retires
from Service with the Employer and all Affiliated Employers. If
such an individual has a Reemployment Date within 12 months of
his Severance from Service hereunder, his employment shall be
deemed to be continuous and no Severance from Service shall have
occurred;
(b) the date the Employee dies;
(c) the first anniversary of the date on which the Employee is laid
off, starts an authorized leave of absence, or in absent from
work for any other reason other than a Parental Absence; or
(d) the second anniversary of the date on which the Employee
commenced a Parental Absence, if such Employee has not yet
returned to work with the Employer or an Affiliated Employer.
<PAGE> 10
I.39 "SPOUSE" shall mean the legal Spouse or surviving Spouse of a Member as
determined in accordance with applicable state law. A former spouse
will be treated as the Spouse or surviving Spouse to the extent
required under a qualified domestic relations order, as defined in Code
Section 414(p).
I.40 "TRUST" shall mean the Stanadyne Automotive Corp. Savings Plus Plan
Trust, established to hold and invest contributions made under the Plan
for the exclusive benefit of the Employees included in the Plan and
from which benefits shall be distributed.
I.41 "TRUST AGREEMENT" shall mean the agreement between the Employer and a
Trustee, as provided for in Article XII.
I.42 "TRUST FUND" shall mean all assets held by the Trustee in accordance
with the Trust Agreement without distinction as to income or principal
and without regard to source.
I.43 "TRUSTEE" shall mean the individual, individuals, or institution
appointed by the Employer to act in accordance with the Trust
account. As of the Effective Date, The Northern Trust Company is
the Trustee.
I.44 "VALUATION DATE" shall mean March 31, June 30, September 30, and
December 31 through December 31, 1990, and the last day of each
calendar month thereafter, and any other date designated as a Valuation
Date by the Committee.
I.45 "YEAR OF SERVICE" means a 12-consecutive month period (computation
period) during which the Employee completes at least 1,000 Hours of
Service.
<PAGE> 11
ARTICLE II
PARTICIPATION
II.1 Eligibility to Participate. Each Employee on January 1, 1993 who was a
Member under the Plan on December 31, 1992, shall continue to be a
Member on January 1, 1993.
Each other Employee shall be an Eligible Employee upon satisfying all
of the following requirements:
(a) he is employed by a Participating Employer;
(b) he is classified as a non-union employee and if he is employed at
the Employer's Tallahassee or Melrose Park facilities, he is
regularly paid on a salaried rather than hourly basis; or
(i) he is covered by a collective bargaining agreement which
provides for his participation herein;
(c) he has completed a Year of Service, which for this purpose is
1,000 Hours of Service during:
(i) the 12-month period beginning on his Employment Date and
ending on the anniversary of such date; or
(ii) any Plan Year which commences after his Employment Date;
(d) he has a minimum of 6 months of Service; and
(e) he is not a "leased employee", as defined under Code Section
414(n)(2).
II.2 Commencement of Participation. Except as provided in Section 2.4, each
Eligible Employee shall become a Member (or if his participation has
terminated, shall again become a Member) on the Entry Date coinciding
with or next following the date on which he:
(a) meets the requirements of Section 2.1; and
(b) enrolls in the Plan by completing an election form to initiate
contributions pursuant to Article III. However, if an Eligible
Employee fails to enroll when first eligible to do so, such
Employee shall be eligible to enroll on any following Entry Date;
provided that he is then an Eligible Employee.
9
<PAGE> 12
II.3 Transfers. The following provisions shall govern in the case of an
Employee who changes employment status:
(a) In the event that an Eligible Employee directly transfers to
an ineligible class of Employees, he shall be deemed to
continue as a Member for all purposes of the Plan except that
he shall not be permitted to direct any further Before-Tax
Contributions on his behalf under the Plan nor shall he
receive any further Employer Matching Contributions unless he
again becomes an Eligible Employee. Such an Employee shall
continue to accrue Years of Service pursuant to Section 1.45.
(b) In the event that an Employee in an ineligible class transfers
to an employment classification as an Eligible Employee, his
Years of Service earned during his employment with all
Participating and Nonparticipating Employers shall be credited
under this Plan for purposes of meeting the eligibility
requirements of Section 2.1. Such Employee shall be eligible
to become a Member when he meets the requirements of Sections
2.1 and 2.2.
II.4 Reemployment of Terminated Employee or Resumption of Employment
Following Leave of Absence.
(a) A Former Member who terminates employment for any reason and
returns to work shall be eligible to participate in the Plan on
the first day of any pay period coinciding with or following his
Reemployment Date; provided that he is then an Eligible Employee.
(b) (i) An Employee who was not a Member of the Plan prior to
termination of employment or leave of absence may, upon
resumption of active employment with a Participating
Employer, elect to become a Member on the first day of any
pay period coincident with or following his Reemployment
Date; provided that he is then an Eligible Employee under
Section 2.1 and has not forfeited his prior Years of
Service under Section 2.4(c) below.
(ii) A former Employee who was not previously a Member of the
Plan will be treated as a new Employee if his prior Years
of Service are forfeited pursuant to Section 2.4(c) below.
In such case, the individual may elect to become a Member
in accordance with Section 2.2; provided that he is an
Eligible Employee as described in Section 2.1. Such an
individual will be required to complete a Year of Service
after his Reemployment Date to meet the service
requirements of Section 2.1(c).
10
<PAGE> 13
(c) For purposes of satisfying the service requirement of Section
2.1(c), if an Employee incurs a One Year Break in Service, he
shall lose his Years of Service accumulated before such break
only if the number of consecutive One Year Breaks in Service is
equal to the greater of 5 or the number of his Years of Service
earned before such One Year Break in Service.
(d) For purposes of this Section 2.4, Year of Service shall mean the
completion of 1,000 Hours of Service during the 12-month period
beginning on an Employee's Employment Date and ending on the
anniversary thereof or any Plan Year which commences after his
Employment Date.
II.5 Eligibility of Former Stanadyne, Inc. Employees. An Employee who
was employed by Stanadyne, Inc. on February 9, 1989, who as of such
date was either a member in the Stanadyne, Inc. Savings Plus Plan,
or was in a class of employees eligible to participate in said plan,
and who became an Employee of Stanadyne Automotive Corp. prior to
January 1, 1990, is eligible to become a Member hereunder effective
immediately upon employment with the Employer and service under the
Stanadyne, Inc. Savings Plus Plan for such an Employee shall be
considered Service under this Plan.
11
<PAGE> 14
ARTICLE III
MEMBER CONTRIBUTIONS AND MAXIMUM AMOUNTS
III.1 Before-Tax Contributions.
(a) Each Eligible Employee may elect, in writing, to authorize a
Participating Employer to reduce his Compensation and make a
corresponding Before-Tax Contribution to the Plan on his
behalf. Effective January 1, 1991, this reduction in
Compensation must be in any whole percentage from 2% to 17% of
such Compensation. Authorization to reduce Compensation shall
be in writing and shall be delivered to the Committee no later
than 30 days prior to the date as of which the Before-Tax
Contribution becomes effective, unless the Committee agrees to
accept a later authorization according to such uniform and
nondiscriminatory rules as it may adopt. Such Compensation
reduction shall continue unchanged until the Member terminates
employment, changes or suspends the Before-Tax Contribution in
accordance with Section 3.4 or 3.5, or transfers to the
employment of a Nonparticipating Employer or an ineligible
class of Employees.
(b) Except as provided under Section 2.4 for certain reemployed
Members, regular Before-Tax Contributions made under Section
3.1(a) shall commence on:
(i)an Entry Date if made before October 1, 1991; or
(ii)the first day of a calendar quarter if made on or after
October 1, 1991.
(c) In addition to regular Before-Tax Contributions under Section
3.1(a), a Member may also elect once each calendar quarter, on
such forms as the Committee may prescribe, to make a single sum
reduction in Compensation which has not yet been received, but
which is due to be paid in such quarter.
(d) The aggregate reduction of such Member's Compensation for the
Plan Year resulting from single sum and regular payroll
reductions shall be no more than 17% of his Compensation for such
Plan Year, and the rate of regular payroll reductions cannot be
less than 2% of Compensation.
Before-Tax Contributions made under this Section 3.1 shall be subject
to the limitations of Sections 3.8, 4.4, and 4.5.
III.2 After-Tax Contributions. After-tax contributions are not permitted.
III.3 Rollover Contributions. Rollover contributions are not permitted.
12
<PAGE> 15
III.4 Change in Level of Contributions. The Before-Tax Contribution
percentage as designated by the Member shall continue in effect,
notwithstanding any change in his Compensation, until he elects to
change such percentage. Subject to the requirements of Section 3.1, a
Member may increase or decrease the rate of such contributions
effective as of the first day of any calendar quarter by providing 30
days prior written notice to the Committee or such lesser notice as the
Committee may approve according to such uniform and nondiscriminatory
rules as it may adopt. Notice of any such change shall be given on a
form to be provided by the Committee for this purpose and shall be
signed by the Member and delivered to the Committee.
III.5 Suspension and Resumption of Contributions. A Member may suspend the
making of Before-Tax Contributions for a minimum of 3 months as of the
beginning of any pay period by providing at least 30 days prior written
notice to the Committee or such lesser notice as the Committee may
approve according to such uniform and nondiscriminatory rules as it may
adopt. Providing he is still an Eligible Employee, a Member who
suspends his contributions pursuant to the above rules may resume such
contributions effective as of the first day of any calendar quarter,
with 30 days prior written notice to the Committee or such lesser
notice as the Committee may approve according to such uniform and
nondiscriminatory rules it may adopt.
III.6 Change in Compensation. In the event of a change in the Compensation of
a Member, the percentage of his Compensation that he has authorized as
his Before-Tax Contribution shall be applied as soon as practicable
with respect to such changed Compensation without action by the Member.
III.7 Remittance of Member Contributions. Before-Tax Contributions will be
remitted to the Trustee by the Participating Employers as soon as
practicable (normally within 10 business days from the date such
amounts would otherwise be available to a Member in cash). All
Before-Tax Contributions shall be invested in accordance with the
Member's investment direction pursuant to Article V.
III.8 Limitation on Amount and Return of Before-Tax Contributions in
Certain Instances.
(a) In no event shall a Member's Before-Tax Contributions for a
taxable year exceed the dollar limit on excludable salary
deferrals under Code Section 402(g)(1) as adjusted for
increases in the cost of living pursuant to Code Section
402(g)(5). In the event a Member's Before-Tax Contributions
should exceed such dollar limit for a taxable year, the
excess, together with any investment earnings attributable
thereto, shall be returned to the Member no later than April
15 following the close of the taxable year for which the
excess contribution was made. For the purposes of this
Section, the
13
<PAGE> 16
Committee shall assume that the Member's taxable year is the
calendar year unless the Member notifies the Committee to the
contrary.
(b) In the event a Member's Before-Tax Contributions for a taxable
year under this Plan, together with his Before-Tax
Contributions under another plan which meets the requirements
of Code Section 401(k), exceed the limits set forth in (a)
above, the Member may treat a portion of such excess as having
been contributed to this Plan and request a return of such
excess together with any investment earnings attributable
thereto. Any such request shall be made no later than March 1
following the close of the taxable year for which the excess
contribution was made, and the return of such excess shall be
made no later than the immediately following April 15.
(c) For each Plan Year, the "average deferral percentage" authorized
by the Highly Compensated Group as Before-Tax Contributions and
Qualified Matching Contributions must meet one of the following
tests:
(i)the"average deferral percentage" of the Highly Compensated
Group may not exceed 1.25 multiplied by the "average
deferral percentage" of all other Eligible Employees who
are not in such group; or
(ii)the "average deferral percentage" of the Highly Compensated
Group may not exceed 2.0 multiplied by the "average
deferral percentage" of all other Eligible Employees, who
are not in such group, subject to a maximum differential of
two percentage points.
(d) The "average deferral percentage" for a specified group for a
Plan Year shall mean the average of the ratios (calculated
separately for each Employee in such group) of (i) over (ii)
where:
(i)equals the sum of the Before-Tax Contributions made on behalf
of each Eligible Employee for the Plan Year pursuant to
Section 3.1, except as provided in Section 3.9 for
"Qualified Matching Contributions"; and
(ii)equals the Eligible Employee's compensation for such Plan
Year as defined under Code Section 414(s) and regulations
under Code Section 401(k), including any alternative
definitions thereunder which the Employer elects to use;
provided such alternatives are uniformly applied to all
Eligible Employees for a Plan Year.
For purposes of the foregoing, only Before-Tax Contributions
allocated to the Member's Account on a date within a Plan Year
and paid to the Trust Fund within 12 months following the close
of such Plan Year shall be
14
<PAGE> 17
considered in determining his deferral percentage for such Plan
Year. In addition, only Before-Tax Contributions which are
attributable to the Compensation an Employee receives from the
Employer during a Plan Year or within 21/2 months following the
close of such Plan Year shall be considered in determining the
Employee deferral percentage for such Plan Year.
If the Participating Employer sponsors two or more plans which
include a cash or deferred arrangement but are considered one
plan for purposes of Code Section 401(a)(4) or 410(b), the cash
or deferred arrangements included in such plans shall be treated
as one plan for purposes of determining the "average deferral
percentage".
If any Eligible Employee who is a member of the Highly
Compensated Group is participating in two or more cash or
deferred arrangements sponsored by the Employer or an Affiliated
Employer, such cash or deferred arrangements shall be treated as
one arrangement for purposes of determining the "deferral
percentage" for such Eligible Employee.
For purposes of determining the "deferral percentage" of an
Eligible Employee who is a 5% owner or one of the ten most
highly-paid Highly Compensated Employees, the Before-Tax
Contributions and Compensation of such Eligible Employee shall
include the Before-Tax Contributions and compensation for the
Plan Year of "family members" (as defined in Code Section
414(q)(6)), as may be required pursuant to the family aggregation
rules of Code Section 401(k) and pertinent regulations issued
thereunder. To such extent as required by regulations, family
members, with respect to such Highly Compensated Employees, shall
be disregarded as separate employees in determining the "average
deferral percentage" both for Eligible Employees who are
non-Highly Compensated Employees and for Eligible Employees who
are Highly Compensated Employees.
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(e) From time to time, the Committee shall review the Before-Tax
Contributions authorized by Eligible Employees. If, upon such
review, the Committee determines that the average percentage
of such contributions applicable to the Highly Compensated
Group exceeds or is likely to exceed the maximum average
percentage necessary to comply with the above rules, the
Committee may reduce the Before-Tax Contributions of the
Highly Compensated Group, to the extent necessary to comply
with such rules. Such reduction shall be effected by
successive reductions of the highest Before-Tax Contribution
percentage authorized by one or more members of the Highly
Compensated Group until the average percentage applicable to
the Highly Compensated Group does not exceed the maximum
average percentage referred to above. Notwithstanding the
foregoing sentence, the Committee may impose a maximum dollar
limitation which is less than the amount specified in Code
Section 402(g), or a maximum percentage which is less than the
percentage in Section 3.1 to all Before-Tax Contributions made
by the Highly Compensated Group.
(f) If, after the end of the Plan Year, the Committee determines
that the Before-Tax Contributions made on behalf of Highly
Compensated Employees are in excess of the amounts allowed
under (c)(i) and (c)(ii) above, the Committee shall return any
Before-Tax Contributions in excess of the amount permitted
above; plus earnings thereon, to the affected Members until
the rules in either (c)(i) or (c)(ii) above are met. The
return of such excess contributions shall be made in the same
manner as described in paragraph (e) above. Such excess
contributions shall be distributed within 2 1/2 months, if at
all possible, following the end of the Plan Year in which such
Before-Tax Contributions were made and in no event later than
the close of the following Plan Year. The return of any
excess Before-Tax Contributions shall be made on a pro rata
basis from the funds in which the Before-Tax Contributions are
then invested, unless the Committee shall permit the Member to
elect such other method of return based on such uniform and
nondiscriminatory rules as it may adopt.
In the case of an Eligible Employee who is subject to the family
aggregation rules of Code Section 414(q)(6) because he is a
member of a family of a 5% owner of the Employer or of one of the
ten most highly-paid Highly Compensated Employees, the
determination and return of excess Before-Tax Contributions under
this Section shall be made in accordance with the family
aggregation rules of Code Section 401(k) and pertinent
regulations issued thereunder.
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(g) For purposes of determining the investment earnings or losses to
be distributed pursuant to paragraphs (a) and (f) hereunder, the
following rules shall apply:
The earnings or losses allocable to Before-Tax Contributions is
the earnings or losses allocable to the Member's Before-Tax
Contribution Account for the Plan Year multiplied by a fraction,
the numerator of which is the Before-Tax Contributions to be
distributed to the Member for the year and the denominator is the
Member's Account balance attributable to Before-Tax Contributions
without regard to any earnings or losses occurring during such
Plan Year.
(h) In the event that the Participating Employer made an Employer
Matching Contribution with respect to any Before-Tax
Contributions returned pursuant to this Section, such Employer
Matching Contribution shall be distributed to the affected
Members of the Highly Compensated Group or forfeited, as
determined by the Committee according to such uniform and
nondiscriminatory rules as it may adopt.
III.9 Use of Qualified Matching Contribution in Testing.
Notwithstanding the provisions of Section 3.8, for any Plan Year in
which Employer Matching Contributions are "Qualified Matching
Contributions", as defined in Treasury Regulation Section
1.401(k)-l(g)(13), the Employer may use such contributions to perform
the average deferral percentage test as described in Section 3.8(c) and
Code Section 401(k)(3)(D). Any Employer Matching Contributions so used
will be considered Before-Tax Contributions for purposes of Sections
3.8(c) and (d), and will not be taken into account when performing the
average contribution percentage test described in Section 4.3.
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ARTICLE IV
EMPLOYER MATCHING CONTRIBUTIONS
IV.1 Employer Matching Contributions.
(a) Each Participating Employer shall make an Employer Matching
Contribution on behalf of each of its Members at the end of
each calendar quarter. Except as further provided in this
Section 4.1, the amount of such Employer Matching Contribution
shall be equal to 50% of the Member's Before-Tax Contributions
during such quarter up to a maximum match of $75 per Member
per calendar quarter (or such higher maximum amount as the
Employer may determine). All Members who make Before-Tax
Contributions during a calendar quarter, including those who
incur a Severance from Service during the Plan Year, shall be
eligible for an Employer Matching Contribution. Employer
Matching Contributions shall be allocated as of the end of
each calendar quarter.
(b) In no event shall the Employer Matching Contribution for any
calendar quarter be less than the lesser of:
(i)50% of the Member's Plan Year-to-date Before-Tax
Contributions; or
(ii)$75 multiplied by the number of calendar quarters in the Plan
Year-to-date that such Member was eligible to participate
in the Plan;
reduced by any Employer Matching Contributions made in previous
calendar quarters of such Plan Year.
(c) In the case of a Member who incurs a Severance from Service for
reason of Retirement or death, the Employer Matching Contribution
for the calendar quarter in which such Severance from Service
occurs shall not be less than the lesser of:
(i)50% of the Member's Plan Year-to-date Before-Tax
Contributions; or
(ii)$300;
reduced by any Employer Matching Contributions made in previous
calendar quarters in such Plan Year.
Employer Matching Contributions made under this Section 4.1 shall be
subject to the limitations of Sections 4.3, 4.4, and 4.5.
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IV.2 Remittance of Employer Matching Contributions. Employer Matching
Contributions will be paid by the Participating Employers to the
Trustee as soon as practicable after such contribution amounts are
determined, but in no event later than the Participating Employer's tax
filing deadline for its fiscal year in which such Plan Year ends.
Employer Matching Contributions shall be invested in accordance with
the Member's investment direction pursuant to Article V.
IV.3 Limitation on Amount of Employer Matching Contributions.
(a) For each Plan Year, the "average contribution percentage" of the
Highly Compensated Group must meet one of the following tests:
(i)the"average contribution percentage" of the Highly
Compensated Group may not exceed 1.25 multiplied by the
"average contribution percentage" of all other Eligible
Employees who are not in such group; or
(ii)the "average contribution percentage" of the Highly
Compensated Group may not exceed 2.0 multiplied by the
"average contribution percentage" of all other Eligible
Employees who are not in such group, subject to a maximum
differential of two percentage points.
(b) Except as provided in Sections 3.9 and 4.10 for "Qualified
Matching Contributions", the "average contribution percentage"
for a specified group for a Plan Year shall mean the average of
the ratios (calculated separately for each employee in such
group) of (i) over (ii) where:
(i)equals the Employer Matching Contribution made on behalf of
the Eligible Employee for the Plan Year pursuant to Section
4.1; and
(ii)equals the Eligible Employee's compensation for such Plan
Year as defined in Code Section 414(s) and regulations
under Code Section 401(m), including any alternative
definitions thereunder which the Employer elects to use;
provided such alternatives are uniformly applied to all
Eligible Employees for a Plan Year.
For purposes of determining the "contribution percentage" of an
Eligible Employee who is a 5% owner or one of the ten most
highly-paid Highly Compensated Employees, the Employer Matching
Contributions and Compensation of such Eligible Employee shall
include the Employer Matching Contributions and compensation for
the Plan Year of "family members" (as defined in Code Section
414(q)(6)) as may be required pursuant to the family aggregation
rules of Code Section 401(m) and
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<PAGE> 22
pertinent regulations issued thereunder. To such extent as
required by regulations, family members with respect to Highly
Compensated Employees shall be disregarded as separate employees
in determining the "contribution percentage" both for Eligible
Employees who are non-Highly Compensated Employees and for
Eligible Employees who are Highly Compensated Employees.
If the Participating Employer sponsors two or more plans to which
Employer Matching Contributions are made and which are subject to
Code Section 401(m) but are considered one plan for purposes of
Code Section 401(a)(4) or 410(b), such plans shall be treated as
one plan for purposes of determining the "average contribution
percentage".
If any Eligible Employee who is a member of the Highly
Compensated Group is participating in two or more plans sponsored
by the Employer or an Affiliated Employer that include Employer
Matching Contributions subject to Code Section 401(m), all such
contributions will be treated as made under one plan for purposes
of this paragraph (b).
(c) If for any Plan Year the average contribution percentage for
the Highly Compensated Group exceeds the limits set forth in
(a) and (b) above, the excess aggregate contributions, (as
defined in Code Section 401(m)(6)(B)) shall be distributed to
the Highly Compensated Group within 2 1/2 months, if at all
possible, following the end of the Plan Year in which such
contributions were made and in no event later than the close
of the following Plan Year. The amount of such excess
aggregate contributions to be distributed shall be determined
by successive reductions of the Employer Matching Contribution
percentage of one or more members of the Highly Compensated
Group with the highest average contribution percentage until
the average contribution percentage applicable to the Highly
Compensated Group does not exceed the maximum average
contribution percentage, referred to above. The Employer
Matching Contributions shall be distributed to such Highly
Compensated Employee at the Committee's discretion until he
has no remaining "excess aggregate contributions".
The distribution of any "excess aggregate contributions" shall be
made on a pro rata basis from the funds in which the excess
aggregate contributions are then invested, unless the Committee
shall permit the Member to elect such other method of
distribution based on such uniform and nondiscriminatory rules as
it may adopt.
In the case of an Eligible Employee who is subject to the family
aggregation rules of Code Section 414(q)(6) because he is a
member of a family of a 5% owner of the Employer or of one of the
ten most Highly Compensated
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Employees, the determination and return of excess aggregate
contributions under this Section shall be made in accordance with
the family aggregation rules of Code Section 401(m) and pertinent
regulations issued thereunder.
(d) The "excess aggregate contributions" to be distributed to a
Member shall be adjusted for investment earnings or losses
applicable thereto.
(e) For purposes of determining the investment earnings or losses to
be distributed pursuant to the foregoing paragraphs, the
following rules shall apply:
The earnings or losses equal the sum of (i) earnings or losses
allocable to the Member's Employer Matching Contribution Account
for the Plan Year multiplied by a fraction, the numerator of
which is Employer Matching Contributions to be returned to the
Eligible Employee for the year and the denominator is the
Eligible Employee's Account balance(s) attributable to Employer
Matching Contributions without regard to any earnings or losses
occurring during such Plan Year; and (ii) 10% of the amount
determined under (i) multiplied by the number of whole calendar
months between the end of the Plan Year and the date of
distribution, counting the month of distribution if distribution
occurs after the 15th of such month.
IV.4 Aggregate Limit Test.
(a) For any Plan Year in which the "average deferral percentage"
(as defined in Section 3.8) and the "average contribution
percentage" (as defined in Section 4.3) of the Highly
Compensated Group can only satisfy the limitations set forth
in Sections 3.8(c)(ii) and 4.3(b) respectively, but neither
can satisfy the limitations set forth in Sections 3.8(c)(i)
and 4.3(a), respectively, and all corrective measures have
been taken under Sections 3.8 and 4.3 to ensure compliance
with the provisions of Code Sections 401(k) and 401(m), the
aggregate limit test, prescribed under proposed Treasury
Regulation 1.401(m)-2(b)(3), or pertinent final regulations
shall be applicable. The "aggregate limit test" shall be
deemed met if (i) below is greater than or equal to (ii) below
where:
(i)equals the sum of (A) and (B) below where:
(A)equals 1.25 multiplied by the greater of (1) or (2)
where:
(1) equals the "average deferral percentage" of the
non-Highly Compensated Group of Eligible
Employees; and
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<PAGE> 24
(2) equals the average contribution percentage of the
non-Highly Compensated Group of Eligible
Employees; and
(B)equals the lesser of (1) or (2) above plus two
percentage points. In no event, however, shall this
amount exceed 2.0 multiplied by the lesser of (1) or (2)
above; and
(ii)equals the sum of (C) and (D) below where:
(C)equals the "average deferral percentage" of the Highly
Compensated Group; and
(D)equals the "average contribution percentage" of the
Highly Compensated Group.
(b) An alternative aggregate limit test may be used in place of the
"aggregate limit test" set forth in (a) above as long as such
test is permitted by the Internal Revenue Service. This
alternative aggregate limit test shall be deemed met if (i) below
is greater than or equal to (ii) below where:
(i)equals the sum of (A) and (B) below where:
(A)equals 1.25 multiplied by the lesser of (1) or (2)
where:
(1) equals the "average deferral percentage" of the
non-Highly Compensated Group of Eligible
Employees; and
(2) equals the "average contribution percentage" of
the non-Highly Compensated Group of Eligible
Employees; and
(B)equals the greater of (1) or (2) above plus two
percentage points. In no event, however, shall this
amount exceed 2.0 multiplied by the greater of (1) or
(2) above; and
(ii)equals the sum of (C) and (D) below where:
(C)equals the "average deferral percentage" of the
Highly Compensated Group; and
(D)equals the average contribution percentage of the Highly
Compensated Group.
(c) The Committee shall determine each Plan Year the appropriate
reductions, distributions, or forfeitures to be made in order to
satisfy the applicable
22
<PAGE> 25
limits set forth in this Section 4.4, and in Sections 3.8 and
4.3. Any such reductions, distributions, or forfeitures shall be
made in accordance with the applicable provisions of Sections 3.8
and 4.3, and the nondiscrimination requirements of Code Section
401(a)(4).
(d) In the event that the "average deferral percentage", the
"average contribution percentage", and the "aggregate limit"
of the Highly Compensated Group does not satisfy the
requirements set forth in Sections 3.8, 4.3, and this Section
4.4, respectively, the Employer may, for any Plan Year prior
to 1992, perform such testing by restructuring the Plan into
component plans as may be permitted in regulations under Code
Sections 401(a)(4) and 401(k); provided such component plans
meet the coverage requirements of Code Section 410(b).
IV.5 Maximum Total Allocations.
(a) Anything to the contrary herein notwithstanding, in no event
shall the Annual Additions, as defined in Section 4.6, for any
Employee for any Plan Year exceed the lesser of:
(i)$30,000 or, if greater, 1/4 of the dollar limitation in effect
under Code Section 415(b)(1)(A) (which amount shall be
subject to adjustments as provided by Treasury regulations
under Code Section 415); or
(ii)25% of the Employee's Compensation (as defined by Treasury
regulations under Code Section 415(c)) from the
Participating Employer.
For purposes of this Section 4.5(a), the limitation year shall be
the Plan Year.
In the event an Annual Addition in excess of the lesser of (i) or
(ii) above is allocated to an Employee for a Plan Year, such
excess shall be corrected in the following order to the extent
required to eliminate the excess:
(iii)After-Tax Contributions, plus any allocable interest shall
be refunded to the Employee if such contributions were made
to this Plan or any other qualified plan of the Employer
for the Plan Year.
(iv)Before-Tax Contributions shall be reduced. Any reduction of
Before-Tax Contributions shall be credited to a suspense
account and treated as the first allocation of Before-Tax
Contributions on behalf of such Employee for the following
Plan Year (and succeeding Plan Years as necessary). In the
event that any Before-Tax Contributions in the suspense
account have not been allocated as Before-Tax Contributions
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<PAGE> 26
to the Employee as of his Severance from Service, the
Employer shall distribute such remaining amounts to the
Employee, including any investment earnings thereon.
(v)Employer Matching Contributions shall be reduced. Any
reduction in Employer Matching Contributions shall be used
as the first allocation of Employer Matching Contributions
on behalf of such Employee for the following Plan Year and
subsequent Plan Years until fully utilized. If such
Employee is not covered by the Plan during such subsequent
Plan Years, the remaining excess amounts shall be held in a
suspense account and allocated pro rata to the Employer
Matching Contribution Accounts of the other Employees on
the last day of the applicable following Plan Year; thereby
reducing the Employer's Actual Matching Contribution for
such Plan Year.
No contributions shall be made to the Plan on behalf of an
Employee for any period during which a suspense account is in
existence for such Employee.
(b) In the case of an Employee who has participated in a defined
benefit plan maintained by the Employer or an Affiliated
Employer, the sum of the "defined benefit plan fraction" and the
"defined contribution plan fraction" determined as of the close
of any Plan Year, shall not exceed one. An Employee's defined
benefit plan fraction and defined contribution plan fraction
shall be determined as follows:
(i)The"defined benefit plan fraction" is a fraction with a
numerator equal to the Employee's projected annual
retirement benefit determined (other than any benefit
attributable to Employee contributions) under the defined
benefit plan and a denominator equal to the lesser of (A)
1.25 multiplied by the dollar limitation in effect under
Code Section 415(b)(1)(A) for such Plan Year; or (B) 1.4
multiplied by 100% of the Employee's compensation (as
defined by Treasury regulations under Code Section 415)
which may be taken into account for such Plan Year.
(ii)The "defined contribution plan fraction" is a fraction with a
numerator equal to the sum of the Annual Additions to the
Employee's Account and a denominator equal to the sum for
each calendar year of the Employee's employment with the
Employer, any predecessor of the Employer, or an Affiliated
Employer of the lesser of (A) 1.25 multiplied by the amount
determined in accordance with Code Section 415(o)(3)(B)(i)
for each such Plan Year; or (B) 1.4 multiplied by 25% of
the Employee's compensation (as defined by Treasury
24
<PAGE> 27
regulations under Code Section 415) which may be taken into
account for each such Plan Year.
For the purpose of applying this Section 4.5(b), all defined benefit
plans and all defined contribution plans maintained by the Employer and
all Affiliated Employers, including plans that have been terminated
shall be aggregated.
If, in any Plan Year, the sum of the "defined benefit plan fraction"
and "defined contribution plan fraction" of a Member would exceed one
without adjustment of the amount of Annual Additions that can be
allocated to such Member, then the amount of maximum annual benefit
that can be paid to such Member under any defined benefit plan
maintained by an Affiliated Employer shall be reduced to the extent
necessary to reduce the sum of the defined benefit plan fraction and
defined contribution plan fraction for such Member to one.
IV.6 Annual Additions. The Annual Addition with respect to an Employee for
any Plan Year shall be the sum of the following amounts allocated to
his Account for the Plan Year:
(a) all after-tax contributions made subsequent to December 31, 1986,
and prior to January 1, 1987, the lesser of 1/2 of an Employee's
after-tax contributions, or the amount of his after-tax
contributions in excess of 6% of his Compensation; plus
(b) Employer Matching Contributions and any other Employer
contributions; plus
(c) Before-Tax Contributions; plus
(d) any forfeitures allocated to the Employee's Account; plus
(e) any amount applied from the suspense account (pursuant to
Section 4.5); plus
(f) excess contributions and excess aggregate contributions as
defined in Code Sections 401(k)(8)(B) and 401(m)(6)(B),
respectively; plus
(g) excess deferrals as defined in Code Section 402(g)(2) which are
not distributed to the Employee by April 15 following the
individual's tax year in which such excess deferrals occurred;
plus
(h) amounts described in Code Sections 415(1)(1) and 419A(d)(2).
For purposes of applying this Section 4.6, all defined contribution
plans maintained by the Employer and all Affiliated Employers shall be
aggregated.
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The term Annual Additions shall not include any rollover contributions.
IV.7 Contributions Conditioned on Tax Deductibility. All Before-Tax
Contributions and Employer Matching Contributions shall be conditioned
upon their deductibility by the Participating Employer for Federal
income tax purposes; provided, however, that no contributions shall be
returned to a Participating Employer, except
as provided in Section 4.8.
IV.8 Return of Contributions. Notwithstanding any other provision of this
Plan, a Before-Tax Contribution or an Employer Matching Contribution
upon request by the Participating Employer may be returned to the
Participating Employer who made the contribution if:
(a) the contribution was made by reason of a mistake of fact;
(b) the contribution was conditioned upon its deductibility for
income tax purposes and the deduction was disallowed; or
(c) the contribution was made under the assumption that the Plan
would initially be qualified by the Internal Revenue Service, but
a notice is received by the Employer that the Plan fails to be
initially qualified under the applicable Code Sections.
The return to the Participating Employer of the amount involved in
either (a), (b), or (c) shall occur within 1 year of the mistaken
payment of the contribution, the disallowance of the deduction, or upon
notification that the Plan fails to initially qualify, as the case may
be.
The amount which may be returned to the Participating Employer is the
excess of the amount contributed over the amount that would have been
contributed had there not occurred the circumstances causing the
excess. Earnings attributable to the excess contribution may not be
returned to the Participating Employer, but losses thereto shall reduce
the amount to be returned. Furthermore, if the withdrawal of the amount
attributable to the excess contribution would cause the balance of the
Account of any Member to be reduced to less than the balance which
would have been in the Account had the excess amount not been
contributed, then the amount to be returned to the Participating
Employer shall be limited to avoid such reduction. In the event any
Before-Tax Contributions are returned to a Participating Employer
pursuant to this Section 4.8, the Participating Employer shall directly
reimburse affected Members for the amounts so returned.
Pursuant to Section 4.8(c), if the initial determination letter is
issued by the District Director of Internal Revenue to the effect that
the Plan and Trust herein set forth or as amended prior to the receipt
of such letter do not meet the requirements of Code
26
<PAGE> 29
Sections 401(a) and 501(a), the Employer shall be entitled at its
option to withdraw, within 1 year of the receipt of such letter, all
contributions made on and after the Effective Date. In such event, the
Plan and Trust shall then terminate and all rights of the Employees
shall be those as if the Plan had never been adopted.
IV.9 Payment of Expenses. In addition to its contributions, the Employer may
elect to pay the administrative expenses of the Plan and fees and
retainers of the Plan's Trustees, consultants, administrators,
recordkeepers, auditors, counsel, and other advisors or service
providers so long as the Plan or Trust Fund remains in effect. If the
Employer does not elect to pay all or part of such expenses, the
Trustee may pay these expenses and charge the payment thereof against
the Trust Fund proportionate to the market value of each Investment
Fund as of the most recent Valuation Date.
IV.10 Qualified Matching Contributions. Employer Matching Contributions made
for Plan Years commencing on and after January 1, 1992 shall be
Qualified Matching Contributions, as defined in Treasury Regulation
Section 1.401(k)-l(g)(13). If, pursuant to Section 3.9, such
contributions are used by the Employer to conduct the "average deferral
percentage" test described in Section 3.8(c), any contributions so used
shall not be included in calculating the "average contribution
percentage" under Section 4.3(b).
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ARTICLE V
INVESTMENT OF CONTRIBUTIONS
V.1 Committee to Establish Accounts. The Committee shall establish and
maintain a separate accounting in the name of each Member and Former
Member which shall reflect all contributions by the Member or Former
Member, all amounts contributed by the Participating Employer under the
Plan on his behalf, earnings on all such contributions, any
distributions, withdrawals, and any expenses charged against such
contributions. The separate accounting in the name of each Member and
Former Member shall include a separate accounting for Before-Tax
Contributions, Employer Matching Contributions, and the Prior Plan
Contribution Account.
V.2 Investment Options. Subject to the provisions of Sections 5.3 and 5.4,
a Member and any Former Member shall direct the Committee to invest his
Before-Tax Contributions and Employer Matching Contributions in the
following funds:
(a) Fund A - Money Market Fund. This Fund shall consist primarily
of high-grade money market instruments with very short
maturities.
(b) Fund B - Fixed Interest Rate Contract Fund. This Fund shall
consist primarily of fixed income vehicles, including, but not
limited to, guaranteed investment contracts issued by insurance
companies, government securities, and certificates of deposits.
(c) Fund C - Equity Index Fund. Initially, this Fund shall consist of
equity investments which attempt to duplicate the composition and
total return of the Standard & Poor's Daily Stock Price Index of
500 Common Stocks (S&P 500 Index).
The Committee may, in its sole discretion, eliminate one or more
investment funds, offer additional investment funds, or alter the
underlying investments of one or more funds from time to time. Members
shall be notified of any changes in investment funds prior to the
effective date of such changes.
V.3 Change in Investment Options. Subject to Section 5.4, a Member may
change the investment allocation of his future Before-Tax Contributions
and Employer Matching Contributions, effective as of any Entry Date, by
providing the Committee with 30 days prior written notice or such
lesser notice as the Committee may approve according to uniform and
nondiscriminatory rules it may adopt. Subject to Section 5.4, a Member
or Former Member may also change the investment allocation of his
existing Account, effective as of any Entry Date, by providing the
Committee with 30 days prior written notice or such lesser notice as
the Committee
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<PAGE> 31
may approve according to uniform and nondiscriminatory rules it may
adopt. Effective October 1, 1991, investment changes shall be permitted
hereunder as of the first day of each calendar quarter (January 1,
April 1, July 1, and October 1).
V.4 Investment Rules. The following rules shall govern all aspects of this
Article V:
(a) A Member shall direct the Committee to invest his current
Before-Tax Contributions and Employer Matching Contributions, in
multiples of 25%, in any of the available funds. Reallocation of
the Member's or Former Member's existing Account pursuant to
Section 5.3 shall also be made to any of the available funds in
multiples of 25%.
(b) Any investment direction given by a Member or Former Member shall
continue in effect until changed by such Member or Former Member
as provided hereunder.
(c) In the absence of any written designation of investment
preference by the Member or Former Member, Before-Tax
Contributions and Employer Matching Contributions shall be
invested 100% in Fund A. The Member shall acknowledge in writing
this default option.
(d) Notwithstanding any instruction from any Member or Former Member
for investment of funds as provided in this Article V, the
Trustee shall have the right to hold uninvested, or invested in
short-term fixed income investments, any funds intended for
investment or reinvestment as otherwise provided in this Article
V for such time as the Trustee, in its sole discretion, deems
advisable.
(e) The Committee may limit changes otherwise permitted hereunder in
the investment allocation of a Member's or Former Member's
Account to the extent a change is precluded as a result of a
temporary period of adverse liquidity with respect to an
investment fund or to the extent a change would adversely affect
the investment return of Accounts of other Members or Former
Members.
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ARTICLE VI
TRUST FUND
VI.1 Trust Fund. All Accounts shall be held in the Trust Fund and each
Member's and Former Member's interest in the investment funds shall be
valued in accordance with Sections 6.2 and 6.3.
VI.2 Valuation of Funds. Each investment fund shall be valued by the Trustee
as of each Valuation Date on the basis of the fund's fair market value.
VI.3 Allocation of Income, Profits, Losses and Expenses. The Accounts of all
Members and Former Members shall be adjusted as of each Valuation Date
to reflect the effects of contributions and withdrawals, income,
realized and unrealized gains and losses, and expenses applicable to
the fund or funds where such Accounts are invested. As provided by
written procedures established by the Committee, such adjustments shall
be based upon the proportion that each Member's and Former Member's
Account invested in a fund as of the last preceding Valuation Date,
after any reductions for distributions and additions for contributions
subsequent to such date, bears to the total of all Accounts of all
Members and Former Members invested in the same fund as of the last
preceding Valuation Date, after reductions for any distributions and
additions for contributions subsequent to such date.
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ARTICLE VII
DEATH
VII.1 Amount of Death Benefit. Upon the death of a Member or Former Member
prior to the complete distribution of his Account in accordance with
Article XI, his Beneficiary shall be entitled to 100% of the Member's
Account.
VII.2 Payment of Death Benefit. After receipt by the Committee of due notice
of the death of the Member or Former Member, the benefit payable under
this Article VII shall be paid to his Beneficiary in one lump sum as
soon as practicable after the calendar quarter and Valuation Date
coincident with or next following the date of such Member's death.
VII.3 Designation of Beneficiary. Each Member or Former Member shall have the
right, by written notice to the Committee, to designate or to change
the Beneficiary to receive any benefit payable in the event of his
death, subject to the spousal consent requirements of Section 1.5, if
he is then married.
VII.4 Payment Other Than to Beneficiary. If a Member has not designated a
Beneficiary, or the Member's designated Beneficiary dies before the
Member, or the Beneficiary dies after the death of the Member or Former
Member but prior to receiving the full death benefit hereunder, the
Member's remaining Account shall be paid with priority as follows:
(a) the Member's surviving Spouse;
(b) children, and children of deceased children, per stirpes;
(c) brothers and sisters, or if deceased, the children of such
brothers and sisters, per stirpes; and
(d) the estate of the Member.
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ARTICLE VIII
VESTING AND TERMINATION OF EMPLOYMENT
VIII.1 Vesting of Contributions. A Member shall at all times be 100% vested in
his Prior Plan Contribution Account, Before-Tax Contribution Account,
and his Employer Matching Contribution Account.
VIII.2 Method of Payment. When a Member incurs a Severance from Service, his
vested Account shall be distributed pursuant to the provisions of
Article XI.
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ARTICLE IX
LOANS
IX.1 Method Loans. Effective October 19, 1989, the Plan may lend a Member
who is actively employed an amount not in excess of the lesser of (i)
$50,000 reduced by the Member's highest outstanding loan balance from
the Plan during the preceding 12-month period; or (ii) 50% of the value
of his vested Account as of the date on which the loan is approved.
For loans granted on or before October 18, 1989, the maximum amount of
such loan shall not exceed the lesser of (a) or (b):
(a) the sum of the amounts in Funds A and B; or
(b) an amount determined based on the following schedule:
Total Amount In All Accounts Maximum Loan Amount
---------------------------- -------------------
$10,000 - $20,000 $10,000
$20,000 - $100,000 50% of Account Balance
Over $100,000 $50,000
In no event shall the amount of the loan exceed $50,000, reduced by the
Member's highest outstanding loan balance from the Plan during the
preceding 12-month period.
IX.2 Rules Relating to Loans. All loans shall comply with the following
terms and conditions:
(a) Loan amounts shall be in $100 increments and the minimum amount
that may be borrowed under the Plan shall be $500.
(b) Loans may be applied for as of any date with prior written notice
as the Committee may approve according to uniform and
nondiscriminatory rules it may adopt. No more than one loan may
be made to a Member in any 12-month period and no more than two
loans may be outstanding to a Member at any time.
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(c) An application for a loan by a Member shall be made in writing to
the Committee, or its delegate, whose action thereon shall be
final.
(d) Repayment of a loan shall be made based on level amortization of
the loan amount and shall be made no less frequently than
quarterly over the term of the loan. The Member shall authorize
the Participating Employer to deduct from his pay the level
amount sufficient to accomplish the repayment.
(e) The period of repayment for any loan shall be arrived at by
mutual agreement between the Committee, or its delegate, and the
Member, but subject to a minimum repayment period of 1 year and a
maximum repayment period of 4 years. Loans may be prepaid in full
at any time without penalty. Partial repayments are also
permitted.
(f) Each loan shall be made against the collateral assignment of the
Member's right, title, and interest in the portion of his Account
against which the loan is taken, evidenced by such Member's
collateral promissory note for the amount of the loan, including
interest, payable to the order of the Plan.
(g) Each loan shall bear a reasonable rate of interest, which shall
be the prime rate of interest as published in the "money rate"
section of the Wall Street Journal as of the first business day
of the month preceding the effective date of the loan, plus 2%.
The Committee shall review the rate of interest to determine if
it is consistent with commercial rates for similar loans and if
not, the Committee shall have the authority to modify such rate
of interest for new loans to be consistent with such commercial
rates.
(h) In the event a loan repayment is not made, or is not paid at
maturity, or in the event of a Member's bankruptcy or
impending bankruptcy, insolvency, or impending insolvency, the
loan shall be deemed to be in default and the Committee, or
its delegate, shall give written notice of such default to
such Member to his last known address. If the default is not
cured within a reasonable period of time from the date of such
notice as determined by the Committee, according to uniform
and nondiscriminatory rules it may adopt and set forth in the
notice, the Member's Account shall be reduced by the amount of
the unpaid balance of the loan, together with the interest
thereon, and the Member's indebtedness shall thereupon be
discharged. This reduction shall occur as soon as the Member
could have received a distribution of the portion of the
Account balance so reduced under applicable law, disregarding
the provisions of (i) below.
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(i) Upon termination or Retirement, no distribution shall be made
to any Member or Former Member or to a Beneficiary of any such
Member or Former Member unless and until all unpaid loans,
including accrued interest thereon, have been liquidated;
provided, however, if any unpaid balance is due on a loan of
such Member or Former Member at the time of such distribution
which has not been satisfied through collection or liquidation
of his Account, the Plan shall distribute to such Member or
Former Member or Beneficiary the collateral promissory note
evidencing the loan, and his Account, reduced by the unpaid
balance of the loan, including accrued interest thereon, shall
be distributed.
(j) All loans shall be debited to a Member's Account first from his
Prior Plan Contribution Account, next from his Employer Matching
Contribution Account and last from his Before-Tax Contribution
Account.
(k) Subject to the provisions of paragraph (j) above, all loans shall
be debited to the investment of a Member's Account as such
Account is invested in Funds A, B, and C in the amount(s)
authorized by the Member in writing. In the absence of any
authorization from the Member, a loan shall be debited on a pro
rata basis from the funds in which his Account is invested at the
time the loan is originated.
(l) Upon receipt of a loan repayment and associated interest, the
Trustee shall deposit such repayment in Fund A, Fund B, and Fund
C in accordance with the Member's current investment election for
contributions at the time of the repayment. The Trustee shall
also credit such repayment to the Member's Accounts in the same
proportion as they were charged with the loan.
(m) The Committee shall make loans available hereunder on a
reasonably equivalent basis. The Committee shall apply
objective criteria in a uniform and nondiscriminatory manner
to determine whether a loan application should be approved.
Such criteria shall be limited to those factors which would be
considered by a commercial lender in the business of making
similar types of loans. Decisions by the Committee regarding
loans shall be final and shall be communicated to the Member
as soon as practicable.
(n) A former member of the Stanadyne, Inc. Savings Plus Plan who is a
Member of this Plan, in accordance with Article II, and who has
an outstanding loan from the Stanadyne, Inc. Savings Plus Plan on
the date his accounts were transferred in accordance with Section
1.34 shall continue such loan under this Plan in accordance with
its original terms.
(o) No loan shall be made to any Former Member unless he is a
party-in-interest under ERISA Section 3(14).
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(p) The Committee may adopt such other rules and regulations relating
to loans as it may deem appropriate.
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ARTICLE X
WITHDRAWALS
X.1 Non-hardship Withdrawals from Prior Plan Contribution Account. Subject
to the provisions of Sections 10.4 and 10.5, a Member may elect to
withdraw any portion of his Prior Plan Contribution Account for any
reason as of any Valuation Date. A Member may elect one such withdrawal
in any calendar quarter.
X.2 Withdrawals After Age 59 1/2. Subject to the provisions of Sections
10.4 and 10.5, a Member who has attained age 59 1/2 may elect to
withdraw any portion of his Account for any reason as of any Valuation
Date.
X.3 Hardship Withdrawals. Subject to the provisions of Sections 10.4 and
10.5, a Member who has not attained age 59 1/2 shall have the right to
withdraw the portion of his Account needed to meet a "financial
hardship", as defined herein:
(a) For the purpose of this Section 10.3, a financial hardship shall
mean an immediate and heavy financial need specified in Treasury
Regulation 1.401(k)-I(d)(2)(iv) which cannot be met from any
other available resource. These include:
(i)medical expenses described in Code Section 213(d) incurred by
the Member, his Spouse, or dependents;
(ii)costs directly related to the purchase of the Member's
principal residence (other than mortgage payments);
(iii)tuition payments for the post-secondary education of the
Member, his spouse, children, or dependents; and
(iv)payments needed to prevent eviction from, or foreclosure on,
the Member's principal residence.
Additional hardship requirements may be adopted by the Committee
on a uniform and nondiscriminatory basis.
The Committee shall determine in its sole discretion whether a
financial hardship exists to warrant a withdrawal, and if such
hardship exists, the amount of the withdrawal necessary to meet
the hardship.
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(b) A Member shall be deemed to lack other resources to satisfy the
financial hardship as required under subsection (a) of this
Section if the following conditions are satisfied:
(i)the Member has withdrawn all amounts available to him under
all of the Employer's (and Affiliated Employer's) qualified
plans;
(ii)the Member has borrowed any amounts available to him under
this Plan pursuant to Article IX and from any other
qualified plans of the Employer and Affiliated Employers,
unless the repayment of the amount borrowed would
constitute a financial hardship to the Member;
(iii)if the Member has made a withdrawal from his Before-Tax
Contribution Account, the Member's Before-Tax Contributions
to the Plan are suspended for the 12-month period
immediately following the date of the hardship withdrawal;
and
(iv)if the Member has made a withdrawal from his Before-Tax
Contribution Account, the Member's maximum Before-Tax
Contribution permitted under Article III for the Plan Year
following the Plan Year in which the hardship withdrawal
was made is reduced by the amount of the Member's
Before-Tax Contributions made during the Plan Year in which
the hardship withdrawal occurred.
(c) In lieu of the conditions outlined in (b) above, a Member may
provide the Committee with written documentation that he lacks
other resources to satisfy his financial hardship. The written
documentation required to be provided by the Member for such
demonstration shall be determined by the Committee.
In no event shall the amount of the withdrawal exceed the amount
necessary to meet the Member's financial hardship.
X.4 Rules for Withdrawals. The following rules shall apply to withdrawals
made pursuant to this Article X:
(a) No more than one non-hardship withdrawal from the Prior Plan
Contribution Account may be made in any calendar quarter unless
otherwise permitted in accordance with such uniform and
nondiscriminatory rules as the Committee may adopt.
(b) A Member who has not attained age 59 1/2 may not withdraw that
portion of his Before-Tax Contribution Account which is
attributable to investment earnings which are credited to such
Account after December 31, 1988.
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(c) A Member may not elect to withdraw Employer Matching
Contributions made on behalf of such Member for any Plan Year
commencing on or after January 1, 1992.
(d) A Member shall request a withdrawal hereunder by providing the
Committee with at least 30 days advance written request of the
withdrawal, except that the Committee may agree to accept a later
request in the case of a withdrawal for financial hardship. The
Member will receive such payment as soon as practicable after the
Committee receives the request.
(e) The amount otherwise available as a withdrawal from the Plan
under this Article shall be reduced by the amount of any loan
outstanding at the time a withdrawal request is made, and no
withdrawal shall be permitted under this Article X to the extent
that such withdrawal would cause the aggregate of the loans
outstanding to exceed the limits expressed in Article IX.
(f) Withdrawals shall be effective as of the date the Committee
approves the withdrawal.
(g) Any withdrawal shall be paid in cash as soon as practicable
following the Valuation Date coincident with the approval of the
withdrawal or such earlier date as the committee may determine in
a uniform and nondiscriminatory manner.
(h) If a Member is married at the time he requests an in-service
withdrawal, consent of his Spouse is required. Such consent shall
be in writing on a form prescribed by the Committee and shall be
made in accordance with the provisions of Section 1.5 as to form
of consent. Consent shall be obtained no earlier than 90 days
prior to date of receipt of the in-service withdrawal
distribution.
X.5 Debiting of Withdrawals. Except to the extent otherwise provided by
this Article X, all withdrawals shall be debited to a Member's Account
first from his Prior Plan Contribution Account, next from the available
portion of his Employer Matching Contribution Account, and then from
his Before-Tax Contribution Account.
In the event that the provisions of this Article X prohibit a
withdrawal from a Member's Account in the sequence described in the
preceding sentence, the amounts withdrawn shall follow such sequence
only to the extent otherwise permitted by the provisions of this
Article X. All withdrawals shall be debited against the investment
funds in the same proportion as such Account is then invested.
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ARTICLE XI
PAYMENT OF BENEFITS
XI.1 Entitlement to Distribution. If a Member incurs a Severance from
Service, he may elect to receive the vested portion of his Account as
provided herein.
XI.2 Form of Payment.
(a) An Account whose value is $3,500 or less shall automatically be
distributed in one lump sum payment in accordance with the
provisions of Section 11.3.
(b) The normal form of payment for an Account whose value is more
than $3,500 shall also be one lump sum payment. The distribution
of any Account, the value of which exceeds $3,500, shall require
the written consent of the Member or Former Member, if such
distribution is scheduled to occur prior to the date such Member
attains age 65.
(c) If a Member or Former Member incurs a Severance from Service and
meets the eligibility requirements for Retirement, he may elect
to receive a distribution of his Account:
(i)in one lump sum payment;
(ii)in a partial lump sum payment and defer distribution of the
remaining Account balance until any date up to age 70;
(iii)in the form of substantially equal installments, payable no
less than annually, over a specified number of years which
shall not exceed the lesser of 10 and the Member's life
expectancy period determined under the applicable
provisions of Code Section 401(a)(9) and the regulations
thereunder. Each year the amount of such installment
payment shall be determined by dividing the Member's
remaining Account balance by a divisor. The initial divisor
shall be equal to the number of annual installments. Each
year such divisor shall be reduced by one until there are
no remaining installments; or
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(iv)for distributions made on or after January 1, 1993,
notwithstanding any provision of the Plan to the contrary
that would otherwise limit a Member's (or a Payee's)
election under this Section, a Member (or a Payee) may
elect, at the time and in the manner prescribed by the
Committee, to have any portion of an Eligible Rollover
Distribution paid directly to an Eligible Retirement Plan
specified by a Member (or a Payee) in a Direct Rollover.
(d) Not more than 90 days nor less than 30 days before a Member's
payment date, the Committee shall furnish the Member with a
notice containing information about electing the form in which
benefits are to be paid. Each Member may elect in writing not
to take the normal form of benefit payment and to elect an
optional form of benefit payment. The election period is the
90-day period ending on the date the Member is entitled to
receive payment. The Committee may, on a uniform and
nondiscriminatory basis, provide for other periods that comply
with regulations issued under Code Sections 401(a)(11) and 417.
If the normal form of benefit payment is one to which Code
Section 401(a)(11) and 417 do not apply, such benefit payment may
commence less than 30 days after the notice required under
Section 1.411(a)-11(c) of the Income Tax Regulations is given,
provided that:
(i)theCommittee clearly informs the Member that the Member has a
right to a period of at least 30 days after receiving the
notice to consider the decision of whether or not to elect
a distribution or an optional form of benefit payment, and
(ii)the Member, after receiving the notice, affirmatively elects
a distribution.
XI.3 Time of Payment.
(a) To the extent practicable, and unless otherwise elected by the
Member or Former Member pursuant to Section 11.3(c) or (d),
any distribution shall be made as soon as practicable after
the valuation is completed for the calendar quarter end
Valuation Date which coincides with or next follows the event
which gave rise to the distribution. Generally, benefits will
not commence hereunder until the Member or Former Member
returns a completed form to the Committee with 30 days prior
written notice or such lesser notice as the Committee shall
approve according to uniform and nondiscriminatory rules it
may adopt. However, if the Member or Former Member fails to
return the completed election form to the Committee, benefits
will automatically commence within the period described in
Section 11.3(b), 11.3(c), or 11.5, whichever is applicable.
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(b) Unless a Member or Former Member elects a deferred payment in
accordance with Section 11.3(c) or (d), or unless Section 11.5
applies, distribution shall commence no later than 60 days
after the close of the Plan Year in which (i) the Member or
Former Member attains age 65; (ii) the 10th anniversary of the
Member's or Former Member's commencement of participation
occurs; or (iii) the Member or Former Member terminates
employment, whichever is latest.
(c) A Member or Former Member who has an Account which is $3,500
or less shall have such Account distributed to him as soon as
practicable after the valuation is completed for the calendar
quarter end Valuation Date following his Severance from
Service. However, a Member or Former Member may elect, in
writing, to defer the commencement of such distribution under
this Article XI to a date which is not later than the quarter
end Valuation Date immediately following the first anniversary
of his Severance from Service, subject to the limitations of
Section 11.5. In the event a Member or Former Member elects to
defer receipt of his Account pursuant to this paragraph, his
Account shall continue to be valued in accordance with Article
VI and shall be invested in accordance with such election
under Article V. If a Member or Former Member whose Account
balance is $3,500 or less makes no deferral election, his
Account shall be distributed to him as soon as practical after
the valuation is completed for the calendar quarter end
Valuation Date following his Severance from Service.
(d) A Member or Former Member who has an Account which is greater
than $3,500 may elect, by not consenting in writing to a
distribution, to defer the commencement of such distribution
under this Article XI to a date which is not later than the
calendar end Valuation Date preceding age 70. In the event a
Member or Former Member elects to defer receipt of his Account
pursuant to this paragraph, his Account shall continue to be
valued in accordance with Article VI and shall be invested in
accordance with such election under Article V.
(e) If a Member or Former Member has elected a deferred payment under
Section 11.3(c) or (d), he may at any time thereafter elect to
change the time or manner of payment of the unpaid portion of his
Account in accordance with the further provisions of this Article
XI; provided that 60 days advance written notice is given to the
Committee.
XI.4 Amount of Distribution. The amount of any distribution shall be
determined by the amount in the Member's or Former Member's Account as
of the calendar quarter end Valuation Date coinciding with or otherwise
immediately preceding such distribution.
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XI.5 Limitation on Distributions. Distribution of benefits shall not be
deferred beyond the April 1 following the calendar year in which the
Member attains age 70 1/2. In the event distributions must commence to
a Member as provided in the previous sentence, the Member may elect a
full distribution of his Account or installment payments as described
in Section 11.2(c). If installments are elected, the divisor under
Section 11.2(c) for any year shall be the lesser of the divisor under
such paragraph, or the divisor that would be required under Code
Section 401(a)(9) and attendant regulations. Upon the death of a
Member, distribution of his remaining Account shall be made to his
Beneficiary no later than 5 years following the Member's death. In any
event, distributions hereunder shall be made in accordance with Code
Section 401(a)(9), including the incidental death benefit requirements
of such Code Section, and regulations thereunder, including Treasury
Regulation 1.401(a)(9)-2. Such regulations and applicable rulings or
announcements, including any grandfather provisions or provisions
delaying the effective date of Code Section 401(a)(9), are hereby
incorporated by reference.
XI.6 Segregated Accounts. If a Member or Former Member has elected to have
his Account distribution, or any part thereof, deferred to a later date
pursuant to Section 11.2 or 11.3, the Account of such individual will
continue to be invested in accordance with the most recent investment
direction on file with the Committee. If there is no investment
direction on file, the Committee shall direct the Trustee to segregate
the Member's or Former Member's interest in the Plan and invest such
interest in Fund A as described in Section 5.2. Amounts invested in
this manner shall share the earnings, on a pro rata basis, attributable
to such fund.
XI.7 Missing Persons. If the Committee shall be unable, within 5 years after
any amount becomes due and payable from the Plan to a Member or
Beneficiary, to make payment because the identity or whereabouts of
such person cannot be ascertained, the Committee may mail a notice by
registered mail to the last known address of such person outlining the
action to be taken unless such person makes written reply to the
Committee within 90 days from the mailing of such notice. The Committee
may direct that such amount and all further benefits with respect to
such person shall be forfeited and all liability for the payment
thereof shall terminate. However, in the event of the subsequent
reappearance of the Member or Beneficiary prior to termination of the
Plan, the benefit which was forfeited (but not any earnings
attributable to such forfeiture) shall be reinstated in full. Any
benefits forfeited shall be applied to reduce future Employer Matching
Contributions to the Plan.
Reinstatement of any benefit forfeited under this Section 11.7 shall be
made by the applicable Participating Employer with an additional
contribution to the Plan.
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ARTICLE XII
RETIREMENT
XII.1 Responsibility for Plan and Trust Administration. The Employer shall
have the sole authority to appoint and remove the Trustee, Members of
the Committee, and any investment manager which may be provided for
under the Trust, and to amend or terminate, in whole or in part, this
Plan or the Trust. The Employer, through its Committee, shall have the
responsibility for the administration of this Plan, which is
specifically described in this Plan and the related Trust Agreement.
The Employer shall be the named Fiduciary for purposes of the Code and
ERISA.
XII.2 Retirement Plan Committee. The Plan shall be administered by the
Employer through the Savings Plus Plan Committee, referred to as
"Committee", consisting of no fewer than three nor more than five
persons to be appointed by and to serve at the pleasure of the
Employer. Any person appointed as a Member of the Committee may resign
from the Committee by delivering his written resignation to both the
Board of Directors of the Employer and the Secretary of the Committee.
The Committee shall be the Plan Administrator, within the meaning of
Section 3(16)A of ERISA.
XII.3 Agents of the Committee. The Committee may delegate specific
responsibilities to other persons as the Committee shall determine. The
Committee may authorize one or more of their number, or any agent, to
execute or deliver any instrument or to make any payment in their
behalf. The Committee may employ and rely on the advice of counsel,
accountants, and such other persons as may be necessary in
administering the Plan.
XII.4 Committee Procedures. The Committee may adopt such rules as it deems
necessary, desirable, or appropriate. All rules and decisions of the
Committee shall be uniformly and consistently applied to all
Participants in similar circumstances. When making a determination or
calculation, the Committee shall be entitled to rely upon information
furnished by a Member, Former Member, or Beneficiary, the Employer, the
legal counsel of the Employer, or the Trustee.
The Committee may act at a meeting or in writing without a meeting. The
Committee shall elect one of its members as chairman, appoint a
secretary, who may or may not be a Committee member and advise the
Trustee of such actions in writing. The secretary shall keep a record
of all meetings and forward all necessary communications to the
Employer and the Trustee. The Committee may adopt such bylaws and
regulations as it deems desirable for the conduct of its affairs. All
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decisions of the Committee shall be made by the vote of the majority
including actions in writing taken without a meeting.
XII.5 Administrative Powers of the Committee. The Committee may from time to
time establish rules for the administration of the Plan. Except as
otherwise herein expressly provided, the Committee will have the
exclusive right and discretionary authority to interpret the Plan and
decide any matters arising hereunder in the administration and
operation of the Plan, and any interpretations or decisions so made
will be conclusive and binding on all persons having an interest in the
Plan; provided, however, that all such interpretations and decisions
will be applied in a uniform and nondiscriminatory manner to all
Employees. The Committee shall have no right to modify any provisions
of the Plan as herein set forth.
XII.6 Benefit Claims Procedures. All claims for benefits under the Plan shall
be in writing and shall be submitted to the Committee member designated
as Committee secretary by the Committee. If any application for payment
of a benefit under the Plan shall be denied, the Committee shall notify
the claimant within 90 days of such application setting forth the
specific reasons therefor and shall afford such claimant a reasonable
opportunity for a full and fair review of the decision denying his
claim. If special circumstances require an extension of time for
processing the claim, the claimant will be furnished with a written
notice of the extension prior to the termination of the initial 90-day
period. In no event shall such extension exceed a period of 90 days
from the end of such initial period. The extension notice shall
indicate the special circumstances requiring an extension of time and
the date by which the Committee expects to render its decision.
Notice of such denial shall set forth, in addition to the specific
reasons for the denial, the following:
(a) reference to pertinent provisions of the Plan;
(b) such additional information as may be relevant to the denial
of the claim;
(c) an explanation of the claims review procedure; and
(d) notice that such claimant may request the opportunity to review
pertinent Plan documents and submit a statement of issues and
comments.
Within 60 days following notice of denial of his claim, upon written
request made by any claimant for a review of such denial to the
Committee secretary, the Committee shall take appropriate steps to
review its decision in light of any further information or comments
submitted by such claimant.
The Committee shall render a decision within 60 days after the
claimant's request for review and shall advise said claimant in writing
of its decision on such review,
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specifying its reasons and identifying appropriate provisions of the
Plan. If special circumstances require an extension of time for
processing, a decision will be rendered as soon as possible, but not
later than 120 days after receipt of a request for the review. If the
extension of time for review is required because of special
circumstances, written notice of the extension shall be furnished to
the claimant prior to the commencement of the extension. If the
decision is not furnished within such time, the claim shall be deemed
denied on review. The decision on review shall be in writing and shall
include specific reasons for the decision, written to the best of the
Committee's ability in a manner calculated to be understood by the
claimant without legal counsel, as well as specific references to the
pertinent Plan provisions on which the decision in based. In the event
of continued disagreement, the claimant may thereafter appeal to the
Employer, whose decision is final.
XII.7 Reliance on Reports and Certificates. The Employer (or the Committee if
so designated by the Employer) will be entitled to rely conclusively
upon all valuations, certificates, opinions, and reports which may be
furnished by the recordkeeper, or any accountant, controller, counsel,
or other person who is employed or engaged for such purposes and shall
exercise the authority and responsibility as it deems appropriate to
comply with all of the legal and governmental regulations affecting
this Plan.
XII.8 Other Committee Powers and Duties. The Committee shall have such duties
and powers as may be necessary to discharge its duties hereunder,
including, but not by way of limitation, the following:
(a) to prescribe written procedures to be followed by Members,
Former Members, or Beneficiaries filing applications for
benefits;
(b) to prepare and distribute, in such manner as the Committee
determines to be appropriate, information explaining the Plan;
(c) to receive from the Employer, Members, and Former Members such
information as shall be necessary for the proper
administration of the Plan;
(d) to furnish the Employer, upon request, such annual reports
with respect to the administration of the Plan as are
reasonable and appropriate;
(e) to receive and review the periodic valuations of the Plan made
by the recordkeeper; and
(f) to receive, review, and keep on file (as it deems convenient or
proper) reports of benefit payments by the Trustee and reports of
disbursements for expenses directed by the Committee.
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The Committee shall have no power to add to, subtract from, or modify
any of the terms of the Plan, or to change or add to any benefits
provided by the Plan, or to waive or fail to apply any requirements of
eligibility for a benefit under the Plan.
XII.9 Compensation of Committee. No member of the Committee who is an
Employee will receive any compensation for his services as such, but
will be reimbursed for reasonable expenses incident to the performance
of such services. The reimbursement of expenses shall be paid in whole
or in part by the Employer, and any expenses not paid by the Employer
shall be paid by the Trustee out of the income of the Trust Fund.
XII.10 Member's Own Participation. No member of the Committee may act, vote,
or otherwise influence a decision of the Committee specifically
relating to his own participation under the Plan.
XII.11 Liability of Committee Members. No member of the Committee will be
liable for any act of omission or commission except as provided by
Federal law.
XII.12 Indemnification. The Board of Directors of the Employer, the Committee,
and the individual members thereof shall be indemnified by the Employer
and not the Trust Fund against any and all expenses, costs, and
liabilities arising by reason of any act or failure to act, unless such
act or failure to act is judicially determined to be gross negligence
or willful misconduct.
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ARTICLE XIII
FIDUCIARY RESPONSIBILITIES
XIII.1 Basic Responsibilities. Any Plan Fiduciary, whether specifically
designated or not, shall:
(a) discharge all duties solely in the interest of Members, Former
Members, and Beneficiaries and for the exclusive purpose of
providing benefits and defraying reasonable administrative
expenses under the Plan;
(b) discharge his responsibilities with the care, skill, prudence,
and diligence a prudent man would use in similar
circumstances; and
(c) conform with the provisions of the Plan.
No person who is ineligible by law will be permitted to serve as
Fiduciary.
XIII.2 Actions of Fiduciaries. Any Plan Fiduciary:
(a) may serve in more than one fiduciary capacity with respect to
the Plan;
(b) may employ one or more persons to render advice with regard to or
to carry out any responsibility that such Fiduciary has under the
Plan; and
(c) may rely upon any discretion, information, or action of any other
Plan Fiduciary, acting within the scope of its responsibilities
under the Plan, as being proper under the Plan.
XIII.3 Fiduciary Liability. No Fiduciary shall be personally liable for any
losses resulting from his action, except as provided by Federal law.
Each Fiduciary shall have only the authority and duties which are
specifically allocated to him, shall be responsible for the proper
exercise of his own authority and duties, and shall not be responsible
for any act or failure to act of any other Fiduciary.
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ARTICLE XIV
AMENDMENT
XIV.1 Internal Revenue Service Qualification. It is the intention of the
Employer that the Plan shall be and remain qualified and exempt under
Code Sections 401(a) and 501(a) and meet the requirements of Code
Sections 401(k) and 401(m). The Employer may authorize any modification
or amendment of this Plan, which is deemed necessary or appropriate to
qualify or maintain the qualification and exemption of the Plan within
the requirements of Code Sections 401(a), 401(k), 401(m), and 501(a),
or any other applicable provisions of the Code as now in effect or
hereafter amended or adopted.
XIV.2 Amendment and Termination by the Employer. The Employer reserves the
right to modify, suspend, or terminate the Plan in whole or in part
(including the provisions relating to contributions). The Employer
shall not have the power to modify, suspend, amend, or terminate the
Plan in such manner as will cause or permit any part of the Trust Fund
to be used for or diverted to purposes other than the exclusive benefit
of Members, Former Members, or their Beneficiaries, or for the payment
of expenses pursuant to the provisions of the Plan. Further, except as
otherwise specifically provided in Sections 4.5 and 4.8, no portion of
the Trust Fund may revert to or become the property of the Employer, so
as to divest a Member or Former Member from or deprive him of any
benefits which may have accrued to him upon termination or partial
termination of the Plan or complete discontinuance of contributions, as
such term is defined in Code Section 411, the amounts credited to the
Accounts of Members affected by such termination or partial termination
shall be nonforfeitable.
Notwithstanding anything to the contrary contained herein, upon such
termination of the Plan, the Employer shall have no obligation or
liability whatsoever to make any further payments to the Trustee.
XIV.3 Right to Terminate. Each Participating Employer by action of its Board
of Directors or other governing authority shall have the right to
terminate, as to itself, the Plan by delivering written notice
authorizing the termination to the Employer, the Committee, and the
Trustee. A Participating Employer who withdraws from the Plan may
arrange for the continuation by itself or its successor of this Plan
and Trust in separate form for its own employees, with such amendments,
if any, as it may deem proper, and may arrange for continuation of the
Plan and Trust by merger with an existing plan and trust, and transfer
of Trust assets.
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The Employer may, in its absolute discretion, have the right to
terminate a Participating Employer's participation at any time when, in
its judgment, such Participating Employer fails or refuses to discharge
its obligations under the Plan.
XIV.4 Valuation of Assets. In determining the value of the Accounts of the
Members or Former Members as of the date of the termination of the
Plan, the assets of the Trust Fund shall be valued by the Trustee at
fair market value as of the close of business on the termination date.
The Accounts of the Members and Former Members shall be adjusted in the
manner provided in Article VI.
XIV.5 Distribution of Assets. If the Plan is terminated, the Trustee shall
distribute all assets, as soon as practicable thereafter. If there is
another defined contribution plan described in Code Section 401(a)
maintained by an Affiliated Employer, a Participant shall have the
option of having such Account transferred to such other Plan, as
permitted by applicable law, until all assets remaining in the Trust
Fund after payment of any expenses properly chargeable to the Trust
Fund are distributed to Members, Former Members, or their
Beneficiaries. Such distribution shall be equal to the value of the
Accounts of the Members as of the date of the termination of the Plan
adjusted for any earnings and expenses of the Trust Fund and Plan
between such date and the date of distribution. Payment will be made in
cash. The Committee's determination shall be final and binding on all
persons.
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ARTICLE XV
TOP-HEAVY PLAN REQUIREMENTS
XV.1 General Rule. For any Plan Year for which this Plan is a Top-Heavy
Plan, as defined in Section 15.5, any other provisions of the Plan to
the contrary notwithstanding, the Plan shall be subject to the
following provisions:
(a) the minimum contribution provisions of Section 15.2; and
(c) the limitation on contributions set by Section 15.3.
XV.2 Minimum Contribution Provisions. Subject to the provisions of Sections
15.3 and 15.4, each Eligible Employee who (i) is a Non-Key Employee (as
defined in Section 15.7); and (ii) is employed on the last day of the
Plan Year shall be entitled to have Employer Matching Contributions
allocated to his Account of not less than 3% (the "Minimum Contribution
Percentage") of his Compensation (as defined for purposes of applying
the limits of Code Section 415) or such other amount, if any, as may be
necessary to comply with the rules established by the Internal Revenue
Service.
The Minimum Contribution Percentage set forth above shall be reduced
for any Plan Year to the percentage at which contributions are made (or
required to be made) under the Plan for the Plan Year for the Key
Employee (as defined in Section 15.6) for whom such percentage is the
highest for such Plan Year.
For this purpose, the percentage with respect to a Key Employee shall
be determined by dividing the contributions made for such Key Employee
by his total Compensation for the Plan Year not to exceed $200,000 or
such higher amount as indexed pursuant to Code Sections 401(a)(17) and
415(d) and the applicable regulations thereunder. Effective January 1,
1994, $150,000 shall be substituted for $200,000.
Contributions taken into account under the immediately preceding
sentence shall include contributions under this Plan and under all
other defined contribution plans required to be included in an
Aggregation Group (as defined in Section 15.5), but shall not include
any plan required to be included in such Aggregation Group if such plan
enables a defined benefit plan required to be included in such group to
meet the requirements of the Code prohibiting discrimination as to
contributions or benefits in favor of employees who are officers,
shareholders or the Highly-Compensated or prescribing the minimum
participation standards.
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<PAGE> 54
Contributions taken into account under this Section 15.2 shall not
include any contributions under the Social Security Act or any other
Federal or state law.
XV.3 Limitation on Contributions. In the event that the Employer also
maintains a defined benefit plan providing benefits on behalf of
Members of this Plan, one of the two following provisions shall apply:
(a) if for the Plan Year this Plan would be a Top-Heavy Plan if "90%"
were substituted for "60%", then Section 15.2 shall apply for
such Plan Year as if amended so that "4%" were substituted for
the "3%"; or
(b) if for the Plan Year (i) this Plan is subject to paragraph (a)
above but does not provide the required additional minimum
contribution; or (ii) this Plan would continue to be a
Top-Heavy Plan if "90%" were substituted for "60%", then the
denominator of both the defined contribution plan fraction and
the defined benefit plan fraction shall be calculated as set
forth in Section 4.5 for the limitation year ending in such
Plan Year by substituting "1.0" for "1.25" in each place such
figure appears, except with respect to any individual for whom
there are no Employer Matching Contributions, forfeitures, or
voluntary nondeductible contributions allocated or any
accruals for such individual under the defined benefit plan.
XV.4 Coordination With Other Plans. In the event that another defined
contribution or defined benefit plan maintained by the Employer or an
Affiliated Employer provides contributions or benefits on behalf of
Members in this Plan, such other plan shall be treated as a part of
this Plan pursuant to the applicable principles set forth in Revenue
Ruling 81-202 in determining whether the plans are providing benefits
at least equal to the minimum benefit required under the defined
benefit plan. If the Plan is subject to Section 15.3(b) but the
Employer does not substitute "1.0" for "1.25" as required, the
applicable percentage under the defined benefit plan shall be increased
by one percentage point (up to a maximum of ten percentage points).
Such determination shall be made by the Committee.
XV.5 Top-Heavy Plan Definitions. This Plan shall be a Top-Heavy Plan for any
Plan Year if, as of the Determination Date, the Aggregate of the
Accounts under the Plan for Members and Former Members who are Key
Employees exceeds 60% of the present value of the Aggregate of the
Accounts for all Members and Former Members, or if this Plan is
required to be in an Aggregation Group which for such Plan Year is a
Top-Heavy Group. For purposes of making this determination, the present
value of the Aggregate of the Accounts for a Member (i) who is not a
Key Employee, but who was a Key Employee in a prior year; or (ii) who
has not performed any Services for the Employer at any time during the
5-year period ending on the Determination Date, shall be disregarded.
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(a) "Determination Date" shall mean for any Plan Year the last day of
the immediately preceding Plan Year (except that for the first
Plan Year the Determination Date means the last day of such Plan
Year).
(b) "Aggregate of the Accounts" shall mean the sum of (i) the
Accounts determined as of the most recent Valuation Date that is
within the 12-month period ending on the Determination Date; and
(ii) the adjustment for contributions due as of the Determination
Date, and as described in the regulations under the Code.
(c) "Aggregation Group" shall mean the group of plans, if any, that
includes both the group of plans that are required to be
aggregated and, if the Committee so elects, the group of plans
that are permitted to be aggregated.
(i)The group of plans that are required to be aggregated (the
"Required Aggregation Group") includes (i) each plan of the
Employer in which a Key Employee is a Member, including
collectively-bargained plans; and (ii) each other plan of
the Employer or an Affiliated Employer, including
collectively-bargained plans, which enables a plan in which
a Key Employee is a Member to meet the requirements of the
Code prohibiting discrimination as to contributions or
benefits in favor of Employees who are officers,
shareholders, or the Highly-Compensated or prescribing the
minimum participation standards.
(ii)The group of plans that are permitted to be aggregated (the
"Permissive Aggregation Group") includes the Required
Aggregation Group plus one or more plans of the Employer or
an Affiliated Employer that is not part of the Required
Aggregation Group and that the Committee certifies as
constituting a plan within the Permissive Aggregation
Group. Such plan or plans may be added to the Permissive
Aggregation Group only if, after the addition, the
Aggregation Group as a whole continues not to discriminate
as to contributions or benefits in favor of Employees who
are officers, shareholders, or the Highly-Compensated and
to meet the minimum participation standards under the Code.
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(d) "Top-Heavy Group" shall mean the Aggregation Group, if as of
the applicable Determination Date, the sum of the present
value of the cumulative accrued benefits for Key Employees
under all defined benefit plans included in the Aggregation
Group; plus the Aggregate of the Accounts of Key Employees
under all defined contribution plans included in the
Aggregation Group exceeds 60% of the sum of the present value
of the cumulative accrued benefits for all employees under all
such defined benefit plans; plus the aggregate accounts for
all employees under such defined contribution plans. For
purposes of making this determination, the present value of
the accrued benefits for a Member (i) who is not a Key
Employee, but who was a Key Employee in a prior year; or (ii)
who has not performed Services for the Employer at any time
during the 5-year period ending on the Determination Date,
shall be disregarded. If the Aggregation Group that is a
Top-Heavy Group is a Required Aggregation Group, each plan in
the Group will be Top-Heavy. If the Aggregation Group that is
a Top-Heavy Group is a Permissive Aggregation Group, only
those plans that are part of the Required Aggregation Group
will be treated as Top-Heavy. If the Aggregation Group is not
a Top-Heavy Group, no plan within such Group will be Top-Heavy.
(e) In determining whether this Plan constitutes a Top-Heavy Plan,
the Committee shall make the following adjustments in connection
therewith:
(i)When more than one plan is aggregated, the Committee shall
determine separately for each plan as of each plan's
Determination Date the present value of the accrued
benefits or the sum of account balances. Such accrued
benefits shall be determined by using the method which is
used for accrual purposes for all plans of the Employer,
or, if there is no such method, as if such benefit accrued
not more rapidly than the slowest accrual rate permitted
under Code Section 411(b)(1)(C).
(ii)Indetermining the present value of the cumulative accrued
benefit or the amount of the account of any Employee, such
present value or account shall include the dollar value of
the aggregate distributions made to such Employee under the
applicable plan during the 5-year period ending on the
Determination Date, unless reflected in the value of the
accrued benefit or account balance as of the most recent
Valuation Date. Such amounts shall include distributions to
Employees which represented the entire amount credited to
their accounts under the applicable plan, and distributions
made on account of the death of a Member to the extent such
death benefits do not exceed the present value of the
accrued benefit or account.
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(iii)Further, in making such determination, such present value,
or such account, shall include any rollover contribution
(or similar transfer), as follows:
(A) if the rollover contribution (or similar
transfer) is initiated by the Employee and made
to or from a plan maintained by another
employer, the plan providing the distribution
shall include such distribution in the value of
such account; the plan accepting the
distribution shall not include such
distribution in the value of such account
unless the plan accepted it before December 31,
1983; or
(B) if the rollover contribution (or similar
transfer) in not initiated by the Employee or
made from a plan maintained by another
employer, the plan accepting the distribution
shall include such distribution in the present
value of such account, whether the plan
accepted the distribution before or after
December 31, 1983; the plan making the
distribution shall not include the distribution
in the present value of such account.
XV.6 Key Employee. The term "Key Employee" shall mean any Employee (and any
Beneficiary of an Employee) under this Plan who is a Key Employee as
determined in accordance with Code Section 416(i)(1), excluding in any
event individuals who have not performed Services for the Employer
during the 5-year period ending on the date on which the Top-Heavy
determination is made.
XV.7 Non-Key Employee. The term "Non-Key Employee" shall mean any Employee
(and any Beneficiary of an Employee) who is not a Key Employee,
excluding in any event individuals who have not performed Services for
the Employer during the 5-year period ending on the date on which the
Top-Heavy determination is made.
XV.8 Change from Top-Heavy Status. In the event the Plan should become a
Top-Heavy Plan for a Plan Year and subsequently reverts to a Plan which
is not Top-Heavy, the change from a Top-Heavy plan to a plan which is
not Top-Heavy shall not reduce a Member's Account.
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ARTICLE XVI
GENERAL PROVISIONS
XVI.1 Plan Voluntary. Although it is intended that the Plan shall be
continued and that contributions shall be made as herein provided, this
Plan is entirely voluntary on the part of the Employer and the
continuance of this Plan and the payment of contributions hereunder are
not to be regarded as contractual obligations of any Participating
Employer, and no Participating Employer guarantees or promises to pay
or to cause to be paid any of the benefits provided by this Plan. Each
person who shall claim the right to any payment or benefit under this
Plan shall be entitled to look only to the Fund for any such payment or
benefit and shall not have any right, claim, or demand therefore
against any Employer, except as provided by Federal law. The Plan shall
not be deemed to constitute a contract between any Participating
Employer and any Employee or to be a consideration for, or an
inducement for, the employment of any Employee by any Participating
Employer. Nothing contained in the Plan shall be deemed to give any
Employee the right to be retained in the Service of any Employer or to
interfere with the right of any Employer to discharge or to terminate
the Service of any Employee at any time without regard to the effect
such discharge or termination may have on any rights under the Plan.
XVI.2 Payments to Minors and Incompetents. If any Member, Former Member, or
Beneficiary entitled to receive any benefits hereunder is a minor or is
deemed by the Committee or is adjudged to be legally incapable of
giving valid receipt and discharge for such benefits, they will be paid
to such person or institution as the Committee may designate, or to the
duly appointed guardian. Such payment shall, to the extent made, be
deemed a complete discharge of any liability for such payment under the
Plan.
XVI.3 Non-Alienation of Benefits. No amount payable to, or held under the
Plan for the Account of, any Member or Former Member shall be subject
in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, or charge, and any attempt to so anticipate,
alienate, sell, transfer, assign, pledge, encumber, or charge the same
shall be void; nor shall any amount payable to, or held under the Plan
for the Account of any Member or Former Member be in any manner liable
for his debts, contracts, liabilities, engagements, or torts, or be
subject to any legal process to levy upon or attach, except as may be
provided under a qualified domestic relations order as defined in Code
Section 414(p).
Under a qualified domestic relations order, an alternate payee who had
been married to the Member or Former Member for at least 1 year may be
treated as a Spouse
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with respect to the portion of the Member's or Former Member's benefit
in which such alternate payee has an interest; provided that the
qualified domestic relations order provides for such treatment.
However, under no circumstances may the spouse of any alternate payee
(who is not a Member or Former Member hereunder) be treated as a Spouse
under the terms of the Plan.
Upon receipt of any judgement, decree, or order (including approval of
a property settlement agreement) relating to the provision of payment
by the Plan to an alternate payee pursuant to a state domestic
relations law, the Committee shall promptly notify the affected Member
or Former Member, and any alternate payee of the receipt of such
judgement, decree, or order and shall notify the affected Member or
Former Member, and any alternate payee of the Committee's procedure for
determining whether or not the judgement, decree, or order is a
qualified domestic relations order.
The Committee shall establish a procedure to determine the status of a
judgement, decree, or order as a qualified domestic relations order and
to administer Plan distributions in accordance with qualified domestic
relations orders. Such procedure shall be in writing, shall include a
provision specifying the notification requirements enumerated in the
preceding paragraph, shall permit an alternate payee to designate a
representative for receipt of communications from the Committee, and
shall include other provisions as the Committee shall determine,
including those which may be required under regulations promulgated by
the Secretary of the Treasury.
During any period in which the issue of whether a judgement, decree, or
order is a qualified domestic relations order is being determined (by
the Committee, a court of competent jurisdiction, or otherwise), the
Committee shall segregate in a separate account under the Plan the
amount, if any, which would have been payable to the alternate payee
during such period if the judgement, decree, or order had been
determined to be a qualified domestic relations order. Such segregated
amount shall be held separately invested in an escrow account during
the determination period.
If the judgment, decree, or order is determined by the Committee to be
a qualified domestic relations order before the first payments would
otherwise be due under such order, then payment of the appropriate
amount shall be paid to the alternate payee(s) as required under the
order. If a domestic relations order is determined by the Committee to
be a qualified order within the 18-month period beginning on the date
that the first payment would have been due under such order, the
separately accounted for amounts (plus reasonable interest thereon)
shall be retroactively paid to the alternate payee(s) named in the
order. Subsequent payments shall not include any interest component.
If the Committee first determines that the order is a qualified
domestic relations order after the 18-month period beginning on the
date on which the first payment
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would have been due under the order, then the provisions of such order
shall be applied on a prospective basis only.
XVI.4 Use of Masculine and Feminine; Singular and Plural. Wherever used in
this Plan, the masculine gender will include the feminine gender and
the singular will include the plural, unless the context indicates
otherwise.
XVI.5 Merger, Consolidation, or Transfer. In the event that the Plan is
merged or consolidated with any other plan, or should the assets or
liabilities of the Plan be transferred to any other plan, each Member
shall be entitled to a benefit immediately after such merger,
consolidation, or transfer if the Plan should then terminate equal to
or greater than the benefit he would have been entitled to receive
immediately before such merger, consolidation, or transfer if the Plan
had then terminated.
XVI.6 Leased Employees. Any individual who performs Services for the Employer
or an Affiliated Employer and who, by application of Code Section
414(n)(2) and regulations issued pursuant thereto, would be considered
a leased employee, shall, for purposes of determining the number of
Employees of the Employer and its Affiliated Employers, and for
purposes of the requirements enumerated in Code Section 414(n)(3), be
considered an Employee with regard to Services performed after December
31, 1986.
When the total of all leased employees constitutes less than 20% of the
Employer's non-Highly Compensated work force within the meaning of Code
Section 414(n)(5)(c)(ii), however, a leased employee shall not be
considered an Employee if the organization from which the individual is
leased maintains a qualified safe harbor plan (as defined in Code
Section 414(n)(5)) in which such individual participates.
"Leased Employees" who are deemed to be Employees for purposes of this
Section 16.6 shall not be eligible to participate in the Plan unless
specifically provided for in Article II.
XVI.7 Procedure for Adoption by Affiliated Employers. Any Affiliated Employer
which is not already a Participating Employer under this Plan may, with
the consent and approval of the Employer, by formal resolution of its
own Board of Directors or other governing authority, adopt the Plan
hereby created and the related Trust, and shall become a Participating
Employer under this Plan as of the effective date of such resolution.
Such adoption shall be effectuated by a formal designation resolution
of the Employer. The adoption resolution of the Affiliated Employer may
contain such specific changes and variations in Plan or Trust terms and
provisions applicable to such adopting Affiliated Employer and its
employees, as may be acceptable to the Employer and the Trustee.
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The adoption resolution shall become, as to such adopting organization
and its employees, a part of this Plan, as then amended or thereafter
amended, and the related Trust. It shall not be necessary for the
adopting organization to sign or execute the original or the amended
Plan and Trust documents. The effective date of the Plan for any such
adopting organization shall be that stated in the resolution of
adoption, and from and after such effective date such adopting
organization shall assume all the rights, obligations and liabilities
of a Participating Employer hereunder and under the Trust.
The administrative powers and control of the Employer, as provided in
the Plan and Trust, including the sole right to amendment, and of
appointment and removal of the Committee and the Trustee and their
successors, shall not be diminished by reason of the participation of
any such adopting organization in the Plan and Trust.
XVI.8 Governing Law. The Plan shall be administered, construed, and enforced
according to the laws of the State of Connecticut; provided, however,
wherever applicable, the provisions of ERISA shall govern and in such
event the laws of the United States of America shall be applied and to
the extent necessary, its courts shall have competent jurisdiction.
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APPENDIX A
PARTICIPATING EMPLOYERS
Stanadyne Automotive Corp. Corporate Office
Stanadyne Automotive Corp. Windsor Plant
Stanadyne Automotive Corp. Jacksonville Plant
Stanadyne Automotive Corp. Washington Plant
Precision Engine Products Corp. Windsor Plant
Precision Engine Products Corp. Tallahassee Plant
(with respect to salaried Employees only)
Precision Engine Products Corp. Melrose Park Facility
(with respect to salaried Employees only)
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS................................................................ 1
1.1 "Account"................................................... 1
1.2 "Affiliated Employer"....................................... 1
1.3 "Before-Tax Contribution"................................... 1
1.4 "Before-Tax Contribution Account"........................... 1
1.5 "Beneficiary"............................................... 1
1.6 "Code"...................................................... 2
1.7 "Committee"................................................. 2
1.8 "Compensation".............................................. 2
1.9 "Direct Rollover"........................................... 2
1.10 "Effective Date"............................................ 2
1.11 "Eligible Employee"......................................... 2
1.12 "Eligible Retirement Plan".................................. 2
1.13 "Eligible Rollover Distribution"............................ 3
1.14 "Employee".................................................. 3
1.15 "Employer".................................................. 3
1.16 "Employer Matching Contribution"............................ 3
1.17 "Employer Matching Contribution Account".................... 3
1.18 "Employment Date"........................................... 3
1.19 "Entry Date"................................................ 3
1.20 "ERISA"..................................................... 3
1.21 "Fiduciary"................................................. 3
1.22 "Former Member"............................................. 4
1.23 "Highly Compensated Employee"............................... 4
1.24 "Highly Compensated Group".................................. 4
1.25 "Hour of Service"........................................... 4
1.26 "Member".................................................... 5
1.27 "Nonparticipating Employer"................................. 5
1.28 "One Year Break in Service"................................. 6
1.29 "Parental Absence".......................................... 6
1.30 "Participating Employer".................................... 6
1.31 "Payee"..................................................... 6
1.32 "Plan"...................................................... 6
1.33 "Plan Year"................................................. 6
1.34 "Prior Plan Contribution Account"........................... 6
1.35 "Reemployment Date"......................................... 6
1.36 "Retirement"................................................ 7
1.37 "Service"................................................... 7
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1.38 "Severance from Service".................................... 7
1.39 "Spouse".................................................... 8
1.40 "Trust"..................................................... 8
1.41 "Trust Agreement"........................................... 8
1.42 "Trust Fund"................................................ 8
1.43 "Trustee"................................................... 8
1.44 "Valuation Date"............................................ 8
1.45 "Year of Service"........................................... 8
ARTICLE II
PARTICIPATION.............................................................. 9
2.1 Eligibility to Participate.................................. 9
2.2 Commencement of Participation............................... 9
2.3 Transfers................................................... 10
2.4 Reemployment of Terminated Employee or Resumption of
Employment Following Leave of Absence....................... 10
2.5 Eligibility of Former Stanadyne, Inc. Employees............. 11
ARTICLE III
MEMBER CONTRIBUTIONS AND MAXIMUM AMOUNTS................................... 12
3.1 Before-Tax Contributions.................................... 12
3.2 After-Tax Contributions..................................... 13
3.3 Rollover Contributions...................................... 13
3.4 Change in Level of Contributions............................ 13
3.5 Suspension and Resumption of Contributions.................. 13
3.6 Change in Compensation...................................... 13
3.7 Remittance of Member Contributions.......................... 13
3.8 Limitation on Amount and Return of Before-Tax
Contributions in Certain Instances.......................... 13
3.9 Use of Qualified Matching Contribution in Testing........... 17
ARTICLE IV
EMPLOYER MATCHING CONTRIBUTIONS.............................................18
4.1 Employer Matching Contributions............................. 18
4.2 Remittance of Employer Matching Contributions............... 19
4.3 Limitation on Amount of Employer Matching Contributions..... 19
4.4 Aggregate Limit Test........................................ 21
4.5 Maximum Total Allocations................................... 23
4.6 Annual Additions............................................ 25
4.7 Contributions Conditioned on Tax Deductibility.............. 26
4.8 Return of Contributions..................................... 26
4.9 Payment of Expenses......................................... 27
4.10 Qualified Matching Contributions............................ 27
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ARTICLE V
INVESTMENT OF CONTRIBUTIONS................................................ 28
5.1 Committee to Establish Accounts............................. 28
5.2 Investment Options.......................................... 28
5.3 Change in Investment Options................................ 28
5.4 Investment Rules............................................ 29
ARTICLE VI
TRUST FUND................................................................. 30
6.1 Trust Fund.................................................. 30
6.2 Valuation of Funds.......................................... 30
6.3 Allocation of Income, Profits, Losses and Expenses.......... 30
ARTICLE VII
DEATH...................................................................... 31
7.1 Amount of Death Benefit..................................... 31
7.2 Payment of Death Benefit.................................... 31
7.3 Designation of Beneficiary.................................. 31
7.4 Payment Other Than to Beneficiary........................... 31
ARTICLE VIII
VESTING AND TERMINATION OF EMPLOYMENT...................................... 32
8.1 Vesting of Contributions.................................... 32
8.2 Method of Payment........................................... 32
ARTICLE IX
LOANS...................................................................... 33
9.1 Method Loans................................................ 33
9.2 Rules Relating to Loans..................................... 33
ARTICLE X
WITHDRAWALS................................................................ 37
10.1 Non-hardship Withdrawals from Prior Plan Contribution
Account..................................................... 37
10.2 Withdrawals After Age 59 1/2................................ 37
10.3 Hardship Withdrawals........................................ 37
10.4 Rules for Withdrawals....................................... 38
10.5 Debiting of Withdrawals..................................... 39
ARTICLE XI
PAYMENT OF BENEFITS........................................................ 41
11.1 Entitlement to Distribution................................. 41
11.2 Form of Payment............................................. 41
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11.3 Time of Payment............................................. 42
11.4 Amount of Distribution...................................... 43
11.5 Limitation on Distributions................................. 43
11.6 Segregated Accounts......................................... 44
11.7 Missing Persons............................................. 44
ARTICLE XII
RETIREMENT................................................................. 45
12.1 Responsibility for Plan and Trust Administration............ 45
12.2 Retirement Plan Committee................................... 45
12.3 Agents of the Committee..................................... 45
12.4 Committee Procedures........................................ 45
12.5 Administrative Powers of the Committee...................... 46
12.6 Benefit Claims Procedures................................... 46
12.7 Reliance on Reports and Certificates........................ 47
12.8 Other Committee Powers and Duties........................... 47
12.9 Compensation of Committee................................... 48
12.10 Member's Own Participation.................................. 48
12.11 Liability of Committee Members.............................. 48
12.12 Indemnification............................................. 48
ARTICLE XIII
FIDUCIARY RESPONSIBILITIES................................................. 49
13.1 Basic Responsibilities...................................... 49
13.2 Actions of Fiduciaries...................................... 49
13.3 Fiduciary Liability......................................... 49
ARTICLE XIV
AMENDMENT.................................................................. 50
14.1 Internal Revenue Service Qualification...................... 50
14.2 Amendment and Termination by the Employer................... 50
14.3 Right to Terminate.......................................... 50
14.4 Valuation of Assets......................................... 51
14.5 Distribution of Assets...................................... 51
ARTICLE XV
TOP-HEAVY PLAN REQUIREMENTS................................................ 52
15.1 General Rule................................................ 52
15.2 Minimum Contribution Provisions............................. 52
15.3 Limitation on Contributions................................. 53
15.4 Coordination With Other Plans............................... 53
15.5 Top-Heavy Plan Definitions.................................. 53
15.6 Key Employee................................................ 56
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15.7 Non-Key Employee............................................ 56
15.8 Change from Top-Heavy Status................................ 56
ARTICLE XVI
GENERAL PROVISIONS......................................................... 57
16.1 Plan Voluntary.............................................. 57
16.2 Payments to Minors and Incompetents......................... 57
16.3 Non-Alienation of Benefits.................................. 57
16.4 Use of Masculine and Feminine; Singular and Plural.......... 59
16.5 Merger, Consolidation, or Transfer.......................... 59
16.6 Leased Employees............................................ 59
16.7 Procedure for Adoption by Affiliated Employers.............. 59
16.8 Governing Law............................................... 60
APPENDIX A
PARTICIPATING EMPLOYERS.....................................................61
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<PAGE> 1
Exhibit 10.7
DRAFT
-----
11/4/97
PRECISION ENGINE PRODUCTS CORP.
RETIREMENT FUND
EFFECTIVE AS OF JANUARY 1, 1998
<PAGE> 2
PREAMBLE
Effective January 1, 1998, Precision Engine Products Corp.
(the "Employer") establishes a retirement plan referred to as the Precision
Engine Products Corp. Retirement Fund (the "Plan") as provided herein. A Trust
Agreement has been adopted by the Employer and is intended to form a part of
this Plan. The purpose of this Plan is to encourage Employee savings for
retirement and to provide a tax qualified facility for accumulation of funds to
be used to provide benefits payable to an Employee upon his retirement, death,
termination of employment, or on certain other occasions. The benefits provided
by this Plan will be in addition to the benefits Employees are entitled to under
any other programs of the Employer.
It is intended that this Plan be qualified under Section
401(a) of the Internal Revenue Code of 1986 (the "Code"), as amended from time
to time, and meet the requirements of Code Section 401(k) as a qualified cash or
deferred arrangement. It is also intended that the Trust be exempt from taxation
as provided under Code Section 501(a).
If the Plan shall fail to initially qualify as amended under
the applicable Code Sections, it shall be null and void, and all contributions
which may have been made hereunder shall be treated in accordance with Section
4.9.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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PREAMBLE
<S> <C>
ARTICLE I -- DEFINITIONS......................................................................................... 1
1.1 "Account"...................................................................................... 1
1.2 "Affiliated Employer".......................................................................... 1
1.3 "Before-Tax Contribution"...................................................................... 1
1.4 "Before-Tax Contribution Account".............................................................. 1
1.5 "Beneficiary".................................................................................. 1
1.6 "Business Day"................................................................................. 2
1.7 "Code"......................................................................................... 2
1.8 "Committee".................................................................................... 2
1.9 "Compensation"................................................................................. 2
1.10 "Disability"................................................................................... 2
1.11 "Direct Rollover".............................................................................. 2
1.12 "Effective Date"............................................................................... 2
1.13 "Eligible Employee"............................................................................ 3
1.14 "Eligible Retirement Plan"......................................................................3
1.15 "Eligible Rollover Distribution"............................................................... 3
1.16 "Employee"..................................................................................... 3
1.17 "Employer"..................................................................................... 3
1.18 "Employer Core Contribution"................................................................... 3
1.19 "Employer Core Contribution Account"........................................................... 3
1.20 "Employer Matching Contribution"............................................................... 3
1.21 "Employer Matching Contribution Account"....................................................... 3
1.22 "Employment Date".............................................................................. 3
1.23 "Entry Date"................................................................................... 4
1.24 "ERISA"........................................................................................ 4
1.25 "Fiduciary".................................................................................... 4
1.26 "Former Member"................................................................................ 4
1.27 "Highly Compensated Employee".................................................................. 4
1.28 "Highly Compensated Group"..................................................................... 4
1.29 "Hour of Service".............................................................................. 4
1.30 "Member"....................................................................................... 4
1.31 "Month of Service"............................................................................. 4
1.32 "Nonparticipating Employer".................................................................... 4
1.33 "Normal Retirement Age"........................................................................ 4
1.34 "Normal Retirement Date"....................................................................... 4
1.35 "One Year Period of Severance"................................................................. 5
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
1.36 "Parental Absence"............................................................................. 5
1.37 "Payee"........................................................................................ 5
1.38 "Plan"......................................................................................... 5
1.39 "Plan Year".................................................................................... 5
1.40 "Prior Plan"................................................................................... 5
1.41 "Reemployment Date"............................................................................ 5
1.42 "Retirement"................................................................................... 5
1.43 "Rollover Contribution"........................................................................ 6
1.44 "Rollover Contribution Account"................................................................ 6
1.45 "Service"...................................................................................... 6
1.46 "Severance from Service"....................................................................... 6
1.47 "Spouse"....................................................................................... 7
1.48 "Temporary Employee"........................................................................... 7
1.49 "Trust"........................................................................................ 7
1.50 "Trust Agreement".............................................................................. 7
1.51 "Trust Fund"................................................................................... 7
1.52 "Trustee"...................................................................................... 7
1.53 "Valuation Date"............................................................................... 7
1.54 "Year of Service".............................................................................. 7
ARTICLE II -- PARTICIPATION...................................................................................... 9
2.1 Eligibility to Participate..................................................................... 9
2.2 Commencement of Participation.................................................................. 9
2.3 Transfers...................................................................................... 9
2.4 Reemployment of Terminated Employee or Resumption
of Employment Following Leave of Absence................................................... 10
2.5 Rollover Membership........................................................................... 11
ARTICLE III -- MEMBER CONTRIBUTIONS AND MAXIMUM AMOUNTS......................................................... 12
3.1 Before-Tax Contributions...................................................................... 12
3.2 After-Tax Contributions....................................................................... 12
3.3 Rollover Contributions........................................................................ 12
3.4 Change in Level of Contributions.............................................................. 13
3.5 Suspension and Resumption of Contributions.................................................... 13
3.6 Change in Compensation........................................................................ 13
3.7 Remittance of Member Contributions............................................................ 13
3.8 Limitation on Amount and Return of Before-Tax
Contributions in Certain Instances......................................................... 13
ARTICLE IV -- EMPLOYER CONTRIBUTIONS............................................................................ 17
4.1 Employer Matching Contributions............................................................... 17
4.2 Remittance of Employer Matching Contributions................................................. 17
4.3 Limitation on Amount of Employer Matching Contributions....................................... 17
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
4.4 Aggregate Limit Test.......................................................................... 19
4.5 Employer Core Contributions................................................................... 20
4.6 Maximum Total Allocations..................................................................... 21
4.7 Annual Additions.............................................................................. 22
4.8 Contributions Conditioned on Tax Deductibility................................................ 23
4.9 Return of Contributions....................................................................... 23
4.10 Payment of Expenses........................................................................... 24
ARTICLE V -- INVESTMENT OF CONTRIBUTIONS........................................................................ 25
5.1 Committee to Establish Accounts............................................................... 25
5.2 Investment Options............................................................................ 25
5.3 Change in Investment Options.................................................................. 25
5.4 Investment Rules.............................................................................. 25
ARTICLE VI -- TRUST FUND........................................................................................ 27
6.1 Trust Fund.................................................................................... 27
6.2 Valuation of Funds............................................................................ 27
6.3 Allocation of Income, Profits, Losses and Expenses............................................ 27
ARTICLE VII -- DEATH............................................................................................ 28
7.1 Amount of Death Benefit....................................................................... 28
7.2 Payment of Death Benefit...................................................................... 28
7.3 Designation of Beneficiary.................................................................... 28
7.4 Payment Other Than to Beneficiary............................................................. 28
ARTICLE VIII -- VESTING AND TERMINATION OF EMPLOYMENT........................................................... 29
8.1 Vesting of Contributions...................................................................... 29
8.2 Method of Payment............................................................................. 29
8.3 Forfeiture.................................................................................... 29
ARTICLE IX -- LOANS............................................................................................. 30
9.1 Loans......................................................................................... 30
9.2 Rules Relating to Loans....................................................................... 30
ARTICLE X -- WITHDRAWALS........................................................................................ 33
10.1 Non-Hardship Withdrawals from Rollover Contribution Account................................... 33
10.2 Withdrawals After Age 59 1/2.................................................................. 33
10.3 Hardship Withdrawals.......................................................................... 33
10.4 Rules for Withdrawals......................................................................... 34
10.5 Debiting of Withdrawals....................................................................... 35
ARTICLE XI -- PAYMENT OF BENEFITS............................................................................... 36
11.1 Entitlement to Distribution................................................................... 36
11.2 Form of Payment............................................................................... 36
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C>
11.3 Time of Payment............................................................................... 37
11.4 Amount of Distribution........................................................................ 38
11.5 Limitation on Distributions................................................................... 38
11.6 Segregated Accounts........................................................................... 39
11.7 Missing Persons............................................................................... 39
ARTICLE XII -- ADMINISTRATION................................................................................... 40
12.1 Responsibility for Plan and Trust Administration.............................................. 40
12.2 Retirement Plan Committee..................................................................... 40
12.3 Agents of the Committee....................................................................... 40
12.4 Committee Procedures.......................................................................... 40
12.5 Administrative Powers of the Committee........................................................ 41
12.6 Benefit Claims Procedures..................................................................... 41
12.7 Reliance on Reports and Certificates.......................................................... 42
12.8 Other Committee Powers and Duties............................................................. 42
12.9 Compensation of Committee..................................................................... 43
12.10 Member's Own Participation.................................................................... 43
12.11 Liability of Committee Members................................................................ 43
12.12 Indemnification............................................................................... 43
ARTICLE XIII -- FIDUCIARY RESPONSIBILITIES...................................................................... 44
13.1 Basic Responsibilities........................................................................ 44
13.2 Actions of Fiduciaries........................................................................ 44
13.3 Fiduciary Liability........................................................................... 44
ARTICLE XIV -- AMENDMENT........................................................................................ 45
14.1 Internal Revenue Service Qualification........................................................ 45
14.2 Amendment and Termination by the Employer..................................................... 45
14.3 Right to Terminate............................................................................ 45
14.4 Valuation of Assets........................................................................... 45
14.5 Distribution of Assets........................................................................ 46
ARTICLE XV -- TOP-HEAVY PLAN REQUIREMENTS....................................................................... 47
15.1 General Rule.................................................................................. 47
15.2 Minimum Contribution Provisions............................................................... 47
15.3 Limitation on Contributions................................................................... 48
15.4 Coordination With Other Plans................................................................. 48
15.5 Top-Heavy Plan Definitions.................................................................... 48
15.6 Key Employee.................................................................................. 51
15.7 Non-Key Employee.............................................................................. 51
15.8 Change from Top-Heavy Status.................................................................. 51
ARTICLE XVI -- GENERAL PROVISIONS............................................................................... 52
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
<S> <C>
16.1 Plan Voluntary................................................................................ 52
16.2 Payments to Minors and Incompetents........................................................... 52
16.3 Non-Alienation of Benefits.................................................................... 52
16.4 Use of Masculine and Feminine; Singular and Plural............................................ 55
16.5 Merger, Consolidation, or Transfer............................................................ 55
16.6 Leased Employees.............................................................................. 55
16.7 Governing Law................................................................................. 55
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
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TABLE OF CONTENTS
(CONTINUED)
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TABLE OF CONTENTS
(CONTINUED)
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TABLE OF CONTENTS
(CONTINUED)
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ARTICLE I
DEFINITIONS
The following words and phrases when used in the Plan shall
have the following meanings, unless a different meaning is plainly required by
the context:
I.1 "ACCOUNT" shall mean the credit balance of a Member or Former Member in
the Trust Fund represented by his Before-Tax Contribution Account,
Employer Matching Contribution Account, Employer Core Contribution
Account, and his Rollover Contribution Account, if any.
I.2 "AFFILIATED EMPLOYER" shall mean any corporation which is included with
the Employer in a controlled group of corporations, as determined in
accordance with Code Section 414(b), any unincorporated trade or
business which, as determined under regulations of the Secretary of the
Treasury, is under common control of the Employer under Code Section
414(c), any organization that includes the Employer, which is a member
of an affiliated service group, as defined in Code Section 414(m), and
any other entity required to be aggregated with the Employer pursuant
to regulations under Code Section 414(o). For the purposes of Sections
4.6 and 4.7, Code Sections 414(b) and (c) shall be applied as modified
by Code Section 415(h).
I.3 "BEFORE-TAX CONTRIBUTION" shall mean a salary reduction contribution
made to the Plan on behalf of a Member pursuant to Article III.
I.4 "BEFORE-TAX CONTRIBUTION ACCOUNT" shall mean a Member's interest in the
Trust Fund attributable to Before-Tax Contributions made to the Plan,
including investment earnings thereon.
I.5 "BENEFICIARY" shall mean the person or persons designated by a Member
or Former Member to receive benefits under the Plan in the event of the
Member's death. If the Member is married and designates someone other
than his legal Spouse, his Beneficiary designation must include the
written consent of his legal Spouse at the time the designation
<PAGE> 13
is made in order to be valid. A former Spouse's consent shall not be
binding on a subsequent Spouse.
Such written consent must approve the specific Beneficiary designated,
acknowledge the effect of such designation, and be witnessed by a
notary public or a Plan representative. If it is established to the
satisfaction of the Committee that the Member has no Spouse, or that
the Spouse's consent cannot be obtained because the Spouse cannot be
located, or because of such other circumstances as may be prescribed in
regulations issued pursuant to Code Section 417, such written consent
shall not be required. If no valid Beneficiary designation is in effect
at the time of the Member's death, Section 7.4 shall apply.
I.6 "BUSINESS DAY" shall mean any day on which the New York Stock Exchange
is open for business.
I.7 "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any regulations issued thereunder. Reference to any
Code Section shall include any successor provision thereto.
I.8 "COMMITTEE" shall mean the person or persons designated by the Employer
to administer the Plan in accordance with Article XII.
I.9 "COMPENSATION" shall mean the total remuneration paid by the Employer
to an Employee which would be reportable on the Employee's Federal
Income Tax Withholding Statement (Form W-2) during the period
considered Service while a Member in a Plan Year; plus for any pay
period during which a Member is making Before-Tax Contributions
hereunder, the Before-Tax Contributions made for such pay period and
salary deferrals made by the Employee to a plan maintained by the
Employer which meets the requirements of Code Section 125 for such pay
period. Such remuneration shall include base pay, bonuses, commissions,
short-term disability pay, shift differential premiums, and incentive
pay paid by the Employer, but shall exclude workers' compensation
amounts, severance pay, and token bonus amounts.
A Member's Compensation taken into account under the Plan for any Plan
Year shall not exceed $160,000, or such amount as indexed pursuant to
Code Sections 401(a)(17) and 415(d) and the applicable regulations
thereunder.
I.10 "DISABILITY" shall mean a physical or mental condition which results in
the Member's qualification for benefits under the Employer's long-term
disability plan unless the Member is covered by a pension plan that
provides long-term disability benefits, provided such disability
<PAGE> 14
(a) was not contracted, suffered or incurred while the Member was
engaged in, or did not result from his or her having engaged
in, a criminal enterprise; or
(b) was not sustained while the Member was employed by anyone
other than the Employer or an Affiliated Employer.
A Member shall not have a Disability unless he or she furnishes proof
of the existence of such Disability to the Committee in the form and
manner, and at such time, as the Committee may request.
I.11 "DIRECT ROLLOVER" shall mean a payment by the Plan to the Eligible
Retirement Plan specified by the Member or Payee.
I.12 "EFFECTIVE DATE" shall mean January 1, 1998.
I.13 "ELIGIBLE EMPLOYEE" shall mean an Employee who is included in the
eligible class described in Section 2.1.
I.14 "ELIGIBLE RETIREMENT PLAN" shall mean an individual retirement account
described in Code Section 408(a), an individual retirement annuity
described in Code Section 408(b), an annuity plan described in Code
Section 403(a), or a qualified trust described in Code Section 401(a),
that accepts the Member's or Payee's Eligible Rollover Distribution.
However, in the case of an Eligible Rollover Distribution to the
surviving Spouse, an Eligible Retirement Plan is an individual
retirement account or individual retirement annuity.
I.15 "ELIGIBLE ROLLOVER DISTRIBUTION" shall mean any distribution of all or
any portion of the balance to the credit of the Member, except that an
Eligible Rollover Distribution does not include (i) any distribution
that is one of a series of substantially equal periodic payments (not
less frequently than annually) made for the lives (or life
expectancies) of the Member and the Member's designated Beneficiary, or
for a specified period of 10 years or more; (ii) any distribution to
the extent such distribution is required under Code Section 401(a)(9);
and (iii) the portion of any distribution that is not includible in
gross income.
I.16 "EMPLOYEE" shall mean any common-law Employee of the Employer or an
Affiliated Employer.
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<PAGE> 15
A leased employee as described in Code Section 414(n)(2) shall be
considered an Employee only to the extent required by Section 16.6.
I.17 "EMPLOYER" shall mean Precision Engine Products Corp., a Delaware
corporation, or its successors or assigns.
I.18 "EMPLOYER CORE CONTRIBUTION" shall mean a contribution by the Employer
to the Plan on behalf of a member pursuant to Section 4.5.
I.19 "EMPLOYER CORE CONTRIBUTION ACCOUNT" shall mean a Member's interest in
the Trust Fund attributable to Employer Core Contributions made to the
Plan, and the investment earnings thereon.
I.20 "EMPLOYER MATCHING CONTRIBUTION" shall mean a contribution by the
Employer made to the Plan on behalf of a Member pursuant to Section
4.1.
I.21 "EMPLOYER MATCHING CONTRIBUTION ACCOUNT" shall mean a Member's interest
in the Trust Fund attributable to Employer Matching Contributions made
to the Plan, including investment earnings thereon.
I.22 "EMPLOYMENT DATE" shall mean the first day for which an Employee
receives credit for an Hour of Service.
I.23 "ENTRY DATE" shall mean the first business day of the month coincident
with or next following the date on which an individual becomes an
Eligible Employee or any business day of any month thereafter.
-4-
<PAGE> 16
I.24 "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time. References to any Section of ERISA shall
include any successor provision thereto.
I.25 "FIDUCIARY" shall mean any person who (i) exercises any discretionary
authority or discretionary control respecting the management of the
Plan, assets held under the Plan, or disposition of Plan assets; (ii)
renders investment advice for a fee or other compensation, direct or
indirect, with respect to assets held under the Plan or has any
authority or responsibility to do so; or (iii) has any discretionary
authority or discretionary responsibility in the administration of the
Plan. Any person who exercises authority or has responsibility of a
fiduciary nature as described above shall be considered a Fiduciary
under the Plan.
I.26 "FORMER MEMBER" shall mean an individual who was a Member, has
terminated employment with the Employer and all Affiliated Employers,
and has not received a total distribution of his vested Account under
the Plan.
I.27 "HIGHLY COMPENSATED EMPLOYEE" shall mean each Employee who (i) was a 5%
owner during the Plan Year or the preceding Plan Year, or (ii) for the
preceding Plan Year had compensation as defined in Code Section
414(q)(4) in excess of $80,000 (as adjusted under Code Section 415(d)).
I.28 "HIGHLY COMPENSATED GROUP" shall mean the group of Highly Compensated
Employees who are also Eligible Employees as defined herein.
I.29 "HOUR OF SERVICE" shall mean each hour for which an Employee is
directly or indirectly paid or entitled to payment by the Employer or
any Affiliated Employer for the performance of duties.
I.30 "MEMBER" shall mean an Employee who is either currently participating
in the Plan or who has an Account under the Plan.
I.31 "MONTH OF SERVICE" shall mean a full calendar month of Service.
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<PAGE> 17
I.32 "NONPARTICIPATING EMPLOYER" means a member of the Metromedia Company
controlled group other than the Employer.
I.33 "NORMAL RETIREMENT AGE" shall mean age 65.
I.34 "NORMAL RETIREMENT DATE" shall mean the first day of the month
coincident with or next following a Member's Normal Retirement Age.
I.35 "ONE YEAR PERIOD OF SEVERANCE" shall mean a one year period beginning
on the earliest of the date an Employee quits, retires, is discharged
or dies, or the first anniversary of the date that the Employee is
absent from work (with or without pay) for any other reason, and ending
on the date the Employee completes an Hour of Service following
termination of Employment.
With respect to a Member who is absent from work due to a Parental
Absence, "second anniversary" shall be substituted for "first
anniversary" in the preceding paragraph.
Additionally, for purposes of Section 2.1, any period of leave under
the Family and Medical Leave Act of 1993 shall be treated as continued
Service to the extent necessary to prevent the occurrence of a One Year
Period of Severance.
I.36 "PARENTAL ABSENCE" shall mean an Employee's absence from work for any
of the following reasons:
(a) the pregnancy of the Employee;
(b) the birth of the Employee's child;
(c) the adoption of a child by the Employee; or
(d) the need to care for the Employee's child immediately
following its birth or adoption.
I.37 "PAYEE" shall mean a Member's or Former Member's surviving Spouse and a
Member's or Former Member's Spouse or
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<PAGE> 18
former Spouse who is the alternate payee under a qualified domestic
relations order, as defined in Code Section 414(p).
I.38 "PLAN" shall mean the Precision Engine Products Corp. Retirement Fund,
as set forth in this document and as amended from time to time.
I.39 "PLAN YEAR" shall mean the calendar year.
I.40 "PRIOR PLAN" shall mean the Precision Engine Products Corp. Tallahassee
Hourly Pension Plan.
I.41 "REEMPLOYMENT DATE" shall mean the day an Employee first completes an
Hour of Service following a Severance from Service, or, in the case of
an Employee on an approved leave of absence, the first day he returns
to work with the Employer or an Affiliated Employer.
I.42 "RETIREMENT" shall mean termination of employment for a reason other
than death after a Member has attained age 57 and has completed 10
Years of Service, as defined in the Prior Plan.
I.43 "ROLLOVER CONTRIBUTION" shall mean an amount received from a deferred
compensation plan which qualifies under Code Section 401 or Code
Section 403(a) and which is rolled over to the Plan pursuant to Code
Section 402(c). A Rollover Contribution can include both Direct
Rollovers and amounts distributed to a Member and then rolled over, and
also include a direct trust to trust transfer. In addition, if an
Eligible Employee had deposited a qualified total distribution within
the meaning of Code Section 401(a)(5)(E) [as in effect prior to January
1, 1993] on an Eligible Rollover Distribution into an individual
retirement account as defined in Code Section 403, he or she may
transfer the amount of the distribution plus earnings from the
individual retirement account into the Plan; provided, however, that
the rollover amount is deposited with the Trustee within sixty (60)
days after receipt from the indicated retirement account.
I.44 "ROLLOVER CONTRIBUTION ACCOUNT" shall mean a Member's interest in the
Prior Plan which was transferred into the Plan as a rollover.
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<PAGE> 19
I.45 "SERVICE" mean all periods of employment with the Employer and
Affiliated Employers measured from the individual's Employment Date and
ending on such Employee's Severance from Service, and excluding any
period between his Severance from Service and his Reemployment Date, if
applicable, unless provided otherwise herein or in Section 1.46.
If an Employee leaves active Service to enter the Armed Forces of the
United States (i) through the operation of a compulsory military
service law; (ii) during a period of declared national emergency; or
(iii) pursuant to a military leave of absence granted by the Employer,
the period of his absence shall be counted as active Service; provided
the Employee returns to Service with the Employer within 90 days (or
such longer period as may be provided by law for the protection of
reemployment rights) after his discharge or release from active duty in
the Armed Forces of the United States, or within the period for which
such military leave of absence was granted by the Employer, as the case
may be. Notwithstanding any provisions of this Plan to the contrary,
contributions, benefits, and service credit with respect to qualified
military service within the meaning of Code Section 414(u)(5) will be
provided in accordance with Code Section 414(u).
I.46 "SEVERANCE FROM SERVICE" shall mean the earliest of the following:
(a) the date on which the Employee resigns, is discharged, or
retires from Service with the Employer and all Affiliated
Employers. If such an individual has a Reemployment Date
within 12 months of his Severance from Service hereunder, his
employment shall be deemed to be continuous and no Severance
from Service shall have occurred;
(b) the date the Employee dies;
(c) the first anniversary of the date on which the Employee is
laid off, starts an authorized leave of absence, or in absent
from work for any other reason other than a Parental Absence;
or
(d) the second anniversary of the date on which the Employee
commenced a Parental Absence, if such Employee has not yet
returned to work with the Employer or an Affiliated Employer.
I.47 "SPOUSE" shall mean the legal Spouse or surviving Spouse of a Member as
determined in accordance with applicable state law. A former spouse
will be treated as the Spouse or surviving Spouse to the extent
required under a qualified domestic relations order, as defined in Code
Section 414(p).
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<PAGE> 20
I.48 "TEMPORARY EMPLOYEE" shall mean a person employed by the Employer
either on a full-time or part-time basis, with the understanding that
his or her employment will be terminated no later than upon completion
of a specific assignment. A temporary employee may be offered and may
accept a new temporary assignment with the Company and may retain his
status as a Temporary Employee.
I.49 "TRUST" shall mean the Precision Engine Products Corp. Retirement Fund
Trust, established to hold and invest contributions made under the Plan
for the exclusive benefit of the Employees included in the Plan and
from which benefits shall be distributed.
I.50 "TRUST AGREEMENT" shall mean the agreement between the Employer and a
Trustee, as provided for in Article XII.
I.51 "TRUST FUND" shall mean all assets held by the Trustee in accordance
with the Trust Agreement without distinction as to income or principal
and without regard to source.
I.52 "TRUSTEE" shall mean the individual, individuals, or institution
appointed by the Employer to act in accordance with the Trust account.
As of the Effective Date, The Fidelity Trust Company is the Trustee.
I.53 "VALUATION DATE" shall mean each Business Day.
I.54 "YEAR OF SERVICE" shall mean an Employee's period of employment which
is equal to the sum of:
(a) the period commencing on the date the Employee first performs
an Hour of Service and ending on the date a Period of
Severance begins; and
(b) (1) if the Employee quits, retires or is discharged,
the period commencing on the date the Employee
terminated his or her Employment and ending on the
first date on which the Employee again performs an
Hour of Service, if such date is within 12 months of
the date on which the Employee last performed an Hour
of Service; or
(2) if the Employee is absent from work for any other
reason and, within 12 months of the first day of such
absence, the Employee quits, retires or is
discharged, the period commencing on the first day of
such absence and
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ending on the first day the Employee again performs
an Hour of Service if such day is within 12 months of
the date his or her absence began.
With respect to an absence from work due to a Parental Absence, the
period between the first anniversary and the second anniversary of the
first date of such absence shall not be taken into account for any
purpose under the Plan.
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ARTICLE II
PARTICIPATION
II.1 Eligibility to Participate. Each Employee on January 1, 1998 who was a
member under the Prior Plan on December 31, 1997, shall become a Member
on January 1, 1998.
Each other Employee shall be an Eligible Employee upon satisfying all
of the following requirements:
(a) he is employed by the Employer;
(b) he is classified as a non-union employee and if he is employed
at the Employer's Tallahassee facility, and is regularly paid
on an hourly rather than salaried basis;
(c) he has a minimum of six (6) consecutive Months of Service;
(d) he is not a "leased employee", as defined under Code Section
414(n)(2) or a Temporary Employee, or an individual
characterized by the Employer as an independent contractor;
and
(e) he is not a nonresident alien who received no earned income
from the Employer which constitutes income from United States
sources.
II.2 Commencement of Participation. Except as provided in Section 2.4, each
Eligible Employee shall become a Member (or if his participation has
terminated, shall again become a Member) on the Entry Date next
following the date on which he:
(a) meets the requirements of Section 2.1; and
(b) enrolls in the Plan by completing an election form to initiate
contributions pursuant to Article III. However, if an Eligible
Employee fails to enroll when first eligible to do so, such
Employee shall be eligible to enroll on any following Entry
Date; provided that he is then an Eligible Employee. Such
enrollment will be effective as of the next payroll period.
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<PAGE> 23
II.3 Transfers. The following provisions shall govern in the case of an
Employee who changes employment status:
(a) In the event that an Eligible Employee directly transfers to
an ineligible class of Employees, he shall be deemed to
continue as a Member for all purposes of the Plan except that
he shall not be permitted to direct any further Before-Tax
Contributions on his behalf under the Plan nor shall he
receive any further Employer Matching Contributions or
Employer Core Contributions unless he again becomes an
Eligible Employee. Such an Employee shall continue to accrue
Months of Service pursuant to Section 1.31 and Years of
Service pursuant to Section 1.54.
(b) In the event that an Employee in an ineligible class transfers
to an employment classification as an Eligible Employee, his
Years of Service earned during his employment with all
Affiliated Employers shall be credited under this Plan for
purposes of meeting the eligibility requirements of Section
2.1. Such Employee shall be eligible to become a Member when
he meets the requirements of Sections 2.1 and 2.2.
II.4 Reemployment of Terminated Employee or Resumption of Employment
Following Leave of Absence.
(a) A Former Member who terminates employment for any reason and
returns to work shall be eligible to participate in the Plan
on the first day of any pay period coincident with or next
following his Reemployment Date, provided that he has not
forfeited his prior Months of Service under Section 2.4(c);
and provided further that he is then an Eligible Employee.
(b) (i) An Eligible Employee who was not a Member of the
Plan prior to termination of employment or leave of
absence may, upon resumption of active employment
with the Employer, elect to become a Member on the
first day of any pay period coincident with or next
following his Reemployment Date; provided that he is
then an Eligible Employee under Section 2.1 and has
not forfeited his prior Months of Service under
Section 2.4(c) below.
(ii) A former Employee who was not previously a Member of
the Plan will be treated as a new Employee if his
prior Months of Service are forfeited
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<PAGE> 24
pursuant to Section 2.4(c) below. In such case, the
individual may elect to become a Member in accordance
with Section 2.2; provided that he is an Eligible
Employee as described in Section 2.1. Such an
individual will be required to complete six (6)
Months of Service after his Reemployment Date to meet
the service requirements of Section 2.1(c).
(c) For purposes of satisfying the service requirement of Section
2.1(c), if an Employee who is not an Eligible Employee incurs
a One Year Period of Severance, he shall lose his Months of
Service accumulated before such period only if the length of
the Period of Severance does not exceed the greater of five
(5) consecutive One Year Periods of Severance or the length of
the Employee's past service.
II.5 Rollover Membership. An Eligible Employee who makes a Rollover
Contribution shall become a Member as of the date of such Contribution
provided he or she has met the requirements of Section 2.1.
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ARTICLE III
MEMBER CONTRIBUTIONS AND MAXIMUM AMOUNTS
III.1 Before-Tax Contributions.
(a) Each Eligible Employee may elect, in writing, to authorize the
Employer to reduce his Compensation and make a corresponding
Before-Tax Contribution to the Plan on his behalf. This
reduction in Compensation must be in any whole percentage from
2% to 17% of such Compensation. Authorization to reduce
Compensation shall be in writing and shall be delivered to the
Committee no later than 30 days prior to the date as of which
the Before-Tax Contribution becomes effective, unless the
Committee agrees to accept a later authorization according to
such uniform and nondiscriminatory rules as it may adopt. Such
Compensation reduction shall continue unchanged until the
Member terminates employment, changes or suspends the
Before-Tax Contribution in accordance with Section 3.4 or 3.5,
or transfers to the employment of a Nonparticipating Employer
or an ineligible class of Employees.
(b) Except as provided under Section 2.4 for certain reemployed
Members, regular Before-Tax Contributions made under Section
3.1(a) shall commence on an Entry Date.
(c) In addition to regular Before-Tax Contributions under Section
3.1(a), a Member may also elect once each calendar quarter, on
such forms as the Committee may prescribe, to make a single
sum reduction in Compensation which has not yet been received,
but which is due to be paid in such quarter.
(d) The aggregate reduction of such Member's Compensation for the
Plan Year resulting from single sum and regular payroll
reductions shall be no more than 17% of his Compensation for
such Plan Year, and the rate of regular payroll reductions
cannot be less than 2% of Compensation.
Before-Tax Contributions made under this Section 3.1 shall be subject
to the limitations of Sections 3.8, 4.4, and 4.6.
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<PAGE> 26
III.2 After-Tax Contributions.
After-tax contributions are not permitted.
III.3 Rollover Contributions.
With the approval of the Committee, any Eligible Employee who is a
Member may make a Rollover Contribution to the Plan. A Rollover
Contribution shall be in cash or in such other property as is
acceptable to the Trustee. In the event that an Eligible Employee makes
a contribution pursuant to this Section that was intended to be a
Rollover Contribution which the Trustee later discovers not to be a
Rollover Contribution, the Trustee shall distribute to such Member as
soon as practicable after such discovery the account balance of his or
her Rollover Contribution Account. Any Eligible Employee who wishes to
make a Rollover Contribution to the Plan shall provide the Committee
with certification as to the eligibility of such contribution in the
form and manner, and at such time, as the Committee may request.
III.4 Change in Level of Contributions.
The Before-Tax Contribution percentage as designated by the Member
shall continue in effect, notwithstanding any change in his
Compensation, until he elects to change such percentage. Subject to the
requirements of Section 3.1, a Member may increase or decrease the rate
of such contributions on a daily basis by notifying the Trustee.
III.5 Suspension and Resumption of Contributions.
A Member may suspend the making of Before-Tax Contributions as of the
end of any payroll period. Providing he is still an Eligible Employee,
a Member who suspends his contributions pursuant to the above rule may
resume such contributions at any time, effective as of the beginning of
the next payroll period.
III.6 Change in Compensation.
In the event of a change in the Compensation of a Member, the
percentage of his Compensation that he has authorized as his Before-Tax
Contribution shall be applied as soon as practicable with respect to
such changed Compensation without action by the Member.
III.7 Remittance of Member Contributions.
Before-Tax Contributions
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<PAGE> 27
will be remitted to the Trustee by the Employer as soon as practicable
(normally within 10 business days from the date such amounts would
otherwise be available to a Member in cash). All Before-Tax
Contributions shall be invested in accordance with the Member's
investment direction pursuant to Article V.
III.8 Limitation on Amount and Return of Before-Tax Contributions in Certain
Instances.
(a) In no event shall a Member's Before-Tax Contributions for a
taxable year exceed the dollar limit on excludable salary
deferrals under Code Section 402(g)(1) as adjusted for
increases in the cost of living pursuant to Code Section
402(g)(5). In the event a Member's Before-Tax Contributions
should exceed such dollar limit for a taxable year, the
excess, together with any investment earnings attributable
thereto, shall be returned to the Member no later than April
15 following the close of the taxable year for which the
excess contribution was made. For the purposes of this
Section, the Committee shall assume that the Member's taxable
year is the calendar year unless the Member notifies the
Committee to the contrary.
(b) In the event a Member's Before-Tax Contributions for a taxable
year under this Plan, together with his Before-Tax
Contributions under another plan which meets the requirements
of Code Section 401(k), exceed the limits set forth in (a)
above, the Member may treat a portion of such excess as having
been contributed to this Plan and request a return of such
excess together with any investment earnings attributable
thereto. Any such request shall be made no later than March 1
following the close of the taxable year for which the excess
contribution was made, and the return of such excess shall be
made no later than the immediately following April 15.
(c) For each Plan Year, the "average deferral percentage"
authorized by the Highly Compensated Group as Before-Tax
Contributions and Qualified Matching Contributions must meet
one of the following tests:
(i) the "average deferral percentage" of the Highly
Compensated Group may not exceed 1.25 multiplied by
the "average deferral percentage" of all other
Eligible Employees who are not in such group; or
(ii) the "average deferral percentage" of the Highly
Compensated Group may not exceed 2.0 multiplied by
the "average deferral percentage" of all other
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<PAGE> 28
Eligible Employees, who are not in such group,
subject to a maximum differential of two percentage
points.
(d) The "average deferral percentage" for a group of eligible
Highly Compensated Employees for a Plan Year shall be the
average of the ratios (computed separately for each eligible
Highly Compensated Employee) of (i) the amount of each Highly
Compensated Employee's Before-Tax Contributions for the Plan
Year to (ii) the eligible Highly Compensated Employee's
Compensation for the Plan Year. The "average deferral
percentage" for all the Employees for a Plan Year shall be the
average of the ratios (computed separately for each Eligible
Employee) of (i) the amount credited to each Employee's
Before-Tax Contribution Account for the previous Plan Year to
(ii) the eligible Employee's Compensation for such preceding
Plan Year.
Compensation for this purpose, shall mean wages as defined in
Code Section 3401(a) for income tax withholding at the source)
determined without regard to any rules under Code Section
3401(a) that limit the remuneration included in wages based on
the nature or location of the employment or the services
performed (such as the exception for agricultural labor in
Code Section 3401(a)(2)). Compensation shall include Employer
contributions made pursuant to a salary reduction agreement
which are not includible in the Eligible Employee's gross
income under Code Section 125, 402(e)(3), 402(h), or 403(b).
For purposes of the foregoing, only Before-Tax Contributions
allocated to the Member's Account on a date within a Plan Year
and paid to the Trust Fund within 12 months following the
close of such Plan Year shall be considered in determining his
deferral percentage for such Plan Year. In addition, only
Before-Tax Contributions which are attributable to the
Compensation an Employee receives from the Employer during a
Plan Year or within 2 1/2 months following the close of such
Plan Year shall be considered in determining the Employee
deferral. If the Employer sponsors two or more plans which
include a cash or deferred arrangement but are considered one
plan for purposes of Code Section 401(a)(4) or 410(b), the
cash or deferred arrangements included in such plans shall be
treated as one plan for purposes of determining the "average
deferral percentage".
If any Eligible Employee who is a member of the Highly
Compensated Group is participating in two or more cash or
deferred arrangements sponsored by the Employer or an
Affiliated Employer, such cash or deferred arrangements shall
be treated as one arrangement for purposes of determining the
"deferral percentage" for such Eligible Employee.
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<PAGE> 29
(e) From time to time, the Committee shall review the Before-Tax
Contributions authorized by Eligible Employees. If, upon such
review, the Committee determines that the average percentage
of such contributions applicable to the Highly Compensated
Group exceeds or is likely to exceed the maximum average
percentage necessary to comply with the above rules, the
Committee may reduce the Before-Tax Contributions of the
Highly Compensated Group, to the extent necessary to comply
with such rules. Such reduction shall be effected by
successive reductions of the highest dollar amount authorized
by one or more members of the Highly Compensated Group until
the average percentage applicable to the Highly Compensated
Group does not exceed the maximum average percentage referred
to above. Notwithstanding the foregoing sentence, the
Committee may impose a maximum dollar limitation which is less
than the amount specified in Code Section 402(g), or a maximum
percentage which is less than the percentage in Section 3.1 to
all Before-Tax Contributions made by the Highly Compensated
Group.
(f) If, after the end of the Plan Year, the Committee determines
that the Before-Tax Contributions made on behalf of Highly
Compensated Employees are in excess of the amounts allowed
under (c)(i) and (c)(ii) above, the Committee shall return any
Before-Tax Contributions in excess of the amount permitted
above, plus earnings thereon, to the affected Members until
the rules in either (c)(i) or (c)(ii) above are met. The
return of such excess contributions shall be made in the same
manner as described in paragraph (e) above. Such excess
contributions shall be distributed within 2 1/2 months, if at
all possible, following the end of the Plan Year in which such
Before-Tax Contributions were made and in no event later than
the close of the following Plan Year. The return of any excess
Before-Tax Contributions shall be made on a pro rata basis
from the funds in which the Before-Tax Contributions are then
invested, unless the Committee shall permit the Member to
elect such other method of return based on such uniform and
nondiscriminatory rules as it may adopt.
(g) For purposes of determining the investment earnings or losses
to be distributed pursuant to paragraphs (a), (b) and (f)
hereunder, the following rules shall apply:
The earnings or losses allocable to Before-Tax Contributions
is the earnings or losses allocable to the Member's Before-Tax
Contribution Account for the Plan Year multiplied by a
fraction, the numerator of which is the Before-Tax
Contributions to be distributed to the Member for the year and
the denominator is the Member's Account balance attributable
to Before-Tax Contributions without regard to any earnings or
losses occurring during such Plan Year.
(h) In the event that the Employer made an Employer Matching
Contribution with respect to any Before-Tax Contributions
returned pursuant to this Section, such Employer Matching
Contribution shall be distributed to the affected Members of
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the Highly Compensated Group or forfeited, as determined by
the Committee according to such uniform and nondiscriminatory
rules as it may adopt.
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<PAGE> 31
ARTICLE IV
EMPLOYER CONTRIBUTIONS
IV.1 Employer Matching Contributions
(a) Each payroll period, the Employer shall make an Employer
Matching Contribution on behalf of each of its Members on the
first $200 per annum of Before-Tax Contributions. The amount
of such Employer Matching Contribution shall be equal to 50%
of the Member's Before-Tax Contributions during such Plan Year
up to a maximum match of $100 per Member per Plan Year (or
such higher maximum amount as the Employer may determine). All
Members who make Before-Tax Contributions during a Plan Year,
including those who incur a Severance from Service during the
Plan Year, shall be eligible for an Employer Matching
Contribution. Employer Matching Contributions shall be
allocated on the date such monies are received by the Trustee.
Employer Matching Contributions made under this Section 4.1 shall be
subject to the limitations of Sections 4.3, 4.4, and 4.6.
IV.2 Remittance of Employer Matching Contributions
Employer Matching Contributions will be paid by the Employer to the
Trustee as soon as practicable after such contribution amounts are
determined, but in no event later than the Employer's tax filing
deadline for its fiscal year in which such Plan Year ends. Employer
Matching Contributions shall be invested in accordance with the
Member's investment direction pursuant to Article V.
IV.3 Limitation on Amount of Employer Matching Contributions
(a) For each Plan Year, the "average contribution percentage" of
the Highly Compensated Group must meet one of the following
tests:
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(i) the "average contribution percentage" of the Highly
Compensated Group may not exceed 1.25 multiplied by
the "average contribution percentage" of all other
Eligible Employees who are not in such group; or
(ii) the "average contribution percentage" of the Highly
Compensated Group may not exceed 2.0 multiplied by
the "average contribution percentage" of all other
Eligible Employees who are not in such group, subject
to a maximum differential of two percentage points.
(b) The term "average contribution percentage" with respect to an
eligible Highly Compensated Employee for a Plan Year shall
mean the average of the value (calculated separately for each
Highly Compensated Employee) of (i) the Employee Matching
Contributions allocated to such Employee for the Plan Year,
compared to (ii) his Compensation for such Plan Year. With
respect to all eligible Employees who are not Highly
Compensated Employees the average contribution percentage
shall be the average of the ratios (calculated separately for
each Eligible Employee) of (1) the Eligible Employee's
Matching Contribution for the preceding Plan Year compared to
all compensation for such preceding Plan Year.
For purposes of this Section 4.3(b), Compensation shall have
the same meaning as under Section 3.8(d).
If the Employer sponsors two or more plans to which Employer
Matching Contributions are made and which are subject to Code
Section 401(m) but are considered one plan for purposes of
Code Section 401(a)(4) or 410(b), such plans shall be treated
as one plan for purposes of determining the "average
contribution percentage".
If any Eligible Employee who is a member of the Highly
Compensated Group is participating in two or more plans
sponsored by the Employer or an Affiliated Employer that
include Employer Matching Contributions subject to Code
Section 401(m), all such contributions will be treated as made
under one plan for purposes of this paragraph (b).
(c) If for any Plan Year the average contribution percentage for
the Highly Compensated Group exceeds the limits set forth in
(a) and (b) above, the excess aggregate contributions, (as
defined in Code Section 401(m)(6)(B)) shall be distributed to
the Highly Compensated Group within 2 1/2 months, if at all
possible, following the end of the Plan Year in which such
contributions were made and in no event later than the close
of the following Plan Year. The amount of such excess
aggregate contributions to be distributed shall be determined
by reductions of the Employer Matching Contribution percentage
of one or more members of the
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Highly Compensated Group who have contributed the largest
dollar amount until the average contribution percentage
applicable to the Highly Compensated Group does not exceed the
maximum average contribution percentage, referred to above.
The distribution of any "excess aggregate contributions" shall
be made on a pro rata basis from the funds in which the excess
aggregate contributions are then invested, unless the
Committee shall permit the Member to elect such other method
of distribution based on such uniform and nondiscriminatory
rules as it may adopt.
(d) The "excess aggregate contributions" to be distributed to a
Member shall be adjusted for investment earnings or losses
applicable thereto.
(e) For purposes of determining the investment earnings or losses
to be distributed pursuant to the foregoing paragraphs, the
following rules shall apply:
The earnings or losses equal the sum of (i) earnings or losses
allocable to the Member's Employer Matching Contribution
Account for the Plan Year multiplied by a fraction, the
numerator of which is Employer Matching Contributions to be
returned to the Eligible Employee for the year and the
denominator is the Eligible Employee's Account balance(s)
attributable to Employer Matching Contributions without regard
to any earnings or losses occurring during such Plan Year; and
(ii) 10% of the amount determined under (i) multiplied by the
number of whole calendar months between the end of the Plan
Year and the date of distribution, counting the month of
distribution if distribution occurs after the 15th of such
month.
IV.4 Aggregate Limit Test
(a) For any Plan Year in which the "average deferral percentage"
(as defined in Section 3.8) and the "average contribution
percentage" (as defined in Section 4.3) of the Highly
Compensated Group can only satisfy the limitations set forth
in Sections 3.8(c)(ii) and 4.3(b) respectively, but neither
can satisfy the limitations set forth in Sections 3.8(c)(i)
and 4.3(a), respectively, and all corrective measures have
been taken under Sections 3.8 and 4.3 to ensure compliance
with the provisions of Code Sections 401(k) and 401(m), the
aggregate limit test, prescribed under Treasury Regulation
Section 1.401(m)-2(b)(3), shall be applicable. The "aggregate
limit test" shall be deemed met if (i) below is greater than
or equal to (ii) below where:
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<PAGE> 34
(i) equals the sum of (A) and (B) below where:
(A) equals 1.25 multiplied by the greater of (1)
or (2) where:
(1) equals the "average deferral
percentage" of the non-Highly
Compensated Group of Eligible
Employees; and
(2) equals the average contribution
percentage of the non-Highly
Compensated Group of Eligible
Employees; and
(B) equals the lesser of (1) or (2) above plus
two percentage points. In no event, however,
shall this amount exceed 2.0 multiplied by
the lesser of (1) or (2) above; and
(ii) equals the sum of (C) and (D) below where:
(C) equals the "average deferral percentage" of
the Highly Compensated Group; and
(D) equals the "average contribution percentage"
of the Highly Compensated Group.
(b) An alternative aggregate limit test may be used in place of
the "aggregate limit test" set forth in (a) above as long as
such test is permitted by the Internal Revenue Service. This
alternative aggregate limit test shall be deemed met if (i)
below is greater than or equal to (ii) below where:
(i) equals the sum of (A) and (B) below where:
(A) equals 1.25 multiplied by the lesser of (1)
or (2) where:
(1) equals the "average deferral
percentage" of the non-Highly
Compensated Group of Eligible
Employees; and
(2) equals the "average contribution
percentage" of the non-Highly
Compensated Group of Eligible
Employees; and
(B) equals the greater of (1) or (2) above plus
two percentage points. In no event, however,
shall this amount exceed 2.0 multiplied by
the greater of (1) or (2) above; and
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<PAGE> 35
(ii) equals the sum of (C) and (D) below where:
(C) equals the "average deferral percentage" of
the Highly Compensated Group; and
(D) equals the average contribution percentage
of the Highly Compensated Group.
(c) In the event the applicable limits set forth in this Section
4.4 are not satisfied, the average contribution percentage for
all Highly Compensated Employees shall be reduced in
accordance with the provisions of Treasury Regulation Section
1.401(m)-2(c).
IV.5 Employer Core Contributions. Each Plan Year, the Employer will
contribute $300 on behalf of each Member, one half of which ($150) will
be paid as soon as practicable after the end of June and one-half of
which ($150) will be paid as soon as practicable after the end of
December. To be eligible to receive an allocation, a Member must be
employed throughout the six month period ending in June or December
provided, however, that notwithstanding the foregoing, a Member (or his
Beneficiary, as applicable) will be entitled to a pro-rated allocation
in the event of the Member's Retirement or death. The aforementioned
proration shall be based upon Months of Service, with a Member
receiving credit for a Month of Service if he is credited with one Hour
of Service for that month.
IV.6 Maximum Total Allocations.
(a) Anything to the contrary herein notwithstanding, in no event
shall the Annual Additions, as defined in Section 4.7, for any
Employee for any Plan Year exceed the lesser of:
(i) $30,000 or, if greater, 1/4 of the dollar limitation
in effect under Code Section 415(b)(1)(A) (which
amount shall be subject to adjustments as provided by
Treasury regulations under Code Section 415); or
(ii) 25% of the Employee's Compensation (as defined by
Treasury regulations under Code Section 415(c)) from
the Employer.
For purposes of this Section 4.6(a), the limitation year shall
be the Plan Year.
In the event an Annual Addition in excess of the lesser of (i)
or (ii) above is allocated to an Employee for a Plan Year,
such excess shall be corrected in the following order to the
extent required to eliminate the excess:
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<PAGE> 36
(iii) After-Tax Contributions, plus any allocable interest
shall be refunded to the Employee if such
contributions were made to any qualified plan of the
Employer for the Plan Year.
(iv) Before-Tax Contributions shall be reduced. Any
reduction of Before-Tax Contributions shall be
credited to a suspense account and treated as the
first allocation of Before-Tax Contributions on
behalf of such Employee for the following Plan Year
(and succeeding Plan Years as necessary). In the
event that any Before-Tax Contributions in the
suspense account have not been allocated as
Before-Tax Contributions to the Employee as of his
Severance from Service, the Employer shall distribute
such remaining amounts to the Employee, including any
investment earnings thereon.
(v) Employer Matching Contributions shall be reduced. Any
reduction in Employer Matching Contributions shall be
used as the first allocation of Employer Matching
Contributions on behalf of such Employee for the
following Plan Year and subsequent Plan Years until
fully utilized. If such Employee is not covered by
the Plan during such subsequent Plan Years, the
remaining excess amounts shall be held in a suspense
account and allocated pro rata to the Employer
Matching Contribution Accounts of the other Employees
on the last day of the applicable following Plan
Year; thereby reducing the Employer's Actual Matching
Contribution for such Plan Year.
No contributions shall be made to the Plan on behalf of an
Employee for any period during which a suspense account is in
existence for such Employee.
(b) In the case of an Employee who has participated in a defined
benefit plan maintained by the Employer or an Affiliated
Employer, the sum of the "defined benefit plan fraction" and
the "defined contribution plan fraction" determined as of the
close of any Plan Year, shall not exceed one. An Employee's
defined benefit plan fraction and defined contribution plan
fraction shall be determined as follows:
(i) The "defined benefit plan fraction" is a fraction
with a numerator equal to the Employee's projected
annual retirement benefit determined (other than any
benefit attributable to Employee contributions) under
the defined benefit plan and a denominator equal to
the lesser of (A) 1.25 multiplied by the dollar
limitation in effect under Code Section 415(b)(1)(A)
for such Plan Year; or (B) 1.4 multiplied by 100% of
the Employee's compensation (as defined by Treasury
regulations under Code Section 415) which may be
taken into account for such Plan Year.
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(ii) The "defined contribution plan fraction" is a
fraction with a numerator equal to the sum of the
Annual Additions to the Employee's Account and a
denominator equal to the sum for each calendar year
of the Employee's employment with the Employer, any
predecessor of the Employer, or an Affiliated
Employer of the lesser of (A) 1.25 multiplied by the
amount determined in accordance with Code Section
415(3)(B)(i) for each such Plan Year; or (B) 1.4
multiplied by 25% of the Employee's compensation (as
defined by Treasury regulations under Code Section
415) which may be taken into account for each such
Plan Year.
For the purpose of applying this Section 4.6(b), all defined benefit
plans and all defined contribution plans maintained by the Employer and
all Affiliated Employers, including plans that have been terminated
shall be aggregated.
If, in any Plan Year, the sum of the "defined benefit plan fraction"
and "defined contribution plan fraction" of a Member would exceed one
without adjustment of the amount of Annual Additions that can be
allocated to such Member, then the amount of maximum annual benefit
that can be paid to such Member under any defined benefit plan
maintained by an Affiliated Employer shall be reduced to the extent
necessary to reduce the sum of the defined benefit plan fraction and
defined contribution plan fraction for such Member to one.
IV.7 Annual Additions. The Annual Addition with respect to an Employee for
any Plan Year shall be the sum of the following amounts allocated to
his Account for the Plan Year:
(a) all after-tax contributions under any other plan of the
Employer; plus
(b) Employer Matching Contributions, Employer Core Contributions
and any other Employer contributions; plus
(c) Before-Tax Contributions; plus
(d) any forfeitures allocated to a Member under any other plan
maintained by the Employer; plus
(e) any amount applied from the suspense account (pursuant to
Section 4.6); plus
(f) excess contributions and excess aggregate contributions as
defined in Code Sections 401(k)(8)(B) and 401(m)(6)(B),
respectively; plus
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(g) excess deferrals as defined in Code Section 402(g)(2) which
are not distributed to the Employee by the April 15 following
the individual's tax year in which such excess deferrals
occurred; plus
(h) amounts described in Code Sections 415(1)(1) and 419A(d)(2).
For purposes of applying this Section 4.7, all defined contribution
plans maintained by the Employer and all Affiliated Employers shall be
aggregated.
The term Annual Additions shall not include any Rollover Contributions.
IV.8 Contributions Conditioned on Tax Deductibility. All Before-Tax
Contributions, Employer Matching Contributions and Employer Core
Contributions shall be conditioned upon their deductibility by the
Employer for Federal income tax purposes; provided, however, that no
contributions shall be returned to the Employer, except as provided in
Section 4.9.
IV.9 Return of Contributions. Notwithstanding any other provision of this
Plan, a Before-Tax Contribution or an Employer Matching Contribution,
upon request by the Employer, may be returned to the Employer who made
the contribution if:
(a) the contribution was made by reason of a mistake of fact;
(b) the contribution was conditioned upon its deductibility for
income tax purposes and the deduction was disallowed; or
(c) the contribution was made under the assumption that the Plan
would initially be qualified by the Internal Revenue Service,
but a notice is received by the Employer that the Plan fails
to be initially qualified under the applicable Code Sections.
The return to the Employer of the amount involved in either (a), (b),
or (c) shall occur within 1 year of the mistaken payment of the
contribution, the disallowance of the deduction, or upon notification
that the Plan fails to initially qualify, as the case may be.
The amount which may be returned to the Employer is the excess of the
amount contributed over the amount that would have been contributed had
there not occurred the circumstances causing the excess. Earnings
attributable to the excess contribution may not be returned to the
Employer, but losses thereto shall reduce the amount to be returned.
Furthermore, if the withdrawal of the amount attributable to the excess
contribution would
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cause the balance of the Account of any Member to be reduced to less
than the balance which would have been in the Account had the excess
amount not been contributed, then the amount to be returned to the
Employer shall be limited to avoid such reduction. In the event any
Before-Tax Contributions are returned to an Employer pursuant to this
Section 4.9, the Employer shall directly reimburse affected Members for
the amounts so returned.
Pursuant to Section 4.9(c), if the initial determination letter is
issued by the Internal Revenue Service to the effect that the Plan and
Trust herein set forth or as amended prior to the receipt of such
letter do not meet the requirements of Code Sections 401(a) and 501(a),
the Employer shall be entitled at its option to withdraw, within 1 year
of the receipt of such letter, all contributions made on and after the
Effective Date. In such event, the Plan and Trust shall then terminate
and all rights of the Employees shall be those as if the Plan had never
been adopted.
IV.10 Payment of Expenses. In addition to its contributions, the Employer may
elect to pay the reasonable administrative expenses of the Plan and
fees and retainers of the Plan's Trustees, consultants, administrators,
recordkeepers, auditors, counsel, and other advisors or service
providers so long as the Plan or Trust Fund remains in effect. If the
Employer does not elect to pay all or part of such expenses, the
Trustee may pay these reasonable expenses and charge the payment
thereof against the Trust Fund proportionate to the market value of
each Investment Fund as of the most recent Valuation Date.
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ARTICLE V
INVESTMENT OF CONTRIBUTIONS
V.1 Committee to Establish Accounts. The Committee shall establish and
maintain a separate accounting in the name of each Member and Former
Member which shall reflect all contributions by the Member or Former
Member, all amounts contributed by the Employer under the Plan on his
behalf, earnings on all such contributions, any distributions,
withdrawals, and any expenses charged against such contributions. The
separate accounting in the name of each Member and Former Member shall
include a separate accounting for Before-Tax Contributions, Employer
Matching Contributions, Employer Core Contribution, and Rollover
Contributions.
V.2 Investment Options. Subject to the provisions of Sections 5.3 and 5.4,
a Member and any Former Member shall provide direction as to the
investment of his Before-Tax Contributions and Rollover Contributions.
Employer Matching Contributions and Employer Core Contributions shall
be invested in the same manner as the Member's Before-Tax
Contributions. The Committee shall establish the investment funds in
which Members may invest contributions and may, in its sole discretion,
eliminate one or more investment funds, offer additional investment
funds, or alter the underlying investments of one or more funds from
time to time. Members shall be notified of any changes in investment
funds prior to the effective date of such changes.
V.3 Change in Investment Options. Subject to Section 5.4, a Member may
change the investment allocation of his future Before-Tax Contributions
on a daily basis. Subject to Section 5.4, a Member or Former Member may
also change the investment allocation of his existing Account on a
daily basis.
V.4 Investment Rules. The following rules shall govern all aspects of this
Article V:
(a A Member shall provide direction for the investment of his
current Before-Tax Contributions and Rollover Contributions in
multiples of 5%, in any of the
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available investment funds. Employer Matching Contributions
and Employer Core Contributions shall be invested in the same
percentages as the Member's Before-Tax Contributions.
Reallocation of the Member's or Former Member's existing
Account pursuant to Section 5.3 shall also be made to any of
the available investment funds in multiples of 5%.
(b Any investment direction given by a Member or Former Member
shall continue in effect until changed by such Member or
Former Member as provided hereunder.
(c In the absence of any designation of investment preference by
the Member or Former Member, Before-Tax Contributions,
Employer Matching Contributions, Employer Core Contribution,
and Rollover Contributions shall be invested 100% in a money
market fund. The Member shall acknowledge in writing this
default option.
(d Notwithstanding any instruction from any Member or Former
Member for investment of funds as provided in this Article V,
the Trustee shall have the right to hold uninvested, or
invested in short-term fixed income investments, any funds
intended for investment or reinvestment as otherwise provided
in this Article V for such time as the Trustee, in its sole
discretion, deems advisable.
(e The Committee may limit changes otherwise permitted hereunder
in the investment allocation of a Member's or Former Member's
Account to the extent a change is precluded as a result of a
temporary period of adverse liquidity with respect to an
investment fund or to the extent a change would adversely
affect the investment return of Accounts of other Members or
Former Members.
(f The Committee may establish rules to implement the provisions
of this Article V, including, without limitation, the use of a
voice response system.
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ARTICLE VI
TRUST FUND
VI.1 Trust Fund. All Accounts shall be held in the Trust Fund and each
Member's and Former Member's interest in the investment funds shall be
valued in accordance with Sections 6.2 and 6.3.
VI.2 Valuation of Funds. The Accounts of all Members shall be adjusted on a
daily basis to reflect the effects of contributions and withdrawals,
income, realized and unrealized gains and losses, and expenses
applicable to the investment fund or funds in which such Accounts are
invested.
VI.3 Allocation of Income, Profits, Losses and Expenses. The Accounts of all
Members and Former Members shall be adjusted on a daily basis to
reflect the effects of contributions and withdrawals, income, realized
and unrealized gains and losses, and expenses applicable to the fund or
funds where such Accounts are invested. As provided by written
procedures established by the Committee, such adjustments shall be
based upon the proportion that each Member's and Former Member's
Account invested in a fund bears to the total of all Accounts of all
Members and Former Members invested in the same fund.
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ARTICLE VII
DEATH
VII.1 Amount of Death Benefit. Upon the death of a Member or Former Member
prior to the complete distribution of his Account in accordance with
Article XI, his Beneficiary shall be entitled to 100% of the Member's
Account.
VII.2 Payment of Death Benefit. After receipt by the Committee of due notice
of the death of the Member or Former Member, the benefit payable under
this Article VII shall be paid to his Beneficiary in one lump sum as
soon as practicable after the Valuation Date coincident with or next
following the date of such Member's death.
VII.3 Designation of Beneficiary. Each Member or Former Member shall have the
right, by written notice to the Committee, to designate or to change
the Beneficiary to receive any benefit payable in the event of his
death, subject to the spousal consent requirements of Section 1.5, if
he is then married.
VII.4 Payment Other Than to Beneficiary. If a Member has not designated a
Beneficiary, or the Member's designated Beneficiary dies before the
Member, or the Beneficiary dies after the death of the Member or Former
Member but prior to receiving the full death benefit hereunder, the
Member's remaining Account shall be paid with priority as follows:
(a the Member's surviving Spouse;
(b children, and children of deceased children, per stirpes;
(c brothers and sisters, or if deceased, the children of such
brothers and sisters, per stirpes; and
(d the estate of the Member.
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ARTICLE VIII
VESTING AND TERMINATION OF EMPLOYMENT
VIII.1 Vesting of Contributions. A Member shall at all times be 100% vested in
his Rollover Contribution Account and Before-Tax Contribution Account.
A Member shall vest in his Employer Matching Contribution Account and
his Employer Core Contribution Account after the completion of five (5)
Years of Service, provided, however, that notwithstanding the
foregoing, an employee will be fully vested in his Employer Matching
Contribution Account and his Employer Core Contribution Account upon
attaining his Normal Retirement Age. If a Member incurs a Severance
from Service prior to the completion of five (5) Years of Service, the
balance in the Member's Employer Matching Contribution Account and
Employer Core Contribution Account shall be forfeited.
VIII.2 Method of Payment. When a Member incurs a Severance from Service, his
vested Account shall be distributed pursuant to the provisions of
Article XI. If a Member's vested percentage is zero when he incurs a
Severance from Service, he shall be deemed to have received a
distribution of zero dollars.
VIII.3 Forfeiture. Any forfeiture arising hereunder shall be used to reduce
future Employer Matching Contributions and Employer Core Contributions,
respectively.
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ARTICLE IX
LOANS
IX.1 Loans. The Plan may lend a Member who is actively employed an amount
not in excess of the lesser of (i) $50,000 reduced by the Member's
highest outstanding loan balance from the Plan during the preceding
12-month period; or (ii) 50% of the value of his vested Account as of
the date on which the loan is approved.
IX.2 Rules Relating to Loans. All loans shall comply with the following
terms and conditions:
(a Loan amounts shall be in $100 increments and the minimum
amount that may be borrowed under the Plan shall be $500.
(b Loans may be applied for as of any date with prior notice as
the Committee may approve according to uniform and
nondiscriminatory rules it may adopt. No more than one loan
may be made to a Member in a calendar year and no more than
two loans may be outstanding to a Member at any time.
(c An application for a loan by a Member shall be made by
contacting the Trustee.
(d Unless the Member is on an unpaid leave of absence, repayment
of a loan shall be made based on level amortization of the
loan amount and shall be made no less frequently than
quarterly over the term of the loan. The Member shall
authorize the Employer to make regular payroll deduction in
level amounts sufficient to accomplish the repayment. All loan
repayments shall be made with after-tax dollars.
(e The period of repayment for any loan shall be arrived at by
mutual agreement between the Committee, or its delegate, and
the Member, but subject to a minimum repayment period of 1
year and a maximum repayment period of 4 years. Loans may be
prepaid in full at any time without penalty. Partial
repayments are also permitted.
(f Each loan shall be made against the collateral assignment of
the Member's right, title, and interest in the portion of his
Account against which the loan is taken,
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evidenced by such Member's collateral promissory note for the
amount of the loan, including interest, payable to the order
of the Plan and shall not exceed 50% of the Member's Account
balance.
(g Each loan shall bear a reasonable rate of interest, which
shall be the prime rate of interest as published in the "money
rate" section of the Wall Street Journal as of the first
business day of the month preceding the effective date of the
loan, plus 2%. The Committee shall review the rate of interest
to determine if it is consistent with commercial rates for
similar loans and if not, the Committee shall have the
authority to modify such rate of interest for new loans to be
consistent with such commercial rates.
(h In the event a loan repayment is not made, or is not paid at
maturity, or in the event of a Member's bankruptcy or
impending bankruptcy, insolvency, or impending insolvency, the
loan shall be deemed to be in default and the Committee, or
its delegate, shall give written notice of such default to
such Member to his last known address. If the default is not
cured by the end of the calendar quarter following the
calendar quarter in which the initial participant has missed,
the Member's Account shall be reduced by the amount of the
unpaid balance of the loan, together with the interest
thereon, and the Member's indebtedness shall thereupon be
discharged. This reduction shall occur as soon as the Member
could have received a distribution of the portion of the
Account balance so reduced under applicable law, disregarding
the provisions of (i) below.
(i Upon termination or Retirement prior to complete repayment of
the loan, a Member must elect to continue repayment of the
loan, or elect to treat the outstanding loan balance as a
distribution from the Plan. All loans shall be restricted to a
Member's Before-Tax Contribution Account.
(j All loans shall be debited to the investment of a Member's
Account as such Account is invested in the amount(s)
authorized by the Member. In the absence of any authorization
from the Member, a loan shall be debited on a pro rata basis
from the funds in which his Account is invested at the time
the loan is originated.
(k Upon receipt of a loan repayment and associated interest, the
Trustee shall deposit such repayment in accordance with the
Member's current investment election for contributions at the
time of the repayment. The Trustee shall also credit such
repayment to the Member's Before-Tax Contribution Account.
(l Loans will be made available hereunder on a reasonably
equivalent basis.
(m There will be a loan initiation fee of $35 for each new loan
chargeable to the Member.
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(n No loan shall be made to any Former Member unless he is a
party-in-interest under ERISA Section 3(14).
(o Loan repayments will be suspended under this Plan as permitted
under Code Section 414(u)(4) for any part of any period during
which an Employee is performing services in the uniformed
services, whether or not qualified military service.
(p The Committee may adopt such other rules and regulations
relating to loans as it may deem appropriate.
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ARTICLE X
WITHDRAWALS
X.1 Non-Hardship Withdrawals from Rollover Contribution Account. Subject to
the provisions of Sections 10.4 and 10.5, a Member may elect to
withdraw any portion of his Rollover Contribution Account for any
reason as of any Valuation Date. A Member may elect one such withdrawal
in any calendar quarter.
X.2 Withdrawals After Age 59 1/2. Subject to the provisions of Sections
10.4 and 10.5, a Member who has attained age 59 1/2 may elect to
withdraw any portion of his vested Account for any reason as of any
Valuation Date.
X.3 Hardship Withdrawals. Subject to the provisions of Sections 10.4 and
10.5, a Member who has not attained age 59 1/2 shall have the right to
withdraw the portion of his Pre-Tax Account needed to meet a "financial
hardship", as defined herein:
(a For the purpose of this Section 10.3, a financial hardship
shall mean an immediate and heavy financial need as specified
in Treasury Regulation Section 1.401(k)-I(d)(2)(iv) which
cannot be met from any other available resource. These are:
(i medical expenses described in Code Section 213(d)
incurred by the Member, his Spouse, or dependents;
(ii costs directly related to the purchase of the
Member's principal residence (other than mortgage
payments);
(iii tuition payments for the post-secondary education of
the Member, his Spouse, children, or dependents; and
(iv payments needed to prevent eviction from, or
foreclosure on, the Member's principal residence.
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The Committee shall determine in its sole discretion whether a
financial hardship exists to warrant a withdrawal, and if such
hardship exists, the amount of the withdrawal necessary to
meet the hardship.
(b A Member shall be deemed to lack other resources to satisfy
the financial hardship as required under subsection (a) of
this Section if the following conditions are satisfied:
(i the Member has withdrawn all amounts available to him
under all of the Employer's (and Affiliated
Employer's) qualified plans;
(ii the Member has borrowed any amounts available to him
under this Plan pursuant to Article IX and from any
other qualified plans of the Employer and Affiliated
Employers, unless the repayment of the amount
borrowed would constitute a financial hardship to the
Member;
(iii if the Member has made a withdrawal from his
Before-Tax Contribution Account, the Member's
Before-Tax Contributions to the Plan are suspended
for the 12-month period immediately following the
date of the hardship withdrawal; and
(iv if the Member has made a withdrawal from his
Before-Tax Contribution Account, the Member's maximum
Before-Tax Contribution permitted under Article III
for the Plan Year following the Plan Year in which
the hardship withdrawal was made is reduced by the
amount of the Member's Before-Tax Contributions made
during the Plan Year in which the hardship withdrawal
occurred.
(c In lieu of the conditions outlined in (b) above, a Member may
provide the Committee with written documentation that he lacks
other resources to satisfy his financial hardship. The written
documentation required to be provided by the Member for such
demonstration shall be determined by the Committee.
In no event shall the amount of the withdrawal exceed the amount
necessary to meet the Member's financial hardship.
X.4 Rules for Withdrawals. The following rules shall apply to withdrawals
made pursuant to this Article X:
(a No more than one non-hardship withdrawal from the Rollover
Contribution Account may be made in any calendar quarter
unless otherwise permitted in
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accordance with such uniform and nondiscriminatory rules as
the Committee may adopt.
(b A Member who has not attained age 59 1/2 may not withdraw that
portion of his Before-Tax Contribution Account which is
attributable to investment earnings.
(c Except as provided in Section 10.2, a Member may not elect to
withdraw Employer Matching Contributions or Employer Core
Contribution made on behalf of such Member for any Plan Year.
(d A Member shall request a withdrawal hereunder by providing the
Committee or its designee with advance request of the
withdrawal, except that the Committee may agree to accept a
later request in the case of a withdrawal for financial
hardship. The Member will receive such payment as soon as
practicable after the Committee receives the request.
(e The amount otherwise available as a withdrawal from the Plan
under this Article shall be reduced by the amount of any loan
outstanding at the time a withdrawal request is made, and no
withdrawal shall be permitted under this Article X to the
extent that such withdrawal would cause the aggregate of the
loans outstanding to exceed the limits expressed in Article
IX.
(f Withdrawals shall be effective as of the date the Committee
approves the withdrawal.
(g Any withdrawal shall be paid in cash as soon as practicable
following the Valuation Date coincident with or next following
the approval of the withdrawal.
X.5 Debiting of Withdrawals. All withdrawals under Section 10.2 shall be
debited to a Member's vested Account first from his Rollover
Contribution Account, next from the available portion of his Employer
Core Contribution Account, next from the available portion of his
Employer Matching Contribution Account, and then from his Before-Tax
Contribution Account.
In the event that the provisions of this Article X prohibit a
withdrawal from a Member's Account in the sequence described in the
preceding sentence, the amounts withdrawn shall follow such sequence
only to the extent otherwise permitted by the provisions of this
Article X. All withdrawals shall be debited against the investment
funds in the same proportion as such Account is then invested.
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ARTICLE XI
PAYMENT OF BENEFITS
XI.1 Entitlement to Distribution. If a Member incurs a Severance from
Service or becomes Disabled, he may elect to receive the vested portion
of his Account as provided herein. Notwithstanding the foregoing, a
Member who is laid off with rights of recall may not elect to receive
the vested portion of his Account until his recall rights have expired.
XI.2 Form of Payment.
(a An Account whose value is $5,000 or less shall automatically
be distributed in one lump sum payment in accordance with the
provisions of Section 11.3.
(b The normal form of payment for an Account whose value is more
than $5,000 shall also be one lump sum payment. The
distribution of any Account, the value of which exceeds
$5,000, shall require the written consent of the Member or
Former Member, if such distribution is scheduled to occur
prior to the date such Member attains age 65.
(c If a Member or Former Member incurs a Severance from Service
and meets the eligibility requirements for Retirement, he may
elect to receive a distribution of his Account:
(i in one lump sum payment;
(ii in a partial lump sum payment and defer distribution
of the remaining Account balance until any date up to
age 70;
(iii in the form of substantially equal installments,
payable no less than annually, over a specified
number of years which shall not exceed the lesser of
10 and the Member's life expectancy period determined
under the applicable provisions of Code Section
401(a)(9) and the regulations thereunder. Each year
the amount of such installment payment shall be
determined by dividing the Member's remaining Account
balance by a divisor. The initial divisor shall be
equal to the number of annual
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installments. Each year such divisor shall be reduced
by one until there are no remaining installments; or
(iv notwithstanding any provision of the Plan to the
contrary that would otherwise limit a Member's (or a
Payee's) election under this Section, a Member (or a
Payee) may elect, at the time and in the manner
prescribed by the Committee, to have any portion of
an Eligible Rollover Distribution paid directly to an
Eligible Retirement Plan specified by a Member (or a
Payee) in a Direct Rollover.
(d Not more than 90 days nor less than 30 days before a Member's
payment date, the Committee shall furnish the Member with a
notice containing information about electing the form in which
benefits are to be paid. Each Member may elect, in such manner
as the Committee may provide, not to take the normal form of
benefit payment and to elect an optional form of benefit
payment. The election period is the 90-day period ending on
the date the Member is entitled to receive payment. The
Committee may, on a uniform and nondiscriminatory basis,
provide for other periods that comply with regulations issued
under Code Sections 401(a)(11) and 417.
If a Member does not make an election within 90 days of the
receipt of his election form, the Member shall be deemed to
have elected a lump sum distribution.
If the normal form of benefit payment is one to which Code
Section 401(a)(11) and 417 do not apply, such benefit payment
may commence less than 30 days after the notice required under
Treasury Regulation Section 1.411(a)-11(c) is given, provided
that:
(i the Committee clearly informs the Member that the
Member has a right to a period of at least 30 days
after receiving the notice to consider the decision
of whether or not to elect a distribution or an
optional form of benefit payment, and
(ii the Member, after receiving the notice, affirmatively
elects a distribution.
XI.3 Time of Payment.
(a To the extent practicable, and unless otherwise elected by the
Member or Former Member pursuant to Section 11.3(c) or (d),
any distribution shall be made as soon as practicable after
the event which gave rise to the distribution, but in no event
more than twelve months thereafter. Generally, benefits will
not commence hereunder until the Member or Former Member
returns a completed form to the
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Committee or its designee with 30 days prior notice or such
lesser notice as the Committee shall approve according to
uniform and nondiscriminatory rules it may adopt. However, if
the Member or Former Member fails to return the completed
election form to the Committee, benefits will automatically
commence within the period described in Section 11.3(b),
11.3(c), or 11.5, whichever is applicable.
(b Unless a Member or Former Member elects a deferred payment in
accordance with Section 11.3(c) or (d), or unless Section 11.5
applies, distribution shall commence no later than 60 days
after the close of the Plan Year in which (i) the Member or
Former Member attains age 65; (ii) the 10th anniversary of the
Member's or Former Member's commencement of participation
occurs; or (iii) the Member or Former Member terminates
employment, whichever is latest.
(c A Member or Former Member who has an Account which is $5,000
or less shall have such Account distributed to him as soon as
practicable following his Severance from Service. However, a
Member or Former Member may elect, in such manner as the
Committee may provide, to defer the commencement of such
distribution under this Article XI to a date which is not
later than the first anniversary of his Severance from
Service, subject to the limitations of Section 11.5. In the
event a Member or Former Member elects to defer receipt of his
Account pursuant to this paragraph, his Account shall continue
to be valued in accordance with Article VI and shall be
invested in accordance with such election under Article V. If
a Member or Former Member whose Account balance is $5,000 or
less makes no deferral election, his Account shall be
distributed to him as soon as practicable following his
Severance from Service.
(d A Member or Former Member who has an Account which is greater
than $5,000 may elect, by not consenting in writing to a
distribution, to defer the commencement of such distribution
under this Article XI to a date which is not later than
December 31 of the calendar year preceding his attainment of
age 70. In the event a Member or Former Member elects to defer
receipt of his Account pursuant to this paragraph, his Account
shall continue to be valued in accordance with Article VI and
shall be invested in accordance with such election under
Article V.
(e If a Member or Former Member has elected a deferred payment
under Section 11.3(c) or (d), he may at any time thereafter
elect to change the time or manner of payment of the unpaid
portion of his Account in accordance with the further
provisions of this Article XI.
XI.4 Amount of Distribution. The amount of any
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distribution shall be determined by the amount in the Member's or
Former Member's Account as of the date of such distribution.
XI.5 Limitation on Distributions. With respect to 5% owners within the
meaning of Code Section 416(i), distribution of benefits shall not be
deferred beyond the April 1 following the calendar year in which the
Member attains age 70-1/2. With respect to non-5% owners, distribution
of benefits shall be deferred under the April 1 of the calendar year
following the later of the year in which the Employee attains age
70-1/2 or retires. In the event distributions must commence to a Member
as provided in the previous sentence, the Member may elect a full
distribution of his Account or installment payments as described in
Section 11.2(c). If installments are elected, the divisor under Section
11.2(c) for any year shall be the lesser of the divisor under such
paragraph, or the divisor that would be required under Code Section
401(a)(9) and attendant regulations. Upon the death of a Member,
distribution of his remaining Account shall be made to his Beneficiary
no later than 5 years following the Member's death. In any event,
distributions hereunder shall be made in accordance with Code Section
401(a)(9), including the incidental death benefit requirements of such
Code Section, and regulations thereunder, including Treasury Regulation
Section 1.401(a)(9)-2. Such regulations and applicable rulings or
announcements, including any grandfather provisions or provisions
delaying the effective date of Code Section 401(a)(9), are hereby
incorporated by reference.
XI.6 Segregated Accounts. If a Member or Former Member has elected to have
his Account distribution, or any part thereof, deferred to a later date
pursuant to Section 11.2 or 11.3, the Account of such individual will
continue to be invested in accordance with the most recent investment
direction on file with the Committee. If there is no investment
direction on file, the Committee shall direct the Trustee to segregate
the Member's or Former Member's interest in the Plan and invest such
interest in a money market fund as described in Section 5.4(c). Amounts
invested in this manner shall share the earnings, on a pro rata basis,
attributable to such fund.
XI.7 Missing Persons. If the Committee shall be unable, within 5 years after
any amount becomes due and payable from the Plan to a Member or
Beneficiary, to make payment because the identity or whereabouts of
such person cannot be ascertained, the Committee may mail a notice by
registered mail to the last known address of such person outlining the
action to be taken unless such person makes written reply to the
Committee within 90 days from the mailing of such notice. The Committee
may direct that such amount and all further benefits with respect to
such person shall be forfeited and all liability for the payment
thereof shall terminate. However, in the event of the subsequent
reappearance of the Member or Beneficiary prior to termination of the
Plan, the benefit
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which was forfeited (but not any earnings attributable to such
forfeiture) shall be reinstated in full. Any benefits forfeited shall
be applied to reduce future Employer Matching Contributions or Employer
Core Contribution to the Plan, as applicable.
Reinstatement of any benefit forfeited under this Section 11.7 shall be
made by the Employer with an additional contribution to the Plan.
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ARTICLE XII
ADMINISTRATION
XII.1 Responsibility for Plan and Trust Administration. The Employer shall
have the sole authority to appoint and remove the Trustee, members of
the Committee, and any investment manager which may be provided for
under the Trust, and to amend or terminate, in whole or in part, this
Plan or the Trust. The Employer, through its Committee, shall have the
responsibility for the administration of this Plan, which is
specifically described in this Plan and the related Trust Agreement.
The Employer shall be the named Fiduciary for purposes of the Code and
ERISA.
XII.2 Retirement Plan Committee. The Plan shall be administered by the
Employer through the Retirement Fund Plan Committee, referred to as
"Committee", consisting of no fewer than three nor more than five
persons to be appointed by and to serve at the pleasure of the
Employer. Any person appointed as a member of the Committee may resign
from the Committee by delivering his written resignation to both the
Board of Directors of the Employer and the Secretary of the Committee.
The Committee shall be the Plan Administrator, within the meaning of
Section 3(16)(A) of ERISA.
XII.3 Agents of the Committee. The Committee may delegate specific
responsibilities to other persons as the Committee shall determine. The
Committee may authorize one or more of their number, or any agent, to
execute or deliver any instrument or to make any payment in their
behalf. The Committee may employ and rely on the advice of counsel,
accountants, and such other persons as may be necessary in
administering the Plan.
XII.4 Committee Procedures. The Committee may adopt such rules as it deems
necessary, desirable, or appropriate. All rules and decisions of the
Committee shall be uniformly and consistently applied to all Members in
similar circumstances. When making a determination or calculation, the
Committee shall be
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entitled to rely upon information furnished by a Member, Former Member,
or Beneficiary, the Employer, the legal counsel of the Employer, or the
Trustee.
The Committee may act at a meeting or in writing without a meeting. The
Committee shall elect one of its members as chairman, appoint a
secretary, who may or may not be a Committee member and advise the
Trustee of such actions in writing. The secretary shall keep a record
of all meetings and forward all necessary communications to the
Employer and the Trustee. The Committee may adopt such bylaws and
regulations as it deems desirable for the conduct of its affairs. All
decisions of the Committee shall be made by the vote of the majority
including actions in writing taken without a meeting.
XII.5 Administrative Powers of the Committee. The Committee may from time to
time establish rules for the administration of the Plan. Except as
otherwise herein expressly provided, the Committee will have the
exclusive right and discretionary authority to interpret the Plan and
decide any matters arising hereunder in the administration and
operation of the Plan, and any interpretations or decisions so made
will be conclusive and binding on all persons having an interest in the
Plan; provided, however, that all such interpretations and decisions
will be applied in a uniform and nondiscriminatory manner to all
Employees. The Committee shall have no right to modify any provisions
of the Plan as herein set forth.
XII.6 Benefit Claims Procedures. All claims for benefits under the Plan shall
be in writing and shall be submitted to the Committee member designated
as Committee secretary by the Committee. If any application for payment
of a benefit under the Plan shall be denied, the Committee shall notify
the claimant within 90 days of such application setting forth the
specific reasons therefor and shall afford such claimant a reasonable
opportunity for a full and fair review of the decision denying his
claim. If special circumstances require an extension of time for
processing the claim, the claimant will be furnished with a written
notice of the extension prior to the termination of the initial 90-day
period. In no event shall such extension exceed a period of 90 days
from the end of such initial period. The extension notice shall
indicate the special circumstances requiring an extension of time and
the date by which the Committee expects to render its decision.
Notice of such denial shall set forth, in addition to the specific
reasons for the denial, the following:
(a reference to pertinent provisions of the Plan;
(b such additional information as may be relevant to the denial
of the claim;
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(c an explanation of the claims review procedure; and
(d notice that such claimant may request the opportunity to
review pertinent Plan documents and submit a statement of
issues and comments. The notice must also provide a
description of any additional information necessary for the
claimant to substantiate his claim and an explanation of why
such materials are necessary.
Within 60 days following notice of denial of his claim, upon written
request made by any claimant for a review of such denial to the
Committee secretary, the Committee shall take appropriate steps to
review its decision in light of any further information or comments
submitted by such claimant.
The Committee shall render a decision within 60 days after the
claimant's request for review and shall advise said claimant in writing
of its decision on such review, specifying its reasons and identifying
appropriate provisions of the Plan. If special circumstances require an
extension of time for processing, a decision will be rendered as soon
as possible, but not later than 120 days after receipt of a request for
the review. If the extension of time for review is required because of
special circumstances, written notice of the extension shall be
furnished to the claimant prior to the commencement of the extension.
If the decision is not furnished within such time, the claim shall be
deemed denied on review. The decision on review shall be in writing and
shall include specific reasons for the decision, written to the best of
the Committee's ability in a manner calculated to be understood by the
claimant without legal counsel, as well as specific references to the
pertinent Plan provisions on which the decision in based.
XII.7 Reliance on Reports and Certificates. The Employer (or the Committee if
so designated by the Employer) will be entitled to rely conclusively
upon all valuations, certificates, opinions, and reports which may be
furnished by the recordkeeper, or any accountant, controller, counsel,
or other person who is employed or engaged for such purposes and shall
exercise the authority and responsibility as it deems appropriate to
comply with all of the legal and governmental regulations affecting the
Plan.
XII.8 Other Committee Powers and Duties. The Committee shall have such duties
and powers as may be necessary to discharge its duties hereunder,
including, but not by way of limitation, the following:
(a to prescribe written procedures to be followed by Members,
Former Members, or Beneficiaries filing applications for
benefits;
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(b to prepare and distribute, in such manner as the Committee
determines to be appropriate, information explaining the Plan;
(c to receive from the Employer, Members, and Former Members such
information as shall be necessary for the proper
administration of the Plan;
(d to furnish the Employer, upon request, such annual reports
with respect to the administration of the Plan as are
reasonable and appropriate;
(e to receive and review the periodic valuations of the Plan made
by the recordkeeper; and
(f to receive, review, and keep on file (as it deems convenient
or proper) reports of benefit payments by the Trustee and
reports of disbursements for expenses directed by the
Committee.
The Committee shall have no power to add to, subtract from, or modify
any of the terms of the Plan, or to change or add to any benefits
provided by the Plan, or to waive or fail to apply any requirements of
eligibility for a benefit under the Plan.
XII.9 Compensation of Committee. No member of the Committee who is an
Employee will receive any compensation for his services as such, but
will be reimbursed for reasonable expenses incident to the performance
of such services. The reimbursement of expenses shall be paid in whole
or in part by the Employer, and any expenses not paid by the Employer
shall be paid by the Trustee out of the income of the Trust Fund.
XII.10 Member's Own Participation. No member of the Committee may act, vote,
or otherwise influence a decision of the Committee specifically
relating to his own participation under the Plan.
XII.11 Liability of Committee Members. No member of the Committee will be
liable for any act of omission or commission except as provided by
Federal law.
XII.12 Indemnification. The Board of Directors of the Employer, the Committee,
and the individual members thereof shall be indemnified by the Employer
and not the Trust Fund against any and all expenses, costs, and
liabilities arising
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by reason of any act or failure to act, unless such act or failure to
act is judicially determined to be gross negligence or willful
misconduct.
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ARTICLE XIII
FIDUCIARY RESPONSIBILITIES
XIII.1 Basic Responsibilities. Any Plan Fiduciary, whether specifically
designated or not, shall:
(a discharge all duties solely in the interest of Members, Former
Members, and Beneficiaries and for the exclusive purpose of
providing benefits and defraying reasonable administrative
expenses under the Plan;
(b discharge his responsibilities with the care, skill, prudence,
and diligence a prudent man would use in similar
circumstances; and
(c conform with the provisions of the Plan.
No person who is ineligible by law to act as a fiduciary will be
permitted to serve as Fiduciary.
XIII.2 Actions of Fiduciaries. Any Plan Fiduciary:
(a may serve in more than one fiduciary capacity with respect to
the Plan;
(b may employ one or more persons to render advice with regard to
or to carry out any responsibility that such Fiduciary has
under the Plan; and
(c may rely upon any discretion, information, or action of any
other Plan Fiduciary, acting within the scope of its
responsibilities under the Plan, as being proper under the
Plan.
XIII.3 Fiduciary Liability. No Plan Fiduciary shall be personally liable for
any losses resulting from his action, except as provided by Federal
law. Each Plan Fiduciary shall have only the authority and duties which
are specifically allocated to him, shall be responsible for the proper
exercise of his own authority and
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duties, and shall not be responsible for any act or failure to act of
any other Plan Fiduciary.
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ARTICLE XIV
AMENDMENT
XIV.1 Internal Revenue Service Qualification. It is the intention of the
Employer that the Plan shall be and remain qualified and exempt under
Code Sections 401(a) and 501(a) and meet the requirements of Code
Sections 401(k) and 401(m). The Employer may authorize any modification
or amendment of this Plan, which is deemed necessary or appropriate to
qualify or maintain the qualification and exemption of the Plan within
the requirements of Code Sections 401(a), 401(k), 401(m), and 501(a),
or any other applicable provisions of the Code as now in effect or
hereafter amended or adopted.
XIV.2 Amendment and Termination by the Employer. The Employer reserves the
right to modify, suspend, or terminate the Plan in whole or in part
(including the provisions relating to contributions). The Employer
shall not have the power to modify, suspend, amend, or terminate the
Plan in such manner as will cause or permit any part of the Trust Fund
to be used for or diverted to purposes other than the exclusive benefit
of Members, Former Members, or their Beneficiaries, or for the payment
of expenses pursuant to the provisions of the Plan. Further, except as
otherwise specifically provided in Sections 4.8 and 4.9, no portion of
the Trust Fund may revert to or become the property of the Employer, so
as to divest a Member or Former Member from or deprive him of any
benefits which may have accrued to him upon termination or partial
termination of the Plan or complete discontinuance of contributions, as
such term is defined in Code Section 411, the amounts credited to the
Accounts of Members affected by such termination or partial termination
shall be nonforfeitable.
Notwithstanding anything to the contrary contained herein, upon such
termination of the Plan, the Employer shall have no obligation or
liability whatsoever to make any further payments to the Trustee.
XIV.3 Right to Terminate. The Employer by action of its Board of Directors or
other governing authority shall have the right to terminate, as to
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itself, the Plan by delivering written notice authorizing the
termination to the Employer, the Committee, and the Trustee.
XIV.4 Valuation of Assets. In determining the value of the Accounts of the
Members or Former Members as of the date of the termination of the
Plan, the assets of the Trust Fund shall be valued by the Trustee at
fair market value as of the close of business on the termination date.
The Accounts of the Members and Former Members shall be adjusted in the
manner provided in Article VI.
XIV.5 Distribution of Assets. If the Plan is terminated, the Trustee shall
distribute all assets, as soon as practicable thereafter. If there is
another defined contribution plan described in Code Section 401(a)
maintained by an Affiliated Employer, a Member shall have the option of
having such Account transferred to such other Plan, as permitted by
applicable law, until all assets remaining in the Trust Fund after
payment of any expenses properly chargeable to the Trust Fund are
distributed to Members, Former Members, or their Beneficiaries. Such
distribution shall be equal to the value of the Accounts of the Members
as of the date of the termination of the Plan adjusted for any earnings
and expenses of the Trust Fund and Plan between such date and the date
of distribution. Payment will be made in cash. The Committee's
determination shall be final and binding on all persons.
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ARTICLE XV
TOP-HEAVY PLAN REQUIREMENTS
XV.1 General Rule. For any Plan Year for which this Plan is a Top-Heavy
Plan, as defined in Section 15.5, any other provisions of the Plan to
the contrary notwithstanding, the Plan shall be subject to the
following provisions:
(a) the minimum contribution provisions of Section 15.2; and
(c) the limitation on contributions set by Section 15.3.
XV.2 Minimum Contribution Provisions. Subject to the provisions of Sections
15.3 and 15.4, each Eligible Employee who (i) is a Non-Key Employee (as
defined in Section 15.7); and (ii) is employed on the last day of the
Plan Year shall be entitled to have Employer Matching Contributions
allocated to his Account of not less than 3% (the "Minimum Contribution
Percentage") of his Compensation (as defined for purposes of applying
the limits of Code Section 415) or such other amount, if any, as may be
necessary to comply with the rules established by the Internal Revenue
Service.
The Minimum Contribution Percentage set forth above shall be reduced
for any Plan Year to the percentage at which contributions are made (or
required to be made) under the Plan for the Plan Year for the Key
Employee (as defined in Section 15.6) for whom such percentage is the
highest for such Plan Year.
For this purpose, the percentage with respect to a Key Employee shall
be determined by dividing the contributions made for such Key Employee
by his total Compensation for the Plan Year not to exceed $160,000 or
such higher amount as indexed pursuant to Code Sections 401(a)(17) and
415(d) and the applicable regulations thereunder.
Contributions taken into account under the immediately preceding
sentence shall include contributions under this Plan and under all
other defined contribution plans required to be included in an
Aggregation Group (as defined in Section 15.5), but shall not include
any plan required to be included in such Aggregation Group if such plan
enables a defined
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benefit plan required to be included in such group to meet the
requirements of the Code prohibiting discrimination as to contributions
or benefits in favor of employees who are officers, shareholders or
Highly Compensated Employees, or prescribing the minimum participation
standards.
Contributions taken into account under this Section 15.2 shall not
include any contributions under the Social Security Act or any other
Federal or state law.
XV.3 Limitation on Contributions. In the event that the Employer also
maintains a defined benefit plan providing benefits on behalf of
Members of this Plan, one of the two following provisions shall apply:
(a) if for the Plan Year this Plan would be a Top-Heavy Plan if
"90%" were substituted for "60%", then Section 15.2 shall
apply for such Plan Year as if amended so that "4%" were
substituted for the "3%"; or
(b) if for the Plan Year (i) this Plan is subject to paragraph (a)
above but does not provide the required additional minimum
contribution; or (ii) this Plan would continue to be a
Top-Heavy Plan if "90%" were substituted for "60%", then the
denominator of both the defined contribution plan fraction and
the defined benefit plan fraction shall be calculated as set
forth in Section 4.5 for the limitation year ending in such
Plan Year by substituting "1.0" for "1.25" in each place such
figure appears, except with respect to any individual for whom
there are no Employer Matching Contributions, forfeitures, or
voluntary nondeductible contributions allocated or any
accruals for such individual under the defined benefit plan.
XV.4 Coordination With Other Plans. In the event that another defined
contribution or defined benefit plan maintained by the Employer or an
Affiliated Employer provides contributions or benefits on behalf of
Members in this Plan, such other plan shall be treated as a part of
this Plan pursuant to the applicable principles set forth in Revenue
Ruling 81-202 in determining whether the plans are providing benefits
at least equal to the minimum benefit required under the defined
benefit plan. If the Plan is subject to Section 15.3(b) but the
Employer does not substitute "1.0" for "1.25" as required, the
applicable percentage under the defined benefit plan shall be increased
by one percentage point (up to a maximum of ten percentage points).
Such determination shall be made by the Committee.
XV.5 Top-Heavy Plan Definitions. This Plan shall be a Top-Heavy Plan for any
Plan Year if, as of the Determination Date,
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the Aggregate of the Accounts under the Plan for Members and Former
Members who are Key Employees exceeds 60% of the present value of the
Aggregate of the Accounts for all Members and Former Members, or if
this Plan is required to be in an Aggregation Group which for such Plan
Year is a Top-Heavy Group. For purposes of making this determination,
the present value of the Aggregate of the Accounts for a Member (i) who
is not a Key Employee, but who was a Key Employee in a prior year; or
(ii) who has not performed any Services for the Employer at any time
during the 5-year period ending on the Determination Date, shall be
disregarded.
(a) "Determination Date" shall mean for any Plan Year the last day
of the immediately preceding Plan Year (except that for the
first Plan Year the Determination Date means the last day of
such Plan Year).
(b) "Aggregate of the Accounts" shall mean the sum of (i) the
Accounts determined as of the most recent Valuation Date that
is within the 12-month period ending on the Determination
Date; and (ii) the adjustment for contributions due as of the
Determination Date, and as described in the regulations under
the Code.
(c) "Aggregation Group" shall mean the group of plans, if any,
that includes both the group of plans that are required to be
aggregated and, if the Committee so elects, the group of plans
that are permitted to be aggregated.
(i) The group of plans that are required to be aggregated
(the "Required Aggregation Group") includes (i) each
plan of the Employer in which a Key Employee is a
Member, including collectively-bargained plans; and
(ii) each other plan of the Employer or an Affiliated
Employer, including collectively-bargained plans,
which enables a plan in which a Key Employee is a
Member to meet the requirements of the Code
prohibiting discrimination as to contributions or
benefits in favor of Employees who are officers,
shareholders, or the Highly-Compensated or
prescribing the minimum participation standards.
(ii) The group of plans that are permitted to be
aggregated (the "Permissive Aggregation Group")
includes the Required Aggregation Group plus one or
more plans of the Employer or an Affiliated Employer
that is not part of the Required Aggregation Group
and that the Committee certifies as constituting a
plan within the Permissive Aggregation Group. Such
plan or plans may be added to the Permissive
Aggregation Group only if, after the addition, the
Aggregation Group as a whole continues not to
discriminate as to contributions or benefits in favor
of Employees who are officers, shareholders, or the
Highly-Compensated and to meet the minimum
participation standards under the Code.
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(d) "Top-Heavy Group" shall mean the Aggregation Group, if as of
the applicable Determination Date, the sum of the present
value of the cumulative accrued benefits for Key Employees
under all defined benefit plans included in the Aggregation
Group; plus the Aggregate of the Accounts of Key Employees
under all defined contribution plans included in the
Aggregation Group exceeds 60% of the sum of the present value
of the cumulative accrued benefits for all employees under all
such defined benefit plans; plus the aggregate accounts for
all employees under such defined contribution plans. For
purposes of making this determination, the present value of
the accrued benefits for a Member (i) who is not a Key
Employee, but who was a Key Employee in a prior year; or (ii)
who has not performed Services for the Employer at any time
during the 5-year period ending on the Determination Date,
shall be disregarded. If the Aggregation Group that is a
Top-Heavy Group is a Required Aggregation Group, each plan in
the Group will be Top-Heavy. If the Aggregation Group that is
a Top-Heavy Group is a Permissive Aggregation Group, only
those plans that are part of the Required Aggregation Group
will be treated as Top-Heavy. If the Aggregation Group is not
a Top-Heavy Group, no plan within such Group will be
Top-Heavy.
(e) In determining whether this Plan constitutes a Top-Heavy Plan,
the Committee shall make the following adjustments in
connection therewith:
(i) When more than one plan is aggregated, the Committee
shall determine separately for each plan as of each
plan's Determination Date the present value of the
accrued benefits or the sum of account balances. Such
accrued benefits shall be determined by using the
method which is used for accrual purposes for all
plans of the Employer, or, if there is no such
method, as if such benefit accrued not more rapidly
than the slowest accrual rate permitted under Code
Section 411(b)(1)(C).
(ii) In determining the present value of the cumulative
accrued benefit or the amount of the account of any
Employee, such present value or account shall include
the dollar value of the aggregate distributions made
to such Employee under the applicable plan during the
5-year period ending on the Determination Date,
unless reflected in the value of the accrued benefit
or account balance as of the most recent Valuation
Date. Such amounts shall include distributions to
Employees which represented the entire amount
credited to their accounts under the applicable plan,
and distributions made on account of the death of a
Member to the extent such death benefits do not
exceed the present value of the accrued benefit or
account.
(iii) Further, in making such determination, such present
value, or such account, shall include any rollover
contribution (or similar transfer), as follows:
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(A) if the rollover contribution (or similar
transfer) is initiated by the Employee and
made to or from a plan maintained by another
employer, the plan providing the
distribution shall include such distribution
in the value of such account; the plan
accepting the distribution shall not include
such distribution in the value of such
account; or
(B) if the rollover contribution (or similar
transfer) in not initiated by the Employee
or made from a plan maintained by another
employer, the plan accepting the
distribution shall include such distribution
in the present value of such account; the
plan making the distribution shall not
include the distribution in the present
value of such account.
XV.6 Key Employee. The term "Key Employee" shall mean any Employee (and any
Beneficiary of an Employee) under this Plan who is a Key Employee as
determined in accordance with Code Section 416(i)(1), excluding in any
event individuals who have not performed Services for the Employer
during the 5-year period ending on the date on which the Top-Heavy
determination is made.
XV.7 Non-Key Employee. The term "Non-Key Employee" shall mean any Employee
(and any Beneficiary of an Employee) who is not a Key Employee,
excluding in any event individuals who have not performed Services for
the Employer during the 5-year period ending on the date on which the
Top-Heavy determination is made.
XV.8 Change from Top-Heavy Status. In the event the Plan should become a
Top-Heavy Plan for a Plan Year and subsequently reverts to a Plan which
is not Top-Heavy, the change from a Top-Heavy plan to a plan which is
not Top-Heavy shall not reduce a Member's Account.
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ARTICLE XVI
GENERAL PROVISIONS
XVI.1 Plan Voluntary. Although it is intended that the Plan shall be
continued and that contributions shall be made as herein provided, this
Plan is entirely voluntary on the part of the Employer and the
continuance of this Plan and the payment of contributions hereunder are
not to be regarded as contractual obligations of the Employer, and the
Employer neither guarantees or promises to pay or to cause to be paid
any of the benefits provided by this Plan. Each person who shall claim
the right to any payment or benefit under this Plan shall be entitled
to look only to the Fund for any such payment or benefit and shall not
have any right, claim, or demand therefore against any Employer, except
as provided by Federal law. The Plan shall not be deemed to constitute
a contract between the Employer and any Employee or to be a
consideration for, or an inducement for, the employment of any Employee
by the Employer. Nothing contained in the Plan shall be deemed to give
any Employee the right to be retained in the Service of the Employer or
to interfere with the right of any Employer to discharge or to
terminate the Service of any Employee at any time without regard to the
effect such discharge or termination may have on any rights under the
Plan.
XVI.2 Payments to Minors and Incompetents. If any Member, Former Member, or
Beneficiary entitled to receive any benefits hereunder is a minor or is
deemed by the Committee or is adjudged to be legally incapable of
giving valid receipt and discharge for such benefits, they will be paid
to such person or institution as the Committee may designate, or to the
duly appointed guardian. Such payment shall, to the extent made, be
deemed a complete discharge of any liability for such payment under the
Plan.
XVI.3 Non-Alienation of Benefits.
(a) No amount payable to, or held under the Plan for the Account
of, any Member or Former Member shall be subject in any manner
to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, or charge, and any attempt to so
anticipate, alienate, sell, transfer, assign, pledge,
encumber, or charge the same shall be void; nor shall any
amount payable to, or held under the
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Plan for the Account of any Member or Former Member be in any
manner liable for his debts, contracts, liabilities,
engagements, or torts, or be subject to any legal process to
levy upon or attach, except as may be provided under a
qualified domestic relations order as defined in Code Section
414(p).
(b) Notwithstanding the foregoing, the preceding sentence shall
not apply to the offset of a Member's benefits hereunder
against an amount that the Member is required to pay to the
Plan, if:
(i) the order or requirement to pay arises:
(A) under a judgment of conviction for a crime
involving such plan;
(B) under a civil judgment (including a consent
order or decree) entered by a Court in an
action brought in connection with a
violation (or alleged violation) of part 4
of Title I of ERISA, or
(C) pursuant, to a settlement agreement between
the Secretary of Labor and the Member, or a
settlement between the PBGC and the Member,
in connection with a violation (or alleged
violation) of Part 4 of Table I of ERISA by
a fiduciary, any other persons.
(ii) the judgment, order, decree or settlement agreement
expressly provides for the offset of all or a part of
the amount ordered or required to be paid to the plan
against a Member's benefits hereunder; and
(iii) if the Member has a Spouse at the time at which the
offset is to be made:
(A) Either such Spouse has consented in writing
to such offset and such consent is witnessed
by a notary public or a representative of
the Plan (or it is established to the
satisfaction of the Plan representative that
such consent may not be obtained by reason
of circumstances described in Code Section
417(a)(2)(B)); or
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(B) such Spouse is ordered or required in such
judgment, order, decree or settlement to pay
an amount to the Plan in connection with a
violation of Part 4 of Title I of ERISA.
(c) Under a qualified domestic relations order, an alternate payee who
had been married to the Member or Former Member may be treated as a
Spouse with respect to the portion of the Member's or Former Member's
benefit in which such alternate payee has an interest; provided that
the qualified domestic relations order provides for such treatment.
However, under no circumstances may the spouse of any alternate payee
(who is not a Member or Former Member hereunder) be treated as a Spouse
under the terms of the Plan.
Upon receipt of any judgement, decree, or order (including
approval of a property settlement agreement) relating to the
provision of payment by the Plan to an alternate payee
pursuant to a state domestic relations law, the Committee
shall promptly notify the affected Member or Former Member,
and any alternate payee of the receipt of such judgement,
decree, or order and shall notify the affected Member or
Former Member, and any alternate payee of the Committee's
procedure for determining whether or not the judgement,
decree, or order is a qualified domestic relations order.
The Committee shall establish a procedure to determine the
status of a judgement, decree, or order as a qualified
domestic relations order and to administer Plan distributions
in accordance with qualified domestic relations orders. Such
procedure shall be in writing, shall include a provision
specifying the notification requirements enumerated in the
preceding paragraph, shall permit an alternate payee to
designate a representative for receipt of communications from
the Committee, and shall include other provisions as the
Committee shall determine, including those which may be
required under regulations promulgated by the Secretary of the
Treasury.
During any period in which the issue of whether a judgement,
decree, or order is a qualified domestic relations order is
being determined (by the Committee, a court of competent
jurisdiction, or otherwise), the Committee shall segregate in
a separate account under the Plan the amount, if any, which
would have been payable to the alternate payee during such
period if the judgement, decree, or order had been determined
to be a qualified domestic relations order. Such segregated
amount shall be held separately invested in an escrow account
during the determination period.
If the judgement, decree, or order is determined by the
Committee to be a qualified domestic relations order before
the first payments would otherwise be due under
-61-
<PAGE> 73
such order, then payment of the appropriate amount shall be
paid to the alternate payee(s) as required under the order. If
a domestic relations order is determined by the Committee to
be a qualified order within the 18-month period beginning on
the date that the first payment would have been due under such
order, the separately accounted for amounts (plus reasonable
interest thereon) shall be retroactively paid to the alternate
payee(s) named in the order. Subsequent payments shall not
include any interest component.
If the Committee first determines that the order is a
qualified domestic relations order after the 18-month period
beginning on the date on which the first payment would have
been due under the order, then the provisions of such order
shall be applied on a prospective basis only.
If a domestic relations order is determined to constitute a
qualified domestic relations order, payment shall be made
immediately or as soon as administratively feasible following
such determination in accordance with the order.
XVI.4 Use of Masculine and Feminine; Singular and Plural. Wherever used in
this Plan, the masculine gender will include the feminine gender and
the singular will include the plural, unless the context indicates
otherwise.
XVI.5 Merger, Consolidation, or Transfer. In the event that the Plan is
merged or consolidated with any other plan, or should the assets or
liabilities of the Plan be transferred to any other plan, each Member
shall be entitled to a benefit immediately after such merger,
consolidation, or transfer if the Plan should then terminate equal to
or greater than the benefit he would have been entitled to receive
immediately before such merger, consolidation, or transfer if the Plan
had then terminated.
XVI.6 Leased Employees. Any individual who performs Services for the Employer
or an Affiliated Employer and who, by application of Code Section
414(n)(2) and regulations issued pursuant thereto, would be considered
a leased employee, shall, for purposes of determining the number of
Employees of the Employer and its Affiliated Employers, and for
purposes of the requirements enumerated in Code Section 414(n)(3), be
considered an Employee.
When the total of all leased employees constitutes less than 20% of the
Employer's non-Highly Compensated Employee work force within the
meaning of Code Section
-62-
<PAGE> 74
414(n)(5)(c)(ii), however, a leased employee shall not be considered an
Employee if the organization from which the individual is leased
maintains a qualified safe harbor plan (as defined in Code Section
414(n)(5)) in which such individual participates.
"Leased Employees" who are deemed to be Employees for purposes of this
Section 16.6 shall not be eligible to participate in the Plan unless
specifically provided for in Article II.
XVI.7 Governing Law. The Plan shall be administered, construed, and enforced
according to the laws of the State of Connecticut (without regard to
its choice of law or conflict of law principles); provided, however,
where applicable ERISA shall govern and in such event the laws of the
United States of America shall be applied and to the extent necessary,
its courts shall have competent jurisdiction.
-63-
<PAGE> 1
EXHIBIT 10.8
STANADYNE AUTOMOTIVE CORP.
BENEFIT EQUALIZATION PLAN
(EFFECTIVE AS OF JANUARY 1, 1992)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
Definitions............................................................................................ 1
ARTICLE II
BEP Pension Benefits................................................................................... 3
2.1 BEP Pension Benefit.................................................................. 3
ARTICLE III
Form and Commencement of Payment
of BEP Pension Benefits.............................................................................. 3
3.1 Form of Benefit Payment.............................................................. 3
3.2 Commencement of Benefit Payment...................................................... 4
3.3 Non-Alienation of Benefits........................................................... 4
3.4 Claims Procedure..................................................................... 4
ARTICLE IV
Death Benefit.......................................................................................... 5
4.1 Amount of Survivor Benefit........................................................... 5
4.2 Designation of Beneficiary........................................................... 5
4.3 Form and Commencement of Survivor Benefit Payments................................... 5
ARTICLE V
Benefits Committee..................................................................................... 5
5.1 Fiduciary Status..................................................................... 5
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
5.2 Quorum............................................................................... 5
5.3 Powers of Benefits Committee......................................................... 6
5.4 Conclusive Effect of Determination................................................... 6
5.5 Liability; Indemnification........................................................... 7
5.6 Compensation......................................................................... 7
5.7 Company to Provide Information....................................................... 8
5.8 Availability of Reports.............................................................. 8
5.9 Conflicts of Interest................................................................ 8
ARTICLE VI
General Provisions..................................................................................... 9
6.1 Benefits Payable by Company.......................................................... 9
6.2 No Trust Fund or Segregation of Assets Required...................................... 9
6.3 Effect on Other Plans................................................................ 9
6.4 Amendment or Termination............................................................. 10
6.5 Severability......................................................................... 10
6.6 Status of Employment................................................................. 10
6.7 Payments to Incompetents............................................................. 11
6.8 Governing Law........................................................................ 11
</TABLE>
<PAGE> 4
-iii-
<PAGE> 5
BACKGROUND
The Plan is intended to be an excess benefit plan providing
benefits in excess of the limitations imposed by Section 415 of the Internal
Revenue Code of 1986, as amended, upon benefits of employees of the Company and
its Affiliates participating in the Stanadyne Automotive Corp. Salaried Pension
Plan.
ARTICLE I
DEFINITIONS
Unless otherwise required by the context, the following terms
shall have the following meanings for purposes of this Plan and any amendments
thereto.
"Actuarial Equivalent" means an amount or benefit of
equivalent current value to the amount or benefit which would otherwise be
provided to or on account of a Participant, determined on the basis of the
actuarial assumptions utilized for such purpose under the Pension Plan.
"Affiliate" has the same meaning as in Article I of the
Pension Plan.
"Beneficiary" means the person entitled to receive, pursuant
to Article IV, any Plan benefits due after Participant's death.
"Benefits Committee" means the members of the Retirement Plan
Committee under the Pension Plan or other persons appointed by the Board of
Directors who are responsible for the administration of the Plan in accordance
with Article V.
<PAGE> 6
"BEP Pension Benefit" means a Participant's retirement benefit
under the Plan determined in accordance with Section 2.1.
"Board of Directors" means the Board of Directors of the
Company as constituted from time to time.
"Company" means Stanadyne Automotive Corp. and subsidiaries or
any predecessor or successor thereto.
"Eligible Employee" means any employee of the Company or an
Affiliate who is a participant in the Pension Plan and whose benefits payable
under the Pension Plan are affected by the Section 415 Limitation in any Plan
Year.
"Participant" means an Eligible Employee, upon entry to the
Plan.
"Pension Plan" means the Stanadyne Automotive Corp. Salaried
Pension Plan, as amended from time to time. "Pension Plan Benefit" means the
annual retirement benefit payable to or on account of a Participant from the
Pension Plan. Such benefit shall include any benefit from the Stanadyne, Inc.
Salaried Pension Plan, whether or not such benefit is payable under the Lincoln
National Group Annuity Contract Number GA-5844.
"Plan" means the Stanadyne Automotive Corp. Benefit
Equalization Plan, as amended from time to time.
"Plan Year" means each 12-consecutive month period ending on
December 31 during any part of which the Plan is in effect.
"Section 415 Limitation" means the limitation on annual
benefits payable from the Pension Plan imposed by Section 415 of the Internal
Revenue Code of 1986, as amended.
<PAGE> 7
Where applicable, words used in the masculine herein shall be read and
construed in the feminine and words used in the feminine herein shall be read
and construed in the masculine. Also, as used herein, singular pronouns shall
include the plural or vice versa. Any reference to a "Section" or "Article"
shall mean the indicated section or article of this Plan and any reference to a
section, article or definition of the Pension Plan shall mean the indicated
section, article or definition of the Pension Plan.
ARTICLE II
BEP PENSION BENEFITS
2.1 BEP Pension Benefit
(a) Subject to Section 2.1(b), a Participant's BEP Pension Benefit
shall be equal to the difference between (1) and (2) where:
(1) is the benefit the Participant would have received under
the Pension Plan if there had been no Section 415 Limitation, but
taking into account the limitations of Section 401(a)(17) of the
Internal Revenue Code of 1986 as amended ("Code"); and
(2) is the Participant's Pension Plan Benefit.
(b) The BEP Pension Benefit shall be accrued in the same annuity form
as the Pension Plan Benefit accrues under the Pension Plan.
ARTICLE III
FORM AND COMMENCEMENT OF PAYMENT
OF BEP PENSION BENEFITS
3.1 Form of Benefit Payment
<PAGE> 8
A Participant's BEP Pension Benefit shall be payable in any form of
benefit payment permitted under the Pension Plan as elected by the
Participant. Any benefit payable under such an elected form of payment
shall be the Actuarial Equivalent of the BEP Pension Benefit payable to
such Participant pursuant to Section 2.1.
3.2 Commencement of Benefit Payment
Payment of a BEP Pension Benefit shall commence at such time as a
Participant commences receipt of his Pension Plan Benefit.
3.3 Non-Alienation of Benefits
No Participant or spouse of a Participant, shall have any right to
commute, encumber, transfer or otherwise dispose of or alienate any
present or future right or expectancy which he may have at any time to
receive payments of benefits hereunder, which benefits and the right
thereto are expressly declared to be non-assignable and
non-transferable, except to the extent required by law. Any attempt to
transfer or assign a benefit, or any rights granted hereunder, by a
Participant or his spouse shall, in the sole discretion of the Benefits
Committee (after consideration of such factors as it deems pertinent),
be grounds for terminating any rights of the Participant, or his
spouse, to any portion of the Plan benefits not previously paid.
3.4 Claims Procedure
A claim for the benefits hereunder may be made in writing to the
Benefits Committee; provided, however, that a claim by a Participant
for retirement benefits under the Pension Plan, shall be deemed to be a
claim hereunder.
<PAGE> 9
ARTICLE IV
DEATH BENEFIT
4.1 Amount of Survivor Benefit
Upon the death of a Participant while employed by the Company or an
Affiliate, a survivor benefit under this Plan shall be paid to his
Beneficiary, equal to the difference between (1) and (2) where:
(1) is the death benefit that would have been payable under
the Pension Plan if there had been no Section 415 Limitation, but
taking into account the limitations of Code section 401(a)(17); and
(2) is the actual death benefit payable under the Pension
Plan.
4.2 Designation of Beneficiary
The Beneficiary of a deceased Participant shall be the Participant's
spouse.
4.3 Form and Commencement of Survivor Benefit Payments
Payment of a survivor benefit under this plan shall be made in such
form, and shall commence at such time, as the survivor benefit under
the Pension Plan.
ARTICLE V
BENEFITS COMMITTEE
5.1 Fiduciary Status
Neither the Benefits Committee nor its individual members shall be
deemed to be a fiduciary with respect to the Plan.
5.2 Quorum
<PAGE> 10
A majority of the members of the Benefits Committee shall constitute a
quorum for any meeting held with respect to the Plan, and the acts of a
majority of the members present at any meeting at which a quorum is
present, or the acts unanimously approved in writing by all such
members, shall be valid acts
5.3 Powers of Benefits Committee
The Benefits Committee shall have the power and duty to do all things
necessary or convenient to effect the intent and purposes of the Plan
and not inconsistent with any of the provisions hereof, whether or not
such powers and duties are specifically set forth herein, and, by way
of amplification and not limitation of the foregoing, the Benefits
Committee shall have the power to:
(A) provide rules and regulations for the management,
operation and administration of the Plan, and, from time to
time, to amend or supplement such rules and regulations;
(B) construe the Plan, which construction, as long as made in
good faith, shall be final and conclusive upon all parties
hereto; and
(C) correct any defect, supply any omission, or reconcile any
inconsistency in the Plan in such manner and to such extent as
it shall deem expedient to carry the same into effect, and it
shall be the sole and final judge of when such action shall be
appropriate.
<PAGE> 11
5.4 Conclusive Effect of Determination
The acts and determinations of the Benefits Committee within the powers
conferred by the Plan shall be final and conclusive for all purposes of
the Plan, and shall not be subject to appeal or review by persons or
entities other than the Board of Directors.
5.5 Liability; Indemnification
No member of the Benefits Committee shall be directly or indirectly
responsible or under any liability by reason of any action or default
by him as a member of the Benefits Committee, or the exercise of or
failure to exercise any power or discretion as such member; except for
his own fraud or willful misconduct. No member of the Benefits
Committee shall be liable in any way for the acts or defaults of any
other member of the Benefits Committee, or any of its advisors, agents
or representatives. The Company shall indemnify and save harmless each
member of the Benefits Committee against any and all expense and
liabilities arising out of his own membership on the Benefits
Committee; except expenses and liabilities arising out of a Benefits
Committee member's own fraud or willful misconduct.
5.6 Compensation
Members of the Benefits Committee who are employees of the Company
shall receive no compensation for their services rendered as members of
the Benefits Committee. Any other members of the Benefits Committee may
receive such reasonable compensation for their services as may be
authorized from time to time by the Board of Directors and, except as
otherwise provided by this Article, shall be entitled to receive their
reasonable expenses incurred in administering the Plan. Any such
compensation and expenses, as
<PAGE> 12
well as extraordinary expenses authorized by the Board of Directors,
shall be paid by the Company.
5.7 Company to Provide Information
The Company shall furnish to the Benefits Committee in writing all
information the Company deems appropriate for the Benefits Committee to
exercise its powers and duties in the administration of the Plan. Such
information may include, but shall not be limited to, the names of all
Participants, their earnings and their dates of birth, employment,
termination of employment, retirement or death. Such information shall
be conclusive for all purposes of the Plan and the Benefits Committee
shall be entitled to rely thereon without any investigation thereof;
provided, however, that the Benefits Committee may correct any errors
discovered in any such information.
5.8 Availability of Reports
The Benefits Committee shall make available, at the request of each
Participant and spouse, for examination at the principal office of the
Company (or at such other location as may be determined by the Benefits
Committee), a copy of the Plan and such of its records, or copies
thereof, as may pertain to any benefits of such Participant or spouse
under the Plan.
5.9 Conflicts of Interest
No member of the Benefits Committee may act, vote, or otherwise
influence a decision of the Benefits Committee specifically relating to
his or her benefits, if any, under the Plan.
<PAGE> 13
ARTICLE VI
GENERAL PROVISIONS
6.1 Benefits Payable by Company
Any Participant who may have or claim any interest in or right to any
compensation, payment, or benefit payable hereunder, shall rely solely
upon the unsecured promise of the Company as set forth herein for the
payment thereof, and nothing herein contained shall be construed to
give to or vest in the Participant or any other person now or at any
time in the future, any right, title, interest, or claim in or to any
specific asset, fund, reserve, account, insurance or annuity policy or
contract, or other property of any kind whatever owned by the Company,
or in which the Company may have any right, title, or interest, now or
at any time in the future.
6.2 No Trust Fund or Segregation of Assets Required
Neither the Company, the Benefits Committee, nor its individual
members, shall segregate or otherwise identify specific assets to be
applied to the purposes of the Plan, nor shall any of them be deemed to
be trustee of any amounts to be paid under the Plan. Any liability of
the Company to any person with respect to benefits payable under the
Plan shall be based solely upon such contractual obligations, if any,
as shall be created by the Plan, and shall give rise only to a claim
against the general assets of the Company. No such liability shall be
deemed to be secured by any pledge or any other encumbrance on any
specific property of the Company.
6.3 Effect on Other Plans
<PAGE> 14
It is agreed and understood that any benefits accrued under this Plan
are in addition to any and all employee benefits to which a Participant
may otherwise be entitled under any other contract, arrangement, or
voluntary pension, profit sharing or other compensation plan of the
Company, whether funded or unfunded, and that this Plan shall not
affect or impair the rights or obligations of the Company or a
Participant under any other such contract, arrangement, or voluntary
pension, profit sharing or other compensation plan.
6.4 Amendment or Termination
This Plan may be amended, modified, suspended, or terminated by the
Board of Directors if and when it deems such action necessary,
provided, however, that notwithstanding the foregoing, no such
amendment, modification, suspension, or termination shall reduce the
benefit to which a Participant or spouse was entitled immediately prior
to such amendment, modification, suspension, or termination. No
Participant or spouse shall have any contractual right to future
benefits otherwise payable, as of the date of such action by the Board
of Directors.
6.5 Severability
If any term or condition of the Plan shall be invalid or unenforceable
to any extent or in any application, then the remainder of the Plan,
with the exception of such invalid or unenforceable provision, shall
not be affected thereby, and shall continue in effect and application
to its fullest extent.
<PAGE> 15
6.6 Status of Employment
Neither the establishment of the Plan, any provisions of the Plan, nor
any action of the Benefits Committee shall be held or construed to
confer upon any employee the right to a continuation of employment by
the Company. Subject to any applicable employment contract, the Company
reserves the right to dismiss any employee, or otherwise deal with any
employee to the same extent as though the Plan had not been adopted.
6.7 Payments to Incompetents
If the Benefits Committee determines that a Participant or spouse is
unable to care for his affairs because of illness or accident, or is a
minor, any benefit due such Participant or beneficiary may be paid to
his spouse, child, parent, or any other person deemed by the Benefits
Committee to have incurred expense for such Participant or beneficiary
(including a duly appointed guardian, committee, or other legal
representative), and any such payment shall be a complete discharge of
the Company's obligation hereunder.
6.8 Governing Law
The Plan shall be construed, administered, and enforced according to
the laws of the State of Connecticut, except to the extent that such
laws are preempted by the federal laws of the United States of America.
IN WITNESS WHEREOF, STANADYNE AUTOMOTIVE CORP. has caused this
Plan to be adopted as of January 1, 1992.
STANADYNE AUTOMOTIVE CORP.
<PAGE> 16
By:________________________
<PAGE> 1
EXHIBIT 10.9
STANADYNE AUTOMOTIVE CORP.
SUPPLEMENTAL RETIREMENT PLAN
(EFFECTIVE JANUARY 1, 1992)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I Definitions.................................................................................. 1
ARTICLE II Purpose and Nature of the Plan.............................................................. 2
2.1 Purpose................................................................................................ 2
2.2 Nature................................................................................................. 2
2.3 No Trust Fund or Segregation of Assets Required........................................................ 2
ARTICLE III Eligibility and Participation.............................................................. 3
3.1 Eligibility............................................................................................ 3
3.2 Duration............................................................................................... 3
3.3 Death Benefits......................................................................................... 3
ARTICLE IV Pension Benefits............................................................................ 4
4.1 Amount of Benefit...................................................................................... 4
4.2 Form and Commencement of Benefit....................................................................... 4
4.3 Beneficiary............................................................................................ 5
4.4 Optional Forms......................................................................................... 5
4.5 Non-Alienation......................................................................................... 5
4.6 Claims Procedure....................................................................................... 5
ARTICLE V Benefits Committee........................................................................... 5
5.1 Fiduciary Status....................................................................................... 5
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
5.2 Quorum................................................................................................. 6
5.3 Powers of Benefits Committee........................................................................... 6
5.4 Conclusive Effect of Determination..................................................................... 6
5.5 Liability; Indemnification............................................................................. 6
5.6 Compensation........................................................................................... 7
5.7 Company to Provide Information......................................................................... 7
5.8 Availability of Reports................................................................................ 8
5.9 Conflicts of Interest.................................................................................. 8
ARTICLE VI General Provisions.......................................................................... 8
6.1 Benefits Payable by Company............................................................................ 8
6.2 Effect on Other Plans.................................................................................. 8
6.3 Amendment or Termination............................................................................... 9
6.4 Severability........................................................................................... 9
6.5 Status of Employment................................................................................... 9
6.6 Payments to Incompetents............................................................................... 9
6.7 Governing Law.......................................................................................... 10
</TABLE>
-ii-
<PAGE> 4
PAGE
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-iii-
<PAGE> 5
ARTICLE I
DEFINITIONS
Unless otherwise required by the context, the following terms
shall have the following meanings for purposes of this Plan and any amendments
thereto.
"Affiliate" has the same meaning as in Article I of the
Pension Plan.
"Benefits Committee" means the members of the Retirement Plan
Committee under the Pension Plan or other persons appointed by the Board of
Directors who are responsible for the administration of the Plan in accordance
with Article V.
"BEP" means the Stanadyne Automotive Corp. Benefit
Equalization Plan, as amended from time to time.
"Board" means the Board of Directors of the Company as
constituted from time to time.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Company" means Stanadyne Automotive Corp. and subsidiaries or
any predecessor or successor thereto.
"Compensation" means the annual compensation of an Eligible
Employee taken into account under the Pension Plan.
"Effective Date" means January 1, 1992.
"Eligible Employee" means any employee of the Company or an
Affiliate who is a participant in the Pension Plan and who is designated to be
eligible to participate in this Plan by the Benefits Committee or its designee.
"Participant" means an Eligible Employee, upon entry to the
Plan.
<PAGE> 6
"Pension Plan" means the Stanadyne Automotive Corp. Salaried
Pension Plan, as amended from time to time.
"Plan" means the Stanadyne Automotive Corp. Supplemental
Retirement Plan, as amended from time to time.
"Plan Year" means any calendar year or part thereof within
which the Plan is in effect.
Where applicable, words used in the masculine herein shall be
read and construed in the feminine and words used in the feminine herein shall
be read and construed in the masculine. Also, as used herein, singular pronouns
shall include the plural or vice versa. Any reference to a "Section" or
"Article" shall mean the indicated section or article of this Plan and any
reference to a section, article or definition of the Pension Plan shall mean the
indicated section, article or definition of the Pension Plan.
ARTICLE II
PURPOSE AND NATURE OF THE PLAN
2.1 Purpose
The purpose of this Plan is to provide retirement income benefits in
excess of those permitted from time to time under Code Section 401(a)
for qualified retirement plans.
2.2 Nature
The Plan is intended to be an unfunded, nonqualified plan maintained by
the Company primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated
employees within the meaning of Sections 201(2),
<PAGE> 7
301(a)(3), and 401(a)(1) of the Employee Retirement Income Security Act
of 1974, as amended. In the event it is ultimately determined that a
Participant is neither one of the select group of management employees
or highly compensated employees, he shall cease to participate in the
Plan.
2.3 No Trust Fund or Segregation of Assets Required
Neither the Company, the Benefits Committee, nor its individual
members, shall segregate or otherwise identify specific assets to be
applied to the purposes of the Plan, nor shall any of them be deemed to
be trustee of any amounts to be paid under the Plan. Any liability of
the Company to any person with respect to benefits payable under the
Plan shall be based solely upon such contractual obligations, if any,
as shall be created by the Plan, and shall give rise only to a claim
against the general assets of the Company, as the case may be. No such
liability shall be deemed to be secured by any pledge or any other
encumbrance on any specific property of the Company.
<PAGE> 8
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Eligibility
Each Eligible Employee shall become a Participant when his Compensation
exceeds the maximum amount of Compensation that may be taken into
account under the Pension Plan under Code Section 401(a) and/or the
amount of benefit he would have received under the Pension Plan is
reduced because the Plan is redesigned to comply with the Tax Reform
Act of 1986 and any regulations promulgated thereunder, including,
without limitation, the regulations under the Code with respect to
nondiscrimination under Code Section 401(a)(4) and coverage under Code
Section 410(b).
3.2 Duration
Each Participant shall remain a Participant until there are no longer
any benefits payable in accordance with the benefit payment provisions
of the Pension Plan.
3.3 Death Benefits
The Participant's spouse, who would be entitled to a retirement, death
or other benefit in accordance with the provisions of the Pension Plan
upon the death of a Participant, shall be entitled to a benefit
hereunder to the same extent that such benefit would otherwise have
been payable in accordance with the provisions of the Pension Plan.
<PAGE> 9
ARTICLE IV
PENSION BENEFITS
4.1 Amount of Benefit
Upon a Participant's retirement, death, disability or other termination
of employment, or upon termination of the Pension Plan on or after the
Effective Date, a benefit shall be payable equal to (A) less (B),
where:
(A) is the benefit (whether it be a retirement, death,
disability, or termination of employment benefit or benefit upon
Pension Plan termination), if any, determined under the applicable
provisions of the Pension Plan, as in effect at the time of the
Participant's retirement, death, disability or termination of
employment, or termination of the Pension Plan, without regard to any
limitation on such benefit imposed under said Pension Plan on account
of the limitations of Code Sections 401(a) or 415, as modified from
time to time, or any successor provisions thereto; and
(B) is the sum of (a) plus (b) where (a) is the benefit
determined under the applicable provisions of the Pension Plan,
(including any benefit from the Stanadayne, Inc. Salaried Pension Plan
whether or not such benefit is payable under the Lincoln National Group
Annuity Contract Number (GA-5844)), as limited by Code Sections 401(a)
and 415, as modified from time to time, or any successor provision
thereto; and (b) is the benefit determined under the applicable
provisions of the BEP. The difference in benefits under Paragraphs (A)
and (B), above, shall be the benefit payable under the terms of this
Plan.
4.2 Form and Commencement of Benefit
-5-
<PAGE> 10
Any benefit payable under the terms of this Plan, shall be paid at the
same time, in the same form, pursuant to the same vesting schedule and
(except as otherwise provided in Section 4.4), over the same period of
time, as the benefit payable under the Pension Plan.
4.3 Beneficiary
Any benefit payable subsequent to the death of a Participant hereunder
shall be paid to the Participant's spouse.
4.4 Optional Forms
Each available optional form of benefit payment, shall be computed on
an actuarial equivalent basis, applying the actuarial assumptions
utilized by the Pension Plan.
4.5 Non-Alienation
No Participant or spouse of a Participant, shall have any right to
commute, encumber, transfer or otherwise dispose of or alienate any
present or future right or expectancy which he may have at any time to
receive payments of benefits hereunder, which benefits and the right
thereto are expressly declared to be non-assignable and
non-transferable, except to the extent required by law. Any attempt to
transfer or assign a benefit, or any rights granted hereunder, by a
Participant or his spouse shall, in the sole discretion of the Benefits
Committee (after consideration of such facts as it deems pertinent), be
grounds for terminating any rights of the Participant, or his spouse,
to any portion of the Plan benefits not previously paid.
4.6 Claims Procedure
-6-
<PAGE> 11
A claim for the benefits hereunder may be made in writing to the
Benefits Committee; provided, however, that a claim by a Participant
for retirement benefits under the Pension Plan, shall be deemed to be a
claim hereunder.
ARTICLE V
BENEFITS COMMITTEE
5.1 Fiduciary Status
Neither the Benefits Committee nor its individual members shall be
deemed to be a fiduciary with respect to the Plan.
5.2 Quorum
A majority of the members of the Benefits Committee shall constitute a
quorum for any meeting held with respect to the Plan, and the acts of a
majority of the members present at any meeting at which a quorum is
present, or the acts unanimously approved in writing by all such
members, shall be valid acts.
5.3 Powers of Benefits Committee
The Benefits Committee shall have the power and duty to do all things
necessary or convenient to effect the intent and purposes of the Plan
and not inconsistent with any of the provisions hereof, whether or not
such powers and duties are specifically set forth herein, and, by way
of amplification and not limitation of the foregoing, the Benefits
Committee shall have the power to:
-7-
<PAGE> 12
(A) provide rules and regulations for the management,
operation and administration of the Plan, and, from time to
time, to amend or supplement such rules and regulations;
(B) construe the Plan, which construction, as long as made in
good faith, shall be final and conclusive upon all parties
hereto; and
(C) correct any defect, supply any omission, or reconcile any
inconsistency in the Plan in such manner and to such extent as
it shall deem expedient to carry the same into effect, and it
shall be the sole and final judge of when such action shall be
appropriate.
5.4 Conclusive Effect of Determination
The acts and determinations of the Benefits Committee within the powers
conferred by the Plan shall be final and conclusive for all purposes of
the Plan, and shall not be subject to appeal or review by persons or
entities other than the Board of Directors.
-8-
<PAGE> 13
5.5 Liability; Indemnification
No member of the Benefits Committee shall be directly or indirectly
responsible or under any liability by reason of any action or default
by him as a member of the Benefits Committee, or the exercise of or
failure to exercise any power or discretion as such member; except for
his own fraud or willful misconduct. No member of the Benefits
Committee shall be liable in any way for the acts or defaults of any
other member of the Benefits Committee, or any of its advisors, agents
or representatives. The Company shall indemnify and save harmless each
member of the Benefits Committee against any and all expense and
liabilities arising out of his own membership on the Benefits
Committee; except expenses and liabilities arising out of a Benefits
Committee member's own fraud or willful misconduct.
5.6 Compensation
Members of the Benefits Committee who are employees of the Company
shall receive no compensation for their services rendered as members of
the Benefits Committee. Any other members of the Benefits Committee may
receive such reasonable compensation for their services as may be
authorized from time to time by the Board of Directors and, except as
otherwise provided by this Article, shall be entitled to receive their
reasonable expenses incurred in administering the Plan. Any such
compensation and expenses, as well as extraordinary expenses authorized
by the Board of Directors, shall be paid by the Company.
5.7 Company to Provide Information
-9-
<PAGE> 14
The Company shall furnish to the Benefits Committee in writing all
information the Company deems appropriate for the Benefits Committee to
exercise its powers and duties in the administration of the Plan.
Such information may include, but shall not be limited to, the names of
all Participants, their earnings and their dates of birth, employment,
termination of employment, retirement or death. Such information shall
be conclusive for all purposes of the Plan and the Benefits Committee
shall be entitled to rely thereon without any investigation thereof;
provided, however, that the Benefits Committee may correct any errors
discovered in any such information.
5.8 Availability of Reports
The Benefits Committee shall make available, at the request of each
Participant and spouse, for examination at the principal office of the
Company (or at such other location as may be determined by the Benefits
Committee), a copy of the Plan and such of its records, or copies
thereof, as may pertain to any benefits of such Participant or spouse
under the Plan.
5.9 Conflicts of Interest
No member of the Benefits Committee may act, vote, or otherwise
influence a decision of the Benefits Committee specifically relating to
his benefits, if any, under the Plan.
ARTICLE VI
GENERAL PROVISIONS
6.1 Benefits Payable by Company
-10-
<PAGE> 15
Any Participant who may have or claim any interest in or right to any
compensation, payment, or benefit payable hereunder, shall rely solely
upon the unsecured promise of the Company as set forth herein for the
payment thereof, and nothing herein contained shall be construed to
give to or vest in the Participant or any other person now or at any
time in the future, any right, title, interest, or claim in or to any
specific asset, fund, reserve, account, insurance or annuity policy or
contract, or other property of any kind whatever owned by the Company,
or in which the Company may have any right, title, or interest, now or
at any time in the future.
6.2 Effect on Other Plans
It is agreed and understood that any benefits accrued under this Plan
are in addition to any and all employee benefits to which a Participant
may otherwise be entitled under any other contract, arrangement, or
voluntary pension, profit sharing or other compensation plan of the
Company, whether funded or unfunded, and that this Plan shall not
affect or impair the rights or obligations of the Company or a
Participant under any other such contract, arrangement, or voluntary
pension, profit sharing or other compensation plan.
-11-
<PAGE> 16
6.3 Amendment or Termination
This Plan may be amended, modified, suspended, or terminated by the
Board of Directors if and when it deems such action necessary,
provided, however, that notwithstanding the foregoing, no such
amendment, modification, suspension or termination shall reduce the
benefit to which a Participant or spouse was entitled immediately prior
to such amendment, modification, suspension, or termination. No
Participant or spouse shall have any contractual right to future
benefits otherwise payable, as of the date of such action by the Board
of Directors.
6.4 Severability
If any term or condition of the Plan shall be invalid or unenforceable
to any extent or in any application, then the remainder of the Plan,
with the exception of such invalid or unenforceable provision, shall
not be affected thereby, and shall continue in effect and application
to its fullest extent.
6.5 Status of Employment
Neither the establishment of the Plan, any provisions of the Plan, nor
any action of the Benefits Committee shall be held or construed to
confer upon any employee the right to a continuation of employment by
the Company. Subject to any applicable employment contract, the Company
reserves the right to dismiss any employee, or otherwise deal with any
employee to the same extent as though the Plan had not been adopted.
6.6 Payments to Incompetents
If the Benefits Committee determines that a Participant or spouse is
unable to care for his affairs because of illness or accident, or is a
minor, any benefit due such Participant or
-12-
<PAGE> 17
beneficiary may be paid to his spouse, child, parent, or any other
person deemed by the Benefits Committee to have incurred expense for
such Participant or beneficiary (including a duly appointed guardian,
committee, or other legal representative), and any such payment shall
be a complete discharge of the Company's obligation hereunder.
6.7 Governing Law
The Plan shall be construed, administered, and enforced according to
the laws of the State of Connecticut, except to the extent that such
laws are preempted by the federal laws of the United States of America.
IN WITNESS WHEREOF, STANADYNE AUTOMOTIVE CORP. has caused this
Plan to be adopted as of January 1, 1992.
STANADYNE AUTOMOTIVE CORP.
By:________________________
-13-
<PAGE> 1
EXHIBIT 10.13
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT (this "Agreement") is dated as of
December 11, 1997 between Stanadyne Automotive Corp., a Delaware corporation
(the "Company") and American Industrial Partners, a Delaware general
partnership ("AIP").
Background
Subject to the terms and conditions of this Agreement, the Company desires
to retain AIP to provide certain management services to the Company and its
subsidiaries.
Terms and Conditions
In consideration of the mutual covenants contained herein and intending to
be legally bound hereby, the parties agree as follows:
1. Management Services. AIP shall provide general management, financial
and other corporate advisory services to the Company and its subsidiaries.
These management services shall be performed by the officers, employees or
agents of AIP as it may determine in its discretion from time to time.
2. Fees and Expenses.
(a) Subject to the provisions of that certain Subordination Agreement
dated as of December 11, 1997 by the Company and AIP in favor of DLJ Capital
Funding, Inc., The First National Bank of Chicago, a national banking
association, as agents for the lenders and the United States Trust Company of
New York as trustee for the senior subordinated notes, the Company shall pay to
AIP an annual management fee (the "Management Fee") of One Million One Hundred
Thousand Dollars ($1,100,000). The Management Fee shall be payable
quarter-annually in advance on each January 1, April 1, July 1 and October 1
occurring during the term of this Agreement, beginning January 1, 1998. The
Company shall pay to AIP on the Closing Date, as defined in that certain Stock
Purchase Agreement dated as of November 7, 1997 by and among SAC, Inc.,
Stanadyne Automotive Holding Corp. and Metromedia Company, its pro rata
Management Fee for the period beginning on the Closing Date and ending on
December 31, 1997.
(b) The Company shall promptly, when requested, reimburse AIP for all
reasonable out-of-pocket expenses incurred in the ordinary course by AIP in
connection with AIP's obligations hereunder.
<PAGE> 2
(c) Notwithstanding anything to the contrary contained herein, the
Company shall accrue but not pay the Management Fee if (i) any such payment
would violate, breach or otherwise constitute a default (or any event which
might with the lapse of time or the giving of notice or both, constitute a
default) under any of the Company's financing agreements, or (ii) AIP instructs
the Company not to pay all or any portion of the Management Fee during any
fiscal year.
3. Indemnification. To the extent permitted by law, the Company shall
protect, hold harmless and indemnify AIP from and against any and all
liability, obligations, losses, claims and damages whatsoever and expenses in
connection therewith including, without limitation, reasonable counsel fees and
expenses, penalties and interest arising out of or as the result of the
entering into of this Agreement except to the extent, and only to the extent,
that such liability or claim is the result of the willful misconduct or gross
negligence of AIP.
4. Independent Contractor; No Joint Venture. AIP is performing services
hereunder as an independent contractor (and not as an agent, representative or
employee of the Company) and AIP is not and shall not be deemed to be a
co-venturer with, or partner of, the Company in any respect.
5. Entire Agreement; Amendment. This Agreement constitutes the entire
agreement and understanding between the parties with respect to the subject
matter hereof. This Agreement may be amended or modified, or any provision
hereof may be waived, provided that such amendment or waiver is set forth in a
writing executed by the parties. No courses of dealing between or among any
persons having any interest in this Agreement will be deemed effective to
modify, amend or discharge any part of this Agreement or any rights or
obligations of any person under or by reason of this Agreement.
6. No Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the other parties hereto; provided
that AIP may assign all of its rights and obligations hereunder to any
Affiliate of AIP without the consent of the Company; and provided further that
AIP may assign any or all of its rights hereunder, without the consent of the
Company (i) to any lender providing financing to AIP or its Affiliates and (ii)
in connection with any sale of all or substantially all of the assets, capital
stock or business of AIP or the Company (whether effected by sale, exchange,
merger, consolidation or other transaction).
7. Binding Effect. In the event of assignment of this Agreement
pursuant to Section 6 hereunder, this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their successors and permitted
assigns.
2
<PAGE> 3
8. Term. This Agreement shall terminate on the fifteenth anniversary of
the date hereof. Notwithstanding the foregoing, this Agreement shall always
remain in effect to the extent that any money is owed under sections 2 or 3 of
this Agreement.
9. Governing Law. The validity, performance, construction and effect of
this Agreement shall be governed by and construed in accordance with the
internal law of the State of [CALIFORNIA].
10. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by personal
delivery, by reputable overnight courier or by mail (registered or certified
mail, postage prepaid, return receipt requested) to the respective parties as
follows:
If to AIP:
American Industrial Partners
One Maritime Plaza, Suite 2525
San Francisco, CA 94111
Telecopy: 415-788-5302
Telephone: 415-788-7354
Attention: Kenneth J. Diekroeger
with a copy to:
Kirkland & Ellis
655 Fifteenth Street, N.W.
Suite 1200
Washington, D.C. 20005
Telecopy: (202) 879-5200
Telephone: (202) 879-5040
Attention: Jack M. Feder, Esq.
If to the Company:
Stanadyne Automotive Corp.
92 Deerfield Road
Windsor, CT 06095
Telecopy: 860-683-4500
Telephone: 860-525-0821
Attention: Mike Boyer, Chief Financial Officer
3
<PAGE> 4
or to such other address as any party hereto may, from time to time, designate
in a written notice given in like manner. Notices will be deemed to have been
given hereunder when delivered personally, five days after deposit in the U.S.
mail and one business day after deposit with a reputable overnight courier
service.
4
<PAGE> 5
IN WITNESS WHEREOF, each of the parties hereto has caused this writing to
be executed as of the day and year first above written.
STANADYNE AUTOMOTIVE CORP.
/s/ Michael Boyer
By: Michael H. Boyer
----------------------
Its: Vice President and CFO
----------------------
AMERICAN INDUSTRIAL PARTNERS
/s/ Kenneth Diekroeger
By: Kenneth Diekroeger
------------------
Its: Principal
------------------
5
<PAGE> 1
EXHIBIT 12.1
STATEMENT OF COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------ -------------------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before taxes, extraordinary item
and cumulative effect of change in accounting $ 2,512 $(2,506) $(1,468) $(4,532) $ 1,648 $ 2,040 $ 7,283
Fixed charges deducted from earnings 9,408 10,989 10,822 10,101 9,019 6,906 5,927
------- ------- ------- ------- ------- ------- -------
Earnings available for payment of fixed charges $11,920 $ 8,483 $ 9,354 $ 5,569 $10,667 $ 8,946 $13,210
======= ======= ======= ======= ======= ======= =======
Fixed charges:
Interest expense $ 8,159 $ 9,188 $ 9,050 $ 9,292 $ 8,259 $ 6,336 $ 5,338
Amortization of deferred financing fees 827 1,315 1,315 290 316 237 237
Portion of rent deemed to be interest 422 486 457 519 444 333 352
------- ------- ------- ------- ------- ------- -------
Total fixed charges $ 9,408 $10,989 $10,822 $10,101 $ 9,019 $ 6,906 $ 5,927
======= ======= ======= ======= ======= ======= =======
Ratio of earnings to fixed charges 1.3 0.8 0.9 0.6 1.2 1.3 2.2
======= ======= ======= ======= ======= ======= =======
</TABLE>
<PAGE> 1
EXHIBIT 21-1
Subsidiaries
------------
DSD International, Inc.
Precision Engine Products Corp.
Stanadyne Automotive Foreign Sales Corporation
Stanadyne Automotive S.p.A.
<PAGE> 1
EXHIBIT 23.1
The Board of Directors
Stanadyne Automotive Holding Corp.
We consent to the use of our reports included herein and to the reference to
our firm under the headings "Selected Consolidated Historical and Pro Forma
Financial Data", "Selected Consolidated Historical Financial Data", and
"Experts" in the prospectus.
Our report dated February 7, 1997, except for the first paragraph of Note 19,
which is as of December 11, 1997, refers to a change to the method of amortizing
unrecognized gains and losses of the post-retirement benefit plans.
/s/ KPMG Peat Marwick
Hartford, Connecticut
February 5, 1998
<PAGE> 1
Exhibit 25.1
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
__________________________
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I. R. S. employer
if not a U. S. national bank) identification No.)
114 West 47th Street 10036-1532
New York, New York (Zip Code)
(Address of principal
executive offices)
__________________________
STANADYNE AUTOMOTIVE CORP.
(Exact name of ISSUER as specified in its charter)
Delaware 22-2940378
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
92 Deerfield Road 06095
Windsor, CT (Zip code)
Telephone (860) 525-0812
__________________________
PRECISION ENGINE PRODUCTS CORP.
(Exact name of GUARANTORS as specified in its charter)
Delaware 13-3500174
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
92 Deerfield Road 06095
Windsor, CT (Zip code)
Telephone (860) 525-0812
<PAGE> 2
- 2 -
__________________________
DSD INTERNATIONAL CORP.
(Exact name of GUARANTORS as specified in its charter)
Delaware 22-2953338
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
92 Deerfield Road 06095
Windsor, CT (Zip code)
Telephone (860) 525-0812
(Address, including zip code, and telephone number, including area code,
of guarantor's principal executive offices)
__________________________
Series B 10 1/4% Senior Subordinated Notes due 2007
(Title of the indenture securities)
<PAGE> 3
- 3 -
GENERAL
1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH THE OBLIGOR
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
Stanadyne Automotive Corp. currently is not in default under any of its
outstanding securities for which United States Trust Company of New York
is Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11,
12, 13, 14 and 15 of Form T-1 are not required under General Instruction
B.
16. LIST OF EXHIBITS
T-1.1 -- Organization Certificate, as amended,
issued by the State of New York Banking Department to
transact business as a Trust Company, is incorporated
by reference to Exhibit T-1.1 to Form T-1 filed on
September 15, 1995 with the Commission pursuant to the
Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE> 4
- 4 -
16. LIST OF EXHIBITS
(cont'd)
T-1.4 -- The By-Laws of United States Trust Company
of New York, as amended, is incorporated by reference
to Exhibit T-1.4 to Form T-1 filed on September 15,
1995 with the Commission pursuant to the Trust
Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.6 -- The consent of the trustee required by
Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of
the trustee pursuant to law or the requirements of its
supervising or examining authority.
NOTE
As of January 21, 1998, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States
Trust Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
__________________
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, 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 21st day
of January, 1998.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /s/ Margaret Ciesmelewski
Margaret Ciesmelewski
Assistant Vice President
<PAGE> 5
EXHIBIT T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of
1939, as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
By: /S/Gerard F. Ganey
Senior Vice President
<PAGE> 6
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
SEPTEMBER 30, 1997
($ IN THOUSANDS)
<TABLE>
<Capton>
ASSETS
<S> <C>
Cash and Due from Banks $ 116,582
Short-Term Investments 183,652
Securities, Available for Sale 691,965
Loans 1,669,611
Less: Allowance for Credit Losses 16,067
----------
Net Loans 1,653,544
Premises and Equipment 61,796
Other Assets 125,121
----------
TOTAL ASSETS $2,832,660
==========
LIABILITIES
Deposits:
Non-Interest Bearing $ 541,619
Interest Bearing 1,617,028
----------
Total Deposits 2,158,647
Short-Term Credit Facilities 365,235
Accounts Payable and Accrued Liabilities 141,793
----------
TOTAL LIABILITIES $2,665,675
==========
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 49,542
Retained Earnings 99,601
Unrealized Gains (Losses) on Securities
Available for Sale, Net of Taxes 2,847
----------
TOTAL STOCKHOLDER'S EQUITY 166,985
----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $2,832,660
==========
</TABLE>
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory
authority and is true to the best of my knowledge and belief.
Richard E. Brinkmann, SVP & Controller
November 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CIK> 0001053439
<NAME> STANADYNE AUTOMOTIVE CORP.
<S> <C> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1997 JAN-01-1996 JAN-01-1995
<PERIOD-END> SEP-30-1997 DEC-31-1996 DEC-31-1995
<CASH> 160 3,371 1,507
<SECURITIES> 0 0 0
<RECEIVABLES> 41,29 36,957 45,473
<ALLOWANCES> 495 478 455
<INVENTORY> 31,068 31,525 35,790
<CURRENT-ASSETS> 79,682 79,372 94,402
<PP&E> 224,648 219,958 211,550
<DEPRECIATION> 131,478 123,842 108,348
<TOTAL-ASSETS> 190,715 194,917 219,417
<CURRENT-LIABILITIES> 61,932 65,769 60,785
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> 12,118 8,879 3,116
<TOTAL-LIABILITY-AND-EQUITY> 190,715 194,917 219,417
<SALES> 201,034 275,639 272,145
<TOTAL-REVENUES> 201,034 275,639 272,145
<CGS> 169,004 234,756 235,645
<TOTAL-COSTS> 19,409 30,976 31,740
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 5,338 8,259 9,292
<INCOME-PRETAX> 7,283 1,648 (4,532)
<INCOME-TAX> 2,681 376 (1,297)
<INCOME-CONTINUING> 4,602 1,272 (3,235)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 (1,711)
<CHANGES> 0 4,330 0
<NET-INCOME> 4,602 5,602 (4,946)
<EPS-PRIMARY> 636.73 774.10 (682.91)
<EPS-DILUTED> 576.87 701.41 (618.83)
</TABLE>
<PAGE> 1
Exhibit 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
10 1/4% SENIOR SUBORDINATED NOTES DUE 2007
OF
STANADYNE AUTOMOTIVE CORP.
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:
<TABLE>
<S> <C> <C>
By Overnight Courier: By Hand: By Registered or Certified
Mail:
United States Trust Company United States Trust Company United States Trust Company
of New York of New York of New York
770 Broadway, 13th Floor 111 Broadway P.O. Box 844
New York, New York 10003 Lower Level Attn: Corporate Trust
Services
Attn: Corporate Trust Attn: Corporate Trust Cooper Station
Services Services
New York, New York 10006 New York, New York
10276-0844
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS 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 BY TELEPHONE AT
800-548-6565, OR BY FACSIMILE AT 212-780-0592.
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1998 (the "Prospectus"), of Stanadyne Automotive Corp., a Delaware
corporation (the "Issuer"), and this Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Issuer's offer (the "Exchange
Offer") to exchange $1,000 in principal amount of its Series B 10 1/4% Senior
Subordinated Notes due 2007 (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 1/4% Senior Subordinated Notes due 2007 (the "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 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 ("Beneficial Owners")
a duly completed and executed form of "Instruction to 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.
<PAGE> 2
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 Issuer, all right, title, and interest in, to, and under the
Tendered Notes.
Please issue the Exchange Notes exchanged for Tendered Notes in the name(s)
of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions" below (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 Issuer or cause ownership of the Tendered
Notes to be transferred to, or upon the order of, the Issuer, on the books of
the registrar for the Notes and deliver all accompanying evidences of transfer
and authenticity to, or upon the order of, the Issuer 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 Issuer 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 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 Issuer 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 Owners 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 Issuer 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 Issuer as contemplated herein. The
undersigned and each Beneficial Owner will, upon request, execute and deliver
any additional documents reasonably requested by the Issuer 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 that are not Participating Broker-Dealers, are not engaged in
and do not intend to engage in, and have no arrangement or understanding with
any person to engage in, a 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 Issuer, 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
of 1933, as amended (together with the rules and regulations promulgated
thereunder, 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 Notes is a Participating Broker-Dealer,
2
<PAGE> 3
such Participating Broker-Dealer acquired the 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 Exchange Notes for its own account in exchange
for Notes, where such Notes were acquired as a result of market-making
activities or other trading activities, such Participating Broker-Dealer will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes; however, by so acknowledging
and by delivering a prospectus, the undersigned will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
[ ] 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
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
BOX 1
DESCRIPTION OF NOTES TENDERED
(Attach additional signed pages, if necessary)
- ------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED NOTE AGGREGATE
HOLDER(S), CERTIFICATE PRINCIPAL AMOUNT AGGREGATE
EXACTLY AS NAME(S) APPEAR(S) ON NOTE CERTIFICATE(S) NUMBER(S) OF REPRESENTED BY PRINCIPAL AMOUNT
(PLEASE FILL IN, IF BLANK) NOTES* CERTIFICATE(S) TENDERED**
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
TOTAL
- ------------------------------------------------------------------------------------------------------------------
* Need not be completed by persons tendering by book-entry transfer.
** The minimum permitted tender is $1,000 in principal amount of 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.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------
BOX 2
BENEFICIAL OWNER(S)
- ------------------------------------------------------------------------------------------------------------------
STATE OF PRINCIPAL RESIDENCE OF EACH PRINCIPAL AMOUNT OF TENDERED NOTES
BENEFICIAL OWNER OF TENDERED NOTES HELD FOR ACCOUNT OF BENEFICIAL OWNER
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
==================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
BOX 3
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
TO BE COMPLETED ONLY IF EXCHANGE NOTES EXCHANGED FOR NOTES AND
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 Exchange Note(s) and any untendered 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 NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF
GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
- --------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
Name of Institution which Guaranteed Delivery:
BOX 5
USE OF BOOK-ENTRY TRANSFER
(SEE INSTRUCTION 1)
TO BE COMPLETED ONLY IF DELIVERY OF TENDERED NOTES IS TO BE MADE BY BOOK-ENTRY
TRANSFER.
Name of Tendering Institution:
Account Number:
Transaction Code Number:
5
<PAGE> 6
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
BOX 6
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5)
IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
X Signature Guarantee
(If required by Instruction 5)
X
(Signature of Registered Holder(s) Authorized Signature
or
Authorized Signatory) X
Note: The above lines must be signed by Name
the registered holder(s) of Notes as (please print)
their name(s) appear(s) on the Notes or
by persons(s) authorized to become Title:
registered holder(s) (evidence of which
authorization must be transmitted with Name of Firm:
this Letter of Transmittal). If (Must be an Eligible
signature is by a trustee, executor, Institution as defined in
administrator, guardian, attor- Instruction 2)
ney-in-fact, officer, or other person
acting in a fiduciary or representative Address:
capacity, such person must set forth his
or her full title below. See Instruction
5.
Name(s): (include Zip Code)
Area Code and Telephone Number:
Capacity:
Dated:
Street Address:
(include Zip Code)
Area Code and Telephone Number:
Tax Identification or Social Security
Number:
</TABLE>
- --------------------------------------------------------------------------------
BOX 7
BROKER-DEALER STATUS
[ ] Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes for
its own account as a result of market-making activities or other trading
activities.
[ ] Check here if you are a Participating Broker-Dealer and wish to receive
10 additional copies of the prospectus and 10 copies of any amendments or
supplements thereto.
6
<PAGE> 7
<TABLE>
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: STANADYNE AUTOMOTIVE CORP.
- --------------------------------------------------------------------------------------------------------------------------
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
----------------------------------------------------------------------------------------------
City, State and ZIP Code
----------------------------------------------------------------------------------------------
SUBSTITUTE
FORM W-9 List account number(s) here (optional)
----------------------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY PART 1 -- PLEASE PROVIDE YOUR TAXPAYER IDENTIFICATION NUMBER Social Security
("TIN") IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING Number or TIN
INTERNAL REVENUE SERVICE 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 OF PERJURY, I CERTIFY THAT Part 3 --
THE INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND
COMPLETE. Awaiting TIN [ ]
SIGNATUREDATE
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
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
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND NOTES. 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 its address set forth herein, and either
certificates for Tendered Notes must be received by the Exchange Agent at its
address set forth herein or such Tendered Notes must be transferred pursuant to
the procedures for book-entry transfer described in the Prospectus under the
caption "Exchange Offer -- Book-Entry Transfer" (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 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 Notes should be sent to the Company. Neither the Issuer nor the
registrar is under any obligation to notify any tendering holder of the Issuer's
acceptance of Tendered Notes prior to the closing of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes
but whose Notes are not immediately available, and who cannot deliver their
Notes, this Letter of Transmittal or any other documents required hereby to the
Exchange Agent prior to the Expiration Date must tender their Notes according to
the guaranteed delivery procedures set forth below, including completion of Box
4. Pursuant to such procedures: (i) such tender must be made by or through a
firm which is a member of a recognized Medallion Program approved by the
Securities Transfer Association Inc. (an "Eligible Institution") and the Notice
of Guaranteed Delivery must be signed by the holder; (ii) prior to the
Expiration Date, the Exchange Agent must have received from the holder and the
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by mail or hand delivery) setting forth the name and address of the
holder, the certificate number(s) of the Tendered Notes and the principal amount
of Tendered Notes, stating that the tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days after the
Expiration Date, this Letter of Transmittal together with the certificate(s)
representing the Notes and any other required documents will be deposited by the
Eligible Institution with the Exchange Agent; and (iii) such properly completed
and executed Letter of Transmittal, as well as all other documents required by
this Letter of Transmittal and the certificate(s) representing all Tendered
Notes in proper form for transfer, must be received by the Exchange Agent within
five New York Stock Exchange trading days after the Expiration Date. Any holder
who wishes to tender Notes pursuant to the guaranteed delivery procedures
described above must ensure that the Exchange Agent receives the Notice of
Guaranteed Delivery relating to such 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 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 Tendered Notes
who is not the registered holder must arrange promptly with the registered
holder to execute and deliver this Letter of Transmittal 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 Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of 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
8
<PAGE> 9
the box entitled "Description of Notes Tendered" (Box 1) above. The entire
principal amount of Notes delivered to the Exchange Agent will be deemed to have
been tendered unless otherwise indicated. If the entire principal amount of all
Notes held by the holder is not tendered, then Notes for the principal amount of
Notes not tendered and Exchange Notes issued in exchange for any 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 Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
Tendered Notes, and Exchange Notes issued in exchange therefor are to be issued
(and any untendered principal amount of Notes is to be reissued) in the name of
the registered holder(s), then such registered holder(s) need not and should not
endorse any Tendered Notes, nor provide a separate bond power. In any other
case, such 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 an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Notes, such 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 an Eligible
Institution.
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
Issuer, evidence satisfactory to the Issuer of their authority to so act must be
submitted with this Letter of Transmittal.
Endorsements on Tendered Notes or signatures on bond powers required by
this Instruction 5 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution unless the Tendered Notes are tendered (i) by a registered holder
who has not completed the box set forth herein entitled "Special Delivery
Instructions" (Box 3) or (ii) by an Eligible Institution.
6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should indicate, in
the applicable box (Box 3), the name and address to which the Exchange Notes
and/or substitute 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 Issuer will pay all transfer taxes, if any,
applicable to the exchange of Tendered Notes pursuant to the Exchange Offer. If,
however, a transfer tax is imposed for any reason other than the transfer and
exchange of 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 such tendering holder.
9
<PAGE> 10
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
Issuer (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 Issuer 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 Tendered Notes must provide
such holder's correct TIN by completing the Substitute Form W-9 set forth
herein, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN), and that (i) the holder has not been notified by the Internal
Revenue Service that such holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal Revenue Service
has notified the holder that such holder is no longer subject to backup
withholding. If the 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 Issuer reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Issuer'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 Tendered
Notes will be determined by the Issuer in its sole discretion, which
determination will be final and binding. The Issuer reserves the right to reject
any and all Notes not validly tendered or any Notes the Issuer's acceptance of
which would, in the opinion of the Issuer or their counsel, be unlawful. The
Issuer also reserves the right to waive any conditions of the Exchange Offer or
defects or irregularities in tenders of Notes as to any ineligibility of any
holder who seeks to tender 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 Issuer shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Notes must be cured within such time as the Issuer
shall determine. Neither the Issuer, the Exchange Agent nor any other person
shall be under any duty to give notification of defects or irregularities with
respect to tenders of Notes, nor shall any of them incur any liability for
failure to give such notification. Tenders of Notes will not be deemed to have
been made until such defects or irregularities have been cured or waived. Any
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.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Notes or transmittal of this Letter of Transmittal will be
accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any tendering Holder whose
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.
10
<PAGE> 11
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF NOTES; RETURN OF
NOTES. Subject to the terms and conditions of the Exchange Offer, the Issuer
will accept for exchange all validly tendered Notes as soon as practicable after
the Expiration Date and will issue Exchange Notes therefor as soon as
practicable thereafter. For purposes of the Exchange Offer, the Issuer shall be
deemed to have accepted tendered Notes when, as and if the Issuer 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 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."
11
<PAGE> 1
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
10 1/4% SENIOR SUBORDINATED NOTES DUE 2007
OF
STANADYNE AUTOMOTIVE CORP.
PURSUANT TO THE PROSPECTUS DATED , 1998
This form must be used by a holder of 10 1/4% Senior Subordinated Notes due
2007 (the "Notes") of Stanadyne Automotive Corp., a Delaware corporation (the
"Company"), who wishes to tender Notes to the Exchange Agent pursuant to the
guaranteed delivery procedures described in "The Exchange Offer -- Guaranteed
Delivery Procedures" of the Company's Prospectus, dated , 1998 (the
"Prospectus"), and in Instruction 2 to the related Letter of Transmittal. Any
holder who wishes to tender Notes pursuant to such guaranteed delivery
procedures must ensure that the Exchange Agent receives this Notice of
Guaranteed Delivery prior to the Expiration Date of the Exchange Offer.
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON , 1998, UNLESS EXTENDED (THE "EXPIRATION
DATE").
United States Trust Company of New York
(the "Exchange Agent")
<TABLE>
<S> <C> <C>
By Overnight Courier: By Hand: By Registered or Certified
United States Trust Company United States Trust Company Mail:
of New York of New York United States Trust Company
770 Broadway, 13th Floor 111 Broadway of New York
New York, New York 10003 Lower Level P.O. Box 844
Attn: Corporate Trust Services Attn: Corporate Trust Services Attn: Corporate Trust Services
New York, New York 10006 Cooper Station
New York, New York 10276-0844
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS 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 BY TELEPHONE AT
800-548-6565, OR BY FACSIMILE AT 212-780-0592.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Notes listed below:
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
CERTIFICATE NUMBER(S) (IF KNOWN) OF NOTES OR AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
ACCOUNT NUMBER AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
==================================================================================================================
</TABLE>
2
<PAGE> 3
PLEASE SIGN AND COMPLETE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Signatures of Registered Holder(s) or
Authorized Signatory: Date: , 1998
Address:
- ------------------------------------------
------------------------------------------
- ------------------------------------------
Name(s) of Registered Holder(s): Area Code and Telephone No.
- ------------------------------------------
- ------------------------------------------
</TABLE>
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Notes or on a security position
listing as the owner of Notes, or by person(s) authorized to become Holder(s) by
endorsements and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
Please print name(s) and address(es)
Name(s):
- --------------------------------------------------------------------------------
Capacity:
Address(es):
- --------------------------------------------------------------------------------
3
<PAGE> 4
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, guarantees deposit with the Exchange Agent of the Letter of Transmittal
(or facsimile thereof), together with the Notes tendered hereby in proper form
for transfer (or confirmation of the book-entry transfer of such Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility described in the
prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures" and in the Letter of Transmittal) and any other required documents,
all by 5:00 p.m., New York City time, on the fifth New York Stock Exchange
trading day following the Expiration Date.
<TABLE>
<S> <C>
Name of firm (Authorized Signature)
Address Name
(Please Print)
Title
(Include Zip Code)
Area Code and Tel. No. Dated , 1998
</TABLE>
DO NOT SEND SECURITIES WITH THIS FORM. ACTUAL SURRENDER OF SECURITIES MUST
BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
4
<PAGE> 5
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at its address set forth herein prior to the Expiration Date. The
method of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and sole risk of the holder,
and the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. As an alternative to delivery by mail, the
holders may wish to consider using an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. For a
description of the guaranteed delivery procedures, see Instruction 2 of the
Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Notes referred
to herein, the signature must correspond with the name(s) written on the face of
the Notes without alteration, enlargement, or any change whatsoever. If this
Notice of Guaranteed Delivery is signed by a participant of the Book-Entry
Transfer Facility whose name appears on a security position listing as the owner
of the Notes, the signature must correspond with the name shown on the security
position listing as the owner of the Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s) appears
on the Notes or signed as the name of the participant shown on the Book-Entry
Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
5
<PAGE> 1
Exhibit 99.3
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
STANADYNE AUTOMOTIVE CORP.
10 1/4% SENIOR SUBORDINATED NOTES DUE 2007
To Registered Holder and/or Participant of the Book-Entry Transfer
Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated
, 1998 (the "Prospectus"), of Stanadyne Automotive Corp., 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"). 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 10 1/4% Senior Subordinated Notes due 2007 (the
"Notes") held by you for the account of the undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (FILL IN AMOUNT):
$ of the 10 1/4% Senior Subordinated Notes due 2007
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[ ] TO TENDER the following Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED, IF ANY):
$
[ ] NOT TO TENDER any Notes held by you for the account of the undersigned.
If the undersigned instructs you to tender the 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 representation and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations that (i) the
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, does not
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 of 1933, as amended (the
"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
Securities and Exchange Commission set forth in no-action letters that are
discussed in the section of the Prospectus entitled "The Exchange Offer--Resales
of the Exchange Notes," and (v) the undersigned is not an "affiliate," as
defined in Rule 405 under the Act, of the Company; (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 such Notes.
6
<PAGE> 2
- --------------------------------------------------------------------------------
SIGN HERE
Name of beneficial owner(s):
Signature(s):
Name (please print):
Address:
Telephone number:
Taxpayer Identification or Social Security Number:
Date:
- --------------------------------------------------------------------------------
7
