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As filed with the Securities and Exchange Commission April 9, 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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MSX INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 7363 38-3323099
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Classification Identification No.)
incorporation or Code Number)
organization)
MSX International Business Services, Inc............. 7363 38-3323109
MSX International Engineering Services, Inc.......... 8711 38-3323110
MSX International (Holdings), Inc.................... 6719 38-3325699
MSX International (USA), Inc......................... 6719 38-3325698
Geometric Results Incorporated....................... 7363 38-2703800
(Exact name of registrant as specified in its (Primary Standard (I.R.S. Employer
charter) Industrial Classification Identification No.)
Code Number)
</TABLE>
DELAWARE
(State or other jurisdiction of
incorporation or organization)
275 Rex Boulevard
Auburn Hills, Michigan 48236
(248) 299-1000
(Address and telephone number of registrant's principal executive offices)
Carol Creel, Esq.
General Counsel
275 Rex Boulevard
Auburn Hills, Michigan 48236
(248) 299-1000
(Name, address and telephone number of agent for service)
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COPIES TO:
DAVID W. FERGUSON, ESQ.
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 450-4000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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CALCULATION OF REGISTRATION FEE
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=================================================================================================================
AMOUNT PROPOSED PROPOSED
TITLE OF EACH CLASS OF TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER NOTE(1) OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
11 3/8% Senior Subordinated
Notes due 2008................ $100,000,000 100% $100,000,000 $29,500
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Guarantees of 11 3/8% Senior
Subordinated Notes due 2008... (2) (2) (2) (2)
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(1) Estimated pursuant to Rule 457(f) solely for the purposes of calculating the
registration fee.
(2) Pursuant to Rule 457(n) no registration fee is required with respect to the
Guarantees of the Senior Subordinated Notes registered hereby.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED 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 APRIL 9, 1998
PRELIMINARY PROSPECTUS
OFFER TO EXCHANGE
11 3/8% SENIOR SUBORDINATED NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933
FOR ANY AND ALL OUTSTANDING
11 3/8% SENIOR SUBORDINATED NOTES DUE 2008
OF
MSX INTERNATIONAL, INC. LOGOMSX INTERNATIONAL, INC.
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THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998, UNLESS EXTENDED.
MSX International, Inc., a Delaware corporation ("MSXI" or the "Company"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal" and, together with this Prospectus, the "Exchange Offer"), to
exchange an aggregate principal amount of up to $100,000,000 of its 11 3/8%
Senior Subordinated Notes due 2008 (the "Exchange Notes") which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a registration statement of which this Prospectus forms a part, for
an identical principal amount of the issued and outstanding 11 3/8% Senior
Subordinated Notes due 2008 (the "Old Notes" and, together with the Exchange
Notes, the "Notes") of the Company from the Holders (as defined herein) thereof
in integral multiples of $1,000. As of the date of this Prospectus, there are
$100,000,000 in aggregate principal amount of the Old Notes outstanding. The
terms of the Exchange Notes are identical in all material respects to the terms
of the Old Notes, except that the offer and sale of the Exchange Notes have been
registered under the Securities Act and therefore the Exchange Notes are not
subject to certain restrictions on transfer applicable to the Old Notes, will
not contain legends relating thereto and will not be entitled to registration
rights or other rights under the Registration Agreement (as defined). The
Exchange Notes will be issued under the same Indenture (as defined herein) as
the Old Notes and the Exchange Notes and the Old Notes will constitute a single
series of debt securities under the Indenture. See "The Exchange Offer."
The Exchange Notes will mature on January 15, 2008. Interest on the Exchange
Notes is payable in cash semi-annually on January 15 and July 15 of each year,
commencing on the first such date following the original issuance of the
Exchange Notes. The Exchange Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after January 15, 2003 at the
redemption prices set forth herein plus accrued and unpaid interest, if any, to
the date of redemption. In addition, at any time prior to January 15, 2001, the
Company may also redeem up to 35% of the aggregate principal amount of Notes
originally outstanding with the proceeds of one or more Public Equity Offerings
(as defined) following which there is a Public Market (as defined), at a
redemption price equal to 111.375% of the principal amount thereof, plus accrued
and unpaid interest to the date of redemption, provided that at least 65% in
aggregate principal amount of Notes originally issued remains outstanding
immediately after giving effect to such redemption. Upon the occurrence of a
Change of Control (as defined), the Company will be required to make an offer to
each holder of Exchange Notes to purchase such holder's Exchange Notes, at a
purchase price of 101% of the aggregate principal amount thereof, plus accrued
and unpaid interest to the date of purchase. See "Description of Notes -- Change
of Control."
The Exchange Notes will be general unsecured obligations of the Company
subordinated in right of payment to all existing and future Senior Indebtedness
(as defined) of the Company. The Notes will rank pari passu with all existing
and future Senior Subordinated Indebtedness (as defined) of the Company and will
rank senior to all future indebtedness that is expressly subordinated in right
of payment to the Notes. The Company is a holding company that will derive all
of its operating income and cash flow from its subsidiaries. The Exchange Notes
will be fully and unconditionally guaranteed (the "Subsidiary Guarantees") on an
unsecured, senior subordinated basis by each Domestic Restricted Subsidiary (as
defined) (collectively, the "Subsidiary Guarantors") of the Company. See
"Description of Notes -- Subsidiary Guarantees." As of December 28, 1997, on a
pro forma basis after giving effect to the Refinancing (as defined), (i) the
Company would have had $62.0 million of outstanding Senior Indebtedness, and
(ii) the Subsidiary Guarantors would have had $45.3 million of outstanding
Senior Indebtedness. See "Description of Notes -- Subordination."
(Continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 18 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS OF THE OLD NOTES PRIOR TO TENDERING
THEIR OLD NOTES IN THE EXCHANGE OFFER.
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UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
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THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1998
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(Cover page continued)
The Company is making the Exchange Offer in reliance on the position of the
staff of the Division of Corporation Finance of the Securities and Exchange
Commission (the "Commission") as set forth in certain interpretive letters
addressed to third parties in other transactions. However, the Company has not
sought its own interpretive letter and there can be no assurance that the staff
of the Division of Corporation Finance of the Commission would make a similar
determination with respect to the Exchange Offer as it has in such interpretive
letters to third parties. Based on these interpretations by the staff of the
Division of Corporation Finance, and subject to the two immediately following
sentences, the Company believes that the Exchange Notes issued pursuant to this
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by a holder thereof (other than a holder who is a
broker-dealer) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such Exchange Notes
are acquired in the ordinary course of such holder's business and that such
holder is not participating, and has no arrangement or understanding with any
person to participate, in a distribution (within the meaning of the Securities
Act) of such Exchange Notes. However, any holder of Old Notes who is an
"affiliate" of the Company or who intends to participate in the Exchange Offer
for the purpose of distributing Exchange Notes, or any broker-dealer who
purchased Old Notes from the Company to resell pursuant to Rule 144A under the
Securities Act ("Rule 144A") or any other available exemption under the
Securities Act, (a) will not be able to rely on the interpretations of the staff
of the Division of Corporation Finance of the Commission set forth in the
above-mentioned interpretive letters, (b) will not be permitted or entitled to
tender such Old Notes in the Exchange Offer and (c) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or other transfer of such Old Notes unless such sale is
made pursuant to an exemption from such requirements.
Each 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
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer during the period
referred to below in connection with resales of Exchange Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
for its own account as a result of market-making or other trading activities.
Subject to certain provisions set forth in the Registration Agreement, the
Company has agreed that this Prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer in connection with any such
resales for a period ending 180 days after the Expiration Date referred to below
or, if earlier, when all such Exchange Notes have been disposed of by such
broker-dealer. See "Plan of Distribution."
Each holder of Old Notes who wishes to exchange Old Notes for Exchange
Notes in the Exchange Offer will be required to represent that (i) it is not an
"affiliate" of the Company, (ii) any Exchange Notes to be received by it are
being acquired in the ordinary course of its business, and (iii) it has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of such Exchange Notes. Any
broker-dealer who is an "affiliate" of the Company may not rely on such
interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. See "The Exchange Offer -- Resales of the Exchange Notes."
In that regard, each broker-dealer who surrenders Old Notes pursuant to the
Exchange Offer will agree, by execution of, or otherwise becoming bound by, the
Letter of Transmittal, that, upon receipt of notice from the Company of the
occurrence of any event or the discovery of any fact which makes any statement
contained or incorporated by reference in this Prospectus untrue in any material
respect or which causes this Prospectus to omit to state a material fact
necessary in order to make the statements contained or incorporated by reference
herein, in the light of the circumstances under which they were made, not
misleading or of the occurrence of certain other events specified in the
Registration Agreement, such broker-dealer will suspend the sale of Exchange
Notes pursuant to this Prospectus until the Company has amended or supplemented
this Prospectus to correct such misstatement or omission and has furnished
copies of the amended or
2
<PAGE> 4
supplemented Prospectus to such broker-dealer or the Company has given notice
that the sale of the Exchange Notes may be resumed, as the case may be. If the
Company gives such notice to suspend the sale of the Exchange Notes, it shall
extend the 180-day period referred to above during which broker-dealers are
entitled to use this Prospectus in connection with the resale of Exchange Notes
by the number of days during the period from and including the date of the
giving of such notice to and including the date when broker-dealers shall have
received copies of the amended or supplemented Prospectus necessary to permit
resales of the Exchange Notes or to and including the date on which the Company
has given notice that the sale of Exchange Notes may be resumed, as the case may
be.
The Exchange Notes will be a new issue of securities for which there
currently is no market. Although Salomon Brothers Inc, Lehman Brothers Inc. and
First Chicago Capital Markets, Inc., the initial purchasers of the Old Notes
(the "Initial Purchasers") have informed the Company that they currently intend
to make a market in the Exchange Notes, they are not obligated to do so, and any
such market making may be discontinued at any time without notice. Accordingly,
there can be no assurance as to the development or liquidity of any market for
the Exchange Notes. The Company currently does not intend to apply for listing
of the Exchange Notes on any securities exchange or for quotation through the
National Association of Securities Dealers Automated Quotation System.
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding and will be entitled to all the same rights and will be subject to
the same limitations applicable thereto under the Indenture (as defined) (except
for those rights which terminate upon consummation of the Exchange Offer).
Following consummation of the Exchange Offer, the holders of Old Notes will
continue to be subject to the existing restrictions upon transfer thereof and
the Company will have no further obligation to such holders to provide for
registration under the Securities Act of the Old Notes held by them. To the
extent that Old Notes are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered Old Notes could be adversely affected. See
"Prospectus Summary -- Certain Consequences of a Failure to Exchange Old Notes."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR
OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
The Company will not receive any proceeds from the issuance of the Exchange
Notes offered hereby. The Company will pay all expenses of the Exchange Offer.
No dealer-manager is being used in connection with this Exchange Offer. See "Use
of Proceeds" and "Plan of Distribution."
This Prospectus, together with the Letter of Transmittal, is being sent to
all registered holders of Old Notes as of , 1998.
3
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AVAILABLE INFORMATION
The Company and the Subsidiary Guarantors have filed with the Securities
and Exchange Commission (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 the Company, the Subsidiary Guarantors 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, and at the Regional
Offices of the Commission at Seven World Trade Center, Suite 1300, New York, New
York 10048 and at 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. In addition, the Commission maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of such Web site is:
http://www.sec.gov.
As a result of the Exchange Offer, the Company will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith will be required to file
periodic reports and other information with the Commission. In the event the
Company ceases to be subject to the informational requirements of the Exchange
Act, the Company will be 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. The Company will also furnish such other reports as may be
required by law.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information (including the financial statements and the notes thereto) included
elsewhere in this Offering Memorandum. On January 3, 1997, the Company acquired
(the "TSG Acquisition") selected assets and operations of the former engineering
and technical business service units of MascoTech Automotive Systems Group, Inc.
("MASG") and MascoTech, Inc. ("MascoTech"). Through the consummation of the TSG
Acquisition, the Company also acquired (the "APX Acquisition") the net assets of
APX International ("APX") which were previously acquired by MASG as of November
6, 1996. References herein to the TSG Acquisition include the APX Acquisition.
Effective August 31, 1997, the Company acquired (the "GRI Acquisition") all of
the issued and outstanding stock of Geometric Results Incorporated ("GRI").
Unless otherwise indicated, the information in this Offering Memorandum is
presented on a pro forma basis as if the GRI Acquisition had occurred on January
1, 1997. All references herein to the Company or MSXI, unless the context
otherwise requires, shall mean MSX International, Inc., including its
subsidiaries, and its predecessor for accounting purposes, the Technical
Services Group of MascoTech ("TSG"). The Old Notes were issued by the Company on
January 22, 1998 (the "Offering"). Concurrently with the Offering, the Company
entered into the New Credit Facility (as defined) in order the replace the Old
Credit Facility (as defined) (the New Credit Facility, together with the
Offering and the application of the net proceeds therefrom, the "Refinancing").
THE COMPANY
The Company is a leading provider of outside staffing, engineering and
business services, principally to the automotive industry in the United States
and Europe, with the capability of providing services on a worldwide basis.
Through internal growth and acquisitions, the Company has become a single source
provider of a broad range of complementary services, including technical and
professional staffing services, engineering, design and related technical
services and other business and marketing services. In August 1997, the Company
acquired GRI, a wholly-owned subsidiary of Ford Motor Company ("Ford"). In
connection with the GRI Acquisition, the Company entered into two five-year
agreements with Ford to manage certain temporary staffing procurement services
for Ford (the "Ford Master Vendor Agreement") and to provide certain general
business services to Ford (the "Ford Master Supply Agreement"). By adding GRI's
capabilities and services to the Company's historical strength in providing
technical staffing and engineering and design services, the Company is now able
to sell a broad range of complementary services to both existing and new
customers within and outside the automotive industry. The Company believes that
it is the only company currently providing such a broad range of services to the
automotive industry on a worldwide basis. The Company employed or sourced over
12,000 individuals at 53 operating facilities in 23 countries as of December 28,
1997. The Company's principal operations are in North America and Europe. Pro
forma net sales and EBITDA for the fiscal year ended December 28, 1997 were
$985.1 million and $33.2 million, respectively.
Automotive original equipment manufacturers ("OEMs") are increasingly
relying on third parties to provide them with essential services as
globalization and competition lead them to improve efficiency by focusing on
their core competencies of vehicle development, assembly and marketing. OEMs are
also consolidating their supplier base by contracting with larger, global
organizations in order to streamline purchasing, reduce costs and improve
quality. Management expects the Company to continue to benefit from these
trends, both in the automotive and other industries.
The Company provides three strategic service offerings to its customers:
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IN-CLIENT SERVICES PRODUCT DEVELOPMENT SERVICES BUSINESS & TECHNOLOGY SERVICES
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- - Contract Staffing - Concept Development - Automotive and Business Process Management
- - Master Vendor Program - Design Engineering - Marketing Services and Document Management
- Manufacturing Engineering - Purchasing Services
- Production Support - Training Services
- Special Vehicles - Image Archiving, Conversion and Warehousing
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In-Client Services, Product Development Services and Business and
Technology Services accounted for approximately 46%, 21% and 33%, respectively,
of pro forma net sales for the fiscal year ended December 28, 1997. The Company
provides its services to over 130 customers, including most of the major United
States OEMs and a number of automotive suppliers. The Company's largest
customers are Ford, General Motors Corporation ("GM") and Chrysler Corporation
("Chrysler"), which accounted for 72%, 8% and 7%, respectively, of the Company's
pro forma net sales for the fiscal year ended December 28, 1997. The Company
believes that it has developed strong relationships with its customers and has a
reputation for quality, reliability and service that has been recognized through
Ford's Q1 and Chrysler's Pentastar awards. In addition, most of its operations
are ISO 9001 or 9002 certified.
In-Client Services. The Company provides two types of staffing services:
first, as a direct supplier of technical, professional and other temporary
staffing ("Contract Staffing") and second, as the master vendor of staffing
procurement through its master vendor program (the "Master Vendor Program").
Contract Staffing. As of December 28, 1997, Contract Staffing supplied
approximately 1,600 employees that it placed on assignment to approximately
130 customers in 10 countries. The Company classifies over 85% of its
employees on assignment as technical personnel. Through its position as
Ford's master vendor, the Company has also enhanced its opportunities to
provide Contract Staffing directly to Ford.
Master Vendor Program. The Master Vendor Program is an automated process
used to manage the procurement of a broad range of temporary staffing
services, including coordination of staffing from other temporary staffing
suppliers. While the Company intends to expand its Master Vendor Program
services to other customers, the Company currently provides such services
solely to Ford pursuant to the Ford Master Vendor Agreement. As of December
28, 1997, there were approximately 6,500 temporary employees at Ford who
had been procured through the Master Vendor Program.
Product Development Services. The Company offers a broad range of
engineering, design and other related services primarily to the automotive
industry including: concept development, design engineering, manufacturing
engineering, production support and special vehicles services. The Company
provides these services on a discrete basis and can draw on these complementary
capabilities to execute development programs for the body and chassis of new
vehicles, such as a recently introduced Ford minicar. As of December 28, 1997,
Product Development Services had a network of 30 offices and facilities situated
in major markets throughout North America, Europe, South America and Asia. Since
January 1, 1996, the Company has performed projects for OEMs including Ford, GM,
Chrysler, Daewoo, Rover, Volkswagen, Volvo, Mercedes and Mazda, and over 20
automotive suppliers such as Textron and Lear. For the fiscal year ended
December 28, 1997, no single project accounted for more than 1% of the Company's
pro forma net sales.
Business & Technology Services. The Company offers a broad range of
business and technical services, principally to the automotive industry
including: automotive and business process management, marketing services,
document management services and other administrative and customer-related
services. The Company typically assumes responsibility for specific non-core
functions of its customers, frequently on an extended basis. For example, the
Company's automotive and business process management services will typically
re-engineer a customer's existing internal processes, such as technical help
desks and warranty certification programs, to improve them and provide them on a
more efficient basis. Other services offered include marketing research,
customer satisfaction surveys, technical training schools and image archiving,
conversion and warehousing. The Company provides a number of these services
under the Ford Master Supply Agreement, pursuant to which the Company is the
sole or preferred supplier of these services to various business units of Ford
(with the exception of selected marketing and training services). In addition,
the Company believes these services have applications across many industries and
provide opportunities for significant growth both in the automotive and other
industries.
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COMPETITIVE STRENGTHS
Strong Customer Relationships and Reputation for Quality. The Company
believes that it has developed strong customer relationships with both OEMs and
automotive suppliers. Management believes that the Company's engineering
capabilities, reliable performance, strong customer service and competitive cost
structure enable it to attract new customers and to maintain its reputation with
existing customers for providing high quality services at competitive prices. As
a result of its focus on quality, the Company has received Ford's Q1 and
Chrysler's Pentastar awards, and most of the Company's operations are ISO 9001
or 9002 certified. The Company believes that its relationships and its
reputation for quality, reliability and service often enable the Company to
pursue business opportunities ahead of its competitors.
Global Presence. Management believes the Company's international presence
is a significant competitive advantage in winning and retaining new business and
meeting the global sourcing, quality and engineering requirements of its
customers. For example, when GM consumer-tested its European sedan replacement
last year, the Company built model vehicles using an integrated system that
enabled the Company to do the styling work near GM's designers in Germany and
Brazil and to build the vehicles in the United States where the cost was lower.
Similarly, automotive suppliers require support in locations where their OEM
customers demand their presence. For example, the Company supports two major
United States-based interior systems suppliers in Europe and Brazil. Non-United
States sales of In-Client Services, Product Development Services and Business
and Technology Services accounted for 14% of the Company's pro forma net sales
for the fiscal year ended December 28, 1997.
Broad Range of Services Provided. The Company believes that its broad range
of service offerings provides several advantages by: (i) simplifying the
procurement and monitoring process for its customers who require multiple
services; (ii) facilitating cross-selling of services to existing customers;
(iii) providing multiple opportunities to identify and penetrate new customers;
and (iv) diversifying the Company's revenues and earnings. Additionally, the
Company believes that its global presence and broad range of services enable it
to recruit and retain a talented pool of employees.
Value-Added Provider. The Company believes that it is frequently able to
operate with a lower cost structure and a higher degree of flexibility and
responsiveness relative to the larger in-house operations of its customers. The
Company believes that In-Client Services provides customers with a
cost-effective and flexible way to manage certain of their technical and
professional staffing needs by assuming the responsibility for procuring,
compensating, monitoring and, in some cases, training temporary staff. Product
Development Services enables OEMs and automotive suppliers to manage their
engineering and design services for selected non-core projects on an efficient
basis. Business and Technology Services provides services that are essential to
the Company's customers, but not at the core of their business competencies.
Investment in Technology. The Company offers its customers access to many
sophisticated technologies. These include supercomputing resources, analytical
software and a large network of computer aided design ("CAD") terminals
connected by an international communications infrastructure. The Company has
made substantial investments in state-of-the-art equipment and related training
to maintain its competitive technological position. The Company believes it is
one of the few independent engineering firms that operates all major CAD
platforms used by the major United States OEMs and, as of December 28, 1997, the
Company operated approximately 500 CAD terminals. The Company's communications
infrastructure permits the rapid exchange of data between the Company and its
customers. The Company believes that its Master Vendor Program, which combines
an intranet-based placement system with procedures to support the monitoring and
continuous improvement of a customer's temporary staffing supplier base, is the
most comprehensive system for management of staffing services. Business and
Technology Services uses proprietary software as an integral part of many of the
services that it offers.
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BUSINESS STRATEGY
The Company's global market position and breadth of services distinguish it
as one of the leading providers of outside staffing, engineering and business
services to the automotive industry and position the Company to take advantage
of positive trends both in the automotive and other industries. The Company's
business strategy is to grow profitably through the following initiatives:
Increase Market Share at Existing Customers. As a result of the APX and GRI
Acquisitions, the Company has expanded its global presence and product
offerings. For example, the GRI Acquisition gave the Company the ability to
provide a broad range of additional services and capabilities that historically
GRI had provided only to Ford. The Company believes that offering three
categories of services that are often complementary creates significant
cross-selling opportunities. For example, customers of Product Development
Services can utilize the Company's image archiving, conversion and warehousing
services for engineering drawings. The Company also can offer its Master Vendor
Program to OEMs other than Ford who are already customers of Contract Staffing.
The Company also believes that it has several opportunities to sell certain
Business and Technology Services that are currently provided only to Ford to
other OEMs and their suppliers. In addition, the Company believes that there are
significant opportunities to sell packages of multiple services, many of which
the Company historically has not attempted to market together, to its existing
customers.
Increase Global Automotive Market Share. Geographic expansion will continue
to be an important element of the Company's business strategy. The Company
intends to expand its existing presence in Germany, the development center for
several important OEMs, and has recently opened new locations in Munich and
Ingolstadt. The Company has established operations in South America and
Australasia to take advantage of global growth opportunities as the Company's
customers expand their operations in these regions. As a result of the Company's
strong customer relationships and worldwide presence, management believes that
the Company is well positioned to expand with OEMs and other suppliers in
established as well as emerging markets.
Expansion into Non-Automotive Markets. The Company's management,
established infrastructure and successful track record of providing staffing,
engineering and business services to several of the world's largest and most
complex organizations position it to expand into new, non-automotive markets.
The Company believes other major corporations are attractive potential customers
for many of the Company's services.
Rationalize Cost Structure. The Company intends to improve its
profitability through the rationalization of its operations, including the
further rationalization of operations acquired in the GRI Acquisition. The
Company expects to realize these cost savings through the consolidation of back
office activities and the ongoing rationalization of duplicative facilities,
management and administrative offices.
Pursue Additional Strategic Acquisitions. The Company plans to continue to
make selective strategic acquisitions to enhance its global market position and
further broaden its service offerings. The Company believes that the
consolidation of the automotive supplier base will present additional
opportunities for acquisitions. The Company seeks acquisitions that will
strengthen MSXI's relationships with existing customers and provide access to
new customers, complement MSXI's existing global capabilities and provide MSXI
with growth opportunities in new markets.
8
<PAGE> 10
COMPANY BACKGROUND
The Company is a holding company formed and owned by Citicorp Venture
Capital, Ltd. ("CVC"), MascoTech and certain members of management. The Company
was formed to consummate the TSG Acquisition, in which it acquired selected
assets and operations of the former engineering and technical business services
units of MASG and MascoTech, including the net assets of APX, a design and
engineering services provider which previously had been acquired by MASG on
November 6, 1996. The TSG Acquisition was effective on January 3, 1997. The
purchase price of the TSG Acquisition was $145.6 million, which was financed
through $3.8 million of common equity, $36.0 million of Redeemable Series A
Preferred Stock (the "Redeemable Series A Preferred Stock"), a $20.0 million
bridge loan provided by CVC (the "CVC Bridge Loan"), a $20.0 million bridge loan
provided by MascoTech (the "MascoTech Bridge Loan"), the issuance of a $30.0
million Senior Subordinated Note to MascoTech (the "Senior Subordinated Note")
and $35.8 million of borrowings under the Old Credit Facility. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources" and "Description of Certain Other
Indebtedness."
Effective August 31, 1997, the Company acquired certain service-providing
operations of Ford through the acquisition of GRI, a wholly-owned subsidiary of
Ford. As part of Ford, GRI acted as administrator of Ford's temporary staffing
services using a predecessor to the Master Vendor Program and also provided
process management, purchasing and printing services to Ford. The purchase price
of $60.0 million was financed with borrowings under the Old Credit Facility,
offset in part by substantial cash balances acquired in the GRI Acquisition.
The Refinancing, including the issuance of the Old Notes, was completed on
January 22, 1998.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby.
9
<PAGE> 11
THE EXCHANGE OFFER
The Exchange Offer............ Up to $100 million aggregate principal amount
of Exchange Notes are being offered in exchange
for a like aggregate principal amount of Old
Notes. The Company is making the Exchange Offer
in order to satisfy its obligations under the
Registration Agreement relating to the Old
Notes. For a description of the procedures for
tendering Old Notes, see "The Exchange Offer --
Procedures for Tendering Old Notes."
Expiration Date............... 5:00 p.m., New York City time, on ,
1998 (such time on such date being hereinafter
called the "Expiration Date") unless the
Exchange Offer is extended by the Company (in
which case the term "Expiration Date" shall
mean the latest date and time to which the
Exchange Offer is extended). Any waiver,
extension or termination of the Exchange Offer
will be publicly announced by the Company
through a release to the Dow Jones News Service
and as otherwise required by applicable law or
regulations. See "The Exchange Offer -- Terms
of the Exchange Offer; Period for Tendering Old
Notes."
Certain Conditions to the
Exchange Offer................ The Exchange Offer is subject to certain
conditions. The Company reserves the right,
subject to applicable law, at any time and from
time to time, (i) to delay the acceptance of
the Old Notes for exchange, (ii) to terminate
the Exchange Offer if certain specified
conditions have not been satisfied, (iii) to
extend the Expiration Date of the Exchange
Offer and retain all Old Notes tendered
pursuant to the Exchange Offer, subject,
however, to the right of holders of Old Notes
to withdraw their tendered Old Notes, or (iv)
to amend the terms of the Exchange Offer in any
respect. See "The Exchange Offer -- Terms of
the Exchange Offer; Period for Tendering Old
Notes" and "-- Certain Conditions to the
Exchange Offer."
Withdrawal Rights............. Tenders of Old Notes may be withdrawn at any
time prior to the Expiration Date by delivering
a written notice of such withdrawal to the
Exchange Agent in conformity with certain
procedures set forth below under "The Exchange
Offer -- Withdrawal Rights."
Procedures for Tendering Old
Notes......................... Tendering holders of Old Notes must complete
and sign a Letter of Transmittal in accordance
with the instructions contained therein and
forward the same by mail, facsimile or hand
delivery, together with any other required
documents, to the Exchange Agent (as defined
below) at the address set forth herein by 5:00
p.m., New York City time on the Expiration
Date, either with the Old Notes to be tendered
or in compliance with the specified procedures
for guaranteed delivery of Old Notes. Certain
brokers, dealers, commercial banks, trust
companies and other nominees may also effect
tenders by book-entry transfer. Holders of Old
Notes registered in the name of a broker,
dealer, commercial bank, trust company or other
nominee are urged to contact such person
promptly if they wish to tender Old Notes
pursuant to the Exchange Offer. See "The
Exchange Offer -- Procedures for Tendering Old
Notes."
10
<PAGE> 12
Letters of Transmittal and certificates
representing Old Notes should not be sent to
the Company. Such documents should only be sent
to the Exchange Agent. Questions regarding how
to tender and requests for information should
be directed to the Exchange Agent. See "The
Exchange Offer -- Exchange Agent."
Guaranteed Delivery
Procedures.................... Holders of Old Notes who wish to tender their
Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes, a Letter of Transmittal or any
other document required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date, must tender their Old Notes
according to the guaranteed delivery procedures
set forth in "The Exchange Offer -- Guaranteed
Delivery Procedures."
Resales of Exchange Notes..... The Company is making the Exchange Offer in
reliance on the position of the staff of the
Division of Corporation Finance of the
Commission as set forth in certain interpretive
letters addressed to third parties in other
transactions. However, the Company has not
sought its own interpretive letter and there
can be no assurance that the staff of the
Division of Corporation Finance of the
Commission would make a similar determination
with respect to the Exchange Offer as it has in
such interpretive letters to third parties.
Based on these interpretations by the staff of
the Division of Corporation Finance, and
subject to the two immediately following
sentences, the Company believes that Exchange
Notes issued pursuant to this Exchange Offer in
exchange for Old Notes may be offered for
resale, resold and otherwise transferred by a
holder thereof (other than a holder who is a
broker-dealer) without further compliance with
the registration and prospectus delivery
requirements of the Securities Act, provided
that such Exchange Notes are acquired in the
ordinary course of such holder's business and
that such holder is not participating, and has
no arrangement or understanding with any person
to participate, in a distribution (within the
meaning of the Securities Act) of such Exchange
Notes. However, any holder of Old 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, or
any broker-dealer who purchased the Old Notes
from the Company to resell pursuant to Rule
144A or any other available exemption under the
Securities Act, (a) will not be able to rely on
the interpretations of the staff of the
Division of Corporation Finance of the
Commission set forth in the above-mentioned
interpretive letters, (b) will not be permitted
or entitled to tender such Old Notes in the
Exchange Offer and (c) must comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with any sale or other transfer of
such Old Notes unless such sale is made
pursuant to an exemption from such
requirements.
Each holder of Old Notes who wishes to exchange
Old Notes for Exchange Notes in the Exchange
Offer will be required to represent that (i) it
is not an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act,
(ii) any Exchange Notes to be received by it
are being acquired in the ordinary course of
its business, and (iii) it has no arrangement
or understanding
11
<PAGE> 13
with any person to participate in a
distribution (within the meaning of the
Securities Act) of such Exchange Notes.
Each broker-dealer that receives Exchange Notes
for its own account in exchange for Old Notes,
where such Old Notes were acquired as the
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. The Letter
of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may
be used by a broker-dealer in connection with
resales of Exchange Notes received in exchange
for Old Notes where such Old Notes were
acquired by such broker-dealer for its own
account as a result of market-making or other
trading activities. Subject to certain
provisions set forth in the Registration
Agreement and to the limitations described
below under "The Exchange Offer -- Resale of
Exchange Notes," the Company has agreed that
this Prospectus, as it may be amended or
supplemented from time to time, may be used by
a broker-dealer in connection with any such
resales for a period ending 180 days after the
Expiration Date or, if earlier, when all such
Exchange Notes have been disposed of by such
broker-dealer. See "Plan of Distribution." Any
holder who is an "affiliate" of the Company may
not rely on such interpretive letters and must
comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any resale transaction. See
"The Exchange Offer -- Resales of Exchange
Notes."
Acceptance of Old Notes and
Offer, Delivery of Exchange
Notes....................... Subject to the terms and conditions of the
Exchange Offer, the Company will accept for
exchange any and all Old Notes which are
properly tendered in the Exchange Offer, and
not withdrawn, prior to 5:00 p.m. New York City
time, on the Expiration Date. Subject to such
terms and conditions, the Exchange Notes issued
pursuant to the Exchange Offer will be
delivered promptly following the Expiration
Date. See "The Exchange Offer -- Acceptance of
Old Notes for Exchange; Delivery of Exchange
Notes."
Exchange Agent................ The exchange agent with respect to the Exchange
Offer is -- (the "Exchange Agent"). The
addresses and telephone and facsimile numbers
of the Exchange Agent are set forth in "The
Exchange Offer -- Exchange Agent" and in the
Letter of Transmittal.
Certain United States Federal
Income Tax Consequences....... Holders of Old Notes should review the
information set forth under "United States
Federal Income Tax Consequences" prior to
tendering Old Notes in the Exchange Offer.
12
<PAGE> 14
THE EXCHANGE NOTES
The following summary description of the Exchange Notes is qualified in its
entirety by the more detailed information set forth under the caption
"Description of Notes" contained elsewhere in this Prospectus.
Exchange Notes................ Up to $100 million aggregate principal amount
of 11 3/8% Senior Subordinated Notes due 2008.
The Exchange Notes will be issued and the Old
Notes were issued under the Indenture. The
terms of the Exchange Notes are identical in
all material respects to the terms of the Old
Notes, except that the offer and sale of the
Exchange Notes have been registered under the
Securities Act and therefore the Exchange Notes
are not subject to certain restrictions on
transfer applicable to the Old Notes, will not
contain legends relating thereto and will not
be entitled to registration rights or other
rights under the Registration Agreement. See
"The Exchange Offer -- Purpose of the Exchange
Offer" and "Description of Notes."
Maturity Date................. January 15, 2008.
Interest Payment Dates........ January 15 and July 15 of each year, commencing
July 15, 1998.
Subsidiary Guarantees......... The Exchange Notes will be guaranteed on a
senior subordinated basis by each Domestic
Restricted Subsidiary.
Subordination................. The Exchange Notes and the Subsidiary
Guarantees will be general unsecured senior
subordinated obligations of the Company and the
Subsidiary Guarantors, as applicable. The
Exchange Notes and the Subsidiary Guarantees
will be subordinated in right of payment to the
prior payment in full of all existing and
future Senior Indebtedness, and will rank pari
passu with all present and future Senior
Subordinated Indebtedness and senior to all
present and future Indebtedness (as defined)
that is by its terms expressly subordinated to
the Notes. As of December 28, 1997, after
giving pro forma effect to the Refinancing, the
Company would have had $62.0 million of
outstanding Senior Indebtedness and the
Subsidiary Guarantors would have had $45.3
million of outstanding Senior Indebtedness. See
"Description of Notes -- Subordination."
Sinking Fund.................. None.
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 January 15, 2003, at the
redemption prices set forth herein plus accrued
and unpaid interest, if any, to the date of
redemption. See "Description of Notes --
Optional Redemption." In addition, at any time
prior to January 15, 2001, the Company may
redeem, at its option, up to an aggregate
amount of 35% of the original principal amount
of Exchange Notes with the proceeds of one or
more Public Equity Offerings following which
there is a Public Market at a redemption price
of 111.375% of the principal amount thereof
plus accrued and unpaid interest, if any, to
the redemption date, provided that at least 65%
of the original aggregate principal amount of
Exchange Notes remains outstanding immediately
after each such redemption.
13
<PAGE> 15
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 a portion of such holder's Exchange Notes at
a price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and
unpaid interest, if any, to the date of
repurchase. In the event of a Change in
Control, there can be no assurance that the
Company will have the financial resources or be
permitted under the terms of its other
indebtedness to repurchase or redeem the
Exchange Notes. See "Description of Notes --
Change of Control."
Certain Covenants............. The indenture pursuant to which the Exchange
Notes will be issued contains certain covenants
that, among other things, will limit the
ability of the Company and its Restricted
Subsidiaries (as defined) to: (i) incur
additional Indebtedness (as defined), (ii) make
Restricted Payments (as defined), (iii) sell
assets of the Company and its Restricted
Subsidiaries, (iv) issue or sell Capital Stock
(as defined) of a Restricted Subsidiary, (v)
enter into certain transactions with
affiliates, (vi) create certain liens, (vii)
enter into certain mergers and consolidations
and (viii) incur Indebtedness which is
subordinate to Senior Indebtedness and senior
to the Exchange Notes. The covenants are
subject to a number of significant exceptions
and qualifications. See "Description of Notes
-- Certain Covenants."
Absence of a Public Market for
the Exchange Notes............ The Exchange Notes will be a new issue of
securities for which there currently is no
market. Although the Initial Purchasers have
informed the Company that they currently intend
to make a market in the Exchange Notes, they
are not obligated to do so, and any such market
making may be discontinued at any time without
notice. Accordingly, there can be no assurance
as to the development or liquidity of any
market for the Exchange Notes. The Company
currently does not intend to apply for listing
of the Exchange Notes on any securities
exchange or for quotation through the National
Association of Securities Dealers Automated
Quotation System.
14
<PAGE> 16
CERTAIN CONSEQUENCES OF A FAILURE TO EXCHANGE OLD NOTES
The sale of the Old Notes was not registered under the Securities Act or
any state securities laws and therefore the Old Notes may not be offered, sold
or otherwise transferred except in compliance with the registration requirements
of the Securities Act and any other applicable securities laws, or pursuant to
an exemption therefrom or in a transaction not subject thereto, and in each case
in compliance with certain other conditions and restrictions, including the
Company's and the Trustee's right in certain cases to require the delivery of
opinions of counsel, certifications and other information prior to any such
transfer. Old Notes which remain outstanding after consummation of the Exchange
Offer will continue to bear a legend reflecting such restrictions on transfer.
In addition, upon consummation of the Exchange Offer, holders of Old Notes which
remain outstanding will not be entitled to any rights to have the resale of such
Old Notes registered under the Securities Act or to any similar rights under the
Registration Agreement. The Company currently does not intend to register under
the Securities Act the resale of any Old Notes which remain outstanding after
consummation of the Exchange Offer.
To the extent that Old Notes are tendered and accepted in the Exchange
Offer, a holder's ability to sell untendered Old Notes could be adversely
affected. In addition, although the Old Notes are eligible for trading in the
Private Offerings, Resale and Trading through Automatic Linkages ("PORTAL")
market, to the extent that Old Notes are tendered and accepted in connection
with the Exchange Offer, any trading market for Old Notes which remain
outstanding after the Exchange Offer could be adversely affected.
15
<PAGE> 17
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following summary combined financial data of the Company for the years
ended December 31, 1995 and 1996 have been derived from the audited historical
combined financial statements of TSG, the predecessor to the Company for
accounting purposes, as of and for the periods then ended. The summary
historical consolidated financial data of the Company as of and for the fiscal
year ended December 28, 1997 have been derived from the audited historical
consolidated financial statements of the Company as of and for the fiscal year
then ended. The unaudited pro forma consolidated financial data of the Company
as of and for the fiscal year ended December 28, 1997 have been derived from the
audited historical financial statements of the Company as of and for the fiscal
year ended December 28, 1997 and the audited historical carve-out financial
statements of GRI for the eight-month period ended August 31, 1997. The
following data should be read in conjunction with "Pro Forma Financial Data,"
"Selected Financial and Other Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements and
notes thereto included elsewhere herein. The summary unaudited pro forma
financial data do not purport to represent what the Company's results of
operations or financial position would actually have been had the Refinancing or
the GRI Acquisition occurred at such times. This data also does not purport to
project the Company's results of operations or financial position for or at any
future period or date.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 28, 1997(B)
------------------- -----------------------------
HISTORICAL
------------------- PRO
1995 1996 HISTORICAL FORMA(A)
---- ---- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................ $216,130 $228,260 $564,546 $985,096
Cost of sales............................................ 178,760 192,510 514,019 914,953
-------- -------- -------- --------
Gross profit............................................. 37,370 35,750 50,527 70,143
Selling, general and administrative expenses............. 25,230 26,240 36,007 49,199
Michigan Single Business Tax............................. 1,500 1,510 2,868 3,107
Restructuring costs...................................... -- -- 2,000 2,000
-------- -------- -------- --------
Operating income......................................... 10,640 8,000 9,652 15,837
Interest expense, net.................................... 1,470 1,310 12,400 15,551
Other (income) expense, net.............................. (1,070) 70 -- 30
-------- -------- -------- --------
Income (loss) before taxes............................... 10,240 6,620 (2,748) 256
Income tax provision..................................... 3,820 2,800 225 1,506
-------- -------- -------- --------
Net income (loss)........................................ $ 6,420 $ 3,820 $ (2,973) $ (1,250)
======== ======== ======== ========
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents................................ $ 1,800 $ 7,070 $ 11,575 $ 11,575
Receivables, net......................................... 60,190 58,860 178,938 178,938
Total assets............................................. 87,480 94,150 287,176 291,765
Total debt and capital lease obligations................. 3,550 4,200 153,246 161,979
Redeemable Series A Preferred Stock...................... -- -- 36,000 36,000
Shareholders' equity (deficit)........................... 63,650 69,450 (26,364) (26,364)
OTHER DATA:
EBITDA(C)................................................ $ 16,680 $ 14,480 $ 22,379 $ 33,170
Capital expenditures..................................... 8,400 4,840 11,518 15,565
Depreciation and amortization............................ 4,540 4,970 9,859 14,226
Ratio of EBITDA to interest expense, net................. 2.1x
</TABLE>
- -------------------------
(A) The summary unaudited pro forma information gives effect to the Refinancing
and the GRI Acquisition. See "Pro Forma Financial Data."
(B) Beginning in 1997, the Company adopted a 52-week fiscal year which ends on
the last Sunday in December.
(C) EBITDA represents income (loss) before income taxes plus interest expense,
net, depreciation and amortization, Michigan Single Business Tax and other
(income) expense, net. EBITDA is presented as additional information because
management believes it to be a useful indicator of a company's ability to
meet debt service and capital expenditure requirements. It is not, however,
intended as an alternative measure of operating results or cash flow from
operations (as determined in accordance with generally accepted accounting
principles).
16
<PAGE> 18
RISK FACTORS
This Prospectus contains statements which constitute forward-looking
statements. These statements appear in a number of places in this Prospectus and
include statements regarding the intent, belief, outlook, estimate or
expectations of the Company, its directors or its officers primarily with
respect to future events and the future financial performance of the Company.
Holders of the Old Notes are cautioned that any such forward-looking statements
are not guarantees of future events or performance and involve risks and
uncertainties, and that actual results may differ materially from those in the
forward-looking statements. In addition to the other matters described in this
Prospectus, holders of the Old Notes offered hereby should consider the specific
factors set forth below before accepting the Exchange Offer.
LEVERAGE; ABILITY TO SERVICE DEBT
The Company is highly leveraged. As of December 28, 1997, as adjusted on a
pro forma basis to give effect to the Refinancing, the Company's total debt and
capital lease obligations would have been $162.0 million (exclusive of $43.9
million of undrawn capacity under the New Credit Facility) and the Company's
ratio of total debt to total capitalization would have been 94%. The degree to
which the Company is leveraged could have important consequences to holders of
the Exchange Notes (and to holders of the Old Notes), including the following:
(i) the Company's ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions, general corporate purposes
or other purposes may be impaired; (ii) a substantial portion of the Company's
cash flow from operations will be dedicated to the payment of principal and
interest on its indebtedness, thereby reducing the funds available to the
Company for its operations and expansion plans; and (iii) the Company may be
more vulnerable to a downturn in general economic conditions or its business.
The discretion of the Company's management with respect to certain business
matters will be limited by covenants contained in the New Credit Facility and
the Indenture as well as future debt instruments. Among other things, the
covenants contained in the Indenture restrict, condition or prohibit the Company
from incurring additional indebtedness, creating liens on its assets, making
certain asset dispositions and entering into certain transactions with
affiliates. In addition, the New Credit Facility contains, financial and
operating covenants and prohibitions, including requirements that the Company
maintain certain financial ratios. There can be no assurance that the Company's
leverage and such restrictions will not materially and adversely affect the
Company's ability to finance its future operations or capital needs or to engage
in other business activities. Moreover, a failure to comply with the obligations
contained in the Indenture or any other agreements with respect to additional
financing (including the New Credit Facility or any replacement facility) could
result in an event of default under such agreements, which could permit
acceleration of the related debt and acceleration of debt under future debt
agreements that may contain cross acceleration or cross default provisions. See
"Description of Notes."
The Company's ability to make scheduled payments or to refinance its
obligations with respect to its indebtedness depends on its financial and
operating performance, which, in turn, is subject to prevailing economic
conditions and to financial, business and other factors beyond its control and
to the ability of the Company to access payments and advances from its
subsidiaries in amounts and at times sufficient to fund its debt obligations.
There can be no assurance that the Company's operating results or access to
payments and advances from its subsidiaries will be sufficient for payment of
the Company's indebtedness, including the Notes. See "-- Holding Company
Structure; Dependence upon Payments from Subsidiaries; Effective Subordination."
HOLDING COMPANY STRUCTURE; DEPENDENCE UPON PAYMENTS FROM SUBSIDIARIES; EFFECTIVE
SUBORDINATION
The Company is a holding company and conducts all of its operations through
subsidiaries. Consequently, the ability of the Company to pay its obligations,
including its obligation to pay interest on and principal of the Exchange Notes
(and on any outstanding Old Notes), whether at the maturity thereof or upon an
earlier redemption at the option of the Company or the holders of such Notes,
will be dependent on the ability of the Company to receive dividends and other
payments or advances from its subsidiaries or to obtain additional capital or
other payments or advances, in cash or otherwise, from its subsidiaries (which
have no obligation to
17
<PAGE> 19
provide such dividends, payments or advances, other than pursuant to the
Subsidiary Guarantees) or from another source. All of the Company's Domestic
Restricted Subsidiaries are Subsidiary Guarantors.
The right of the Company to receive assets of any of its subsidiaries upon
liquidation or reorganization (and the consequent right of holders to
participate in those assets) of such subsidiary will be subject to the prior
claims of that subsidiary's creditors (including trade creditors). Accordingly,
the Exchange Notes (as is the case with the Old Notes) effectively will be
subordinated to all liabilities of the Company's subsidiaries, including trade
payables, except to the extent that the Company is itself recognized as a
creditor of such subsidiary, in which case the claims of the Company would still
be subordinated to any security interest in the assets of such subsidiary, and
any indebtedness of such subsidiary senior to that held by the Company. As
adjusted on a pro forma basis to give effect to the Refinancing, the aggregate
amount of debt and other liabilities of the Company's subsidiaries would have
been approximately $181.1 million as of December 28, 1997 (excluding debt owed
by any subsidiary to the Company).
RELIANCE ON THE AUTOMOTIVE INDUSTRY
Sales of the Company's services to the automotive market (including OEM
suppliers) accounted for approximately 97% of the Company's pro forma net sales
for the fiscal year ended December 28, 1997. As a result, the Company's
principal operations are directly related to domestic and foreign automotive
vehicle design, planning and production. Automotive sales and production are
highly cyclical, dependent on consumer spending and subject to the impact of
domestic and international economic conditions. In addition, automotive
production and sales can be affected by labor relations issues, regulatory
requirements, trade agreements and other factors. A decline in automotive sales
and design, planning and production could materially adversely affect the
Company's results of operations or financial condition. Because of the Company's
reliance on the automotive industry, which is centered in Southeastern Michigan,
approximately 36% of the Company's facilities were located in Michigan and over
50% of the Company's employees were based in Michigan as of December 28, 1997.
In the future, a majority of the Company's business is likely to remain in
Michigan, and therefore might be affected by any extraordinarily adverse
conditions in Michigan.
RELIANCE ON MAJOR CUSTOMERS
Sales to Ford, the Company's largest customer, accounted for approximately
72% of the Company's pro forma net sales in the fiscal year ended December 28,
1997. All of the Company's sales of In-Client Services and Business and
Technology Services to Ford are governed by the Ford Master Supply Agreement and
the Ford Master Vendor Agreement. Under the Ford Master Supply Agreement, the
Company has been designated as Ford's sole or preferred supplier of business and
technical services. The agreement is scheduled to terminate in August 2002, but
is subject to earlier termination by Ford in the event that the Company fails to
satisfy certain standards of performance and competitiveness. There can be no
assurance that Ford will continue to require all of the services currently
provided or that Ford will not develop alternative sources, including its
in-house operations, for the services currently purchased under the Ford Master
Supply Agreement.
The Ford Master Vendor Agreement designates the Company as the sole "master
vendor" of selected Contract Staffing services to specified Ford business units.
See "Business -- Operations -- In-Client Services." These services consist of
management of the selection, retention and payment of suppliers of personnel to
Ford through the Master Vendor Program. In exchange for such services, Ford pays
certain agreed upon compensation to the Company. In the United States, this
compensation includes payment for the personnel supplied to Ford at prescribed
hourly billing rates, together with certain agreed upon fees. These billing
rates are adjusted to reflect inflation on an annual basis. The Company is not
entitled to compensation from Ford for personnel costs that exceed the
prescribed billing rates. The Ford Master Vendor Agreement contemplates the
reduction of the fee percentage over time, with such reductions being fully
implemented by July 1998. In the United Kingdom, the Company receives
compensation in the form of a direct fee and passes through supplier charges
directly to Ford. The Ford Master Vendor Agreement specifies that certain
percentages of Ford's requirements for personnel be filled with the Company's
Contract Staffing employees. The Ford Master Vendor Agreement is scheduled to
terminate in August 2002, although the parties have
18
<PAGE> 20
agreed to negotiate in good faith to extend the term for an additional five-year
period. The Ford Master Vendor Agreement is also subject to certain termination
rights, including Ford's right to terminate upon MSXI's failure to satisfy
certain standards of performance and competitiveness or upon the occurrence of a
change in Ford's business, brought about by adverse economic conditions, that
eliminates the need for the services. Termination of the Ford Master Vendor or
the Ford Master Supply Agreement by Ford could have a material adverse effect on
the Company's business, operating results or financial condition.
IMPACT OF TERMINATION OF CUSTOMER RELATIONSHIPS
As a leading, single source provider of staffing, engineering and business
services, the Company provides its customers with a broad range of complementary
services tailored to suit its customers' needs. Accordingly, as customers' needs
arise, the Company must often make significant financial commitments and incur
overhead expenses in order to complete projects or fulfill purchase orders. In
the event that the Company's customers cancel or cease to maintain their
arrangements with the Company or the Company is unable to procure similar
business from new customers, the Company may not be able to generate sufficient
revenues to offset its financial commitments or overhead expenses. There can be
no assurance that the work flow under its current arrangements will continue or
that such arrangements will be replaced by similar arrangements with the same or
new customers.
CONTROL BY PRINCIPAL SHAREHOLDERS
CVC and MascoTech beneficially own approximately 92% of the Company's
outstanding Common Stock and members of the management of the Company
beneficially own approximately 8% of the Company's outstanding Common Stock. If
these stockholders were to vote all of their shares in a similar manner, they
would effectively control the Company. In addition, they would have sufficient
voting power to elect the entire Board of Directors of the Company and, in
general, to determine the outcome of certain proposed corporate transactions,
including mergers, consolidations and the sale of all or substantially all of
the Company's assets, and to prevent or cause a change in control of the
Company. Further, CVC, MascoTech and certain members of management have entered
into a Stockholders' Agreement (as defined) whereby they have agreed to vote
their shares in such a manner as to elect the entire Board of Directors of the
Company. See "Certain Relationships and Related Transactions -- Stockholders'
Agreement."
COMPETITION
Each industry in which the Company operates is highly competitive. The
Company competes not only with full-service and highly specialized companies in
national, regional and local markets, but also competes with businesses that
have the ability to perform the Company's services in-house. The Company's
competitors may have greater name recognition and greater marketing, financial
and other resources than the Company, and the Company's in-house competitors
often have the capability to offer more highly integrated services at lower
cost. There can be no assurance that the Company will be able to compete
effectively against its competitors in the future or that businesses will
continue to outsource the types of services that the Company offers. Continued
or increased competition could limit the Company's ability to maintain or
increase its market share and margins and could have a material adverse effect
on the Company's business, financial condition or results of operation.
POSSIBLE ADVERSE EFFECTS OF FLUCTUATIONS IN THE GENERAL ECONOMY
Historically, the general level of economic activity has significantly
affected the demand for the Company's services. As economic activity has slowed,
the use of third-party services often has been curtailed before permanent
employees have been laid off. An economic downturn on a national or local basis
may adversely affect the demand for the Company's services and may have a
material adverse effect on the Company's results of operations or financial
condition. As economic activity has increased, the demand for third-party
services has similarly increased. During periods of increased economic activity
and generally higher levels of employment, the Company may face increased
competitive pricing pressures. There can be no assurance that such pricing
pressures will not adversely affect the Company's results of operations.
19
<PAGE> 21
DEPENDENCE ON AVAILABILITY OF QUALIFIED PERSONNEL
The Company depends upon its ability to attract and retain personnel,
particularly technical personnel, who possess the skills and experience
necessary to meet the needs of its clients. Competition for individuals with
proven technical or professional skills is intense. The Company competes with
other staffing companies as well as the Company's customers and other employers
for qualified personnel. There can be no assurance that qualified personnel will
continue to be available to the Company in sufficient numbers and upon economic
terms acceptable to the Company. If the cost of attracting and retaining such
personnel increases, there can be no assurance that the Company will be able to
pass this increased cost through to its customers, and therefore such increases
may have a significant effect on the Company's results of operations and
financial condition.
FOREIGN EXCHANGE RISK
As a result of the Company's global expansion, non-United States net sales
accounted for approximately 14% of the Company's pro forma net sales for the
fiscal year ended December 28, 1997. A significant percentage of such sales are
denominated in currencies other than U.S. dollars. The Company anticipates that
its percentage of net sales generated outside the U.S. will increase in the
future. Changes in exchange rates therefore may have a significant effect on the
Company's results of operations and financial condition.
RISKS ASSOCIATED WITH RATIONALIZATION OF OPERATIONS
One of the Company's principal strategies is to improve its financial
results through the rationalization of operations. The Company expects to
realize cost savings from the GRI Acquisition through the consolidation of back
office activities and the ongoing rationalization of duplicative facilities,
management and administrative offices. Although the Company believes that its
strategies are reasonable, there can be no assurance that it will be able to
implement its plans without delay or that it will not encounter unanticipated
problems in connection with the rationalization of operations or that, when
implemented, its efforts will result in the cost savings that are currently
anticipated. The Company's plans may require substantial attention from members
of the Company's management, which would limit the amount of time such members
have available to devote to the Company's daily operations.
RISKS ASSOCIATED WITH ACQUISITION STRATEGY
The Company plans to continue to make selective strategic acquisitions to
enhance its global market position and broaden its service offerings. There can
be no assurance, however, that the Company will be able to identify additional
acquisitions or that, if identified, any anticipated benefits will be realized
from such acquisitions. The availability of additional acquisition financing
cannot be assured and, depending on the terms of such additional acquisitions,
could be restricted by the terms of the New Credit Facility and/or the
Indenture. The process of integrating acquired operations into the Company's
existing operations may result in unforeseen operating difficulties and may
require significant financial resources that would otherwise be available for
the ongoing development or expansion of the Company's existing operations. In
addition, successful completion of an acquisition may depend on consents from
third parties, including regulatory authorities and private parties, which
consents are beyond the control of the Company. Possible future acquisitions by
the Company could result in the incurrence of additional debt, contingent
liabilities and amortization expenses related to goodwill and other intangible
assets, all of which could materially adversely affect the Company's results of
operations and financial condition.
POTENTIAL FLUCTUATIONS IN PERIODIC OPERATING RESULTS
Results for any quarter or fiscal year are not necessarily indicative of
the results that the Company may achieve for any subsequent quarter or fiscal
year. The timing or completion of material projects could result in fluctuations
in the Company's results of operations for particular quarterly or annual
periods.
20
<PAGE> 22
EMPLOYMENT LIABILITY RISK
The Company, in the course of providing services to its customers, places
its employees in the workplaces of other businesses. An attendant risk of such
activity includes possible claims of errors and omissions, misuse of client
proprietary information, discrimination and harassment, theft of client
property, other criminal activity or torts, workers' compensation claims and
other claims. While the Company has not historically experienced any material
claims of these types, there can be no assurance that the Company will not
experience such claims in the future. In some instances, the Company has agreed
to indemnify clients against some of the foregoing matters.
FRAUDULENT CONVEYANCE
Although the Exchange Notes are obligations of the Company, they will be
unconditionally guaranteed on an unsecured senior subordinated basis by the
Subsidiary Guarantors. The Company is a holding company that derives all of its
operating income and cash flow from its subsidiaries. The performance by each
Subsidiary Guarantor of its obligations with respect to its Subsidiary Guarantee
may be subject to review under relevant federal and state fraudulent conveyance
and similar statutes in a bankruptcy or reorganization case or lawsuit by or on
behalf of unpaid creditors of such Subsidiary Guarantor. Under these statutes,
if a court were to find under relevant federal or state fraudulent conveyance
statutes that a Subsidiary Guarantor did not receive fair consideration or
reasonably equivalent value for incurring its Subsidiary Guarantee of the Old
Notes (and the exchange of the New Notes therefor), and that, at the time of
such incurrence, the Subsidiary Guarantor: (i) was insolvent, (ii) was rendered
insolvent by reason of such incurrence or grant, (iii) was engaged in a business
or transaction for which the assets remaining with such Subsidiary Guarantor
constituted unreasonably small capital or (iv) intended to incur, or believed
that it would incur, debts beyond its ability to pay such debts as they matured,
then such court, subject to applicable statutes of limitation, could void such
Subsidiary Guarantor's obligations under its Subsidiary Guarantee, recover
payments made under such Subsidiary Guarantee, subordinate such Subsidiary
Guarantee to other indebtedness of such Subsidiary Guarantor or take other
action detrimental to the Holders of the Notes.
The measure of insolvency for these purposes will depend upon the governing
law of the relevant jurisdiction. Generally, however, a company will be
considered insolvent for these purposes if the sum of that company's debts is
greater than the fair value of all of that company's property or if the present
fair salable value of that company's 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 or if a company is not able to pay its debts as they become
due. Moreover, regardless of solvency, a court could void an incurrence of
indebtedness, including the Subsidiary Guarantees, if it determined that such
transaction was made with the intent to hinder, delay or defraud creditors. In
addition, a court could subordinate the indebtedness, including the Subsidiary
Guarantees, to the claims of all existing and future creditors on similar
grounds. The Subsidiary Guarantees could also be subject to the claim that,
since the Subsidiary Guarantees were incurred for the benefit of the Company
(and only indirectly for the benefit of the Subsidiary Guarantors), the
obligations of the Subsidiary Guarantors thereunder were incurred for less than
reasonably equivalent value or fair consideration. Neither the Company nor any
Subsidiary Guarantor believes that, after giving effect to the Offering, any of
the Subsidiary Guarantors (i) was insolvent or rendered insolvent by the
incurrence of the Guarantees in connection with the Offering, (ii) was not in
possession of sufficient capital to run their business effectively or (iii)
incurred debts beyond its ability to pay as the same mature or become due.
There can be no assurance as to what standard a court would apply in order
to determine whether a Subsidiary Guarantor was "insolvent" upon the sale of the
Old Notes or that, regardless of the method of valuation, a court would not
determine that such Subsidiary Guarantor was insolvent upon consummation of the
sale of the Old Notes.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of Exchange Notes
or of any outstanding Old Notes will have the right to require the Company to
repurchase all or a portion of such holder's Notes at a
21
<PAGE> 23
price in cash equal to 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest, if any, to the date of repurchase. However, the
Company's ability to repurchase the Notes upon a Change of Control may be
limited by the terms of then existing contractual obligations of the Company and
its subsidiaries. In addition, the occurrence of a Change of Control will
constitute an Event of Default under the New Credit Facility. The New Credit
Facility prohibits the purchase of the Exchange Notes (and any outstanding Old
Notes) unless and until such time as the indebtedness under the New Credit
Facility is paid in full. There can be no assurance that the Company will have
the financial resources to repay amounts due under the New Credit Facility, or
to repurchase or redeem the Exchange Notes (and any outstanding Old Notes). If
the Company fails to repurchase all of such Notes tendered for purchase upon the
occurrence of a Change of Control, such failure will constitute an Event of
Default under the Indenture. See "-- Leverage; Ability to Service Debt" above.
With respect to the sale of assets referred to in the definition of Change
of Control, the phrase "all or substantially all" as used in such definition
varies according to the facts and circumstances of the subject transaction, has
no clearly established meaning under the relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of a person and
therefore it maybe unclear whether a Change of Control has occurred and whether
the Notes are subject to an offer to purchase.
The Change of Control provision may not necessarily afford the holders
protection in the event of a highly leveraged transaction, including a
reorganization, restructuring, merger or other similar transaction involving the
Company that may adversely affect the holders, because such transactions may not
involve a shift in voting power or beneficial ownership or, even if they do, may
not involve a shift of the magnitude required under the definition of Change of
Control to trigger such provisions. Except as described under "Description of
Exchange Notes -- Change of Control" the Indenture does not contain provisions
that permit the holders of the Notes to require the Company to repurchase or
redeem the Notes in the event of a takeover, recapitalization or similar
transaction.
LACK OF PUBLIC MARKET; RESTRICTIONS ON TRANSFERABILITY
The Exchange Notes are a new issue of securities for which there is
currently no active trading market. If a trading market develops for the
Exchange Notes, they may trade at a discount from their initial offering price,
depending upon prevailing interest rates, the market for similar securities and
other factors, including general economic conditions and the financial condition
of the Company. The Company does not intend to apply for a listing or quotation
of the Exchange Notes on any securities exchange or stock market. Each of the
Initial Purchasers currently makes a market in the Notes. However, the Initial
Purchasers are not obligated to do so, and any such market making may be
discontinued at any time without notice. There can be no assurance as to the
development or liquidity of any market for the Exchange Notes.
RESTRICTIONS ON TRANSFER
The Old Notes were offered and sold by the Company in a private offering
exempt from registration requirements pursuant to the Securities Act. As a
result, the Old Notes may not be reoffered or resold except pursuant to an
effective registration statement under the Securities Act, or pursuant to an
exemption from, or in a transaction not subject to, such registration
requirements. Each Holder (other than any Holder who is an affiliate of the
Company) who duly exchanges Old Notes for Exchange Notes in the Exchange Offer
will receive Exchange Notes that are freely transferable under the Securities
Act. Holders who participate in the Exchange Offer should be aware, however,
that if they accept the Exchange Offer for the purpose of engaging in a
distribution, the Exchange Notes may not be publicly reoffered or resold without
complying with the registration and prospectus delivery requirements under the
Securities Act. As a result, each Holder accepting the Exchange Offer will be
required to represent that (i) it is not an "affiliate" of the Company, (ii) any
Exchange Notes to be received by it are being acquired in the ordinary course of
its business, and (iii) it has no arrangement or understanding with any person
to participate in a distribution (within the meaning of the Securities Act) of
such Exchange Notes. If existing Commission interpretations permitting free
transferability
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<PAGE> 24
of the Exchange Notes following the Exchange Offer are changed prior to
consummation of the Exchange Offer, the Company will use its best efforts to
register the Old Notes for resale under the Securities Act. See "The Exchange
Offer."
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
in exchange for Old Notes as described in this Prospectus, the Company will
receive Old Notes in like principal amount. The Old Notes surrendered in
exchange for the Exchange Notes will be retired and canceled. Accordingly, the
issuance of the Exchange Notes will not result in any change in the indebtedness
of the Company.
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<PAGE> 25
CAPITALIZATION
The following table sets forth the audited consolidated capitalization of
the Company as of December 28, 1997 and as adjusted on a pro forma basis to give
effect to the Refinancing. See "Use of Proceeds" and "Pro Forma Financial Data."
This table should be read in conjunction with the consolidated financial
statements, including the notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Offering Memorandum.
<TABLE>
<CAPTION>
AS OF
DECEMBER 28, 1997
-----------------------
ACTUAL PRO FORMA
------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Old Credit Facility....................................... $ 75,444 --
Notes payable and current portion of long-term debt....... 12,486 $ 7,486
-------- --------
Total short-term debt................................ 87,930 7,486
-------- --------
Long-term debt, less current portion:
New Credit Facility(A).................................... -- 54,177
CVC Bridge Loan(B)........................................ 17,500 --
MascoTech Bridge Loan(B).................................. 17,500 --
Senior Subordinated Note.................................. 30,000 --
11 3/8% Senior Subordinated Notes due 2008................ -- 100,000
-------- --------
Total long-term debt, less current portion........... 65,000 154,177
-------- --------
Long-term capital lease obligations......................... 316 316
Redeemable Series A Preferred Stock......................... 36,000 36,000
Shareholders' equity (deficit):
Common Stock, $.01 par: authorized, 2,000,000 shares;
issued and outstanding 95,004 shares................... 1 1
Additional paid in capital................................ (22,251) (22,251)
Cumulative foreign currency translation adjustment........ (1,141) (1,141)
Accumulated deficit....................................... (2,973) (2,973)
-------- --------
Total shareholders' equity (deficit)................. (26,364) (26,364)
-------- --------
Total capitalization, including total short-term
debt............................................. $162,882 $171,615
======== ========
</TABLE>
- -------------------------
(A) The New Credit Facility provides for borrowings of up to $100 million.
Availability under the New Credit Facility is subject to satisfaction of a
borrowing base requirement and certain other conditions. See "Description of
Certain Other Indebtedness -- New Credit Facility."
(B) Excludes current portion which is included under "Notes payable and current
portion of long-term debt."
24
<PAGE> 26
PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data have been derived from the
audited historical consolidated financial statements as of and for the fiscal
year ended December 28, 1997 for the Company and from the audited historical
carve-out financial statements for the eight-month period ended August 31, 1997
for GRI.
The Company is a holding company formed and owned by CVC, MascoTech and
certain members of management. The Company was formed to consummate the TSG
Acquisition, in which it acquired selected assets and operations of the former
engineering and technical business services units of MASG and MascoTech, as well
as the net assets of APX which previously had been acquired by MASG on November
6, 1996. The TSG Acquisition was effective on January 3, 1997. Effective August
31, 1997, the Company acquired certain service-providing operations of Ford
through the acquisition of GRI, a wholly-owned subsidiary of Ford. The pro forma
information gives effect to (i) the GRI Acquisition and (ii) the Refinancing, as
described in the notes to the unaudited pro forma consolidated financial data.
The unaudited pro forma consolidated balance sheet gives effect to the
Refinancing as if such transaction had occurred on December 28, 1997. The
unaudited pro forma consolidated statement of operations gives effect to the GRI
Acquisition and to the Refinancing as if such transactions had occurred on
January 1, 1997. The unaudited pro forma financial data do not purport to
represent what the Company's results of operations or financial position would
actually have been had these transactions occurred at such times. This data also
does not purport to project the Company's results of operations or financial
position for or at any future period or date.
The unaudited pro forma financial data should be read in conjunction with
"Use of Proceeds," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the historical financial statements and the notes
thereto included elsewhere in this Offering Memorandum.
25
<PAGE> 27
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 28, 1997
<TABLE>
<CAPTION>
PRO FORMA
MSXI ADJUSTMENTS PRO FORMA
---- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 11,575 $ 154,688(A)
(149,588)(B)
(5,100)(C) $ 11,575
Receivables, net...................................... 178,938 178,938
Inventory............................................. 1,239 1,239
Prepaid expenses and other assets..................... 5,638 5,638
Deferred income taxes................................. 2,352 2,352
-------- --------
Total current assets............................... 199,742 199,742
-------- --------
Property and equipment, net............................. 34,337 34,337
Goodwill, net of accumulated amortization of $892 as of
December 28, 1997..................................... 31,934 31,934
Other assets............................................ 8,783 4,589(C) 13,372
Deferred income taxes................................... 12,380 12,380
-------- --------
Total assets....................................... $287,176 $291,765
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable and current portion of long-term debt... $ 87,930 (80,444)(B) $ 7,486
Bank overdrafts....................................... 21,908 21,908
Accounts payable...................................... 58,458 58,458
Accrued payroll and benefits.......................... 16,984 16,984
Accrued expenses...................................... 20,907 (4,144)(B) 16,763
Deferred income taxes................................. 984 984
-------- --------
Total current liabilities.......................... 207,171 122,583
-------- --------
Long-term debt.......................................... 65,000 154,177(A)
(65,000)(B) 154,177
Long-term capital lease obligations..................... 316 316
Long-term deferred compensation liability and
other accruals........................................ 5,053 5,053
Redeemable Series A Preferred Stock..................... 36,000 36,000
Shareholders' equity (deficit).......................... (26,364) (26,364)
-------- --------
Total liabilities and shareholders' equity
(deficit)........................................ $287,176 $291,765
======== ========
</TABLE>
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<PAGE> 28
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED DECEMBER 28, 1997
<TABLE>
<CAPTION>
PRO FORMA
GRI FOR THE ADJUSTMENTS PRO FORMA
EIGHT MONTHS ENDED FOR THE GRI ADJUSTMENTS FOR
MSXI AUGUST 31, 1997 ACQUISITION THE REFINANCING PRO FORMA
---- ------------------ ----------- --------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales........................... $564,546 $431,134 $(10,584)(A) $985,096
Cost of sales....................... 514,019 411,518 (10,584)(A) 914,953
-------- -------- --------
Gross profit...................... 50,527 19,616 70,143
Selling, general and administrative
expenses.......................... 36,007 13,636
(851)(B)
407(C) 49,199
Michigan Single Business
Tax............................... 2,868 239 3,107
Restructuring costs................. 2,000 2,000
-------- -------- --------
Operating income.................. 9,652 5,741 15,837
Interest expense (income), net...... 12,400 (1,166) $ 14,803(E)
(12,400)(F)
1,166(G)
748(H) 15,551
Other expense (income), net......... -- 30 30
-------- -------- --------
Income (loss) before income
taxes........................... (2,748) 6,877 256
Income tax provision (benefit)...... 225 2,908 186(D) (1,813)(I) 1,506
-------- -------- --------
Net income (loss)................. $ (2,973) $ 3,969 $ (1,250)
======== ======== ========
OTHER DATA
EBITDA(J)........................... $ 22,379 $ 9,940 $ 33,170
Capital expenditures................ 11,518 4,047 15,565
Depreciation and amortization....... 9,859 3,960 14,226
Ratio of EBITDA to interest expense
(income), net..................... 2.1x
Ratio of earnings to fixed
charges(K)........................ 1.0x
</TABLE>
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<PAGE> 29
BASIS OF PRESENTATION
The following pro forma adjustments are based on available information and
certain management estimates and assumptions. The Company believes that such
adjustments provide a reasonable basis for presenting all of the significant
effects of the GRI Acquisition and the Refinancing and that the pro forma
adjustments are properly applied in the unaudited pro forma consolidated
financial statements.
The final determination of the purchase price for the GRI Acquisition will
be completed when certain contractual matters are concluded. The preliminary
allocation of purchase price for the GRI Acquisition will be completed during
1998. Any adjustments to the purchase price will change recorded goodwill and
will be amortized to expense over the remaining goodwill period. Management
believes the resolution of these matters will not have a material effect on the
results of operations, financial position or cash flows of the Company.
ADJUSTMENTS TO PRO FORMA CONSOLIDATED BALANCE SHEET AS OF DECEMBER 28, 1997
The accompanying unaudited pro forma consolidated balance sheet as of
December 28, 1997 has been prepared as if the following transactions had been
consummated as of December 28, 1997:
(A) Issuance by MSXI of $100.0 million of the Notes and the borrowing of
$54.2 million under the New Credit Facility.
(B) Application of the net proceeds from the issuance of the Notes offered
hereby and the borrowings under the New Credit Facility to repay in
full, including accrued interest thereon, the outstanding CVC Bridge
Loan, the outstanding MascoTech Bridge Loan, the outstanding Senior
Subordinated Note and outstanding indebtedness under the Old Credit
Facility.
(C) Payment of approximately $4.1 million for fees and expenses related to
the Offering and approximately $1.0 million for fees and expenses
related to the New Credit Facility, of which approximately $0.5 million
had been accrued as of December 28, 1997.
ADJUSTMENTS TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE FISCAL
YEAR ENDED
DECEMBER 28, 1997
The accompanying unaudited pro forma consolidated statement of operations
for the fiscal year ended December 28, 1997 include the following adjustments to
present results as if the GRI Acquisition and the Refinancing had been
consummated on January 1, 1996:
GRI Acquisition
(A) Eliminate intercompany sales between the Company and GRI.
(B) Reduce employment expense to reflect contractual agreements with Ford
in connection with the GRI Acquisition.
(C) Record amortization of goodwill resulting from the GRI Acquisition over
an estimated useful life of 20 years.
(D) Record the income tax provision resulting from the pro forma
adjustments related to the GRI Acquisition, at an assumed effective
income tax rate of 42%.
The Refinancing
(E) Record interest expense associated with the Notes at an annual
interest rate of 11.375%, the New Credit Facility at assumed annual
interest rates which ranged from 6.7% to 7.2% on average monthly
borrowings and other debt at assumed annual interest rates which
ranged from 7.0% to 7.39%.
The impact on interest expense of a 1/8 of 1% change in the interest
rate related to average monthly borrowings on the New Credit Facility
and other debt is approximately $44,000 on an annual basis.
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<PAGE> 30
(F) Eliminate historical interest expense.
(G) Eliminate GRI interest income related to excess GRI cash used by the
Company to reduce borrowings used to finance the GRI Acquisition.
(H) Record amortization of costs associated with the Refinancing.
(I) Record the income tax benefit resulting from the pro forma adjustments
related to the Refinancing, at an assumed effective income tax rate of
42%.
Other
(J) EBITDA represents income (loss) before income taxes plus interest
expense, net, depreciation, amortization, Michigan Single Business Tax
and other (income) expense, net. EBITDA is presented as additional
information because management believes it to be a useful indicator of
a company's ability to meet debt service and capital expenditure
requirements. It is not, however, intended as an alternative measure
of operating results or cash flow from operations (as determined in
accordance with generally accepted accounting principles).
(K) For purposes of computing the ratio of earnings to fixed charges,
earnings represent net income (loss) before income taxes and fixed
charges. Fixed charges consist of interest expense, the interest
component of operating leases and amortization of deferred financing
costs.
29
<PAGE> 31
SELECTED FINANCIAL AND OTHER DATA
The following selected historical combined financial data of the Company
for the year ended December 31, 1993 have been derived from the unaudited
historical combined financial statements of TSG, the predecessor to the Company
for accounting purposes as of and for the period then ended. The selected
historical combined statement of operations data of the Company for the year
ended December 31, 1994 have been derived from the audited historical combined
statement of operations of TSG for the year ended December 31, 1994. The
selected historical combined balance sheet data of the Company as of December
31, 1994 have been derived from the unaudited combined balance sheet of TSG as
of December 31, 1994. The selected historical combined financial data of the
Company as of and for the years ended December 31, 1995 and 1996 have been
derived from the audited historical combined financial statements of TSG as of
and for the periods then ended. The selected historical consolidated financial
data of the Company as of and for the fiscal year ended December 28, 1997 have
been derived from the audited historical financial statements of the Company, as
of and for the fiscal year then ended. The selected financial and other data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements and notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
FISCAL
YEAR ENDED DECEMBER 31, YEAR ENDED
----------------------------------------- DECEMBER 28,
1993 1994 1995 1996 1997
---- ---- ---- ---- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................................... $155,259 $184,540 $216,130 $228,260 $564,546
Cost of sales....................................... 125,855 149,950 178,760 192,510 514,019
-------- -------- -------- -------- --------
Gross profit........................................ 29,404 34,590 37,370 35,750 50,527
Selling, general and administrative expenses........ 20,586 23,550 25,230 26,240 36,007
Michigan Single Business Tax........................ 1,340 1,760 1,500 1,510 2,868
Restructuring costs................................. -- -- -- -- 2,000
-------- -------- -------- -------- --------
Operating income.................................... 7,478 9,280 10,640 8,000 9,652
Interest expense, net............................... 308 920 1,470 1,310 12,400
Other (income) expense, net......................... 173 (180) (1,070) 70 --
-------- -------- -------- -------- --------
Income (loss) before taxes.......................... 6,997 8,540 10,240 6,620 (2,748)
Income tax provision................................ 2,939 3,140 3,820 2,800 225
-------- -------- -------- -------- --------
Net income (loss)................................... $ 4,058 $ 5,400 $ 6,420 $ 3,820 $ (2,973)
======== ======== ======== ======== ========
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents........................... $ 120 $ 1,540 $ 1,800 $ 7,070 $ 11,575
Receivables, net.................................... 41,400 47,240 60,190 58,860 178,938
Total assets........................................ 60,442 69,490 87,480 94,150 287,176
Total debt and capital lease obligations............ 201 3,370 3,550 4,200 153,246
Redeemable Series A Preferred Stock................. -- -- -- -- 36,000
Shareholders' equity (deficit)...................... 35,890 46,430 63,650 69,450 (26,364)
OTHER DATA:
EBITDA(C)........................................... $ 11,684 $ 15,430 $ 16,680 $ 14,480 $ 22,379
Capital expenditures................................ 5,175 7,030 8,400 4,840 11,518
Depreciation and amortization....................... 2,866 4,390 4,540 4,970 9,859
Ratio of earnings to fixed charges(D)............... 5.6x 4.1x 3.4x 3.1x --
</TABLE>
- -------------------------
(A) Beginning in 1997, the Company adopted a 52-week fiscal year which ends on
the last Sunday in December.
(B) EBITDA represents income (loss) before income taxes plus interest expense,
net, depreciation, amortization, Michigan Single Business Tax and other
(income) expense, net. EBITDA is presented as additional information because
management believes it to be a useful indicator of a company's ability to
meet debt service and capital expenditure requirements. It is not, however,
intended as an alternative measure of operating results or cash flow from
operations (as determined in accordance with generally accepted accounting
principles).
(C) For purposes of computing the ratio of earnings to fixed charges, earnings
represent net income (loss) before income taxes and fixed charges. Fixed
charges consist of interest expense, the interest component of operating
leases and amortization of deferred financing costs.
(D) For the fiscal year ended December 28, 1997 earnings were inadequate to
cover fixed charges by approximately $2.7 million.
30
<PAGE> 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following analysis of financial condition and results of operations
should be read in conjunction with the separate financial statements of the
Company, APX and GRI and the related notes thereto and the unaudited pro forma
financial statements and related notes thereto contained elsewhere in this
Offering Memorandum. The results of operations for the fiscal year ended
December 28, 1997 include the results of operations of MSXI, which include the
results of operations of GRI since August 31, 1997, the date of the GRI
Acquisition. The results of operations for the year ended December 31, 1996
include the results of operations of TSG, the predecessor to the Company for
accounting purposes but does not include the results of APX, which was acquired
by the Company effective January 3, 1997. Accordingly, the results of operations
for the fiscal year ended December 28, 1997 are not directly comparable to the
results of operations for the year ended December 31, 1996.
GENERAL
The Company is a holding company formed and owned by CVC, MascoTech and
certain members of management. The Company was formed to consummate the TSG
Acquisition, in which it acquired selected assets and operations of the former
engineering and technical business services units of MASG and MascoTech, as well
as the net assets of APX, a design and engineering services provider, which
previously were acquired by MASG on November 6, 1996. The TSG Acquisition was
effective on January 3, 1997. TSG was a provider of product engineering services
and temporary staffing to the automotive industry. The Company acquired GRI on
August 31, 1997 in order to continue its strategy of increasing its global
presence and range of product offerings. GRI provided the Company with the
ability to offer master vendor services and additional Business and Technology
Services. As a result of the APX and GRI Acquisitions, the Company believes that
it is well positioned to increase its market share among existing customers,
increase its market share in the global automotive market and expand into
non-automotive markets. The Company also intends to continue to rationalize its
cost structure through the elimination of redundant back office activities,
facilities, management and administrative offices, as well as to pursue
additional strategic acquisitions that complement or expand the Company's
existing service offerings.
The Company is organized around three strategic service offerings:
In-Client Services, Product Development Services, and Business and Technology
Services.
In-Client Services consists principally of TSG's and APX's former temporary
staffing businesses and GRI's temporary staffing procurement services. Pro forma
net sales of In-Client Services for the fiscal year ended December 28, 1997 were
approximately $450 million. Contract Staffing sales are generated principally
from time and material contracts in which the Company bills customers for
contract labor at an hourly rate. Contract Staffing cost of sales consist
principally of direct labor costs and related benefits which are paid by the
Company. While the Company intends to expand its Master Vendor Program to other
customers, all of the Master Vendor Program sales are currently generated under
the Ford Master Vendor Agreement.
The Company generates a substantial portion of its In-Client Services' net
sales under the Ford Master Vendor Agreement by charging Ford prescribed hourly
billing rates, which adjust annually to reflect inflation. In addition, the
Company charges Ford certain agreed upon fees. The Master Vendor Program's costs
of sales consists principally of direct labor costs billed from suppliers to the
Company. During 1997, the specified fees were periodically reduced by
approximately 37% to reflect changes in service levels and improved operating
efficiencies. Pursuant to the Ford Master Vendor Agreement, the fees will be
further reduced by an additional 20% in July of 1998. In anticipation of these
fee reductions, the Company continued cost reduction measures initiated by GRI
prior to the GRI Acquisition, which were principally completed as of September
28, 1997. These cost reduction measures included the implementation of process
and system efficiencies including the reduction of personnel, the combination of
certain functions and the elimination of certain extraneous services. To further
offset these fee reductions, the Company and Ford have agreed that the Company
will provide an increasing number of contract laborers to Ford or receive
compensation for staffing shortfalls below a specified minimum level.
Additionally, the Company expects that Ford will increase its usage of Master
Vendor
31
<PAGE> 33
Program services for its European business units. The Company also anticipates
negotiating with suppliers to lower its aggregate labor costs, of which Ford is
entitled to share in the realized savings up to a set amount. The Company
believes that the effect of the foregoing will offset the effect of the fee
reductions although there can be no assurance that such benefits will be fully
realized.
Product Development Services consists principally of TSG's and APX's
engineering services businesses. Pro forma net sales of Product Development
Services for the fiscal year ended December 28, 1997 were approximately $205
million. Product Development Services sales are generated principally from fixed
price, time and material and price per unit contracts. Contracts are typically
for specific projects and range from several days to several years in duration.
Product Development Services cost of sales consists principally of direct labor
costs and related benefits and facility and technology costs.
Business and Technology Services consists principally of TSG's marketing
and training services and the balance of GRI's services other than temporary
staffing procurement services. Pro forma net sales of Business and Technology
Services for the fiscal year ended December 28, 1997 were approximately $320
million. All sales to Ford of these services are pursuant to the Ford Master
Supply Agreement. The Ford Master Supply Agreement requires that Ford utilize
the Company as the sole or preferred provider of certain of these services.
Sales under the Ford Master Supply Agreement are principally cost plus in which
the Company charges Ford for services which are provided by either the Company
or outside suppliers. Sales outside of the Ford Master Supply Agreement are
generated principally from fixed price, time and material and price per unit
contracts. Outside of the Ford Master Supply Agreement, Business and Technology
Services are typically provided under purchase orders that are renewed annually.
Business and Technology Services cost of sales consists principally of direct
labor costs and related benefits and facility and technology costs.
As part of the GRI Acquisition, Ford retained the former Power Products
division ("PPD") of GRI and the Company agreed to provide certain transitional
administrative functions to PPD for a limited time. Fees for the services that
are currently provided to Ford approximate $0.3 million per month. The Company
anticipates that Ford will discontinue the use of these services during 1998. In
anticipation of the discontinuance of these services, the Company has identified
cost savings in relation to the elimination of redundant facilities and
personnel, including the GRI headquarters, which will be closed when the
building's lease expires on May 31, 1998. The Company anticipates it will
realize these cost savings during 1998, effectively offsetting the reduction in
fees earned for providing these services to Ford.
32
<PAGE> 34
SUPPLEMENTAL FINANCIAL AND OTHER DATA
The supplemental financial data presented below are included for the
purpose of providing supplemental information in order to assist investors in
understanding the historical financial performance of TSG, APX and GRI. The
financial information for the fiscal years ended 1995 and 1996 for APX includes
the operations of PMC, which were not included in the APX Acquisition. As a
result, the financial statements of APX are not reflective of the assets
acquired in the APX Acquisition. The 1996 fiscal year of APX reflects only
results for the 10 month and 6 day period ending November 6, 1996, the date APX
was acquired by MASG. In addition, the carve-out financial statements for GRI
for 1997 are for the eight-month period ended August 31, 1997. From September 1,
1997 the results of GRI are included in the results of MSXI. The following
supplemental historical data should not be construed to be indicative of the
results that actually would have occurred if the companies had been combined on
the date assumed and do not purport to project the Company's results of
operations at any future date.
<TABLE>
<CAPTION>
HISTORICAL(A)
-------------------------------------------
MSXI/TSG APX(B)(D) GRI(C)(D) TOTAL(E)
-------- --------- --------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Year Ending 1997
Net sales........................................... $ 564.5 -- $ 431.1 $ 995.6
Cost of sales....................................... (514.0) -- (411.5) (925.5)
------- ------- ------- --------
Gross profit...................................... 50.5 -- 19.6 70.1
Selling, general and administrative expenses........ 36.0 -- (13.6) 49.6
Michigan Single Business Tax........................ (2.9) -- (0.2) (3.1)
Restructuring costs................................. (2.0) -- -- (2.0)
------- ------- ------- --------
Operating income.................................. $ 9.7 -- $ 5.7 $ 15.4
======= ======= ======= ========
Other Data:
EBITDA(E)......................................... $ 22.4 -- $ 9.9 $ 32.3
Capital expenditures.............................. 11.5 -- 4.0 15.5
Year Ending 1996
Net sales........................................... $ 228.3 $ 135.1 $ 690.5 $1,053.8
Cost of sales....................................... (192.5) (127.1) (665.7) (985.3)
------- ------- ------- --------
Gross profit...................................... 35.8 7.9 24.8 68.5
Selling, general and administrative expenses........ (26.2) (7.9) (21.6) (55.7)
Michigan Single Business Tax........................ (1.5) (0.8) (0.3) (2.6)
------- ------- ------- --------
Operating income.................................. $ 8.0 $ (0.8) $ 3.0 $ 10.2
======= ======= ======= ========
Other Data:
EBITDA(E)......................................... $ 14.5 $ 1.9 $ 8.3 $ 24.7
Capital expenditures.............................. 4.8 0.6 3.7 9.1
Year Ending 1995
Net sales........................................... $ 216.1 $ 140.2 $ 550.4 $ 906.8
Cost of sales....................................... (178.8) (129.7) (531.1) (839.6)
------- ------- ------- --------
Gross profit...................................... 37.4 10.5 19.3 67.2
Selling, general and administrative expenses........ (25.2) (9.3) (23.3) (57.9)
Michigan Single Business Tax........................ (1.5) (1.4) (0.3) (3.2)
------- ------- ------- --------
Operating income.................................. $ 10.6 $ (0.2) $ (4.3) $ 6.1
======= ======= ======= ========
Other Data:
EBITDA(E)......................................... $ 16.7 $ 3.6 $ 0.2 $ 20.5
Capital expenditures.............................. 8.4 0.7 6.6 15.7
</TABLE>
- -------------------------
(A) Numbers may not total due to rounding.
(B) The 1996 fiscal year of APX reflects only results for the 10 month and 6 day
period ending November 6, 1996, the date APX was acquired by MASG.
Additionally, the historical financial statements of APX include the results
of operations of the PMC division which was not acquired by MASG. For the
fiscal years ended 1995 and 1996, net sales attributable to PMC were $10.6
million and $8.8 million, respectively, and operating income attributable to
PMC was $(.9) million and $0.1 million, respectively.
Unaudited net sales; gross profit; selling, general and administrative
expenses and the operating loss for the period November 7, 1996 to December
29, 1996 were approximately $16.5 million, $1.4 million, $1.7 million and
$0.4 million, respectively.
(C) Carve-out financial statements for GRI for 1997 are for the eight-month
period ended August 31, 1997. From September 1, 1997 the results of GRI are
included in the results of MSXI.
(D) Michigan Single Business Tax for APX for the fiscal year ended 1995 has been
reclassified from cost of sales in the historical audited statements of
operations. For consistency of presentation, approximately $2.0 million of
divisional administrative expense
33
<PAGE> 35
has been reclassified from cost of sales in the historical audited
statement of operations for APX for the year ended 1995 to selling, general
and administrative expenses.
(E) The total column is a summation of the amounts of the indicated entities and
do not reflect elimination of intracompany sales for the period in 1997 and
for 1996 of $10.6 million and $17.1 million, respectively. Intracompany
sales for the period in 1995 is not readily available. The information
presented is not intended to be a presentation of pro forma information in
accordance with Article 11 of Regulation S-X. Reference is made to the pro
forma financial information included elsewhere herein under the caption "Pro
Forma Financial Data."
(F) EBITDA represents income (loss) before income taxes plus interest expense,
net, depreciation and amortization, Michigan Single Business Tax and other
(income) expense, net. EBITDA is presented as additional information because
management believes it to be a useful indicator of a company's ability to
meet debt service and capital expenditure requirements. It is not, however,
intended as an alternative measure of operating results or cash flow from
operations (as determined in accordance with generally accepted accounting
principles).
RESULTS OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 28, 1997 COMPARED WITH THE TWELVE MONTHS ENDED
DECEMBER 31, 1996
Net Sales
MSXI's net sales for the twelve months ended December 28, 1997 increased
$336.2 million (147.3%), from $228.3 million to $564.5 million, as compared to
the twelve months ended December 31, 1996. This increase resulted principally
from the APX and GRI acquisitions. These increases were offset by a decline in
net sales of Product Development Services in the United States due to the
completion of a multi-year project, the early termination of an engineering
project in Europe and the planned elimination of an unprofitable shop facility
in the United States. Combined 1997 sales of MSXI and preacquisition GRI were
lower than the combined 1996 sales of TSG, APX and GRI due to decreases in sales
of Product Development Services, temporary staffing procurement services at GRI
and purchasing services. Product Development Services sales declined due to a
reduction in product engineering sales, primarily in Europe, and the closure of
two unprofitable prototype tooling facilities in the United States. Sales of
temporary staffing procurement services declined due to lower headcount placed
at Ford. Sales of Purchasing services decreased because Ford reduced its usage
of training and consultant procurement services as a result of the effectiveness
of the Company's services.
Gross Profit
MSXI's gross profit for the twelve months ended December 28, 1997, which
includes gross profits from GRI for four months, increased $14.8 million
(41.5%), from $35.7 million to $50.5 million, as compared to the twelve months
ended December 31, 1996. This increase resulted principally from the APX and GRI
Acquisitions. Gross profit as a percentage of net sales for the twelve months
ended December 28, 1997 decreased from 15.7% to 9.0% as compared to the twelve
months ended December 31, 1996, principally due to the inclusion of gross
profits from GRI, which is at a lower margin than the Company's other
businesses, and due to lower margins earned on sales of Product Development
Services as a result of underabsorbed fixed costs resulting from the decrease in
sales in Europe and North America. Gross profit as a percentage of net sales
also decreased as a result of a change in the pricing of certain manufacturing
engineering purchase orders from fixed price to time and materials.
Selling, General and Administrative Expenses
MSXI's selling, general and administrative expenses for the twelve months
ended December 28, 1997 increased $9.8 million (37.4%), from $26.2 million to
$36.0 million, as compared to the twelve months ended December 31, 1996. This
increase resulted principally from the APX and GRI acquisitions. In addition,
there was a one time $2.0 million charge in 1997 related to the closure of two
facilities. Selling, general and administrative expenses as a percentage of net
sales for the twelve months ended December 28, 1997 decreased from 11.5% to
6.4%, as compared to the twelve months ended December 31, 1996, principally as a
result of the elimination of redundant personnel and administrative costs and
the increase in sales during the period. Combined 1997 MSXI and preacquisition
GRI selling, general and administrative expenses in 1997 were lower than the
combined TSG, APX and GRI selling, general and administrative expenses for 1996
primarily due to cost reductions realized upon integrating the APX Acquisition.
34
<PAGE> 36
Operating Income
Principally as a result of the foregoing offset by an increase in Michigan
Single Business Tax of $1.4 million, MSXI's operating income for the twelve
months ended December 28, 1997 increased $1.7 million (21.3%), from $8.0 million
to $9.7 million, as compared to the twelve months ended December 31, 1996, and
operating income as a percentage of sales for the twelve months ended December
28, 1997 decreased from 3.5% to 1.7% as compared to the twelve months ended
December 31, 1996.
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
Net Sales
TSG's net sales for 1996 increased $12.2 million (5.6%), from $216.1
million to $228.3 million, as compared to 1995. This increase resulted
principally from an increase in sales of Product Development Services in Europe
and an increase in sales of Business and Technology Services, particularly
training and marketing services, and the commencement of a new special vehicles
program in the United States. These increases were partially offset by a decline
in sales of Product Development Services in the United States due to the
completion of a multi-year project.
APX's net sales reported in its audited financial statements for fiscal
1996 decreased $5.1 million (3.6%), from $140.2 million to $135.1 million, as
compared to 1995. This decrease resulted principally from fiscal 1996 audited
results reflecting ten months and six days, as compared to 1995 results which
included twelve full months. For the year ended December 31, 1996, APX's
unaudited net sales increased $11.4 million (8.1%), from $140.2 million to
$151.6 million, as compared to 1995, principally as a result of an expansion in
sales of Product Development Services and Contract Staffing services in Europe,
as well as increased sales of Contract Staffing to both new and existing
customers in the United States. The increase was partially offset by a decrease
in PMC sales. The Company did not acquire PMC as part of the APX Acquisition.
GRI's net sales for 1996 increased $140.1 million (25.5%), from $550.4
million to $690.5 million, as compared to 1995. This increase resulted
principally from increased sales of temporary staffing procurement services in
the United States and increased sales of Business and Technology Services,
particularly consultant procurement services and training, development and
imaging services, all of which were provided only to Ford. In addition, GRI
began providing temporary staffing procurement services to Ford in Europe.
Gross Profit
TSG's gross profit for 1996 decreased $1.6 million (4.3%), from $37.4
million to $35.8 million, as compared to 1995, and gross profit as a percentage
of net sales for 1996 decreased from 17.3% to 15.7%, as compared to 1995. These
decreases resulted principally from underabsorbed fixed costs relating to the
decrease in sales of Product Development Services in the United States and an
increase in infrastructure costs necessary to support significantly higher sales
of Product Development Services in Europe.
APX's gross profit reported in APX's historical audited financial
statements for fiscal 1996 increased $0.8 million (11.3%), from $7.1 million to
$7.9 million, as compared to 1995. This increase resulted principally from a
change in the classification of approximately $2.0 million of administrative
expenses. In 1995 these expenses were accounted for in cost of sales whereas in
1996 such expenses were accounted for as selling, general and administrative
expenses. The increase also resulted from a change in classification of Michigan
Single Business Tax, which in 1995 had been included in cost of sales. This
increase was offset by the fact that 1996 results reported in APX's historical
audited financial statements reflect ten months and six days as compared to 1995
results which included twelve full months. After adjusting for the change in
classification of administrative expenses and Michigan Single Business Tax and
to include results for the period from November 7, 1996 to December 29, 1996,
for the year ended December 31, 1996, APX's unaudited gross profit decreased
$1.2 million (11.4%), from $10.5 million to $9.3 million, as compared to 1995,
principally as a result of a decline in the margin in sales of product
engineering services due to completions of higher margin contracts, costs of
transition to new projects and increased price competition. Gross profit as a
percentage of net sales for 1996 decreased from 7.5% to 6.1%.
35
<PAGE> 37
GRI's gross profit for 1996 increased $5.5 million (28.5%), from $19.3
million to $24.8 million, as compared to 1995. This increase resulted
principally from an increase in sales of its temporary staffing procurement
services. Gross profit as a percentage of net sales for 1996 increased from 3.5%
to 3.6%, as compared to 1995, as a result of increased gross profit margins due
to an increase in sales of higher margin Business and Technology Services in
1996. These increases were partially offset by higher costs as a percentage of
sales relating to temporary staffing procurement services as well as other
business services.
Selling, General and Administrative Expenses
TSG's selling, general and administrative expenses for 1996 increased $1.0
million (4.0%), from $25.2 million to $26.2 million, as compared to 1995. This
increase resulted principally from one-time severance payments to executives who
were released in contemplation of the APX Acquisition. Selling, general and
administrative expenses as a percentage of net sales for 1996 decreased from
11.7% to 11.5%, as compared to 1995 as a result of the increased sales.
APX's selling, general and administrative expenses reported in its
historical audited financial statements for 1996 increased $0.6 million (8.2%),
from $7.3 million to $7.9 million, as compared to 1995. This increase reflects a
change in the classification of approximately $2.0 million of administrative
expenses, which in 1995 were accounted for in cost of sales whereas in 1996 such
expenses were accounted for in selling, general and administrative expenses.
This increase was offset by the fact that 1996 results reported in APX's
historical audited financial statements reflect ten months and six days as
compared to 1995 results which included twelve full months. After adjusting for
the change in classification of administrative expenses and to include results
for the period from November 7, 1996 to December 29, 1996, for the year ended
December 31, 1996, APX's unaudited selling, general and administrative expenses
increased $0.2 million (2.2%), from $9.3 million to $9.5 million as compared to
1995, as adjusted. This increase was principally a result of an increase in
costs associated with the redesign of the Company's medical benefits program and
an increase in corporate administration costs, partially offset by a decrease in
marketing and business development expenses. Selling, general and administrative
expenses as a percentage of net sales for 1996 decreased from 6.6% to 6.3%, as
compared to 1995 principally as a result of the increase in net sales.
GRI's selling, general and administrative expenses decreased $1.7 million
(7.3%), from $23.3 million to $21.6 million, as compared to 1995. This decrease
was due to cost reduction initiatives in the finance and human resources areas,
partially offset by an increase in training and support staff costs which were
incurred to support higher sales volumes. Selling, general and administrative
expenses as a percentage of net sales for 1996 decreased from 4.2% to 3.1%, as
compared to 1995, principally as a result of the increase in net sales.
Operating Income
Principally as a result of the foregoing, TSG's operating income for 1996
decreased $2.6 million (24.5%), from $10.6 million to $8.0 million, as compared
to 1995, and operating income as a percentage of sales for 1996 decreased from
4.9% to 3.5%, as compared to 1995.
Principally as a result of the foregoing and a decrease in Michigan Single
Business Tax of $0.6 million, APX's operating loss reported in APX's historical
audited financial statements for 1996 increased $0.6 million (300%), from ($0.2)
million to ($0.8) million, as compared to 1995, and operating loss as a
percentage of sales for 1996 increased from (0.1%) to (0.6%), as compared to
1995.
Principally as a result of the foregoing, GRI's operating income for 1996
increased $7.3 million, from a loss of $4.3 million to income of $3.0 million,
as compared to 1995, and operating income as a percentage of sales for 1996
increased from (0.8%) to 0.4%, as compared to 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements are to service its
indebtedness, to fund capital expenditures and for working capital. The Company
believes that its cash flow from operations, together with its borrowing
capacity under the New Credit Facility, will be sufficient to meet such
requirements.
36
<PAGE> 38
Through the consummation of the TSG Acquisition, the Company acquired TSG
and the net assets of APX which were previously acquired by MASG on November 6,
1996. The purchase price of the TSG Acquisition was $145.6 million, which was
financed through $3.8 million of common equity, $36.0 million of Redeemable
Series A Preferred Stock, the $20.0 million CVC Bridge Loan, the $20.0 million
MascoTech Bridge Loan, the issuance of a $30.0 million Senior Subordinated Note
and $35.8 million of borrowings under credit facilities between the Company and
NBD as agent and its affiliates (the "Old Credit Facility"). On August 31, 1997,
the Company acquired GRI for $60.0 million which was financed with borrowings
under the Old Credit Facility, offset in part by substantial cash balances
acquired in the GRI Acquisition.
The Company typically pays its employees on a weekly basis and is
reimbursed by its customers 30 to 60 days later. However, in connection with the
Master Vendor Program, the Company currently receives reimbursement at
approximately the same time it makes payment to its suppliers.
On a combined basis, capital expenditures for the fiscal year ended
December 28, 1997 was $15.6 million. The majority of these capital expenditures
were to fund the purchase of computer systems and project specific equipment and
improvements on leased facilities. As of the date hereof, the Company expects
that its capital expenditure requirements, which are principally to support the
continued upgrade of systems and technology, will be approximately $14 million
in 1998.
During 1997, the Company's primary sources of funds to meet working capital
needs were from operations, funds made available through the Old Credit
Facility, the NatWest Facility, and the Ford Facility (as defined). A portion of
the Old Credit Facility was used to finance the GRI Acquisition. Net cash from
operating activities for the fiscal year ended December 28, 1997 decreased $6.0
million, from $7.8 million to $1.8 million, as compared to the year ended
December 31, 1996. This decrease was principally due to an increase in accounts
receivable. Net cash used for investing activities for the fiscal year ended
December 28, 1997 increased $165.9 million, from $4.8 million to $170.7 million,
as compared to the year ended December 31, 1996. This increase was principally
due to the TSG Acquisition and the GRI Acquisition. Net cash from financing
activities for the fiscal year ended December 28, 1997, increased $176.8
million, from $4.8 million to $181.6 million, as compared to the fiscal year
ended December 31, 1996. This increase was due to the CVC and MascoTech Bridge
Loans, aggregating $40.0 million, the issuance of $3.8 million of Common Stock,
$36.0 million of Redeemable Series A Preferred Stock, a $30.0 million Senior
Subordinated Note and borrowings under the Old Credit Facility.
Immediately following the Exchange Offer, the Company's total indebtedness
will consist of the Notes, borrowings under the New Credit Facility and
borrowings of approximately $7.5 million under various short-term arrangements.
Under the New Credit Facility, pro forma as of December 28, 1997, the Company
would have had the ability to borrow up to $43.9 million for working capital and
general corporate purposes, subject to certain conditions. The Company is in the
process of amending the New Credit Facility to add a $30 million term loan
portion. Term loan borrowings will be subject to satisfaction of the same
borrowing base requirements as are other borrowings under the New Credit
Facility. The Notes and the New Credit Facility will include certain financial
and operating covenants which will, among other things, restrict the ability of
the Company to incur additional indebtedness, make investments and take other
actions. See "Description of Notes" and "Description of Certain Other
Indebtedness." The ability of the Company to meet its debt service obligations
will be dependent upon the future performance of the Company, which will be
impacted by general economic conditions and other factors. See "Risk Factors."
For 1997, approximately 14% of the Company's pro forma net sales were from
foreign markets. The Company anticipates that its percentage of net sales
generated outside the United States will increase over time. The Company's
foreign revenues are usually received in the local currency and are typically
naturally hedged as the corresponding costs are usually in the same currency. To
the extent the Company is not naturally hedged, it intends to actively manage
its exposure to foreign exchange rate fluctuations.
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INFLATION AND SEASONALITY
Although the Company cannot anticipate future inflation, it does not
believe that inflation has had, or is likely in the foreseeable future to have,
a material impact on its results of operations. While the Company's contracts
typically do not include automatic adjustments for inflation, the Ford Master
Vendor Agreement does provide for automatic adjustments for inflation for
services provided under the Master Vendor Program. The Company's quarterly
operating results are affected primarily by the number of billing days in the
quarter and the seasonality of its customers' businesses. Demand for services of
the Company have historically been lower during the year-end holidays.
YEAR 2000
The Company recognizes the need to ensure its operations will not be
adversely impacted by Year 2000 software failures. Software failures due to
processing errors potentially arising from calculations using the Year 2000 date
are a known risk. The Company is addressing this risk to the availability and
integrity of financial systems and the reliability of operational systems. The
Company has established processes for evaluating and managing the risks and
costs associated with this problem. The inventory of affected computer hardware
and software is in process. The total cost of compliance and its effect on the
Company's future results of operations is being determined. However, management
believes the ultimate cost of compliance will not have a material effect on its
financial condition, results of operations or its cash flows.
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BUSINESS
GENERAL
The Company is a leading provider of outside staffing, engineering and
business services, principally to the automotive industry in the United States
and Europe, with the capability of providing services on a worldwide basis.
Through internal growth and acquisitions, the Company has become a single source
provider of a broad range of complementary services, including technical and
professional staffing services, engineering, design and related technical
services and other business and marketing services. In August 1997, the Company
acquired GRI, a wholly-owned subsidiary of Ford. In connection with the GRI
Acquisition, the Company entered into the Ford Master Vendor Agreement to manage
certain temporary staffing procurement services for Ford, and the Ford Master
Supply Agreement to provide certain general business services to Ford. By adding
GRI's capabilities and services to the Company's historical strength in
providing technical staffing and engineering and design services, the Company is
now able to sell a broad range of complementary services to both existing and
new customers within and outside the automotive industry. The Company believes
that it is the only company currently providing such a broad range of services
to the automotive industry on a worldwide basis. The Company employed or sourced
over 12,000 individuals at 53 operating facilities in 23 countries as of
December 28, 1997. The Company's principal operations are in North America and
Europe. Pro forma net sales and EBITDA for the fiscal year ended December 28,
1997 were $985.1 million and $33.2 million, respectively.
OEMs are increasingly relying on third parties to provide them with
essential services as globalization and competition lead them to improve
efficiency by focusing on their core competencies of vehicle development,
assembly and marketing. OEMs are also consolidating their supplier base by
contracting with larger, global organizations in order to streamline purchasing,
reduce costs and improve quality. Management expects the Company to continue to
benefit from these trends, both in the automotive and other industries.
The Company provides three strategic service offerings to its customers:
<TABLE>
<CAPTION>
IN-CLIENT SERVICES PRODUCT DEVELOPMENT SERVICES BUSINESS & TECHNOLOGY SERVICES
------------------ ---------------------------- ------------------------------
<S> <C> <C>
- - Contract Staffing - Concept Development - Automotive and Business Process Management
- - Master Vendor Program - Design Engineering - Marketing Services and Document Management
- Manufacturing Engineering - Purchasing Services
- Production Support - Training Services
- Special Vehicles - Image Archiving, Conversion and Warehousing
</TABLE>
In-Client Services, Product Development Services and Business and
Technology Services accounted for approximately 46%, 21% and 33%, respectively,
of pro forma net sales for the fiscal year ended December 28, 1997. The Company
provides its services to over 130 customers, including most of the major United
States OEMs and a number of automotive suppliers. The Company's largest
customers are Ford, GM and Chrysler, which accounted for 72%, 8% and 7%,
respectively, of the Company's pro forma net sales for the fiscal year ended
December 28, 1997. The Company believes that it has developed strong
relationships with its customers and has a reputation for quality, reliability
and service that has been recognized through Ford's Q1 and Chrysler's Pentastar
awards. In addition, most of its operations are ISO 9001 or 9002 certified.
In-Client Services. The Company provides two types of staffing services:
Contract Staffing, through which the Company acts as a direct supplier of
technical, professional and other temporary staffing, and the Master Vendor
Program, through which the Company acts as the master vendor of staffing
procurement.
Contract Staffing. As of December 28, 1997, Contract Staffing supplied
approximately 1,600 employees that it placed on assignment to approximately
130 customers in 10 countries. The Company classifies over 85% of its
employees on assignment as technical personnel. Through its position as
Ford's master vendor, the Company has also enhanced its opportunities to
provide Contract Staffing directly to Ford.
Master Vendor Program. The Master Vendor Program is an automated process
used to manage the procurement of a broad range of temporary staffing
services, including coordination of staffing from other
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temporary staffing suppliers. While the Company intends to expand its
Master Vendor Program services to other customers, the Company currently
provides such services solely to Ford pursuant to the Ford Master Vendor
Agreement. As of December 28, 1997, there were approximately 6,500
temporary employees at Ford who had been procured through the Master Vendor
Program.
Product Development Services. The Company offers a broad range of
engineering, design and other related services primarily to the automotive
industry including: concept development, design engineering, manufacturing
engineering, production support and special vehicle services. The Company
provides these services on a discrete basis and can draw on these complementary
capabilities to execute development programs for the body and chassis of new
vehicles, such as a recently introduced Ford minicar. As of December 28, 1997,
Product Development Services had a network of 30 offices and facilities situated
in major markets throughout North America, Europe, South America and Asia. Since
January 1, 1996, the Company has performed projects for OEMs including Ford, GM,
Chrysler, Daewoo, Rover, Volkswagen, Volvo, Mercedes and Mazda, and over 20
automotive suppliers such as Textron and Lear. For the fiscal year ended
December 28, 1997, no single project accounted for more than 1% of the Company's
pro forma net sales.
Business & Technology Services. The Company offers a broad range of
business and technical services, principally to the automotive industry
including: automotive and business process management, marketing services,
document management services and other administrative and customer-related
services. The Company typically assumes responsibility for specific non-core
functions of its customers, frequently on an extended basis. For example, the
Company's automotive and business process management services will typically
re-engineer a customer's existing internal processes, such as technical help
desks and warranty certification programs, to improve them and provide them on a
more efficient basis. Other services offered include marketing research,
customer satisfaction surveys, technical training schools and image archiving,
conversion and warehousing. The Company provides a number of these services
under the Ford Master Supply Agreement, pursuant to which the Company is the
sole or preferred supplier of these services to various business units of Ford.
In addition, the Company believes these services have applications across many
industries and provide opportunities for significant growth both in the
automotive and other industries.
The Company is a Delaware corporation. The principal executive offices of
the Company are located at 275 Rex Boulevard, Auburn Hills, Michigan 48326 and
its telephone number is (248) 299-1000.
COMPETITIVE STRENGTHS
Strong Customer Relationships and Reputation for Quality. The Company
believes that it has developed strong customer relationships with both OEMs and
automotive suppliers. Management believes that the Company's engineering
capabilities, reliable performance, strong customer service and competitive cost
structure enable it to attract new customers and to maintain its reputation with
existing customers for providing high quality services at competitive prices. As
a result of its focus on quality, the Company has received Ford's Q1 and
Chrysler's Pentastar awards, and most of the Company's operations are ISO 9001
or 9002 certified. The Company believes that its relationships and its
reputation for quality, reliability and service often enable the Company to
pursue business opportunities ahead of its competitors.
Global Presence. Management believes the Company's international presence
is a significant competitive advantage in winning and retaining new business and
meeting the global sourcing, quality and engineering requirements of its
customers. For example, when GM consumer-tested its European sedan replacement
last year, the Company built model vehicles using an integrated system that
enabled the Company to do the styling work near GM's designers in Germany and
Brazil and to build the vehicles in the United States where the cost was lower.
Similarly, automotive suppliers require support in locations where their OEM
customers demand their presence. For example, the Company supports two major
United States-based interior systems suppliers in Europe and Brazil. Non-United
States sales of In-Client Services, Product Development Services and Business
and Technology Services accounted for 14% of the Company's pro forma net sales
for the fiscal year ended December 28, 1997.
Broad Range of Services Provided. The Company believes that its broad range
of service offerings provides several advantages by: (i) simplifying the
procurement and monitoring process for its customers who
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require multiple services; (ii) facilitating cross-selling of services to
existing customers; (iii) providing multiple opportunities to identify and
penetrate new customers; and (iv) diversifying the Company's revenues and
earnings. Additionally, the Company believes that its global presence and broad
range of services enable it to recruit and retain a talented pool of employees.
Value-Added Provider. The Company believes that it is frequently able to
operate with a lower cost structure and a higher degree of flexibility and
responsiveness relative to the larger in-house operations of its customers. The
Company believes that In-Client Services provides customers with a
cost-effective and flexible way to manage certain of their technical and
professional staffing needs by assuming the responsibility for procuring,
compensating, monitoring and, in some cases, training temporary staff. Product
Development Services enables OEMs and automotive suppliers to manage their
engineering and design services for selected non-core projects on an efficient
basis. Business and Technology Services provides services that are essential to
the Company's customers, but not at the core of their business competencies.
Investment in Technology. The Company offers its customers access to many
sophisticated technologies. These include supercomputing resources, analytical
software and a large network of CAD terminals connected by an international
communications infrastructure. The Company has made substantial investments in
state-of-the-art equipment and related training to maintain its competitive
technological position. The Company believes it is one of the few independent
engineering firms that operates all major CAD platforms used by the major United
States OEMs and, as of December 28, 1997, the Company operated approximately 500
CAD terminals. The Company's communications infrastructure permits the rapid
exchange of data between the Company and its customers. The Company believes
that its Master Vendor Program, which combines an intranet-based placement
system with procedures to support the monitoring and continuous improvement of a
customer's temporary staffing supplier base, is the most comprehensive system
for management of staffing services. Business and Technology Services uses
proprietary software as an integral part of many of the services that it offers.
BUSINESS STRATEGY
The Company's global market position and breadth of services distinguish it
as one of the leading providers of outside staffing, engineering and business
services to the automotive industry and position the Company to take advantage
of positive trends both in the automotive and other industries. The Company's
business strategy is to grow profitably through the following initiatives:
Increase Market Share at Existing Customers. As a result of the APX and GRI
Acquisitions, the Company has expanded its global presence and product
offerings. For example, the GRI Acquisition gave the Company the ability to
provide a broad range of additional services and capabilities that historically
GRI had provided only to Ford. The Company believes that offering three
categories of services that are often complementary creates significant
cross-selling opportunities. For example, customers of Product Development
Services can utilize the Company's image archiving, conversion and warehousing
services for engineering drawings. The Company also can offer its Master Vendor
Program to OEMs other than Ford who are already customers of Contract Staffing.
The Company also believes that it has several opportunities to sell certain
Business and Technology Services that are currently provided only to Ford to
other OEMs and their suppliers. In addition, the Company believes that there are
significant opportunities to sell packages of multiple services, many of which
the Company historically has not attempted to market together, to its existing
customers.
Increase Global Automotive Market Share. Geographic expansion will continue
to be an important element of the Company's business strategy. The Company
intends to expand its existing presence in Germany, the development center for
several important OEMs, and has recently opened new locations in Munich and
Ingolstadt. The Company has established operations in South America and
Australasia to take advantage of global growth opportunities as the Company's
customers expand their operations in these regions. As a result of the Company's
strong customer relationships and worldwide presence, management believes that
the Company is well positioned to expand with OEMs and other suppliers in
established as well as emerging markets.
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Expansion into Non-Automotive Markets. The Company's management,
established infrastructure and successful track record of providing staffing,
engineering and business services to several of the world's largest and most
complex organizations position it to expand into new, non-automotive markets.
The Company believes other major corporations are attractive potential customers
for many of the Company's services.
Rationalize Cost Structure. The Company intends to improve its
profitability through the rationalization of its operations, including the
further rationalization of operations acquired in the GRI Acquisition. The
Company expects to realize these cost savings through the consolidation of back
office activities and the ongoing rationalization of duplicative facilities,
management and administrative offices.
Pursue Additional Strategic Acquisitions. The Company plans to continue to
make selective strategic acquisitions to enhance its global market position and
further broaden its service offerings. The Company believes that the
consolidation of the automotive supplier base will present additional
opportunities for acquisitions. The Company seeks acquisitions that will
strengthen MSXI's relationships with existing customers and provide access to
new customers, complement MSXI's existing global capabilities and provide MSXI
with growth opportunities in new markets.
OPERATIONS
IN-CLIENT SERVICES
The Company provides two types of staffing services: (i) Contract Staffing,
which is the supply of technical, professional and other temporary staffing and
(ii) the management of staffing procurement through its Master Vendor Program.
In-Client Services operates principally in the United States and in the United
Kingdom, and also in continental Europe and Latin and South America. The Company
plans to open additional offices in North America and Europe, in part to meet
Ford's requirements pursuant to the Ford Master Vendor Agreement.
Contract Staffing. The Company offers a full range of Contract Staffing
services including long and short-term temporary staffing, temporary-to-direct
hiring, payroll services and placement services. As of December 28, 1997, the
Company supplied approximately 1,600 temporary employees. The Company classifies
over 85% of its employees on assignment as technical personnel. The Company
supplies these personnel primarily to the automotive industry. The Company also
supplies a small number of office/ professional and light industrial workers.
The temporary staff that the Company supplies to its customers are
employees of the Company. These employees typically are assigned to work on a
full-time basis on a specific project of a customer. The period of an assignment
ranges from one day to ten years. The average length of an assignment is 33
months. Services are typically charged to customers on an hourly basis.
The Company has a dedicated recruiting staff that collects resumes from
trade shows, job fairs, technical schools, open houses, employee and customer
referrals and other sources. The Company has developed a recruiting database of
over 25,000 current resumes. The Company emphasizes to potential employees the
challenging nature of assignments, competitive compensation packages and the
opportunities for global assignments with a variety of customers. The recruiting
staff also recruits for positions elsewhere in the Company. This provides
prospective employees with diverse career opportunities and reduces the
Company's recruiting costs on a Company-wide basis.
Master Vendor Program. The Master Vendor Program permits a customer to
consolidate and streamline the procurement, administration and billing of all of
its temporary staffing. The customer specifies the number of positions, position
requirements and skill sets on a computerized order form that, when completed,
is transmitted through an intranet to the Company. The Master Vendor Program
then procures the contract labor from independent suppliers, as well as the
Company's Contract Staffing services, to fill the positions. Procurement
services provided by the Master Vendor Program may include, but are not limited
to, supplier contract administration, candidate interviewing, selection and
placement, purchase order processing, timesheet (invoice) processing, supplier
payment and customer billing and reporting. The Company processes each
individual contractor's time sheets on a periodic basis and provides a
consolidated, detailed invoice to the customer and a single payment to each
supplier.
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The following diagram illustrates the difference between the Master Vendor
Program and the typical temporary staffing procurement process:
TYPICAL PROCUREMENT PROCESS FLOW CHARTS
The Master Vendor Program enables customers to continually monitor and
improve their temporary staffing suppliers. The Company has the capability to
collaborate with its customers to select an appropriate pool of suppliers and to
establish individual service objectives. Based on criteria set by the customer,
a supplier's performance can be continuously reviewed and the supplier base can
be modified to remove suppliers who have failed to perform satisfactorily or to
direct additional business to better performing suppliers. Suppliers are
evaluated on a number of factors, including "hit" rate (how many job positions
the supplier fills), response rate (how frequently the supplier submits a resume
for an open position), quality of the resumes submitted, quality of the
contractee, contractee attrition/turnover and the average bill rate for
contractees.
GRI began providing temporary staffing procurement services to Ford in
1994. Currently, the Company provides Master Vendor Program services only to
Ford, although the Company has begun to market the Master Vendor Program to
other intensive users of temporary staffing services. As of December 28, 1997,
there were approximately 6,500 temporary employees at Ford who had been procured
through the Master Vendor Program.
Since the GRI Acquisition, the Company has been providing Master Vendor
Program services to certain Ford business units pursuant to the Ford Master
Vendor Agreement. The Ford Master Vendor Agreement designates the Company as the
sole "master vendor" of selected temporary staffing services to Ford. These
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services consist of management of the selection, retention and payment of
suppliers of temporary staff to Ford through the Master Vendor Program. In
exchange for such services, Ford pays certain agreed upon compensation to the
Company. In the United States, this compensation includes payment for the
personnel supplied to Ford at prescribed hourly billing rates, together with
certain agreed upon fees. These billing rates are adjusted to reflect inflation
on an annual basis. The Company is not entitled to compensation from Ford for
personnel costs that exceed the prescribed billing rates. The Company can earn
additional margins by negotiating rates with its suppliers that are lower than
the prescribed billing rates. The Ford Master Vendor Agreement contemplates the
reduction of the fee percentage over time, with such reductions being fully
implemented by July 1998. Prior to the GRI Acquisition, GRI implemented a number
of cost-saving measures that will partially offset these fee percentage
reductions. In the United Kingdom, the Company receives compensation in the form
of a direct fee and passes through supplier charges directly to Ford. The Ford
Master Vendor Agreement specifies that certain percentages of Ford's
requirements for personnel be filled with the Company's Contract Staffing
employees. The Ford Master Vendor Agreement also provides that the Company will
pay to Ford a specified percentage of the pre-tax profits earned by the Company
from Master Vendor Program services provided to non-Ford entities for the term
of the agreement. The parties have agreed to maintain an advisory board
comprised of executives from both the Company and Ford to monitor and enhance
the relationship between the parties. The Ford Master Vendor Agreement is
scheduled to terminate in August 2002, although the parties have agreed to
negotiate in good faith to extend the term for an additional five-year period.
The agreement is also subject to certain termination rights, including Ford's
right to terminate upon MSXI's failure to satisfy certain standards of
performance and competitiveness or upon the occurrence of a change in Ford's
business, brought about by adverse economic conditions, that eliminates the need
for the Master Vendor Program services.
Pursuant to the Ford Master Vendor Agreement, candidates are procured in
the United States from 50 to 60 suppliers, with 97% of hired candidates sourced
from 38 preferred suppliers. Most candidates are engineers and other technical
personnel.
Customers. In-Client Services has approximately 130 customers, including
Ford, GM, and Chrysler, who accounted for 80%, 7% and 6%, respectively, of
In-Client Services pro forma net sales for the fiscal year ended December 28,
1997. Currently, the Company provides Master Vendor Program services only to
Ford.
Competition. The temporary staffing industry is highly competitive and
fragmented, with limited barriers to entry. The Company competes in staffing
services based on its ability to provide high quality personnel on an efficient
basis and at a competitive price. The Company believes that its global presence
and its database of prospective employees provide it with a competitive
advantage in its ability to supply labor efficiently on short notice and on a
global basis. The Company also believes that the flexibility, comprehensiveness
and extent of automation of the Master Vendor Program will provide it with a
competitive advantage in supplying Contract Staffing services. The Company's
principal competitors in In-Client Services include CDI, TechAid, Manpower,
Kelly Services Technical, Olsten, Adecco, Randstad (in Europe only) and Volt.
Regulation. In many countries, particularly in continental Europe, entry
into the temporary employment market is restricted by the requirement to
register with, or obtain licenses from, a government agency. In addition, a wide
variety of ministerial requirements may be imposed, such as record keeping,
written contracts and reporting. The United States does not presently have any
form of national registration or licensing requirement.
PRODUCT DEVELOPMENT SERVICES
The Company offers a broad range of Product Development Services. Product
Development Services projects vary widely and may require the Company to provide
only one or more of its services described below or, alternatively, may require
the Company to provide all such services. Product Development Services
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operates in the United States, the United Kingdom, Germany, France, Brazil,
Mexico, Spain, India and China.
- CONCEPT DEVELOPMENT. The Company provides support capabilities, such as
conceptualization and clay modeling of new car concepts, building
prototypes of concept vehicles and evaluating similar vehicles produced
by competitors. These services assist OEMs in defining and styling
vehicles.
- DESIGN ENGINEERING. The Company designs parts for new cars and redesigns
parts for existing models to differentiate a new model or for a new,
foreign market. Design engineering services also include packaging
studies, simulation studies to evaluate noise, vibration and harshness
characteristics, crash and durability analysis and ergonomic and
visibility studies.
- MANUFACTURING ENGINEERING. The Company provides a range of manufacturing
engineering services required for the assembly of vehicle bodies. These
services involve designing the assembly layout for part or vehicle
production, including workstations, conveyance systems, and related
checking fixtures. The Company manufactures or purchases and then
assembles the components of tools for welding, assembly, conveyance and
testing. The Company uses advanced simulation methods to evaluate cycle
times, capacity and robot programming. The Company's services range from
the design of discrete work stations to the planning of entire assembly
layouts. For example, the Company currently is responsible for the design
and build of all checking fixtures for the entire body of a small GM
sedan to be sold in China.
- PRODUCTION SUPPORT. The Company provides capabilities such as engineering
visualization to assess the feasibility of certain phases of the vehicle
production process.
- SPECIAL VEHICLES. The Company provides assembly, painting and other
detailing services for specialty vehicles, including show cars.
The Company is capable of engineering complete niche vehicles, which
typically are derivatives of existing vehicle platforms. For example, the
Company recently engineered an alternative fuel vehicle for Ford. In addition,
the Company managed the engineering and design program for a new Ford minicar,
which included building the prototype and assisting Ford in the market launch of
the minicar. The Company has also completed similar program management and
prototype builds for rapid-transit vehicles, personal recreation vehicles and
theme park vehicles.
Customers. Since January 1, 1996, Product Development Services has
performed projects for OEMs including Ford, GM, Chrysler, Daewoo, Rover,
Volkswagen, Volvo, Mercedes and Mazda, and over 20 automotive suppliers such as
Textron and Lear. Customers typically invite several companies to bid for
contracts. The Company provides Product Development Services under purchase
orders which may be short or long-term, and may provide for fixed pricing,
pricing based on time and materials or price per unit.
Competition. The industry in which Product Development Services competes is
highly competitive. Competition in Product Development Services is segmented by
the types of services offered and the location of customers. The basis of
competition includes the size of the firms competing, global capability,
relevant experience, prior relationships with customers and price. The Company's
competitors in the United States include Modern Engineering, a subsidiary of
CDI, Defiance, and MegaTech, a subsidiary of Becker Group, and in Europe include
Bertrandt, Hawtal Whiting, Engineering & Design and Rucker.
BUSINESS & TECHNOLOGY SERVICES
The Company provides a broad range of business and technical services,
principally to the automotive industry. Business and Technology Services had 13
locations in North and South America, Europe and Asia and approximately 1,400
employees as of December 28, 1997. Business and Technology Services include: (i)
automotive and business process management; (ii) marketing and document
management services; (iii) purchasing services; (iv) training services; and (v)
image archiving, conversion and warehousing. All of these services seek to add
value through process re-engineering and/or technology application. These
services enable the Company to manage customers' non-core, but essential,
business processes.
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The Company's automotive and business process management services
re-engineer processes such as warranty administration, dealer technical
hotlines, customer assistance centers and manufacturer and dealer field service
programs, and then manages the re-engineered process for the customer. The
Company further enhances the value of these business services by providing
global service integration, a multi-lingual workforce and technology
applications. While the Company has developed its expertise in providing these
services to the automotive industry, its services can be used by manufacturers
in other industries that distribute their products through dealers and are
concerned with brand equity and customer satisfaction.
The Company provides a variety of marketing and document management
services. For example, the Company conducts marketing research for its customers
by organizing and administering focus groups surveys, such as customer
satisfaction surveys, and organizing and reporting the results. The Company also
sets up and staffs outbound call centers that make customer follow-up calls
after a customer visits a dealership. Document Management services include full
printing and fulfillment services and the management of copy centers linked
together with intranet technology. The Company believes that there is potential
for expansion of its marketing services since these services are needed not just
by automotive companies but by many large companies in other industries.
Purchasing services consists of administering payment for consulting and
training services for Ford. This includes preparation, administration and
payment of vendor invoices related to consulting and training services and
university contracts prepared for Ford. The Company believes that it can expand
this business by offering comparable services to customers other than Ford and
by adding other purchased commodities to the procurement process.
The Company's training services include the design, development and
administration of training programs for plant management, technical training
schools, and more specialized dealer technician training. These services also
encompass CD-ROM interactive training for use on personal computers. Most of the
employees performing these services work on-site at the customer's facilities.
The Company believes that it can successfully cross-sell these services to other
customers as well as pursue partnerships with other training companies.
The Company's image archiving, conversion and warehousing provides an
on-line service to Ford which makes available archived engineering drawings
through an on-line computer network. The Company archives electronic files,
converts paper drawings and aperture cards to electronic images that are then
stored on computer servers and accessed by the user through internet/intranet
technologies. Presently, the Company archives over one million engineering
drawings for Ford which are available to the engineering and manufacturing
departments through Ford's intranet. In addition to engineering drawings, the
group has archived corporate finance manuals, engineering process and standards
manual and human resource records. The Company believes there are significant
opportunities for growth in this business by applying the archiving and
retrieval process to other intensive document users, such as governmental
agencies, the healthcare industry and manufacturing and engineering companies.
Most of the operations included in Business and Technology Services were
acquired by the Company through the GRI Acquisition, and as such Ford is
currently its principal customer for these services. The Company and Ford
entered into the Ford Master Supply Agreement which provides that, for a
five-year term ending in August 2002, the Company shall be the sole or preferred
supplier of these services to various business units of Ford, with the exception
of selected marketing and training services. The Ford Master Supply Agreement
also provides that the Company will continue to administer and perform services
for the Ford Customer Service Division (Europe) ("FCSD"), or will perform
similar services at the same level as those provided to FCSD, for the term of
the Ford Master Supply Agreement. Ford's obligations under the Ford Master
Supply Agreement are subject to the Company remaining competitive as to price,
quality and timeliness of delivery with respect to each of the services
provided.
Customers. During 1997, Business and Technology Services provided services
to 16 customers. Business and Technology Services' customers include Ford,
Chrysler, GM, Jaguar, New Holland, Mazda, Procter & Gamble, Caterpillar,
Brunswick Marine and Lockheed. Ford (including Jaguar and Mazda) accounted for
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92% of Business and Technology Services' net sales on a pro forma basis for the
fiscal year ended December 28, 1997.
Competition. The industry in which Business and Technology Services
competes is highly competitive, although the degree of competition depends on
the service provided. In many cases, the principal competition is the customer's
in-house operations. For certain of the services such as training, marketing and
imaging services, there are numerous outside competitors, many of whom have
greater name recognition and marketing, financial and other resources than the
Company and some of whom have the capability to provide more highly integrated
services. In other cases where the Company has been an innovator in developing
outsourced services, the competitive market is developing.
SALES AND MARKETING
The Company's marketing efforts take place at several levels. Senior
management is responsible for identifying opportunities to develop new services
and to sell existing services to new or current customers, and for coordinating
marketing initiatives with potential customers. The local managers responsible
for the delivery of the Company's services support these efforts. Senior
management is responsible for monitoring the emerging demand for services so
that efforts can be expanded or redirected to take advantage of potential
business either in established or new marketing areas. Each office is
responsible for determining the potential market for services in its geographic
area and developing that market through personal contact with prospective and
existing customers.
EMPLOYEES
The following table sets forth certain information regarding the Company's
employees as of December 28, 1997.
<TABLE>
<CAPTION>
NUMBER OF
EMPLOYEES
---------
<S> <C>
North America............................................... 4,023
United Kingdom.............................................. 879
Germany..................................................... 273
Rest of Europe.............................................. 322
South America............................................... 37
Australasia................................................. 37
-----
Total..................................................... 5,571
=====
</TABLE>
Of the Company's 5,571 employees, approximately 5,135 were paid on an
hourly basis. Currently, approximately 200 of the Company's employees in the
United States are members of unions. The Company has two collective bargaining
agreements with the International Association of Machinists and Aerospace
Workers (the "IAM"). One of these agreements, which covers 55 employees, expires
in March 2001 and the other agreement, which covers the remainder of unionized
employees, expires in September 1998. The Company is currently negotiating the
terms of a third collective bargaining agreement, which will cover approximately
30 employees, with the International Union, United Automobile, Aerospace and
Agricultural Implement Workers of America (the "UAW"). The majority of the
Company's European employees are members of industrial trade union organizations
and confederations within their respective countries. The majority of these
organizations and confederations operate under national contracts which are not
specific to any one employer. The Company has experienced labor disputes at
certain of its facilities. Negotiations in 1995 over one of the IAM collective
bargaining agreements resulted in a two-day work stoppage. A 1997 dispute with
employees represented by the UAW at an operation employing approximately 100
union personnel accelerated the anticipated closing of the operation due to the
inability of the Company and the employees to renegotiate the collective
bargaining agreement upon its expiration. The Company believes its current
relations with its employees are good.
47
<PAGE> 49
PROPERTIES
The following table sets forth certain information regarding the facilities
operated by the Company as of December 28, 1997.
<TABLE>
<CAPTION>
NUMBER OF
REGION FACILITIES
------ ----------
<S> <C>
North America............................................... 26
United Kingdom.............................................. 9
Germany..................................................... 6
Rest of Europe.............................................. 8
South America............................................... 1
Australasia................................................. 3
--
Total....................................................... 53
==
</TABLE>
Most of the Company's facilities are offices, and all but one of the
Company's facilities are leased. The Company believes that the termination of
any one of its leases would not materially adversely affect the Company. In
addition, the Company leases 5 facilities that were idle as of December 28,
1997.
ENVIRONMENTAL
The Company's operations and properties are subject to foreign, federal,
state and local environmental protection laws and regulations, such as those
governing discharges into air and water, as well as handling and disposal of
solid and hazardous wastes. The requirements of these laws and regulations have
tended to become increasingly stringent, complex and costly to comply with.
Certain environmental laws, such as the Comprehensive Environmental
Response, Compensation & Liability Act ("CERCLA" or "Superfund") provide for
strict, joint and several liability for investigation and remediation of spills
and other releases of hazardous substances. Such laws may apply to conditions at
properties presently or formerly owned or operated by an entity or its
predecessors, as well as to conditions at properties at which wastes or other
contamination attributable to an entity or its predecessors come to be located.
Certain of the Company's properties may require remediation as the result of
activities at such properties occurring prior to the Company's operations at
such locations. With respect to certain properties, the Company believes that
prior owners or operators will be obligated to perform any required remediation,
or to indemnify the Company pursuant to its agreements with such parties, should
remediation be necessary. There can be no guarantee that such third parties will
perform their obligations under such agreements and as a result it is possible
that the Company will be required to make expenditures for environmental
remediation in the future. However, based upon the Company's experience to date,
the Company believes that any costs it may incur relating to environmental laws
will not have a material adverse effect on the Company's business, financial
condition and results of operations. There can be no assurance, however, that
future events, such as changes in existing laws, the development of new facts,
or the failure of prior owners or operators to meet their contractual
obligations to the Company, will not cause the Company to incur additional costs
that could have a material adverse effect on the Company's business, financial
condition and results of operations.
LEGAL PROCEEDINGS
On December 23, 1997, Cambridge Industries, Inc. filed a complaint against
the Company in Michigan State Court. The complaint alleges that the Company, by
retaining approximately $1.1 million of funds paid into a lock-box account
maintained by the Company, has converted such funds. Cambridge Industries is
seeking whatever relief the court deems just, including treble damages. The
Company believes it has meritorious defenses and counterclaims to this action
and intends to defend itself vigorously against all of the allegations contained
in the complaint. The Company does not believe that the ultimate outcome of this
litigation will have a material adverse effect on its consolidated financial
condition or results of operation.
48
<PAGE> 50
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to
directors and executive officers of the Company as of March 31, 1998.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Erwin H. Billig........................... 71 Chairman of the Board of Directors
Ralph L. Miller........................... 56 President; Chief Operating Officer
Frederick K. Minturn...................... 42 Executive Vice President; Chief Financial Officer
Derek Grills.............................. 54 Vice President, In-Client Services
Don Springer.............................. 49 Vice President, Business and Technology Services
Richard A. Manoogian...................... 61 Director
Richard M. Cashin, Jr..................... 44 Director
Michael A. Delaney........................ 43 Director
David E. Cole............................. 60 Director
Lee Gardner............................... 51 Director
</TABLE>
Erwin H. Billig has been Chairman of the Board of Directors since January
3, 1997. He served as Vice Chairman of MascoTech from 1994 to 1997 and was
President and Chief Operating Officer of MascoTech from 1986 to 1994. He is also
a Chairman of the Board of Directors of Titan Wheel International, Inc., a
director of OEA, Inc. and a director and Vice Chairman of Delco Remy
International, Inc.
Ralph L. Miller has served as President and Chief Operating Officer since
January 3, 1997. He was President and Chief Executive Officer of APX from
January 1994 through December 1996, and Executive Vice President of Aero
Detroit, Inc. from 1992 to 1994. From 1985 to 1992, Mr. Miller served as
President of Modern Engineering. He is also a director of Separation Dynamics
International Ltd., Industrial Technology Institute and iX Systems, Inc.
Frederick K. Minturn has been Executive Vice President and Chief Financial
Officer since January 3, 1997. Mr. Minturn was Group Controller of MascoTech's
Automotive Operations from 1991 through December 1996 and was a Vice President
of such group from 1994 through December 1996.
Derek Grills has served as Vice President -- In-Client Services since
January 3, 1997. From July 1994 through December 1996, Mr. Grills was Vice
President of In-Client Services for APX. Before joining APX, he was Vice
President of TAD Resources International, Inc. from 1983 to 1994.
Don Springer has served as Vice President of Business and Technology
Services since the GRI Acquisition on August 31, 1997. Prior to such date, Mr.
Springer was President and Chief Operating Officer of GRI. During his ten years
with GRI, he held multiple operating positions including Chief Informational
Officer, Vice President International Operations, Vice President of various
United States operating divisions and Vice President Sales and Marketing.
Richard A. Manoogian has been a director since January 3, 1997. Mr.
Manoogian served as Chairman, Chief Executive Officer and a director of
MascoTech from 1984 to 1997 and continues to serve as Chairman and as a
director. Mr. Manoogian is also Chairman of the Board of Masco Corporation and a
director of First Chicago NBD Corporation, Detroit Renaissance and The American
Business Conference.
Richard M. Cashin, Jr. has been a director since January 3, 1997. Mr.
Cashin has been president of CVC since 1994. Prior to being appointed president,
Mr. Cashin served as a Managing Director of CVC for more than four years. Mr.
Cashin is also a director of Levitz Furniture Inc., Delco Remy International,
Inc., LifeStyle Furnishings International Ltd., Fairchild Semiconductor
Corporation, FFC Holding, Inc., Cable Systems International, Euramax
International, Plc, Titan Wheel International, Inc., Hoover Group Inc., Thermal
Engineering, Gerber Childrenswear Inc., JAC Holding Corporation, GVC Holdings,
Ballantrae Corporation and Delta Commodities, Inc.
49
<PAGE> 51
Michael A. Delaney has been a director since January 3, 1997. Mr. Delaney
has been a Vice President of CVC since 1989. Mr. Delaney is also a director of
GVC Holdings, JAC Holding Corporation, CORT Business Services Corporation, Inc.,
Palomar Technologies Corporation, Enterprise Media Inc., SC Processing, Inc.,
Triumph Group, Inc., CLARK Material Handling Inc., Ballantrae Corporation,
International Knife and Saw, Inc., Aetna Industries, Inc., AmeriSource Health
Corporation and Delco Remy International, Inc.
David E. Cole has been a director since January 3, 1997. Mr. Cole has been
the Director of the Office for the Study of Automotive Transportation (OSAT) at
the University of Michigan's Transportation Research Institute since 1978. Prior
to attaining this position, Mr. Cole was a Professor of Mechanical Engineering
at the University of Michigan since 1967. Mr. Cole is also a director of the
Automotive Hall of Fame and is on the Board of Trustees of Hope College. From
1985 to 1988, Mr. Cole served as a director of the Society of Automotive
Engineers.
Lee M. Gardner has been a director since January 3, 1997. Mr. Gardner
served as President and Chief Operating Officer of MascoTech from 1992 to 1997,
and continues to serve as President and Co-Chief Operating Officer. Prior to
1992, he served as President of MascoTech's Automotive Operations.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to all
compensation paid or earned for services rendered to the Company and its
subsidiaries in all capacities in 1997 (except for bonus amounts, which are
compensation for services rendered in 1996) by the Company's President and the
three other executive officers whose total annual salary and bonus for the
fiscal year ending December 28, 1997 exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------
OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
--------------------------- ---- ------ ----- ------------
($) ($) ($)
<S> <C> <C> <C> <C>
Ralph L. Miller.......................................... 1997 325,000 -- --
President; Chief Operating Officer
Frederick K. Minturn..................................... 1997 200,000 65,000 92,961(1)
Executive Vice President; Chief Financial Officer
Derek Grills............................................. 1997 165,000 36,000 --
Vice President, In-Client Services
Don Springer(2).......................................... 1997 149,000 212,453 142,730
Vice President, Business and Technology Services
</TABLE>
- -------------------------
(1) Representing the value on the date of a grant of 4,697 shares of common
stock of MascoTech pursuant to MascoTech's 1991 Stock Incentive Plan, which
represented compensation for services in 1996.
(2) The amounts of compensation for Mr. Springer were neither set nor paid by
MSXI, but were determined and paid by GRI, Mr. Springer's employer until
August 1997. Mr. Springer began receiving compensation from MSXI on January
1, 1998.
DIRECTOR COMPENSATION
Outside directors are entitled to receive $10,000 in annual compensation
and $500 per meeting attended. As of the date of this Offering Memorandum, Mr.
Cole is the only outside director.
EMPLOYMENT AGREEMENTS
Ralph L. Miller and Frederick K. Minturn. Effective as of January 3, 1997,
the Company entered into employment agreements with Mr. Miller to serve as
President and Chief Operating Officer and Mr. Minturn
50
<PAGE> 52
to serve as Executive Vice President and Chief Financial Officer, each for an
initial term of two years. The agreements will automatically renew for
successive one-year terms unless otherwise terminated in writing by either the
Company or Messrs. Miller or Minturn, as the case may be. Annual base salary for
Mr. Miller is $325,000 and for Mr. Minturn is $200,000, subject, in each case,
to increases upon approval by the Board of Directors. The Company has also
agreed to pay Mr. Miller and Mr. Minturn a discretionary annual performance
bonus of up to 50% and 40%, respectively, of his annual base salary for each
fiscal year of the Company that ends during the term of his employment. The
amount of such bonus will be based upon the achievement of certain performance
goals to be set by the Company. Mr. Miller and Mr. Minturn will also be entitled
to all other employee benefits maintained for officers and employees of the
Company. The Company may terminate employment upon death or disability. Either
the Company or Mr. Miller or Mr. Minturn, as applicable, may terminate the
agreement, with or without cause (as defined therein). If the agreement is
terminated without cause by the Company or with good reason (as defined therein)
by Mr. Miller or Mr. Minturn, as applicable, the Company will pay to Mr. Miller
or Mr. Minturn, as applicable, the full base salary for the remainder of the
term then in effect. If, however, the agreement is terminated without cause by
the Company during or upon the expiration of the initial term, then Mr. Miller
or Mr. Minturn, as applicable, shall receive the full base salary for not less
than one year. The agreements also provide that, during the term of their
employment, and thereafter for the greater of twelve months or the remainder of
the then current term, Mr. Miller and Mr. Minturn will not, directly or
indirectly, engage in certain activities competitive with the business of the
Company.
Don Springer. On August 28, 1997, the Company entered into an at-will
employment agreement with Mr. Springer to serve as Vice President, Business and
Technology Services. Annual base salary for Mr. Springer is $195,000. In
addition, Mr. Springer may be paid a bonus up to 30% of his annual base salary
in accordance with the Company's performance. Mr. Springer may be awarded an
additional 15% of his base salary by the Board of Directors if the Company's
performance exceeds expected results. The Agreement also includes a commitment
by the Company to offer Mr. Springer the opportunity to purchase 1,000 shares of
Class A Common Stock of the Company at $40 per share, subject to certain
conditions, including approval by the Board of Directors and Mr. Springer's
continuous employment until September 1, 1998. Should the Company choose to
terminate Mr. Springer's employment without cause, he will be entitled to a
gross amount of $230,000, subject to a release of all claims against the Company
or its affiliates relating to his termination.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the compensation committee are Messrs. Billig, Delaney and
Gardner.
51
<PAGE> 53
PRINCIPAL STOCKHOLDERS
The following table provides certain information regarding the beneficial
ownership, as defined in Rule 13d-3 of the Securities Exchange Act of 1934 (the
"Exchange Act"), of the Company's common stock as of April 6, 1998 by (i) each
stockholder known to the Company to be the beneficial owner of 5% or more of any
class of the Company's voting securities, (ii) each of the Company's directors
and executive officers and (iii) all directors and executive officers as a
group. So far as is known to the Company, the persons named in the tables below
as beneficially owning the shares set forth therein have sole voting power and
sole investment power with respect to such shares, unless otherwise indicated.
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY OWNED PERCENT OF CLASS
---------------------- ----------------------
SERIES A SERIES A
CLASS A PREFERRED PREFERRED
NAME OF BENEFICIAL OWNER COMMON STOCK CLASS A STOCK
------------------------ ------- --------- ------- ---------
<S> <C> <C> <C> <C>
Citicorp Venture Capital, Ltd.......................... 43,752* 180,000 46.1% 50.0%
399 Park Avenue, 14th Floor
New York, New York 10043
MascoTech, Inc......................................... 43,752* 180,000 46.1% 50.0%
21001 Van Born Road
Taylor, Michigan 48180
Erwin H. Billig........................................ 2,000* -- 2.1% --
Ralph L. Miller(1)..................................... 3,000* -- 3.2% --
Frederick K. Minturn................................... 1,500* -- 1.6% --
All directors and executive officers as a group........ 7,500 -- 7.9% --
</TABLE>
- -------------------------
* Consists of an equal number of shares of each of Series A-1 Common Stock,
Series A-2 Common Stock, Series A-3 Common Stock and Series A-4 Common Stock
(collectively, the "Class A Common Stock")
(1) Mr. Miller has agreed in principle with CVC to acquire certain shares of
Class A Common and Series A Preferred Stock currently held by CVC for an
aggregate purchase price of $1,000,000. Mr. Miller intends to borrow
$250,000 of the purchase price from the Company, such loan to mature on
December 31, 1999 and to bear interest at (i) the same rate of interest
borne by the Notes or (ii) the highest rate permitted under applicable law,
if such rate is less than the interest rate borne by the Notes, and to
borrow the remaining $750,000 of the purchase price from a third party. Such
purchase is expected to be completed by April 15, 1998, although there is no
assurance that the transaction will be completed. Upon completion of the
purchase, Mr. Miller would own approximately 5.6% and 2.5% of the Class A
Common and Series A Preferred Stock, respectively, and CVC would own
approximately 43.6% and 47.5% of the Class A Common and Series A Preferred
Stock, respectively.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCKHOLDERS' AGREEMENT
On January 3, 1997, in connection with the ownership of certain capital
shares of the Company, the Company entered into a stockholders' agreement (the
"Stockholders' Agreement") with MascoTech, CVC and certain executive officers
and directors of the Company (the "Management Stockholders" and, together with
MascoTech and CVC, the "Stockholders"). The Stockholders' Agreement imposes
certain restrictions on, and rights with respect to, the transfer of shares of
the Company's Common Stock (as defined) and Series A Preferred Stock held by
MascoTech, CVC and the Management Stockholders. The Stockholders Agreement also
entitles the Stockholders to certain rights regarding corporate governance of
the Company and to CVC and MascoTech the right to purchase their pro rata share
in connection with the issuance of any new shares of Common Stock by the
Company.
The Stockholders' Agreement sets forth conditions under which the parties
may transfer their shares. The Stockholders' Agreement provides for a right of
first refusal in favor of the Company in the event that any
52
<PAGE> 54
Stockholder (the "Selling Stockholder") desires to transfer its shares of Common
Stock pursuant to a bona fide third party offer or an involuntary transfer (as
defined in the Stockholders Agreement). To the extent that the Company elects to
purchase fewer than all of the shares proposed to be sold by such Selling
Stockholder, the Stockholders' Agreement provides for rights of first refusal on
a pro rata basis in favor of the other Stockholders. In the case of a bona fide
third party offer, without the consent of the Selling Stockholders, neither the
Company nor the other Stockholders may purchase any of the shares pursuant to
the right of first refusal unless all such shares are purchased. If such Selling
Stockholder is MascoTech or CVC, and such Selling Stockholder proposes to sell
shares representing more than 5% of the outstanding shares of Common Stock on a
fully-diluted basis or if any Selling Stockholder proposes to transfer shares of
Series A Preferred Stock, then such Selling Stockholder must also cause the
buyer to give the other Stockholders an option to sell a pro rata number of
their respective shares of the same class and on the same terms and conditions
as the Selling Stockholder.
In the event that a Management Stockholder's shares of capital stock are
subject to an involuntary transfer (such as a seizure pursuant to a judgment
lien or in connection with any voluntary or involuntary bankruptcy proceeding),
the Stockholders' Agreement grants similar rights to purchase such shares first
to the Company and then to MascoTech and CVC, pro rata.
Subject to certain restrictions, following the fifth anniversary of the
date of the Stockholders' Agreement and for as long as CVC or MascoTech, as the
case may be, or any of their permitted successors and assigns, shall hold more
than 60% of the Common Stock of the Company originally issued to them, the
Stockholders' Agreement grants each of MascoTech and CVC certain "drag-along
rights." The drag-along rights require the other Stockholders to sell all of
their capital stock upon the same terms and conditions as MascoTech and CVC in
connection with the sale of all of the shares of MascoTech or CVC, as the case
may be, to a third party. In addition, if MascoTech or CVC propose the transfer
or sale of all or substantially all of the assets or business of the Company to
any third party, MascoTech or CVC, as the case may be, may require the other
Selling Stockholders to take all action necessary to cause the Company to
approve such transaction.
The Stockholders' Agreement provides that the Board of Directors (the
"Board") of the Company shall consist of seven members consisting of two
nominees of CVC, two nominees of MascoTech, one nominee of the Management
Stockholders and two disinterested directors. Voting on the Board is weighted so
as to provide each MascoTech designate with 17.5%, each CVC designate with
17.5%, the Management designate with 10%, and each disinterested director with
10%, respectively, of the voting power on the Board.
REGISTRATION RIGHTS AGREEMENT
On January 3, 1997, the Company entered into a registration rights
agreement (the "MSXI Registration Rights Agreement") with the CVC, MascoTech and
the Management Stockholders. The MSXI Registration Rights Agreement provides
that CVC and MascoTech shall be entitled, at any time, to request that the
Company effect an underwritten primary or secondary public offering, which
raises aggregate net proceeds to the Company of at least $50,000,000 or, after
June 3, 1998, to request that the Company effect an underwritten primary or
secondary public offering of at least 25% of the Company's Common Stock on a
fully diluted basis; and in connection with any such public offering the Company
is required to use reasonable efforts to include in such offering all other
shares, subject to certain exceptions, that the stockholders request for
inclusion therein. In addition, at any time following an initial public offering
of the Company's shares, the MSXI Registration Rights Agreement provides that,
subject to certain limitations, each of CVC and MascoTech shall be entitled to
request three long-form registrations using SEC Form S-1 or S-2 and request
unlimited short-form registrations using Form S-3 (any registration effected in
accordance with this or the preceding sentence, a "Demand Registration"). If (i)
the Company's Board determines that a Demand Registration must be postponed to
avoid the disclosure of material non-public information or (ii) as a result of a
pending material financing or acquisition, then the Company may require CVC or
MascoTech, as the case may be, to withdraw its Demand Registration and not
submit another Demand Registration for up to sixty days. Whenever the Company
decides to register any of its shares (other than on Forms S-4 and S-8), the
CVC, MascoTech and Management Stockholders have the right to register (or
"piggyback") their shares on the same terms as the Company. The Company is
obligated to pay all reasonable fees, costs and expenses in connection with any
initial, demand or piggyback registration.
53
<PAGE> 55
Notwithstanding such demand registration rights, the Company shall not be
obligated to effect a Demand Registration statement if, within 90 days of such
request, a registration statement in which CVC or MascoTech was entitled to
participate, pursuant to their demand or piggyback registration rights, was
filed. In addition, the Company and each Stockholder shall be precluded from
effecting any public sale or distribution of the shares for a certain period
prior to and following the effective date of any initial public offering or any
demand or piggyback registration. In each demand registration, holders of
registrable securities other than the holders initiating such registration may
include their securities in such registration, subject to certain restrictions.
The MSXI Registration Rights Agreement contains indemnity and contribution
provisions between the Company and any selling stockholders for losses arising
out of any registration effected pursuant to the MSXI Registration Rights
Agreement.
OTHER
Mr. Miller has agreed in principle with CVC to acquire certain shares of
Class A Common and Series A Preferred Stock for an aggregate purchase price of
$1,000,000. Mr. Miller intends to borrow $250,000 of the purchase price from the
Company. See "Principal Stockholders."
54
<PAGE> 56
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company's Certificate of Incorporation ("Certificate of Incorporation")
provides that the Company is authorized to issue 2,000,000 shares of Common
Stock, par value $0.01 per share, divided into two classes: Class A Common Stock
("Class A Stock") and Class B Common Stock ("Class B Stock" and, together with
the Class A Stock, the "Common Stock").
Class A Stock is divided into five series consisting of 125,000 shares each
of Series A-1 Common Stock ("Series A-1"), Series A-2 Common Stock ("Series
A-2"), Series A-3 Common Stock ("Series A-3"), Series A-4 Common Stock ("Series
A-4") and 500,000 Shares of Series I Common Stock ("Series I"). Class B Stock is
divided into five series consisting of 125,000 shares each of Series B-1 Common
Stock ("Series B-1"), Series B-2 Common Stock ("Series B-2"), Series B-3 Common
Stock ("Series B-3"), Series B-4 Common Stock ("Series B-4") and 500,000 Shares
of Series II Common Stock ("Series II").
The holders of Class A Stock are entitled to one vote for each share held
of record on all matters to be voted on by the Company's stockholders. The
holders of Class B Stock have no voting rights except as required by law or in
the Certificate of Incorporation.
The holders of all classes of Common Stock receive dividends ratably. If
dividends are declared in shares of Common Stock, the dividend must be declared
and paid at the same rate per share on each class or series of Common Stock and
unless 95% of the shares of each class or series approves, the dividends payable
in shares of a particular class or series of Common Stock are payable only to
holders of the particular class or series of Common Stock; however, any dividend
payable to one class or series of Common Stock entitles the other class or
series to a dividend in the same form and amount on the same date. If the
dividends consist of voting securities of the Company, at the request of each
holder of Class B Stock, the Company must pay dividends to holders of Class B
Stock in nonvoting securities of the Company which are identical to the voting
securities and convertible into or exchangeable for voting securities on the
same terms as the Class B Stock is convertible to Class A Stock. The holders of
all classes are entitled to share ratably in all distributions resulting from
any liquidation, dissolution or winding up.
The holders of (a) Series A-1 can convert their shares into Series B-1, (b)
Series A-2 can convert their shares into Series B-2, (c) Series A-3 can convert
their shares into B-3, (d) Series A-4 can convert their shares into B-4, and (e)
Series I can convert their shares into Series II, in each case at a one-to-one
conversion rate. Such conversion may occur at any time in the event that the
holder thereof has determined that it might be subject to a Regulatory Problem
(as defined in the Certificate of Incorporation) or an Accounting Determination
(as defined in the Certificate of Incorporation). The holders of each series of
Class B Stock can convert their shares into Class A Stock in the same manner as
described in (a) through (e) above. Upon the occurrence of a Qualifying Offering
(as defined in the Stockholders' Agreement) or a Sale Transaction (as defined in
the Stockholders' Agreement), (a) each share of Series A-1, Series A-2, Series
A-3, and Series A-4 will be automatically converted into one fully paid and
non-assessable share of Series I Stock and (b) each share of Series B-1, Series
B-2, Series B-3, and Series B-4 will be automatically converted into one fully
paid and non-assessable share of Series II Stock.
PREFERRED STOCK
The Company's Certificate of Incorporation provides that the Company is
authorized to issue 1,500,000 shares of preferred stock, divided into two
classes: 500,000 shares of Redeemable Series A Preferred Stock, par value $0.01
and 1,000,000 of New Preferred Stock, par value $0.01 ("New Preferred").
The Redeemable Series A Preferred Stock has a stated value of $100 per
share, and no additional shares may be issued. As long as any shares of the
Redeemable Series A Preferred Stock are outstanding, the Company may not issue
preferred stock that is senior or pari passu with respect to payment of
dividends, other distributions, or preference on redemption or liquidation
without the consent of the holders of 67% of the Redeemable Series A Preferred
Stock. Except as required by law or to validate certain actions of the Company
which adversely affect the rights or powers, ranking, or authorized number of
shares, the holders of
55
<PAGE> 57
Redeemable Series A Preferred Stock have no voting rights. Dividends on the
Redeemable Series A Preferred Stock are payable in cash at a rate per annum
equal to 12% of the sum of $100 plus an amount equal to any accrued and unpaid
dividends. Dividends on the Redeemable Series A Preferred Stock accrue daily and
are cumulative. The Company may not declare or pay any dividend or other
distribution in respect of the Common Stock or other class or series of stock
ranking junior to the Redeemable Series A Preferred Stock (collectively the
"Junior Stock") unless all accrued and unpaid dividends with respect to
Redeemable Series A Preferred Stock have either been paid or contemporaneously
are declared and paid; however, the Company may (a) acquire Junior Stock in an
exchange or conversion, (b) pay dividends in shares of Junior Stock, and (c)
acquire shares of Common Stock pursuant to the Stockholders' Agreement.
The New Preferred shall be authorized in one or more series and shall have
voting powers, preferences, and other rights and qualifications as the Board of
Directors state in a restitution or resolutions provided for an issuance of the
New Preferred.
The Redeemable Series A Preferred Stock is mandatorily redeemable by the
Company at the earlier of (a) June 30, 2007 or (b) the date on which a Sale
Transaction by MascoTech or CVC occurs. However, in conjunction with the
Offering, the Company extended the date on which the Redeemable Series A
Preferred Stock is mandatorily redeemable to December 31, 2008. The Company may
redeem any or all of the Redeemable Series A Preferred Stock at its election
prior to the mandatory redemption date. In both instances, the redemption price
for the Redeemable Series A Preferred Stock shall be the sum of $100 plus an
amount equal to any accrued and unpaid dividends. The Company may also elect to
acquire shares of the Redeemable Series A Preferred Stock from time to time
without redeeming or otherwise acquiring all or any other issued shares of the
Redeemable Series A Preferred Stock (a "Special Redemption") pursuant to the
terms of the Stockholders' Agreement.
The Redeemable Series A Preferred Stock may be exchanged for the Company's
12% Junior Subordinated Debentures ("Junior Debentures") at the election of the
Company. The Company must make its election within 45 days of receipt of notice
from MascoTech or CVC of their offer to exchange and sell their Redeemable
Series A Preferred Stock ("Exchange Notice"). The Junior Debentures will mature
on the mandatory redemption date of the Redeemable Series A Preferred Stock. If
the Company elects to exchange the shares, it must exchange all of the shares
designated to be exchanged in the Exchange Notice and all of the shares
designated by other holders of Redeemable Series A Preferred Stock in an
additional notice. The New Credit Facility and the Indenture restrict the
incurrence of additional Indebtedness, including the exchange of the Redeemable
Series A Preferred Stock.
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DESCRIPTION OF CERTAIN OTHER INDEBTEDNESS
NEW CREDIT FACILITY
On January 22, 1998 the Company entered into the New Credit Facility with
NBD Bank, on behalf of itself and as agent for a syndicate of other lenders.
Funds under the New Credit Facility are available for acquisitions, working
capital and general corporate purposes. The Company is in the process of
amending the New Credit Facility to add a $30 million term loan portion. Term
loan borrowings will be subject to satisfaction of the same borrowing base
requirements as are other borrowings under the New Credit Facility.
Interest Rate. Interest on the loans under the New Credit Facility are
payable quarterly or, if earlier, at the end of each interest period and will
accrue at an annual rate equal to, at the option of the Company, (a) a floating
rate (the "Floating Rate") which shall be the higher of (i) the prime rate of
NBD Bank or a comparable rate of an affiliate of NBD Bank or (ii) 1.0% over the
Federal Funds rate, or (b) the London Interbank Offered Rate ("LIBOR") plus the
applicable margin, which is initially 1.40% and can range from 0.45% to 1.40%
based on the Company's ratio of total debt to EBITDA (each as defined in and
calculated pursuant to the New Credit Facility).
Borrowing Base. The New Credit Facility provides the Company with available
credit of up to $100 million but if the Company's ratio of total debt to EBITDA
exceeds a specified number, the amount available may be limited to a percentage
of eligible accounts receivable of the Company.
Guarantee and Security Interest. Each significant domestic subsidiary of
the Company has guaranteed all obligations of the Company under the New Credit
Facility. In addition, these obligations are secured by a pledge of the Stock of
such domestic subsidiaries and a first lien on substantially all assets of such
domestic subsidiaries and a pledge of 65% of the stock of the significant
foreign subsidiaries. The obligations of the Company under the New Credit
Facility rank senior to all other indebtedness of the Company, including the
Notes.
Covenants. The New Credit Facility contains certain reporting covenants and
other customary affirmative covenants and various negative covenants including
but not limited to certain limitations on mergers, sales of assets,
acquisitions, liens, investments, indebtedness, contingent obligations,
dividends, subsidiaries' ability to agree to dividend restrictions, affiliate
transactions and changes of business. The New Credit Facility also contains
certain covenants with respect to employee benefit arrangements and
environmental matters. The New Credit Facility also contains certain financial
covenants including but not limited to a ratio of total debt to EBITDA, a fixed
charge coverage ratio, and a minimum net worth requirement (each as defined in
and calculated pursuant to the New Credit Facility).
Events of Default. The New Credit Facility contains customary events of
default including without limitation defaults for nonpayment of principal when
due, nonpayment of interest and fees within five business days when due,
material misrepresentations, default in the performance of most negative
covenants, default in performance of any other term or covenant for thirty days
after notice (five days after notice for information covenants), bankruptcy or
insolvency, ERISA, change of control, unstayed judgments in excess of a certain
amount and cross-defaults to any indebtedness equal to or in excess of a certain
amount in the aggregate for the Company or any subsidiary, which default is a
payment default or would permit the holders of such indebtedness to cause such
indebtedness to become due prior to its stated maturity.
FORD FACILITY
The Fleet Central Billing-Finance Facility (the "Ford Facility") is an
arrangement between the Company and Ford Motor Company Limited ("Ford Limited")
whereby the Company participates in the Fleet Central Billing Program (the
"Program"). Under the Ford Facility, Ford Limited appoints the Company as an
agent to purchase maintenance and service accounts receivable ("Receivables") of
selected Ford Limited dealers in the United Kingdom (the "Dealers"). The Company
purchases the Receivables on behalf of Ford at a discount of 2.75% or such rate
of discount as may be agreed upon from time to time. Ford provides the Company
with funding to purchase Receivables, and such funding currently bears interest
at the one month LIBOR rate plus 1.66% and is subject to adjustment in the
future. As of December 28, 1997, there was approximately $7.5 million of
indebtedness outstanding under the Fleet Central Billing-Finance Facility.
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Old Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. For each $1,000 principal amount of Old Notes surrendered to
the Company pursuant to the Exchange Offer, the holder of such Old Note will
receive an Exchange Note having a principal amount equal to that of the
surrendered Old Note. The Company will keep the Exchange Offer open for not less
than 30 business days (or longer if required by applicable law) after the date
notice of the Exchange Offer is mailed to the holders of the Old Notes. As used
herein, the term "Expiration Date" means 5:00 p.m., New York City time, on
, 1998; provided, however, that if the Company has extended the
period of time for which the Exchange Offer is open, the term "Expiration Date"
means the latest time and date to which the Exchange Offer is extended.
As of the date of this Prospectus, $100,000,000 in aggregate principal
amount of the Old Notes are outstanding. This Prospectus, together with the
Letter of Transmittal, is first being sent on or about the date set forth on the
cover page to all Holders of Old Notes at the addresses set forth in the
security register with respect to Old Notes maintained by the Trustee. The
Company's obligations to accept Old Notes for exchange pursuant to the Exchange
Offer is subject to certain conditions as set forth under "-- Certain Conditions
to the Exchange Offer" below.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for any exchange of any Old Notes, by giving notice of
such extension to the Holders thereof. During any such extension, all Old Notes
previously tendered will remain subject to the Exchange Offer and may be
accepted for exchange by the Company. Any Old Notes not accepted for exchange
for any reason will be returned without expense to the tendering Holder thereof
as promptly as practicable after the expiration or termination of the Exchange
Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified below under "Certain Conditions to the Exchange Offer." The Company
will give notice of any extension, amendment, non-acceptance or termination to
the Holders of the Old Notes as promptly as practicable, such notice in the case
of any extension to be issued by means of a press release or other public
announcement no later than 9:00 a.m., New York City Time, on the next business
day after the previously scheduled Expiration Date.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a Holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering Holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a Holder who wishes to tender
Old Notes for exchange pursuant to the Exchange Offer must transmit a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal, to (the "Exchange
Agent") at the address set forth below under "Exchange Agent" on or prior to the
Expiration Date. In addition, (i) certificates for such Old Notes must be
received by the Exchange Agent along with the Letter of Transmittal, (ii) a
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of
such Old Notes, if such procedure is available, into the Exchange Agent's
account at DTC (as defined) pursuant to the procedure for book-entry transfer
described below, must be received by the Exchange Agent prior to the Expiration
Date or (iii) the Holder must comply with the guaranteed delivery procedures
described below. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY
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INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD
NOTES SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered Holder of the Old Notes who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution (as defined below). 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 guarantees must be by a firm which is a member
of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (collectively, "Eligible
Institutions"). If Old Notes are registered in the name of a person other than
the person signing the Letter of Transmittal, the Old Notes surrendered for
exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Company in its sole discretion, duly executed by the registered Holder with the
signature thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or not to accept any
particular Old Notes the acceptance of which might, in the judgment of the
Company or its counsel, be unlawful. The Company also reserves the absolute
right to waive any defects or irregularities or conditions of the Exchange Offer
as to any particular Old Notes either before or after the Expiration Date
(including the right to waive the ineligibility of any Holder who seeks to
tender Old Notes in the Exchange Offer). The interpretation of the terms and
conditions of the Exchange Offer as to any particular Old Notes either before or
after the Expiration Date (including the Letter of Transmittal and the
instructions thereto) by the Company shall be final and binding on all parties.
Unless waived, any defects or irregularities in connection with the tender of
Old Notes for exchange must be cured within such reasonable period of time as
the Company shall determine. Neither the Company, the Exchange Agent nor any
other person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Old Notes for exchange, nor shall any
of them incur any liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than
the registered Holder or Holders of Old Notes, such Old Notes must be endorsed
or accompanied by appropriate powers of attorney, in either case signed exactly
as the name or names of the registered Holder or Holders that appear on the Old
Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers or corporations or others acting in a fiduciary or representative
capacity, such person should so indicate when signing and, unless waived by the
Company, proper evidence satisfactory to the Company of its authority to so act
must be submitted.
By executing, or otherwise becoming bound by, the Letter of Transmittal,
each holder of the Old Notes (other than certain specified holders) will
represent that (i) it is not an affiliate of the Company, (ii) any Exchange
Notes to be received by it were acquired in the ordinary course of its business
and (iii) it has no arrangement or understanding with any person to participate
in the distribution (within the meaning of the Securities Act) of the Exchange
Notes. If the tendering Holder is a broker-dealer that will receive Exchange
Notes for its owns account in exchange for Old Notes that were acquired as a
result of market-making activities or other trading activities, it will be
required to acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes. See "-- Resales of the Exchange Notes."
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the Exchange Notes promptly after acceptance of
the Old Notes. See "Certain Conditions to the Exchange Offer" below. For
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purposes of the Exchange Offer, the Company shall be deemed to have accepted
properly tendered Old Notes for exchange when, as and if the Company has given
oral or written notice thereof to the Exchange Agent.
In all cases, issuance of Exchange Notes for Old Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of certificates for such Old Notes or a timely
Book-Entry Confirmation of such Old Notes into the Exchange Agent's account at
DTC pursuant to the book-entry transfer procedures described below, a properly
completed and duly executed Letter of Transmittal and all other required
documents. If any tendered Old Notes are not accepted for any reason set forth
in the terms and conditions of the Exchange Offer or if certificates
representing Old Notes are submitted for a greater principal amount than the
Holder desires to exchange, such unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering Holder thereof (or, in the case of Old
Notes tendered by book-entry transfer into the Exchange Agent's account at DTC
pursuant to the book-entry transfer procedures described below, such
non-exchanged Old Notes will be credited to an account maintained with DTC) as
promptly as practicable after the expiration or termination of the Exchange
Offer.
BOOK-ENTRY TRANSFER
Any financial institution that is a participant in DTC's systems may make
book-entry delivery of Old Notes by causing DTC to transfer such Old Notes into
the Exchange Agent's account in accordance with DTC's procedures for transfer.
However, the exchange for the Old Notes so tendered will only be made after
timely confirmation of such book-entry transfer of Old Notes into the Exchange
Agent's account, and timely receipt by the Exchange Agent of an Agent's Message
(as such term is defined in the next sentence) and any other documents required
by the Letter of Transmittal. The term "Agent's Message" means a message,
transmitted by DTC and received by the Exchange Agent and forming a part of a
Book-Entry Confirmation, which states that DTC has received an express
acknowledgment from a Participant tendering Old Notes that 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. Although delivery of Old Notes
may be effected through book-entry transfer into the Exchange Agent's account at
DTC, the Letter of Transmittal (or facsimile thereof), properly completed and
duly executed, with any required signature guarantees and any other required
documents, must in any case be delivered to and received by the Exchange Agent
at its address set forth under "-- Exchange Agent" on or prior to the Expiration
Date, or the guaranteed delivery procedure set forth below must be complied
with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
GUARANTEED DELIVERY PROCEDURES
If a registered Holder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
Holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent receives from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the Holder of Old Notes and the amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that within five New York
Stock Exchange ("NYSE") trading days after the date of execution of the Notice
of Guaranteed Delivery, the certificates of all physically tendered Old Notes,
in proper form for transfer, or a Book-Entry Confirmation, as the case may be,
and any other documents required by the Letter of Transmittal will be deposited
by the Eligible Institution with the Exchange Agent, and (iii) the certificates
for all physically tendered Old Notes, in proper form for transfer, or a
Book-Entry Confirmation, as the case may be, and all other documents required by
the Letter of Transmittal, are received by the Exchange Agent within five NYSE
trading days after the date of execution of the Notice of Guaranteed Delivery.
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WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the principal amount of such Old Notes), and (where
certificates for Old Notes have been transmitted) specify the name in which such
Old Notes are registered, if different from that of the withdrawing Holder. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates, the withdrawing
Holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such Holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at DTC to be credited with the withdrawn Old Notes and otherwise comply with the
procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company, whose determination shall be final and binding on all parties. Any
Old Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the Holder thereof without cost to such Holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
DTC pursuant to the book-entry transfer procedures described above, such Old
Notes will be credited to an account maintained with DTC for the Old Notes) as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be tendered by following one of
the procedures described under "Procedures for Tendering Old Notes" above at any
time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue Exchange Notes in
exchange for, any Old Notes and may terminate or amend the Exchange Offer, if at
any time before the Expiration Date, the Company determines that the Exchange
Offer violates applicable law, any interpretation of the staff of the Commission
or any order of any governmental agency or court of competent jurisdiction.
The foregoing condition is for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to such
condition. The failure by the Company at any time to exercise the foregoing
rights shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no Exchange Notes will be issued in exchange for any such Old
Notes, if prior to the Expiration Date any stop order shall be threatened or in
effect with respect to the Registration Statement of which this Prospectus
constitutes a part or the qualification of the Indenture under the Trust
Indenture Act of 1939, as amended (the "TIA").
EXCHANGE AGENT
has been appointed as the Exchange Agent for the
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at one of the addresses set forth below. Questions and requests
for assistance, requests for additional copies of this Prospectus or of the
Letter of
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Transmittal and requests for Notices of Guaranteed Delivery should be directed
to the Exchange Agent, addressed as follows:
Deliver To:
[ ], Exchange Agent
By Mail or By Hand:
Attn: [ ]
[ ]
[ ]
Attention: [ ]
By Facsimile:
[ ]
Confirm by Telephone:
[ ]
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made by telephone
or in person by officers and employees of the Company.
The 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 the Trustee, accounting and legal fees and printing costs among
others.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that Holders who instruct
the Company to register Exchange Notes in the name of, or request that Old Notes
not tendered or not accepted in the Exchange Offer be returned to, a person
other than the registered tendering Holder will be responsible for the payment
of any applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE; RESALE OF THE EXCHANGE NOTES
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of, the Securities
Act and applicable state securities law. Old Notes not exchanged pursuant to the
Exchange Offer will continue to accrue interest at 11 3/8% per annum and will
otherwise remain outstanding in accordance with their terms. Holders of Old
Notes do not have any appraisal or dissenters' rights under the Delaware General
Corporation Law in connection with the Exchange Offer. In general, the Old Notes
may not be offered or sold unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Old Notes under the Securities
Act. However, (i) if the Initial Purchasers so request with respect to Old Notes
not eligible to be exchanged for Exchange Notes in the Exchange Offer and held
by them following
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consummation of the Exchange Offer or (ii) if any holder of Old Notes is not
eligible to participate in the Exchange Offer or, in the case of any holder of
Old Notes that participates in the Exchange Offer, does not receive freely
tradable Exchange Notes in exchange for Old Notes, the Company is obligated to
file a registration statement on the appropriate form under the Securities Act
relating to the Old Notes held by such persons.
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, the Company is of the view that
Exchange Notes issued pursuant to the Exchange Offer may be offered for resale,
resold or otherwise transferred by holders thereof (other than (i) any such
holder which is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act or (ii) any broker-dealer that purchases Notes from the
Company to resell pursuant to Rule 144A or any other available exemption)
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 holders' business and such holders have no intention, or
any arrangement or understanding with any person, to participate in the
distribution of such Exchange Notes. If any holder has any arrangement or
understanding with respect to the distribution of the Exchange Notes to be
acquired pursuant to the Exchange Offer, such holder (i) could not rely on the
applicable interpretations of the staff of the Commission and (ii) must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction. A broker-dealer who holds Old
Notes that were acquired for its own account as a result of market-making or
other trading activities may be deemed to be an "underwriter" within the meaning
of the Securities Act and must, therefore, deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of Exchange
Notes. Each such broker-dealer that receives Exchange Notes for its own account
in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge in the Letter of Transmittal that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution."
In addition, to comply with the securities laws of certain jurisdictions,
if applicable, the Exchange Notes may not be offered or sold unless they have
been registered or qualified for sale in such jurisdiction or any exemption from
registration or qualification is available and is complied with. The Company has
agreed, pursuant to the Registration Agreement and subject to certain specified
limitations therein, to register or qualify the Exchange Notes for offer or sale
under the securities or blue sky laws of such jurisdictions as any holder of the
Notes reasonably requests in writing.
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DESCRIPTION OF NOTES
GENERAL
The form and terms of the Exchange Notes are the same as the form and terms
of the Old Notes except that (i) the Exchange Notes are being registered under
the Securities Act and thus will not bear restrictive legends restricting their
transfer pursuant to the Securities Act and (ii) holders of Exchange Notes will
not be entitled to certain rights of holders of the Old Notes under the
Registration Rights Agreement that will terminate upon the consummation of the
Exchange Offer. The Old Notes were issued and the Exchange Notes will be issued
under the Indenture dated as of January 15, 1998 (the "Indenture"), among the
Company, the Subsidiary Guarantors and IBJ Schroder Bank & Trust Company, as
trustee (the "Trustee"). The Indenture has been filed as an exhibit to the
registration statement (the "Registration Statement") of which this Prospectus
forms a part. The Indenture will be qualified under the Trust Indenture Act of
1939, as amended, upon effectiveness of the Registration Statement.
The following is a summary of certain provisions of the Indenture and the
Notes. The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Indenture, including the definitions of
certain terms therein and those terms made a part thereof by the Trust Indenture
Act of 1939, as amended. Capitalized terms used herein and not otherwise defined
have the meanings set forth in the section "-- Certain Definitions." As used in
this section, the term "Company" refers to MSX International, Inc.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company, which, unless otherwise provided by the Company, will be the offices of
the Trustee. At the option of the Company, payment of interest may be made by
check mailed to the addresses of the Holders as such addresses appear in the
Note register.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
will be made for any registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
TERMS OF THE EXCHANGE NOTES
The Notes will be general unsecured senior subordinated obligations of the
Company, limited in aggregate principal amount to $130.0 million, and will
mature on January 15, 2008. The Indenture provides for the issuance of the $100
million aggregate principal amount of Notes offered thereby and an additional
series of Notes in an aggregate principal amount not to exceed $30 million as
provided for in the covenant described below under "Certain Covenants --
Limitation on Incurrence of Indebtedness." The Notes will bear interest at the
rate per annum shown on the cover page hereof from January 16, 1998, or from the
most recent date to which interest has been paid or provided for, payable
semi-annually to Holders of record at the close of business on the January 1 or
July 1 immediately preceding the interest payment date on January 15 and July 15
of each year, commencing July 15, 1998. The Company will pay interest on overdue
principal at 1% per annum in excess of such rate, and it will pay interest on
overdue installments of interest at such higher rate to the extent lawful.
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Notes will not be
redeemable at the option of the Company prior to January 15, 2003. Thereafter,
the Notes will be redeemable, at the Company's option, in whole or in part, at
any time or from time to time, upon not less than 30 nor more than 60 days'
prior notice mailed by first-class mail to each Holder's registered address, at
the following redemption prices (expressed in percentages of principal amount),
plus accrued and unpaid interest to the redemption date (subject to the
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right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date), if redeemed during the 12-month period
commencing on January 15 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
------ ----------
<S> <C>
2003........................................................ 105.6875%
2004........................................................ 103.7917
2005........................................................ 101.8958
2006 and thereafter......................................... 100.0000
</TABLE>
In addition, at any time and from time to time prior to January 15, 2001,
the Company may redeem at its option in the aggregate up to 35% of the original
principal amount of the Notes with the proceeds of one or more Public Equity
Offerings following which there is a Public Market, at a redemption price
(expressed as a percentage of principal amount) of 111.375% plus accrued and
unpaid interest, if any, to the redemption date (subject to the right of Holders
of record on the relevant record date to receive interest due on the relevant
interest payment date); provided, however, that at least 65% of the original
aggregate principal amount of the Notes must remain outstanding after each such
redemption.
SELECTION
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Note of $1,000 in original principal amount or less
will be redeemed in part. If any Note is to be redeemed in part only, the notice
of redemption relating to such Note shall state the portion of the principal
amount thereof to be redeemed. A new 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 Note.
SUBSIDIARY GUARANTEES
Each of the Company's Domestic Restricted Subsidiaries will irrevocably and
unconditionally Guarantee on a joint and several basis, as primary obligors and
not merely as sureties, on an unsecured senior subordinated basis the
performance and punctual payment when due, whether at Stated Maturity, by
acceleration or otherwise, of all obligations of the Company under the Indenture
and the Notes, whether for payment of principal of or interest on the Notes,
expenses, indemnification or otherwise (all such obligations Guaranteed by the
Subsidiary Guarantors being herein called the "Guaranteed Obligations"). The
Subsidiary Guarantors will agree to pay, in addition to the amount stated above,
any and all expenses (including reasonable counsel fees and expenses) incurred
by the Trustee or the Holders in enforcing any rights under the Subsidiary
Guarantees. Each Subsidiary Guarantee will be limited in amount to an amount not
to exceed the maximum amount that can be Guaranteed by the applicable Subsidiary
Guarantor without rendering such Subsidiary Guarantee voidable under applicable
law relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally.
The Company shall cause each Domestic Restricted Subsidiary that at any
time becomes an obligor or Guarantor with respect to any obligations under one
or more Bank Credit Agreements to execute and deliver to the Trustee a
supplemental indenture pursuant to which such Domestic Restricted Subsidiary
will Guarantee payment of the Notes on the same terms and conditions as those
set forth in the Indenture.
Each Subsidiary Guarantee is a continuing Guarantee and shall (a) remain in
full force and effect until payment in full of all the Guaranteed Obligations,
(b) be binding upon each Subsidiary Guarantor and (c) inure to the benefit of
and be enforceable by the Trustee, the Holders and their successors, transferees
and assigns. A Subsidiary Guarantee will be released upon the sale of all the
Capital Stock, or all or substantially all of the assets, of the applicable
Subsidiary Guarantor if such sale is made in compliance with the Indenture.
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<PAGE> 67
SUBORDINATION
The indebtedness evidenced by the Notes and the Subsidiary Guarantees will
be unsecured senior subordinated obligations of the Company and the Subsidiary
Guarantors, as the case may be. The payment of the principal of, premium (if
any) and interest on the Notes and the payment of any Subsidiary Guarantee is
subordinate in right of payment, as set forth in the Indenture, to the prior
payment in full of all Senior Indebtedness of the Company or the relevant
Subsidiary Guarantor, as the case may be, whether outstanding on the Issue Date
or thereafter incurred, including the obligations of the Company and such
Subsidiary Guarantor under the Senior Credit Facility.
As of December 28, 1997, after giving pro forma effect to the Refinancing,
(i) the Company would have had approximately $62.0 million outstanding Senior
Indebtedness (excluding unused commitments under the Senior Credit Facility) and
(ii) Senior Indebtedness of the Subsidiary Guarantors would have been
approximately $45.3 million (excluding Guarantees under the Senior Credit
Facility). Although the Indenture contains limitations on the amount of
additional Indebtedness that the Company and its Restricted Subsidiaries may
incur, under certain circumstances the amount of such Indebtedness could be
substantial and, in any case, such Indebtedness may be Senior Indebtedness. See
"Certain Covenants -- Limitation on Incurrence of Indebtedness."
Only Indebtedness of the Company or a Subsidiary Guarantor that is Senior
Indebtedness will rank senior to the Notes and the relevant Subsidiary Guarantee
in accordance with the provisions of the Indenture. The Notes and each
Subsidiary Guarantee will in all respects rank pari passu with all other Senior
Subordinated Indebtedness of the Company and the relevant Subsidiary Guarantor,
respectively. The Company and each Subsidiary Guarantor has agreed in the
Indenture that it will not Incur, directly or indirectly, any Indebtedness that
is subordinate or junior in ranking in right of payment to its Senior
Indebtedness unless such Indebtedness is pari passu with or is expressly
subordinated in right of payment to the Notes. Unsecured Indebtedness is not
deemed to be subordinated or junior merely because it is unsecured.
The Company may not pay principal of, premium (if any) or interest on, the
Notes or make any deposit pursuant to the provisions described under "--
Defeasance" below and may not repurchase, redeem or otherwise retire any Notes
(collectively, "pay the Subordinated Debt") if (i) any Senior Indebtedness is
not paid when due or (ii) any other default on any such Senior Indebtedness
occurs and the maturity of such Senior Indebtedness is accelerated in accordance
with its terms unless, in either case, the default has been cured or waived and
any such acceleration has been rescinded or such Senior Indebtedness has been
paid in full. However, the Company may pay the Subordinated Debt without regard
to the foregoing if the Company and the Trustee receive written notice approving
such payment from the Representative of the Senior Indebtedness with respect to
which either of the events set forth in clause (i) or (ii) of the immediately
preceding sentence has occurred and is continuing. During the continuance of any
default (other than a default described in clauses (i) and (ii) of the second
preceding sentence) with respect to any Designated Senior Indebtedness pursuant
to which the maturity thereof may be accelerated immediately without further
notice (except such notice as may be required to effect such acceleration) or
upon the expiration of any applicable grace periods, the Company may not pay the
Subordinated Debt for a period (a "Payment Blockage Period") commencing upon the
receipt by the Trustee (with a copy to the Company) of written notice (a
"Blockage Notice") of such default from the Representative of the holders of
such Designated Senior Indebtedness specifying an election to effect a Payment
Blockage Period and ending 179 days thereafter (or earlier if such Payment
Blockage Period is terminated (i) by written notice to the Trustee and the
Company from the Person or Persons who gave such Blockage Notice, (ii) because
the default giving rise to such Blockage Notice is no longer continuing or (iii)
because such Designated Senior Indebtedness has been repaid in full).
Notwithstanding the provisions described in the immediately preceding sentence,
unless the holders of such Designated Senior Indebtedness or the Representative
of such holders has accelerated the maturity of such Designated Senior
Indebtedness, the Company may resume payments on the Notes after the end of such
Payment Blockage Period. The Notes shall not be subject to more than one Payment
Blockage Period in any consecutive 360-day period, irrespective of the number of
defaults with respect to Designated Senior Indebtedness during such period.
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Upon any payment or distribution of the assets of the Company of any kind
or character upon a total or partial liquidation, winding up, assignment for the
benefit of creditors or marshalling of assets or other distribution in a
bankruptcy, insolvency, receivership or dissolution or reorganization of or
similar proceeding relating to the Company or its property, the holders of
Senior Indebtedness will be entitled to receive payment in full of such Senior
Indebtedness before the Noteholders are entitled to receive any payment, and,
until the Senior Indebtedness is paid in full, any payment or distribution to
which Noteholders would be entitled but for the subordination provisions of the
Indenture will be made to holders of such Senior Indebtedness as their interests
may appear. If a payment or distribution is made to Noteholders that, due to the
subordination provisions, should not have been made to them, such Noteholders
are required to hold it in trust for the holders of Senior Indebtedness and pay
it over to them as their interests may appear.
The obligations of a Subsidiary Guarantor under its Subsidiary Guarantee
are unsecured senior subordinated obligations. As such, the rights of
Noteholders to receive payment by a Subsidiary Guarantor pursuant to its
Subsidiary Guarantee will be subordinated in right of payment to the rights of
holders of Senior Indebtedness of such Subsidiary Guarantor. The terms of the
subordination provisions described above with respect to the Company's
obligations under the Notes apply equally to a Subsidiary Guarantor and the
obligations of such Subsidiary Guarantor under its Subsidiary Guarantee.
By reason of the subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company or a Subsidiary Guarantor who
are holders of Senior Indebtedness of the Company or a Subsidiary Guarantor, as
the case may be, may recover more, ratably, than the Noteholders, and creditors
of the Company who are not holders of Senior Indebtedness may recover less,
ratably, than holders of Senior Indebtedness and may recover more, ratably, than
the Noteholders.
The terms of the subordination provisions described above will not apply to
payments from money or the proceeds of U.S. Government Obligations held in trust
by the Trustee for the payment of principal of and interest on the Notes
pursuant to the provisions described under "-- Defeasance."
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder shall have the
right to require that the Company repurchase all or a portion of such Holder's
Notes at a purchase price in cash equal to 101% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of repurchase (subject to
the right of Holders of record on the relevant record date to receive interest
due on the relevant interest payment date), in accordance with the provisions of
the next paragraph.
Within 30 days following any Change of Control, the Company shall mail a
notice to each Holder with a copy to the Trustee stating: (1) that a Change of
Control has occurred and that such Holder has the right to require the Company
to purchase such Holder's Notes at a purchase price in cash equal to 101% of the
principal amount outstanding at the repurchase date plus accrued and unpaid
interest, if any, to the date of repurchase (subject to the right of Holders of
record on the relevant record date to receive interest on the relevant interest
payment date); (2) the circumstances and relevant facts and relevant financial
information regarding such Change of Control; (3) the repurchase date (which
shall be no earlier than 30 days nor later than 60 days from the date such
notice is mailed); and (4) the instructions determined by the Company,
consistent with the covenant described hereunder, that a Holder must follow in
order to have its Notes repurchased.
The Company shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to the covenant
described hereunder. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the covenant
described hereunder by virtue thereof.
The occurrence of certain of the events which would constitute a Change of
Control would constitute a default under the Senior Credit Facility. Future
Senior Indebtedness of the Company may contain
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<PAGE> 69
prohibitions of certain events which would constitute a Change of Control or
require such Senior Indebtedness to be repurchased upon a Change of Control.
Moreover, the exercise by the Holders of their right to require the Company to
repurchase the Notes could cause a default under such Senior Indebtedness, even
if the Change of Control itself does not, due to the financial effect of such
repurchase on the Company. Finally, the Company's ability to pay cash to the
Holders upon a repurchase may be limited by the Company's then existing
financial resources. There can be no assurance that sufficient funds will be
available when necessary to make any repurchases required in connection with a
Change of Control. The Company's failure to purchase the Notes in connection
with a Change in Control would result in a default under the Indenture which
would, in turn, constitute a default under the Senior Credit Facility. In such
circumstances, the subordination provisions in the Indenture would likely
restrict payment to the Holders of the Notes.
BOOK-ENTRY, DELIVERY AND FORM
Exchange Notes will be in registered certificated form ("Certificated
Notes") or registered global form ("Global Notes"). Each Global Note will be
deposited upon issuance with The Depository Trust Company ("DTC") and registered
in the name of a nominee of DTC. Holders may elect to hold their Exchange Notes
directly or, subject to the rules and procedures of DTC described below, in a
Global Note. However, tendering Holders of Old Notes held in global form shall
initially receive an interest held in a Global Note and tendering Holders of Old
Notes held directly in certificated form shall initially receive Exchange Notes
in certificated form, in each case unless otherwise specified in the Letter of
Transmittal.
The Depository has advised the Company as follows: The Depository is a
limited-purpose trust company and organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and "a clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934 (the "Exchange Act"). The Depository was created to hold securities
of institutions that have accounts with the Depository ("participants") and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. The Depository's participants include securities
brokers and dealers (which may include the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to the
Depository's book-entry system is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, whether directly or indirectly.
Upon the issuance of the Global Note, the Depository will credit, on its
book-entry registration and transfer system, the principal amount of the Notes
represented by such Global Note to the accounts of participants. The accounts to
be credited shall be designated by the Initial Purchasers of such Notes.
Ownership of beneficial interests in the Global Note will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests in the Global Note will be shown on, and the transfer of
those ownership interests will be effected only through, records maintained by
the Depository (with respect to participants' interest) and such participants
(with respect to the owners of beneficial interests in the Global Note other
than participants). The laws of some jurisdictions may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and laws may impair the ability to transfer or pledge
beneficial interests in the Global Note.
So long as the Depository, or its nominee, is the registered holder and
owner of the Global Note, the Depository or such nominee, as the case may be,
will be considered the sole legal owner and holder of the related Notes for all
purposes of such Notes and the Indenture. Except as set forth below, owners of
beneficial interests in the Global Note will not be entitled to have the Notes
represented by the Global Note registered in their names, will not receive or be
entitled to receive physical delivery of certificated Notes in definitive form
and will not be considered to be the owners or holders of any Notes under the
Global Note. The Company understands that under existing industry practice, in
the event an owner of a beneficial interest in the Global Note desires to take
any action that the Depository, as the holder of the Global Note, is entitled to
take, the Depository would authorize the participants to take such action, and
that the participants would authorize
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beneficial owners owning through such participants to take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
Payment of principal of and interest on Notes represented by the Global
Note registered in the name of and held by the Depository or its nominee will be
made to the Depository or its nominee, as the case may be, as the registered
owner and holder of the Global Note.
The Company expects that the Depository or its nominee, upon receipt of any
payment of principal of or interest on the Global Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Note as
shown on the records of the Depository or its nominee. The Company also expects
that payments by participants to owners of beneficial interests in the Global
Note held through such participants will be governed by standing instructions
and customary practices and will be the responsibility of such participants. The
Company will not have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the Global Note for any Note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests or for any
other aspect of the relationship between the Depository and its participants or
the relationship between such participants and the owners of beneficial
interests in the Global Note owning through such participants.
Unless and until it is exchanged in whole or in part for certificated Notes
in definitive form, the Global Note may not be transferred except as a whole by
the Depository to a nominee of such Depository or by a nominee of such
Depository to such Depository or another nominee of such Depository.
Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of the
Depository, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Trustee nor the Company will have any responsibility for the performance by the
Depository or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
CERTIFICATED NOTES
The Notes represented by the Global Note are exchangeable for certificated
Notes in definitive form of like tenor as such Notes in denominations of
U.S.$1,000 and integral multiples thereof if (i) the Depository notifies the
Company that it is unwilling or unable to continue as Depository for the Global
Note or if at any time the Depository ceases to be a clearing agency registered
under the Exchange Act, (ii) the Company in its discretion at any time
determines not to have all of the Notes represented by the Global Note or (iii)
a default entitling the holders of the Notes to accelerate the maturity thereof
has occurred and is continuing. Any Note that is exchangeable pursuant to the
preceding sentence is exchangeable for certificated Notes issuable in authorized
denominations and registered in such names as the Depository shall direct.
Subject to the foregoing, the Global Note is not exchangeable, except for a
Global Note of the same aggregate denomination to be registered in the name of
the Depository or its nominee.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Incurrence of Indebtedness. (a) The Company shall not, and
shall not permit any Restricted Subsidiary to, Incur, directly or indirectly,
any Indebtedness provided, however, that the Company and the Restricted
Subsidiaries may Incur Indebtedness if, immediately after giving effect to such
Incurrence, the Consolidated Coverage Ratio exceeds 2.0 to 1 if such
Indebtedness is Incurred prior to January 15, 2001 or 2.25 to 1 if such
Indebtedness is Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and the
Restricted Subsidiaries may Incur any or all of the following Indebtedness: (1)
Indebtedness Incurred pursuant to the Bank Credit Agreements and Guarantees of
Indebtedness Incurred pursuant to the Bank Credit Agreements; provided, however,
that, after giving effect to any such Incurrence, the aggregate principal amount
of such Indebtedness then outstanding does not exceed the greater of (i) $115.0
million less the amount of Net Available Cash from
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Asset Sales used to permanently reduce indebtedness under the Bank Credit
Agreements and (ii) the sum of (x) 85% of the net book value of the accounts
receivable of the Company and its Restricted Subsidiaries, determined in
accordance with GAAP and (y) 50% of the net book value of the inventory of the
Company and its Restricted Subsidiaries, determined in accordance with GAAP; (2)
Indebtedness represented by (i) the Notes issued in the Offering (and the
Exchange Notes), (ii) up to $30 million aggregate principal amount of Notes
issued subsequent to the Issue Date and (iii) Indebtedness represented by the
Subsidiary Guarantees; (3) Indebtedness outstanding on the Issue Date (other
than Indebtedness described in clause (1) of this paragraph); (4) Indebtedness
of the Company owed to and held by a Wholly-Owned Subsidiary or Indebtedness of
a Wholly-Owned Subsidiary owed to and held by the Company or a Wholly-Owned
Subsidiary; provided, however, that any subsequent issuance or transfer of any
Capital Stock which results in any such Wholly-Owned Subsidiary ceasing to be a
Wholly-Owned Subsidiary or any subsequent transfer of such Indebtedness (other
than to the Company or a Wholly-Owned Subsidiary) shall be deemed, in each case,
to constitute the Incurrence of such Indebtedness by the issuer thereof; (5)
Refinancing Indebtedness in respect of Indebtedness Incurred pursuant to
paragraph (a) or pursuant to clause (2), (3) or this clause (5); (6)
Indebtedness in respect of performance bonds, bankers' acceptances, letters of
credit and surety or appeal bonds entered into by the Company or a Restricted
Subsidiary in the ordinary course of business (in each case other than an
obligation for borrowed money); (7) Hedging Obligations consisting of Interest
Rate Agreements and Currency Agreements entered into in the ordinary course of
business and not for the purpose of speculation; provided, however, that, in the
case of Currency Agreements and Interest Rate Agreements, such Currency
Agreements and Interest Rate Agreements do not increase the Indebtedness of the
Company outstanding at any time other than as a result of fluctuations in
foreign currency exchange rates or interest rates or by reason of fees,
indemnities and compensation payable thereunder; (8) Purchase Money Indebtedness
and Capital Lease Obligations Incurred to finance the acquisition or improvement
by the Company or a Restricted Subsidiary of any assets in the ordinary course
of business and which do not exceed $7.0 million in the aggregate at any time
outstanding; (9) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient funds in
the ordinary course of business, provided that such Indebtedness is extinguished
within five business days of Incurrence; (10) Indebtedness Incurred after the
Issue Date representing interest paid-in-kind; or (11) Indebtedness in an
aggregate principal amount which, together with all other Indebtedness of the
Company and its Restricted Subsidiaries outstanding on the date of such
Incurrence (other than Indebtedness permitted by clauses (1) through (10) above
or paragraph (a)), does not exceed $10.0 million.
(c) Notwithstanding the foregoing, the Company shall not, and shall not
permit any Restricted Subsidiary to, Incur any Indebtedness pursuant to the
foregoing paragraph (b) if the proceeds thereof are used, directly or
indirectly, to Refinance (i) any Subordinated Obligations unless such
Indebtedness shall be subordinated to the Notes and the Subsidiary Guarantees,
as applicable, to at least the same extent as such Subordinated Obligations or
(ii) any Senior Subordinated Indebtedness unless such Indebtedness shall be
Senior Subordinated Indebtedness or shall be subordinated to the Notes and the
Subsidiary Guarantees, as applicable.
(d) For purposes of determining compliance with the foregoing covenant, (i)
in the event that an item of Indebtedness meets the criteria of more than one of
the types of Indebtedness described above, the Company, in its sole discretion,
will classify such item of Indebtedness and only be required to include the
amount and type of such Indebtedness in one of the above clauses and (ii) an
item of Indebtedness may be divided and classified in more than one of the types
of Indebtedness described above.
Limitation on Layered Debt. Notwithstanding paragraphs (a) and (b) of the
covenant described under "-- Limitation on Incurrence of Indebtedness," the
Company shall not, and shall not permit any Subsidiary Guarantor to, Incur any
Indebtedness if such Indebtedness is subordinate or junior in ranking in right
of payment to any Senior Indebtedness of the Company or such Subsidiary
Guarantor, as applicable, unless such Indebtedness is Senior Subordinated
Indebtedness or is expressly subordinated in right of payment to Senior
Subordinated Indebtedness.
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Limitation on Restricted Payments. (a) The Company shall not, and shall not
permit any Restricted Subsidiary, directly or indirectly, to make a Restricted
Payment if at the time the Company or such Restricted Subsidiary makes such
Restricted Payment: (1) a Default shall have occurred and be continuing (or
would result therefrom); (2) the Company is not able to Incur an additional
$1.00 of Indebtedness pursuant to paragraph (a) of the covenant described under
"-- Limitation on Incurrence of Indebtedness"; or (3) the aggregate amount of
such Restricted Payment together with all other Restricted Payments (the amount
of any payments made in property other than cash to be valued at the fair market
value of such property, as determined in good faith by the Board of Directors)
declared or made since the Issue Date would exceed the sum of: (A) 50% of the
Consolidated Net Income accrued during the period (treated as one accounting
period) from the Issue Date to the end of the most recent fiscal quarter prior
to the date of such Restricted Payment for which financial statements of the
Company are available (or, in case such Consolidated Net Income accrued during
such period (treated as one accounting period) shall be a deficit, minus 100% of
such deficit); (B) the aggregate Net Cash Proceeds received subsequent to the
Issue Date by the Company from the issuance or sale of (i) its Capital Stock
(other than Disqualified Stock or the issuance or sale of Capital Stock to a
Subsidiary of the Company) or (ii) the Capital Stock of a Restricted Subsidiary
pursuant to a Qualified TIPS Transaction (other than any issuance or sale to a
Subsidiary of the Company); (C) the amount by which Indebtedness of the Company
or its Restricted Subsidiaries is reduced on the Company's balance sheet upon
the conversion or exchange (other than by a Subsidiary of the Company)
subsequent to the Issue Date, of any Indebtedness of the Company or its
Restricted Subsidiaries convertible or exchangeable for Capital Stock (other
than Disqualified Stock) of the Company (less the amount of any cash, or the
fair market value of any other property, distributed by the Company or any
Restricted Subsidiary upon such conversion or exchange); and (D) an amount equal
to the sum of the net reduction in Investments resulting from repayments of
loans or advances or other transfers of assets subsequent to the Issue Date, in
each case to the Company or any Restricted Subsidiary; provided, however, that
the foregoing amount shall not exceed the amount of Investments previously made
(and treated as a Restricted Payment) by the Company or any Restricted
Subsidiary in such Person.
(b) The provisions of the foregoing paragraph (a) shall not prohibit: (i)
any purchase or redemption of Capital Stock or Subordinated Obligations of the
Company or any Restricted Subsidiary made in exchange for, or out of the
proceeds of the substantially concurrent sale of, Capital Stock of the Company
(other than Disqualified Stock and other than Capital Stock issued or sold to a
Subsidiary of the Company); provided, however, that (A) such purchase or
redemption shall be excluded from the calculation of the amount of Restricted
Payments and (B) the Net Cash Proceeds from such sale shall be excluded from the
calculation of amounts under clause (3)(B) of paragraph (a) above; (ii) any
purchase or redemption of (A) Subordinated Obligations of the Company made in
exchange for, or out of the proceeds of the substantially concurrent sale of,
Subordinated Obligations of the Company which is permitted to be Incurred
pursuant to paragraphs (b) and (c) of the covenant described under "--
Limitation on Incurrence of Indebtedness" or (B) Subordinated Obligations of a
Restricted Subsidiary made in exchange for, or out of the proceeds of the
substantially concurrent sale of, Subordinated Obligations of such Restricted
Subsidiary or the Company which is permitted to be Incurred pursuant to
paragraphs (b) and (c) of the covenant described under "-- Limitation on
Incurrence of Indebtedness"; provided, however, that such purchase or redemption
shall be excluded from the calculation of the amount of Restricted Payments;
(iii) dividends paid within 60 days after the date of declaration thereof if at
such date of declaration such dividend would have complied with this covenant;
provided, however, that at the time of payment of such dividend, no other
Default shall have occurred and be continuing (or would result therefrom);
provided, further, however, that such dividend shall be included in the
calculation of the amount of Restricted Payments; (iv) any purchase or
redemption or other retirement for value of Capital Stock of the Company
required pursuant to any shareholders agreement, management agreement or
employee stock option agreement in accordance with the provisions of any such
arrangement in an amount not to exceed $1.5 million in the aggregate; provided,
however, that at the time of such purchase or redemption, no other Default shall
have occurred and be continuing (or would result therefrom); provided, further,
however, that such purchase or redemption shall be included in the amount of
Restricted Payments; or (v) Guarantees by the Company or any Restricted
Subsidiary of Indebtedness Incurred by the Company or a Restricted Subsidiary,
provided, however, that at the time such Guarantee is Incurred it would be
permitted
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under the covenant described under "-- Limitation on Incurrence of Indebtedness"
provided, further, however, that such Guarantee shall be excluded from the
amount of Restricted Payments.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company shall not, and shall not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or consensual restriction on the ability of any
Restricted Subsidiary (a) to pay dividends or make any other distributions on
its Capital Stock to the Company or a Restricted Subsidiary or pay any
Indebtedness owed to the Company, (b) to make any loans or advances to the
Company or (c) to transfer any of its property or assets to the Company, except:
(i) any encumbrance or restriction pursuant to an agreement in effect at or
entered into on the Issue Date; (ii) any encumbrance or restriction with respect
to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness
Incurred by such Restricted Subsidiary which was entered into on or prior to the
date on which such Restricted Subsidiary was acquired by the Company (other than
as consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by the Company) and outstanding on such date; (iii)
any encumbrance or restriction pursuant to an agreement effecting a Refinancing
of Indebtedness Incurred pursuant to an agreement referred to in clause (i) or
(ii) of this covenant (or effecting a Refinancing of such Refinancing
Indebtedness pursuant to this clause (iii)) or contained in any amendment to an
agreement referred to in clause (i) or (ii) of this covenant or this clause
(iii); provided, however, that the encumbrances and restrictions with respect to
such Restricted Subsidiary contained in any such refinancing agreement or
amendment are no more restrictive in any material respect than the encumbrances
and restrictions with respect to such Restricted Subsidiary contained in such
agreements; (iv) any such encumbrance or restriction consisting of customary
non-assignment provisions in leases governing leasehold interests to the extent
such provisions restrict the transfer of the lease or the property leased
thereunder; (v) in the case of clause (c) above, restrictions contained in
security agreements or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent such restrictions restrict the transfer of the property
subject to such security agreements or mortgages; (vi) any restriction with
respect to (x) a Restricted Subsidiary imposed pursuant to an agreement entered
into for the sale or disposition of all or substantially all the Capital Stock
or assets of such Restricted Subsidiary or (y) an asset of a Restricted
Subsidiary pursuant to an agreement entered into for the sale or disposition of
such asset, in each case pending the closing of such sale or disposition; (vii)
any restriction imposed by applicable law; and (viii) any encumbrance or
restriction with respect to a Foreign Restricted Subsidiary which is contained
in agreements evidencing Indebtedness permitted under the covenant described
under "-- Limitation on Incurrence of Indebtedness" and which encumbrance or
restriction is customary in agreements of such type.
Limitation on Sales of Assets and Subsidiary Stock. The Company shall not,
and shall not permit any Restricted Subsidiary to, consummate any Asset
Disposition unless (i) the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Disposition at least equal to the fair
market value (including as to the value of all non-cash consideration), as
determined in good faith by the Board of Directors, of the shares and assets
subject to such Asset Disposition and (ii) at least 75% of the consideration
therefor received by the Company or such Restricted Subsidiary is in the form of
cash or cash equivalents, provided, however, that this clause (ii) shall not
apply if the Company or a Restricted Subsidiary is disposing of assets in
exchange for Additional Assets. For the purposes of this covenant, the
assumption of Indebtedness of the Company or any Restricted Subsidiary and the
release of the Company or such Restricted Subsidiary from all liability on such
Indebtedness in connection with such Asset Disposition is deemed to be cash.
With respect to any Asset Disposition occurring on or after the Issue Date
from which the Company or any Restricted Subsidiary receives Net Available Cash,
the Company or such Restricted Subsidiary shall (i) within 365 days after the
date such Net Available Cash is received and to the extent the Company or such
Restricted Subsidiary elects (or is required by the terms of any Senior
Indebtedness) to (A) apply an amount equal to such Net Available Cash to prepay,
repay, purchase or legally defease Senior Indebtedness of the Company or such
Restricted Subsidiary, in each case owing to a Person other than the Company or
any Affiliate of the Company, or (B) invest an equal amount, or the amount not
so applied pursuant to clause (A), in Additional Assets (including by means of
an Investment in Additional Assets by a Subsidiary Guarantor
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with Net Available Cash received by the Company or another Subsidiary Guarantor)
and (ii) apply such excess Net Available Cash (to the extent not applied
pursuant to clause (i)) as provided in the following paragraphs of the covenant
described hereunder; provided, however, that in connection with any prepayment,
repayment or purchase of Senior Indebtedness pursuant to clause (A) above (other
than the repayment of Senior Indebtedness Incurred under a Bank Credit Agreement
to fund the purchase of an asset which is sold by the Company within 180 days of
its purchase pursuant to a Sale/Leaseback Transaction), the Company or such
Restricted Subsidiary shall retire such Senior Indebtedness and shall cause the
related loan commitment (if any) to be permanently reduced in an amount equal to
the principal amount so prepaid, repaid or purchased. The amount of Net
Available Cash required to be applied pursuant to clause (ii) above and not
theretofore so applied shall constitute "Excess Proceeds." Pending application
of Net Available Cash pursuant to this provision, such Net Available Cash shall
be invested in Temporary Cash Investments.
If at any time the aggregate amount of Excess Proceeds not theretofore
subject to an Excess Proceeds Offer (as defined below) totals at least $3
million, the Company shall, not later than 30 days after the end of the period
during which the Company is required to apply such Excess Proceeds pursuant to
clause (i) of the immediately preceding paragraph (or, if the Company so elects,
at any time within such period), make an offer (an "Excess Proceeds Offer") to
purchase from the holders of Notes and Other Qualified Notes (determined on a
pro rata basis according to the accreted value or aggregate principal amount, as
the case may be, of the Notes and the Other Qualified Notes) in an amount equal
to the Excess Proceeds (rounded down to the nearest multiple of $1,000) on such
date, at a purchase price equal to 100% of the principal amount of such Notes,
plus, in each case, accrued interest (if any) to the date of purchase (the
"Excess Proceeds Payment"). Upon completion of an Excess Proceeds Offer the
amount of Excess Proceeds remaining after application pursuant to such Excess
Proceeds Offer, (including payment of the purchase price for Notes duly
tendered) may be used by the Company for any corporate purpose (to the extent
not otherwise prohibited by the Indenture).
The Company shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations thereunder in the event that such Excess Proceeds are received by
the Company under the covenant described hereunder and the Company is required
to repurchase Notes as described above. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of the covenant
described hereunder, the Company shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its obligations
under the covenant described hereunder by virtue thereof.
Limitation on Affiliate Transactions. (a) The Company shall not, and shall
not permit any Restricted Subsidiary to, enter into or permit to exist any
transaction or series of related transactions (including the purchase, sale,
lease or exchange of any property, employee compensation arrangements or the
rendering of any service) with any Affiliate of the Company (an "Affiliate
Transaction") unless the terms thereof (1) are no less favorable to the Company
or such Restricted Subsidiary than those that could be obtained at the time of
such transaction in arm's-length dealings with a Person who is not such an
Affiliate, (2) if such Affiliate Transaction (or series of related Affiliate
Transactions) involves aggregate payments in an amount in excess of $1.0 million
(i) are set forth in writing and (ii) comply with clause (1), (3) if such
Affiliate Transaction (or series of related Affiliate Transactions) involves
aggregate payments in an amount in excess of $2.5 million in any one year, (i)
are set forth in writing, (ii) comply with clause (2) and (iii) have been
approved by a majority of the disinterested members of the Board of Directors,
and (4) if such Affiliate Transaction (or series of related Affiliate
Transactions) involves aggregate payments in an amount in excess of $10.0
million in any one year, (i) comply with clause (3) and (ii) have been
determined by a nationally recognized investment banking firm to be fair, from a
financial standpoint, to the Company and its Restricted Subsidiaries.
(b) The provisions of the foregoing paragraph (a) shall not prohibit (i)
any Restricted Payment permitted to be paid pursuant to the covenant described
under "-- Limitation on Restricted Payments," (ii) any issuance of securities,
or other payments, awards or grants in cash, securities or otherwise, pursuant
to, or the funding of, employment arrangements, stock options and stock
ownership plans in the ordinary course of business and approved by the Board of
Directors, (iii) the grant of stock options or similar rights to employees and
directors of the Company in the ordinary course of business and pursuant to
plans approved by the Board of Directors, (iv) loans or advances to employees of
the Company or its Subsidiaries, provided, however, the
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aggregate amount of such loans or advances outstanding at any one time shall not
exceed $1.5 million, (v) fees, compensation or employee benefit arrangements
paid to and indemnity provided for the benefit of directors, officers or
employees of the Company or any Subsidiary in the ordinary course of business,
(vi) any Affiliate Transaction between the Company and a Restricted Subsidiary
or between Restricted Subsidiaries in the ordinary course of business (so long
as the other stockholders of any participating Restricted Subsidiaries which are
not Wholly Owned Subsidiaries are not themselves Affiliates of the Company), or
(vii) Existing Affiliate Agreements, including amendments thereto or
replacements thereof entered into after the Issue Date, provided, however, that
the terms of any such amendment or replacement are at least as favorable to the
Company as those that could be obtained at the time of such amendment or
replacement in arm's-length dealings with a Person which is not an Affiliate. If
the Company or any Restricted Subsidiary has complied with all of the provisions
of the foregoing paragraph (a) other than clause (4)(ii) thereof, such paragraph
shall not prohibit the Company or any Restricted Subsidiary from entering into
Affiliate Transactions pursuant to which the Company or any Restricted
Subsidiary renders services in the ordinary course of business to CVC or
MascoTech or to Affiliates of CVC or MascoTech.
Limitation on the Issuance or Sale of Capital Stock of Restricted
Subsidiaries. The Company shall not (i) sell, pledge, hypothecate or otherwise
dispose of any shares of Capital Stock of a Restricted Subsidiary (other than
pledges of Capital Stock securing Senior Indebtedness) or (ii) permit any
Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise
dispose of any shares of its Capital Stock other than (A) to the Company or a
Restricted Subsidiary, (B) directors' qualifying shares and shares owned by
foreign shareholders, to the extent required by applicable local laws in foreign
countries, (C) pursuant to a Qualified TIPS Transaction or (D) if, immediately
after giving effect to such issuance or sale, such Restricted Subsidiary would
no longer constitute a Subsidiary. The proceeds of any sale of such Capital
Stock permitted hereby will be treated as Net Available Cash from an Asset
Disposition and must be applied in accordance with the terms of the covenant
described under "-- Limitation on Sales of Assets and Subsidiary Stock."
Limitation on Liens. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, Incur or permit to exist any
Lien (other than Permitted Liens) of any nature whatsoever on any property of
the Company or any Restricted Subsidiary (including Capital Stock of a
Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired,
which secures Indebtedness that ranks pari passu with or is subordinated to the
Notes or the Subsidiary Guarantees unless (i) if such Lien secures Indebtedness
that ranks pari passu with the Notes and the Subsidiary Guarantees, the Notes
and the Subsidiary Guarantees are secured on an equal and ratable basis with the
obligation so secured until such time as such obligation is no longer secured by
a Lien or (ii) if such Lien secures Indebtedness that is subordinated to the
Notes and the Subsidiary Guarantees, such Lien shall be subordinated to a Lien
granted to the Holders on the same collateral as that securing such Lien to the
same extent as such subordinated Indebtedness is subordinated to the Note and
the Subsidiary Guarantees.
Designation of Restricted and Unrestricted Subsidiaries. The Board of
Directors may designate any Subsidiary of the Company (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary if (a) the
Subsidiary to be so designated (the "Designee") does not own any Capital Stock
or Indebtedness of, or own or hold any Lien on any property of, the Company or
any other Subsidiary (other than a direct or indirect Subsidiary of the
Designee, provided, however, that any such direct or indirect Subsidiary of the
Designee shall otherwise comply with clauses (a) through (f) of this covenant),
(b) the Subsidiary to be so designated is not obligated under any Indebtedness,
Lien or other obligation that, if in default, would result (with the passage of
time or notice or otherwise) in a default on any Indebtedness of the Company or
of any Subsidiary (other than the Designee or a Subsidiary of the Designee that
is an Unrestricted Subsidiary), (c) the Company certifies that such designation
complies with the covenant described under "Certain Covenants -- Limitation on
Restricted Payments," (d) such Subsidiary, either alone or in the aggregate with
all other Unrestricted Subsidiaries, does not operate, directly or indirectly
all or substantially all of the business of the Company and its Subsidiaries;
(e) such Subsidiary does not directly or indirectly, own any Indebtedness of or
Capital Stock in, and has no Investments in, the Company or any Restricted
Subsidiary; and (f) such Subsidiary is a Person with respect to which neither
the Company nor any of its Restricted Subsidiaries has any direct or indirect
obligation (i) to subscribe for additional Capital Stock or (ii) to maintain or
preserve such Person's financial condition or to cause such Person to achieve
any specified levels
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of operating results. 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 as of
such date. For purposes of making any such designation, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary will be deemed to be Restricted Payments at
the time of such designation and will reduce the amount available for Restricted
Payments under clause (3) of the covenant described under "Certain Covenants --
Limitation on Restricted Payments." Such designation shall only be permitted if
such Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
Any such designation or redesignation by the Board of Directors will be
evidenced to the Trustee by filing with the Trustee a Board Resolution giving
effect to such designation or redesignation and an Officers' Certificate (a)
certifying that such designation or redesignation complies with the foregoing
provisions and (b) giving the effective date of such designation or
redesignation, such filing with the Trustee to occur within 45 days after the
end of the fiscal quarter of the Company in which such designation or
redesignation is made (or, in the case of a designation or redesignation made
during the last fiscal quarter of the Company's fiscal year, within 90 days
after the end of such fiscal year). Unless designated as an Unrestricted
Subsidiary as herein provided, each Subsidiary of the Company shall be a
Restricted Subsidiary. Except as provided herein, no Restricted Subsidiary shall
be redesignated as an Unrestricted Subsidiary.
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary, if immediately after giving pro forma effect to such
designation (a) the Company could Incur $1.00 of additional Indebtedness under
paragraph (a) of the covenant described under "Certain Covenants -- Limitation
on Incurrence of Indebtedness" and (b) no Default shall have occurred and be
continuing or would result therefrom.
Merger and Consolidation. The Company shall not consolidate with or merge
with or into, or convey, transfer or lease, in one transaction or a series of
related transactions, all or substantially all its assets to, any Person,
unless: (i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a corporation organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia and the
Successor Company (if not the Company) shall expressly assume, by an indenture
supplemental thereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Company under the Notes
and the Indenture; (ii) immediately after giving effect to such transaction on a
pro forma basis (and treating any Indebtedness which becomes an obligation of
the Successor Company or any Subsidiary as a result of such transaction as
having been Incurred by such Successor Company or such Subsidiary at the time of
such transaction), no Default shall have occurred and be continuing; (iii)
except in the case of a merger the sole purpose of which is to change the
Company's jurisdiction of incorporation, immediately after giving effect to such
transaction on a pro forma basis, the Successor Company would be able to Incur
an additional $1.00 of Indebtedness pursuant to paragraph (a) of the covenant
described under "-- Limitation on Incurrence of Indebtedness"; (iv) immediately
after giving effect to such transaction on a pro forma basis, the Successor
Company shall have Consolidated Net Worth in an amount that is not less than the
Consolidated Net Worth of the Company immediately prior to such transaction; and
(v) the Company shall have delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that such consolidation, merger or transfer
and such supplemental indenture (if any) comply with the Indenture.
Notwithstanding the foregoing clauses (ii), (iii) and (iv), any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to the Company or another Restricted Subsidiary.
The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, but the predecessor Company in the case of a
conveyance, transfer or lease shall not be released from the obligation to pay
the principal of and interest on the Notes.
The Company shall not permit any Subsidiary Guarantor to consolidate with
or merge with or into, or convey, transfer or lease, in one transaction or a
series of transactions, all or substantially all its assets to, any
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Person (other than the Company or a Wholly-Owned Subsidiary), unless: (i) the
resulting, surviving or transferee Person (if not such Subsidiary) shall be a
corporation organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia and the Successor Company
(if not such Subsidiary) shall expressly assume, by a Guarantee agreement, in
form satisfactory to the Trustee, all the obligations of such Subsidiary under
its Subsidiary Guarantee; (ii) immediately after giving effect to such
transaction on a pro forma basis (and treating any Indebtedness which becomes an
obligation of the resulting, surviving or transferee Person as a result of such
transaction as having been Incurred by such Person at the time of such
transaction), no Default shall have occurred and be continuing; and (iii) the
Company shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or transfer and
such Guarantee agreement comply with the Indenture. The provisions of clauses
(i) and (iii) above shall not apply to any transactions which constitute an
Asset Disposition if the Company has complied with the applicable provisions of
the covenant described under "-- Limitation on Sales of Assets and Subsidiary
Stock" above.
SEC Reports. Until such time as the Company shall become subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall provide the Trustee, the Initial Purchasers, the Noteholders and
prospective Noteholders (upon request) with such annual reports and such
information, documents and other reports as are specified in Sections 13 and
15(d) of the Exchange Act and applicable to a U.S. corporation subject to such
Sections, such information, documents and other reports to be so provided at the
times specified for the filing of such information, documents and reports under
such Sections. Thereafter, notwithstanding that the Company may not be required
to remain subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company shall file with the SEC and provide the Trustee and
Noteholders and prospective Noteholders (upon request) such annual reports and
such information, documents and other reports as are specified in such Sections
and applicable to a U.S. corporation subject to such Sections, such information,
documents and other reports to be so filed and provided at the times specified
for the filing of such information, documents and reports under such Sections;
provided, however, that the Company shall not be required to file any report,
document or other information with the SEC if the SEC does not permit such
filing.
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in the
payment of interest on the Notes when due (whether or not such payment is
prohibited by the provisions described under "Subordination" above), continued
for 30 days, (ii) a default in the payment of principal of any Note when due at
its Stated Maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise (whether or not such payment is prohibited by the
provisions described under "Subordination" above), (iii) the failure by the
Company, to comply for 60 days after notice with any of its obligations under
the covenants described under "-- Limitation on Incurrence of Indebtedness," "--
Limitation on Restricted Payments," "-- Limitation on Sales of Assets and
Subsidiary Stock" and "-- Merger and Consolidation," (iv) the failure by the
Company to comply for 60 days after notice with its other agreements contained
in the Indenture, (v) Indebtedness of the Company or any Restricted Subsidiary
is not paid within any applicable grace period after final maturity or is
accelerated by the holders thereof because of a default and the total amount of
such Indebtedness unpaid or accelerated exceeds $5.0 million (the
"cross-acceleration provision"), (vi) certain events of bankruptcy, insolvency
or reorganization of the Company or a Significant Subsidiary (the "bankruptcy
provisions"), (vii) any judgment or decree for the payment of money in excess of
$5 million is rendered against the Company or a Restricted Subsidiary, remains
outstanding following such judgment and is not discharged, waived or stayed
within 60 days after entry of such judgment or decree (the "judgment default
provision"), or (viii) a Subsidiary Guarantee ceases to be in full force and
effect (other than in accordance with the terms of such Subsidiary Guarantee) or
a Subsidiary Guarantor denies or disaffirms its obligations under its Subsidiary
Guarantee and such default continues for 10 days. However, a default under
clause (iii) or (iv) will not constitute an Event of Default until the Trustee
or the Holders of 25% in principal amount of the outstanding Notes notify the
Company of the default and the Company does not cure such default within the
time specified in clauses (iii) and (iv) hereof after receipt of such notice.
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If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the outstanding Notes may declare the
principal of and accrued but unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal and interest shall be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company occurs and is
continuing, the principal of and interest on all the Notes will ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holders of the Notes. Under certain
circumstances, the Holders of a majority in principal amount of the outstanding
Notes may rescind any such acceleration with respect to the Notes and its
consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the Notes unless (i) such Holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
Holders of at least 25% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy, (iii) such Holders have offered the
Trustee reasonable security or indemnity against any loss, liability or expense,
(iv) the Trustee has not complied with such request within 60 days after the
receipt thereof and the offer of security or indemnity and (v) the Holders of a
majority in principal amount of the outstanding Notes have not given the Trustee
a direction inconsistent with such request within such 60-day period. Subject to
certain restrictions, the Holders of a majority in principal amount of the
outstanding Notes are given the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
Holder or that would involve the Trustee in personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder notice of the Default
within 90 days after it occurs. Except in the case of a Default in the payment
of principal of or interest on any Note, the Trustee may withhold notice if and
so long as a committee of its trust officers determines that withholding notice
is not opposed to the interest of the Holders. In addition, the Company is
required to deliver to the Trustee, within 120 days after the end of each fiscal
year, a certificate indicating whether the signers thereof know of any Default
that occurred during the previous year. The Company also is required to deliver
to the Trustee, within 30 days after the occurrence thereof, written notice of
any event which would constitute certain Defaults, their status and what action
the Company is taking or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the Holders of a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange for the Notes) and any past default or compliance with any provisions
may also be waived with the consent of the Holders of a majority in principal
amount of the Notes then outstanding. However, without the consent of each
Holder of an outstanding Note affected thereby, no amendment may, among other
things, (i) reduce the amount of Notes whose Holders must consent to an
amendment, (ii) reduce the rate of or extend the time for payment of interest on
any Note, (iii) reduce the principal of or change the Stated Maturity of any
Note, (iv) reduce the premium payable upon the redemption of any Note or change
the time at which any Note may be redeemed as described under "-- Optional
Redemption" above, (v) make any Note payable in money other than that stated in
the Note, (vi) impair the right of any Holder to institute suit for the
enforcement of any payment on or with respect to such Holder's Notes or any
Subsidiary Guarantee, (vii) make any change in the amendment provisions which
require each Holder's consent or in the waiver provisions or (viii) make any
change to the subordination provisions of the Indenture that would adversely
affect the Noteholders.
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Without the consent of any Holder, the Company and Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation of the obligations of the Company
under the Indenture, to provide for uncertificated Notes in addition to or in
place of certificated Notes (provided that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Code), to add Guarantees with respect to the Notes, to release Subsidiary
Guarantors when permitted by the Indenture, to secure the Notes, to add to the
covenants of the Company for the benefit of the Holders or to surrender any
right or power conferred upon the Company, to make any change that does not
adversely affect the rights of any Holder or to comply with any requirement of
the SEC in connection with the qualification of the Indenture under the Trust
Indenture Act. However, no amendment may be made to the subordination provisions
of the Indenture that adversely affects the rights of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
their Representative) consents to such change.
The consent of the Holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to Holders a notice briefly describing such amendment. However,
the failure to give such notice to all Holders, or any defect therein, will not
impair or affect the validity of the amendment.
TRANSFER
Certificated Notes will be issued in registered form and will be
transferable only upon the surrender of the Notes being transferred for
registration of transfer. The Company may require payment of a sum sufficient to
cover any tax, assessment or other governmental charge payable in connection
with certain transfers and exchanges.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under "-- Change of
Control" and under the covenants described under "-- Certain Covenants" (other
than the covenant described under "-- Merger and Consolidation"), the operation
of the cross-acceleration provision, the bankruptcy provisions with respect to
Significant Subsidiaries and the judgment default provision described under
"-- Defaults" above and the limitations contained in clauses (iii) and (iv)
under "Certain Covenants -- Merger and Consolidation" above ("covenant
defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iii), (iv), (v), (vi) (with respect only
to Significant Subsidiaries) or (vii) under "-- Defaults" above or because of
the failure of the Company to comply with clause (iii) or (iv) under "Certain
Covenants -- Merger and Consolidation" above. If the Company exercises its legal
defeasance option or its covenant defeasance option, each Subsidiary Guarantor
will be released from all of its obligations with respect to its Subsidiary
Guarantee.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal and interest on the Notes to
redemption or maturity, as the case may be, and must comply with certain other
conditions, including delivery to the Trustee of an Opinion of Counsel to the
effect that holders of the Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit and defeasance and will
be subject to Federal income tax on the same amount and in the same manner and
at the
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same times as would have been the case if such deposit and defeasance had not
occurred (and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable Federal income tax law).
CONCERNING THE TRUSTEE
IBJ Schroder Bank & Trust Company is the Trustee under the Indenture and
has been appointed by the Company as Registrar and Paying Agent with regard to
the Notes.
The Holders of a majority in principal amount of the outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. The Indenture provides that if an Event of Default occurs (and is
not 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 Notes,
unless such Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense and then only to the
extent required by the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business, including improvements to
existing assets, used by the Company or a Restricted Subsidiary in a Related
Business; (ii) the Capital Stock of a Person that becomes a Restricted
Subsidiary as a result of the acquisition of such Capital Stock by the Company
or another Restricted Subsidiary; provided, however, that any such Restricted
Subsidiary is primarily engaged in a Related Business; (iii) Capital Stock
constituting an additional equity interest in any Person that at such time is a
Restricted Subsidiary that is not a Wholly-Owned Subsidiary; or (iv) the costs
of improving or developing any property owned by the Company or a Restricted
Subsidiary that is used in a Related Business.
"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 the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under "Certain Covenants -- Limitation on
Restricted Payments," "Certain Covenants -- Limitation on Affiliate
Transactions" and "Certain Covenants -- Limitations on Sales of Assets and
Subsidiary Stock" only, "Affiliate" shall also mean any beneficial owner of
Capital Stock representing 10% or more of the total voting power of the Voting
Stock (on a fully diluted basis) of the Company or of rights or warrants to
purchase such Capital Stock (whether or not currently exercisable) and any
Person who would be an Affiliate of any such beneficial owner pursuant to the
first sentence hereof.
"Asset Disposition" means any sale, lease, transfer, Sale/Leaseback
Transaction or other disposition (or series of related sales, leases, transfers
or dispositions) by the Company or any Restricted Subsidiary, including any
disposition by means of a merger, consolidation or similar transaction (each
referred to for the purposes of this definition as a "disposition"), of (i) any
shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares and shares owned by foreign shareholders to the extent
required by applicable local laws in foreign countries), (ii) all or
substantially all the assets of any division, business segment or comparable
line of business of the Company or any Restricted Subsidiary or (iii) any other
assets of the Company or any Restricted Subsidiary outside of the ordinary
course of business of the Company or such Restricted Subsidiary. Notwithstanding
the foregoing, the term "Asset Disposition" shall not include
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(x) a disposition by a Restricted Subsidiary to the Company or by the Company or
a Restricted Subsidiary to a Subsidiary Guarantor, (y) for purposes of the
covenant described under "Certain Covenants -- Limitation on Sales of Assets and
Subsidiary Stock", a disposition that constitutes a Permitted Investment or a
Restricted Payment permitted by the covenant described under "Certain Covenants
- -- Limitation on Restricted Payments", and (z) a disposition of assets having a
fair market value of less than $1,000,000.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the Notes, compounded annually) of the total obligations of the lessee
for rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease has been
extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Credit Agreements" means the Senior Credit Facility and any other
bank credit agreement or similar facility now existing or entered into in the
future by the Company or any Restricted Subsidiary, as any of the same may be
amended, waived, modified, Refinanced or replaced from time to time (except to
the extent that any such amendment, waiver, modification, replacement or
Refinancing would be prohibited by the terms of the Indenture).
"Bank Indebtedness" means any and all present and future amounts payable
under or in respect of the Bank Credit Agreements, including principal, premium
(if any), interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization, whether or not a claim for
post-filing interest is allowed in such proceedings), fees, charges, expenses,
reimbursement obligations, guarantees and all other indebtedness and other
Obligations and liabilities payable thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board of Directors.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Change of Control" means the occurrence of any of the following events:
(i) prior to the first public offering of Voting Stock of the Company,
the Permitted Investors cease to be entitled (by "beneficial ownership" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act) of Voting Stock,
contract or otherwise) to elect or cause the election of directors having,
a majority in the aggregate of the total voting power of the Board of
Directors, whether as a result of issuance of securities of the Company,
any merger, consolidation, liquidation or dissolution of the Company, any
direct or indirect transfer of securities by the Permitted Investors or
otherwise (for purposes of this clause (i) and clause (ii) below, the
Permitted Investors shall be deemed to beneficially own any Voting Stock of
any entity (the "specified entity") held by any other entity (the "parent
entity") so long as the Permitted Investors beneficially own (as so
defined), directly or indirectly, in the aggregate a majority of the voting
power of the Voting Stock of such parent entity);
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(ii) after the first public offering of Voting Stock of the Company,
any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than one or more Permitted Holders, is or becomes the
beneficial owner (as defined in clause (i) above, except that for purposes
of this clause (ii) such person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
directly or indirectly), of more than 35% of the total voting power of the
Voting Stock of the Company and either (x) the Permitted Holders
beneficially own (as defined in clause (i) above), directly or indirectly,
in the aggregate a lesser percentage of the total voting power of the
Voting Stock of the Company than such other person and do not have the
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors or (y) such
other person is entitled to elect directors having a majority of the total
voting power of the Board of Directors; or
(iii) after the first public offering of Voting Stock of the Company,
during any period of not greater than two consecutive years beginning after
the Issue Date, individuals who at the beginning of such period constituted
the Board of Directors (together with any new directors whose election by
such Board of Directors or whose nomination for election by the
shareholders of the Company was approved by a vote of a majority of the
directors of the Company then still in office who were either directors at
the beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a majority
of the Board of Directors then in office.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days (or, if less, the
number of days after the end of such fiscal quarter as the consolidated
financial statements of the Company shall be available) prior to the date of
such determination to (ii) Consolidated Interest Expense for such four fiscal
quarters; provided, however, that (1) if the Company or any Restricted
Subsidiary has Incurred any Indebtedness since the beginning of such period that
remains outstanding on such date of determination or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence
of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day of such
period and the discharge of any other Indebtedness repaid, repurchased, defeased
or otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period (except that, in the case
of Indebtedness used to finance working capital needs incurred under a revolving
credit or similar arrangement, the amount thereof shall be deemed to be the
average daily balance of such Indebtedness during such four-fiscal-quarter
period), (2) if since the beginning of such period the Company or any Restricted
Subsidiary shall have made any Asset Disposition, the EBITDA for such period
shall be reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets which are the subject of such Asset Disposition for
such period, or increased by an amount equal to the EBITDA (if negative)
directly attributable thereto for such period, and Consolidated Interest Expense
for such period shall be reduced by an amount equal to the Consolidated Interest
Expense directly attributable to any Indebtedness of the Company or any
Restricted Subsidiary repaid, repurchased, defeased, assumed by a third person
(to the extent the Company and its Restricted Subsidiaries are no longer liable
for such Indebtedness) or otherwise discharged with respect to the Company and
its continuing Restricted Subsidiaries in connection with such Asset Disposition
for such period (or, if the Capital Stock of any Restricted Subsidiary is sold,
the Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (3) if since the beginning of such period the Company shall
have consummated a Public Equity Offering following which there is a Public
Market, Consolidated Interest Expense for such period shall be reduced by an
amount equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to the Company and its Restricted
Subsidiaries in connection with such Public Equity Offering for such period, (4)
if since the beginning of such period the Company or any Restricted Subsidiary
(by merger or otherwise) shall have made an Investment in any Restricted
Subsidiary (or any Person which becomes a Restricted Subsidiary) or an
acquisition of assets,
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which acquisition constitutes all or substantially all of an operating unit of a
business, including any such Investment or acquisition occurring in connection
with a transaction requiring a calculation to be made hereunder, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto (including the Incurrence of any Indebtedness) as if
such Investment or acquisition occurred on the first day of such period and (5)
if since the beginning of such period any Person (that subsequently became a
Restricted Subsidiary or was merged with or into the Company or any Restricted
Subsidiary since the beginning of such period) shall have made any Asset
Disposition, any Investment or acquisition of assets that would have required an
adjustment pursuant to clause (3) or (4) above if made by the Company or a
Restricted Subsidiary during such period, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving pro forma effect
thereto as if such Asset Disposition, Investment or acquisition occurred on the
first day of such period. For purposes of this definition, whenever pro forma
effect is to be given to an acquisition of assets, the amount of income or
earnings relating thereto and the amount of Consolidated Interest Expense
associated with any Indebtedness Incurred in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible financial or
accounting Officer of the Company in accordance with Article 11 of Regulation
S-X. If any Indebtedness bears a floating rate of interest and is being given
pro forma effect, the interest on such Indebtedness shall be calculated as if
the rate in effect on the date of determination had been the applicable rate for
the entire period (taking into account any Interest Rate Agreement applicable to
such Indebtedness if such Interest Rate Agreement has a remaining term in excess
of 12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
incurred by the Company or its Restricted Subsidiaries, (i) interest expense
attributable to Capital Lease Obligations, (ii) amortization of debt discount,
(iii) capitalized interest, (iv) non-cash interest expenses, (v) commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, (vi) net costs associated with Hedging
Obligations (including amortization of fees), and (vii) interest actually paid
on any Indebtedness of any other Person that is Guaranteed by the Company or any
Restricted Subsidiary.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated Subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income: (i) any net income (or loss) of
any Person if such Person is not a Restricted Subsidiary, except that subject to
the exclusion contained in clause (iv) below, the Company's equity in the net
income of any such Person for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash actually distributed by such
Person during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution paid to a Restricted Subsidiary, to the limitations contained in
clause (iii) below); (ii) for purposes of subclause (a)(3)(A) of the covenant
described under "Certain Covenants -- Limitation on Restricted Payments" only,
any net income (or loss) of any Person acquired by the Company or a Subsidiary
in a pooling of interests transaction for any period prior to the date of such
acquisition; (iii) any net income of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (A) subject to
the exclusion contained in clause (iv) below, the Company's equity in the net
income of any such Restricted Subsidiary for such period shall be included in
such Consolidated Net Income up to the aggregate amount of cash that could have
been distributed by such Restricted Subsidiary consistent with such restriction
during such period to the Company or another Restricted Subsidiary as a dividend
or other distribution (subject, in the case of a dividend or other distribution
paid to another Restricted Subsidiary, to the limitation contained in this
clause) and (B) the Company's equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such Consolidated
Net Income; (iv) any gain (or loss) realized upon the sale or other disposition
of any assets of the Company or its consolidated Subsidiaries (including
pursuant to any sale-and-leaseback arrangement) which is not sold or otherwise
disposed of in the ordinary course of business and any gain (or loss) realized
upon the sale or other disposition of any Capital Stock of any Person; (v)
extraordinary gains or losses; and (vi) the cumulative effect of a change in
accounting principles. Notwithstanding the foregoing, for the purposes of the
covenant described under "Certain Covenants -- Limitation on Restricted
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Payments" only, there shall be excluded from Consolidated Net Income any
dividends, repayments of loans or advances or other transfers of assets from
Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the
extent such dividends, repayments or transfers increase the amount of Restricted
Payments permitted under such covenant pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as (i) the par
or stated value of all outstanding Capital Stock of the Company plus (ii)
paid-in capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and (B) any
amounts attributable to Disqualified Stock.
"Currency Agreement" means, with respect to any Person, any foreign
exchange contract, currency swap agreement or other similar agreement to which
such Person is a party or a beneficiary.
"CVC" means Citicorp Venture Capital, Ltd., a New York corporation.
"CVC Investor" means (i) CVC or any direct or indirect Wholly-Owned
Subsidiary of CVC, (ii) Citicorp, N.A. and (iii) any officer, employee or
director of CVC so long as such person shall be an employee, officer or director
of CVC or any direct or indirect Wholly-Owned Subsidiary of CVC.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii)
any other Senior Indebtedness of the Company which, at the date of
determination, has an aggregate principal amount outstanding of, or under which,
at the date of determination, the holders thereof are committed to lend up to,
at least $10 million and is specifically designated by the Company in the
instrument evidencing or governing such Senior Indebtedness as "Designated
Senior Indebtedness" for purposes of the Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which 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 (i) matures
or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise,
(ii) is convertible or exchangeable, at the option of the holder thereof, for
Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the
holder thereof, in whole or in part, in each case on or prior to the eleven
month anniversary of the Stated Maturity of the Notes. Disqualified Stock shall
not include any Capital Stock that is not otherwise Disqualified Stock if by its
terms the holders have the right to require the issuer to repurchase such stock
(or such stock is mandatorily redeemable) upon a Change of Control (or upon an
event substantially similar to a Change of Control).
"Domestic Restricted Subsidiary" means any Restricted Subsidiary of the
Company other than a Foreign Restricted Subsidiary.
"EBITDA" for any period means the sum of Consolidated Net Income plus,
without duplication, the following to the extent deducted in calculating such
Consolidated Net Income: (i) Consolidated Interest Expense, (ii) income tax
expense (including Michigan Single Business Tax expense), (iii) depreciation
expense, (iv) amortization expense and (v) all other non-cash items reducing
Consolidated Net Income (other than items that will require cash payments and
for which an accrual or reserve is, or is required by GAAP to be, made, other
than accruals for post-retirement benefits other than pensions), less all
non-cash items increasing Consolidated Net Income, in each case for such period.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization of, a Subsidiary of the
Company shall be added to Consolidated Net Income to compute EBITDA only to the
extent (and in the same proportion) that the net income of such Subsidiary was
included in calculating Consolidated Net Income.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Existing Affiliate Agreements" means the Stockholders' Agreement, the MSXI
Registration Rights Agreement and any other existing agreement with MascoTech or
any of its Affiliates described on Schedule I to the Indenture.
"Foreign Restricted Subsidiary" means any Restricted Subsidiary of the
Company which is not organized under the laws of the United States of America or
any State thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles in the United States
of America as then in effect, including those set forth in (i) the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants, (ii) statements and pronouncements of the
Financial Accounting Standards Board and (iii) such other statements by such
other entity as approved by a significant segment of the accounting profession.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
Person and any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such Person (whether
arising by virtue of partnership arrangements, or by agreements to keep-well, to
purchase assets, goods, securities or services, to take-or-pay or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include (x) endorsements for collection or deposit in the
ordinary course of business or (y) guarantees among Restricted Subsidiaries or
guarantees by the Company of Restricted Subsidiaries; provided that the
Indebtedness being guaranteed is permitted to be Incurred. The term "Guarantee"
used as a verb has a corresponding meaning. The term "Guarantor" shall mean any
Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness of a Person existing at the time
such Person becomes a Subsidiary (whether by merger, consolidation, acquisition
or otherwise) shall be deemed to be Incurred by such Subsidiary at the time it
becomes a Subsidiary; provided, further, however, that in the case of a discount
security, neither the accrual of interest nor the accretion of original issue
discount shall be considered an Incurrence of Indebtedness, but the entire face
amount of such security shall be deemed Incurred upon the issuance of such
security. The term "Incurrence" when used as a noun shall have a correlative
meaning.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable; (ii) all Capital
Lease Obligations of such Person and all Attributable Debt in respect of
Sale/Leaseback Transactions entered into by such Person; (iii) all obligations
of such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such Person, all obligations of such Person
under any title retention agreement, and any obligation to pay rent or other
payment amounts of such Person with respect to any Sale/Leaseback Transaction
(but excluding trade accounts payable arising in the ordinary course of
business), which purchase price or obligation is due more than six months after
the date of placing such property in service or taking delivery and title
thereto or the completion of such services (provided that, in the case of
obligations of an acquired Person assumed in connection with an acquisition of
such Person, such obligations would constitute Indebtedness of such Person);
(iv) all obligations of such Person for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in (i) through (iii) above) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the tenth Business Day following receipt by such Person
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of a demand for reimbursement following payment on the letter of credit); (v)
the amount of all obligations of such Person with respect to the redemption,
repayment or other repurchase of any Disqualified Stock or, with respect to any
Subsidiary of such Person, any Preferred Stock (but excluding, in each case, any
accrued dividends); (vi) all obligations of the type referred to in clauses (i)
through (v) of other Persons and all dividends of other Persons for the payment
of which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee; (vii) all obligations of the type referred to in clauses (i) through
(vi) of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the amount of
such obligation being deemed to be the lesser of the value of such property or
assets or the amount of the obligation so secured; and (viii) to the extent not
otherwise included in this definition, Hedging Obligations of such Person. The
amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations as described above at such date;
provided, however, that the amount outstanding at any time of any Indebtedness
issued with original issue discount shall be deemed to be the face amount of
such Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with
GAAP.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement or other financial agreement or arrangement designed to
protect the Company or any Restricted Subsidiary against fluctuations in
interest rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such Person) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary," the definition of "Restricted Payment" and the
covenant described under "Certain Covenants -- Limitation on Restricted
Payments," (i) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of any Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (x) the Company's
"Investment" in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"Issue Date" means the date on which the Notes are originally issued.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Management Investors" means each of the officers, employees and directors
of the Company who own Voting Stock of the Company on the Issue Date, in each
case so long as such person shall remain an officer, employee or director of the
Company.
"MascoTech" means MascoTech, Inc., a Delaware corporation, and its
successors.
"Net Available Cash" from an Asset Disposition means cash payments received
by the Company or any of its Subsidiaries therefrom (including any cash payments
received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise, but only as and when received, but
excluding any other consideration received in the form of assumption by the
acquiring Person of Indebtedness or other
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obligations relating to such properties or assets or received in any other
noncash form) in each case net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses incurred, and all Federal,
state, provincial, foreign and local taxes required to be paid or accrued as a
liability under GAAP, as a consequence of such Asset Disposition, (ii) all
payments made on any Indebtedness which is secured by any assets subject to such
Asset Disposition, in accordance with the terms of any Lien upon or other
security agreement of any kind with respect to such assets, or which must by its
terms, or in order to obtain a necessary consent to such Asset Disposition, or
by applicable law, be repaid out of the proceeds from such Asset Disposition,
(iii) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Disposition and (iv) the deduction of appropriate amounts provided by the seller
as a reserve, in accordance with GAAP, against any liabilities associated with
the property or other assets disposed in such Asset Disposition and retained by
the Company or any Restricted Subsidiary after such Asset Disposition, including
without limitation liabilities under any indemnification obligations associated
with such Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees and expenses actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Obligations" means all present and future obligations for principal,
premium, interest (including, without limitation, any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law), penalties, fees, indemnifications,
reimbursements (including, without limitation, all reimbursement and other
obligation pursuant to any letters of credit, bankers acceptances or similar
instruments or documents), damages and other liabilities payable under the
documentation at any time governing any indebtedness.
"Officer" means the Chief Executive Officer, the President, the Chief
Financial Officer or any Vice President of the Company.
"Officers' Certificate" means a certificate signed by two Officers of the
Company, at least one of whom shall be the principal financial officer of the
Company, and delivered to the Trustee.
"Other Qualified Notes" means any outstanding Senior Subordinated
Indebtedness of the Company issued pursuant to an indenture having a provision
substantially similar to the provision relating to Asset Dispositions contained
in the covenant described under "Certain Covenants -- Limitation on Sales of
Assets and Subsidiary Stock."
"Permitted Holders" means the CVC Investors, MascoTech, the Management
Investors and their respective Permitted Transferees; provided, however, that
any Management Investor and any CVC Investor and any Permitted Transferee of a
Management Investor or CVC Investor (other than CVC or Citicorp, N.A. or any
direct or indirect Subsidiary of CVC or Citicorp, N.A. or any other Person
controlled by CVC or Citicorp, N.A.) shall not be a "Permitted Holder" if such
Person is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of Voting Stock that represents at least
30% of the aggregate voting power of all classes of the Voting Stock of the
Company, voting together as a single class (without giving effect to the
attribution of beneficial ownership as a result of any stockholders' agreement
as in effect on the Issue Date, and any amendment to such agreement that does
not materially change the allocation of voting power provided in such
agreement).
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in (i) the Company; (ii) a Restricted Subsidiary or a Person that
will, upon the making of such Investment, become a Restricted Subsidiary;
provided, however, that the primary business of such Restricted Subsidiary is a
Related Business; (iii) another Person if as a result of such Investment such
other Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
(iv) Temporary Cash Investments; (v) receivables owing to the Company or any
Restricted Subsidiary if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade terms as the
Company or any
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such Restricted Subsidiary deems reasonable under the circumstances; (vi)
payroll, travel and similar advances to cover matters that are expected at the
time of such advances ultimately to be treated as expenses for accounting
purposes and that are made in the ordinary course of business; (vii) loans or
advances to employees of the Company or a Restricted Subsidiary in an aggregate
amount not to exceed $1.5 million; (viii) stock, obligations or securities
received in settlement of debts created in the ordinary course of business and
owing to the Company or any Restricted Subsidiary or in satisfaction of
judgments; (ix) Persons other than Restricted Subsidiaries that are primarily
engaged in a Related Business or property or assets to be used primarily in a
Related Business, in an aggregate amount not to exceed $20.0 million (to the
extent utilized for an Investment, such amount will be reinstated to the extent
that the Company or any Restricted Subsidiary receives dividends, repayments of
loans or other transfers of assets as a return of such Investment); provided,
however, that at the time of any Investment pursuant to this clause (ix), the
Company and its Restricted Subsidiaries would be able to Incur an additional
$1.00 of Indebtedness pursuant to paragraph (a) of the covenant described under
"-- Limitation on Incurrence of Indebtedness"; and (x) any Person to the extent
such Investment represents the non-cash portion of the consideration received
for an Asset Disposition as permitted pursuant to the covenant described under
"Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock."
"Permitted Investors" means (i) MascoTech and its Permitted Transferees,
(ii) the CVC Investors and (iii) the Management Investors and their Permitted
Transferees; provided that the Management Investors and their Permitted
Transferees do not in the aggregate beneficially own more than 30% of the
aggregate voting power of the Voting Stock of the Company (without giving effect
to any attribution of beneficial ownership which may result from the
Stockholders' Agreement and any amendment to such agreement that does not
materially change the allocation of voting power provisions in such agreement).
"Permitted Lien" means (a) Liens on property of a Person existing at the
time such Person is merged into or consolidated with the Company or any
Restricted Subsidiary; provided that such Liens were not created in anticipation
of such Person being so merged or consolidated; and (b) Liens to secure any
Refinancing Indebtedness; provided such liens cover only such property which are
the subject of a lien securing the Indebtedness being Refinanced.
"Permitted Transferee" means, (a) with respect to any CVC Investor who is
an employee, officer or director of CVC or any Wholly Owned Subsidiary of CVC,
any spouse or lineal descendant (including by adoption) of such CVC Investor so
long as such CVC Investor shall be an employee, officer or director of CVC; (b)
with respect to MascoTech, any direct or indirect Subsidiary or any other Person
controlled by MascoTech; and (c) with respect to any Management Investor, any
spouse or lineal descendant (including by adoption) of such Management Investor
so long as such Management Investor shall be an employee, officer or director of
the Company.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Public Equity Offering" means an underwritten primary public offering of
common stock of the Company pursuant to an effective registration statement
under the Securities Act.
"Public Market" means any time after (i) a Public Equity Offering has been
consummated and (ii) at least 10% of the total issued and outstanding common
stock of the Company has been distributed by means of an effective registration
statement under the Securities Act or sales pursuant to Rule 144 under the
Securities Act.
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"Purchase Money Indebtedness" mean Indebtedness (i) consisting of the
deferred purchase price of property, conditional sale obligations, obligations
under any title retention agreement, other purchase money obligations and
obligations in respect of industrial revenue bonds or similar Indebtedness, in
each case where the maturity of such Indebtedness does not exceed the
anticipated useful life of the asset being financed, and (ii) Incurred to
finance the acquisition by the Company or a Restricted Subsidiary of such asset,
including additions and improvements; provided, however, that any Lien arising
in connection with any such Indebtedness shall be limited to the specified asset
being financed or, in the case of real property or fixtures, including additions
and improvements, the real property on which such asset is attached; and
provided, further, however, that such Indebtedness is Incurred within 180 days
after such acquisition of such asset by the Company or Restricted Subsidiary.
"Qualified Finance Subsidiary" means a Subsidiary of the Company
constituting a "finance subsidiary" within the meaning of Rule 3a-5 under the
Investment Company Act of 1940, as amended (the "1940 Act"), or an issuer of
asset-backed securities within the meaning of Rule 3a-7 of the 1940 Act or any
other vehicle under a similar exemption, formed for the purpose of engaging in a
Qualified TIPS Transaction and having no assets other than those necessary to
consummate the Qualified TIPS Transaction.
"Qualified TIPS Transaction" means an issuance by a Qualified Finance
Subsidiary of preferred trust securities or similar securities in respect of
which any dividends, liquidation preference or other obligations under such
securities are Guaranteed by the Company to the extent required by the 1940 Act,
as amended, or customary for transactions of such type.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture; provided, however, that (i)
such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; provided further,
however, that Refinancing Indebtedness shall not include Indebtedness of the
Company or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or complementary
(as determined in good faith by the Board of Directors) to the businesses of the
Company and the Restricted Subsidiaries on the Issue Date.
"Representative" means any trustee, agent or representative (if any) for an
issue of Senior Indebtedness of the Company.
"Restricted Payment" means, with respect to any Person, (i) the declaration
or payment of any dividends or any other distributions on or in respect of its
Capital Stock (including any such payment in connection with any merger or
consolidation involving such Person) or similar payment to the holders of its
Capital Stock, except dividends or distributions payable solely in its Capital
Stock (other than Disqualified Stock) and except dividends or distributions
payable solely to the Company or a Restricted Subsidiary (and, if such
Restricted Subsidiary is not wholly owned, to its other shareholders on a pro
rata basis or on a basis that results in the receipt by the Company or a
Restricted Subsidiary of dividends or distributions of greater value than it
would receive on a pro rata basis), (ii) the purchase, redemption or other
acquisition or retirement for value of any Capital Stock of the Company held by
any Person or of any Capital Stock of a Restricted Subsidiary held by any
Affiliate of the Company (other than a Restricted Subsidiary), including the
exercise of any option to exchange any Capital Stock (other than into Capital
Stock of the Company that is not Disqualified Stock), (iii) the purchase,
repurchase, redemption, defeasance or other acquisition or retirement for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment of any Subordinated Obligations
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(other than the purchase, repurchase or other acquisition of Subordinated
Obligations purchased in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year of the
date of acquisition) or (iv) the making of any Investment in any Person (other
than a Permitted Investment).
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person and such lease is reflected on such Person's balance
sheet as a Capital Lease Obligation.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien. "Secured Indebtedness" of any Subsidiary Guarantor has a correlative
meaning.
"Senior Credit Facility" means the Credit Agreement dated as of January 22,
1998, in effect on the Issue Date, by and among the Company, as borrower and
guarantor, and certain subsidiaries, as borrowing subsidiaries, the Lenders
referred to therein and NBD Bank, as agent, as the same may be amended,
extended, renewed, restated, supplemented or otherwise modified (in each case,
in whole or in part, and without limitation as to amount, terms, conditions,
covenants and other provisions) from time to time, and any agreement governing
Indebtedness Incurred to refund, replace or refinance any borrowings and
commitments then outstanding or permitted to be outstanding under such Senior
Credit Facility or any such prior agreement as the same may be amended,
extended, renewed, restated, supplemented or otherwise modified (in each case,
in whole or in part, and without limitation as to amount, terms, conditions,
covenants and other provisions). The term "Senior Credit Facility" shall include
all related or ancillary documents executed at any time, including, without
limitation, any instruments, guarantee agreements and security documents.
"Senior Indebtedness" of the Company means (i) Indebtedness of the Company
and all Bank Indebtedness, whether outstanding on the Issue Date or thereafter
Incurred and (ii) accrued and unpaid interest (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization relating to
the Company whether or not a claim for post-filing interest is allowed in such
proceeding) in respect of (A) indebtedness of the Company for money borrowed and
(B) indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which the Company is responsible or liable
unless, in the instrument creating or evidencing the same or pursuant to which
the same is outstanding, it is provided that such obligations are subordinate in
right of payment to the Notes; provided, however, that Senior Indebtedness shall
not include (1) any obligation of the Company to any Subsidiary, (2) any
liability for Federal, state, local or other taxes owed or owing by the Company,
(3) any accounts payable or other liability to trade creditors arising in the
ordinary course of business (including Guarantees thereof or instruments
evidencing such liabilities), (4) any Indebtedness of the Company (and any
accrued and unpaid interest in respect thereof) which is subordinate or junior
in any respect (other than as a result of the Indebtedness being unsecured) to
any other Indebtedness or other obligation of the Company, including any Senior
Subordinated Indebtedness and any Subordinated Obligations, (5) any obligations
with respect to any Capital Stock or (6) that portion of any Indebtedness which
at the time of Incurrence is Incurred in violation of the Indenture. "Senior
Indebtedness" of any Subsidiary Guarantor has a correlative meaning.
"Senior Subordinated Indebtedness" of the Company means the Notes and any
other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank pari passu with the Notes in right of payment and is not
subordinated by its terms in right of payment to any Indebtedness or other
obligation of the Company which is not Senior Indebtedness. "Senior Subordinated
Indebtedness" of any Subsidiary Guarantor has a correlative meaning.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
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"Stockholders' Agreement" means the stockholders' agreement dated January
3, 1997 by and between the Company, MascoTech, CVC, and certain executive
officers and directors of the Company, as amended from time to time.
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement to that
effect. "Subordinated Obligation" of any Subsidiary Guarantor has a correlative
meaning.
"Subsidiary" means, in respect of any Person, any corporation, association,
partnership, business trust or other business entity of which more than 50% of
the total voting power of shares of Capital Stock or other interests (including
partnership interests or trust interests) 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
(i) such Person, (ii) such Person and one or more Subsidiaries of such Person or
(iii) one or more Subsidiaries of such Person.
"Subsidiary Guarantee" means the Guarantee by a Subsidiary Guarantor of the
Company's obligations with respect to the Notes.
"Subsidiary Guarantor" means each Subsidiary designated as such on the
signature pages of the Indenture and any other Subsidiary that has issued a
Subsidiary Guarantee.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations of the United States of America or any agency thereof or
obligations Guaranteed by the United States of America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $250,000,000 (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act) or any
money-market fund sponsored by an registered broker dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above, (iv)
investments in commercial paper, maturing not more than 90 days after the date
of acquisition, issued by a corporation (other than an Affiliate of the Company)
organized and in existence under the laws of the United States of America, any
State thereof or the District of Columbia or any foreign country recognized by
the United States of America with a rating at the time as of which any
investment therein is made of "P-1" (or higher) according to Moody's Investors
Service, Inc. or "A-1" (or higher) according to Standard and Poor's Ratings
Group, and (v) investments in securities with maturities of six months or less
from the date of acquisition issued or fully Guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "A" by Standard &
Poor's Ratings Group or "A" by Moody's Investors Service, Inc.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided above under "Certain
Covenants -- Designation of Restricted and Unrestricted Subsidiaries" and (ii)
any Subsidiary of an Unrestricted Subsidiary.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
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"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by the Company
and/or one or more Wholly Owned Subsidiaries.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Holders of Exchange Notes are not entitled to any registration rights with
respect to the Exchange Notes. Holders of Old Notes are entitled to certain
registration rights pursuant to the Registration Agreement. Pursuant to the
Registration Agreement, the Company has agreed to file with the SEC and have
declared effective within 180 days after the Issue Date a registration statement
(the "Exchange Offer Registration Statement") under the Securities Act with
respect to the Exchange Offer. The Company also agreed that, after the
effectiveness of the Exchange Offer Registration Statement, it would, subject to
certain conditions, offer to the Holders of Old Notes who are able to make
certain representations the opportunity to exchange their Old Notes for Exchange
Notes. In the event that applicable interpretations of the staff of the SEC do
not permit the Company to effect the Exchange Offer ("SEC Blockage") or do not
permit any Holder of Old Notes, subject to certain limitations, to participate
in such Exchange Offer, the Company has agreed to file with the SEC a shelf
registration statement (the "Shelf Registration Statement") to cover resales of
the applicable Old Notes. The Registration Statement of which this Prospectus is
a part constitutes the Exchange Offer Registration Statement.
The Registration Agreement provides that the Company will use its
reasonable best efforts to have the Exchange Offer Registration Statement
declared effective by the SEC within 180 days after the Issue Date. If the
Exchange Offer has not been consummated within 210 days after the Issue Date
(unless there exists a SEC Blockage) (such event, a "Registration Default"),
during the first 90-day period immediately following the occurrence of such
Registration Default interest will accrue on the Notes at a rate of 0.25% per
annum and shall increase by 0.25% per annum at the end of each subsequent 90-day
period until the Exchange Offer is consummated, but in no event shall such
interest exceed 1.0% per annum.
Holders of Old Notes will be required to make certain representations to
the Company (as described in the Registration Agreement) in order to participate
in the Exchange Offer and will be required to deliver information to be used in
connection with the Shelf Registration Statement and to provide comments on the
Shelf Registration Statement within the time periods set forth in the
Registration Agreement in order to have their Old Notes included in the Shelf
Registration Statement and benefit from the provisions regarding liquidated
damages set forth in the preceding sentence. In addition, for so long as the
Notes are outstanding, the Company will continue to provide to Holders of Notes
and to prospective purchasers of the Notes the information required by Rule
144A(d)(4). The Company will provide a copy of the Registration Agreement to
prospective investors upon request.
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UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes the material United States federal income
tax consequences of the ownership and disposition of the Notes by U.S. Holders
(as defined below) who acquired such securities in the Offering (the "Initial
U.S. Holders"). This summary is based on the Internal Revenue Code of 1986, as
amended to the date hereof (the "Code"), administrative pronouncements, judicial
decisions and existing and proposed Treasury Regulations, changes to any of
which subsequent to the date of this Prospectus may affect the tax consequences
described herein. This summary discusses only Notes held as capital assets
within the meaning of Section 1221 of the Code. It does not discuss all of the
tax consequences that may be relevant to a holder in light of his particular
circumstances or to holders subject to special rules, such as persons who are
not U.S. Holders (as defined below) or Initial U.S. Holders, certain financial
institutions, insurance companies, dealers in securities and holders who hold
the Notes as part of a straddle, hedging, conversion or other integrated
transaction. Holders of Notes should consult their tax advisors with regard to
the application of the United States federal income tax laws to their particular
situations as well as any tax consequences arising under the laws of any state,
local or foreign taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that, for United States federal income tax purposes, is (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, or (iii) an estate or trust the income of which
is subject to United States federal income taxation regardless of its source.
The term also includes certain former citizens or residents of the United
States.
PAYMENTS OF INTEREST
Interest paid on a Note will generally be taxable as ordinary income at the
time it accrues or is received in accordance with the U.S. Holder's method of
accounting for federal income tax purposes.
EXCHANGE OFFER
The exchange of Old Notes for Exchange Notes pursuant to the Exchange Offer
will not result in any federal income tax consequences to U.S. Holders. When a
U.S. Holder exchanges an Old Note for an Exchange Note pursuant to the Exchange
Offer, the U.S. Holder will have the same adjusted basis and holding period in
the Exchange Note as in the Old Note immediately before the exchange.
SALE, EXCHANGE OR RETIREMENT
Upon the sale, exchange or retirement of a Note, a U.S. Holder will
recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement (excluding amounts attributable to
accrued and unpaid interest, which amounts will be includible as ordinary
interest income) and such U.S. Holder's tax basis in the Note. Gain or loss
realized on the sale, exchange or retirement of a Note will be capital gain or
loss. Recently enacted legislation includes substantial changes to the federal
taxation of capital gains recognized by individuals, including a 20% maximum tax
rate for certain gains from the sale of capital assets held for more than 18
months. The deduction of capital losses is subject to certain limitations.
Prospective investors should consult their tax advisors regarding the treatment
of capital gains and losses.
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PLAN OF DISTRIBUTION
Each 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 supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. Each of the Company and
the Subsidiary Guarantors has agreed that it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale for a period of 180 days after the Expiration Date. In
addition, until , 1998 (90 days after the date of this Prospectus),
all dealers effecting transactions in the Exchange Notes may be required to
deliver a prospectus.
Neither the Company nor the Subsidiary Guarantors will receive any proceeds
from any sales of the Exchange Notes by broker-dealers. Exchange Notes received
by brokers-dealers for their own account pursuant to the Exchange Offer may be
sold from time to time in one or more transactions in the over-the-counter
market, in negotiated transactions, through the writing of options on the
Exchange Notes or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such Exchange Notes. Any broker or dealer that resells
Exchange Notes that were received by it for its own account pursuant to the
Exchange Offer or 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 persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a 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 broker-dealer that requests such documents
in the Letter of Transmittal.
The Company and each of the Subsidiary Guarantors has jointly and severally
agreed to pay all expenses incident to the Exchange Offer (including the
expenses of one counsel for the holders of the Old Notes) other than commissions
or concessions of any brokers or dealers and will indemnify the holders of the
Old Notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be passed upon for
the Company by Davis Polk & Wardwell, New York, New York.
93
<PAGE> 95
EXPERTS
The combined balance sheet of TSG as of December 31, 1996 and the related
combined statements of operations and cash flows for each of the two years in
the period ended December 31, 1996 appearing in this Prospectus have been
included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The consolidated balance sheet of the Company as of December 28, 1997 and
the related consolidated statement of operations and cash flows for the year
then ended appearing elsewhere in this Prospectus have been included herein in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
The combined balance sheet of APX as of November 6, 1996 and the related
combined statements of operations, stockholders' deficit and cash flows for the
period December 31, 1995 to November 6, 1996 appearing in this Prospectus have
been included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The combined financial statements of APX International at December 30, 1995
and for the year then ended, appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The consolidated carve-out balance sheets of GRI as of December 31, 1996
and August 31, 1997 and the related consolidated carve-out statements of
operations, stockholders' equity and cash flows for the two years in the period
ended December 31, 1996 and for the eight-month period ended August 31, 1997
appearing in this Prospectus have been included herein in reliance on the report
of Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
94
<PAGE> 96
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MSX INTERNATIONAL, INC. (INCLUDING ITS PREDECESSOR TSG)
Report of Independent Accountants......................... F-2
Combined Balance Sheet as of December 31, 1996 and
Consolidated Balance Sheet as of December 28, 1997..... F-3
Combined Statements of Operations for the years ended
December 31, 1995 and 1996 and Consolidated Statement
of Operations for the fiscal year ended December 28,
1997................................................... F-4
Combined Statements of Cash Flows for the years ended
December 31, 1995 and 1996 and Consolidated Statement
of Cash Flows for the fiscal year ended December 28,
1997................................................... F-5
Notes to Combined and Consolidated Financial Statements... F-6
APX INTERNATIONAL
Report of Independent Accountants......................... F-30
Combined Balance Sheet as of November 6, 1996............. F-31
Combined Statement of Operations for the period December
31, 1995 to November 6, 1996........................... F-32
Combined Statement of Stockholders' Deficit for the period
December 31, 1995 to November 6, 1996.................. F-33
Combined Statement of Cash Flows for the period December
31, 1995 to November 6, 1996........................... F-34
Notes to Combined Financial Statements.................... F-35
Report of Independent Auditors............................ F-40
Combined Balance Sheet as of December 30, 1995............ F-41
Combined Statement of Income and Stockholders' Deficiency
for the year ended December 30, 1995................... F-42
Combined Statement of Cash Flows for the year ended
December 30, 1995...................................... F-43
Notes to Combined Financial Statements.................... F-44
GEOMETRIC RESULTS INCORPORATED
Report of Independent Accountants......................... F-49
Consolidated Carve-Out Balance Sheets as of December 31,
1996 and August 31, 1997............................... F-50
Consolidated Carve-Out Statements of Operations for the
years ended December 31, 1996 and 1995 and for the
eight-month period ended August 31, 1997............... F-51
Consolidated Carve-Out Statements of Stockholder's Equity
for the years ended December 31, 1996 and 1995 and for
the eight-month period ended August 31, 1997........... F-52
Consolidated Carve-Out Statements of Cash Flows for the
years ended December 31, 1996 and 1995 and for the
eight-month period ended August 31, 1997............... F-53
Notes to Consolidated Carve-Out Financial Statements...... F-54
</TABLE>
F-1
<PAGE> 97
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
MSX International, Inc.:
We have audited the accompanying combined balance sheet of the Technical
Services Group (certain subsidiaries of MascoTech, Inc., as described in the
basis of presentation note) ("TSG"), the predecessor for accounting purposes, as
of December 31, 1996 and the accompanying combined statement of operations and
cash flows for the years ended December 31, 1995 and 1996. In addition, we have
audited the accompanying consolidated balance sheet of MSX International, Inc.
("MSXI") as of December 28, 1997 and the related consolidated statements of
operations and cash flows for the fiscal year then ended. These financial
statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 financial statements referred to above present fairly,
in all material respects, the combined financial position of TSG as of December
31, 1996 and the consolidated financial position of MSXI as of December 28,
1997, and the results of their operations and their cash flows for the periods
indicated above in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Detroit, Michigan
March 31, 1998
F-2
<PAGE> 98
MSX INTERNATIONAL, INC.
(INCLUDING ITS PREDECESSOR TSG)
COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1996 AND
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 28, 1997
<TABLE>
<CAPTION>
PREDECESSOR
------------
DECEMBER 31, DECEMBER 28,
1996 1997
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 7,070 $ 11,575
Receivables, net.......................................... 58,860 178,938
Inventory................................................. 930 1,239
Prepaid expenses and other assets......................... 3,600 5,638
Deferred income taxes..................................... -- 2,352
------- --------
Total current assets................................... 70,460 199,742
Property and equipment, net................................. 18,140 34,337
Goodwill, net of accumulated amortization of $892........... -- 31,934
Other assets................................................ 5,550 8,783
Deferred income taxes....................................... -- 12,380
------- --------
Total assets........................................... $94,150 $287,176
======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable and current portion of long-term debt....... $ 4,170 $ 87,930
Bank overdrafts........................................... -- 21,908
Accounts payable.......................................... 5,550 58,458
Accrued payroll and benefits.............................. 2,640 16,984
Accrued expenses.......................................... 8,090 20,907
Deferred income taxes..................................... -- 984
------- --------
Total current liabilities.............................. 20,450 207,171
Long-term debt.............................................. 30 65,000
Long-term capital lease obligations......................... -- 316
Long-term deferred compensation liability and other......... 4,220 5,053
------- --------
Total liabilities...................................... 24,700 277,540
------- --------
Redeemable Series A Preferred Stock, authorized 500,000
shares; issued and outstanding 360,000 shares............. -- 36,000
Shareholders' equity (deficit):
Common stock, $.01 par: authorized 2,000,000 shares;
issued and
outstanding 95,004 shares.............................. -- 1
Additional paid-in capital................................ -- (22,251)
Cumulative foreign currency translation adjustment........ (2,790) (1,141)
Accumulated deficit....................................... -- (2,973)
MascoTech, Inc. net investment and advances............... 72,240 --
------- --------
Total shareholders' equity (deficit)................... 69,450 (26,364)
------- --------
Total liabilities and shareholders' equity (deficit)... $94,150 $287,176
======= ========
</TABLE>
The accompanying notes are an integral part of the financial statements
F-3
<PAGE> 99
MSX INTERNATIONAL, INC.
(INCLUDING ITS PREDECESSOR TSG)
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 28, 1997
<TABLE>
<CAPTION>
PREDECESSOR PREDECESSOR
------------ ------------ FISCAL YEAR
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 28,
1995 1996 1997
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales............................................... $ 216,130 $ 228,260 $ 564,546
Cost of sales........................................... (178,760) (192,510) (514,019)
--------- --------- ---------
Gross profit.......................................... 37,370 35,750 50,527
--------- --------- ---------
Selling, general and administrative expenses............ (25,230) (26,240) (36,007)
Michigan Single Business Tax............................ (1,500) (1,510) (2,868)
Restructuring costs..................................... -- -- (2,000)
--------- --------- ---------
Operating income...................................... 10,640 8,000 9,652
--------- --------- ---------
Other income (expense), net:
Interest expense, net................................. (230) (170) (4,383)
Interest expense, related parties..................... (1,240) (1,140) (8,017)
Other income (expense), net........................... 1,070 (70) --
--------- --------- ---------
(400) (1,380) (12,400)
--------- --------- ---------
Income (loss) before income taxes.................. 10,240 6,620 (2,748)
Income tax provision.................................... 3,820 2,800 225
--------- --------- ---------
Net income (loss).................................. $ 6,420 $ 3,820 $ (2,973)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 100
MSX INTERNATIONAL, INC.
(INCLUDING ITS PREDECESSOR TSG)
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED DECEMBER 28, 1997
<TABLE>
<CAPTION>
PREDECESSOR PREDECESSOR FISCAL YEAR
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 28,
1995 1996 1997
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash from (used for):
Operating activities:
Net income (loss)..................................... $ 6,420 $ 3,820 $ (2,973)
Adjustments to reconcile net income (loss) to net cash
from (used for) operating activities:
Depreciation....................................... 4,540 4,970 8,967
Amortization....................................... -- -- 892
(Increase) decrease in receivables, net............ (12,650) 1,380 (36,343)
(Increase) decrease in inventory................... (160) 530 (309)
(Increase) decrease in prepaid expenses............ (940) 210 (1,513)
Increase (decrease) in current liabilities......... 930 10 30,487
Other, net......................................... 780 (3,130) 2,576
-------- ------- ---------
Net cash from (used for) operating activities......... (1,080) 7,790 1,784
-------- ------- ---------
Investing activities:
Capital expenditures.................................. (8,400) (4,840) (11,518)
Acquisition of business, net of cash received......... -- -- (159,137)
Other, net............................................ 110 70 (5)
-------- ------- ---------
Net cash used for investing activities................ (8,290) (4,770) (170,660)
-------- ------- ---------
Financing activities:
Increase in debt...................................... 260 650 143,399
Payment of debt....................................... (80) -- --
Decrease in cash overdraft............................ -- -- (669)
Sale of Redeemable Preferred Stock.................... -- -- 36,000
Sale of Common Stock.................................. -- -- 3,800
Increase in MascoTech, Inc. net investment and
advances........................................... 11,690 4,770 --
Other, net............................................ (680) (610) (938)
-------- ------- ---------
Net cash from financing activities.................... 11,190 4,810 181,592
-------- ------- ---------
Effect of foreign exchange rate changes on cash......... (1,560) (2,560) (1,141)
-------- ------- ---------
Cash:
Increase for the period............................... 260 5,270 11,575
Balance, beginning of period.......................... 1,540 1,800 --
-------- ------- ---------
Balance, end of period................................ $ 1,800 $ 7,070 $ 11,575
======== ======= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 101
MSX INTERNATIONAL, INC.
(INCLUDING ITS PREDECESSOR TSG)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS UNLESS STATED OTHERWISE)
1. ORGANIZATION AND BASIS OF PRESENTATION:
The accompanying financial statements represent the consolidated assets and
liabilities and operations of MSX International, Inc. and its subsidiaries
("MSXI" or "the Company") in 1997, and in 1996 and 1995, the combined assets and
liabilities and operations of certain subsidiaries and divisions of subsidiaries
of MascoTech, Inc. ("MascoTech") which constituted the Technical Services Group
of MascoTech ("TSG"). MSXI is a holding company formed and owned by Citicorp
Venture Capital, Ltd. ("CVC"), MascoTech and certain members of management. The
Company was formed to consummate the acquisition of TSG ("TSG Acquisition"), in
which it acquired selected assets and operations of TSG owned by MascoTech and
MascoTech Automotive Systems Group ("MASG"), as well as the net assets of APX
International, a design and engineering services provider, which had been
acquired by MASG effective November 6, 1996. The TSG Acquisition was effective
on January 3, 1997. Effective August 31, 1997, the Company acquired certain
service-providing operations of Ford Motor Company ("Ford") through the
acquisition of Geometric Results Incorporated ("GRI"), a wholly-owned subsidiary
of Ford. The results of operations of APX and GRI have been included in the
results of operations of the Company from January 3, 1997 and September 1, 1997,
respectively.
The acquisitions of APX and GRI have been accounted for using the purchase
method of accounting and, accordingly, the purchase price of each acquisition
has been allocated to the acquired assets and assumed liabilities based upon the
estimated fair values as of the closing of the acquisition. These allocations
resulted in an increase in certain accrued liabilities, principally severance
and facility costs. These allocations also resulted in goodwill of approximately
$32.7 million.
The acquisition of TSG (the "Predecessor" for accounting purposes) has been
accounted for, using the purchase method of accounting, at carryover basis as no
change in control resulted from the acquisition. The amount paid in excess of
book value for TSG of approximately $26.2 million has been recorded as a
reduction of additional paid-in capital. In accordance with SFAS 109 "Accounting
for Income Taxes," the Company established deferred taxes related to the TSG
Acquisition by recording an increase in additional paid-in capital in the amount
of $10.4 million.
As a result of the acquisitions and new basis of accounting, the Company's
financial statements for the periods subsequent to the acquisitions are not
comparable to the Predecessor's financial statements for the periods prior to
the acquisitions.
The Company is principally engaged in the business of providing technical
support services, primarily to automobile manufacturers and suppliers in the
United States and Europe.
Until it was sold, TSG paid MascoTech a management fee for various
corporate support staff and administrative services. Such fees approximated one
percent of domestic net sales and amounted to approximately $1.4 million in 1995
and $1.5 million in 1996. Certain of TSG's employee benefit plans and insurance
coverages were administered by MascoTech. These costs as well as other costs
incurred on TSG's behalf were charged directly to TSG. TSG was also charged
interest expense at various rates for TSG's European operations on the average
amounts due MascoTech. This charge aggregated $1.2 million and $1.1 million in
1995 and 1996, respectively. The related advances are included in MascoTech's
net investment and advances in the related accompanying balance sheet.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. Principles of Consolidation/Combination: The accompanying financial
statements include the accounts of MSXI and TSG, as appropriate. Significant
intercompany transactions have been eliminated. Beginning in 1997, the Company
adopted a 52-week fiscal year which ends on the last Sunday in December.
F-6
<PAGE> 102
MSX INTERNATIONAL, INC.
(INCLUDING ITS PREDECESSOR TSG)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS STATED OTHERWISE)
b. Cash and Cash Equivalents: All highly liquid investments with an
original maturity of three months or less are considered to be cash equivalents.
c. Receivables: Receivables are presented net of aggregate allowances for
doubtful accounts of $.3 million at December 31, 1995 and 1996 and $1.2 million
at December 28, 1997.
d. Inventory: Inventory is comprised of raw materials, parts and supplies
which are stated at the lower of cost or net realizable value, with cost
determined using the first-in, first-out method.
e. Property and Equipment: Property and equipment, including significant
betterments to existing facilities, are recorded at cost. Upon retirement or
disposal of properties and equipment, the cost and accumulated depreciation are
removed from the accounts, and any gain or loss is included in income.
Maintenance and repair costs are charged to expense as incurred.
f. Goodwill: The excess of the purchase price over the estimated fair
values of acquired assets and assumed liabilities is being amortized using the
straight-line method over the period estimated to be benefited ranging from 20
to 30 years.
At each balance sheet date, management assesses whether there has been a
permanent impairment of goodwill by comparing anticipated undiscounted future
cash flows from operating activities with the carrying amount of the excess of
cost over net assets of acquired companies. The factors considered by management
in performing this assessment include current operating results, business
prospects, market trends, competitive activities and other economic factors.
Based on this assessment, there was no permanent impairment related to goodwill
at December 28, 1997.
g. Fair Value of Financial Instruments: The carrying value of financial
instruments reported in each balance sheet approximates fair value. The carrying
value of bank debt approximates fair value as the variable rates inherent in the
related financial instrument reflects changes in the overall market interest
rates.
h. Foreign Currency Translation: Net assets of operations outside of the
United States are translated into U.S. dollars using current exchange rates with
the effects of translation adjustments included as a separate component in
Shareholders' equity (deficit). Revenues and expenses are translated at the
average rates of exchange during the period.
i. Revenue Recognition: Revenues from fixed price contracts are recognized
using the percentage of completion method, measured by comparing the percentage
of labor costs incurred to date to estimated total labor costs for each
contract. Time and material contracts are valued at selling price based on
contractual billing rates.
Contract costs include all direct material and labor costs and indirect
costs such as indirect labor, supplies, tools and repairs. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. Changes in fixed price contracts may result in revisions
to estimates of costs and revenue and are recognized in the period in which the
revisions are determined.
F-7
<PAGE> 103
MSX INTERNATIONAL, INC.
(INCLUDING ITS PREDECESSOR TSG)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS STATED OTHERWISE)
j. Depreciation: Depreciation is computed using the straight-line method
over the estimated useful lives of assets as follows:
<TABLE>
<CAPTION>
USEFUL LIVES
IN YEARS
------------
<S> <C>
Buildings and leasehold improvements........................ 10-40
Machinery and equipment..................................... 3- 5
Computer, peripherals and software.......................... 3- 5
Automobiles and trucks...................................... 3- 5
</TABLE>
k. Income Taxes: Deferred income taxes are recorded to reflect the tax
liability/benefit on future years of differences between the tax basis and
financial reporting amounts of assets and liabilities at each fiscal year end.
As of December 31, 1996, the domestic operations of TSG were included in
the consolidated federal income tax return of MascoTech. Accordingly,
substantially all U.S. income tax-related assets and liabilities of TSG related
to TSG's operations were due from or to MascoTech.
For the years ended December 31, 1995 and 1996, income tax expense and
credits were computed on a separate return basis.
l. Reclassification: Certain prior year amounts have been reclassified to
conform with current year presentation.
m. 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 the disclosure of contingent assets and liabilities at the date
of the financial statements. Such estimates and assumptions also affect the
reported amounts of revenue and expenses during the reporting periods. Actual
results may differ from such estimates and assumptions.
n. Recently Issued Financial Accounting Standards: In June 1997, the FASB
issued SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." The
Company will adopt the provisions of these statements as required, for the
fiscal year ended December 27, 1998. The Company believes the adoption of those
statements will have no material impact on the Company's financial statements.
3. ACQUISITIONS OF BUSINESSES:
On January 3, 1997, the Company acquired selected assets and operations of
the former engineering and technical business services units of MASG and
MascoTech, as well as the net assets of APX, a design and engineering services
provider which had been acquired by MASG effective November 6, 1996 ("the TSG
Acquisition").
The purchase price of the TSG Acquisition was $145.6 million which was
financed through $3.8 million of common equity, $36.0 million of redeemable
preferred stock, a $20.0 million bridge loan provided by CVC, a $20.0 million
bridge loan provided by MascoTech, the issuance of a $30.0 million Senior
Subordinated Note to MascoTech and $35.8 million of borrowings under the Old
Credit Facility. The excess of purchase price over acquired net assets resulted
in a $26.2 million decrease in Shareholders' equity (deficit), as discussed in
Note 1, and goodwill of $24.6 million relating to the acquisition of APX.
Effective August 31, 1997, the Company acquired certain service-providing
operations of Ford through the acquisition of GRI, a wholly-owned subsidiary of
Ford. As part of Ford, GRI acted as administrator of
F-8
<PAGE> 104
MSX INTERNATIONAL, INC.
(INCLUDING ITS PREDECESSOR TSG)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS STATED OTHERWISE)
Ford's temporary staffing services using a predecessor to the Master Vendor
Program and also provided process management, purchasing and printing services
to Ford. The purchase price of $60.0 million was financed with borrowings under
the Old Credit Facility, offset in part by substantial cash balances acquired.
The excess of purchase price over the acquired net assets of GRI resulted in an
increase in Goodwill of approximately $8.1 million.
The aforementioned transactions are summarized as follows:
<TABLE>
<CAPTION>
TSG APX GRI TOTAL
--- --- --- -----
<S> <C> <C> <C> <C>
Current assets..................................... $ 63,798 $ 28,923 $116,066 $ 208,787
Excess of purchase price over acquired net
assets........................................... 26,229 24,594 8,142 58,965
Other non-current assets........................... 23,984 4,715 11,653 40,352
Liabilities........................................ (11,523) (15,104) (75,861) (102,488)
-------- -------- -------- ---------
Purchase price..................................... $102,488 $ 43,128 $ 60,000 $ 205,616
======== ======== ======== =========
</TABLE>
The final determination of the purchase prices for the APX and GRI
acquisitions will be completed when certain contractual matters are concluded.
The preliminary allocation of purchase price for the GRI acquisition will be
completed during 1998. Any adjustments to purchase prices will change recorded
goodwill and will be amortized to expense over the remaining goodwill period.
Management believes the resolution of these matters will not have a material
effect on the results of operations, financial position or cash flows of the
Company.
The following unaudited pro forma consolidated results of operations for
the year ended December 31, 1996 and for the fiscal year ended December 28, 1997
are presented as if the TSG and GRI acquisitions had been made at the beginning
of each period presented. The unaudited pro forma information does not reflect
the effects of the debt issue and refinancing which took place January 22, 1998,
as described in Note 17. The unaudited pro forma information is not necessarily
indicative of either the results of operations that would have occurred had the
acquisitions been made during the periods presented or the future results of the
combined operations.
<TABLE>
<CAPTION>
YEAR ENDED FISCAL YEAR ENDED
DECEMBER 31, DECEMBER 28,
1996 1997
------------ -----------------
<S> <C> <C>
Net sales................................................... $1,044,379 $985,096
Income before income taxes.................................. 3,956 2,908
Net income.................................................. 2,180 307
</TABLE>
4. ACCOUNTS RECEIVABLE, NET:
Receivables arise from services provided pursuant to contracts or
agreements with customers for such services. The primary users of MSXI's and
TSG's services are manufacturers in the automotive industry. Billed sales to one
customer were $70.1 million, $57.5 million and $318.2 million in 1995, 1996, and
1997, respectively, billed sales to a second customer were $57.4 million, $49.0
million and $74.8 million in 1995, 1996, and 1997, respectively, and billed
sales to a third customer were $35.3 million, $44.9 million and $67.4 million in
1995, 1996, and 1997, respectively. At December 31, 1995 and 1996 and at
December 28, 1997, the foregoing three customers accounted for approximately 70
percent, 64 percent and 69 percent, respectively, of the accounts receivable
balance.
F-9
<PAGE> 105
MSX INTERNATIONAL, INC.
(INCLUDING ITS PREDECESSOR TSG)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS STATED OTHERWISE)
Accounts receivable include both billed and unbilled receivables. Unbilled
receivables amounted to $26.7 million and $61.8 million at December 31, 1996 and
at December 28, 1997, respectively. All such billings are expected to be
collected within the ensuing year.
5. PROPERTY AND EQUIPMENT, NET:
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 28,
1996 1997
--------------- ---------------
<S> <C> <C>
Cost:
Land and improvements..................................... $ -- $ 163
Buildings and leasehold improvements...................... 4,940 11,930
Machinery and equipment................................... 33,510 52,140
Computer, peripherals and software........................ 8,660 27,188
Automobiles and trucks.................................... 1,040 1,609
-------- --------
48,150 93,030
Less accumulated depreciation............................. (30,010) (58,693)
-------- --------
$ 18,140 $ 34,337
======== ========
</TABLE>
Depreciation expense totaled $4.5 million, $5.0 million and $9.0 million in
1995, 1996 and 1997, respectively.
6. ACCRUED LIABILITIES:
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 28,
1996 1997
--------------- ---------------
<S> <C> <C>
Income and other taxes...................................... $4,100 $ 911
Insurance................................................... 2,110 1,110
Restructuring costs......................................... -- 6,097
Deferred income............................................. -- 4,078
Interest.................................................... -- 4,979
Other....................................................... 1,880 3,732
------ -------
$8,090 $20,907
====== =======
</TABLE>
7. RESTRUCTURING ACTIONS:
During fiscal year 1997, restructuring costs aggregated $6.7 million. These
costs are comprised of $2.7 million of severance pay for certain employees of an
acquired business, facility closure costs of $2.0 million which are primarily
remaining operating lease obligations of acquired facilities closed subsequent
to the acquisition, and $2.0 million of remaining lease obligations and other
costs related to the closure of MSXI facilities. Restructuring costs accounted
for in the purchase of the related businesses and costs charged to operations
were $4.7 million and $2.0 million, respectively. Restructuring charges were
accounted for in accordance with approved management plans and are expected to
be completed in 1998. Remaining accrued restructuring costs totaled $6.1 million
as of December 28, 1997, of which approximately $4.9 million is expected to be
paid in 1998.
F-10
<PAGE> 106
MSX INTERNATIONAL, INC.
(INCLUDING ITS PREDECESSOR TSG)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS STATED OTHERWISE)
8. DEBT:
MSX International
At December 28, 1997 MSXI had a $20.0 million bridge loan provided by CVC,
a $20.0 million bridge loan provided by MascoTech and a $30.0 million Senior
Subordinated Note issued to MascoTech outstanding. In addition, at December 28,
1997, the Company had available under a short-term credit agreement with NBD
Bank ("NBD Credit Facility") up to $115.0 million of credit, under which $75.4
million was outstanding, a variable amount credit facility available through the
Ford Motor Company Limited, under which $7.5 million was outstanding, and United
Kingdom credit facilities with banks of $3.4 million, under which $0.7 million
was outstanding.
Under a Bridge Credit Agreement, a further $60 million of bridge revolving
loans were available but not drawn as of December 28, 1997. Such loans would
bear interest under the terms, described below, applicable to the bridge loans.
The bridge loans are payable in escalating annual installments and bear
interest at 12%, which will escalate in steps to 13% after December 31, 1997 and
remain as such until maturity at December 31, 2002. At December 28, 1997, bridge
loan principal of $5.0 million is due within one year. The Senior Subordinated
Note is payable in full at December 31, 2006, and bears interest at the rate of
12.5%. Both the bridge loans and the Senior Subordinated Note provide for
semi-annual interest payment.
The short-term credit agreement with NBD provides for borrowings as Prime
Rate loans, Eurodollar Rate loans, Swingline loans and Letters of Credit. This
agreement expires on March 31, 1998. Prime Rate and Swingline loans are payable
on demand. Eurodollar Rate loans are issued in maturities of one to three
months. Borrowings under this agreement bear interest at a variable rate. At
December 28, 1997, the interest rates based on LIBOR on the short-term credit
agreement approximated 7.46% on loans of $40.0 million. Also at December 28,
1997, interest on swingline loans approximated 6.94% on loans of $26.5 million.
Line of Credit borrowings from the Ford Motor Company Limited bear interest at
9.3% and are payable on demand. Borrowings under the United Kingdom credit
facilities bear interest at a rate of 1.25% over the bank's base rate, as
defined or as negotiated, and are payable on demand. Such interest rates ranged
from 8.5% to 9.06% at December 28, 1997.
On January 23, 1998, the Company issued, in a private placement, $100
million aggregate principal amount of 11 3/8% unsecured Senior Subordinated
Notes, maturing January 15, 2008. Concurrently with the private placement, the
Company entered into a new credit facility with NBD, with a borrowing base of up
to $100 million, as defined, to replace the NBD Credit Facility. See Note 17.
The proceeds from the placement and the new credit facility were used to retire
the bridge loans to CVC and MascoTech, the Senior Subordinated Note and the
outstanding amount under the NBD Credit Facility.
Debt maturities as of December 28, 1997 were as follows: 1998 - $5.0
million; 1999 - $5.0 million; 2000 - $6.0 million; 2001 - $7.0 million, 2002 -
$8.0 million, and 2003 - $9.0 million.
Interest paid was approximately $7.4 million for the fiscal year ended
December 28, 1997.
Technical Services Group
TSG had a note payable in the amount of $70 thousand, of which $40 thousand
was classified as a current liability and short-term credit agreements of which
$4.1 million was outstanding at December 31, 1996. The note was payable in
annual installments and bore a variable interest rate. The short-term credit
agreements bore variable interest rates of .75 percent to 2.75 percent over the
bank's base rate, as defined. Such interest rates approximated 7.2 percent at
December 31, 1996. The note and short-term credit agreements matured
F-11
<PAGE> 107
MSX INTERNATIONAL, INC.
(INCLUDING ITS PREDECESSOR TSG)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS STATED OTHERWISE)
as follows: 1997 - $4.2 million; 1998 - $30 thousand. Payment of the note and
short-term credit agreements were guaranteed by MascoTech.
Interest paid was $.3 million and $.5 million in 1995 and 1996,
respectively.
9. LEASE COMMITMENTS:
MSX International
MSXI and its subsidiaries have leases for real estate and equipment
utilized in its business. In most cases, management expects that in the normal
course of business these leases will be renewed or replaced by other leases.
Future minimum rental payments required under leases that have an initial or
remaining non-cancelable lease term in excess of one year are as follows:
<TABLE>
<CAPTION>
OTHER
CAPITAL OPERATING
TOTAL LEASES LEASES
----- ------- ---------
<S> <C> <C> <C>
Year ended December 31:
1998......................................... $16,653 $182 $16,471
1999......................................... 11,706 69 11,637
2000......................................... 8,857 68 8,789
2001......................................... 6,753 27 6,726
2002......................................... 1,803 -- 1,803
Thereafter................................... 2,455 -- 2,455
------- ---- -------
$48,227 346 $47,881
======= =======
Less amount representing interest.............. 30
----
Present value of minimum payments.............. $316
====
</TABLE>
Rental expense was approximately $17.6 million for the fiscal year ended
December 28, 1997.
Technical Services Group
Rental expense was approximately $8.2 million and $5.4 million in 1995 and
1996, respectively.
10. REDEEMABLE SERIES A PREFERRED STOCK:
In connection with the TSG Acquisition, the Company issued 360,000 shares
of 12% Series A Cumulative Redeemable Preferred Stock ("the Preferred Stock")
with a stated value and redemption value of $100 per share or $36 million.
Dividends on the Preferred Stock are payable in cash at the rate per annum
equal to 12% of the stated value plus an amount equal to any accrued and unpaid
dividends. As of December 28, 1997, the Company has not declared any dividends.
Accordingly, no dividends have been paid or accrued. Dividends accumulated but
not declared aggregate approximately $4.4 million as of December 28, 1997. The
Company may not declare or pay any dividends or other distribution with respect
to any common stock or other class or series of stock ranking junior to the
Preferred Stock without first complying with restrictions specified in the
Stockholder's Agreement. The Preferred Stock, which has no voting rights, is
mandatorily redeemable at the earlier of June 30, 2007 or the date on which a
sale transaction, as defined, occurs. The Company may redeem any or all of the
Preferred Stock at its election prior to June 30, 2007. The Company may also
elect to acquire shares of the Preferred Stock from time to time without
redeeming or otherwise acquiring all or any other issued shares
F-12
<PAGE> 108
MSX INTERNATIONAL, INC.
(INCLUDING ITS PREDECESSOR TSG)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS STATED OTHERWISE)
of the Preferred Stock pursuant to the terms of the Stockholder's Agreement. As
of December 28, 1997, no Preferred Stock had been redeemed or acquired by the
Company.
11. SHAREHOLDERS' EQUITY (DEFICIT):
<TABLE>
<CAPTION>
PREDECESSOR
------------
AT AT
DECEMBER 31, DECEMBER 28,
1996 1997
------------ ------------
<S> <C> <C>
Balance, beginning of period................................ $63,650 $ --
Net income (loss)........................................... 3,820 (2,973)
Common Stock................................................ -- 1
Additional paid-in capital.................................. -- (22,251)
Cumulative foreign currency translation adjustment.......... (2,790) (1,141)
MascoTech, Inc. additional net investment and advances...... 4,770 --
------- --------
Balance, end of period...................................... $69,450 $(26,364)
======= ========
</TABLE>
MSX International
The common stock at par value resulted from the initial capitalization of
the Company by MascoTech, CVC and certain members of management. The additional
paid-in capital amount of $(22.3) million represents amounts received from the
issuance of common stock in excess of par value of $3.8 million, reduced by
amounts paid to MascoTech for the acquisition of TSG in excess of book value as
of December 31, 1996 of $(26.2) million. As the acquisition of TSG did not
involve a change in control, the acquisition was recorded at carryover basis. In
accordance with SFAS 109 "Accounting for Income Taxes", the Company established
deferred taxes related to the TSG Acquisition by recording an increase in
additional paid-in capital in the amount of $10.4 million.
Technical Services Group
Investment and advances reflect the accumulation of transactions between
MascoTech and TSG through December 31, 1996. These transactions included
operating results, management fees, advances and intercompany transactions.
12. EMPLOYEE BENEFIT PLANS:
The Company maintains a qualified cash or deferred compensation plan under
Section 401(k) of the Internal Revenue Code. Participation in this plan is
available to substantially all salaried employees and to certain groups of
hourly employees. Under the plan, employees may elect to defer up to 20 percent
of their annual wages, subject to the limitations of the Internal Revenue Code.
Third party administrative costs paid by the plan approximated $21,033 for 1997.
Contributions to union-sponsored, multi-employer pension plans were
approximately $0.6 million and $0.5 million in 1995 and 1996, respectively, and
$0.7 million for the fiscal year ended December 28, 1997. These plans are not
administered by the Company and contributions are determined in accordance with
provisions of negotiated labor contracts. MSXI has no present intention of
withdrawing from any of these plans, nor has MSXI been informed that there is
any intention to terminate such plans.
F-13
<PAGE> 109
MSX INTERNATIONAL, INC.
(INCLUDING ITS PREDECESSOR TSG)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS STATED OTHERWISE)
MSXI has an unfunded deferred compensation plan for certain salaried
employees. Individual participants make pre-tax contributions to the plan and
MSXI matches up to 5 percent of the individual's annual salary. MSXI
contributions vest over a period of time. Individuals may elect to receive
lump-sum or defined payments of vested balances upon retirement or termination.
The deferred compensation plan liability at December 31, 1996 and December 28,
1997 was $3.7 million and $3.2 million, respectively. This is an unfunded and
unsecured obligation of MSXI. However, MSXI has, through deposits to a grantor
trust, restricted certain corporate assets having a fair value at December 31,
1996 and December 28, 1997 of $2.0 million and $1.6 million, respectively, that
are intended to be used to settle a portion of the obligation.
With the APX Acquisition, the Company acquired certain obligations with
respect to a frozen defined benefit pension plan. The plan was frozen in 1988
and covers certain union and non-union employees who were employed by
Autodynamics Corporation of America, Inc., a company acquired previously by one
of the companies that comprised APX. This plan is not administered by the
Company. Contributions are determined in accordance with provisions of the plan.
The Autodynamics plan status as of June 30, 1997, the date of the most
recent actuarial report, was as follows:
<TABLE>
<S> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation................................. $747
====
Accumulated benefit obligation............................ $747
====
Projected benefit obligation.............................. $747
Plan assets at fair value................................. 842
----
Plan assets in excess of projected benefit obligations.... $ 95
====
</TABLE>
TSG had a liability, subsequently assumed by MSXI, related to a terminated
post-retirement life and health benefit plan for certain currently retired
employees. The accumulated post-retirement obligation was approximately $0.6
million and approximately $0.2 million at December 31, 1996 and December 28,
1997, respectively. The net periodic post-retirement benefit cost was
approximately $40 thousand for the year ended December 31, 1996 and the fiscal
year ended December 28, 1997. The discount rates used in determining the
accumulated post-retirement benefit obligation were 7.5 percent and 7.25 percent
in 1996 and 1997, respectively. The assumed health cost trend rate in 1996 was
12 percent, decreasing to an ultimate rate in the year 2001 of 7 percent. The
assumed health cost trend rate in 1997 was 9 percent, decreasing to an ultimate
rate in the year 2006 of 5 percent. If the assumed medical cost trend rates were
increased by 1 percent, the accumulated post-retirement benefit obligation would
have increased by $10 thousand and the aggregate of the service and interest
cost components of the net periodic post-retirement benefit cost would have
increased by $2 thousand.
13. OTHER INCOME (EXPENSE), NET:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------
1995 1996
---- ----
<S> <C> <C>
Other, net:
Realized currency exchange gain (loss).................... $ 630 $(110)
Other, net................................................ 440 40
------ -----
$1,070 $ (70)
====== =====
</TABLE>
F-14
<PAGE> 110
MSX INTERNATIONAL, INC.
(INCLUDING ITS PREDECESSOR TSG)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS STATED OTHERWISE)
14. INCOME TAXES:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, ENDED
----------------- DECEMBER 28,
1995 1996 1997
---- ---- ------------
<S> <C> <C> <C>
Income (loss) before income taxes:
Domestic.................................................. $ 6,160 $ 1,700 $ 3,236
Foreign................................................... 4,080 4,920 (5,984)
------- ------- -------
$10,240 $ 6,620 $(2,748)
======= ======= =======
Provision for income taxes (credit):
Currently payable:
Federal................................................ $ 1,410 $ 2,810 $ 1,049
Foreign................................................ 2,030 1,950 (640)
Deferred:
Federal................................................ 770 (2,170) 315
Foreign................................................ (390) 210 (499)
------- ------- -------
$ 3,820 $ 2,800 $ 225
======= ======= =======
Deferred tax assets (liabilities):
Amortizable goodwill...................................... $ -- $ -- $ 9,111
Accrued interest expense.................................. -- -- 2,023
Accrued liabilities and deferred compensation............. 2,170 3,480 863
Net operating loss........................................ -- -- 360
German tax benefit........................................ 620 240 332
Property and equipment.................................... (370) (700) 1,937
Contractual advances...................................... -- 1,300 --
Accounts receivable....................................... (670) (800) (984)
Valuation allowance....................................... -- -- (535)
Other, net................................................ (120) 70 641
------- ------- -------
Net deferred tax asset................................. $ 1,630 $ 3,590 $13,748
======= ======= =======
</TABLE>
The following is a reconciliation of the tax at the U.S. federal statutory
rate to the provision for income taxes allocated to income before income taxes:
<TABLE>
<CAPTION>
YEAR ENDED FISCAL YEAR
DECEMBER 31, ENDED
--------------- DECEMBER 28,
1995 1996 1997
---- ---- ------------
35% 35% 35%
--- --- ---
<S> <C> <C> <C>
Tax at U.S. statutory rate.................................. $3,580 $2,320 $(961)
Valuation allowance......................................... -- -- 535
Higher (lower) effective foreign tax rate................... 210 440 351
Other, net.................................................. 30 40 300
------ ------ -----
$3,820 $2,800 $ 225
====== ====== =====
</TABLE>
As of December 31, 1996 and December 28, 1997, a provision had not been
made for U.S. or additional foreign taxes on approximately $8.7 million and $1.4
million, respectively, of undistributed earnings of foreign subsidiaries, as
those earnings were intended to be permanently reinvested. Generally, such
earnings become
F-15
<PAGE> 111
MSX INTERNATIONAL, INC.
(INCLUDING ITS PREDECESSOR TSG)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS STATED OTHERWISE)
taxable upon the remittance of dividends and under certain other circumstances.
It was not practicable to estimate the amount of deferred tax liability on such
undistributed earnings. A $0.3 million German tax benefit had been recorded on
approximately $0.9 million of undistributed earnings of a German subsidiary to
its parent, a subsidiary of MSXI, located in the United Kingdom. The valuation
allowance relates to certain foreign deductions for which recovery of the
related deferred tax asset is not likely.
Income taxes paid were approximately $1.8 million, $3.6 million, and $1.6
million in 1995, 1996 and 1997, respectively.
15. GEOGRAPHIC INFORMATION:
The Company operates in one principal industry segment: providing technical
support services to automobile manufacturers and suppliers.
Geographic financial information is as follows:
<TABLE>
<CAPTION>
YEAR ENDED FISCAL YEAR
DECEMBER 31, ENDED
-------------------- DECEMBER 28,
1995 1996 1997
---- ---- ------------
<S> <C> <C> <C>
Net sales to customers:
United States............................................. $143,950 $140,770 $463,141
Europe and rest of world.................................. 72,180 87,490 101,405
-------- -------- --------
Total net sales........................................ $216,130 $228,260 $564,546
======== ======== ========
Income (loss) before income taxes:
United States............................................. $ 6,160 $ 1,700 $ 3,236
Europe and rest of world.................................. 4,080 4,920 (5,984)
-------- -------- --------
Income (loss) before income taxes...................... $ 10,240 $ 6,620 $ (2,748)
======== ======== ========
Identifiable Assets:
United States............................................. $ 53,750 $ 53,610 $208,494
Europe and rest of world.................................. 33,730 40,540 78,682
-------- -------- --------
Total assets........................................... $ 87,480 $ 94,150 $287,176
======== ======== ========
</TABLE>
16. COMMITMENTS AND CONTINGENCIES:
On December 23, 1997, Cambridge Industries, Inc. filed a complaint against
the Company in Michigan State Court. The complaint alleges that the Company, by
retaining approximately $1.1 million of funds paid into a lock-box account
maintained by the Company, has converted such funds. Cambridge Industries is
seeking whatever relief the court deems just, including treble damages. The
Company believes it has meritorious defenses and counterclaims to this action
and intends to defend itself vigorously against all of the allegations contained
in the complaint. The Company does not believe that the ultimate outcome of this
litigation will have a material effect on its consolidated financial condition,
results of operations or cash flows.
17. SUBSEQUENT EVENT
Issuance of Senior Subordinated Notes and New Credit Facility
On January 22, 1998, the Company issued, in a private placement, $100
million aggregate principal amount of 11 3/8% unsecured Senior Subordinated
Notes maturing January 15, 2008. Interest on the Notes is payable semi-annually
at 11.375% per annum commencing on July 15, 1998. The Notes may be redeemed
F-16
<PAGE> 112
MSX INTERNATIONAL, INC.
(INCLUDING ITS PREDECESSOR TSG)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS STATED OTHERWISE)
subsequent to January 15, 2003 at premiums which begin at 105.6875% and decline
each year to face for redemptions taking place after January 15, 2006. In
addition, at any time prior to January 15, 2001, the Company may redeem up to
35% of the original aggregate principal amount of the Notes with the proceeds of
one or more public equity offerings at a redemption price of 111.375% plus
accrued and unpaid interest, if any. Also, upon the occurrence of a Change of
Control as defined in the indenture (the "Indenture"), the Notes may be redeemed
at the option of the Note holders at a premium of 1%, plus accrued and unpaid
interest, if any. The Notes contain covenants which, among others, limit the
incurrence of additional indebtedness and restrict capital transactions,
distributions and asset dispositions of certain subsidiaries.
In connection with the Notes Offering, each of the Company's domestic
restricted subsidiaries, as defined in the Indenture ("the Guarantor
Subsidiaries"), is expected to irrevocably and unconditionally guarantee the
Company's performance under the Notes as primary obligors. The following
consolidating and combining financial data provides information regarding the
financial position, results of operations and cash flows of the Guarantor
Subsidiaries (including Predecessor combining financial data) as set forth.
Concurrently with the private placement, the Company entered into a new
credit facility with NBD (the "New Credit Facility"), with a borrowing base of
up to $100 million, as defined, to replace the NBD Credit Facility. Interest on
the loans under the New Credit Facility will be payable quarterly or, if
earlier, at the end of each interest period and will accrue at an annual rate
equal to, at the option of the Company, (a) a floating rate, as defined, or (b)
the London Interbank Offered Rate plus an applicable margin, as defined.
Each significant domestic subsidiary of the Company will guarantee all
obligations of the Company under the New Credit Facility. In addition, these
obligations will be secured by a pledge of the Stock of such domestic
subsidiaries and a first lien on substantially all assets of such domestic
subsidiaries and a pledge of 65% of the stock of the significant foreign
subsidiaries. The obligations of the Company under the New Credit Facility will
rank senior to all other indebtedness of the Company, including the Notes.
The New Credit Facility contains certain reporting covenants and other
customary affirmative covenants and various negative covenants including but not
limited to certain limitations on mergers, sales of assets, acquisitions, liens,
investments, indebtedness, contingent obligations, dividends, subsidiaries
ability to agree to dividend restrictions, affiliate transactions and changes of
business. The New Credit Facility also contains certain covenants with respect
to employee benefit arrangements and environmental matters and certain financial
covenants including but not limited to a ratio of total debt to EBITDA, a fixed
charge coverage ratio and a minimum net worth requirement, each as defined.
The Guarantor Subsidiaries account for their investments in the
non-guarantor subsidiaries, if any, on the equity method. The principal
elimination entries are to eliminate the investments in subsidiaries and
intercompany balances and transactions.
GRI is a guarantor subsidiary. The financial statements of GRI as of and
for the two years in the period ended December 31, 1995 and 1996 and as of and
for the eight months in the period ended August 31, 1997 are separately included
on a consolidated basis with its subsidiaries.
The financial statements of APX International are presented on a combined
basis, including its non-guarantor subsidiaries, as of and for the year ended
December 30, 1995 because the non-guarantor subsidiaries were immaterial to the
combined financial statements of APX International for that period.
F-17
<PAGE> 113
MSX INTERNATIONAL, INC.
(INCLUDING ITS PREDECESSOR TSG)
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 28, 1997
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR MSXI
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ 2,449 $ 9,126 $ -- $ 11,575
Receivables, net............................ 130,404 48,534 -- 178,938
Inventory................................... 1,204 35 -- 1,239
Prepaid expenses and other assets........... 2,106 3,532 -- 5,638
Deferred income taxes....................... 863 1,489 -- 2,352
-------- ------- -------- --------
Total current assets..................... 137,026 62,716 -- 199,742
-------- ------- -------- --------
Property and equipment, net................... 23,208 11,129 -- 34,337
Goodwill, net................................. 31,934 -- -- 31,934
Investment in subsidiaries.................... 23,587 -- (23,587) --
Other assets.................................. 5,290 3,493 -- 8,783
Deferred income taxes......................... 11,036 1,344 -- 12,380
-------- ------- -------- --------
Total assets............................. $232,081 $78,682 $(23,587) $287,176
======== ======= ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable and current portion of
long-term debt........................... $ 71,280 $16,650 $ -- $ 87,930
Bank overdrafts............................. 21,908 -- -- 21,908
Accounts payable............................ 51,818 6,640 -- 58,458
Accrued liabilities......................... 31,752 6,171 (32) 37,891
Deferred income tax......................... -- 984 -- 984
-------- ------- -------- --------
Total current liabilities................ 176,758 30,445 (32) 207,171
Long-term debt................................ 65,000 -- -- 65,000
Intercompany accounts......................... (31,389) 31,389 -- --
Long-term capital lease obligations........... 316 -- -- 316
Long-term deferred compensation liability and
other....................................... 4,654 399 -- 5,053
-------- ------- -------- --------
Total liabilities........................ 215,339 62,233 (32) 277,540
Redeemable Series A Preferred Stock........... 36,000 32 (32) 36,000
Shareholders' equity (deficit)
Common Stock.................................. 1 2,702 (2,702) 1
Additional paid-in capital.................... (16,263) 22,158 (28,146) (22,251)
Cumulative foreign currency translation
adjustment.................................. (23) (3,598) 2,480 (1,141)
Retained earnings (deficit)................... (2,973) (4,845) 4,845 (2,973)
-------- ------- -------- --------
Total shareholders' equity (deficit)..... (19,258) 16,417 (23,523) (26,364)
-------- ------- -------- --------
Total liabilities and shareholders'
deficit................................ $232,081 $78,682 $(23,587) $287,176
======== ======= ======== ========
</TABLE>
F-18
<PAGE> 114
MSX INTERNATIONAL, INC.
(INCLUDING ITS PREDECESSOR TSG)
COMBINING BALANCE SHEET
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR TSG
SUBSIDIARIES SUBSIDIARIES COMBINED
------------ ------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 340 $ 6,730 $ 7,070
Receivables, net......................................... 34,274 24,586 58,860
Inventory................................................ 894 36 930
Prepaid expenses and other assets........................ 2,241 1,359 3,600
------- ------- -------
Total current assets.................................. 37,749 32,711 70,460
Property and equipment, net................................ 11,371 6,769 18,140
Other assets............................................... 4,490 1,060 5,550
------- ------- -------
Total assets.......................................... $53,610 $40,540 $94,150
======= ======= =======
LIABILITIES AND MASCOTECH, INC. NET INVESTMENT AND ADVANCES
Current liabilities:
Notes payable and current portion of long-term debt...... $ -- $ 4,170 $ 4,170
Accounts payable......................................... 2,711 2,839 5,550
Accrued liabilities...................................... 6,849 3,881 10,730
------- ------- -------
Total current liabilities............................. 9,560 10,890 20,450
Long-term debt............................................. -- 30 30
Long-term deferred compensation liability and other........ 4,220 -- 4,220
------- ------- -------
Total liabilities..................................... 13,780 10,920 24,700
------- ------- -------
Shareholders' equity (deficit):
Cumulative foreign currency translation adjustment......... -- (2,790) (2,790)
MascoTech, Inc. net investment and advances................ 39,830 32,410 72,240
------- ------- -------
Total shareholders' equity (deficit): ................ 39,830 29,620 69,450
------- ------- -------
Total liabilities and MascoTech, Inc. net investment
and advances........................................ $53,610 $40,540 $94,150
======= ======= =======
</TABLE>
F-19
<PAGE> 115
MSX INTERNATIONAL, INC.
(INCLUDING ITS PREDECESSOR TSG)
COMBINING STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996 AND
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 28, 1997
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
1995
Net sales................................... $ 143,950 $ 72,180 $ -- $ 216,130
Cost of sales............................... (118,901) (59,859) -- (178,760)
--------- -------- ------ ---------
Gross profit........................... 25,049 12,321 -- 37,370
Selling, general and administrative
expenses.................................. (17,218) (8,012) -- (25,230)
Michigan Single Business Tax................ (1,500) -- -- (1,500)
--------- -------- ------ ---------
Operating income....................... 6,331 4,309 -- 10,640
Other expense, net.......................... (171) (229) -- (400)
--------- -------- ------ ---------
Income before income taxes............. 6,160 4,080 -- 10,240
Income tax provision........................ 2,180 1,640 -- 3,820
--------- -------- ------ ---------
Net income............................. $ 3,980 $ 2,440 $ -- $ 6,420
========= ======== ====== =========
1996
Net sales................................... $ 140,770 $ 87,490 $ -- $ 228,260
Cost of sales............................... (120,614) (71,896) -- (192,510)
--------- -------- ------ ---------
Gross profit........................... 20,156 15,594 -- 35,750
Selling, general and administrative
expenses.................................. (16,775) (9,465) -- (26,240)
Michigan Single Business Tax................ (1,510) -- -- (1,510)
--------- -------- ------ ---------
Operating income....................... 1,871 6,129 -- 8,000
Other expense, net.......................... (171) (1,209) -- (1,380)
--------- -------- ------ ---------
Income before income taxes............. 1,700 4,920 -- 6,620
Income tax provision........................ 640 2,160 -- 2,800
--------- -------- ------ ---------
Net income............................. $ 1,060 $ 2,760 $ -- $ 3,820
========= ======== ====== =========
FISCAL YEAR ENDED DECEMBER 28, 1997
Net sales................................... $ 463,141 $101,405 $ -- $ 564,546
Cost of sales............................... (420,999) (93,020) -- (514,019)
--------- -------- ------ ---------
Gross profit........................... 42,142 8,385 -- 50,527
Selling, general and administrative
expenses.................................. (24,572) (11,435) -- (36,007)
Michigan Single Business Tax................ (2,868) -- -- (2,868)
Restructuring costs......................... (2,000) -- -- (2,000)
--------- -------- ------ ---------
Operating income (loss)................ 12,702 (3,050) -- 9,652
Other expense, net.......................... (9,466) (2,934) -- (12,400)
Equity in subsidiary earnings (loss)........ (4,845) -- 4,845 --
--------- -------- ------ ---------
Loss before income taxes............... (1,609) (5,984) 4,845 (2,748)
Income tax provision (benefit).............. 1,364 (1,139) -- 225
--------- -------- ------ ---------
Net loss............................... $ (2,973) $ (4,845) $4,845 $ (2,973)
========= ======== ====== =========
</TABLE>
F-20
<PAGE> 116
MSX INTERNATIONAL, INC.
(INCLUDING ITS PREDECESSOR TSG)
COMBINING STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED DECEMBER 28, 1997
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR MSXI
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash from (used for):
Operating activities:
Net income (loss).......................... $ 1,872 $ (4,845) $ -- $ (2,973)
Equity in earnings of subsidiaries......... (4,845) 4,845 --
Adjustments to reconcile net income (loss)
to net cash from (used for) operating
activities:
Depreciation............................ 5,523 3,444 -- 8,967
Amortization............................ 892 -- 892
(Increase) decrease in receivables...... (28,394) (7,949) -- (36,343)
(Increase) decrease in inventory........ (310) 1 -- (309)
(Increase) decrease in prepaid expenses
and other assets...................... (828) (685) -- (1,513)
Increase (decrease) in current
liabilities........................... 32,558 (2,071) -- 30,487
Other, net.............................. 2,861 (285) -- 2,576
--------- -------- -------- ---------
Net cash from (used for) operating
activities.............................. 9,329 (12,390) 4,845 1,784
--------- -------- -------- ---------
INVESTING ACTIVITIES:
Capital expenditures....................... (7,433) (4,085) -- (11,518)
Acquisition of business, net............... (122,806) (30,327) (6,004) (159,137)
Investment in foreign subsidiaries......... (24,378) -- 24,378 --
Other, net................................. (8) 3 -- (5)
--------- -------- -------- ---------
Net cash used for investing activities..... (154,625) (34,409) 18,374 (170,660)
--------- -------- -------- ---------
Financing activities:
Intercompany............................... (30,610) 30,610 -- --
Investment in subsidiaries................. 8 19,385 (19,393) --
Equity in subsidiaries..................... 3,794 -- (3,794) --
Increase in debt........................... 136,275 7,124 143,399
Decrease in cash overdraft................. (669) -- -- (669)
Sale of Redeemable Preferred Stock......... 36,000 -- -- 36,000
Sale of Common Stock....................... 3,800 -- -- 3,800
Other, net................................. (830) (76) (32) (938)
--------- -------- -------- ---------
Net cash from financing activities......... 147,768 57,043 (23,219) 181,592
--------- -------- -------- ---------
Effect of foreign exchange rate on cash...... (23) (1,118) -- (1,141)
--------- -------- -------- ---------
Cash:
Increase during the period................. 2,449 9,126 -- 11,575
Balance, beginning of period............... -- -- -- --
--------- -------- -------- ---------
Balance, end of period..................... $ 2,449 $ 9,126 $ -- $ 11,575
========= ======== ======== =========
</TABLE>
F-21
<PAGE> 117
MSX INTERNATIONAL, INC.
(INCLUDING ITS PREDECESSOR TSG)
COMBINING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR TSG
SUBSIDIARIES SUBSIDIARIES COMBINED
------------ ------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash from (used for):
Operating activities:
Net income............................................... $ 1,060 $ 2,760 $ 3,820
Adjustments to reconcile net income to net cash from
(used for) operating activities:
Depreciation and amortization......................... 2,373 2,597 4,970
Decrease in receivables, net.......................... 412 968 1,380
(Increase) decrease in inventory...................... 533 (3) 530
(Increase) decrease in prepaid expenses and other
assets.............................................. 630 (420) 210
Increase (decrease) in current liabilities............ 2,800 (2,790) 10
Other, net............................................ (1,537) (1,593) (3,130)
------- ------- -------
Net cash from (used for) operating activities............ 6,271 1,519 7,790
------- ------- -------
Investing activities:
Capital expenditures, net................................ (2,178) (2,592) (4,770)
------- ------- -------
Net cash used for investing activities................... (2,178) (2,592) (4,770)
Financing activities:
Increase in debt......................................... -- 650 650
Increase (decrease) in MascoTech net investment and
advances.............................................. (3,237) 8,007 4,770
Other, net............................................... (670) 60 (610)
------- ------- -------
Net cash from (used for) financing activities............ (3,907) 8,717 4,810
------- ------- -------
Effect of foreign exchange rate changes on cash............ -0- (2,560) (2,560)
Cash:
Increase for the year.................................... 186 5,084 5,270
At January 1............................................. 154 1,646 1,800
------- ------- -------
At December 31........................................... $ 340 $ 6,730 $ 7,070
======= ======= =======
</TABLE>
F-22
<PAGE> 118
MSX INTERNATIONAL, INC.
(INCLUDING ITS PREDECESSOR TSG)
COMBINING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR TSG
SUBSIDIARIES SUBSIDIARIES COMBINED
------------ ------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash from (used for):
Operating activities:
Net income.............................................. $ 3,980 $ 2,440 $ 6,420
Adjustments to reconcile net income to net cash from
(used for) operating activities:
Depreciation and amortization........................ 2,202 2,338 4,540
Decrease in receivables, net......................... (674) (11,976) (12,650)
(Increase) decrease in inventory..................... (1,008) 848 (160)
(Increase) decrease in prepaid expenses and other
assets............................................. (406) (534) (940)
Increase (decrease) in current liabilities........... (4,338) 5,268 930
Other, net........................................... 1,579 (799) 780
------- -------- --------
Net cash from (used for) operating activities........... 1,335 (2,415) (1,080)
------- -------- --------
Investing activities:
Capital expenditures.................................... (4,075) (4,325) (8,400)
Other, net.............................................. -- 110 110
------- -------- --------
Net cash used for investing activities.................. (4,075) (4,215) (8,290)
------- -------- --------
Financing activities:
Increase in debt........................................ -- 260 260
Payment of debt......................................... -- (80) (80)
MascoTech net investment and advances................... 3,002 8,688 11,690
Other, net.............................................. (680) -- (680)
------- -------- --------
Net cash from financing activities...................... 2,322 8,868 11,190
------- -------- --------
Effect of foreign exchange rate changes on cash........... -0- (1,560) (1,560)
Cash:
Increase (decrease) for the year........................ (418) 678 260
At January 1............................................ 572 968 1,540
------- -------- --------
At December 31.......................................... $ 154 $ 1,646 $ 1,800
======= ======== ========
</TABLE>
F-23
<PAGE> 119
GEOMETRIC RESULTS INCORPORATED -- SERVICES
(A FORMER BUSINESS UNIT OF GEOMETRIC RESULTS INCORPORATED AND SUBSIDIARIES)
CONSOLIDATED CARVE-OUT BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1996 AND AUGUST 31, 1997
<TABLE>
<CAPTION>
AS OF AS OF AS OF
DECEMBER 31, DECEMBER 31, AUGUST 31,
1995 1996 1997
------------ ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash investments............................... $ 4,416 $ 3,268 $ 6,334
Cash equivalent -- investment with Ford................. 12,080 14,012 50,044
Receivables............................................. 80,308 95,972 56,109
Prepaid expenses and other assets....................... 2,552 3,286 4,691
-------- -------- --------
Total current assets................................. 99,356 116,538 117,178
Property and equipment, net............................... 13,206 10,972 11,051
Deposits and other assets................................. 56 20 18
-------- -------- --------
Total assets......................................... $112,618 $127,530 $128,247
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash overdraft.......................................... $ 9,075 $ 18,348 $ 22,569
Accounts payable........................................ 54,652 46,081 35,331
Accrued payroll and benefits............................ 5,834 7,996 6,033
Accrued expenses........................................ 4,084 6,135 8,080
Line of credit from Ford................................ 5,948 2,717 4,852
-------- -------- --------
Total current liabilities............................ 79,593 81,277 76,865
Deferred income taxes..................................... 250 170 764
-------- -------- --------
Total liabilities.................................... 79,843 81,447 77,629
Shareholders' equity:
Common stock and additional paid-in capital............... 3,780 3,780 3,780
Cumulative foreign currency translation adjustment........ (566) (434) (875)
Retained earnings......................................... 29,561 42,737 47,713
-------- -------- --------
Total shareholders' equity........................... 32,775 46,083 50,618
-------- -------- --------
Total liabilities and shareholders' equity........... $112,618 $127,530 $128,247
======== ======== ========
</TABLE>
F-24
<PAGE> 120
GEOMETRIC RESULTS INCORPORATED -- SERVICES
(A FORMER BUSINESS UNIT OF GEOMETRIC RESULTS INCORPORATED AND SUBSIDIARIES)
CONSOLIDATED CARVE-OUT STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996 AND
FOR THE EIGHT-MONTH PERIOD ENDED AUGUST 31, 1997
<TABLE>
<CAPTION>
FOR THE
FOR THE FOR THE EIGHT-MONTH
YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, AUGUST 31,
1995 1996 1997
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales................................................ $550,398 $690,468 $431,134
Cost of sales............................................ 531,118 665,661 411,518
-------- -------- --------
Gross profit........................................ 19,280 24,807 19,616
Selling, general and administrative expenses............. 23,330 21,576 13,636
Michigan single business tax............................. 289 251 239
-------- -------- --------
Operating income (loss)............................. (4,339) 2,980 5,741
Other income, net........................................ 1,947 2,511 1,136
-------- -------- --------
Income (loss) before income taxes................... (2,392) 5,491 6,877
Income tax provision (benefit)........................... (411) 2,530 2,908
-------- -------- --------
Net income (loss)................................... $ (1,981) $ 2,961 $ 3,969
======== ======== ========
</TABLE>
F-25
<PAGE> 121
GEOMETRIC RESULTS INCORPORATED -- SERVICES
(A FORMER BUSINESS UNIT OF GEOMETRIC RESULTS INCORPORATED AND SUBSIDIARIES)
CONSOLIDATED CARVE-OUT CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996 AND
FOR THE EIGHT-MONTH PERIOD ENDED AUGUST 31, 1997
<TABLE>
<CAPTION>
FOR THE
FOR THE FOR THE EIGHT-MONTH
YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, AUGUST 31,
1995 1996 1997
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash from (used for):
Operating Activities:
Net income............................................ $ (1,981) $ 2,961 $ 3,969
Adjustments to reconcile net income to net cash from
(used for) operating activities:
Depreciation....................................... 3,922 5,111 3,960
(Gain) loss on disposal of assets.................. 74 481 8
Provision for doubtful accounts.................... (88) (62) (2)
Deferred income taxes.............................. (245) (101) 262
(Increase) decrease in receivables................. (43,759) (15,602) 39,865
(Increase) decrease in prepaid expenses and other
assets........................................... 2,472 (2,588) (1,071)
Increase (decrease) in accounts payable............ 37,421 (8,571) (10,750)
Increase (decrease) in accrued payroll and
benefits......................................... 1,445 2,162 (1,962)
Increase (decrease) in income taxes due to
parent........................................... (985) 4,618 2,192
Increase (decrease) in accrued expenses............ 1,301 (656) (248)
-------- -------- --------
Net cash from operating activities............... (423) (12,247) 36,223
-------- -------- --------
Investing activities:
Proceeds from sale of assets.......................... 125 333 --
Capital expenditures.................................. (6,601) (3,676) (4,047)
-------- -------- --------
Net cash used for investing activities........... (6,476) (3,343) (4,047)
-------- -------- --------
Financing activities:
Net borrowings on lines of credit from parent......... 960 (3,231) 2,135
Divisional equity transfer............................ 8,079 10,215 1,007
Increase in cash overdraft............................ 3,116 9,273 4,221
-------- -------- --------
Net cash from (used for) financing activities.... 12,155 16,257 7,363
-------- -------- --------
Effect of exchange rate changes on cash................. (65) 117 (441)
-------- -------- --------
Cash and cash investments:
Increase for the period............................... 5,191 784 39,098
At January 1.......................................... 11,305 16,496 17,280
-------- -------- --------
At August 31.......................................... $ 16,496 $ 17,280 $ 56,378
======== ======== ========
</TABLE>
F-26
<PAGE> 122
APX INTERNATIONAL
COMBINED BALANCE SHEET
AS OF DECEMBER 30, 1995 AND
COMBINING BALANCE SHEET
AS OF NOVEMBER 6, 1996
<TABLE>
<CAPTION>
AS OF
DECEMBER 30, AS OF NOVEMBER 6, 1996
1995 -----------------------------------------
------------ GUARANTOR NON-GUARANTOR APX
APX COMBINED SUBSIDIARIES SUBSIDIARIES COMBINED
------------ ------------ ------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash investments.................. $ 737 $ 39 $ 87 $ 126
Accounts receivable, net................... 36,369 32,555 2,053 34,608
Inventory.................................. 2,696 1,193 -- 1,193
Prepaid expenses and other current
assets.................................. 1,610 2,411 67 2,478
-------- -------- ------- --------
Total current assets.................... 41,412 36,198 2,207 38,405
Equipment, net............................... 5,970 3,451 650 4,101
Other........................................ 1,141 898 41 939
-------- -------- ------- --------
Total assets............................ $ 48,523 $ 40,547 $ 2,898 $ 43,445
======== ======== ======= ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable........................... $ 4,365 $ 6,543 $ 43 $ 6,586
Accrued payroll and benefits............... 2,873 5,664 109 5,773
Accrued expenses........................... 3,571 5,030 298 5,328
-------- -------- ------- --------
Total current liabilities............... 10,809 17,237 450 17,687
Long-term liabilities:
Intercompany accounts...................... -- (3,704) 3,704 --
Capital leases............................. 772 505 -- 505
Due to affiliate........................... 42,171 34,004 -- 34,004
Other...................................... 1,063 234 -- 234
-------- -------- ------- --------
Total long-term liabilities............. 44,006 31,039 3,704 34,743
Stockholders' deficit:
Common stock............................... 371 132 239 371
Additional paid-in capital................. 10,990 10,990 -- 10,990
Cumulative foreign currency translation
adjustment.............................. 3 (2) 7 5
Accumulated deficit........................ (17,656) (18,849) (1,502) (20,351)
-------- -------- ------- --------
Total stockholders' deficit............. (6,292) (7,729) (1,256) (8,985)
-------- -------- ------- --------
Total liabilities and stockholders'
deficit............................... $ 48,523 $ 40,547 $ 2,898 $ 43,445
======== ======== ======= ========
</TABLE>
F-27
<PAGE> 123
APX INTERNATIONAL
COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 30, 1995 AND
COMBINING STATEMENT OF OPERATIONS
FOR THE PERIOD DECEMBER 31, 1995 TO NOVEMBER 6, 1996
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED FOR THE PERIOD DECEMBER 31, 1995 TO
DECEMBER 30, NOVEMBER 6, 1996
1995 ---------------------------------------
------------ GUARANTOR NON-GUARANTOR APX
APX COMBINED SUBSIDIARIES SUBSIDIARIES COMBINED
------------ ------------ ------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales.................................... $140,234 $126,853 $8,197 $135,050
Cost of sales 133,116 118,566 8,554 127,120
-------- -------- ------ --------
Gross profit (loss)..................... 7,118 8,287 (357) 7,930
Selling, general and administrative
expenses................................... 7,299 7,357 528 7,885
Michigan Single Business Tax................. -- 806 -- 806
-------- -------- ------ --------
Operating profit (loss)................. (181) 124 (885) (761)
Other expense, net........................... (2,727) (2,126) (3) (2,129)
-------- -------- ------ --------
Loss before income tax benefit.......... (2,908) (2,002) (888) (2,890)
Income tax benefit........................... 114 195 -- 195
-------- -------- ------ --------
Net loss................................ $ (2,794) $ (1,807) $ (888) $ (2,695)
======== ======== ====== ========
</TABLE>
F-28
<PAGE> 124
APX INTERNATIONAL
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 30, 1995 AND
COMBINING STATEMENT OF CASH FLOWS
FOR THE PERIOD DECEMBER 31, 1995 TO NOVEMBER 6, 1996
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED FOR THE PERIOD DECEMBER 31, 1995 TO
DECEMBER 30, NOVEMBER 6, 1996
1995 -----------------------------------------
------------ GUARANTOR NON-GUARANTOR APX
APX COMBINED SUBSIDIARIES SUBSIDIARIES COMBINED
------------ ------------ ------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash from (used for):
Operating Activities:
Net loss.................................... $(2,794) $(1,807) $ (888) $(2,695)
Adjustments to reconcile net income to net
cash from (used for) operating
activities:
Depreciation and amortization............ 2,423 1,745 97 1,842
Loss on disposal of fixed assets......... 497 633 -- 633
Changes in assets and liabilities:
Accounts receivable...................... (1,317) 2,914 (1,153) 1,761
Inventory................................ 129 1,503 -- 1,503
Prepaid expenses and other current
assets................................. (501) (834) 170 (664)
Accounts payable......................... (98) 764 2 766
Accrued expenses......................... 1,267 3,980 (25) 3,955
------- ------- ------- -------
Net cash provided (used) by operating
activities.......................... (394) 8,898 (1,797) 7,101
------- ------- ------- -------
Investing Activities:
Purchases of equipment................... (747) (444) (162) (606)
------- ------- ------- -------
Financing activities:
Advances from affiliates................. 2,682 (9,969) 1,802 (8,167)
Capital lease payments................... (1,018) (394) -- (394)
Cash overdraft........................... -- 1,455 -- 1,455
Other.................................... 168 (164) 164 --
------- ------- ------- -------
Net cash from (used for) financing
activities.......................... 1,832 (9,072) 1,966 (7,106)
------- ------- ------- -------
Net increase (decrease) in cash............... 691 (618) 7 (611)
Cash, beginning of period..................... 46 657 80 737
------- ------- ------- -------
Cash, end of period........................... $ 737 $ 39 $ 87 $ 126
======= ======= ======= =======
</TABLE>
F-29
<PAGE> 125
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
MSX International, Inc.:
We have audited the accompanying combined balance sheet of APX
International as of November 6, 1996, and the related combined statements of
operations, stockholders' deficit and cash flows for the period December 31,
1995 to November 6, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
As discussed in Note 8, TAD Resources International, Inc. sold
substantially all of APX International subsequent to the balance sheet date. The
accompanying combined financial statements do not reflect the impact of this
transaction.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of APX International
as of November 6, 1996 and the combined results of their operations and their
cash flows for the period December 31, 1995 to November 6, 1996 in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
November 10, 1997
F-30
<PAGE> 126
APX INTERNATIONAL
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
NOVEMBER 6,
1996
-----------
(IN THOUSANDS)
<S> <C>
ASSETS
Current assets:
Cash................................................... $ 126
Accounts receivable, net of allowance for doubtful
accounts of $1,080.................................... 34,608
Inventory.............................................. 1,193
Prepaid expenses and other current assets.............. 2,478
--------
Total current assets.............................. 38,405
Equipment, net.............................................. 4,101
Other....................................................... 939
--------
Total Assets...................................... $ 43,445
========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities
Current liabilities:
Cash overdraft.................................... $ 2,705
Accounts payable.................................. 3,881
Accrued payroll and benefits...................... 5,773
Accrued expenses.................................. 3,651
Deferred revenue.................................. 858
Deferred taxes.................................... 114
Current portion of capital leases................. 705
--------
Total current liabilities.................... 17,687
Long-term obligations:
Capital leases.................................... 505
Due to affiliate.................................. 34,004
Other............................................. 234
--------
34,743
Stockholders' deficit
Common stock........................................... 371
Additional paid-in capital............................. 10,990
Cumulative foreign currency translation adjustments.... 5
Retained earnings (accumulated deficit)................ (20,351)
--------
Stockholders' deficit............................. (8,985)
--------
Total liabilities and stockholders'
deficit...................................... $ 43,445
========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-31
<PAGE> 127
APX INTERNATIONAL
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD DECEMBER 31, 1995
TO NOVEMBER 6, 1996
--------------------------------
(IN THOUSANDS)
<S> <C>
Net sales................................................... $135,050
Cost of sales............................................... 127,120
--------
Gross profit........................................... 7,930
Selling, general and administration expenses................ 7,885
Michigan Single Business Tax................................ 806
--------
Operating loss......................................... (761)
Interest expense, net....................................... 2,129
--------
Loss before income tax benefit......................... (2,890)
Income tax benefit.......................................... 195
--------
Net loss............................................... $ (2,695)
========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-32
<PAGE> 128
APX INTERNATIONAL
COMBINED STATEMENT OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
FOR THE PERIOD DECEMBER 31, 1995 TO NOVEMBER 6, 1996
-----------------------------------------------------------------
RETAINED CUMULATIVE
EARNINGS FOREIGN
COMMON PAID-IN (ACCUMULATED TRANSLATION STOCKHOLDERS'
STOCK CAPITAL DEFICIT) ADJUSTMENTS DEFICIT
------ ------- ------------ ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995............. $371 $10,990 $(17,656) $3 $(6,292)
Net loss............................... (2,695) (2,695)
Translation adjustments, net........... 2 2
---- ------- -------- -- -------
Balance, November 6, 1996.............. $371 $10,990 $(20,351) $5 $(8,985)
==== ======= ======== == =======
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-33
<PAGE> 129
APX INTERNATIONAL
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 31, 1995
TO NOVEMBER 6, 1996
-------------------
(IN THOUSANDS)
<S> <C>
Operating activities:
Net loss.................................................. $(2,695)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 1,842
Loss on disposal of fixed assets....................... 633
Changes in assets and liabilities:
Accounts receivable.................................. 1,761
Inventory............................................ 1,503
Prepaid expenses and other current assets............ (664)
Accounts payable..................................... 766
Accrued expenses..................................... 4,326
Deferred revenue..................................... 458
Non-current liabilities.............................. (829)
-------
Net cash provided by operating activities............ 7,101
-------
Investing activities, purchases of equipment................ (606)
-------
Financing activities:
Advances from affiliates.................................. (8,167)
Capital lease payments.................................... (394)
Cash overdraft............................................ 1,455
-------
Net cash used in financing activities.................. (7,106)
-------
Net decrease in cash........................................ (611)
Cash, beginning of period................................... 737
-------
Cash, end of period......................................... $ 126
=======
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-34
<PAGE> 130
APX INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND OPERATIONS
The business of APX International (the "Company") is to provide drafting,
design and other engineering-based services to primarily the automotive industry
in the United States and Europe. The Company also produces automotive body
parts. The preparation of the combined 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
the disclosure of contingent assets and liabilities at the date of the financial
statements. Such estimates and assumptions also affect the reported amounts of
revenue and expense during the reporting periods. Actual results may differ from
such estimates and assumptions.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Preparation: The Company is affiliated with TAD Resources
International, Inc. ("TAD") through common stock ownership and management. The
Company is included in the combined financial statements of TAD Resources
International, Inc. and Affiliated Companies. The combined financial statements
of the Company are presented as of and for the period ending November 6, 1996.
Subsequent to November 6, 1996, the Company was sold by TAD to MascoTech
Automotive Systems Group, Inc. ("MASG"). These combined financial statements
include the accounts of the following companies and operations (collectively,
APX), all affiliated through common stock ownership and management that are
engaged in the similar lines of business:
Aero-Detroit, Inc. ("Aero Detroit")
Production Molded Composites Division
Landmark Holdings, Inc. ("Landmark")
Pioneer Acquisition Corporation ("Pioneer")
APX-U. K. (a branch operation of TAD Technical Services, Ltd.)
APX-Germany (a branch operation of TAD Technical Services, Ltd.)
APX International do Brasil Limitada (Brazil)
APX International GmbH (Germany)
Intercompany transactions and accounts have been eliminated.
b. Revenue and Cost Recognition: Revenues from fixed price contracts are
recognized on the percentage of completion method, measured by the percentage of
costs incurred to date to estimated total costs for each contract. Time and
material contracts are based on time incurred at agreed upon billing rates.
Contract costs include all direct material and labor costs and indirect
costs such as indirect labor, supplies, tools and repairs. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. Changes in fixed price contracts may result in revisions
to costs and income and are recognized in the period in which the revisions are
determined.
c. Inventories: Inventories are stated at the lower of cost or market. Cost
is determined using the first-in, first-out ("FIFO") method.
d. Advertising: Advertising costs are expensed as incurred and included in
operating expenses. Advertising expenses amount to $118,000 for 1996.
e. Property, Plant and Equipment: Equipment is stated at cost and is
depreciated on straight-line and accelerated methods over the estimated useful
lives or, in the case of capital leases, over the terms of the leases. Upon
retirement or disposal of property, plant and equipment, the cost and
accumulated depreciation are removed from the accounts and any gain or loss is
included in income. Repair and maintenance costs are charged to expense as
incurred.
F-35
<PAGE> 131
APX INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Equipment as of November 6, 1996 consisted of the following:
<TABLE>
<S> <C>
Machinery and computer equipment............................ $ 3,515,000
Equipment under capital leases.............................. 4,841,000
Furniture and fixtures...................................... 1,111,000
Automobiles and trucks...................................... 41,000
Leasehold improvements...................................... 704,000
-----------
10,212,000
Less accumulated depreciation.......................... 6,111,000
-----------
$ 4,101,000
===========
</TABLE>
f. Other Assets: Excess of cost over value of assets acquired is being
amortized on the straight-line method over periods up to 40 years.
g. Translation of Foreign Currency: The financial statements of the foreign
subsidiaries and affiliates are translated into U. S. dollars using the current
exchange rate with the effects of translation adjustments deferred and included
as a component of stockholders' deficit. Revenues and expenses are translated at
the average rates of exchange during the period. Gains and losses on foreign
currency transactions are not significant.
h. Income Taxes: Pioneer and Landmark have elected Subchapter S Corporation
status of the Internal Revenue Code. Therefore, in lieu of Federal income taxes,
the shareholders are taxed on their proportionate share of the Company's taxable
income. Consequently, no provision or liability for Federal income taxes has
been included for these companies. Income tax expense and credits are computed
on a separate return basis. Deferred income taxes result principally from
temporary differences in the bases of assets and liabilities for tax and
reporting purposes for Pioneer and Landmark.
3. ACCOUNTS RECEIVABLE
Receivables arise from services provided pursuant to contracts or
agreements with customers for such services. The primary users of the Company's
services are manufacturers in the automotive industry. At November 6, 1996 and
for the period then ended, three customers, Ford Motor Company, Chrysler
Corporation and General Motors, accounted for approximately 60 percent of the
Company's accounts receivable balance and 62 percent of total sales for the
year.
Accounts receivable include both billed and unbilled receivables. Unbilled
receivables consist of $4,685,000 as of November 6, 1996 for services rendered
under fixed price contracts and $6,034,000 as of November 6, 1996 for services
rendered under time and materials contracts in excess of amounts already billed.
Billings on fixed price contracts generally can be rendered upon completion of
specified portions of work. All such billings can be rendered and should be
collected within the ensuing year. The Company generally does not bill in
advance of providing services.
F-36
<PAGE> 132
APX INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. INCOME TAXES
<TABLE>
<CAPTION>
NOVEMBER 6, 1996
----------------
<S> <C>
Provision for income taxes, deferred........................ $ (195)
======
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 6, 1996
----------------
<S> <C>
Deferred tax assets (liabilities):
NOL carryforward....................................... $ 4,601
Property and equipment................................. (730)
Accrued liabilities.................................... 81
Accounts receivable.................................... 49
Other.................................................. 45
Deferred state taxes................................... (114)
Valuation allowance.................................... (4,046)
-------
Net deferred tax asset (liability)................... $ (114)
=======
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 31, 1995
TO NOVEMBER 6, 1996
-------------------
<S> <C>
U. S. federal statutory rate................................ 35.0%
Benefit at U. S. statutory rate............................. $ 474
Other....................................................... 18
Deferred state taxes........................................ (130)
Change in valuation allowance............................... (557)
------
Income tax benefit........................................ $ (195)
======
</TABLE>
Aero Detroit has available federal net operating loss carryforwards to
offset future taxable income, if any, of $13,147,876 expiring in the years 2003
to 2011. Michigan Single Business Tax paid during the period December 31, 1995
to November 6, 1996 was approximately $1,321,000.
5. RETIREMENT PLANS
The Company maintains a qualified cash or deferred compensation plan under
Section 401(k) of the Internal Revenue Code. Participation in this plan is
available to substantially all salaried employees and to certain groups of
hourly employees. Under the plan, employees may elect to defer up to 20 percent
of their annual wages, subject to the limitations of the Internal Revenue Code.
Third party administrative costs paid by the plan approximated $48,000 for 1996.
The Company has three defined contribution pension plans. Participation in
these plans is available to certain union employees. Company contributions to
the plans are based on a specified amount per hour based on the provisions of
the individual union's collective bargaining agreements. Company contributions
to the plans aggregated $506,272 in 1996.
The Company has two frozen defined benefit pension plans. One plan covers
certain IAMAW union employees under a multi-employer plan that was frozen in
1984. The other plan was frozen in 1988 and covers certain union and non-union
employees that were employed by Autodynamics Corporation of America, Inc., a
company acquired previously by Aero-Detroit. These plans are not administered by
the Company. Contributions are determined in accordance with the provisions of
the plans.
F-37
<PAGE> 133
APX INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Autodynamics plan status as of the most recently available period is as
of the plan years ended June 30, 1996 and is as follows:
<TABLE>
<S> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation................................. $ 212,000
==========
Accumulated benefit obligation............................ $ 739,000
==========
Projected benefit obligation................................ $1,027,000
Plan assets at fair value................................... 855,000
----------
Projected benefit obligation in excess of plan assets....... $ (172,000)
==========
Net pension cost:
Service cost.............................................. $ 60,000
Actual return on plan assets.............................. (55,000)
----------
Net pension cost..................................... $ 5,000
==========
</TABLE>
6. COMMITMENTS
Lease: Minimum lease commitments in effect at November 6, 1996, under all
noncancellable leases, including capital leases, are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
TOTAL LEASES LEASES
----- ------- ---------
<S> <C> <C> <C>
Year ended December:
1997.................................................. $ 6,750,000 $ 644,000 $ 6,106,000
1998.................................................. 4,525,000 143,000 4,382,000
1999.................................................. 3,253,000 10,000 3,243,000
2000.................................................. 2,948,000 9,000 2,939,000
2001.................................................. 3,678,000 -- 3,678,000
Thereafter............................................ -- -- --
----------- --------- -----------
$21,154,000 806,000 $20,348,000
=========== ===========
Less amount representing interest..................... (120,000)
---------
Present value of minimum payments..................... $ 686,000
=========
</TABLE>
Total rent expense paid under operating lease was $8,118,000 for the period
December 31, 1995 to November 6, 1996.
7. RELATED-PARTY TRANSACTIONS
a. Credit Arrangements: As of November 6, 1996, an affiliated company, TAD
Resources International, Inc. had revolving credit arrangements with certain
banks through June 1997. APX was a party to these agreements. Borrowings were
limited by a collateral formula based upon the level of qualified accounts
receivable. Collateral was provided to the bank by all accounts receivable
including those of APX, and the arrangement was guaranteed by all affiliated
companies, including those that form part of APX.
APX records its borrowings from affiliated companies as intercompany
advances. Total interest charged to APX by these affiliated companies was
$1,975,000 in 1996. The weighted average interest rate approximated 6.2%.
b. Operating Leases: The Company leases office space and equipment from
various affiliated companies. Rent expense disclosed in Note 6. includes
approximately $4,465,000 arising from such leases during 1996.
F-38
<PAGE> 134
APX INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
c. Other: The Company was charged management fees from a related company of
approximately $362,000 in 1996.
8. SUBSEQUENT EVENT:
TAD entered into an agreement dated November 6, 1996, whereby TAD sold
substantially all of the assets and liabilities of Aero-Detroit, Landmark and
Pioneer to MASG. Also included in the sale were the APX-UK and APX-Germany
operations and all of the issued and outstanding shares of stock of APX
International do Brasil Limitada and APX International GmbH.
In early 1997, MASG sold the net assets of APX to MSX International, Inc.,
an affiliate of MascoTech, Inc. The sale price was in excess of book value.
No effect has been given to these transactions in the accompanying
financial statements.
F-39
<PAGE> 135
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
APX International
We have audited the accompanying combined balance sheet of APX
International (the Company) as of December 30, 1995, and the related combined
statements of income and stockholders' deficiency, and cash flows for the year
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of APX International
at December 30, 1995, and the combined results of their operations and their
cash flows for the year then ended in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
April 12, 1996
F-40
<PAGE> 136
APX INTERNATIONAL
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 30, 1995
-----------------
(IN THOUSANDS)
<S> <C>
ASSETS
Current assets:
Cash...................................................... $ 737
Accounts receivable, net of allowance for doubtful
accounts of $171....................................... 36,369
Inventory................................................. 2,696
Prepaid expenses and other current assets................. 1,610
--------
Total current assets........................................ 41,412
Equipment, net.............................................. 5,970
Other....................................................... 1,141
--------
$ 48,523
========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Cash overdraft............................................ $ 1,250
Accounts payable.......................................... 3,115
Accrued payroll and benefits.............................. 2,873
Accrued expenses.......................................... 2,030
Deferred gain............................................. 400
Deferred taxes............................................ 309
Current portion of capital leases......................... 832
--------
Total current liabilities................................... 10,809
Long-term obligations:
Capital leases............................................ 772
Due to affiliate.......................................... 42,171
Other..................................................... 1,063
--------
Total long-term obligations................................. 44,006
Stockholders' deficiency:
Common stock.............................................. 371
Additional paid-in capital................................ 10,990
Foreign currency translation.............................. 3
Retained earnings (deficit)............................... (17,656)
--------
Total stockholders' deficiency.............................. (6,292)
--------
$ 48,523
========
</TABLE>
See accompanying notes to financial statements.
F-41
<PAGE> 137
APX INTERNATIONAL
COMBINED STATEMENT OF INCOME AND STOCKHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 30, 1995
-----------------
(IN THOUSANDS)
<S> <C>
Revenue from services....................................... $140,234
Cost of services............................................ 133,116
--------
7,118
Selling, general, and administrative expenses............... 7,299
--------
Operating loss.............................................. (181)
Interest expense............................................ 2,727
--------
Loss before income tax benefit.............................. (2,908)
Income tax benefit.......................................... (114)
--------
Net loss.................................................... (2,794)
Stockholders' deficiency at beginning of year............... (3,669)
Foreign currency translation adjustment..................... 3
Stockholders' equity of new affiliates...................... 168
--------
Stockholders' deficiency at end of year..................... $ (6,292)
========
</TABLE>
See accompanying notes to financial statements.
F-42
<PAGE> 138
APX INTERNATIONAL
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 30, 1995
-----------------
(IN THOUSANDS)
<S> <C>
OPERATING ACTIVITIES
Net loss.................................................... $(2,794)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 2,423
Loss on disposal of fixed assets.......................... 497
Changes in assets and liabilities:
Accounts receivable.................................... (1,317)
Inventory.............................................. 129
Prepaid expenses and other current assets.............. (501)
Accounts payable....................................... (98)
Accrued payroll and benefits........................... 881
Accrued expenses....................................... 786
Deferred revenue....................................... (400)
-------
Net cash used in operating activities....................... (394)
INVESTING ACTIVITY
Purchases of equipment...................................... (747)
-------
Net cash used in investing activity......................... (747)
FINANCIAL ACTIVITIES
Advances from affiliates.................................... 2,682
Capital lease payments...................................... (1,018)
Proceeds from issuance of stock by new affiliates........... 168
-------
Net cash provided by financial activities................... 1,832
-------
Net increase in cash........................................ 691
Cash at beginning of year................................... 46
-------
Cash at end of year......................................... $ 737
=======
</TABLE>
See accompanying notes to financial statements.
F-43
<PAGE> 139
APX INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 30, 1995
1. ORGANIZATION AND OPERATIONS
The primary business of APX is to provide drafting, design and other
engineering-based services to primarily the automotive industry. The Company is
also in the business of producing automotive body parts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Basis of Preparation
APX is affiliated with TAD Resources International, Inc. through common
stock ownership and management. APX is included in the combined financial
statements of TAD Resources International, Inc. and Affiliated Companies. The
combined financial statements of APX have been prepared in connection with the
pending sale of the businesses of APX to two separate parties. These combined
financial statements include the accounts of the following companies and
operations (collectively, APX), all affiliated through common stock ownership
and management that are engaged in the similar lines of business:
Aero-Detroit, Inc.
Landmark Holdings, Inc.
Pioneer Acquisition Corporation
APX GmbH (Germany)
APX-U.K. (a branch operation of TAD Technical Services, Ltd.)
APX-Germany (a branch operation of TAD Technical Services, Ltd.)
Overseas Resources, Inc.
Wholly-owned subsidiaries of Aero-Detroit, Inc., TAAG, Inc. and C&D, Inc.
have not been consolidated with Aero-Detroit because they are in the same
business as TAD and will remain with the TAD group of companies. Aero-Detroit's
investment in TAAG and C&D are recorded on the cost basis and total $13,198,000.
TAAG and C&D will not be included in any proposed sale transaction, and
therefore, the investment has been excluded from these combined financial
statements. Amount due to affiliate has been reduced by this same amount as the
original investment was funded through borrowings from TAD.
Intercompany transactions and accounts have been eliminated.
The fiscal year end of APX is on the Saturday nearest to December 31.
Use of Estimates
The preparation of the combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Revenue and Cost Recognition
Revenues from fixed price contracts are recognized on the percentage of
completion method, measured by the percentage of costs incurred to date to
estimated total costs for each contract. Time and material contracts are valued
at selling price based on billing rates.
Costs include all direct material and labor costs and indirect costs such
as indirect labor, supplies, tools and repairs. Provisions for estimated losses
on uncompleted contracts are made in the period in which such losses are
determined. Changes in fixed price contracts may result in revisions to costs
and income and are recognized in the period in which the revisions are
determined.
F-44
<PAGE> 140
APX INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method.
Advertising
Advertising costs are expensed as incurred and included in operating
expenses. Advertising expenses amounted to $209,000 for 1995.
Equipment and Depreciation
Equipment is stated at cost and are depreciated on straight-line and
accelerated methods over the estimated useful lives.
Equipment for 1995 consisted of the following:
<TABLE>
<S> <C>
Machinery and computer equipment............................ $ 3,923,000
Equipment under capitalized leases.......................... 5,474,000
Furniture and fixtures...................................... 1,421,000
Automobiles and trucks...................................... 72,000
Leasehold improvements...................................... 655,000
-----------
11,545,000
Less accumulated depreciation.......................... 5,575,000
-----------
$ 5,970,000
===========
</TABLE>
Other Assets
Excess of cost over value of assets acquired is being amortized on the
straight-line method over periods up to 40 years.
Translation of Foreign Currency
The financial statements of the foreign subsidiaries and affiliates are
translated into U.S. dollars using the exchange rate at each balance sheet date
for assets and liabilities, and a weighted average exchange rate for revenues
and expenses. The related translation adjustments are reported as a component of
stockholders' equity. Gains and losses on foreign currency transactions are not
significant.
Acquisitions
APX made acquisitions of stock and assets of two companies during 1995 and
the results of these acquisitions have been included from their respective dates
of acquisition. The effect of these acquisitions on the Company's results of
operations was not significant.
3. ACCOUNTS RECEIVABLE
Receivables arise from services provided pursuant to contracts or
agreements with customers for such services. Historically, losses due to
customers' inability to comply with the payment terms of their contracts or
agreements with the Company have not been significant. The primary users of the
Company's services are manufacturers in the automotive industry. At December 30,
1995 and for the year then ended, three customers, Ford Motor Company, Chrysler
Corporation and General Motors, accounted for approximately 60% of the Company's
accounts receivable balance and 73% of total revenues for the year.
F-45
<PAGE> 141
APX INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Accounts receivable include both billed and unbilled receivables. Unbilled
receivables consist of $3,780,000 for services rendered under fixed price
contracts and $4,093,000 for services rendered under time and materials
contracts in excess of amounts already billed. Billings on fixed price contracts
generally can be rendered upon completion of specified portions of work. All
such billings can be rendered and should be collected within the ensuing year.
The Company generally does not bill in advance of providing services.
4. DEFERRED GAIN
In 1993, the Company entered into a sale/leaseback arrangement with a
related party. The Company sold fully depreciated machinery and equipment for
$2,000,000 to an affiliate. The proceeds for the sale have been recorded as a
deferred gain which will be amortized over a five-year period concurrent with
the related operating lease, accordingly, there is no impact on the results of
operations for the year ended December 30, 1995.
5. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The Company's deferred
tax liability of $309,000 is due to deferred income resulting from the use of
the cash method of accounting for tax reporting purposes.
The Company's benefit for income taxes for the year ended December 30, 1995
consists of deferred state taxes of $114,000.
Aero-Detroit files a consolidated tax return with its subsidiaries TAAG and
C&D. 1995 operating losses of Aero will be offset by taxable income of TAAG and
C&D; however, the accompanying financial statements do not reflect that benefit.
Pioneer and Landmark have elected Subchapter S Corporation status of the
Internal Revenue Code. Therefore, in lieu of Federal income taxes, the
shareholders are taxed on their proportionate share of the Company's taxable
income. Consequently, no provision or liability for Federal income taxes has
been included for these companies. Aero Detroit, Inc. has available Federal net
operating loss carryforwards to offset future taxable income, if any, of
$11,584,000 expiring in the years 2003-2010. Deferred tax assets arising from
net operating loss carryovers of Aero-Detroit are fully reserved due to the
uncertainty of future taxable income.
6. RETIREMENT PLANS
The Company maintains a qualified cash or deferred compensation plan under
section 401(k) of the Internal Revenue Code. Participation in this plan is
available to substantially all salaried employees and to certain groups of
hourly employees. Under the plan, employees may elect to defer up to 20% of
their annual wages, subject to the limitations of the Internal Revenue Code.
Third-party administrative plan costs approximated $91,000 for 1995.
The Company has three defined contribution pension plans. Participation in
these plans is available to certain union employees. Company contributions to
the plan are based on a specified amount per hour based on the provisions of the
individual union's collective bargaining agreement. Company contributions to the
plans aggregated $609,400 in 1995.
The Company has two frozen defined benefit pension plans. One plan covers
certain IAMAW union employees under a multi-employer plan that was frozen in
1984. The other plan was frozen in 1988 and covers certain union and non-union
employees that were employed by Autodynamics Corporation of America, Inc., a
company acquired previously by Aero-Detroit. These plans are not administered by
the Company. Contributions are determined in accordance with the provisions of
the plans.
F-46
<PAGE> 142
APX INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The IAMAW union plan's actuarially computed value of vested benefits were
more than the net assets of the Plan as of August 1995. Therefore, the Company
would have a withdrawal liability of $1,264,000 if the Company were to withdraw
from the Plan. However, the Company has no present intention of withdrawing from
this plan, nor has the Company been informed that there is any intention to
terminate such plan. There were no Company contributions made to the plan in
1995.
The Autodynamics plan status as of the most recently available period is as
of the plan year ended June 30, 1995 and is as follows:
<TABLE>
<S> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation.............................. $ 194,000
=========
Accumulated benefit obligation......................... $ 727,000
=========
Projected benefit obligation................................ 962,000
Plan assets at fair value................................... 861,000
---------
Projected benefit obligation in excess of plan assets....... $(101,000)
=========
Net pension cost:
Service cost........................................... $ 47,000
Actual return on plan assets........................... (67,000)
---------
Net pension cost (credit)................................... $ (20,000)
=========
</TABLE>
7. COMMITMENTS
Lease
Minimum lease commitments in effect at December 30, 1995, under all
noncancellable leases, including capital leases are as follows:
<TABLE>
<CAPTION>
OTHER
CAPITAL OPERATING
TOTAL LEASES LEASES
----- ------- ---------
<S> <C> <C> <C>
Year ended December:
1996................................ $ 7,942,000 $ 918,000 $ 7,024,000
1997................................ 6,750,000 644,000 6,106,000
1998................................ 4,525,000 143,000 4,382,000
1999................................ 3,253,000 10,000 3,243,000
2000................................ 2,948,000 9,000 2,939,000
Thereafter.......................... 3,678,000 -- 3,678,000
----------- ---------- -----------
$29,096,000 1,724,000 $27,372,000
=========== ===========
Less amount representing interest... (120,000)
----------
Present value of minimum payments... $1,604,000
==========
</TABLE>
Total rent expense paid under operating leases was $10,880,000 in 1995.
Deferred Compensation
The Company has deferred compensation agreements with certain present and
past officers and key employees of Pioneer. The principal costs of such plans
has been accrued over the period of active
F-47
<PAGE> 143
APX INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
employment. To fund the majority of these plans, life insurance contracts were
purchased on the related employees. Net present value of future payments under
these agreements are as follows:
<TABLE>
<S> <C>
1996........................................................ $136,000
1997........................................................ 68,000
1998........................................................ 56,000
1999........................................................ 37,000
2000........................................................ 20,000
Thereafter.................................................. 32,000
--------
$349,000
========
</TABLE>
Other
Obligations under noncompetition agreements are $97,000, payable through
the year 2000.
8. RELATED-PARTY TRANSACTIONS
Credit Arrangements
An affiliated company, TAD Resources International, Inc. has revolving
credit arrangements with certain banks through June 1997. APX is a party to
these agreements. Borrowings are limited by a collateral formula based upon the
level of qualified accounts receivable. Security is provided to the bank by all
accounts receivable including those of APX, and the arrangement is guaranteed by
all affiliated companies, including those that form part of APX.
APX records borrowings as intercompany advances. Interest is charged to APX
at the same rate charged by the bank. Total interest charged to APX in 1995 was
$2,279,000.
Operating Leases
The Company leases office space and equipment from various companies
affiliated with APX. Rent expense disclosed in Note 7 includes approximately
$7,152,000 arising from these leases during 1995.
Other
The Company was charged management fees from a related company of $454,000
in 1995.
9. SUBSEQUENT EVENT
As of December 30, 1995, TAD Resources International, Inc. made a decision
to dispose of the businesses of APX. Subsequent to the end of the year, TAD
received offers from separate parties to acquire separately APX's drafting,
design and other engineering-based services business and APX's automotive body
parts production business. TAD is currently in negotiations with the potential
buyers.
F-48
<PAGE> 144
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
MSX International, Inc.
We have audited the accompanying consolidated carve-out balance sheets of
Geometric Results Incorporated -- Service ("GRI-Service"), a business unit of
Geometric Results Incorporated and subsidiaries, as of December 31, 1996 and
August 31, 1997 and the related consolidated carve-out statements of operations,
stockholder's equity and cash flows for each of the two years in the period
ended December 31, 1996 and for the eight-month period ended August 31, 1997.
These financial statements are the responsibility of GRI-Service's management.
Our responsibility is to express an opinion on these consolidated carve-out
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 carve-out financial statements referred to
above present fairly, in all material respects, the financial position of
GRI-Service as of December 31, 1996 and August 31, 1997 and the results of its
operations and its cash flows for the periods indicated above in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
March 4, 1998
F-49
<PAGE> 145
GEOMETRIC RESULTS INCORPORATED -- SERVICE
(A FORMER BUSINESS UNIT OF GEOMETRIC RESULTS INCORPORATED AND SUBSIDIARIES)
CONSOLIDATED CARVE-OUT BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND AUGUST 31, 1997
<TABLE>
<CAPTION>
1996 1997
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 3,268 $ 6,334
Investment with parent.................................... 14,012 50,044
Accounts receivable -- trade:
From parent and other affiliates....................... 95,711 48,693
Other, net of allowance for doubtful accounts.......... 261 7,416
Deferred income taxes..................................... 151 483
Other..................................................... 3,135 4,208
-------- --------
Total current assets................................. 116,538 117,178
Property, plant and equipment, net.......................... 10,972 11,051
Deposits and other assets................................... 20 18
-------- --------
Total assets......................................... $127,530 $128,247
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Cash overdraft............................................ $ 18,348 $ 22,569
Lines of credit from parent............................... 2,717 4,852
Accounts payable -- trade:
To parent and other affiliates......................... 6,644 2,884
Other.................................................. 39,437 32,447
Accrued payroll, vacations, bonuses and incentives........ 7,996 6,033
Accrued income taxes...................................... 2,707 4,900
Other..................................................... 3,428 3,180
-------- --------
Total current liabilities............................ 81,277 76,865
Deferred income taxes....................................... 170 764
-------- --------
Total liabilities.................................... 81,447 77,629
Commitments and contingencies
Stockholder's equity:
Common stock ($1 par value; authorized 10,000 shares; 10
shares issued and outstanding) and paid-in capital..... 3,780 3,780
Foreign currency translation adjustment................... (434) (875)
Retained earnings (Note 2)................................ 42,737 47,713
-------- --------
Total stockholder's equity........................... 46,083 50,618
-------- --------
Total liabilities and stockholder's equity........... $127,530 $128,247
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated carve-out
financial statements.
F-50
<PAGE> 146
GEOMETRIC RESULTS INCORPORATED -- SERVICE
(A FORMER BUSINESS UNIT OF GEOMETRIC RESULTS INCORPORATED AND SUBSIDIARIES)
CONSOLIDATED CARVE-OUT STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995, 1996 AND
FOR THE EIGHT-MONTH PERIOD ENDED AUGUST 31, 1997
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenue:
Contract services......................................... $547,333 $689,516 $429,891
Other..................................................... 3,065 952 1,243
-------- -------- --------
550,398 690,468 431,134
-------- -------- --------
Cost of revenue:
Subcontract costs......................................... 455,095 588,198 358,948
Salaries, wages and benefits.............................. 39,514 45,898 32,304
Other direct costs........................................ 36,509 31,565 20,266
-------- -------- --------
531,118 665,661 411,518
-------- -------- --------
Gross profit.............................................. 19,280 24,807 19,616
General and administrative expense.......................... 23,330 21,576 13,636
Michigan Single Business Tax................................ 289 251 239
-------- -------- --------
Income (loss) from operations.......................... (4,339) 2,980 5,741
Interest income, net of expense............................. 675 1,373 1,166
Other income (expense), net................................. (528) 1,138 30
Sale of certain contracts................................... 1,800 --
-------- -------- --------
Income (loss) from operations before income taxes...... (2,392) 5,491 6,877
Provision (benefit) for income taxes........................ (411) 2,530 2,908
-------- -------- --------
Net income (loss)...................................... $ (1,981) $ 2,961 $ 3,969
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated carve-out
financial statements.
F-51
<PAGE> 147
GEOMETRIC RESULTS INCORPORATED -- SERVICE
(A FORMER BUSINESS UNIT OF GEOMETRIC RESULTS INCORPORATED AND SUBSIDIARIES)
CONSOLIDATED CARVE-OUT STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
AND THE EIGHT-MONTH PERIOD ENDED AUGUST 31, 1997
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY
COMMON PAID-IN TRANSLATION RETAINED
STOCK CAPITAL ADJUSTMENT EARNINGS TOTAL
------ ---------- ----------- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994..................... $-- $3,780 $ (508) $23,463 $26,735
Divisional equity transfer from PPD............ -- -- -- 8,079 8,079
Net loss....................................... -- -- -- (1,981) (1,981)
Foreign currency translation adjustment........ -- -- (58) -- (58)
--- ------ ------ ------- -------
Balance, December 31, 1995..................... -- 3,780 (566) 29,561 32,775
Divisional equity transfer from PPD............ -- -- -- 10,215 10,215
Net income..................................... -- -- -- 2,961 2,961
Foreign currency translation adjustment........ -- -- 132 -- 132
--- ------ ------ ------- -------
Balance, December 31, 1996..................... $-- $3,780 $ (434) $42,737 $46,083
Divisional equity transfer from PPD............ -- -- -- 1,007 1,007
Net income..................................... -- -- -- 3,969 3,969
Foreign currency translation adjustment........ -- -- (441) -- (441)
--- ------ ------ ------- -------
Balance, August 31, 1997....................... $-- $3,780 $ (875) $47,713 $50,618
=== ====== ====== ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated carve-out
financial statements.
F-52
<PAGE> 148
GEOMETRIC RESULTS INCORPORATED -- SERVICE
(A FORMER BUSINESS UNIT OF GEOMETRIC RESULTS INCORPORATED AND SUBSIDIARIES)
CONSOLIDATED CARVE-OUT STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996 AND FOR THE EIGHT-MONTH PERIOD
ENDED AUGUST 31, 1997
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)...................................... $ (1,981) $ 2,961 3,969
Adjustments to reconcile net income (loss) to net cash
used in
operations:
Depreciation...................................... 3,922 5,111 3,960
(Gain) loss on disposal of assets................. 74 481 8
Provision for doubtful accounts................... (88) (62) (2)
Deferred income taxes............................. (245) (101) 262
Changes in assets and liabilities:
Accounts receivable............................. (43,759) (15,602) 39,865
Other assets.................................... 2,472 (2,588) (1,071)
Accounts payable -- trade....................... 37,421 (8,571) (10,750)
Accrued payroll, vacation, bonuses and
incentives................................... 1,445 2,162 (1,962)
Income taxes, due to/from parent................ (985) 4,618 2,192
Other current liabilities....................... 1,301 (656) (248)
-------- -------- --------
Net cash provided by (used in) operations......... (423) (12,247) 36,223
-------- -------- --------
Cash flows from investing activities:
Proceeds from sale of assets........................... 125 333 --
Capital expenditures................................... (6,601) (3,676) (4,047)
-------- -------- --------
Net cash used in investing activities............. (6,476) (3,343) (4,047)
-------- -------- --------
Cash flows from financing activities:
Net borrowings on lines of credit from parent.......... 960 (3,231) 2,135
Divisional equity transfer (Note 2).................... 8,079 10,215 1,007
Increase in cash overdraft............................. 3,116 9,273 4,221
-------- -------- --------
Net cash provided by financing activities......... 12,155 16,257 7,363
-------- -------- --------
Effect of exchange rate changes on cash................ (65) 117 (441)
-------- -------- --------
Net increase in cash and equivalents.............. 5,191 784 39,098
-------- -------- --------
Cash and equivalents at beginning of year.............. 11,305 16,496 17,280
-------- -------- --------
Cash and equivalents at end of year............... $ 16,496 $ 17,280 $ 56,378
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated carve-out
financial statements.
F-53
<PAGE> 149
GEOMETRIC RESULTS INCORPORATED -- SERVICE
(A FORMER BUSINESS UNIT OF GEOMETRIC RESULTS INCORPORATED AND SUBSIDIARIES)
NOTES TO CONSOLIDATED CARVE-OUT FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. DESCRIPTION OF BUSINESS:
Business
The accompanying consolidated financial statements represent the carve-out
of certain operations of Ford Motor Company ("Ford"). Such carve-out financial
statements comprise the Service Business ("GRI-Service") of Geometric Results
Incorporated and subsidiaries' ("GRI"). GRI was created to provide contract
administrative and professional services that Ford, GRI-Service's former parent,
and its subsidiaries have historically outsourced and to compete for such
contracts on an arm's length basis. GRI also, through its Industrial Power
Products Division ("PPD"), is engaged in the sale, marketing and servicing of
Ford industrial and marine engines, transmissions, parts and components.
GRI-Service consists of five lines:
- Purchasing Services, including PeopleNet (in-client labor process
management) and AdTeam (training and procurement consulting management);
- Automotive Process Management, focusing on warranty, dealer and customer
support services;
- Training Services, emphasizing training, process management,
instructional system design and training delivery;
- Enterprise Imaging, providing electronic imaging of text documents and
engineering drawings via internet/intranet technologies; and
- Diversified Document Services, principally printing and mailroom
operations.
The largest revenue generating GRI-Service line is purchasing services,
which contributed 85%, 87% and 84% of total GRI-Service revenues in 1995 and
1996, and for the eight-month period ended August 31, 1997, respectively.
GRI-Service has established wholly-owned subsidiaries in Spain, Great Britain,
Germany, Mexico, Canada, Australia and New Zealand. The subsidiaries are engaged
in the same activities as GRI-Service. Foreign subsidiary assets accounted for
approximately 18% and 20% of total GRI-Service assets as of December 31, 1996
and August 31, 1997, respectively.
On August 31, 1997, MSX International (Holdings), Inc. a Delaware
corporation ("MSXI"), purchased GRI, pursuant to a Stock Purchase Agreement (the
"Agreement") dated July 25, 1997 by and among Ford and MSXI. GRI's PPD was not a
part of this sale, therefore, the accompanying consolidated financial statements
reflect only the "carve-out" balance sheets, statements of operations,
stockholders' equity and cash flows of GRI-Service for the periods presented.
The consolidated carve-out financial statements have been prepared as if
GRI-Service had operated as a stand-alone entity for all periods presented, and
include those assets, liabilities, revenues and expenses directly attributable
to the GRI-Service operations. Certain corporate, general and administrative
expenses have been allocated to GRI-Service from Ford on various bases which, in
the opinion of management, are reasonable. GRI-Service in turn allocates certain
corporate, general and administrative expenses to PPD on various bases which, in
the opinion of management, are reasonable. The financial statements exclude
certain corporate, general and administrative expenses that have been allocated
by GRI-Service to PPD. Such expenses and allocations are not necessarily
indicative of, and it is not practical for management to estimate, the nature
and level of expenses which might have been incurred had GRI-Service been
operating as a separate company. Under the terms of an interim agreement, GRI-
Service will continue to provide PPD certain services for which it will bill PPD
directly. The sale of GRI-Service will limit and eventually eliminate
GRI-Service's ability to allocate expenses to PPD, which amounts are material to
the results of operations of GRI-Service. For the years ended December 31, 1995
and 1996 and for the eight-month period ended August 31, 1997, these allocated
costs were $4,113, $5,207 and $3,397,
F-54
<PAGE> 150
GEOMETRIC RESULTS INCORPORATED -- SERVICE
(A FORMER BUSINESS UNIT OF GEOMETRIC RESULTS INCORPORATED AND SUBSIDIARIES)
NOTES TO CONSOLIDATED CARVE-OUT FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
respectively. The amounts that will be incurred on a separate company basis
could differ significantly from allocated amounts due to economies of scale,
differences in management and/or operational practices or other factors. The
financial information included herein does not purport to be indicative of the
financial position and results of operation of GRI-Service had it operated as a
stand-alone entity during the periods covered, and may not be indicative of
future operations or financial position.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation and Basis of Presentation
The accompanying financial statements include the accounts of GRI-Service
and its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.
Included in the retained earnings of GRI-Service is the divisional equity
transfer from PPD which represents the difference between all expenses paid by
GRI-Service on behalf of PPD or allocated to PPD by GRI-Service and all cash
transferred to GRI-Service by PPD since its acquisition. Expenses paid by GRI-
Service or allocated to PPD are not settled with GRI-Service and become a
permanent component of the divisional equity transfer. Cash generated by PPD is
utilized by GRI-Service on a daily basis. At December 31, 1996 and August 31,
1997, the cumulative divisional equity transfer that is included in GRI-
Service's retained earnings was approximately $26,821 and $27,828, respectively.
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 amount of assets and liabilities and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Concentration of Credit Risk
As previously stated, GRI-Service's principal customer is Ford. The loss of
this business would have a severe impact on GRI-Service.
Cash Equivalent -- Investment with Parent
Prior to August 31, 1997, GRI-Service invested excess cash with Ford. As
the funds were readily accessible by GRI-Service, the investment with Ford was
considered a cash equivalent. Such balances were approximately $14,012 and $498
at December 31, 1996 and August 31, 1997, respectively. The investment bore
interest at the published floating short-term rate established by Ford which was
5.3% and 5.5% at December 31, 1996 and August 31, 1997, respectively. Accrued
interest receivable at December 31, 1996 and August 31, 1997 was $130 and $146,
respectively.
F-55
<PAGE> 151
GEOMETRIC RESULTS INCORPORATED -- SERVICE
(A FORMER BUSINESS UNIT OF GEOMETRIC RESULTS INCORPORATED AND SUBSIDIARIES)
NOTES TO CONSOLIDATED CARVE-OUT FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Property, Plant and Equipment
Depreciation of property, plant and equipment is computed using the
straight-line method based upon the following useful lives:
<TABLE>
<S> <C>
Office furniture, fixtures and equipment.................... 1 - 5 years
Computer equipment and purchased software................... 3 - 5 years
Tooling..................................................... 5 years
Automobiles................................................. 3 years
Machinery and equipment..................................... 20 years
Buildings and improvements.................................. 36 years
</TABLE>
Leasehold improvements are amortized on a straight-line basis over their
estimated useful lives or the term of the lease, whichever is less. When
depreciable assets are retired or sold, the cost and related allowance for
depreciation are removed from the accounts and the resulting gain or loss is
reflected in earnings.
Income Taxes
Prior to August 31, 1997, GRI-Service's accounts were included in Ford's
consolidated federal and principal combined state income tax returns. In
connection with this arrangement, GRI-Service had a tax allocation agreement
with Ford whereby they provided for income taxes on a separate return basis and
paid to or received from Ford those amounts which would have otherwise been due
to or from the applicable tax authority. Under this agreement, losses could be
carried forward to offset future taxable income. Income taxes payable to Ford as
of December 31, 1996 and August 31, 1997 were $1.9 million and $3.1 million,
respectively.
Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.
Income tax expense is the tax payable for the period and the change during the
period in deferred tax assets and liabilities.
Foreign earnings are considered permanently invested outside the United
States. Repatriation of these earnings to the United States would result in
additional taxes.
Foreign Currency Translation
All balance sheet accounts of foreign subsidiaries are translated at the
current exchange rate as of the end of the accounting period. Income statement
items are translated at average currency exchange rates. The resulting
translation adjustment is recorded as a separate component of stockholder's
equity. Transaction gains and losses included in income were not significant in
1995, 1996 or for the eight-month period ended August 31, 1997.
Revenue Recognition
GRI-Service recognizes contract services revenue and related direct costs
as the services are provided.
New Accounting Pronouncements
In June 1997, the FASB issued Statement of Financial Accountings Standards
No. 130 "Comprehensive Income" ("SFAS No. 130") and Statement of Financial
Accounting Standards No. 131 "Disclosure about Segments of an Enterprise and
Related Information" ("SFAS No. 131"). SFAS No. 130 establishes
F-56
<PAGE> 152
GEOMETRIC RESULTS INCORPORATED -- SERVICE
(A FORMER BUSINESS UNIT OF GEOMETRIC RESULTS INCORPORATED AND SUBSIDIARIES)
NOTES TO CONSOLIDATED CARVE-OUT FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
standards for reporting and display of comprehensive income and its components
in a full set of general purpose 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 nonowner sources. SFAS No.
131 requires publicly-held companies to report financial and other information
about key revenue-producing segments of the entity for which such information is
available and is utilized by the chief operating decision maker. Specific
information to be reported for individual segments includes profit or loss,
certain revenue and expense items and total assets. The impact of adopting SFAS
No. 130 and SFAS No. 131, both effective for the GRI-Service in 1998, has not
yet been determined.
Reclassification
Certain prior year amounts have been reclassified to conform with the
current year presentation.
3. RELATED PARTY TRANSACTIONS:
For 1995, 1996 and for the eight-month period ended August 31, 1997,
substantially all contract service revenue and other income were earned from
transactions with Ford. Additionally, substantially all of the interest income
is earned from and expense is paid to Ford.
GRI-Service has historically purchased telephone, insurance, and various
other services from Ford, which amounted to $1,622, $2,780 and $2,053 in 1995,
1996 and for the eight-month period ended August 31, 1997, respectively.
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is comprised of the following at December 31,
1996 and August 31, 1997:
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Land and improvements.................................... $ 163 $ 163
Building and improvements................................ 1,440 1,682
Machinery and equipment.................................. 6,204 6,269
Leasehold improvements................................... 3,794 3,608
Office furniture, fixtures and equipment................. 4,249 4,389
Computer equipment and purchased software................ 12,318 14,919
Tooling.................................................. 433 381
Automobiles.............................................. 215 416
-------- --------
28,816 31,827
Less accumulated depreciation and amortization........... (17,844) (20,776)
-------- --------
$ 10,972 $ 11,051
======== ========
</TABLE>
F-57
<PAGE> 153
GEOMETRIC RESULTS INCORPORATED -- SERVICE
(A FORMER BUSINESS UNIT OF GEOMETRIC RESULTS INCORPORATED AND SUBSIDIARIES)
NOTES TO CONSOLIDATED CARVE-OUT FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
5. COMMITMENTS AND CONTINGENCIES:
GRI-Service leases certain office space, furniture, fixtures and equipment
under operating leases with renewal options of one to three years and rent
escalation clauses generally in accordance with the consumer price index.
Pursuant to the Agreement, GRI-Service will assume certain of the leases. The
related lease expense for 1995 and 1996 and for the eight-month period ended
August 31, 1997 was $3,609 and $3,574 and $2,794, respectively. Minimum future
rental payments under the assumed operating leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, RENTS
- ------------------------ -----
<S> <C>
1997 (four months)................................................ $ 1,960
1998.............................................................. 4,391
1999.............................................................. 2,714
2000.............................................................. 2,124
2001.............................................................. 3,966
-------
$15,155
=======
</TABLE>
Litigation
GRI-Service is subject to legal proceedings, claims and liabilities which
arise in the normal course of business. In the opinion of management, the amount
of ultimate liability with respect to these actions will not have a material
impact on the financial position, results of operations and cash flows of
GRI-Service.
6. SHORT-TERM DEBT:
In April 1996 a line of credit for European operations was established with
an affiliate of GRI-Service for a term of three years. Such agreement provides
for advances against certain dealer maintenance and servicing accounts
receivable, bearing interest at the prevailing European bank rate of 6.25% plus
1.66%. Principal is due when GRI-Service receives payment from its customers and
simple interest is due monthly in arrears. At August 31, 1997, approximately
$4,852 was outstanding under this agreement.
7. EMPLOYEE BENEFIT PLANS:
GRI-Service has various employee benefit plans, including a profit sharing
plan for U.S. employees and various management and executive incentive plans
under which employees meeting certain eligibility tests can earn, at the
discretion of the Board of Directors, additional compensation. Such additional
compensation, if any, is determined on an annual basis.
GRI-Service has an employee savings plan (401(k) plan) for all permanent,
U.S. employees who are at least 21 years of age and have one year of service (as
defined). GRI-Service contributions to the plan are made strictly at the
discretion of the Board of Directors and are allocated to participant accounts
on a pro rata basis based on participant age and salary. Participants may make
voluntary contributions to the plan, subject to federal limitations, up to 15%
of their compensation (as defined).
For the years ended December 31, 1995 and 1996 and for the eight-month
period ended August 31, 1997 GRI-Service provided $2,487, $4,499 and $3,230,
respectively, relating to these plans.
F-58
<PAGE> 154
GEOMETRIC RESULTS INCORPORATED -- SERVICE
(A FORMER BUSINESS UNIT OF GEOMETRIC RESULTS INCORPORATED AND SUBSIDIARIES)
NOTES TO CONSOLIDATED CARVE-OUT FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
8. INCOME TAXES:
The provision (benefit) for income taxes for the years ended December 31,
1995 and 1996 and for the eight-month period ended August 31, 1997 include the
following:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Federal:
Current............................................ $ (268) $ 1,555 $1,046
Deferred........................................... (201) (93) 241
State and local:
Current............................................ (46) 52 96
Deferred........................................... (44) (8) 20
Foreign, current..................................... 148 1,019 1,505
------ ------- ------
Total......................................... $ (411) $ 2,530 $2,908
====== ======= ======
</TABLE>
The types of temporary differences between the tax bases of assets and
liabilities and their financial reporting amounts that give rise to a
significant portion of the deferred tax liability and deferred tax asset and
their approximate tax effects are as follows:
<TABLE>
<CAPTION>
1996 1997
---------------------------- ----------------------------
NET DEFERRED NET DEFERRED NET DEFERRED NET DEFERRED
TAX ASSET TAX LIABILITY TAX ASSET TAX LIABILITY
CURRENT NON-CURRENT CURRENT NON-CURRENT
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Depreciation.................................. $ -- $(265) $ -- $(859)
Incentives.................................... -- 95 -- 95
Unbilled revenue.............................. (279) -- -- --
Bad debts..................................... 6 -- 18 --
Accrued vacation.............................. 415 -- 446 --
Other, net.................................... 9 -- 19 --
----- ----- ----- -----
Net asset (liability).................... $ 151 $(170) $ 483 $(764)
===== ===== ===== =====
</TABLE>
Management has determined that a valuation allowance for the net deferred
tax asset is not necessary based on GRI-Service's history of increasing earnings
allowing GRI-Service, in the event of future losses, to carry back and recover
the majority of its deferred tax assets from refunds of taxes paid in prior
years.
For the years ended December 31, 1995 and 1996, and for the eight-month
period ended August 31, 1997, GRI-Service has cumulative undistributed foreign
tax-based earnings of approximately $7,541 and $8,051 and $12,207, respectively.
It is the intent of GRI-Service to permanently reinvest these earnings. U.S.
income tax has been provided on approximately $1,891, $3,791 and $4,763 for the
years ended December 31, 1995 and 1996 and for the eight-month period ended
August 31, 1997, respectively, which, under U.S. tax law, represent constructive
dividends. In the event the remaining earnings of approximately $5,650, $4,260
and $7,444 for the years ended December 31, 1995 and 1996 and for the
eight-month period ended August 31, 1997, respectively, are distributed,
GRI-Service will be subject to U.S. income taxes.
9. SALE OF CERTAIN CONTRACTS:
During 1995, GRI-Service sold the assets and certain liabilities of
selected contracts in Great Britain. Accordingly, the net gain of $1,800 has
been included in other income.
F-59
<PAGE> 155
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH
HEREIN OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE AS OF WHICH INFORMATION
IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................. 4
Prospectus Summary..................... 5
Risk Factors........................... 17
Use of Proceeds........................ 23
Capitalization......................... 24
Pro Forma Financial Data............... 25
Selected Financial and Other Data...... 30
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 31
Business............................... 39
Management............................. 49
Principal Stockholders................. 52
Certain Relationships and Related
Transactions......................... 52
Description of Capital Stock........... 55
Description of Certain Other
Indebtedness......................... 57
The Exchange Offer..................... 58
Description of Notes................... 64
United States Federal Income Tax
Consequences......................... 92
Plan of Distribution................... 93
Legal Matters.......................... 93
Experts................................ 94
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
UNTIL , 1998 (90 DAYS AFTER THE DATE HEREOF), ALL DEALERS EFFECTING
TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
$100,000,000
MSX INTERNATIONAL, INC.
11 3/8% SENIOR SUBORDINATED NOTES
DUE 2008
MSX INTERNATIONAL, INC. LOGO
------------
PROSPECTUS
--, 1998
------------
======================================================
<PAGE> 156
PART II
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General corporation Law provides, generally,
that a corporation shall have the power to indemnify any person who was or is a
party or is threatened to be made a party to any action, suit or proceeding
(except actions by or in the right of the corporation) by reason of the fact
that such person is or was a director or officer of the corporation against all
expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. A corporation may similarly indemnify such person for expenses
actually and reasonably incurred by him in connection with the defense or
settlement of any action or suit by or in the right of the corporation, provided
such person acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation, and, in the case of
claims, issues and matters as to which such person shall have been adjudged
liable to the corporation, provided that a court shall have determined, upon
application, that, despite the adjudication of liability but in view of all of
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
Section 102(b)(7) of the Delaware General Corporation Law provides,
generally, that the certificate of incorporation may contain a provisions
eliminating or limiting the personal liability of a director to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that such provision may not eliminate or limit the liability
of a director (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 knowing violation of law, (iii) under
section 174 of Title 8, or (iv) for any transaction form which the director
derived an improper personal benefit. No such provision may eliminate or limit
the liability of a director for any act or omission occurring prior to the date
which such provision becomes effective.
Article FOUR, Section 1 of the Company's By-laws provides as follows:
"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 or has agreed to
become a Director or officer of the Corporation, or is or was serving or
has agreed to serve at the request of the Corporation as a Director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, and may indemnify any person who was or is a
party or is threatened to be made a party to such an action, suit or
proceeding by reason of the fact that he is or was or has agreed to become
an employee or agent of the Corporation, or is or was serving or has agreed
to serve at the request of the Corporation as an 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 or on his behalf
in connection with such action, suit or proceeding and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful; except that in the case of an action or
suit by or in the right of the Corporation to procure a judgment in its
favor (1) such indemnification shall be limited to expenses (including
attorneys' fees) actually and reasonably incurred by such person in the
defense or settlement of such action or suit, and (2) no indemnification
shall be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the Corporation unless and
only to the extent that the Delaware Court of Chancery or the court in
which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such
other court shall deem proper.
<PAGE> 157
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not apposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful."
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<C> <C> <S>
*3.1 -- Restated Certificate of Incorporation of the Company.
*3.2 -- Amended and Restated By-laws of the Company.
4.1 -- Indenture dated as of January 15, 1998 by and between the
Company, the Subsidiary Guarantors and IBJ Schroder Bank &
Trust Company, as trustee, in respect of the 11 3/8% Senior
Subordinated Notes due 2008.
4.2 -- Form of Exchange Notes.
4.3 -- Registration Agreement dated as of January 16, 1998 by and
among the Company, the Subsidiary Guarantors and Salomon
Brothers Inc, Lehman Brothers Inc. and First Chicago Capital
Markets, Inc.
*5.1 -- Opinion of Davis Polk & Wardwell as to the validity of the
Exchange Notes.
*10.1 -- Stockholders' Agreement dated as of January 3, 1997 among
the Company, MascoTech, Inc. ("MascoTech"), Citicorp Venture
Capital, Ltd. ("CVC") and certain executive officers and
directors of the Company.
*10.2 -- Registration Rights Agreement dated as of January 3, 1997
among the Company, CVC, MascoTech and certain executive
officers and directors of the Company.
*10.3 -- Credit Agreement dated as of January , 1998 among the
Company, the Subsidiary Guarantors and NBD Bank.
*10.4 -- Master Vendor Agreement dated as of August 31, 1997 between
the Company and Ford Motor Company ("Ford").
*10.5 -- Master Supply Agreement dated as of August 31, 1997 between
the Company and Ford.
*10.6 -- MascoTech Subscription Agreement dated as of January 3, 1997
between the Company and MascoTech.
*10.7 -- CVC Subscription Agreement dated as of January 3, 1997
between the Company and CVC.
*10.8 -- Management Subscription Agreement dated as of January 3,
1997 between the Company and certain executive officers of
the Company.
*10.9 -- Stock Purchase Agreement dated as of July 25, 1997 between
MSX International (Holdings), Inc. and Ford.
*10.10 -- Acquisition Agreement dated as of November 12, 1996 among
the Company, MascoTech and ASG Holdings Inc.
*10.11 -- Employment Agreement dated as of January 3, 1997 between the
Company and Ralph L. Miller.
*10.12 -- Employment Agreement dated as of January 3, 1997 between the
Company and Frederick K. Minturn.
*10.13 -- Employment Agreement dated as of August 28, 1997 between the
Company and Don Springer.
*12.1 -- Statement re: Computation of Ratio of Earnings to Fixed
Charges.
*21.1 -- Subsidiaries of the Company.
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consent of Coopers & Lybrand L.L.P.
23.3 -- Consent of Coopers & Lybrand L.L.P.
23.4 -- Consent of Ernst & Young LLP
*23.5 -- Consent of Davis Polk & Wardwell (contained in Exhibit 5.1).
*25.1 -- Statement of eligibility of Trustee on Form T-1.
*99.1 -- Letter of Transmittal.
*99.2 -- Notice of Guaranteed Delivery.
</TABLE>
II-2
<PAGE> 158
<TABLE>
<C> <C> <S>
*99.3 -- Instruction to Registered Holder and/or Book-entry transfer
of Participant.
*99.4 -- Form of Letter to Clients.
*99.5 -- Form of Letter to Registered Holders and Depository Trust
Company Participants.
</TABLE>
- -------------------------
* To be filed by amendment
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(a)(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
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective 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 that 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.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) To respond to requests for information that is incorporated by
reference into the Prospectus pursuant to Items 4, 10(b), 11 or 13 of Form S-4,
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.
(d) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
II-3
<PAGE> 159
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Auburn Hills, State of
Michigan on April 9, 1998.
MSX INTERNATIONAL, INC.
By: /s/ RALPH L. MILLER
------------------------------------
Ralph L. Miller
President; Chief Operating Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ralph L. Miller and Frederick K. Minturn, and
each of them, his or her true and lawful attorneys-in-fact and agents, with full
power of substitution and revocation, for him or her and in his or her name,
place and stead, in any and all capacities to sign any and all amendments
(including post-effective amendments to this Registration Statement 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's-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and things requisite and necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their 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 has been signed by the following persons, in the
capacities indicated on April 9, 1998.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>
/s/ ERWIN H. BILLIG Chairman of the Board of Directors
- ------------------------------------------
Erwin H. Billig
/s/ RALPH L. MILLER President; Chief Operating Officer
- ------------------------------------------
Ralph L. Miller
/s/ FREDERICK K. MINTURN Executive Vice President; Chief Financial Officer
- ------------------------------------------
Frederick K. Minturn
/s/ RICHARD A. MANOOGIAN Director
- ------------------------------------------
Richard A. Manoogian
/s/ RICHARD M. CASHIN, JR. Director
- ------------------------------------------
Richard M. Cashin, Jr.
/s/ MICHAEL A. DELANEY Director
- ------------------------------------------
Michael A. Delaney
/s/ DAVID E. COLE Director
- ------------------------------------------
David E. Cole
/s/ LEE GARDNER Director
- ------------------------------------------
Lee Gardner
</TABLE>
II-4
<PAGE> 160
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Auburn Hills, State of
Michigan on April 9, 1998.
GEOMETRIC RESULTS INCORPORATED
By: /s/ RALPH L. MILLER
------------------------------------
Ralph L. Miller
President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ralph L. Miller and Frederick K. Minturn, and
each of them, his or her true and lawful attorneys-in-fact and agents, with full
power of substitution and revocation, for him or her and in his or her name,
place and stead, in any and all capacities to sign any and all amendments
(including post-effective amendments to this Registration Statement 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's-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and things requisite and necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their 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 has been signed by the following persons, in the
capacities indicated on April 9, 1998.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>
/s/ ERWIN H. BILLIG Chief Executive Officer
- ------------------------------------------
Erwin H. Billig
/s/ RALPH L. MILLER President
- ------------------------------------------
Ralph L. Miller
/s/ FREDERICK K. MINTURN Vice President, Treasurer and Secretary
- ------------------------------------------
Frederick K. Minturn
</TABLE>
II-5
<PAGE> 161
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Auburn Hills, State of
Michigan on April 9, 1998.
MSX INTERNATIONAL BUSINESS SERVICES,
INC.
By: /s/ EDWARD MANNINO
------------------------------------
Edward Mannino
President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ralph L. Miller and Frederick K. Minturn, and
each of them, his or her true and lawful attorneys-in-fact and agents, with full
power of substitution and revocation, for him or her and in his or her name,
place and stead, in any and all capacities to sign any and all amendments
(including post-effective amendments to this Registration Statement 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's-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and things requisite and necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their 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 has been signed by the following persons, in the
capacities indicated on April 9, 1998.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>
/s/ ERWIN H. BILLIG Chief Executive Officer
- ------------------------------------------
Erwin H. Billig
/s/ RALPH L. MILLER Director
- ------------------------------------------
Ralph L. Miller
/s/ FREDERICK K. MINTURN Vice President, Treasurer and Assistant Secretary
- ------------------------------------------
Frederick K. Minturn
/s/ EDWARD MANNINO President
- ------------------------------------------
Edward Mannino
</TABLE>
II-6
<PAGE> 162
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Auburn Hills, State of
Michigan on April 9, 1998.
MSX INTERNATIONAL ENGINEERING
SERVICES, INC.
By: /s/ RALPH L. MILLER
------------------------------------
Ralph L. Miller
President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ralph L. Miller and Frederick K. Minturn, and
each of them, his or her true and lawful attorneys-in-fact and agents, with full
power of substitution and revocation, for him or her and in his or her name,
place and stead, in any and all capacities to sign any and all amendments
(including post-effective amendments to this Registration Statement 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's-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and things requisite and necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their 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 has been signed by the following persons, in the
capacities indicated on April 9, 1998.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>
/s/ ERWIN H. BILLIG Chief Executive Officer
- ------------------------------------------
Erwin H. Billig
/s/ RALPH L. MILLER President
- ------------------------------------------
Ralph L. Miller
/s/ FREDERICK K. MINTURN Vice President, Treasurer and Secretary
- ------------------------------------------
Frederick K. Minturn
</TABLE>
II-7
<PAGE> 163
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Auburn Hills, State of
Michigan on April 9, 1998.
MSX INTERNATIONAL (HOLDINGS), INC.
By: /s/ RALPH L. MILLER
------------------------------------
Ralph L. Miller
President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ralph L. Miller and Frederick K. Minturn, and
each of them, his or her true and lawful attorneys-in-fact and agents, with full
power of substitution and revocation, for him or her and in his or her name,
place and stead, in any and all capacities to sign any and all amendments
(including post-effective amendments to this Registration Statement 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's-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and things requisite and necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their 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 has been signed by the following persons, in the
capacities indicated on April 9, 1998.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>
/s/ ERWIN H. BILLIG Chief Executive Officer
- ------------------------------------------
Erwin H. Billig
/s/ RALPH L. MILLER President
- ------------------------------------------
Ralph L. Miller
/s/ FREDERICK K. MINTURN Vice President, Treasurer and Secretary
- ------------------------------------------
Frederick K. Minturn
</TABLE>
II-8
<PAGE> 164
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Auburn Hills, State of
Michigan on April 9, 1998.
MSX INTERNATIONAL (USA), INC.
By: /s/ RALPH L. MILLER
------------------------------------
Ralph L. Miller
President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ralph L. Miller and Frederick K. Minturn, and
each of them, his or her true and lawful attorneys-in-fact and agents, with full
power of substitution and revocation, for him or her and in his or her name,
place and stead, in any and all capacities to sign any and all amendments
(including post-effective amendments to this Registration Statement 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's-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and things requisite and necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their 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 has been signed by the following persons, in the
capacities indicated on April 9, 1998.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>
/s/ ERWIN H. BILLIG Chief Executive Officer
- ------------------------------------------
Erwin H. Billig
/s/ RALPH L. MILLER President
- ------------------------------------------
Ralph L. Miller
/s/ FREDERICK K. MINTURN Vice President, Treasurer and Secretary
- ------------------------------------------
Frederick K. Minturn
</TABLE>
II-9
<PAGE> 165
EXHIBIT INDEX
<TABLE>
<C> <S>
*3.1 -- Restated Certificate of Incorporation of the Company
*3.2 -- Amended and Restated By-laws of the Company.
4.1 -- Indenture dated as of January 15, 1998 by and between the
Company, the Subsidiary Guarantors and IBJ Schroder Bank &
Trust Company, as trustee, in respect of the 11 3/8% Senior
Subordinated Notes due 2008.
4.2 -- Form of Exchange Notes.
4.3 -- Registration Agreement dated as of January 16, 1998 by and
among the Company, the Subsidiary Guarantors and Salomon
Brothers Inc, Lehman Brothers Inc. and First Chicago Capital
Markets, Inc.
*5.1 -- Opinion of Davis Polk & Wardwell as to the validity of the
Exchange Notes.
*10.1 -- Stockholders' Agreement dated as of January 3, 1997 among
the Company, MascoTech, Inc. ("MascoTech"), Citicorp Venture
Capital, Ltd. ("CVC") and certain executive officers and
directors of the Company.
*10.2 -- Registration Rights Agreement dated as of January 3, 1997
among the Company, CVC, MascoTech and certain executive
officers and directors of the Company.
*10.3 -- Credit Agreement dated as of January , 1998 among the
Company, the Subsidiary Guarantors and NBD Bank.
*10.4 -- Master Vendor Agreement dated as of August 31, 1997 between
the Company and Ford Motor Company ("Ford").
*10.5 -- Master Supply Agreement dated as of August 31, 1997 between
the Company and Ford.
*10.6 -- MascoTech Subscription Agreement dated as of January 3, 1997
between the Company and MascoTech.
*10.7 -- CVC Subscription Agreement dated as of January 3, 1997
between the Company and CVC.
*10.8 -- Management Subscription Agreement dated as of January 3,
1997 between the Company and certain executive officers of
the Company.
*10.9 -- Stock Purchase Agreement dated as of July 25, 1997 between
MSX International (Holdings), Inc. and Ford.
*10.10 -- Acquisition Agreement dated as of November 12, 1996 among
the Company, MascoTech and ASG Holdings Inc.
*10.11 -- Employment Agreement dated as of January 3, 1997 between the
Company and Ralph L. Miller.
*10.12 -- Employment Agreement dated as of January 3, 1997 between the
Company and Frederick K. Minturn.
*10.13 -- Employment Agreement dated as of August 28, 1997 between the
Company and Don Springer.
*12.1 -- Statement re: Computation of Ratio of Earnings to Fixed
Charges.
*21.1 -- Subsidiaries of the Company.
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consent of Coopers & Lybrand L.L.P.
23.3 -- Consent of Coopers & Lybrand L.L.P.
23.4 -- Consent of Ernst & Young LLP
*23.5 -- Consent of Davis Polk & Wardwell (contained in Exhibit 5.1).
*25.1 -- Statement of eligibility of Trustee on Form T-1.
*99.1 -- Letter of Transmittal.
*99.2 -- Notice of Guaranteed Delivery.
*99.3 -- Instruction to Registered Holder and/or Book-entry transfer
of Participant.
*99.4 -- Form of Letter to Clients.
*99.5 -- Form of Letter to Registered Holders and Depository Trust
Company Participants.
</TABLE>
- -------------------------
* To be filed by amendment
II-10
<PAGE> 1
EXHIBIT 4.1
==============================================================
MSX INTERNATIONAL, INC.,
as Company,
THE SUBSIDIARY GUARANTORS named herein
and
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
11 3/8% Senior Subordinated Notes Due 2008
____________________
INDENTURE
Dated as of January 15, 1998
____________________
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CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Section Indenture Section
- ----------- -----------------
<S> <C>
310(a)(1) 7.9; 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 7.10
(b)... 7.8; 7.10
(c)... N.A.
311(a) 7.11
(b)... 7.11
312(a) 2.5
(b)... 13.3
(c)... 13.3
313(a) 7.6
(b)(1) 7.6
(b)(2) N.A.
(c)... 13.2
(d)... 7.6
314(a) 4.2; 4.10; 4.13; 13.2
(b)... 7.6
(c)(1) 13.4
(c)(2) 13.4
(c)(3) N.A.
(d)... N.A.
(e)... 13.5
(f)... 4.10
315(a) 7.1
(b)... 7.5; 13.2
(c)... 7.1
(d)... 7.1
(e)... 6.11
316(a)(last sentence) 13.6
(a)(1)(A) 6.5
(a)(1)(B) 6.4
(a)(2) N.A.
(b) 6.7
317(a)(1) 6.8
(a)(2) 6.9
(b) 2.4
318(a) 13.1
</TABLE>
N.A. means Not Applicable.
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE> 3
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TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C>
SECTION 1.1. Definitions 1
SECTION 1.2. Other Definitions 25
SECTION 1.3. Incorporation by Reference of Trust
Indenture Act 26
SECTION 1.4. Rules of Construction 26
ARTICLE 2
THE SECURITIES
SECTION 2.1. Form and Dating 27
SECTION 2.2. Execution and Authentication 28
SECTION 2.3. Registrar and Paying Agent 29
SECTION 2.4. Paying Agent To Hold Money in Trust 30
SECTION 2.5. Securityholder Lists 30
SECTION 2.6. Transfer and Exchange 31
SECTION 2.7. Replacement Securities 34
SECTION 2.8. Outstanding Securities 35
SECTION 2.9. Temporary Securities 35
SECTION 2.10 Cancellation 35
SECTION 2.11. Defaulted Interest 36
SECTION 2.12. CUSIP Numbers 36
SECTION 2.13. Restrictive Legends 36
SECTION 2.14. Special Transfer Provisions 38
ARTICLE 3
REDEMPTION
SECTION 3.1. Optional Redemption 41
SECTION 3.2. Notices to Trustee 42
SECTION 3.3. Selection of Securities To Be Redeemed 42
SECTION 3.4. Notice of Redemption 43
SECTION 3.5. Effect of Notice of Redemption 44
SECTION 3.6. Deposit of Redemption Price 44
SECTION 3.7. Securities Redeemed in Part 44
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ARTICLE 4
COVENANTS
<S> <C> <C>
SECTION 4.1. Payment of Securities 45
SECTION 4.2. SEC Reports 45
SECTION 4.3. Limitation on Incurrence of Indebtedness 46
SECTION 4.4. Limitation on Layered Debt 48
SECTION 4.5. Limitation on Restricted Payments 48
SECTION 4.6. Limitation on Restrictions on Distributions from Restricted
Subsidiaries 51
SECTION 4.7. Limitation on Sales of Assets and Subsidiary
Stock 52
SECTION 4.8. Limitation on Affiliate Transactions 56
SECTION 4.9. Limitation on Issuance or Sale of Capital Stock of Restricted
Subsidiaries 58
SECTION 4.10. Limitation on Liens 58
SECTION 4.11. Designation of Restricted and Unrestricted
Subsidiaries 59
SECTION 4.12. Change of Control 60
SECTION 4.13. Compliance Certificate 62
SECTION 4.14. Further Instruments and Acts 62
SECTION 4.15. Payment of Taxes and Other Claims 62
SECTION 4.16. Future Guarantors 63
SECTION 4.17. Maintenance of Office or Agency 63
SECTION 4.18. Corporate Existence 64
ARTICLE 5
SUCCESSOR COMPANY
SECTION 5.1. Merger, Consolidation and Sale of Assets 64
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1. Events of Default 66
SECTION 6.2. Acceleration 68
SECTION 6.3. Other Remedies 69
SECTION 6.4. Waiver of Past Defaults 69
SECTION 6.5. Control by Majority 69
SECTION 6.6. Limitation on Suits 70
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SECTION 6.7. Rights of Holders to Receive Payment 70
SECTION 6.8. Collection Suit by Trustee 70
SECTION 6.9. Trustee May File Proofs of Claim 71
SECTION 6.10. Priorities 71
SECTION 6.11. Undertaking for Costs 72
SECTION 6.12. Waiver of Stay or Extension Laws 72
ARTICLE 7
TRUSTEE
SECTION 7.1. Duties of Trustee 72
SECTION 7.2. Rights of Trustee 74
SECTION 7.3. Individual Rights of Trustee 75
SECTION 7.4. Trustee's Disclaimer 75
SECTION 7.5. Notice of Defaults 75
SECTION 7.6. Reports by Trustee to Holders 76
SECTION 7.7. Compensation and Indemnity 76
SECTION 7.8. Replacement of Trustee 77
SECTION 7.9. Successor Trustee by Merger 78
SECTION 7.10. Eligibility; Disqualification 79
SECTION 7.11. Preferential Collection of Claims Against Company 79
ARTICLE 8
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1. Discharge of Liability on Securities; 79
Defeasance
SECTION 8.2. Conditions to Defeasance 81
SECTION 8.3. Application of Trust Money 82
SECTION 8.4. Repayment to Company 83
SECTION 8.5. Indemnity for Government Obligations 83
SECTION 8.6. Reinstatement 83
ARTICLE 9
AMENDMENTS
SECTION 9.1. Without Consent of Holders 84
SECTION 9.2. With Consent of Holders 85
SECTION 9.3. Compliance with Trust Indenture Act 86
SECTION 9.4. Revocation and Effect of Consents
and Waivers 86
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SECTION 9.5. Notation on or Exchange of Securities 86
SECTION 9.6. Trustee to Sign Amendments 87
ARTICLE 10
SUBORDINATION OF THE SECURITIES
SECTION 10.1. Agreement To Subordinate 87
SECTION 10.2. Liquidation; Dissolution; Bankruptcy 88
SECTION 10.3. Default on Senior Indebtedness 90
SECTION 10.4. Payment of Subordinated Debt Permitted if No
Default 91
SECTION 10.5. Notices by the Company 92
SECTION 10.6. Subrogation 92
SECTION 10.7. Relative Rights 92
SECTION 10.8. Subordination May Not Be Impaired by the
Company 93
SECTION 10.9. Distribution of Notice to Representative 93
SECTION 10.10. Rights of Trustee and Paying Agent 93
SECTION 10.11. Consent of Holders of Specified Senior
Indebtedness 94
SECTION 10.12. Contractual Subordination 94
ARTICLE 11
SUBSIDIARY GUARANTEES
SECTION 11.1. Guarantees 95
SECTION 11.2. Limitation on Liability 97
SECTION 11.3. Successors and Assigns 98
SECTION 11.4. No Waiver 98
SECTION 11.5. Modification 98
SECTION 11.6. Release of Subsidiary Guarantor 98
SECTION 11.7. Execution of Supplemental Indenture
for Future Subsidiary Guarantors 99
ARTICLE 12
SUBORDINATION OF SUBSIDIARY GUARANTEES
SECTION 12.1. Agreement To Subordinate 99
SECTION 12.2. Liquidation; Dissolution; Bankruptcy 100
SECTION 12.3. Default on Subsidiary Guarantor Senior
Indebtedness 102
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SECTION 12.4. Payments of Subordinated Debt
Permitted if No Default 103
SECTION 12.5. Notices by a Subsidiary Guarantor 104
SECTION 12.6. Subrogation 104
SECTION 12.7. Relative Rights 104
SECTION 12.8. Subordination May Not Be Impaired
by the Subsidiary Guarantor 105
SECTION 12.9. Distribution or Notice to
Representative 105
SECTION 12.10. Rights of Trustee and Paying Agent 105
SECTION 12.11. Consent of Holders of Senior
Indebtedness 106
SECTION 12.12. Contractual Subordination 106
ARTICLE 13
MISCELLANEOUS
SECTION 13.1. Trust Indenture Act Controls 107
SECTION 13.2. Notices 107
SECTION 13.3. Communication by Holders with Other
Holders 108
SECTION 13.4. Certificate and Opinion as to
Conditions Precedent 108
SECTION 13.5. Statements Required in Certificate
or Opinion 108
SECTION 13.6. When Securities Disregarded 109
SECTION 13.7. Rules by Trustee, Paying Agent and
Registrar 109
SECTION 13.8. Legal Holidays 109
SECTION 13.9. Governing Law 110
SECTION 13.10. No Recourse Against Others 110
SECTION 13.11. Successors 110
SECTION 13.12. Multiple Originals 110
SECTION 13.13. Table of Contents; Headings 110
SECTION 13.14. Severability Clause 111
Signatures 100
Exhibit A - Form of Security A-1
Exhibit B - Form of Exchange Security B-1
Exhibit C - Form of Certificate To Be Delivered in
Connection with Transfers to Non-QIB
Accredited Investors C-1
Exhibit D - Form of Certificate To Be Delivered in
Connection with Transfers Pursuant
to Regulation S D-1
Exhibit E - Form of Guarantee E-1
</TABLE>
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Page
Note: This Table of Contents shall not, for any purpose, be deemed to be
part of the Indenture.
-vi-
<PAGE> 9
INDENTURE dated as of January 15, 1998, between MSX INTERNATIONAL, INC., a
Delaware corporation (the "Company"), certain of the Company's subsidiaries
signatory hereto (each, a "Subsidiary Guarantor" and, collectively, the
"Subsidiary Guarantors") and IBJ SCHRODER BANK & TRUST COMPANY, a national
banking corporation, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other parties and for
the equal and ratable benefit of the Holders of the Company's 11 3/8% Senior
Subordinated Notes Due 2008 (the "Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business, including improvements
to existing assets, used by the Company or a Restricted Subsidiary in a Related
Business; (ii) the Capital Stock of a Person that becomes a Restricted
Subsidiary as a result of the acquisition of such Capital Stock by the Company
or another Restricted Subsidiary; provided, however, that any such Restricted
Subsidiary is primarily engaged in a Related Business; (iii) Capital Stock
constituting an additional equity interest in any Person that at such time is a
Restricted Subsidiary that is not a Wholly-Owned Subsidiary; or (iv) the costs
of improving or developing any property owned by the Company or a Restricted
Subsidiary that is used in a Related Business.
"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 the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under Sections 4.5, 4.7 and 4.8 only,
"Affiliate" shall also mean any beneficial owner of Capital Stock representing
10% or more of the total voting power of the Voting Stock (on a fully diluted
basis) of the Company or of rights or warrants to purchase such Capital Stock
(whether or not currently exercisable) and any Person who would be an Af-
<PAGE> 10
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filiate of any such beneficial owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer, Sale/Leaseback
Transaction or other disposition (or series of related sales, leases, transfers
or dispositions) by the Company or any Restricted Subsidiary, including any
disposition by means of a merger, consolidation or similar transaction (each
referred to for the purposes of this definition as a "disposition"), of (i) any
shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares and shares owned by foreign shareholders to the extent
required by applicable local laws in foreign countries), (ii) all or
substantially all the assets of any division, business segment or comparable
line of business of the Company or any Restricted Subsidiary or (iii) any other
assets of the Company or any Restricted Subsidiary outside of the ordinary
course of business of the Company or such Restricted Subsidiary.
Notwithstanding the foregoing, the term "Asset Disposition" shall not include
(x) a disposition by a Restricted Subsidiary to the Company or by the Company
or a Restricted Subsidiary to a Subsidiary Guarantor, (y) for purposes of
Section 4.7, a disposition that constitutes a Permitted Investment or a
Restricted Payment permitted by Section 4.5, and (z) a disposition of assets
having a fair market value of less than $1 million.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as
at the time of determination, the present value (discounted at the interest
rate borne by the Securities, compounded annually) of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such Sale/Leaseback Transaction (including any period for which such lease
has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the product of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied
by the amount of such payment by (ii) the sum of all such payments.
"Bank Credit Agreements" means the Senior Credit Facility and any other
bank credit agreement or similar facility now existing or entered into in the
future by the Company or any Restricted Subsidiary, as any of the same may be
amended, waived, modified, Refinanced or replaced from time to time
<PAGE> 11
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(except to the extent that any such amendment, waiver, modification,
replacement or Refinancing would be prohibited by the terms of this Indenture).
"Bank Indebtedness" means any and all present and future amounts payable
under or in respect of the Bank Credit Agreements, including principal, premium
(if any), interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization, whether or not a claim for
post-filing interest is allowed in such proceedings), fees, charges, expenses,
reimbursement obligations, guarantees and all other amounts and other
indebtedness and other Obligations and liabilities payable thereunder or in
respect thereof.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board of Directors.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined
in accordance with GAAP; and the Stated Maturity thereof shall be the date of
the last payment of rent or any other amount due under such lease prior to the
first date upon which such lease may be terminated by the lessee without
payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such
equity.
"Change of Control" means the occurrence of any of the following events:
(i) prior to the first public offering of Voting Stock of the
Company, the Permitted Investors cease to be entitled (by
"beneficial ownership" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act) of Voting Stock, contract or otherwise) to
elect or cause the election of directors having a majority in the
aggregate of the total voting power of the Board of Directors,
whether as a re-
<PAGE> 12
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sult of issuance of securities of the Company, any merger, consolidation,
liquidation or dissolution of the Company, any direct or indirect
transfer of securities by the Permitted Investors or otherwise (for
purposes of this clause (i) and clause (ii) below, the Permitted
Investors shall be deemed to beneficially own any Voting Stock of any
entity (the "specified entity") held by any other entity (the "parent
entity") so long as the Permitted Investors beneficially own (as so
defined), directly or indirectly, in the aggregate a majority of the
voting power of the Voting Stock of such parent entity);
(ii) after the first public offering of Voting Stock of the Company,
any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined in clause (i) above, except that for
purposes of this clause (ii) such person shall be deemed to have
"beneficial ownership" of all shares that any such person has the right
to acquire, directly or indirectly) of more than 35% of the total voting
power of the Voting Stock of the Company and either (x) the Permitted
Holders beneficially own (as defined in clause (i) above), directly or
indirectly, in the aggregate a lesser percentage of the total voting
power of the Voting Stock of the Company than such other person and do
not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the Board of Directors or
(y) such other person is entitled to elect directors having a majority of
the total voting power of the Board of Directors; or
(iii) after the first public offering of Voting Stock of the
Company, during any period of not greater than two consecutive years
beginning after the Issue Date, individuals who at the beginning of such
period constituted the Board of Directors (together with any new
directors whose election by such Board of Directors or whose nomination
for election by the shareholders of the Company was approved by a vote of
a majority of the directors of the Company then still in office who were
either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason
to constitute a majority of the Board of Directors then in office.
"Code" means the Internal Revenue Code of 1986, as amended.
<PAGE> 13
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"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days (or, if less, the
number of days after the end of such fiscal quarter as the consolidated
financial statements of the Company shall be available) prior to the date of
such determination to (ii) Consolidated Interest Expense for such four fiscal
quarters; provided, however, that (1) if the Company or any Restricted
Subsidiary has Incurred any Indebtedness since the beginning of such period
that remains outstanding on such date of determination or if the transaction
giving rise to the need to calculate the Consolidated Coverage Ratio is an
Incurrence of Indebtedness, or both, EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving effect on a pro forma basis to
such Indebtedness as if such Indebtedness had been Incurred on the first day of
such period and the discharge of any other Indebtedness repaid, repurchased,
defeased or otherwise discharged with the proceeds of such new Indebtedness as
if such discharge had occurred on the first day of such period (except that, in
the case of Indebtedness used to finance working capital needs incurred under a
revolving credit or similar arrangement, the amount thereof shall be deemed to
be the average daily balance of such Indebtedness during such
four-fiscal-quarter period), (2) if since the beginning of such period the
Company or any Restricted Subsidiary shall have made any Asset Disposition, the
EBITDA for such period shall be reduced by an amount equal to the EBITDA (if
positive) directly attributable to the assets which are the subject of such
Asset Disposition for such period, or increased by an amount equal to the
EBITDA (if negative) directly attributable thereto for such period, and
Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased,
defeased, assumed by a third person (to the extent the Company and its
Restricted Subsidiaries are no longer liable for such Indebtedness) or
otherwise discharged with respect to the Company and its continuing Restricted
Subsidiaries in connection with such Asset Disposition for such period (or, if
the Capital Stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the Indebtedness of
such Restricted Subsidiary to the extent the Company and its continuing
Restricted Subsidiaries are no longer liable for such Indebtedness after such
sale), (3) if since the beginning of such period the Company shall have
consummated a Public Equity Offering following which there is a Public Market,
Consolidated Interest Expense for such period shall be reduced by
<PAGE> 14
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an amount equal to the Consolidated Interest Expense directly attributable
to any Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the Company and
its Restricted Subsidiaries in connection with such Public Equity Offering for
such period, (4) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an Investment in
any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary)
or an acquisition of assets, which acquisition constitutes all or substantially
all of an operating unit of a business, including any such Investment or
acquisition occurring in connection with a transaction requiring a calculation
to be made hereunder, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto (including the
Incurrence of any Indebtedness) as if such Investment or acquisition occurred
on the first day of such period and (5) if since the beginning of such period
any Person (that subsequently became a Restricted Subsidiary or was merged with
or into the Company or any Restricted Subsidiary since the beginning of such
period) shall have made any Asset Disposition, any Investment or acquisition of
assets that would have required an adjustment pursuant to clause (3) or (4)
above if made by the Company or a Restricted Subsidiary during such period,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto as if such Asset Disposition, Investment
or acquisition occurred on the first day of such period. For purposes of this
definition, whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness Incurred in
connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting Officer of the Company in
accordance with Article 11 of Regulation S-X. If any Indebtedness bears a
floating rate of interest and is being given pro forma effect, the interest on
such Indebtedness shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period (taking into
account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
incurred by the Company or its Restricted Subsidiaries, (i) in-
<PAGE> 15
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terest expense attributable to Capital Lease Obligations, (ii) amortization of
debt discount, (iii) capitalized interest, (iv) non-cash interest expenses, (v)
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, (vi) net costs associated with
Hedging Obligations (including amortization of fees), and (vii) interest
actually paid on any Indebtedness of any other Person that is Guaranteed by the
Company or any Restricted Subsidiary.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated Subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income: (i) any net income (or loss)
of any Person if such Person is not a Restricted Subsidiary, except that
subject to the exclusion contained in clause (iv) below, the Company's equity
in the net income of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually distributed
by such Person during such period to the Company or a Restricted Subsidiary as
a dividend or other distribution (subject, in the case of a dividend or other
distribution paid to a Restricted Subsidiary, to the limitations contained in
clause (iii) below); (ii) for purposes of subclause (a)(3)(A) of Section 4.5
only, any net income (or loss) of any Person acquired by the Company or a
Subsidiary in a pooling of interests transaction for any period prior to the
date of such acquisition; (iii) any net income of any Restricted Subsidiary if
such Restricted Subsidiary is subject to restrictions, directly or indirectly,
on the payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (A) subject to
the exclusion contained in clause (iv) below, the Company's equity in the net
income of any such Restricted Subsidiary for such period shall be included in
such Consolidated Net Income up to the aggregate amount of cash that could have
been distributed by such Restricted Subsidiary consistent with such restriction
during such period to the Company or another Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution paid to another Restricted Subsidiary, to the limitation contained
in this clause) and (B) the Company's equity in a net loss of any such
Restricted Subsidiary for such period shall be included in determining such
Consolidated Net Income; (iv) any gain (or loss) realized upon the sale or
other disposition of any assets of the Company or its consolidated Subsidiaries
(including pursuant to any sale-and-leaseback arrangement) which is not sold or
otherwise disposed of in the ordinary course of business and any gain (or loss)
realized upon the
<PAGE> 16
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sale or other disposition of any Capital Stock of any Person; (v) extraordinary
gains or losses; and (vi) the cumulative effect of a change in accounting
principles. Notwithstanding the foregoing, for the purposes of Section 4.5
only, there shall be excluded from Consolidated Net Income any dividends,
repayments of loans or advances or other transfers of assets from Unrestricted
Subsidiaries to the Company or a Restricted Subsidiary to the extent such
dividends, repayments or transfers increase the amount of Restricted Payments
permitted under such Section pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending at least 45 days prior to the taking of
any action for the purpose of which the determination is being made, as (i) the
par or stated value of all outstanding Capital Stock of the Company plus (ii)
paid-in capital or capital surplus relating to such Capital Stock plus (iii)
any retained earnings or earned surplus less (A) any accumulated deficit and
(B) any amounts attributable to Disqualified Stock.
"Currency Agreement" means, with respect to any Person, any foreign
exchange contract, currency swap agreement or other similar agreement to which
such Person is a party or a beneficiary.
"CVC" means Citicorp Venture Capital, Ltd., a New York corporation.
"CVC Investor" means (i) CVC or any direct or indirect Wholly-Owned
Subsidiary of CVC, (ii) Citicorp, N.A. and (iii) any officer, employee or
director of CVC so long as such person shall be an employee, officer or
director of CVC or any direct or indirect Wholly-Owned Subsidiary of CVC.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Depository" means The Depository Trust Company, its nominees and their
respective successors.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii)
any other Senior Indebtedness of the Company which, at the date of
determination, has an aggregate principal amount outstanding of, or under
which, at the date of determination, the holders thereof are committed to lend
up to,
<PAGE> 17
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at least $10 million and is specifically designated by the Company in the
instrument evidencing or governing such Senior Indebtedness as "Designated
Senior Indebtedness" for purposes of this Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which 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
(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or exchangeable, at the option of the holder
thereof, for Indebtedness or Disqualified Stock or (iii) is redeemable at the
option of the holder thereof, in whole or in part, in each case on or prior to
the eleven month anniversary of the Stated Maturity of the Securities.
Disqualified Stock shall not include any Capital Stock that is not otherwise
Disqualified Stock if by its terms the holders have the right to require the
issuer to repurchase such stock (or such stock is mandatorily redeemable) upon
a Change of Control (or upon an event substantially similar to a Change of
Control).
"Domestic Restricted Subsidiary" means any Restricted Subsidiary of the
Company other than a Foreign Restricted Subsidiary.
"EBITDA" for any period means the sum of Consolidated Net Income plus,
without duplication, the following to the extent deducted in calculating such
Consolidated Net Income: (i) Consolidated Interest Expense, (ii) income tax
expense (including Michigan Single Business Tax expense), (iii) depreciation
expense, (iv) amortization expense and (v) all other non-cash items reducing
Consolidated Net Income (other than items that will require cash payments and
for which an accrual or reserve is, or is required by GAAP to be, made, other
than accruals for post-retirement benefits other than pensions), less all
non-cash items increasing Consolidated Net Income, in each case for such
period. Notwithstanding the foregoing, the provision for taxes based on the
income or profits of, and the depreciation and amortization of, a Subsidiary of
the Company shall be added to Consolidated Net Income to compute EBITDA only to
the extent (and in the same proportion) that the net income of such Subsidiary
was included in calculating Consolidated Net Income.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
<PAGE> 18
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"Existing Affiliate Agreements" means the Stockholders' Agreement, the
MSXI Registration Rights Agreement and any other existing agreement with
MascoTech or any of its Affiliates described on Schedule I hereof.
"Exchange Securities" means the 11 3/8% Senior Subordinated Notes due 2008
to be issued in exchange for the Initial Securities pursuant to the
Registration Agreement.
"Foreign Restricted Subsidiary" means any Restricted Subsidiary of the
Company which is not organized under the laws of the United States of America
or any State thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles in the United States
of America as then in effect, including those set forth in (i) the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants, (ii) statements and pronouncements of the
Financial Accounting Standards Board and (iii) such other statements by such
other entity as approved by a significant segment of the accounting profession.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
Person and any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such Person (whether
arising by virtue of partnership arrangements, or by agreements to keep-well,
to purchase assets, goods, securities or services, to take-or-pay or to
maintain financial statement conditions or otherwise) or (ii) entered into for
the purpose of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include (x) endorsements for collection or deposit in the
ordinary course of business or (y) guarantees among Restricted Subsidiaries or
guarantees by the Company of Restricted Subsidiaries; provided that the
Indebtedness being guaranteed is permitted to be Incurred. The term
"Guarantee" used as a verb has a corresponding meaning. The term "Guarantor"
shall mean any Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
<PAGE> 19
-11-
"Holder" or "Securityholder" means the Person in whose name a Security is
registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness of a Person existing at the time
such Person becomes a Subsidiary (whether by merger, consolidation, acquisition
or otherwise) shall be deemed to be Incurred by such Subsidiary at the time it
becomes a Subsidiary; provided, further, however, that in the case of a
discount security, neither the accrual of interest nor the accretion of
original issue discount shall be considered an Incurrence of Indebtedness, but
the entire face amount of such security shall be deemed Incurred upon the
issuance of such security. The term "Incurrence" when used as a noun shall
have a correlative meaning.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable; (ii) all Capital
Lease Obligations of such Person and all Attributable Debt in respect of
Sale/Leaseback Transactions entered into by such Person; (iii) all obligations
of such Person issued or assumed as the deferred purchase price of property,
all conditional sale obligations of such Person, all obligations of such Person
under any title retention agreement, and any obligation to pay rent or other
payment amounts of such Person with respect to any Sale/Leaseback Transaction
(but excluding trade accounts payable arising in the ordinary course of
business), which purchase price or obligation is due more than six months after
the date of placing such property in service or taking delivery and title
thereto or the completion of such services (provided that, in the case of
obligations of an acquired Person assumed in connection with an acquisition of
such Person, such obligations would constitute Indebtedness of such Person);
(iv) all obligations of such Person for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in (i) through (iii) above) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the tenth Business Day following receipt by such Person of a demand
for reimbursement following payment on the letter of credit); (v) the amount of
all obligations of such Person with
<PAGE> 20
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respect to the redemption, repayment or other repurchase of any Disqualified
Stock or, with respect to any Subsidiary of such Person, any Preferred Stock
(but excluding, in each case, any accrued dividends); (vi) all obligations of
the type referred to in clauses (i) through (v) of other Persons and all
dividends of other Persons for the payment of which, in either case, such
Person is responsible or liable, directly or indirectly, as obligor, guarantor
or otherwise, including by means of any Guarantee; (vii) all obligations of the
type referred to in clauses (i) through (vi) of other Persons secured by any
Lien on any property or asset of such Person (whether or not such obligation is
assumed by such Person), the amount of such obligation being deemed to be the
lesser of the value of such property or assets or the amount of the obligation
so secured; and (viii) to the extent not otherwise included in this definition,
Hedging Obligations of such Person. The amount of Indebtedness of any Person
at any date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence
of the contingency giving rise to the obligation, of any contingent obligations
as described above at such date; provided, however, that the amount outstanding
at any time of any Indebtedness issued with original issue discount shall be
deemed to be the face amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP.
"Indenture" means this Indenture as amended or supplemented from time to
time by one or more supplemental indentures entered into pursuant to the
applicable provisions hereof or otherwise in accordance with the terms hereof.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act.
"Initial Purchasers" means, collectively, Salomon Brothers Inc, Lehman
Brothers Inc. and First Chicago Capital Markets, Inc.
"Initial Securities" means the 11 3/8% Senior Subordinated Notes due 2008
of the Company issued on the Issue Date for so long as such securities
constitute Restricted Securities.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement or other financial
<PAGE> 21
-13-
agreement or arrangement designed to protect the Company or any Restricted
Subsidiary against fluctuations in interest rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such Person) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary," the definition of "Restricted Payment" and Section
4.5 hereof, (i) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of any Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (x) the Company's
"Investment" in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"Issue Date" means the date on which the Securities are originally issued.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Management Investors" means each of the officers, employees and directors
of the Company who own Voting Stock of the Company on the Issue Date, in each
case so long as such
<PAGE> 22
-14-
person shall remain an officer, employee or director of the Company.
"MascoTech" means MascoTech, Inc., a Delaware corporation, and its
successors.
"Moody's" means Moody's Investors Service, Inc.
"Net Available Cash" from an Asset Disposition means cash payments
received by the Company or any of its Subsidiaries therefrom (including any
cash payments received by way of deferred payment of principal pursuant to a
note or installment receivable or otherwise, but only as and when received, but
excluding any other consideration received in the form of assumption by the
acquiring Person of Indebtedness or other obligations relating to such
properties or assets or received in any other noncash form) in each case net of
(i) all legal, title and recording tax expenses, commissions and other fees and
expenses incurred, and all Federal, state, provincial, foreign and local taxes
required to be paid or accrued as a liability under GAAP, as a consequence of
such Asset Disposition, (ii) all payments made on any Indebtedness which is
secured by any assets subject to such Asset Disposition, in accordance with the
terms of any Lien upon or other security agreement of any kind with respect to
such assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Disposition, or by applicable law, be repaid out of the
proceeds from such Asset Disposition, (iii) all distributions and other
payments required to be made to minority interest holders in Subsidiaries or
joint ventures as a result of such Asset Disposition and (iv) the deduction of
appropriate amounts provided by the seller as a reserve, in accordance with
GAAP, against any liabilities associated with the property or other assets
disposed in such Asset Disposition and retained by the Company or any
Restricted Subsidiary after such Asset Disposition including without limitation
liabilities under any indemnification obligations associated with such Asset
Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Non-U.S. Person" means a person who is not a U.S. Person, as defined in
Regulation S.
<PAGE> 23
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"Obligations" means all present and future obligations for principal,
premium, interest (including, without limitation, any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for
in the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law), penalties, fees, indemnifications,
reimbursements (including, without limitation, all reimbursement and other
obligations pursuant to any letters of credit, bankers acceptances or similar
instruments or documents), damages and other liabilities payable under the
documentation at any time governing any indebtedness.
"Officer" means the Chief Executive Officer, the President, the Chief
Financial Officer or any Vice President of the Company.
"Officers' Certificate" means a certificate signed by two Officers of the
Company, at least one of whom shall be the principal financial officer of the
Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee; such counsel may be an employee of or
counsel to the Company or the Trustee. Each such opinion shall include, if
applicable, the statements provided for in Section 314(c) of the TIA.
"Other Qualified Securities" means any outstanding Senior Subordinated
Indebtedness of the Company issued pursuant to an indenture having a provision
substantially similar to the provision relating to Asset Dispositions contained
in Section 4.7 hereof.
"Permitted Holders" means the CVC Investors, MascoTech, the Management
Investors and their respective Permitted Transferees; provided, however, that
any Management Investor and any CVC Investor and any Permitted Transferee of a
Management Investor or CVC Investor (other than CVC or Citicorp, N.A. or any
direct or indirect Subsidiary of CVC or Citicorp, N.A. or any other Person
controlled by CVC or Citicorp, N.A.) shall not be a "Permitted Holder" if such
Person is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of Voting Stock that represents at least
30% of the aggregate voting power of all classes of the Voting Stock of the
Company, voting together as a single class (without giving effect to the
attribution of beneficial ownership as a result of any stockholders' agreement
as in effect on the Issue Date, and any amendment to such agreement
<PAGE> 24
-16-
that does not materially change the allocation of voting power provided in such
agreement).
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in (i) the Company; (ii) a Restricted Subsidiary or a
Person that will, upon the making of such Investment, become a Restricted
Subsidiary; provided, however, that the primary business of such Restricted
Subsidiary is a Related Business; (iii) another Person if as a result of such
Investment such other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all its assets to, the Company or a
Restricted Subsidiary; provided, however, that such Person's primary business
is a Related Business; (iv) Temporary Cash Investments; (v) receivables owing
to the Company or any Restricted Subsidiary if created or acquired in the
ordinary course of business and payable or dischargeable in accordance with
customary trade terms; provided, however, that such trade terms may include
such concessionary trade terms as the Company or any such Restricted Subsidiary
deems reasonable under the circumstances; (vi) payroll, travel and similar
advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and that are made
in the ordinary course of business; (vii) loans or advances to employees of the
Company or a Restricted Subsidiary in an aggregate amount not to exceed $1.5
million; (viii) stock, obligations or securities received in settlement of
debts created in the ordinary course of business and owing to the Company or
any Restricted Subsidiary or in satisfaction of judgments; (ix) Persons other
than Restricted Subsidiaries that are primarily engaged in a Related Business
or property or assets to be used primarily in a Related Business, in an
aggregate amount not to exceed $20.0 million (to the extent utilized for an
Investment, such amount will be reinstated to the extent that the Company or
any Restricted Subsidiary receives dividends, repayments of loans or other
transfers of assets as a return of such Investment); provided, however, that at
the time of any Investment pursuant to this clause (ix), the Company and its
Restricted Subsidiaries would be able to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of Section 4.3 hereof; and (x) any
Person to the extent such Investment represents the non-cash portion of the
consideration received for an Asset Disposition as permitted under Section 4.7
hereof.
"Permitted Investors" means (i) MascoTech and its Permitted Transferees,
(ii) the CVC Investors and (iii) the Management Investors and their Permitted
Transferees; provided that the Management Investors and their Permitted
Transferees
<PAGE> 25
-17-
do not in the aggregate beneficially own more than 30% of the aggregate voting
power of the Voting Stock of the Company (without giving effect to any
attribution of beneficial ownership which may result from the Stockholders'
Agreement, and any amendment to such agreement that does not materially change
the allocation of voting power provided for in such agreement).
"Permitted Lien" means (a) Liens on property of a Person existing at the
time such Person is merged into or consolidated with the Company or any
Restricted Subsidiary; provided that such Liens were not created in
anticipation of such Person being so merged or consolidated; and (b) Liens to
secure any Refinancing Indebtedness; provided such Liens cover only such
property which are the subject of a lien securing the Indebtedness being
Refinanced.
"Permitted Transferee" means (a) with respect to any CVC Investor who is
an employee, officer or director of CVC or any Wholly-Owned Subsidiary of CVC,
any spouse or lineal descendant (including by adoption) of such CVC Investor so
long as such CVC Investor shall be an employee, officer or director of CVC; (b)
with respect to MascoTech, any direct or indirect Subsidiary or any other
Person controlled by MascoTech; and (c) with respect to any Management
Investor, any spouse or lineal descendant (including by adoption) of such
Management Investor so long as such Management Investor shall be an employee,
officer or director of the Company.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Security which is due or overdue or is to
become due at the relevant time.
<PAGE> 26
-18-
"Private Placement Legend" means the legend initially set forth on the
securities in the form set forth in Section 2.13.
"Public Equity Offering" means an underwritten primary public offering of
common stock of the Company pursuant to an effective registration statement
under the Securities Act.
"Public Market" means any time after (i) a Public Equity Offering has been
consummated and (ii) at least 10% of the total issued and outstanding common
stock of the Company has been distributed by means of an effective registration
statement under the Securities Act or sales pursuant to Rule 144 under the
Securities Act.
"Purchase Money Indebtedness" means Indebtedness (i) consisting of the
deferred purchase price of property, conditional sale obligations, obligations
under any title retention agreement, other purchase money obligations and
obligations in respect of industrial revenue bonds or similar Indebtedness, in
each case where the maturity of such Indebtedness does not exceed the
anticipated useful life of the asset being financed, and (ii) Incurred to
finance the acquisition by the Company or a Restricted Subsidiary of such
asset, including additions and improvements; provided, however, that any Lien
arising in connection with any such Indebtedness shall be limited to the
specified asset being financed or, in the case of real property or fixtures,
including additions and improvements, the real property on which such asset is
attached; and provided, further, however, that such Indebtedness is Incurred
within 180 days after such acquisition of such asset by the Company or
Restricted Subsidiary.
"Qualified Finance Subsidiary" means a Subsidiary of the Company
constituting a "finance subsidiary" within the meaning of Rule 3a-5 under the
Investment Company Act of 1940, as amended (the "1940 Act"), or an issuer of
asset-backed securities within the meaning of Rule 3a-7 of the 1940 Act or any
other vehicle under a similar exemption, formed for the purpose of engaging in
a Qualified TIPS Transaction and having no assets other than those necessary to
consummate the Qualified TIPS Transaction.
"Qualified Institutional Buyer" or "QIB" shall have the meaning specified
in Rule 144A under the Securities Act.
"Qualified TIPS Transaction" means an issuance by a Qualified Finance
Subsidiary of preferred trust securities or
<PAGE> 27
-19-
similar securities in respect of which any dividends, liquidation preference or
other obligations under such securities are Guaranteed by the Company to the
extent required by the 1940 Act, as amended, or customary for transactions of
such type.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced"
and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with this Indenture; provided, however, that (i)
such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or
if Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; provided, further,
however, that Refinancing Indebtedness shall not include Indebtedness of the
Company or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary.
"Registration Agreement" means the Registration Agreement dated the Issue
Date by and among the Company, the Subsidiary Guarantors and the Initial
Purchasers, as amended from to time.
"Regulation S" means Regulation S under the Securities Act.
"Related Business" means any business related, ancillary or complementary
(as determined in good faith by the Board of Directors) to the businesses of
the Company and the Restricted Subsidiaries on the Issue Date.
"Representative" means any trustee, agent or representative (if any) for
an issue of Senior Indebtedness of the Company.
<PAGE> 28
-20-
"Responsible Officer" means, when used with respect to the Trustee, any
officer assigned to the Corporate Trust Office, including any vice president,
assistant vice president, assistant secretary or any other officer of the
Trustee to whom any corporate trust matter is referred because of his or her
knowledge or familiarity with the particular subject.
"Restricted Payment" means, with respect to any Person, (i) the
declaration or payment of any dividends or any other distributions on or in
respect of its Capital Stock (including any such payment in connection with any
merger or consolidation involving such Person) or similar payment to the
holders of its Capital Stock, except dividends or distributions payable solely
in its Capital Stock (other than Disqualified Stock) and except dividends or
distributions payable solely to the Company or a Restricted Subsidiary (and, if
such Restricted Subsidiary is not wholly owned, to its other shareholders on a
pro rata basis or on a basis that results in the receipt by the Company or a
Restricted Subsidiary of dividends or distributions of greater value than it
would receive on a pro rata basis), (ii) the purchase, redemption or other
acquisition or retirement for value of any Capital Stock of the Company held by
any Person or of any Capital Stock of a Restricted Subsidiary held by any
Affiliate of the Company (other than a Restricted Subsidiary), including the
exercise of any option to exchange any Capital Stock (other than into Capital
Stock of the Company that is not Disqualified Stock), (iii) the purchase,
repurchase, redemption, defeasance or other acquisition or retirement for
value, prior to scheduled maturity, scheduled repayment or scheduled sinking
fund payment of any Subordinated Obligations (other than the purchase,
repurchase or other acquisition of Subordinated Obligations purchased in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of acquisition) or
(iv) the making of any Investment in any Person (other than a Permitted
Investment).
"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; provided, however, that the Trustee shall
be entitled to request and conclusively rely on an Opinion of Counsel with
respect to whether any Security constitutes a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
<PAGE> 29
-21-
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person and such lease is reflected on such Person's balance
sheet as a Capital Lease Obligation.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien. "Secured Indebtedness" of any Subsidiary Guarantor has a correlative
meaning.
"Securities" shall mean, collectively, the Initial Securities, the
Exchange Securities and the Subsequent Securities, and any other Securities
authenticated and delivered under this Indenture, which should be treated as a
single class of securities, as amended or supplemented from time to time in
accordance with the terms of this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Senior Credit Facility" means the Credit Agreement dated as of January
22, 1998, in effect on the Issue Date, by and among the Company, as borrower,
and guarantor, and certain subsidiaries, as borrowing subsidiaries, the Lenders
referred to therein and NBD Bank, as agent, as the same may be amended,
extended, renewed, restated, supplemented or otherwise modified (in each case,
in whole or in part, and without limitation as to amount, terms, conditions,
covenants and other provisions) from time to time, and any agreement governing
Indebtedness Incurred to refund, replace or refinance any borrowings and
commitments then outstanding or permitted to be outstanding under such Senior
Credit Facility or any such prior agreement as the same may be amended,
extended, renewed, restated, supplemented or otherwise modified (in each case,
in whole or in part, and without limitation as to amount, terms, conditions,
covenants and other provisions). The term "Senior Credit Facility" shall
include all related or ancillary documents executed at any time, including,
without limitation, any instruments, guarantee agreements and security
documents.
"Senior Indebtedness" of the Company means (i) Indebtedness of the Company
and all Bank Indebtedness, whether outstanding on the Issue Date or thereafter
Incurred and (ii) accrued and unpaid interest (including interest accruing on
or
<PAGE> 30
-22-
after the filing of any petition in bankruptcy or for reorganization relating
to the Company whether or not a claim for post-filing interest is allowed in
such proceeding) in respect of (A) indebtedness of the Company for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which the Company is responsible or
liable unless, in the instrument creating or evidencing the same or pursuant to
which the same is outstanding, it is provided that such obligations are
subordinate in right of payment to the Securities; provided, however, that
Senior Indebtedness shall not include (1) any obligation of the Company to any
Subsidiary, (2) any liability for Federal, state, local or other taxes owed or
owing by the Company, (3) any accounts payable or other liability to trade
creditors arising in the ordinary course of business (including Guarantees
thereof or instruments evidencing such liabilities), (4) any Indebtedness of
the Company (and any accrued and unpaid interest in respect thereof) which is
subordinate or junior in any respect (other than as a result of the
Indebtedness being unsecured) to any other Indebtedness or other obligation of
the Company, including any Senior Subordinated Indebtedness and any
Subordinated Obligations, (5) any obligations with respect to any Capital Stock
or (6) that portion of any Indebtedness which at the time of Incurrence is
Incurred in violation of this Indenture. "Senior Indebtedness" of any
Subsidiary Guarantor has a correlative meaning.
"Senior Subordinated Indebtedness" of the Company means the Securities and
any other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank pari passu with the Securities in right of payment and
is not subordinated by its terms in right of payment to any Indebtedness or
other obligation of the Company which is not Senior Indebtedness. "Senior
Subordinated Indebtedness" of any Subsidiary Guarantor has a correlative
meaning.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon
<PAGE> 31
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the happening of any contingency unless such contingency has occurred).
"Stockholders' Agreement" means the stockholders' agreement dated January
3, 1997 by and among the Company, MascoTech, CVC and certain executive officers
and directors of the Company, as amended from time to time.
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Securities pursuant to a written agreement to
that effect. "Subordinated Obligation" of any Subsidiary Guarantor has a
correlative meaning.
"Subsidiary" means, in respect of any Person, any corporation,
association, partnership, business trust or other business entity of which more
than 50% of the total voting power of shares of Capital Stock or other
interests (including partnership interests or trust interests) 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 (i) such Person, (ii) such Person and one or more
Subsidiaries of such Person or (iii) one or more Subsidiaries of such Person.
"Subsidiary Guarantee" means the Guarantee by a Subsidiary Guarantor of
the Company's obligations with respect to the Securities.
"Subsidiary Guarantor" means each Subsidiary designated as such on the
signature pages of this Indenture and any other Subsidiary that has issued a
Subsidiary Guarantee.
"S&P" means Standard and Poor's Ratings Service.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any agency
thereof or obligations Guaranteed by the United States of America or any agency
thereof, (ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws of
the United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $250,000,000 (or the
foreign currency equivalent thereof) and
<PAGE> 32
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has outstanding debt which is rated "A" (or a similar equivalent rating) or
higher by at least one nationally recognized statistical rating organization
(as defined in Rule 436 under the Securities Act) or any money-market fund
sponsored by a registered broker dealer or mutual fund distributor, (iii)
repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clause (i) above entered into with a bank
meeting the qualifications described in clause (ii) above, (iv) investments in
commercial paper, maturing not more than 90 days after the date of acquisition,
issued by a corporation (other than an Affiliate of the Company) organized and
in existence under the laws of the United States of America, any state thereof
or the District of Columbia or any foreign country recognized by the United
States of America with a rating at the time as of which any investment therein
is made of "P-1" (or higher) according to Moody's or "A-1" (or higher)
according to S&P and (v) investments in securities with maturities of six
months or less from the date of acquisition issued or fully Guaranteed by any
state, commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
S&P or "A" by Moody's.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 1
77aaa-77bbbb) as in effect on the date of this Indenture, except as provided in
Section 9.3.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means such successor including but not
limited to any corporation resulting from or surviving any such consolidation
or merger to which any of its successors may be a party as provided in Section
7.9.
"Trust Officer" means the Chairman of the Board, the President or any
other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code as in
effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided in Section 4.11 and (ii) any
Subsidiary of an Unrestricted Subsidiary.
<PAGE> 33
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"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly-Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by the
Company and/or one or more Wholly-Owned Subsidiaries.
SECTION 1.2. Other Definitions.
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Affiliate Transaction" 4.8
"Agent Members" 2.6
"Bankruptcy Law" 6.1
"Blockage Notice" 10.3(c)
"covenant defeasance option" 8.1(b)
"Custodian" 6.1
"defeasance trust" 8.2
"Event of Default" 6.1
"Excess Proceeds" 4.7(a)
"Excess Proceeds Offer" 4.7(a)
"Excess Proceeds Offer Amount" 4.7(c)
"Excess Proceeds Offer Period" 4.7(c)
"Excess Proceeds Payment" 4.7(a)
"Global Securities" 2.1(b)
"Guaranteed Obligations" 11.1
"legal defeasance option" 8.1(b)
"Notice of Default" 6.1
"Participants" 2.6
"pay the Subordinated Debt" 10.3(a)
"Paying Agent" 2.3
"Payment Blockage Period" 10.3(c)
"Physical Securities" 2.1
"Private Placement Legend" 2.13
"Purchase Date" 4.7(b)
"Registrar" 2.3
"Securities Register" 2.3
</TABLE>
<PAGE> 34
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Term Defined in Section
---- ------------------
"Subsequent Securities" 2.2
"Successor Company" 5.1
SECTION 1.3. Incorporation by Reference of Trust Indenture Act. This
Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the Securities means the Company and any other obligor on the
indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.4. Rules of Construction. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) the principal amount of any non-interest-bearing or other
discount security at any date shall be the principal amount thereof that
would be shown on a balance
<PAGE> 35
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sheet of the Company dated such date prepared in accordance with GAAP;
(7) all references to $, US$, dollars or United States dollars shall
refer to the lawful currency of the United States; and
(8) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision.
ARTICLE 2
THE SECURITIES
SECTION 2.1. Form and Dating.
(a) The Securities and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A, which is hereby incorporated in and
expressly made a part of this Indenture. The Exchange Securities and the
Trustee's certificate of authentication relating thereto shall be substantially
in the form of Exhibit B hereto. The Securities may have notations, legends or
endorsements required by law, stock exchange rules, agreements to which the
Company is subject, if any, or usage (provided that any such notation, legend
or endorsement is in a form acceptable to the Company). Each Security shall be
dated the date of its authentication. If required, the Securities may bear the
appropriate legend regarding any original issue discount for federal income tax
purposes. Each Security shall have attached to it an executed Guarantee
substantially in the form of Exhibit E, from each of the Subsidiary Guarantors.
The terms and provisions contained in the Securities, annexed hereto as
Exhibits A and B, shall constitute, and are hereby expressly made, a part of
this Indenture and, to the extent applicable, the Company, the Subsidiary
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.
(b) Global Securities. The Securities offered and sold in reliance on
Rule 144A and Securities offered and sold in reliance on Regulation S shall be
issued initially in the form of one or more permanent Global Securities
("Global Securities") in definitive, fully registered form without interest
coupons, in substantially the form of Exhibit A, which shall be
<PAGE> 36
-28-
deposited on behalf of the purchasers of the Securities represented thereby
with the Trustee, at the Trustee's office in New York City, as custodian for
the Depository, and registered in the name of the Depository or a nominee of
the Depository, duly executed by the Company (and having an executed Guarantee
endorsed thereon) and authenticated by the Trustee as hereinafter provided and
shall bear the legend set forth in Section 2.13. The aggregate principal
amount of the Global Securities may from time to time be increased or decreased
by adjustments made on the records of the Trustee and the Depository or its
nominee in the limited circumstances hereinafter provided.
Securities issued in exchange for interests in Global Securities pursuant
to Section 2.6 may be issued in the form of permanent certificated Securities
in registered form in substantially the form set forth in Exhibit A (the
"Physical Securities"). All Securities offered and sold in reliance on
Regulation S shall remain in the form of a Global Security until the
consummation of the Exchange Offer pursuant to the Registration Agreement;
provided, however, that all of the time periods specified in the Registration
Agreement to be complied with by the Company have been so complied with.
SECTION 2.2. Execution and Authentication. An Officer of the Company and
each Subsidiary Guarantor shall sign the Securities for the Company and the
Guarantees for the Subsidiary Guarantors by manual or facsimile signature. If
an Officer whose signature is on a Security no longer holds that office at the
time the Trustee authenticates the Security, the Security shall be valid
nevertheless. A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture. The aggregate principal amount of
Securities outstanding at any time may not exceed $130,000,000 (except as
provided in Section 2.7) of which $100,000,000 in aggregate principal amount is
being offered on (i) the Issue Date and (ii) one or more additional series of
Securities (the "Subsequent Securities") in an aggregate principal amount not
to exceed $30 million may be issued from time to time in the future. The
Trustee shall authenticate and make available for delivery (i) Initial
Securities for original issue in an aggregate principal amount of $100,000,000,
(ii) Exchange Securities from time to time for issue only in exchange for a
like principal amount of Initial Securities and (iii) Subsequent Securities, in
each case, upon a written order of the Company signed by an Officer of the
Company. Such order shall specify the amount of the Securities or Subsequent
Secu-
<PAGE> 37
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rities to be authenticated and the date on which the Securities are to be
authenticated. All Securities issued on the Issue Date and Subsequent
Securities shall be identical in all respects other than the issue date and the
date from which interest accrues, except as provided in this Section 2.2. The
Trustee may appoint an authenticating agent acceptable to the Company to
authenticate the Securities, upon the consent of the Company to such
appointment. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Securities whenever the Trustee may do so
upon a written order of the Company in the form of an Officers' Certificate.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as
any Registrar, Paying Agent or agent for service of notices and demands.
In the event the Company shall issue and the Trustee shall authenticate
any Subsequent Securities, the Company shall use its best efforts to obtain the
same "CUSIP" number for such Subsequent Securities as is printed on the
Securities outstanding at such time; provided however, that if any such
Subsequent Securities issued under this Indenture are determined, pursuant to
an Opinion of Counsel of the Company in a form reasonably satisfactory to the
Trustee, to be a different class of Security than the Securities outstanding
for Federal income tax purposes, the Company may obtain a "CUSIP" number for
such Subsequent Securities that is different from the "CUSIP" number printed on
the Securities then outstanding. Notwithstanding the foregoing, all Securities
and Subsequent Securities issued under this Indenture shall vote and consent
together on all matters as one class and neither the Securities nor Subsequent
Securities will have the right to vote or consent as a separate class on any
matter.
SECTION 2.3. Registrar and Paying Agent. The Company shall maintain an
office or agency where Securities may be presented for registration of transfer
or for exchange (the "Registrar") and an office or agency where Securities may
be presented for payment (the "Paying Agent"). The Registrar, acting on behalf
of and as agent for the Company, shall keep a register (the "Securities
Register") of the Securities and of their transfer and exchange. The Company
may have one or more co-registrars and one or more additional paying agents.
The term "Paying Agent" includes any additional paying agent. The Company
shall enter into an appropriate agency agreement with any Registrar, Paying
Agent or co-registrar not a party to this Indenture, which shall incorporate
the terms of
<PAGE> 38
-30-
the TIA. The agreement shall implement the provisions of this Indenture that
relate to such agent. The Company shall promptly notify the Trustee of the
name and address of any such agent. If the Company fails to maintain a
Registrar or Paying Agent, the Trustee shall act as such and shall be entitled
to appropriate compensation and indemnification therefor pursuant to Section
7.7. The Company may act as Paying Agent, Registrar, co-Registrar or transfer
agent.
The Company initially appoints the Trustee as Registrar and Paying Agent
in connection with the Securities, until such time as the Trustee has resigned
or a successor has been appointed pursuant to Section 7.8. Any of the
Registrar, the Paying Agent or any other agent may resign upon 30 days' notice
to the Company.
SECTION 2.4. Paying Agent To Hold Money in Trust. On or prior to each
due date of the principal and interest on any Security, the Company shall
deposit with the Paying Agent a sum sufficient to pay such principal and
interest when so becoming due. The Company shall require each Paying Agent
(other than the Trustee) to agree in writing that the Paying Agent shall hold
in trust for the benefit of Securityholders or the Trustee all sums held by the
Paying Agent for the payment of principal of or interest on the Securities and
shall notify the Trustee of any default by the Company or any other obligor in
making any such payment. If the Company or a Subsidiary acts as Paying Agent,
it shall segregate the money held by it as Paying Agent and hold it as a
separate trust fund. The Company at any time may require a Paying Agent to pay
all money held by it to the Trustee and to account for any funds disbursed by
the Paying Agent. Upon complying with this Section, the Paying Agent shall
have no further liability for the money delivered to the Trustee.
SECTION 2.5. Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to
it of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, all information in the possession or control of
the Company as to the names and addresses of Securityholders; provided that as
long as the Trustee is the Registrar, no such list need be furnished.
<PAGE> 39
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SECTION 2.6. Transfer and Exchange. The Securities shall be issued in
registered form and shall be transferable only upon the surrender of a Security
for registration of transfer. When a Security is presented to the Registrar or
a co-registrar with a request to register a transfer, the Registrar and the
Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and the Registrar shall record in the
Securities Register the transfer as requested if the requirements of Section
8-401(1) of the Uniform Commercial Code are met, and thereupon one or more new
Securities in the same aggregate principal amount shall be issued to the
designated assignee or transferee and the old Security will be returned to the
Company. When Securities are presented to the Registrar or a co-registrar with
a request to exchange them for an equal principal amount of Securities of other
denominations, the Registrar shall make the exchange as requested, in the same
manner, if the same requirements are met. To permit registration of transfers
and exchanges, the Company shall execute and the Trustee shall authenticate
Securities and each of the Subsidiary Guarantors shall execute a Guarantee
thereon at the Registrar's or co-registrar's request. The Company may require
payment of a sum sufficient to pay all taxes, assessments or other governmental
charges in connection with any transfer or exchange pursuant to this Section.
The Company shall not be required to make and the Registrar need not register
transfers or exchanges of Securities selected for redemption (except, in the
case of Securities to be redeemed in part, the portion thereof not to be
redeemed) or any Securities for a period of 15 days before a selection of
Securities to be redeemed or 15 days before an interest payment date.
Prior to the due presentation for registration of transfer of any
Security, the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of receiving
payment of principal of and interest on such Security and for all other
purposes whatsoever, whether or not such Security is overdue, and none of the
Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall
be affected by notice to the contrary.
All Securities issued upon any transfer or exchange pursuant to the terms
of this Indenture will evidence the same debt and will be entitled to the same
benefits under this Indenture as the Securities surrendered upon such transfer
or exchange.
<PAGE> 40
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With respect to Global Securities:
(1) Each Global Security authenticated under this Indenture shall (i) be
registered in the name of the Depository designated for such Global Security or
a nominee thereof, (ii) be deposited with such Depository or a nominee thereof
or custodian therefor, (iii) bear legends as set forth in Section 2.13 and (iv)
constitute a single Security for all purposes of this Indenture.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Securities, and the Depository may be treated by the Company, the
Trustee and any Agent of the Company or the Trustee as the absolute owner of
such Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any Agent
of the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depository or impair, as between
the Depository and its Agent Members, the operation of customary practices
governing the exercise of the rights of a Holder of any Security.
(2) Transfers of a Global Security shall be limited to transfers in whole
but not in part to the Depository, its successors or their respective nominees.
Interests of beneficial owners in a Global Security may be transferred or
exchanged for Physical Securities in accordance with the rules and procedures
of the Depository and the provisions of Section 2.14. In addition, a Global
Security is exchangeable for certificated Securities if (i) the Depository
notifies the Company that it is unwilling or unable to continue as a Depository
for such Global Security or if at any time the Depository ceases to be a
clearing agency registered under the Exchange Act,(ii) the Company executes and
delivers to the Trustee a notice that such Global Security shall be so
transferable, registrable, and exchangeable, and such transfers shall be
registrable or (iii) there shall have occurred and be continuing an Event of
Default or an event which, with the giving of notice or lapse of time or both,
would constitute an Event of Default with respect to the Securities represented
by such Global Security. Any Global Security that is exchangeable for
certificated Securities pursuant to the preceding sentence will be transferred
to, and registered and exchanged for, certificated Securities in authorized
denominations, without legends applicable to a Global Security, and registered
in such names as the Depository
<PAGE> 41
-33-
holding such Global Security may direct. Subject to the foregoing, a Global
Security is not exchangeable, except for a Global Security of like denomination
to be registered in the name of the Depository or its nominee. In the event
that a Global Security becomes exchangeable for certificated Securities, (i)
certificated Securities will be issued only in fully registered form in
denominations of $1,000 or integral multiples thereof, (ii) payment of
principal, any repurchase price, and interest on the certificated Securities
will be payable, and the transfer of the certificated Securities will be
registrable, at the office or agency of the Company maintained for such
purposes, and (iii) no service charge will be made for any registration or
transfer or exchange of the certificated Securities, although the Company may
require payment of a sum sufficient to cover any tax or governmental charge
imposed in connection therewith.
(3) Securities issued in exchange for a Global Security or any portion
thereof shall have an aggregate principal amount equal to that of such Global
Security or portion thereof to be so exchanged, shall be registered in such
names and be in such authorized denominations as the Depository shall designate
and shall bear the applicable legends provided for herein. Any Global Security
to be exchanged in whole shall be surrendered by the Depository to the Trustee.
With respect to any Global Security to be exchanged in part, either such
Global Security shall be so surrendered for exchange or, if the Trustee is
acting as custodian for the Depository or its nominee with respect to such
Global Security, the principal amount thereof shall be reduced, by an amount
equal to the portion thereof to be so exchanged, by means of an appropriate
adjustment made on the records of the Trustee. Upon any such surrender or
adjustment, the Trustee shall authenticate and deliver the Security issuable on
such exchange to or upon the order of the Depository or an authorized
representative thereof.
(4) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any portion
thereof, whether pursuant to this Section 2.6, Section 2.7, 2.9, 2.14 or
otherwise, shall be authenticated and delivered in the form of, and shall be, a
Global Security, unless such Security is registered in the name of a Person
other than the Depository for such Global Security or a nominee thereof.
Members of, or participants in, the Depository ("Participants") shall have no
rights under this Indenture with respect to any Global Security held on their
behalf by the Depository or by the Trustee as the custodian of the Depository
or under such Global Security, and the Deposi-
<PAGE> 42
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tory may be treated by the Company, the Trustee and any agent of the Company or
the Trustee as the absolute owner of such Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depository or impair, as between the Depository and its Participants, the
operation of customary practices of such Depository governing the exercise of
the rights of a holder of a beneficial interest in any Global Security.
SECTION 2.7. Replacement Securities. If a mutilated Security is
surrendered to the Trustee or Registrar or if the Holder of a Security claims
that the Security has been lost, destroyed or wrongfully taken, the Company
shall issue and the Trustee shall authenticate a replacement Security and the
Subsidiary Guarantors shall execute a Guarantee thereon if the requirements of
Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies
any other reasonable requirements of the Trustee and the Company. Such Holder
shall furnish an indemnity bond sufficient in the judgment of the Company, the
Subsidiary Guarantors and the Trustee to protect the Company, the Subsidiary
Guarantors, the Trustee, the Paying Agent, the Registrar and any co-registrar
from any loss, liability, cost or expense which any of them may suffer if a
Security is replaced. The Company and the Trustee may charge the Holder for
their expenses in replacing a Security.
Every replacement Security issued pursuant to the terms of this Section
shall constitute an additional obligation of the Company and the Subsidiary
Guarantors under this Indenture.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 2.8. Outstanding Securities. Securities outstanding at any time
are all Securities authenticated by the Trustee except for those canceled by
it, those delivered to it for cancellation and those described in this Section
as not outstanding. Subject to the provisions of Section 13.6, a Security does
not cease to be outstanding because the Company or an Affiliate of the Company
holds the security.
If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Trustee and the Company re-
<PAGE> 43
-35-
ceive proof satisfactory to them that the replaced Security is held by a bona
fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance with this
Indenture, on a redemption date or maturity date or, pursuant to Section
8.1(a), within 91 days prior thereto, money sufficient to pay all principal and
interest payable on that redemption or maturity date with respect to the
Securities (or portions thereof) to be redeemed or maturing, as the case may
be, then on and after such date such Securities (or portions thereof) cease to
be outstanding and on and after such redemption or maturity date interest on
them ceases to accrue.
SECTION 2.9. Temporary Securities. Until definitive Securities are ready
for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form
of definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities and
deliver them in exchange for temporary securities.
SECTION 2.10. Cancellation. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for
registration of transfer, exchange or payment. The Trustee and no one else
shall cancel all Securities surrendered for registration of transfer, exchange,
payment or cancellation and deliver such canceled Securities to the Company.
The Trustee shall from time to time provide the Company a list of all
Securities that have been canceled as requested by the Company. The Company
may not issue new Securities to replace Securities it has redeemed, paid or
delivered to the Trustee for cancellation.
SECTION 2.11. Defaulted Interest. If the Company defaults in a payment
of interest on the Securities, the Company shall pay defaulted interest (plus
interest on such defaulted interest to the extent lawful) in any lawful manner
in accordance with Section 4.1. The Company may pay the defaulted interest to
the persons who are Securityholders on a subsequent special record date. The
Company shall fix or cause to be fixed any such special record date and payment
date to the reasonable satisfaction of the Trustee and shall promptly mail to
each Securityholder a notice that states the special record
<PAGE> 44
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date, the payment date and the amount of defaulted interest to be paid.
SECTION 2.12. CUSIP Numbers. The Company in issuing the Securities may
use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided that any such notice may state that no representation is made as to
the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
The Company will promptly notify the Trustee of any change in the CUSIP
numbers.
SECTION 2.13. Restrictive Legends. Each Global Security and Physical
Security that constitutes a Restricted Security or is sold in compliance with
Regulation S shall bear the following legend (the "Private Placement Legend")
on the face thereof until after the second anniversary of the later of the
Issue Date and the last date on which the Company or any Affiliate of the
Company was the owner of such Security (or any predecessor security) (or such
shorter period of time as permitted by Rule 144(k) under the Securities Act or
any successor provision thereunder) (or such longer period of time as may be
required under the Securities Act or applicable state securities laws in the
opinion of counsel for the Company, unless otherwise agreed by the Company and
the Holder thereof):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY
OF THE ISSUANCE HEREOF (OR A PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER
THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS
PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE
COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX
CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF
THIS SECURITY), (3) IN AN
<PAGE> 45
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OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT
(AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF
TRANSFER ON THE REVERSE OF THIS SECURITY), AND, IF SUCH TRANSFER IS BEING
EFFECTED BY CERTAIN TRANSFERORS SPECIFIED IN THE INDENTURE (AS DEFINED BELOW)
PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING
OF RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT), A CERTIFICATE
WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE
TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (4) TO AN INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2) (3) OR (7) UNDER THE
SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING
THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A
CERTIFICATE IN THE FORM ATTACHED TO THIS SECURITY IS DELIVERED BY THE
TRANSFEREE TO THE COMPANY AND THE TRUSTEE (PROVIDED THAT CERTAIN HOLDERS
SPECIFIED IN THE INDENTURE MAY NOT TRANSFER THIS SECURITY PURSUANT TO THIS
CLAUSE (4) PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN
THE MEANING OF RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT)), (5)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED
BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR (6) 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. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES IT
WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES, LEGAL OPINIONS
AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY
TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE
HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE
BENEFIT OF THE COMPANY THAT (1) IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) IT IS AN
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY
FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) IT IS A NON-U.S.
PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT
SATISFYING THE REQUIREMENTS OF PARAGRAPH (o)(2) OR RULE 902 UNDER) REGULATION
S UNDER THE SECURITIES ACT.
Each Global Security shall also bear the following legend on the face
thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE
<PAGE> 46
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TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY, OR BY ANY SUCH NOMINEE OF THE DEPOSITORY, OR BY THE DEPOSITORY OR
NOMINEE OF SUCH SUCCESSOR 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,
A NEW YORK CORPORATION ("DTC"), TO AN 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 IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.14 OF THE INDENTURE.
SECTION 2.14. Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors and Non-U.S.
Persons. The following provisions shall apply with respect to the registration
of any proposed transfer of a Security constituting a Restricted Security to
any Institutional Accredited Investor which is not a QIB or to any Non-U.S.
Person:
(i) the Registrar shall register the transfer of any Security
constituting a Restricted Security whether or not such Security bears the
Private Placement Legend, if (x) the requested transfer is after the
second anniversary of the Issue Date (provided, however, that neither the
Company nor any Affiliate of the Company has held any beneficial interest
in such Security, or portion thereof, at any time on or prior to the
second anniversary of the Issue Date) or (y) (1) in the case of a
transfer to an Institutional Accredited Investor which is not a QIB
(excluding Non-U.S. Persons), the proposed transferee has delivered to
the Registrar a certificate substantially in the form of Exhibit C hereto
and any legal opinions and certifications required thereby or (2) in the
case of a transfer to a Non-U.S. Person, the proposed transferor has
delivered
<PAGE> 47
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to the Registrar a certificate substantially in the form of Exhibit D
hereto; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Security, upon receipt by the Registrar
of (x) the certificate, if any, required by paragraph (i) above and (y)
written instructions given in accordance with the Depository's and the
Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical
Securities) a decrease in the principal amount of such Global Security in an
amount equal to the principal amount of the beneficial interest in the Global
Security to be transferred, and (b) the Company shall execute, the Subsidiary
Guarantors shall execute the Guarantees on, and the Trustee shall authenticate
and deliver, one or more Physical Securities of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Security constituting
a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has checked the box provided for
on the form of Security stating, or has otherwise advised the Company and
the Registrar in writing, that the sale has been made in compliance with
the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Security stating, or has
otherwise advised the Company and the Registrar in writing, that it is
purchasing the Security for its own account or an account with respect to
which it exercises sole investment discretion and that it and any such
account is a QIB within the meaning of Rule 144A, and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that
it has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from
registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the
Securities to be transferred consist of Physical
<PAGE> 48
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Securities which after transfer are to be evidenced by an interest in a
Global Security, upon receipt by the Registrar of written instructions
given in accordance with the Depository's and the Registrar's procedures,
the Registrar shall reflect on its books and records the date and an
increase in the principal amount of such Global Security in an amount
equal to the principal amount of the Physical Securities to be
transferred, and the Trustee shall cancel the Physical Securities so
transferred.
(c) Private Placement Legend. Upon the transfer, exchange or replacement
of Securities not bearing the Private Placement Legend, the Registrar shall
deliver Securities that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Securities bearing the Private Placement
Legend, the Registrar shall deliver only Securities that bear the Private
Placement Legend unless (i) the requested transfer is after the second
anniversary of the Issue Date (provided, however, that neither the Company nor
any Affiliate of the Company has held any beneficial interest in such Security,
or portion thereof, at any time prior to or on the second anniversary of the
Issue Date), or (ii) there is delivered to the Registrar an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act.
(d) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as
provided in this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.6 or this Section 2.14.
The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time during
the Registrar's normal business hours upon the giving of reasonable written
notice to the Registrar.
(e) Transfers of Securities Held by Affiliates. Any certificate (i)
evidencing a Security that has been transferred to an Affiliate of the Company
within two years after the Issue Date, as evidenced by a notation on the
Assignment Form for such transfer or in the representation letter delivered in
re-
<PAGE> 49
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spect thereof or (ii) evidencing a Security that has been acquired from an
Affiliate (other than by an Affiliate) in a transaction or a chain of
transactions not involving any public offering, shall, until two years after
the last date on which either the Company or any Affiliate of the Company was
an owner of such Security, in each case, bear a legend in substantially the
form set forth in Section 2.13 hereof, unless otherwise agreed by the Company
(with written notice thereof to the Trustee).
ARTICLE 3
REDEMPTION
SECTION 3.1. Optional Redemption.
(a) Except as set forth in the following paragraph, the Securities will
not be redeemable at the option of the Company prior to January 15, 2003.
Thereafter, the Securities will be redeemable, at the Company's option, in
whole or in part at any time or from time to time, upon not less than 30 nor
more than 60 days' prior notice mailed by first class mail to each Holder's
registered address, at the following redemption prices (expressed as
percentages of the principal amount thereof), plus accrued and unpaid interest
to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date), if redeemed during the twelve-month period commencing on January 15 of
the years set forth below:
<TABLE>
<CAPTION>
Redemption
Period Price
------ ----------
<S> <C>
2003 105.6875%
2004 103.7917%
2005 101.8958%
2006 and thereafter 100.0000%
</TABLE>
(b) At any time and from time to time, on or prior to January 15, 2001,
the Company may, at its option, redeem in the aggregate up to 35% of the
original principal amount of the Securities with the proceeds of one or more
Public Equity Offerings following which there is a Public Market, at a
redemption price (expressed as a percentage of principal amount) of 111.375%
plus accrued and unpaid interest, if any, to the redemption date (subject to
the right of Holders of record on the relevant record date to receive interest
due on the relevant interest payment date); provided, however, that at least
65% of
<PAGE> 50
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the original aggregate principal amount of the Securities must remain
outstanding after each such redemption.
SECTION 3.2. Notices to Trustee. If the Company elects to redeem
Securities pursuant to Section 3.1, it shall notify the Trustee in writing of
the redemption date, the principal amount of Securities to be redeemed and the
paragraph of the Securities pursuant to which the redemption will occur. The
Company shall give each notice to the Trustee provided for in this Section at
least 45 days before the redemption date unless the Trustee consents to a
shorter period. Such notice shall be accompanied by an Officers' Certificate
from the Company to the effect that such redemption will comply with the
provisions herein.
SECTION 3.3. Selection of Securities To Be Redeemed. If fewer than all
the Securities are to be redeemed, the Trustee shall select the Securities to
be redeemed pro rata or by lot or by such other method that complies with
applicable legal and securities exchange requirements, if any, and that the
Trustee in its sole discretion shall deem to be fair and appropriate and in
accordance with methods generally used at the time of selection by fiduciaries
in similar circumstances. The Trustee shall make the selection from
outstanding Securities not previously called for redemption. The Trustee may
select for redemption portions of the principal of Securities that have
denominations larger than $1,000. Securities and portions of them that the
Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000.
Provisions of this Indenture that apply to Securities called for redemption
also apply to portions of Securities called for redemption. The Trustee shall
notify the Company promptly of the Securities or portions of Securities to be
redeemed. In the event the Company is required to make an offer to repurchase
Securities pursuant to Sections 4.7 or 4.12 and the amount available for such
offer is not evenly divisible by $1,000, the Trustee shall promptly refund to
the Company any remaining funds, which in no event will exceed $1,000.
SECTION 3.4. Notice of Redemption. At least 30 days but not more than 60
days before a date for redemption of Securities, the Company shall mail a
notice of redemption by first-class mail to the registered address appearing in
the Security Register of each Holder of Securities to be redeemed. The notice
shall identify the Securities (including CUSIP numbers, if any) to be redeemed
and shall state:
(1) the redemption date;
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(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be redeemed,
the identification and principal amounts of the particular Securities to
be redeemed;
(6) that, unless the Company defaults in making such redemption
payment, interest on Securities (or portion thereof) called for
redemption ceases to accrue on and after the redemption date;
(7) the paragraph of the Securities pursuant to which the
Securities called for redemption are being redeemed;
(8) the CUSIP number, if any, printed on the Securities being
redeemed; and
(9) 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
Securities.
At the Company's written request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's sole expense; provided
that such request by the Company to the Trustee is received by the Trustee at
least three (3) Business Days prior to the date the Trustee is requested to
give notice to the Holders whose Securities are to be redeemed. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION 3.5. Effect of Notice of Redemption. Once notice of redemption
is mailed, Securities called for redemption become due and payable on the
redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest to the redemption date. Such
notice if mailed in the manner herein provided shall be conclusively presumed
to have been given, whether or not the Holder receives such notice. Failure to
give notice or any defect in the notice to any Holder shall not affect the
validity of the notice to any other Holder.
<PAGE> 52
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SECTION 3.6. Deposit of Redemption Price. Prior to 11:00 a.m. (New York
City time) on the redemption date, the Company shall deposit with the Trustee
or Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, shall
segregate and hold in trust) money sufficient to pay the redemption price of
and accrued interest (if any) on all Securities or portions thereof to be
redeemed on that date other than Securities or portions of Securities called
for redemption which have been delivered by the Company to the Trustee for
cancellation.
SECTION 3.7. Securities Redeemed in Part. Upon surrender of a Security
that is redeemed in part (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Security without service charge,
a new Security or Securities of any authorized denomination as requested by
such Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered, except that
if a Global Security is so surrendered, the Company shall execute, and the
Trustee shall authenticate and deliver to the Depository for such Global
Security, without service charge, a new Global Security in denomination equal
to and in exchange for the unredeemed portion of the principal of the Global
Security so surrendered.
ARTICLE 4
COVENANTS
SECTION 4.1. Payment of Securities. The Company shall promptly pay the
principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the date due if on such date the Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest then due. The Company shall pay interest on overdue
principal at 1% per annum in excess of the rate per annum set forth in the
Securities, and it shall pay interest on overdue installments of interest at
the same rate to the extent lawful.
SECTION 4.2. SEC Reports. Until such time as the Company shall become
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall provide the Trustee, the Initial Purchasers, the
Securityholders
<PAGE> 53
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and prospective Securityholders, in compliance with TIA Section 314, with such
annual reports and such information, documents and other reports as are
specified in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S.
corporation subject to such Sections, and such information, documents and other
reports to be so provided at the times specified for filing of such
information, documents and reports under such Sections. Thereafter,
notwithstanding that the Company may not be required to remain subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall file with the SEC and provide the Trustee and Securityholders and
prospective Securityholders, in compliance with TIA Section 314, with such
annual reports and such information, documents and other reports as are
specified in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S.
corporation subject to such Sections, and such information, documents and other
reports to be so filed and provided at the times specified for the filing of
such information, documents and reports under such Sections; provided, however,
that the Company shall not be required to file any report, document or other
information with the SEC if the SEC does not permit such filing.
SECTION 4.3. Limitation on Incurrence of Indebtedness.
(a) The Company will not, and will not permit any Restricted Subsidiary
to, Incur, directly or indirectly, any Indebtedness; provided, however, that
the Company and the Restricted Subsidiaries may Incur Indebtedness if,
immediately after giving effect to such Incurrence, the Consolidated Coverage
Ratio exceeds 2.0 to 1 if such Indebtedness is Incurred prior to January 15,
2001, and 2.25 to 1 if such Indebtedness is Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and the
Restricted Subsidiaries may Incur any or all of the following Indebtedness:
(1) Indebtedness Incurred pursuant to the Bank Credit Agreements and
Guarantees of Indebtedness Incurred pursuant to the Bank Credit
Agreement; provided, however, that, after giving effect to any such
Incurrence, the aggregate principal amount of such Indebtedness then
outstanding does not exceed the greater of (i) $115.0 million less the
amount of Net Available Cash from Asset Sales used to permanently reduce
indebtedness under the Bank Credit Agreements and (ii) the sum of (x) 85%
of the net book value of the accounts receivable of the Company and
<PAGE> 54
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its Restricted Subsidiaries, determined in accordance with GAAP and (y)
50% of the net book value of the inventory of the Company and its
Restricted Subsidiaries, determined in accordance with GAAP;
(2) Indebtedness represented by (i) the Securities issued in the
Offering (and the Exchange Securities), (ii) up to $30 million aggregate
principal amount of Securities issued subsequent to the Issue Date and
(iii) Indebtedness represented by the Subsidiary Guarantees;
(3) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1) of this Section 4.3(b));
(4) Indebtedness of the Company owed to and held by any Wholly-Owned
Subsidiary or Indebtedness of a Wholly-Owned Subsidiary owed to and held
by the Company or a Wholly-Owned Subsidiary; provided, however, that any
subsequent issuance or transfer of any Capital Stock which results in any
such Wholly-Owned Subsidiary ceasing to be a Wholly-Owned Subsidiary or
any subsequent transfer of such Indebtedness (other than to the Company
or a Wholly-Owned Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Indebtedness by the issuer thereof;
(5) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clause (2), (3) or this clause
(5) of this Section 4.3(b);
(6) Indebtedness in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds entered into by
the Company or a Restricted Subsidiary in the ordinary course of business
(in each case other than an obligation for borrowed money);
(7) Hedging Obligations consisting of Interest Rate Agreements and
Currency Agreements entered into in the ordinary course of business and
not for the purpose of speculation; provided, however, that, in the case
of Currency Agreements and Interest Rate Agreements, such Currency
Agreements and Interest Rate Agreements do not increase the Indebtedness
of the Company outstanding at any time other than as a result of
fluctuations in foreign currency exchange rates or interest rates or by
reason of fees, indemnities and compensation payable thereunder;
<PAGE> 55
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(8) Purchase Money Indebtedness and Capital Lease Obligations
Incurred to finance the acquisition or improvement by the Company or a
Restricted Subsidiary of any assets in the ordinary course of business
and which do not exceed $7.0 million in the aggregate at any time
outstanding;
(9) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business, provided that such
Indebtedness is extinguished within five business days of Incurrence;
(10) Indebtedness Incurred after the Issue Date representing
interest paid-in-kind; or
(11) Indebtedness in an aggregate principal amount which, together
with all other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the date of such Incurrence (other than
Indebtedness permitted by clauses (1) through (10) above or paragraph (a)
of this Section 4.3), does not exceed $10.0 million.
(c) Notwithstanding the foregoing, the Company shall not, and shall
not permit any Restricted Subsidiary to, Incur any Indebtedness pursuant to the
foregoing Section 4.3(b) if the proceeds thereof are used, directly or
indirectly, to Refinance (i) any Subordinated Obligations unless such
Indebtedness shall be subordinated to the Securities and the Subsidiary
Guarantees, as applicable, to at least the same extent as such Subordinated
Obligations or (ii) any Senior Subordinated Indebtedness unless such
Indebtedness shall be Senior Subordinated Indebtedness or shall be subordinated
to the Securities and the Subsidiary Guarantees, as applicable.
(d) For purposes of determining compliance with this Section 4.3,
(i) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described above, the Company, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the above clauses
and (ii) an item of Indebtedness may be divided and classified in more than one
of the types of Indebtedness described above.
<PAGE> 56
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SECTION 4.4. Limitation on Layered Debt. Notwithstanding paragraphs (a)
and (b) of Section 4.3 hereof, the Company shall not, and shall not permit any
Subsidiary Guarantor to, Incur any Indebtedness if such Indebtedness is
subordinate or junior in ranking in any respect to any Senior Indebtedness of
the Company or such Subsidiary Guarantor, as applicable, unless such
Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated
in right of payment to Senior Subordinated Indebtedness.
SECTION 4.5. Limitation on Restricted Payments.
(a) The Company will not, and will not permit any Restricted Subsidiary,
directly or indirectly, to make a Restricted Payment if at the time the Company
or such Restricted Subsidiary makes such Restricted Payment: (1) a Default
will have occurred and be continuing (or would result therefrom); (2) the
Company is not able to Incur an additional $1.00 of Indebtedness under Section
4.3(a); or (3) the aggregate amount of such Restricted Payment together with
all other Restricted Payments (the amount of any payments made in property
other than cash to be valued at the fair market value of such property as
determined in good faith by the Board of Directors) declared or made since the
Issue Date would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the Issue Date to the end of the
most recent fiscal quarter prior to the date of such Restricted Payment
for which financial statements of the Company are available (or, in case
such Consolidated Net Income accrued during such period (treated as one
accounting period) shall be a deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received subsequent to the Issue
Date by the Company from the issuance or sale of (i) its Capital Stock
(other than Disqualified Stock or the issuance or sale of Capital Stock
to a Subsidiary of the Company) or (ii) the Capital Stock of a Restricted
Subsidiary pursuant to a Qualified TIPS Transaction (other than any
issuance or sale to a Subsidiary of the Company);
(C) the amount by which Indebtedness of the Company or its
Restricted Subsidiaries is reduced on the Company's balance sheet upon
the conversion or exchange (other than by a Subsidiary of the Company)
subsequent to the Issue Date, of any Indebtedness of the Company or its
Restricted
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Subsidiaries convertible or exchangeable for Capital Stock (other than
Disqualified Stock) of the Company (less the amount of any cash, or the
fair market value of any other property, distributed by the Company or
any Restricted Subsidiary upon such conversion or exchange); and
(D) an amount equal to the sum of the net reduction in Investments
resulting from repayments of loans or advances or other transfers of
assets subsequent to the Issue Date, in each case to the Company or any
Restricted Subsidiary; provided, however, that the foregoing sum shall
not exceed the amount of Investments previously made (and treated as a
Restricted Payment) by the Company or any Restricted Subsidiary in such
Person;
(b) The provisions of Section 4.5(a) will not prohibit:
(i) any purchase or redemption of Capital Stock or Subordinated
Obligations of the Company or any Restricted Subsidiary made in exchange
for, or out of the proceeds of the substantially concurrent sale of,
Capital Stock of the Company (other than Disqualified Stock and other
than Capital Stock issued or sold to a Subsidiary of the Company);
provided, however, that (A) such purchase or redemption shall be excluded
from the calculation of the amount of Restricted Payments and (B) the Net
Cash Proceeds from such sale shall be excluded from the calculation of
amounts under Section 4.5(a)(3)(B);
(ii) any purchase or redemption of (A) Subordinated Obligations of
the Company made in exchange for, or out of the proceeds of the
substantially concurrent sale of, Subordinated Obligations of the Company
which is permitted to be Incurred pursuant to Section 4.3(b) and (c)
hereof or (B) Subordinated Obligations of a Restricted Subsidiary made in
exchange for, or out of the proceeds of the substantially concurrent sale
of, Subordinated Obligations of such Restricted Subsidiary or the Company
which is permitted to be Incurred pursuant to Section 4.3(b) and (c)
hereof; provided, however, that such purchase or redemption shall be
excluded from the calculation of the amount of Restricted Payments;
(iii) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with this Section 4.5; provided, however, that at the time of payment of
such divi-
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dend, no other Default shall have occurred and be continuing (or would
result therefrom); provided, further, however, that such dividend shall
be included in the calculation of the amount of Restricted Payments;
(iv) any purchase or redemption or other retirement for value of
Capital Stock of the Company required pursuant to any shareholders'
agreement, management agreement or employee stock option agreement in
accordance with the provisions of any such arrangement in an amount not
to exceed $1.5 million in the aggregate; provided, however, that at the
time of such purchase or redemption, no other Default shall have occurred
and be continuing (or would result therefrom); provided, further,
however, that such purchase or redemption shall be included in the amount
of Restricted Payments; or
(v) Guarantees by the Company or any Restricted Subsidiary of
Indebtedness Incurred by the Company or a Restricted Subsidiary,
provided, however, that at the time such Guarantee is Incurred it would
be permitted under Section 4.3 hereof, provided, further, however, that
such Guarantee shall be excluded from the amount of Restricted Payments.
SECTION 4.6. Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or consensual restriction on the ability of any
Restricted Subsidiary (a) to pay dividends or make any other distributions on
its Capital Stock to the Company or a Restricted Subsidiary or pay any
Indebtedness owed to the Company, (b) to make any loans or advances to the
Company or (c) to transfer any of its property or assets to the Company;
except:
(i) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date;
(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary which was entered into on or prior to the
date on which such Restricted Subsidiary was acquired by the Company
(other than as consideration in, or to provide all or any portion of the
funds or credit support utilized to consummate, the transaction or series
of related transactions
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pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by the Company) and outstanding on such date;
(iii) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (i) or (ii) of this Section 4.6 (or effecting a
Refinancing of such Refinancing Indebtedness pursuant to this clause
(iii)) or contained in any amendment to an agreement referred to in
clause (i) or (ii) of this Section 4.6 or this clause (iii); provided,
however, that the encumbrances and restrictions with respect to such
Restricted Subsidiary contained in any such refinancing agreement or
amendment are no more restrictive in any material respect than
encumbrances and restrictions with respect to such Restricted Subsidiary
contained in such agreements;
(iv) any such encumbrance or restriction consisting of customary
non-assignment provisions in leases governing leasehold interests to the
extent such provisions restrict the transfer of the lease or the property
leased thereunder;
(v) in the case of Section 4.6(c) above, restrictions contained in
security agreements or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent such restrictions restrict the transfer of the
property subject to such security agreements or mortgages;
(vi) any restriction with respect to (x) a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or disposition
of all or substantially all the Capital Stock or assets of such
Restricted Subsidiary or (y) an asset of a Restricted Subsidiary pursuant
to an agreement entered into for the sale or disposition of such asset,
in each case pending the closing of such sale or disposition;
(vii) any restrictions imposed by applicable law; and
(viii) any encumbrance or restriction with respect to a Foreign
Restricted Subsidiary which is contained in agreements evidencing Indebtedness
permitted under Section 4.3 hereof and which encumbrance or restriction is
customary in agreements of such type.
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SECTION 4.7. Limitation on Sales of Assets and Subsidiary Stock.
(a) The Company will not, and will not permit any Restricted Subsidiary
to, consummate any Asset Disposition unless (i) the Company or such Restricted
Subsidiary receives consideration at the time of such Asset Disposition at
least equal to the fair market value (including as to the value of all non-cash
consideration), as determined in good faith by the Board of Directors, of the
shares and assets subject to such Asset Disposition, and (ii) at least 75% of
the consideration therefor received by the Company or such Restricted
Subsidiary is in the form of cash or cash equivalents, provided, however, that
this clause (ii) shall not apply if the Company or a Restricted Subsidiary is
disposing of assets in exchange for Additional Assets.
With respect to any Asset Disposition occurring on or after the Issue Date
from which the Company or any Restricted Subsidiary receives Net Available
Cash, the Company or such Restricted Subsidiary shall (i) within 365 days after
the date such Net Available Cash is received and to the extent the Company or
such Restricted Subsidiary elects (or is required by the terms of any Senior
Indebtedness) to (A) apply an amount equal to such Net Available Cash to
prepay, repay, purchase or legally defease Senior Indebtedness of the Company
or such Restricted Subsidiary, in each case owing to a Person other than the
Company or any Affiliate of the Company, or (B) invest an equal amount, or the
amount not so applied pursuant to clause (A), in Additional Assets (including
by means of an Investment in Additional Assets by a Subsidiary Guarantor with
Net Available Cash received by the Company or another Subsidiary Guarantor) and
(ii) apply such excess Net Available Cash (to the extent not applied pursuant
to clause (i)) as provided in the following paragraphs of this Section 4.7;
provided, however, that in connection with any prepayment, repayment or
purchase of Senior Indebtedness pursuant to clause (A) above (other than the
repayment of Senior Indebtedness Incurred under a Bank Credit Agreement to fund
the purchase of an asset which is sold by the Company within 180 days of its
purchase pursuant to a Sale/Leaseback Transaction), the Company or such
Restricted Subsidiary shall retire such Senior Indebtedness and shall cause the
related loan commitment (if any) to be permanently reduced in an amount equal
to the principal amount so prepaid, repaid or purchased. The amount of Net
Available Cash required to be applied pursuant to clause (ii) above and not
theretofore so applied shall constitute "Excess Proceeds." Pending applica-
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tion of Net Available Cash pursuant to this provision, such Net Available Cash
shall be invested in Temporary Cash Investments.
If at any time the aggregate amount of Excess Proceeds not theretofore
subject to an Excess Proceeds Offer (as defined below) totals at least $3
million, the Company shall, not later than 30 days after the end of the period
during which the Company is required to apply such Excess Proceeds pursuant to
clause (i) of the immediately preceding paragraph of this Section 4.7(a) (or,
if the Company so elects, at any time within such period), make an offer (an
"Excess Proceeds Offer") to purchase from the Holders of Securities and Other
Qualified Securities (determined on a pro rata basis according to the accreted
value or aggregate principal amount, as the case may be, of the Securities and
Other Qualified Securities) in an amount equal to the Excess Proceeds (rounded
down to the nearest multiple of $1,000) on such date, at a purchase price equal
to 100% of the principal amount of such Securities, plus, in each case, accrued
interest (if any) to the date of purchase (the "Excess Proceeds Payment").
Upon completion of an Excess Proceeds Offer the amount of Excess Proceeds
remaining after application pursuant to such Excess Proceeds Offer, (including
payment of the purchase price for Securities duly tendered) may be used by the
Company for any corporate purpose (to the extent not otherwise prohibited by
this Indenture).
For the purposes of this Section 4.7, the following are deemed to be cash
or cash equivalents: (x) the assumption of Indebtedness of the Company or any
Restricted Subsidiary and the release of the Company or such Restricted
Subsidiary from all liability on such Indebtedness in connection with such
Asset Disposition, and (y) securities received by the Company or any Restricted
Subsidiary from the transferee that are immediately converted by the Company or
such Restricted Subsidiary into cash.
(b) Promptly, and in any event within 30 days after the Company becomes
obligated to make an Excess Proceeds Offer, the Company shall be obligated to
deliver to the Trustee and send, by first-class mail to each Holder, at the
address appearing in the Security Register, a written notice stating that the
Holder may elect to have his Securities purchased by the Company either in
whole or in part (subject to prorationing as hereinafter described in the event
the Excess Proceeds Offer is oversubscribed) in integral multiples of $1,000 of
principal amount, at the applicable purchase price. The notice, which shall
govern the terms of the Excess Proceeds Offer, shall include such disclosures
as are required by law and shall specify
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(i) that the Excess Proceeds Offer is being made pursuant to this Section 4.7;
(ii) the purchase price (including the amount of accrued interest, if any) for
each Security and the purchase date not less than 30 days nor more than 60 days
after the date of such notice (the "Purchase Date"); (iii) that any Security
not tendered or accepted for payment will continue to accrue interest in
accordance with the terms thereof; (iv) that, unless the Company defaults in
making the payment, any Security accepted for payment pursuant to the Excess
Proceeds Offer shall cease to accrue interest on and after the Purchase Date;
(v) that Securityholders electing to have Securities purchased pursuant to an
Excess Proceeds Offer will be required to surrender their Securities to the
Paying Agent at the address specified in the notice at least three business
days prior to the Purchase Date and must complete any form letter of
transmittal proposed by the Company and acceptable to the Trustee and the
Paying Agent; (vi) that Securityholders will be entitled to withdraw their
election if the Paying Agent receives, not later than one business day prior to
the Purchase Date, a telex, facsimile transmission or letter setting forth the
name of the Securityholder, the principal amount of Securities the
Securityholder delivered for purchase, the Security certificate number (if any)
and a statement that such Securityholder is withdrawing its election to have
such Securities purchased; (vii) that if Securities in a principal amount in
excess of the aggregate principal amount which the Company has offered to
purchase are tendered pursuant to the Excess Proceeds Offer, the Company shall
purchase Securities on a pro rata basis among the Securities tendered (with
such adjustments as may be deemed appropriate by the Company so that only
Securities in denominations of $1,000 or integral multiples of $1,000 shall be
acquired); (viii) that Securityholders whose Securities are purchased only in
part will be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered; and (ix) the instructions that
Securityholders must follow in order to tender their Securities.
(c) Not later than the date upon which written notice of an Excess
Proceeds Offer is delivered to the Trustee as provided above, the Company shall
deliver to the Trustee an Officers' Certificate as to (i) the amount of the
Excess Proceeds Offer (the "Excess Proceeds Offer Amount"), (ii) the allocation
of the Net Available Cash from the Asset Dispositions pursuant to which such
Excess Proceeds Offer is being made and (iii) the compliance of such allocation
with the provisions of Section 4.7(a). Upon the expiration of the period for
which the Excess Proceeds Offer remains open (the "Excess Proceeds Offer
Period"), the Company shall deliver to the Trustee for cancella-
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tion the Securities or portions thereof which have been properly tendered to
and are to be accepted by the Company. Not later than 11:00 a.m. (New York
City time) on the Purchase Date, the Company shall irrevocably deposit with the
Trustee or with a paying agent (or, if the Company is acting as Paying Agent,
segregate and hold in trust) an amount in cash sufficient to pay the Excess
Proceeds Offer Amount for all Securities properly tendered to and accepted by
the Company. The Trustee shall, as promptly as possible after the Purchase
Date, mail or deliver payment to each tendering Holder in the amount of the
purchase price.
(d) Holders electing to have a Security purchased will be required to
surrender the Security, together with all necessary endorsements and other
appropriate materials duly completed, to the Company at the address specified
in the notice at least three Business Days prior to the Purchase Date. Holders
will be entitled to withdraw their election in whole or in part if the Trustee
or the Company receives not later than one Business Day prior to the Purchase
Date, a facsimile transmission or letter setting forth the name of the Holder,
the principal amount of the Security (which shall be $1,000 or an integral
multiple thereof) which was delivered for purchase by the Holder, the aggregate
principal amount of such Security (if any) that remains subject to the original
notice of the Excess Proceeds Offer and that has been or will be delivered for
purchase by the Company and a statement that such Holder is withdrawing his
election to have such Security purchased. If at the expiration of the Excess
Proceeds Offer Period the aggregate principal amount of Securities surrendered
by Holders exceeds the Excess Proceeds Offer Amount, the Company shall select
the Securities to be purchased on a pro rata basis (with such adjustments as
may be deemed appropriate by the Company so that only securities in
denominations of $1,000, or integral multiples thereof, shall be purchased).
Holders whose Securities are purchased only in part will be issued new
Securities equal in principal amount to the unpurchased portion of the
Securities surrendered.
(e) A Security shall be deemed to have been accepted for purchase at the
time the Trustee, directly or through an agent, mails or delivers payment
therefor to the surrendering Holder.
(f) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section 4.7. To
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the extent that the provisions of any securities laws or regulations conflict
with provisions of this Section 4.7, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section by virtue thereof.
SECTION 4.8. Limitation on Affiliate Transactions.
(a) The Company will not, and will not permit any Restricted Subsidiary
to, enter into or permit to exist any transaction or series of related
transactions (including the purchase, sale, lease or exchange of any property,
employee compensation arrangements or the rendering of any service) with any
Affiliate of the Company (an "Affiliate Transaction") unless the terms thereof
(1) are no less favorable to the Company or such Restricted Subsidiary than
those that could be obtained at the time of such transaction in arm's-length
dealings with a Person who is not such an Affiliate, (2) if such Affiliate
Transaction (or series of related Affiliate Transactions) involves aggregate
payments in an amount in excess of $1.0 million, (i) are set forth in writing,
(ii) comply with clause (1) of this Section 4.8(a), (3) if such Affiliate
Transaction (or series of related Affiliate Transactions) involves aggregate
payments in an amount in excess of $2.5 million in any one year, (i) are set
forth in writing, (ii) comply with clause (2) of this Section 4.8(a) and (iii)
have been approved by a majority of the disinterested members of the Board of
Directors and (4) if such Affiliate Transaction (or series of related Affiliate
Transactions) involves aggregate payments in an amount in excess of $10.0
million in any one year, (i) comply with clause (3) of this Section 4.8(a) and
(ii) have been determined by a nationally recognized investment banking firm to
be fair, from a financial standpoint, to the Company and its Restricted
Subsidiaries.
(b) Section 4.8(a) shall not prohibit (i) any Restricted Payment
permitted to be paid pursuant to Section 4.5, (ii) any issuance of securities,
or other payments, awards or grants in cash, securities or otherwise, pursuant
to, or the funding of, employment arrangements, stock options and stock
ownership plans in the ordinary course of business and approved by the Board of
Directors, (iii) the grant of stock options or similar rights to employees and
directors of the Company in the ordinary course of business and pursuant to
plans approved by the Board of Directors, (iv) loans or advances to employees
of the Company or its Subsidiaries, provided, however, that the aggregate
amount of such loans or advances outstanding at any one time shall not exceed
$1.5 million, (v) fees, compensation
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or employee benefit arrangements paid to and indemnity provided for the benefit
of directors, officers or employees of the Company or any Subsidiary in the
ordinary course of business, (vi) any Affiliate Transaction between the Company
and a Restricted Subsidiary or between Restricted Subsidiaries in the ordinary
course of business (so long as the other stockholders of any participating
Restricted Subsidiaries which are not Wholly-Owned Subsidiaries are not
themselves Affiliates of the Company), or (vii) Existing Affiliate Agreements,
including amendments thereto or replacements thereof entered into after the
Issue Date, provided, however, that the terms of any such amendment or
replacement are at least as favorable to the Company as those that could be
obtained at the time of such amendment or replacement in arm's-length dealings
with a Person which is not an Affiliate. If the Company or any Restricted
Subsidiary has complied with all of the provisions of the foregoing paragraph
(a) of this Section 4.8 other than clause (4)(ii) thereof, such paragraph shall
not prohibit the Company or any Restricted Subsidiary from entering into
Affiliate Transactions pursuant to which the Company or any Restricted
Subsidiary renders services in the ordinary course of business to CVC or
MascoTech or to Affiliates of CVC or MascoTech.
SECTION 4.9. Limitation on Issuance or Sale of Capital Stock of
Restricted Subsidiaries. The Company will not (i) sell, pledge, hypothecate or
otherwise dispose of any shares of Capital Stock of a Restricted Subsidiary
(other than pledges of Capital Stock securing Senior Indebtedness), or (ii)
permit any Restricted Subsidiary, directly or indirectly, to issue or sell or
otherwise dispose of any shares of its Capital Stock other than (A) to the
Company or a Restricted Subsidiary, (B) directors' qualifying shares and Shares
owned by foreign shareholders, to the extent required by applicable local laws
in foreign countries, (C) pursuant to a Qualified TIPS Transaction or (D) if,
immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Subsidiary. The proceeds of any sale
of such Capital Stock permitted hereby will be treated as Net Available Cash
from an Asset Disposition and must be applied in accordance with Section 4.7.
SECTION 4.10. Limitation on Liens. The Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, Incur or permit to
exist any Lien (other than Permitted Liens) of any nature whatsoever on any
property of the Company or any Restricted Subsidiary (including Capital Stock
of a Restricted Subsidiary), whether owned at the Issue Date or thereafter
acquired, which secures Indebtedness that
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ranks pari passu with or is subordinated to the Securities or the Subsidiary
Guarantees unless:
(i) if such Lien secures Indebtedness that ranks pari passu with the
Securities and the Subsidiary Guarantees, the Securities and Subsidiary
Guarantees are secured on an equal and ratable basis with the obligation
so secured until such time as such obligation is no longer secured by a
Lien; or
(ii) if such Lien secures Indebtedness that is subordinated to the
Securities and the Subsidiary Guarantees, such Lien shall be subordinated
to a Lien granted to the Holders on the same collateral as that securing
such Lien to the same extent as such subordinated Indebtedness is
subordinated to the Securities and the Subsidiary Guarantees.
SECTION 4.11. Designation of Restricted and Unrestricted Subsidiaries.
The Board of Directors may designate any Subsidiary of the Company (including
any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
if (a) the Subsidiary to be so designated (the "Designee") does not own any
Capital Stock or Indebtedness of, or own or hold any Lien on any property of,
the Company or any other Subsidiary (other than a direct or indirect Subsidiary
of the Designee, provided, however, that any such direct or indirect Subsidiary
of the Designee shall otherwise comply with clauses (a) through (f) of this
covenant), (b) the Subsidiary to be so designated is not obligated under any
Indebtedness, Lien or other obligation that, if in default, would result (with
the passage of time or notice or otherwise) in a default on any Indebtedness of
the Company or of any Subsidiary (other than the Designee or a Subsidiary of
the Designee that is an Unrestricted Subsidiary), (c) the Company certifies
that such designation complies with Section 4.5 hereof, (d) such Subsidiary,
either alone or in the aggregate with all other Unrestricted Subsidiaries, does
not operate, directly or indirectly, all or substantially all of the business
of the Company and its Subsidiaries; (e) such Subsidiary does not directly or
indirectly, own any Indebtedness of or Capital Stock in, and has no Investments
in, the Company or any Restricted Subsidiary; and (f) such Subsidiary is a
Person with respect to which neither the Company nor any of its Restricted
Subsidiaries has any direct or indirect obligation (i) to subscribe for
additional Capital Stock or (ii) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels of
operating results. If, at any time, any Unrestricted Subsidi-
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ary 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 as of such date. For purposes of making any such
designation, all outstanding Investments by the Company and its Restricted
Subsidiaries (except to the extent repaid in cash) in the Subsidiary will be
deemed to be Restricted Payments at the time of such designation and will
reduce the amount available for Restricted Payments under Section 4.5(a)(3)
hereof. Such designation shall only be permitted if such Restricted Payment
would be permitted at such time and if such Restricted Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary.
Any such designation or redesignation pursuant to this Section 4.11 by the
Board of Directors will be evidenced to the Trustee by filing with the Trustee
a Board Resolution giving effect to such designation or redesignation and an
Officers' Certificate (a) certifying that such designation or redesignation
complies with the foregoing provisions and (b) giving the effective date of
such designation or redesignation, such filing with the Trustee to occur within
45 days after the end of the fiscal quarter of the Company in which such
designation or redesignation is made (or, in the case of a designation or
redesignation made during the last fiscal quarter of the Company's fiscal year,
within 90 days after the end of such fiscal year). Unless designated as an
Unrestricted Subsidiary as provided in this Section 4.11, each Subsidiary of
the Company shall be a Restricted Subsidiary. Except as provided in this
Section 4.11, no Restricted Subsidiary shall be redesignated as an Unrestricted
Subsidiary.
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary, if immediately after giving pro forma effect to such
designation (a) the Company could Incur $1.00 of additional Indebtedness under
Section 4.3(a) and hereof (b) no Default shall have occurred and be continuing
or would result therefrom.
SECTION 4.12. Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder shall have
the right to require that the Company repurchase all or a portion of such
Holder's Securities at a purchase price in cash equal to 101% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
repurchase (subject to the right of Holders of record on the relevant record
date to receive interest due on the relevant
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interest payment date), in accordance with the terms of Section 4.12(b).
(b) Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that such Holder has
the right to require the Company to purchase such Holder's Securities at
a purchase price in cash equal to 101% of the principal amount
outstanding at the repurchase date, plus accrued and unpaid interest, if
any, to the date of repurchase (subject to the right of Holders of record
on the relevant record date to receive interest on the relevant interest
payment date);
(2) the circumstances and relevant facts and relevant financial
information regarding such Change of Control;
(3) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Company, consistent with this
Section 4.12, that a Holder must follow in order to have its Securities
repurchased.
(c) Holders electing to have a Security purchased will be required
to surrender the Security, together with all necessary endorsements and other
appropriate materials duly completed, to the Company at the address specified
in the notice at least three Business Days prior to the purchase date. Holders
will be entitled to withdraw their election if the Trustee or the Company
receives not later than one Business Day prior to the purchase date, a
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Security which was delivered for purchase by the Holder
as to which such notice of withdrawal is being submitted and a statement that
such Holder is withdrawing his election to have such Security purchased.
(d) On the purchase date, all Securities purchased by the Company
under this Section shall be delivered to the Trustee for cancellation, and the
Company shall pay the purchase price plus accrued and unpaid interest, if any,
to the Holders entitled thereto.
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(e) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section 4.12. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section by virtue thereof.
(f) Notwithstanding the occurrence of a Change of Control, the
Company shall not be obligated to repurchase the Securities or otherwise comply
with this Section if the Company has irrevocably elected to redeem all the
Securities in accordance with Article Three; provided that the Company does not
default in its redemption obligations pursuant to such election.
SECTION 4.13. Compliance Certificate. The Company shall deliver to
the Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate, one of the signers of which shall be the principal
executive, financial or accounting officer of the Company, stating that in the
course of the performance by the signers of their duties as Officers of the
Company they would normally have knowledge of any breach of covenant or other
obligations or any Default and whether or not the signers know of any breach of
covenant or other obligation or any Default that occurred during such period.
If they do, the certificate shall describe the breaches of covenants, other
obligation or Default, its status and what action the Company is taking or
proposes to take with respect thereto. The Company also shall comply with TIA
Section 314(a)(4).
SECTION 4.14. Further Instruments and Acts. Upon request of the
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.15. Payment of Taxes and Other Claims. The Company
shall, and shall cause each of its Subsidiaries to, pay or discharge or cause
to be paid or discharged, before the same shall become delinquent, all taxes,
assessments and governmental charges levied or imposed upon its or its
Subsidiaries' income, profits or property; provided, however, that neither the
Company nor any of its Subsidiaries shall be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or
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validity is being contested in good faith by appropriate negotiations or
proceedings and for which disputed amounts adequate reserves have been made in
accordance with GAAP.
SECTION 4.16. Future Guarantors. The Company shall cause each Domestic
Restricted Subsidiary that at any time becomes an obligor or guarantor with
respect to any obligations under one or more Bank Credit Agreements to execute
and deliver to the Trustee a supplemental indenture pursuant to which such
Domestic Restricted Subsidiary will Guarantee payment of the Securities on the
same terms and conditions as those set forth in this Indenture. Each
Subsidiary Guarantee will be limited in amount to an amount not to exceed the
maximum amount that can be Guaranteed by the applicable Subsidiary Guarantor
without rendering such Subsidiary Guarantee voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally.
SECTION 4.17. 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 or agency of the Trustee, Registrar or co-Registrar),
where Securities may be surrendered for registration of transfer or exchange or
for presentation for payment and where notices and demands to or upon the
Company in respect of the Securities and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the address of the Trustee's
office in New York City as set forth in Section 13.2.
The Company may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York, for such purposes. The Company will give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
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The Company hereby initially designates the Trustee's office in New York
City as set forth in Section 13.2 as an agency of the Company in accordance
with Section 2.3.
SECTION 4.18. Corporate Existence. Subject to Article 5 and Section 4.7,
the Company shall do or cause to be done, at its own cost and expense, all
things necessary to, and will cause each of its Restricted Subsidiaries to,
preserve and keep in full force and effect the corporate or partnership
existence and rights (charter and statutory), licenses and/or franchises of the
Company and each of its Restricted Subsidiaries; provided, however, that the
Company or any of its Restricted Subsidiaries shall not be required to preserve
any such rights, licenses or franchises if the Board of Directors shall
reasonably determine that the preservation thereof is no longer desirable in
the conduct of the business of the Company and the Subsidiaries, taken as a
whole.
ARTICLE 5
SUCCESSOR COMPANY
SECTION 5.1. Merger, Consolidation and Sale of Assets. The Company will
not consolidate with or merge with or into, or convey, transfer or lease, in
one transaction or a series of related transactions, all or substantially all
its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") will be a corporation organized and existing under the laws of
the United States of America, any State thereof or the District of
Columbia and the Successor Company (if not the Company) will expressly
assume, by an indenture supplemental hereto, executed and delivered to
the Trustee, in form satisfactory to the Trustee, all the obligations of
the Company under the Securities and this Indenture;
(ii) immediately after giving effect to such transaction on a pro
forma basis (and treating any Indebtedness which becomes an obligation of
the Successor Company or any Subsidiary as a result of such transaction
as having been Incurred by such Successor Company or such Subsidiary at
the time of such transaction), no Default will have occurred and be
continuing;
(iii) except in the case of a merger the sole purpose of which is to
change the Company's jurisdiction of incor-
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poration, immediately after giving effect to such transaction on a pro
forma basis, the Successor Company would be able to Incur an additional
$1.00 of Indebtedness pursuant to Section 4.3(a);
(iv) immediately after giving effect to such transaction on a pro
forma basis, the Successor Company will have a Consolidated Net Worth in
an amount that is not less than the Consolidated Net Worth of the Company
immediately prior to such transaction; and
(v) the Company will have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if
any) comply with this Indenture.
Notwithstanding the foregoing clauses (ii), (iii) and (iv) of this Section
5.1, any Restricted Subsidiary may consolidate with, merge into or transfer all
or part of its properties and assets to the Company or another Restricted
Subsidiary.
The Successor Company will be the successor to the Company and succeed to,
and be substituted for, and may exercise every right and power of, the Company
under this Indenture, but the predecessor Company in the case of a conveyance,
transfer or lease, will not be released from the obligation to pay the
principal of and interest on the Securities.
The Company shall not permit any Subsidiary Guarantor to consolidate with
or merge with or into, or convey, transfer or lease, in one transaction or a
(other than the Company or a Wholly-Owned Subsidiary), unless: (i) the
resulting, surviving or transferee Person (if not such Subsidiary) shall be a
corporation organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia and the Successor
Company (if not such Subsidiary) shall expressly assume, by a Guarantee
agreement, in form satisfactory to the Trustee, all the obligations of such
Subsidiary under its Subsidiary Guarantee; (ii) immediately after giving effect
to such transaction on a pro forma basis (and treating any Indebtedness which
becomes an obligation of the resulting, surviving or transferee Person as a
result of such transaction as having been Incurred by such Person at the time
of such transaction), no Default shall have occurred and be continuing; and
(iii) the Company shall have delivered to the
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Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and such Guarantee agreement comply with
this Indenture. The provisions of clauses (i) and (iii) above shall not apply
to any transactions which constitute an Asset Disposition if the Company has
complied with the applicable provisions of Section 4.7 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1. Events of Default. An "Event of Default" occurs if:
(i) the Company defaults in the payment of interest on any Security
when the same becomes due and payable (whether or not such payment is
prohibited by the provisions of Article 10 hereof), and such default
continues for a period of 30 days;
(ii) the Company defaults in the payment of the principal of any
Security when the same becomes due and payable at its Stated Maturity,
upon optional redemption, upon required repurchase, upon declaration or
otherwise (whether or not such payment is prohibited by the provisions of
in Article 10 hereof);
(iii) the Company fails to comply for 60 days after notice with any
obligations under Section 4.3, 4.5, 4.7 or 5.1 hereof;
(iv) the Company fails to comply with any of its other agreements
contained in this Indenture (other than those referred to in (i), (ii),
or (iii) above) and such failure continues for 60 days after the notice
specified below;
(v) the Company or any Restricted Subsidiary of the Company fails to
pay any Indebtedness within any applicable grace period after final
maturity or acceleration of any such Indebtedness by the holders thereof
because of a default and the total amount of such Indebtedness unpaid or
accelerated exceeds $5.0 million;
(vi) the Company or any Significant Subsidiary of the Company
pursuant to or within the meaning of any Bankruptcy Law:
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(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in
an involuntary case in which it is the debtor;
(C) consents to the appointment of a Custodian of it or for
any substantial part of its property; or
(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(vii) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary of the Company in an involuntary case;
(B) appoints a Custodian of the Company or any Significant
Subsidiary of the Company or for any substantial part of the
property of the Company or Significant Subsidiary;
(C) orders the winding up or liquidation of the Company or any
Significant Subsidiary of the Company;
(or any similar relief is granted under any foreign laws) and the order
or decree remains unstayed and in effect for 60 days;
(viii) the rendering of any judgment or decree for the payment of
money in excess of $5.0 million against the Company or any Restricted
Subsidiary if such judgment or decree remains unpaid and outstanding for
a period of 60 days following such judgment and is not discharged, waived
or stayed within 60 days after such judgment or decree thereof; or
(ix) a Subsidiary Guarantee ceases to be in full force and effect
(other than in accordance with the terms of such Subsidiary Guarantee) or
a Subsidiary Guarantor denies or disaffirms its obligations under its
Subsidiary Guarantee and such default continues for 10 days.
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The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court
or any order, rule or regulation of any administrative or governmental body.
The term "Bankruptcy Law" means Title 11, United States Code, as amended,
or any similar federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
A Default under clause (iii) or (iv) of this Section 6.1 is not an Event
of Default until the Trustee or the Holders of at least 25% in aggregate
principal amount of the outstanding Securities notify the Company of the
Default and the Company does not cure such Default within the time specified
after receipt of such notice. Such notice must specify the Default, demand
that it be remedied and state that such notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (v) of this Section 6.1 and any event which
with the giving of notice or the lapse of time would become an Event of Default
under clause (iii), (iv) or (viii) of this Section 6.1, its status and what
action the Company is taking or proposes to take with respect thereto.
SECTION 6.2. Acceleration. If an Event of Default occurs and is
continuing, the Trustee by notice to the Company, or the Holders of at least
25% in aggregate principal amount of the outstanding Securities by notice to
the Company and the Trustee, may declare the principal of and accrued but
unpaid interest on all the Securities to be due and payable. Upon such a
declaration, such principal and interest shall be due and payable immediately.
If an Event of Default specified in Section 6.1(vi) or (vii) with respect to
the Company occurs and is continuing, the principal of and interest on all the
Securities will ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Securityholders.
The Holders of a majority in aggregate principal amount of the outstanding
Securities by notice to the Trustee may rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default have been cured or waived ex-
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cept nonpayment of principal or interest that has become due solely because of
acceleration. No such rescission shall affect any subsequent Default or impair
any right consequent thereto.
SECTION 6.3. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are, to the extent
permitted by law, cumulative.
SECTION 6.4. Waiver of Past Defaults. The Holders of a majority in
aggregate principal amount of the Securities then outstanding by notice to the
Trustee may waive any past or existing Default and its consequences except (i)
a Default in the payment of the principal of or interest on a Security or (ii)
a Default in respect of a provision that under Section 9.2 cannot be amended
without the consent of each Securityholder affected. When a Default is waived,
it is deemed cured, and any Event of Default arising therefrom shall be deemed
to have been cured, but no such waiver shall extend to any subsequent or other
Default or impair any consequent right.
SECTION 6.5. Control by Majority. The Holders of a majority in aggregate
principal amount of the Securities then outstanding may direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. However, the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture or, subject to Section 7.1, that the Trustee determines is unduly
prejudicial to the rights of other Securityholders or would involve the Trustee
in personal liability; provided, however, that the Trustee may take any other
action deemed proper by the Trustee that is not inconsistent with such
direction. Prior to taking any action hereunder, the Trustee shall be entitled
to indemnification from the Securityholders satisfactory to it in its sole
discretion against all losses and expenses caused by taking or not taking such
action.
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SECTION 6.6. Limitation on Suits. Subject to Section 6.7 hereof, a
Securityholder may not pursue any remedy with respect to this Indenture or the
Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in aggregate principal amount of the
Securities then outstanding make a written request to the Trustee to
pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security
or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in aggregate principal amount of the
Securities then outstanding do not give the Trustee a direction
inconsistent with the request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.7. Rights of Holders To Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any Holder to receive payment
of principal, premium (if any) or interest on the Securities held by such
Holder, on or after the respective due dates expressed in the Securities, 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 6.8. Collection Suit by Trustee. If an Event of Default
specified in Section 6.1(i) or (ii) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or any other obligor upon the Securities for the whole amount then due
and owing (together with interest on any unpaid interest to the extent lawful)
and the amounts provided for in Section 7.7.
SECTION 6.9. Trustee May File Proofs of Claim. The Trustee may file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the
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claims of the Trustee and the Securityholders allowed in any judicial
proceedings relative to the Company, its creditors or its property and, unless
prohibited by law or applicable regulations, may vote on behalf of the Holders
in any election of a trustee in bankruptcy or other Person performing similar
functions, and any Custodian in any such judicial proceeding is hereby
authorized by each Holder to make payments to the Trustee and, in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 7.7.
SECTION 6.10. Priorities. If the Trustee collects any money or property
pursuant to this Article 6, it shall pay out the money or property in the
following order, subject to applicable law:
FIRST: to the Trustee for amounts due under Section 7.7;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal (including any premium) and interest, ratably,
without preference or priority of any kind, according to the amounts due
and payable on the Securities for principal (including any premium) and
interest, respectively; and
THIRD: to the Company.
The Trustee may, upon prior written notice to the Company, fix a record
date and payment date for any payment to Securityholders pursuant to this
Section. At least 15 days before such record date, the Company shall mail to
each Securityholder and the Trustee a notice that states the record date, the
payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court may in its discretion
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees and expenses, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section does not ap-
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ply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7 or a
suit by Holders of more than 10% in aggregate principal amount of the
outstanding Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the
extent it may lawfully do so) shall not at any time insist upon, or plead, or
in any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which
may affect the covenants or the performance of this Indenture; and the Company
(to the extent that it may lawfully do so) hereby expressly waives all benefit
or advantage of any such law, and shall not 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 had been
enacted.
ARTICLE 7
TRUSTEE
SECTION 7.1. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent Person
would exercise or use under the circumstances in the conduct of such Person's
own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture and the TIA
against the Trustee; and
(2) 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, in the case of any such certificates or opinions
which by any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall
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examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of
this Section;
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.2 and 6.5 hereof.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to
the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section and
to the provisions of the TIA.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) The Trustee shall have no responsibility to examine or review
and shall have no liability for the contents of any documents submitted to or
delivered to any Holder of Securities by the Company in the nature of a
solicitation or an official statement or offering circular, whether preliminary
or final.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
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SECTION 7.2. Rights of Trustee. Subject to Section 7.1:
(a) The Trustee may rely on any document including, without
limitation, any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, bond, note or coupon 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. The Trustee shall not
be liable for any action it takes or omits to take in good faith in
reliance on the Officers' Certificate or Opinion of Counsel.
(c) The Trustee may execute any of the trusts or power hereunder or
perform any duties hereunder either directly or by or through agents and
shall not be responsible for the misconduct or gross 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 which it believes to be authorized or within
its rights or powers; provided, however, that the Trustee's conduct does
not constitute willful misconduct or gross negligence.
(e) The Trustee may consult with counsel of its selection, and the
advice or opinion of counsel with respect to legal matters relating to
this Indenture and the Securities shall be full and complete
authorization and protection from liability in respect to any action
taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction.
(g) Except with respect to Section 4.1, the Trustee shall have no
duty to inquire as to the performance of the
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Company's covenants in Article 4. In addition, the Trustee shall not be
deemed to have knowledge of any Default of Event of Default except (i)
any Default or Event of Default occurring pursuant to Sections 6.1(i),
6.1(ii) and 4.1 or (ii) any Default or Event of Default of which a
responsible Officer of the Trustee shall have received written
notification or obtained actual knowledge.
SECTION 7.3. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its respective Affiliates with the
same rights it would have if it were not Trustee. Any Paying Agent, Registrar,
co-registrar or co-paying agent may do the same with like rights. However, the
Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.4. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for
any statement of the Company in this Indenture or the Securities or in any
document issued in connection with the sale of the Securities other than the
Trustee's certificate of authentication.
SECTION 7.5. Notice of Defaults. If a Default occurs and is
continuing and if it is known to a responsible Officer of the Trustee, the
Trustee shall mail to each Securityholder notice of the Default within 90 days
after it is known by a Trust Officer or written notice is received by the
Trustee. Except in the case of a Default in payment of principal of or
interest on any Security (including payments pursuant to the mandatory
redemption provisions of such Security, if any), the Trustee may withhold the
notice if and so long as its board of directors or a trust committee or
directors and/or responsible officers of the trustee in good faith determine
that withholding the notice is in the interests of Securityholders.
SECTION 7.6. Reports by Trustee to Holders. As promptly as
practicable after each May 15 beginning with the May 15 following the date of
this Indenture, and in any event prior to July 15 in each year, the Trustee
shall mail to each Securityholder a brief report dated as of May 15 that
complies with TIA Section 313(a). The Trustee also shall comply with TIA
Section Section 313(b), (c) and (d). Prior to delivery to the Holders, the
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Trustee shall deliver to the Company a copy of any report it delivers to
Holders pursuant to this Section 7.6.
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any
delisting thereof.
SECTION 7.7. Compensation and Indemnity. The Company shall pay to the
Trustee from time to time such reasonable compensation for its services as the
Company and the Trustee shall from time to time agree in writing for all
services rendered by it in any capacity. The Trustee's compensation shall not
be limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses incurred or made by it, including costs of collection,
in addition to such compensation for its services, except any such expense,
disbursement or advance as may arise from its negligence, willful misconduct or
bad faith. Such expenses shall include the reasonable compensation and
expenses, disbursements and advances of the Trustee's agents, counsel,
accountants and experts. The Trustee shall provide the Company reasonable
notice of any expenditure not in the ordinary course of business; provided that
prior approval by the Company of any such expenditure shall not be a
requirement for the making of such expenditure nor for reimbursement by the
Company thereof. The Company shall indemnify each of the Trustee and any
predecessor Trustees against any and all loss, damage, claim, liability or
expense (including attorneys' fees and expenses) (other than taxes applicable
to the Trustee's compensation hereunder) incurred by it in connection with the
acceptance or administration of this trust and the performance of its duties
hereunder. 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 of such claim.
The Trustee may have separate counsel at its own expense. The Company need not
reimburse any expense or indemnify against any loss, liability or expense
incurred by the Trustee through the Trustee's own willful misconduct,
negligence or bad faith. The Company need not pay for any settlement made
without its written consent.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities
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on all money or property held or collected by the Trustee other than money or
property held in trust to pay principal of and interest on particular
Securities.
The Company's payment obligations pursuant to this Section shall
survive the discharge of this Indenture. When the Trustee incurs expenses
after the occurrence of a Default specified in Section 6.1(vi) or (vii) with
respect to the Company, the expenses are intended to constitute expenses of
administration under the Bankruptcy Law.
SECTION 7.8. Replacement of Trustee. The Trustee may resign at any
time upon 30 days notice to the Company. The Holders of a majority in
principal amount of the Securities then outstanding may remove the Trustee by
so notifying the Trustee and may appoint a successor Trustee. The Company
shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the Holders of
a majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint 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 Securityholders. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, subject to the
lien provided for in Section 7.7.
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If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.7 shall continue for the
benefit of the retiring Trustee.
SECTION 7.9. Successor Trustee by Merger. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee, provided that such corporation
shall be eligible under this Article 7 and TIA Section 3.10(a).
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of
the successor to the Trustee; and in all such cases such certificates shall
have the full force which it is anywhere in the Securities or in this Indenture
provided that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. This Indenture shall
always have a Trustee, which shall at all times satisfy the requirements of TIA
Section Section 301(a)(1), 301(a)(2), 301(a)(4) and 301(a)(5). The Trustee
shall have a combined capital and surplus of at least $25,000,000 as set forth
in its most recent published annual report of condition. The Trustee shall
comply with TIA Section 310(b); provided, however, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities or certifi-
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cates of interest or participation in other securities of the Company are
outstanding if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 7.10, the Trustee shall resign
immediately in the manner and with the effect specified by this Article 7.
SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE 8
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1. Discharge of Liability on Securities; Defeasance.
(a) When (i) the Company delivers to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.7) for
cancellation or (ii) all outstanding Securities have become due and payable,
whether at maturity or as a result of the mailing of a notice of redemption
pursuant to Article 3 hereof, and, in each case of this clause (ii), the
Company irrevocably deposits or causes to be deposited with the Trustee United
States dollars or U.S. Government Obligations sufficient to pay and discharge
the entire indebtedness on the Securities not heretofore delivered to the
Trustee for cancellation, for the principal of, premium, if any, and interest
to the date of deposit (other than Securities replaced pursuant to Section
2.7), and if in either case the Company pays all other sums payable hereunder
by the Company, then this Indenture shall, subject to Section 8.1(c), cease to
be of further effect. The Trustee shall acknowledge satisfaction and discharge
of this Indenture on demand of the Company accompanied by an Officers'
Certificate from the Company that all conditions precedent provided for herein
relating to satisfaction and discharge of this Indenture have been complied
with and at the cost and expense of the Company.
(b) Subject to Sections 8.1(c) and 8.2, the Company at any time may
terminate (i) all of its obligations under the Securities and this Indenture
("legal defeasance option") or (ii) its obligations under Article 4 and the
operation of Sections 6.1(iii), 6.1(iv), 6.1(v), 6.1(vi) and 6.1(vii) (but only
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with respect to a Significant Subsidiary), 6.1(viii) and 5.1(iii) and 5.1(iv)
("covenant defeasance option"). The Company may exercise its legal defeasance
option notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default with respect
thereto. If the Company exercises its covenant defeasance option, payment of
the Securities may not be accelerated due to a failure to comply with Article 4
or the operation of Sections 6.1(iii), 6.1(iv), 6.1(v), 6.1(vi) and 6.1(vii)
(but only with respect to a Significant Subsidiary), or 6.1(viii) or because of
the failure of the Company to comply with 5.1(iii) and 5.1(iv). If the Company
exercises its legal defeasance option or its covenant defeasance option, each
Subsidiary Guarantor will be released from all of its obligations under Article
11.
Upon satisfaction of the conditions set forth herein and upon request
of the Company, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 7.7, 7.8, 8.3, 8.4, 8.5 and
8.6 shall survive until the Securities have been paid in full. Thereafter, the
Company's obligations in Sections 7.7, 8.4 and 8.5 shall survive.
SECTION 8.2. Conditions to Defeasance. The Company may exercise its
legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits or causes to be deposited in
trust (the "defeasance trust") with the Trustee money or U.S. Government
Obligations which through the scheduled payment of principal and interest
in respect thereof in accordance with their terms will provide cash at
such times and in such amounts as will be sufficient to pay principal and
interest when due on all outstanding Securities (except Securities
replaced pursuant to Section 2.7) to maturity or redemption, as the case
may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any de-
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posited money without investment will provide cash at such times and in
such amounts as will be sufficient to pay principal and interest when due
on all outstanding Securities (except Securities replaced pursuant to
Section 2.7) to maturity or redemption, as the case may be;
(3) 91 days pass after the deposit is made and during the 91-day
period no Default specified in Section 6.1(vi) or (vii) with respect to
the Company occurs which is continuing at the end of the period;
(4) the deposit does not result in a breach of, or otherwise
constitute a default under any other agreement or investment with respect
to any Senior Indebtedness and no default exists under any Indebtedness;
(5) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or
is qualified as, a regulated investment company under the Investment
Company Act of 1940;
(6) the Company shall have delivered to the Trustee an Opinion of
Counsel stating that the Securityholders will not recognize income, gain
or loss for federal income tax purposes as a result of such deposit and
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 deposit and defeasance had not occurred (and, in the case of legal
defeasance only, such Opinion of Counsel must be based on a ruling of the
Internal Revenue Service or other change in applicable federal income tax
law);
(7) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that
the Securityholders 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 deposit and
covenant defeasance had not occurred;
(8) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge
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of the Securities as contemplated by this Article 8 have been complied
with; and
(9) the Company shall have paid or duly provided for payment under
terms mutually satisfactory to the Company and the Trustee all amounts
then due to the Trustee pursuant to Section 7.7 hereof.
Opinions of Counsel required to be delivered under this Section may
have qualifications customary for opinions of the type required and counsel
delivering such Opinions of Counsel may rely on certificates of the Company or
government or other officials customary for opinions of the type required,
including certificates certifying as to matters of fact.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date
in accordance with Article 3.
SECTION 8.3. Application of Trust Money. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to this
Article 8. It shall apply the deposited money and the money from U.S.
Government Obligations either directly or through the Paying Agent (including
the Company acting as its own Paying Agent as the Trustee may determine) and in
accordance with this Indenture to the payment of principal of and interest on
the Securities.
SECTION 8.4. Repayment to Company. The Trustee and the Paying Agent
shall notify the Company of any excess money or Securities held by them at any
time and shall promptly turn over to the Company upon request any excess money
or securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon written request any money held by
them for the payment of principal or interest that remains unclaimed for two
years, and, thereafter, Securityholders entitled to the money must look to the
Company for payment as general creditors.
SECTION 8.5. Indemnity for Government Obligations. The Company shall
pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited U.S. Government Obligations or the
principal and interest received on such U.S. Government Obligations other than
any such tax, fee or other charge which by law is for the account of the
Holders of the defeased Securities; provided that the
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Trustee shall be entitled to charge any such tax, fee or other charge to such
Holder's account.
SECTION 8.6. Reinstatement. If the Trustee or Paying Agent is unable
to apply any money or U.S. Government Obligations in accordance with this
Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 8 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8; provided, however, that, (a) if
the Company has made any payment of interest on or principal of any Securities
following the reinstatement of their obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money or U.S. Government Obligations held by the Trustee or
Paying Agent and (b) unless otherwise required by any legal proceeding or any
order or judgment of any court or governmental authority, the Trustee or Paying
Agent shall return all such money and U.S. Government Obligations to the
Company promptly after receiving a written request therefor at any time, if
such reinstatement of the Company's obligations has occurred and continues to
be in effect.
ARTICLE 9
AMENDMENTS
SECTION 9.1. Without Consent of Holders. The Company and the Trustee
may amend this Indenture or the Securities without notice to or consent of any
Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are as described in Section 163(f)(2)(B) of the Code;
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(4) to add Guarantees with respect to the Securities;
(5) to release Subsidiary Guarantors when permitted by this Indenture;
(6) to secure the Securities;
(7) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(8) to make any change that does not adversely affect the rights of
any Securityholder; or
(9) to comply with any requirements of the SEC in connection with
qualifying this Indenture under the TIA.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein,
shall not impair or affect the validity of an amendment under this section. No
amendment may be made to Article 10 hereof that adversely affects the rights of
any holder of Senior Indebtedness then outstanding unless the holder of such
Senior Indebtedness (or its Representative) consents to such change.
SECTION 9.2. With Consent of Holders. The Company and the Trustee may
amend this Indenture or the Securities without notice to any Securityholder but
with the written consent of the Holders of at least a majority in principal
amount of the Securities then outstanding. However, without the consent of
each Securityholder affected, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment;
(2) reduce the rate of or extend the time for payment of interest on
any Security;
(3) reduce the principal of or change the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption of any Security or
change the time at which any Security may be redeemed in accordance with
Article 3;
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(5) make any Security payable in money other than that stated in the
Security;
(6) impair the right of any Holder to institute suit for the
enforcement of any payment on or with respect to such Holder's Securities or
any Subsidiary Guarantee;
(7) make any change in the amendment provisions which require each
Holder's consent or in the waiver provisions; or
(8) make any change to the subordination provisions of this Indenture
that would adversely affect the Securityholders.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein,
shall not impair or affect the validity of an amendment under this Section.
SECTION 9.3. Compliance with Trust Indenture Act. Every amendment to
this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.4. Revocation and Effect of Consents and Waivers. A consent
to an amendment or a waiver by a Holder of a Security shall bind the Holder and
every subsequent Holder of that Security or portion of the Security that
evidences the same debt as the consenting Holder's Security, even if notation
of the consent or waiver is not made on the Security. An amendment or waiver
becomes effective once the requisite number of consents are received by the
Company or the Trustee. After an amendment or waiver becomes effective, it
shall bind every Securityholder.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent
or take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding
the immediately preceding paragraph, those Persons who were
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Securityholders at such record date (or their duly designated proxies), and
only those Persons, shall be entitled to give such consent or to revoke any
consent previously given or to take any such action, whether or not such
Persons continue to be Holders after such record date. No such consent shall
be valid or effective for more than 120 days after such record date.
SECTION 9.5. Notation on or Exchange of Securities. If an amendment
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder.
Alternatively, if the Company or the Trustee so determine, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.6. Trustee To Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment
the Trustee shall be entitled to receive indemnity reasonably satisfactory to
it and to receive, and (subject to Section 7.1) shall be fully protected in
relying upon, an Officers' Certificate and an Opinion of Counsel stating that
such amendment complies with the provisions of Article 9 of this Indenture.
ARTICLE 10
SUBORDINATION OF THE SECURITIES
SECTION 10.1. Agreement To Subordinate. Notwithstanding any other
provision to the contrary in this Indenture, the Company covenants and agrees,
and each Holder by accepting a Security covenants and agrees, that the payment
of principal of, premium (if any) and interest on and all other Obligations
under or in connection with the Indebtedness now or hereafter evidenced by the
Securities, the Subsidiary Guarantees, this Indenture and/or related
agreements, documents or instruments is subordinate in right of payment, to the
extent and in the manner provided in this Article, to the prior payment in full
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of all Senior Indebtedness of the Company or the relevant Subsidiary Guarantor,
as the case may be, whether outstanding on the Issue Date or thereafter
incurred, including all Obligations of the Company and such Subsidiary
Guarantor under the Senior Credit Facility. The subordination provisions set
forth in this Article are for the benefit of, and shall be enforceable directly
by, the holders of Senior Indebtedness.
Each Holder authorizes and directs the Trustee on such Holder's behalf
to take such action as may be necessary or appropriate, in the sole discretion
of the Trustee, to acknowledge or effectuate the subordination between the
Holders and the holders of Senior Indebtedness of the Company as provided in
this Article and appoints the Trustee as such Holder's attorney-in-fact for any
and all such purposes, including, in the event of any voluntary or involuntary
liquidation or dissolution of the Company, whether total or partial, or in a
bankruptcy, reorganization, insolvency, receivership, dissolution, assignment
for the benefit of creditors, marshalling of assets or similar proceeding
relating to the Company or its property, the timely filing of a claim for the
unpaid balance of such Holder's Securities in the form required in said
proceeding and cause said claim to be approved. If the Trustee does not file a
proper claim or proof of debt in the form required in such proceeding prior to
20 days before the expiration of the time to file such claim or claims, then
the Representative is hereby authorized to have the right to file and is hereby
authorized to file an appropriate claim for and on behalf of the Holders;
provided, however, that any such claim filed by the Representative shall be
superseded by the claim, if any, subsequently filed by the Trustee.
Each Holder by accepting a Security acknowledges and agrees that the
subordination provision set forth in this Article are, and are intended to be,
an inducement and consideration to each holder of any Senior Indebtedness of
the Company, whether such Senior Indebtedness was created before or after the
issuance of the Securities, to acquire and continue to hold, or to continue to
hold, such Senior Indebtedness, and such holder of Senior Indebtedness shall be
deemed conclusively to have relied upon such subordination provisions in
acquiring and continuing to hold, or in continuing to hold, such Senior
Indebtedness, and such holder is made an obligee hereunder and may enforce
directly such subordination provisions.
SECTION 10.2. Liquidation; Dissolution; Bankruptcy. Upon any payment
or distribution of the assets of the Company of any kind or character, whether
in cash, property or securi-
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ties, to creditors upon a total or partial liquidation, winding up, assignment
for the benefit of creditors or marshalling of assets or other distribution in
a bankruptcy, insolvency receivership or dissolution or reorganization of or
similar proceeding relating to the Company or its property or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding:
(a) the holders of Senior Indebtedness of the Company shall be
entitled to receive payment in full in cash of such Senior Indebtedness
before Holders are entitled to receive any payment; and
(b) until the Senior Indebtedness of the Company is paid in full in
cash any payment or distribution to which Holders would be entitled but
for this Article shall be made to holders of such Senior Indebtedness, as
their interests may appear.
Upon any prepayment, payment or distribution referred to in this
Article, the Trustee and the Holders shall be entitled to rely upon any order
or decree of a court of competent jurisdiction in which such proceedings are
pending for the purpose of ascertaining the identity of Persons entitled to
participate in such payment or distribution, the holders of Senior
Indebtedness, the amount thereof or payable thereon and all other facts
pertinent thereto or to this Article, and the Trustee and the Holders shall be
entitled to rely upon a certificate of the liquidating trustee or agent or
other Person (including any Representative of holders of Senior Indebtedness of
the Company) making any payment or distribution to the Trustee or to the
Holders for the purpose of ascertaining the identity of Persons entitled to
participate in such payment or distribution, the holders of Senior
Indebtedness, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this
Article. In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person, as a holder of
Senior Indebtedness, to participate in any payment or distribution pursuant to
this Section, the Trustee may requires such Person (at the expense of the
Holders) to furnish evidence to the reasonable satisfaction of the Trustee,
acting in good faith, as to the amount of such Senior Indebtedness held by such
Person, as to the extent to which such Person is entitled to participate in
such payment or distribution, and as to other facts pertinent to the rights of
such Person under this Section, and if such evidence is not furnished, the
Trustee may defer any payment to such Person
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pending judicial determination as to the right of such Person to receive
payment.
The consolidation or merger of the Company with or into any Person, or
the sale, assignment, transfer, lease, conveyance or other disposition of all
or substantially all of the Company's assets to any Person, upon the terms and
conditions set forth in Article 5, shall not be deemed to be liquidation,
dissolution or reorganization or similar proceeding relating to the Company for
purposes of this Section if the Person formed by or surviving such
consolidation or merger, or to which such sale, assignment, transfer, lease,
conveyance or other disposition is made, shall, as a part of such
consolidation, merger, sale, assignment, transfer, lease, conveyance or other
disposition, comply with the conditions set forth in Article 5.
If a payment or distribution is made to Holders that, due to the
subordination provisions, should not have been made to them, such Holders are
required to hold it in trust for the holders of Senior Indebtedness of the
Company and pay it over to them as their interests may appear.
SECTION 10.3. Default on Senior Indebtedness.
(a) If any Senior Indebtedness of the Company is not paid when due,
the Company may not: (i) pay principal of, premium (if any) or interest on the
Securities or any other obligations under or in connection with the Securities,
this Indenture and/or any related agreements, documents or instruments; (ii)
make any deposit pursuant to Article 8; or (iii) repurchase, redeem or
otherwise retire any Securities (collectively "pay the Subordinated Debt")
unless the default shall have been cured or waived or such Senior Indebtedness
has been paid in full in cash.
(b) If any default on any Senior Indebtedness of the Company (other
than as set forth in Section 10.3(a)) occurs and the maturity of such Senior
Indebtedness is accelerated in accordance with its terms, the Company may not
pay the Subordinated Debt, unless the default shall have been cured or waived
and any such acceleration has been rescinded or such Senior Indebtedness has
been paid in full in cash.
(c) Notwithstanding Sections 10.3(a) and (b), the Company may pay the
Subordinated Debt without regard to the foregoing if the Company and the
Trustee receive written notice approving such payment from the Representative
of the Senior Indebtedness with respect to which either of the events set
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forth in Sections 10.3(a) and (b) has occurred and is continuing. During the
continuance of any default (other than a default described in Sections 10.3(a)
and (b)) with respect to any Designated Senior Indebtedness of the Company
pursuant to which the maturity thereof may be accelerated immediately without
further notice (except such notice as may be required to effect such
acceleration) or upon the expiration of any applicable grace periods, the
Company may not pay the Subordinated Debt for a period (a "Payment Blockage
Period") commencing upon the receipt by the Trustee (with a copy to the
Company) of written notice (a "Blockage Notice") of such default from the
Representative of the holders of such Designated Senior Indebtedness specifying
an election to effect a Payment Blockage Period and ending 179 days thereafter
(or earlier if such Payment Blockage Period is terminated (i) by written notice
to the Trustee and the Company from the Person or Persons who gave such
Blockage Notice, (ii) because the default giving rise to such Blockage Notice
is no longer continuing or (iii) because such Designated Senior Indebtedness
has been repaid in full in cash). Notwithstanding the provisions described in
the immediately preceding sentence, unless the holders of such Designated
Senior Indebtedness or the Representative of such holders has accelerated the
maturity of such Designated Senior Indebtedness, the Company may resume
payments on the Securities after the end of such Payment Blockage Period. The
Securities shall not be subject to more than one Payment Blockage Period in any
consecutive 360-day period, irrespective of the number of such nonpayment
defaults with respect to Designated Senior Indebtedness during such period.
(d) The Company covenants that it will, upon request of the Trustee,
deliver an Officers' Certificate (with copies thereof to the Representative of
each class of Senior Indebtedness of the Company) showing in reasonable detail
the Senior Indebtedness outstanding as of the date of such Officers'
Certificate and the Representative of each class of Senior Indebtedness. The
Trustee may conclusively rely thereon except to the extent that it shall have
received, from the Representative of any class of Senior Indebtedness, notice
in writing controverting any of the statements made therein. Not less than 10
days prior to making any distribution in respect of Senior Indebtedness
pursuant to this Section, the Trustee shall deliver to each Representative of
any class of Senior Indebtedness copies of the most recent Officers'
Certificate filed with it by the Company pursuant to this subsection (d).
(e) In the event that the Securities are declared due and payable
before their Stated Maturity in accordance with
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Article 6, then and in such event the holders of Senior Indebtedness
outstanding at the time the Securities so become due and payable shall be
entitled to receive payment in full in cash of all amounts due or to become due
on or in respect of such Senior Indebtedness (whether or not an event of
default has occurred thereunder or such Senior Indebtedness is, or has been
declared to be, due and payable prior to the date on which it otherwise would
have become due and payable) before the Holders shall be entitled to receive
any Security Payment.
SECTION 10.4. Payment of Subordinated Debt Permitted if No Default.
Nothing contained in this Article or elsewhere in this Indenture, or in any of
the Securities, shall prevent the Company or any Person acting on behalf of the
Company, at any time except as otherwise provided in Section 10.2 from paying
the Subordinated Debt.
SECTION 10.5. Notices by the Company. The Company shall give prompt
written notice in the form of an Officers' Certificate, notify the Trustee,
each Paying Agent and the Representative of any facts known to the Company that
would cause a payment on the Subordinated Debt to violate this Article, but
failure to give such notice shall not affect the subordination provided in this
Article of the Securities to Senior Indebtedness. Without limiting the
foregoing, if payment of the Securities is accelerated because of an Event of
Default, the Company shall promptly notify the Representative of the
acceleration.
SECTION 10.6. Subrogation. After all Senior Indebtedness is
irrevocably and indefeasibly paid in full in cash and until the Securities are
paid in full, Holders shall be subrogated to the rights of holders of Senior
Indebtedness to receive distributions applicable to Senior Indebtedness to the
extent that distributions otherwise payable to Holders have been applied to the
payment of Senior Indebtedness. A distribution made under this Article to
holders of Senior Indebtedness which otherwise would have been made to Holders
is not, as between the Company and the Holders, payment by the Company on
Senior Indebtedness.
SECTION 10.7. Relative Rights. This Article defines the relative
rights of Holders and holders of Senior Indebtedness. Nothing in this
Indenture shall:
(a) impair, as between the Company and the Holders, the obligation of
the Company, which is absolute and un-
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conditional, to pay the principal of, premium (if any) and interest on
the Securities in accordance with their terms;
(b) affect the relative rights of Holders and creditors of the
Company other than holders of Senior Indebtedness; or
(c) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of
holders of Senior Indebtedness to receive prepayment, payments and
distributions otherwise payable to Holders.
If the Company fails because of this Article to pay the principal of,
premium (if any) or interest on a Security on the due date or upon the
acceleration thereof, the failure is still a Default or Event of Default.
SECTION 10.8. Subordination May Not Be Impaired by the Company. No
right of any holder of Senior Indebtedness of the Company to enforce the
subordination of the Indebtedness evidenced by the Securities shall be impaired
by (a) any act or failure to act by the Company or by its failure to comply
with this Indenture, (b) any release of any collateral or any guarantor or any
Person of the Company's obligations under the Senior Indebtedness, (c) any
amendment, supplement, extension, renewal, restatement or other modification of
the Senior Indebtedness, (d) any settlement or compromise of any Senior
Indebtedness, (e) the unenforceability of any of the Senior Indebtedness or (f)
the failure of any holder of Senior Indebtedness to pursue claims against the
Company. The terms of the subordination provisions contained in this Article
10 will not apply to payments from money or the proceeds of U.S. Government
Obligations held in trust by the Trustee for the payment of principal of and
interest on the Securities pursuant to and in accordance with the provisions
described in Article 8.
SECTION 10.9. Distribution of Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness
of the Company, the distribution may be made and the notice given to their
Representative (if any).
SECTION 10.10. Rights of Trustee and Paying Agent. The Trustee or any
Payment Agent may continue to make payments in respect of the Securities and
shall not be charged with knowledge of the existence of facts that would
prohibit the making of any such payment unless, not less than three Business
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Days prior to the date of any such payment, a Responsible Officer of the
Trustee receives written notice reasonably satisfactory to it that payments in
respect of the Securities may not be made under this Article. Only the
Company, a Representative (satisfactorily identified to the Trustee) or a
holder of a class of Senior Indebtedness that has no Representative
(satisfactorily identified to the Trustee) may give the notice. Prior to the
receipt of such notice, the Trustee and any Paying Agent shall be entitled in
all respects to assume that no such facts exist. In any case, the Trustee
shall have no responsibility to the holders of Senior Indebtedness for payments
made to Holders by the Company or any Paying Agent unless cash payments are
made at the direction of the Trustee after receipt of such notice referred to
above.
Neither the Trustee nor any Payment Agent shall be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. With
respect to the holders of Senior Indebtedness, the Trustee undertakes to
perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be liable to
any holder of Senior Indebtedness if it shall mistakenly pay over or deliver to
Holders, the Company or any other Person moneys or assets to which any holder
of Senior Indebtedness shall be entitled by virtue of this Article 10 or
otherwise.
SECTION 10.11. Consent of Holders of Senior Indebtedness. The
provisions of this Article (including the definitions contained in this Article
and references to this Article contained in this Indenture) shall not be
amended, waived or modified in a manner that would adversely affect the rights
of the holders of any Senior Indebtedness of the Company, and no such
amendment, waiver or modification shall become effective, unless the holders of
such Senior Indebtedness shall have consented in writing (in accordance with
the provisions of the agreement governing such Senior Indebtedness) to such
amendment, waiver or modification.
SECTION 10.12. Contractual Subordination. This Article 10 represents
a bona fide agreement of contractual subor-
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dination pursuant to Section 510(b) of the United States Bankruptcy Code.
ARTICLE 11
SUBSIDIARY GUARANTEES
SECTION 11.1. Guarantees. Each Subsidiary Guarantor hereby
irrevocably and unconditionally guarantees, jointly and severally, to each
Holder and to the Trustee and its successors and assigns the full and punctual
payment of principal of, premium, if any, and interest on the Securities when
due, whether at Stated Maturity, by acceleration or otherwise, and all other
obligations of the Company under this Indenture and the Securities (all the
foregoing being hereinafter collectively called the "Guaranteed Obligations").
Each Subsidiary Guarantor further agrees that the Guaranteed Obligations may be
extended or renewed, in whole or in part, without notice or further assent from
such Subsidiary Guarantor and that such Subsidiary Guarantor will remain bound
under this Article 11 notwithstanding any extension or renewal of any
Guaranteed Obligation.
Each Subsidiary Guarantor waives presentation to, demand of, payment
from and protest to the Company of any of the Guaranteed Obligations and also
waives notice of protest for nonpayment. Each Subsidiary Guarantor waives
notice of any default under the Securities or the Guaranteed Obligations. The
obligations of each Subsidiary Guarantor hereunder shall not be affected by (a)
the failure of any Holder or the Trustee to assert any claim or demand or to
enforce any right or remedy against the Company or any other Person under this
Indenture, the Securities or any other agreement or otherwise; (b) any
extension or renewal of any thereof; (c) any rescission, waiver, amendment or
modification of any of the terms or provisions of this Indenture, the
Securities or any other agreement; (d) the release of any security held by any
Holder or the Trustee for the Guaranteed Obligations or any of them; (e) the
failure of any Holder or the Trustee to exercise any right or remedy against
any other guarantor of the Guaranteed Obligations; or (f) any change in the
ownership of such Subsidiary Guarantor.
Each Subsidiary Guarantor further agrees that its Subsidiary Guarantee
herein constitutes a guarantee of payment, performance and compliance when due
(and not a guarantee of collection) and waives any right to require that any
resort be had by any Holder or the Trustee to any security held for payment of
the Guaranteed Obligations.
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Each Subsidiary Guarantee is, to the extent and in the manner set forth
in Article 12, subordinated and subject in right of payment to the prior
payment in full of the principal of and premium, if any, and interest on all
Senior Indebtedness of the Subsidiary Guarantor giving such Subsidiary
Guarantee and each Subsidiary Guarantee is made subject to such provisions of
this Indenture.
Except as expressly set forth in Sections 8.2, 11.2 and 11.6, the
obligations of each Subsidiary Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense of setoff, counterclaim, recoupment or termination
whatsoever or by reason of the invalidity, illegality or unenforceability of
the Guaranteed Obligations or otherwise. Without limiting the generality of
the foregoing, the obligations of each Subsidiary Guarantor herein shall not be
discharged or impaired or otherwise affected by the failure of any Holder or
the Trustee to assert any claim or demand or to enforce any remedy under this
Indenture, the Securities or any other agreement, by any waiver or modification
of any thereof, by any default, failure or delay, willful or otherwise, in the
performance of the Guaranteed Obligations, or by any other act or thing or
omission or delay to do any other act or thing which may or might in any manner
or to any extent vary the risk of such Subsidiary Guarantor or would otherwise
operate as a discharge of such Subsidiary Guarantor as a matter of law or
equity.
Each Subsidiary Guarantor further agrees that its Subsidiary Guarantee
herein shall continue to be effective or be reinstated, as the case may be, if
at any time payment, or any part thereof, of principal of, premium, if any, or
interest on any Guaranteed Obligation is rescinded or must otherwise be
restored by any Holder or the Trustee upon the bankruptcy or reorganization of
the Company or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against any
Subsidiary Guarantor by virtue hereof, upon the failure of the Company to pay
the principal of, premium, if any, or interest on any Obligation when and as
the same shall become due, whether at maturity, by acceleration, by redemption
or otherwise, or to perform or comply with any other Guaranteed Obligation,
each Subsidiary Guarantor hereby promises to and will, upon receipt of written
demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the
Hold-
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ers or the Trustee an amount equal to the sum of (i) the unpaid amount of such
Guaranteed Obligations, (ii) accrued and unpaid interest on such Guaranteed
Obligations (but only to the extent not prohibited by law) and (iii) all other
monetary Guaranteed Obligations of the Company to the Holders and the Trustee.
Each Subsidiary Guarantor agrees that it shall not be entitled to any
right of subrogation in respect of any Guaranteed Obligations guaranteed hereby
until payment in full of all Guaranteed Obligations and all obligations to
which the Guaranteed Obligations are subordinated as provided in Article 12.
Each Subsidiary Guarantor further agrees that, as between it, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity of the
Guaranteed Obligations hereby may be accelerated as provided in Article 6 for
the purposes of such Subsidiary Guarantor's Subsidiary Guarantee herein,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby, and (y) in the
event of any declaration of acceleration of such Obligations as provided in
Article 6, such Obligations (whether or not due and payable) shall forthwith
become due and payable by such Subsidiary Guarantor for the purposes of this
Section.
Each Subsidiary Guarantor also agrees to pay any and all costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or any
Holder in enforcing any rights under this Section.
SECTION 11.2. Limitation on Liability. Any term or provision of this
Indenture to the contrary notwithstanding, the maximum aggregate amount of the
obligations guaranteed hereunder by any Subsidiary Guarantor shall not exceed
the maximum amount that can be hereby guaranteed without rendering this
Indenture, as it relates to such Subsidiary Guarantor, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally. To effectuate the
foregoing intention, the obligations of each Subsidiary Guarantor shall be
limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Subsidiary Guarantor and after giving
effect to any collections from or payments made by or on behalf of any other
Subsidiary Guarantor in respect of the obligations of such other Subsidiary
Guarantor under its Subsidiary Guarantee or pursuant to its contribution
obligations hereunder, result in the obligations of such Subsidiary Guarantor
under its Subsidiary Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under fed-
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eral, state or foreign law. Each Subsidiary Guarantor that makes a payment or
distribution under a Subsidiary Guarantee shall be entitled to a contribution
from each other Subsidiary Guarantor in an amount based on the consolidated net
worth of each Subsidiary Guarantor.
SECTION 11.3. Successors and Assigns. This Article 11 shall be
binding upon each Subsidiary Guarantor and its successors and assigns and shall
enure 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 conferred upon that party in this
Indenture and in the Securities shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions of this
Indenture.
SECTION 11.4. No Waiver. Neither a failure nor a delay on the part of
either the Trustee or the Holders in exercising any right, power or privilege
under this Article 11 shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any
other rights, remedies or benefits which either may have under this Article 11
at law, in equity, by statute or otherwise.
SECTION 11.5. Modification. No modification, amendment or waiver of
any provision of this Article 11, nor the consent to any departure by any
Subsidiary Guarantor therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Trustee, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any Subsidiary Guarantor in any case shall
entitle such Subsidiary Guarantor to any other or further notice or demand in
the same, similar or other circumstances.
SECTION 11.6. Release of Subsidiary Guarantor. A Subsidiary Guarantor
may, by execution and delivery to the Trustee of a supplemental indenture
satisfactory to the Trustee, be released from its Guarantee upon the sale of
all of its Capital Stock, or all or substantially all of the assets of the
applicable Subsidiary Guarantor, to any Person that is not a Subsidiary of the
Company, if such sale is made in compliance with this Indenture.
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SECTION 11.7. Execution of Supplemental Indenture for Future
Subsidiary Guarantors. Each Subsidiary which is required to become a
Subsidiary Guarantor pursuant to Section 4.16 shall, and the Company shall
cause each such Subsidiary to, promptly execute and deliver to the Trustee a
supplemental indenture in the form of Exhibit E hereto pursuant to which such
Subsidiary shall become a Subsidiary Guarantor under this Article 11 and shall
guarantee the Obligations. Concurrently with the execution and delivery of
such supplemental indenture, the Company shall deliver to the Trustee an
Opinion of Counsel to the effect that such supplemental indenture has been duly
authorized, executed and delivered by such Subsidiary and that, subject to the
application of bankruptcy, insolvency, moratorium, fraudulent conveyance or
transfer and other similar laws relating to creditors' rights generally and to
the principles of equity, whether considered in a proceeding at law or in
equity, the Subsidiary Guarantee of such Subsidiary Guarantor is a legal, valid
and binding obligation of such Subsidiary Guarantor, enforceable against such
Subsidiary Guarantor in accordance with its terms.
ARTICLE 12
SUBORDINATION OF SUBSIDIARY GUARANTEES
SECTION 12.1. Agreement To Subordinate. Notwithstanding any other
provision to the contrary in this Indenture, each Subsidiary Guarantor
covenants and agrees, and each Holder by accepting a Security covenants and
agrees, that all payments by such Subsidiary Guarantor in respect of its
Subsidiary Guarantee are subordinated in right of payment, to the extent and in
the manner provided in this Article, to the prior payment in full of all Senior
Indebtedness of such Subsidiary Guarantor, whether outstanding on the Issue
Date or thereafter incurred, including all Obligations of the Company and such
Subsidiary Guarantor under the Senior Credit Facility. The subordination
provisions set forth in this Article are for the benefit of, and shall be
enforceable directly by, the holders of Senior Indebtedness.
Each Holder authorizes and directs the Trustee on such Holder's behalf
to take such action as may be necessary or appropriate, in the sole discretion
of the Trustee, to acknowledge or effectuate the subordination between the
Holders and the holders of Senior Indebtedness of each subsidiary Guarantor as
provided in this Article and appoints the Trustee as such Holder's
attorney-in-fact for any and all such proposes, including, in the event of any
voluntary or involuntary liquida-
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tion or dissolution of a Subsidiary Guarantor, whether total or partial, or in
a bankruptcy, reorganization, insolvency, receivership, dissolution, assignment
for the benefit of creditors, marshalling of assets or similar proceeding
relating to a Subsidiary Guarantor or its property, the timely filing of a
claim for the unpaid balance of such Holder's Securities in the form required
in said proceeding and cause said claim to be approved. If the Trustee does
not file a property claim or proof to debt in the form required in such
proceeding prior to 20 days before the expiration of the time to exile such
claim or claims, then the Representative is hereby authorized to have the right
to file and is hereby authorized to file an appropriate claim for and on behalf
of the Holders; provided, however, that any such claim filed by such
Representative shall be superseded by the claim, if any, subsequently filed by
the Trustee.
Each Holder by accepting a Security acknowledges and agrees that the
subordination provisions set forth in this Article are, and are intended to be,
an inducement and consideration to each holder of Senior Indebtedness of each
Subsidiary Guarantor, whether such Senior Indebtedness was created before or
after the issuance of the Securities, to acquire and continue to hold, or to
continue to hold, such Senior Indebtedness, and such holder of Senior
Indebtedness shall be deemed conclusively to have relied upon such
subordination provisions in acquiring and continuing to hold, or in continuing
to hold, such Senior Indebtedness, and such holder is made an obligee hereunder
and may enforce directly such subordination provisions.
SECTION 12.2. Liquidation; Dissolution; Bankruptcy. Upon any payment
or distribution of the assets of any Subsidiary Guarantor of any kind or
character, whether in cash, property or securities, to creditors upon a total
or partial liquidation or dissolution or reorganization or similar proceeding
relating to such Subsidiary Guarantor or its property or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding:
(a) the holders of Senior Indebtedness of such Subsidiary Guarantor
shall be entitled to receive payment in full in cash of such Senior
Indebtedness before Holders are entitled to receive any payment; and
(b) until the Senior Indebtedness of such Subsidiary Guarantor is
paid in full, any payment or distribution to which Holders would be
entitled but for this Article shall
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be made to holders of Senior Indebtedness of such Subsidiary Guarantor,
as their interests may appear.
Upon any payment or distribution referred to in this Article, the
Trustee and the Holders shall be entitled to rely upon any order or decree of a
court of competent jurisdiction in which such proceedings are pending for the
purpose of ascertaining the identity of Persons entitled to participate in such
payment or distribution, the holders of Senior Indebtedness, the amount thereof
or payable thereon and all other facts pertinent thereto or to this Article,
and the Trustee and the Holders shall be entitled to rely upon a certificate of
the liquidating trustee or agent or other Person (including any Representative
of holders of Senior Indebtedness of such Subsidiary Guarantor) making any
payment or distribution to the Trustee or to the Holders for the purpose of
ascertaining the identity of Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article. In the event that the Trustee determines
in good faith that further evidence is required with respect to the right of
any Person, as a holder of Senior Indebtedness, to participate in any payment
or distribution pursuant to this Section, the Trustee may request such Person
(at the expense of the Holders) to furnish evidence to the reasonable
satisfaction of the Trustee, acting in good faith, as to the amount of such
Senior Indebtedness held by such Person, as to the extent to which such Person
is entitled to participate in such payment or distribution, and as to the other
facts pertinent to the rights of such Person under this Section, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive
payment.
The consolidation or merger of a Subsidiary Guarantor with or into any
Person, or the sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of such Subsidiary Guarantor's assets
to any Person, in compliance with the terms and conditions set forth in
Sections 5.1 and 5.2, shall not be deemed to be a liquidation, dissolution or
reorganization or similar proceeding relating to such Subsidiary Guarantor for
purposes of this Section.
SECTION 12.3. Default on Senior Indebtedness.
(a) If any Senior Indebtedness of a Subsidiary Guarantor is not paid
when due, such Subsidiary Guarantor may not
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pay the Subordinated Debt unless the default shall have been cured or waived or
such Senior Indebtedness has been paid in full.
(b) If any default on any Senior Indebtedness of a Subsidiary
Guarantor (other than as set forth in Section 12.3(a)) occurs and such Senior
Indebtedness is accelerated in accordance with its terms, such Subsidiary
Guarantor may not pay the Subordinated Debt unless the default shall have been
cured or waived and any such acceleration has been rescinded or such Senior
Indebtedness has been paid in full in cash.
(c) Notwithstanding Sections 12.3(a) and (b), the Subsidiary
Guarantors may pay the Subordinated Debt without regard to the foregoing if the
Subsidiary Guarantors and the Trustee receive written notice approving such
payment from the Representative of the Senior Indebtedness with respect to
which either of the events set forth in Sections 12.3(a) and (b) has occurred
and is continuing. During the continuance of any default (other than a default
described in Sections 12.3(a) and (b)) with respect to any Senior Indebtedness
of a Subsidiary Guarantor pursuant to which the maturity thereof may be
accelerated immediately without further notice (except such notice as may be
required to effect such acceleration) or the expiration of any applicable grace
periods, the Subsidiary Guarantors may not pay the Subordinated Debt for the
Payment Blockage Period commencing upon the receipt by the Trustee (with a copy
to the Subsidiary Guarantors) of a Blockage Notice from the Representative of
the holders of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 180 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Trustee
and the Subsidiary Guarantor from the Person or Persons who gave such Blockage
Notice, (ii) because the default giving rise to such Blockage Notice has been
waived in writing or (iii) because such Designated Senior Indebtedness has been
repaid in full in cash). Notwithstanding the provisions described in the
immediately preceding sentence, unless the holders of such Designated Senior
Indebtedness or the Representative of such holders has accelerated the maturity
of such Designated Senior Indebtedness, the Subsidiary Guarantor may resume
payments on the Securities after the end of such Payment Blockage Period. The
Securities shall not be subject to more than one Payment Blockage Period in any
consecutive 360-day period, irrespective of the number of such nonpayment
defaults with respect to Designated Senior Indebtedness during such period.
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(d) Each Subsidiary Guarantor covenants that it will, upon request of
the Trustee, deliver an Officers' Certificate (with copies thereof to the
Representative of each class of Senior Indebtedness of such Subsidiary
Guarantor) showing in reasonable detail the Senior Indebtedness outstanding as
of the date of such Officers' Certificate and the Representative of each class
of such Senior Indebtedness. The Trustee may conclusively rely thereon except
to the extent that it shall have received, from the Representative of any class
of such Senior Indebtedness, notice in writing controverting any of the
statements made therein. Not less than 10 days prior to making any
distribution in respect of Senior Indebtedness pursuant to this Section, the
Trustee shall deliver to each Representative of any class of such Senior
Indebtedness copies of the most recent Officers' Certificate filed with it by
such Subsidiary Guarantor pursuant to this subsection (d).
(e) In the event that the Securities are declared due and payable
before their Stated Maturity in accordance with Article 6, then and in such
event the holders of Senior Indebtedness of any Subsidiary Guarantor
outstanding at the time the Securities so become due and payable shall be
entitled to receive payment in full in cash of all amounts due or to become due
on or in respect of such Senior Indebtedness (whether or not an Event of
Default has occurred thereunder or the Senior Indebtedness of such Subsidiary
Guarantor is, or has been declared to be, due and payable prior to the date on
which it otherwise would have become due and payable) before the Holders shall
be entitled to receive any Security Payment.
SECTION 12.4. Payments of Subordinated Debt Permitted if No Default.
Nothing contained in this Article or elsewhere in this Indenture, or in any of
the Securities, shall prevent a Subsidiary Guarantor or any Person acting on
behalf of a Subsidiary Guarantor, at any time except as otherwise provided in
Section 12.2 or 12.3, from paying the Subordinated Debt.
SECTION 12.5. Notices by a Subsidiary Guarantor. Each Subsidiary
Guarantor shall promptly notify the Trustee, each Paying Agent and the
Representative of any facts known to such Subsidiary Guarantor that would cause
a payment on the Subordinated Debt to violate this Article, but failure to give
such notice shall not affect the subordination provided in this Article of any
Subsidiary Guarantee to holders of Senior Indebtedness of such Subsidiary
Guarantor. Without limiting the foregoing, if payment of the Securities is
accelerated because
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of an Event of Default, the Subsidiary Guarantors shall promptly notify the
Representative of the acceleration.
SECTION 12.6. Subrogation. After all Senior Indebtedness is
irrevocably and indefeasibly paid in full in cash and until the Securities are
paid in full, Holders shall be subrogated to the rights of holders of Senior
Indebtedness of the respective Subsidiary Guarantors to receive distributions
applicable to Senior Indebtedness to the extent that distributions otherwise
payable to Holders have been applied to the payment of Senior Indebtedness. A
distribution made under this Article to holders of Senior Indebtedness which
otherwise should have been made to Holders is not, as between a Subsidiary
Guarantor and the Holders, payment by such Subsidiary Guarantor on Senior
Indebtedness.
SECTION 12.7. Relative Rights. This Article defines the relative
rights of Holders and holders of Senior Indebtedness of the Subsidiary
Guarantors. Nothing in this Indenture shall:
(a) impair, as between a Subsidiary Guarantor and the Holders, the
obligation of a Subsidiary Guarantor, which is absolute and
unconditional, to make any payment in accordance with the terms of its
Subsidiary Guarantee;
(b) affect the relative rights of Holders and creditors of a
Subsidiary Guarantor other than holders of Senior Indebtedness of such
Subsidiary Guarantor; or
(c) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of
holders of Senior Indebtedness to receive prepayment, payments and
distributions otherwise payable to Holders.
If a Subsidiary Guarantor fails because of this Article to pay the
principal of (or premium, if any) or interest on a Security on the due date or
upon the acceleration thereof, the failure is still a Default or Event of
Default.
SECTION 12.8. Subordination May Not Be Impaired by the Subsidiary
Guarantor. No right of any holder of Senior Indebtedness to enforce the
subordination of the Obligation of a Subsidiary Guarantor pursuant to its
Subsidiary Guarantee shall be impaired by (a) any act or failure to act by such
Subsidiary Guarantor or by its failure to comply with this Indenture, (b) any
release of any collateral or any guarantor or any Per-
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son or such Subsidiary Guarantor's obligations under Senior Indebtedness, (c)
any amendment, supplement, extension, renewal, restatement or other
modification of any Senior Indebtedness, (d any settlement or compromise of
any Senior Indebtedness, (e) the unenforceability of any of the Senior
Indebtedness or (f) the failure of any holder of Senior Indebtedness to pursue
claims against such Subsidiary Guarantor. The terms of the subordination
provisions contained in this Article 12 will not apply to payments from money
or the proceeds of U.S. Government Obligations held in trust by the Trustee for
the payment of principal of and interest on the Securities pursuant to and in
accordance with the provisions described in Article 8.
SECTION 12.9. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness,
the distribution may be made and the notice given to their Representative (if
any).
SECTION 12.10. Rights of Trustee and Paying Agent. The Trustee or any
Paying Agent may continue to make payments in respect of the Securities and
shall not be charged with knowledge of the existence of facts that would
prohibit the making of any such payment unless, not less than three Business
Days prior to the date of any such payment, a Responsible Officer of the
Trustee receives written notice reasonably satisfactory to it that payments in
respect of the Securities may not be made under this Article. Only a
Subsidiary Guarantor, a Representative (satisfactorily identified to the
Trustee) or a holder of a class of Senior Indebtedness that has no
Representative (satisfactorily identified to the Trustee) may give the notice.
Prior to the receipt of such notice, the Trustee and any Paying Agent shall be
entitled in all respects to assume that no such facts exist. In any case, the
Trustee shall have no responsibility to the holders of Senior Indebtedness for
payments made to Holders by a Subsidiary Guarantor or any Paying Agent unless
such payments are made at the direction of the Trustee after receipt of such
notice referred to above.
Neither the Trustee nor any Paying Agent shall be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness. With respect to the
holders of Senior Indebtedness, the Trustee undertakes to perform or to observe
only such of its covenants and obligations as are specifically set forth in
this Article 12, and no implied covenants or obligations with respect to the
holders of Senior Indebtedness shall be read into this Indenture against the
Trustee. The Trustee shall not be liable to any holders of Senior Indebtedness
if it shall mistakenly pay over or deliver to Holders, the Company or
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any other Person moneys or assets to which any holder of Senior Indebtedness
shall be entitled by virtue of this Article 12 or otherwise.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee.
This Section is solely for the benefit of the Trustee and any Paying
Agents and shall not limit the obligations of the Holders.
SECTION 12.11. Consent of Holders of Senior Indebtedness. The
provisions of this Article (including the definitions contained in this Article
and references to this Article contained in this Indenture) shall not be
amended, waived or modified in a manner that would adversely affect the rights
of the holders of any Senior Indebtedness of the Subsidiary Guarantors, and no
such amendment, waiver or modification shall become effective, unless the
holders of such Senior Indebtedness shall have consented in writing (in
accordance with the provisions of the Agreement governing such Senior
Indebtedness) to such amendment, waiver or modification.
SECTION 12.12. Contractual Subordination. This Article represents a
bona fide agreement of contractual subordination pursuant to Section 510(b) of
the United States Bankruptcy Code.
ARTICLE 13
MISCELLANEOUS
SECTION 13.1. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control. If this Indenture excludes any provision of the TIA that is
required to be included, such provision shall be deemed included herein.
SECTION 13.2. Notices. Any notice or communication shall be in
writing and delivered in person, by overnight courier or facsimile (if to the
Company, with receipt confirmed by an Officer) or mailed by first-class mail
addressed as follows:
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If to the Company or any Subsidiary Guarantor:
MSX International Inc.
275 Rex Boulevard
Auburn Hills, MI 48326
Attention:
If to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Corporate Trust Department
Facsimile: (212) 858-2952
Telephone: (212) 858-2000
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed first class, postage pre-paid to a
Securityholder, including any notice delivered in connection with TIA Section
Section 310(b), 313(c), 314(a) and 315(b), shall be sent to the Securityholder
at the Securityholder's address as it appears on the registration books of the
Registrar and shall be sufficiently given if so sent within the time
prescribed. To the extent required by the TIA, any notice or communication
shall also be mailed to any Person described in TIA Section 313(c).
Failure to send a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is sent in the manner provided
above, it is duly given, whether or not the addressee receives it.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice.
SECTION 13.3. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c). With respect to the disclosure of any
information as to the names and addresses of the Securityhold-
<PAGE> 114
-106-
ers, the Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under TIA Section 312(b).
SECTION 13.4. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take or
refrain from taking any action under this Indenture, the Company shall furnish
to the Trustee to the extent required by the TIA or this Indenture:
(1) an Officers' Certificate (which in connection with the original
issuance of the Securities need only be executed by one Officer for the
Company) in form and substance reasonably satisfactory to the Trustee
stating that all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 13.5. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 13.6. When Securities Disregarded. In determining whether the
Holders of the required principal amount
<PAGE> 115
-107-
of Securities have concurred in any direction, waiver or consent, Securities
owned by the Company or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company shall
be disregarded and deemed not to be outstanding, except that, for the purpose
of determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities which the Trustee actually knows
are so owned shall be so disregarded. Also, subject to the foregoing, only
Securities outstanding at the time shall be considered in any such
determination.
SECTION 13.7. Rules by Trustee, Paying Agent and Registrar. The
Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Trustee shall provide the Company reasonable notice of
such rules. The Registrar and the Paying Agent may make reasonable rules for
their functions.
SECTION 13.8. Legal Holidays. If a payment date is a Legal Holiday,
payment shall be made on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the intervening period. If a regular record
date is a Legal Holiday, the record date shall not be affected.
SECTION 13.9. Governing Law. This Indenture and the Securities shall
be governed by, and construed in accordance with, the laws of the State of New
York without giving effect to applicable principles of conflict of laws to the
extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 13.10. No Recourse Against Others. No recourse for the
payment of the principal of, premium, if any, or interest on any of the
Securities or for any claim based thereon or otherwise in respect thereof, and
no recourse under or upon any obligation, covenant or agreement of the Company
in this Indenture, or in any of the Securities or because of the creation of
any Indebtedness represented hereby and thereby, shall be had against any
incorporator, stockholder, officer, director, employee or controlling person of
the Company or any Successor Person thereof. Each Holder, by accepting a
Security, waives and releases all such liability. The waiver and release shall
be part of the consideration for the issuance of the Securities.
SECTION 13.11. Successors. All agreements of the Company in this
Indenture and the Securities shall bind the
<PAGE> 116
-108-
Company's successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 13.12. Multiple 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. One signed copy is enough to prove
this Indenture.
SECTION 13.13. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.
SECTION 13.14. Severability Clause. In case any provision in this
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
<PAGE> 117
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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
MSX INTERNATIONAL, INC.
By:
---------------------------
Name: Frederick Minturn
Title: Executive Vice President
GEOMETRIC RESULTS INCORPORATED
By:
---------------------------
Name: Frederick Minturn
Title: Secretary
MSX INTERNATIONAL ENGINEERING
SERVICES, INC.
By:
---------------------------
Name: Frederick Minturn
Title: Vice President
MSX INTERNATIONAL BUSINESS
SERVICES, INC.
By:
---------------------------
Name: Edward Mannino
Title: President
MSX INTERNATIONAL (USA), INC.
By:
---------------------------
Name: Frederick Minturn
Title: Vice President
<PAGE> 118
-110-
MSX INTERNATIONAL (HOLDINGS), INC.
By:
---------------------------
Name:
Title:
<PAGE> 119
-111-
TRUSTEE:
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
By:
---------------------------
Name:
Title:
<PAGE> 120
SCHEDULE I
Existing Affiliate Transactions
<PAGE> 121
EXHIBIT A
FACE OF SECURITY
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES
OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE
REFERRED TO ON THE REVERSE HEREOF.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY
OF THE ISSUANCE HEREOF (OR A PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER
THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS
PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE
COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX
CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF
THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S
UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON
THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), AND, IF SUCH
TRANSFER IS BEING EFFECTED BY CERTAIN TRANSFERORS SPECIFIED IN THE INDENTURE
(AS DEFINED BELOW) PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED
A-1
<PAGE> 122
PERIOD" (WITHIN THE MEANING OF RULE 903(c)(3) OF REGULATION S UNDER THE
SECURITIES ACT), A CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR THE
TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (4) TO
AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY
THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY)
THAT IS ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR
DISTRIBUTION, AND A CERTIFICATE IN THE FORM ATTACHED TO THIS SECURITY IS
DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE (PROVIDED THAT
CERTAIN HOLDERS SPECIFIED IN THE INDENTURE MAY NOT TRANSFER THIS SECURITY
PURSUANT TO THIS CLAUSE (4) PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED
PERIOD" (WITHIN THE MEANING OF RULE 903(c)(3) OF REGULATION S UNDER THE
SECURITIES ACT)), (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT,
OR (6) 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. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS
SECURITY AGREES IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH
CERTIFICATES, LEGAL OPINIONS AND OTHER INFORMATION AS THEY MAY REASONABLY
REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE
FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT (1) IT AND ANY
ACCOUNT FOR WHICH IT IS ACTING IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A OR (2) IT IS AN INSTITUTION THAT IS AN "ACCREDITED
INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR
DISTRIBUTION OR (3) IT IS A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (o)(2)
OR RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE OF THE
DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR 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, A NEW YORK CORPORATION
("DTC"), TO AN ISSUER OR
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<PAGE> 123
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 IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.14 OF THE INDENTURE.
A-3
<PAGE> 124
No.
$
11 3/8% Senior Subordinated Notes Due 2008
CUSIP No. 553758AA1
MSX INTERNATIONAL, INC., a Delaware corporation, promises to pay to Cede &
Co., or registered assigns, the principal sum of Dollars on
January 15, 2008.
Interest Payment Dates: January 15 and July 15.
Record Dates: January 1 and July 1.
Additional provisions of this Security are set forth on the reverse side
of this Security.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
MSX INTERNATIONAL, INC.
By:
---------------------------------
Name:
Title:
Dated:
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<PAGE> 125
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
IBJ Schroder Bank & Trust Company, as Trustee, certifies that this is one of
the Securities referred to in the within-mentioned Indenture.
By:
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
By:
---------------------
Name:
Title:
Date of Authentication:
A-5
<PAGE> 126
[REVERSE OF SECURITY]
11 3/8% SENIOR SUBORDINATED SECURITY DUE 2008
1. Interest
MSX INTERNATIONAL, INC., a Delaware corporation (such entity, and its
successors and assigns under the Indenture hereinafter referred to, and each
other entity which is required to become the Company pursuant to the Indenture,
and its successors and assigns under the Indenture, being herein called the
"Company"), promises to pay interest on the principal amount of this Security
at the rate per annum shown above. The Company will pay interest semi-annually
on January 15 and July 15 of each year, commencing July 15, 1998. Interest on
the Securities will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from January 22, 1998. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. The Company
shall pay interest on overdue principal at 1% per annum in excess of the rate
borne by the Securities, and it shall pay interest on overdue installments of
interest at the same rate to the extent lawful.
2. Method of Payment
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the record date immediately preceding the interest payment date
even if Securities are canceled on registration of transfer or registration of
exchange (including pursuant to an Exchange Offer (as defined in the applicable
Registration Agreement)) after the record date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company will
pay principal and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts ("U.S. Legal
Tender"). However, the Company may pay principal and interest by its check
payable in such U.S. Legal Tender. The Company may deliver any such interest
payment to the Paying Agent or to a Holder's registered address.
3. Paying Agent and Registrar
Initially, IBJ Schroder Bank & Trust Company, a national banking
corporation ("Trustee"), will act as Paying
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<PAGE> 127
Agent and Registrar. The Company may appoint and change any Paying Agent,
Registrar or co-registrar without notice. The Company may act as Paying Agent,
Registrar, co-Registrar or transfer agent.
4. Indenture
The Company issued the Securities under an Indenture dated as of January
15, 1998 (the "Indenture"), among the Company, the Subsidiary Guarantors and
the Trustee. This Security is one of a duly authorized issue of Initial
Securities of the Company designated as its 11 3/8% Senior Subordinated Notes
due 2008 (the "Initial Securities"). The Securities include the Initial
Securities and the Exchange Securities (as defined in the Indenture) issued in
exchange for the Initial Securities pursuant to the Registration Agreement.
The Initial Securities and the Exchange Securities are treated as a single
class of securities under the Indenture. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in
effect on the date of the Indenture (the "TIA"). Terms defined in the
Indenture and not defined herein have the meanings ascribed thereto in the
Indenture. The Securities are subject to all such terms, and Securityholders
are referred to the Indenture and the TIA for a statement of those terms. Any
conflict between this Security and the Indenture will be governed by the
Indenture.
The Securities are unsecured senior subordinated obligations of the
Company limited to $130,000,000 aggregate principal amount. The Indenture
imposes certain limitations on the Incurrence of Indebtedness by the Company
and its Restricted Subsidiaries, the existence of liens, the payment of
dividends on, and redemption of, the Capital Stock of the Company and its
Subsidiaries, restricted payments, the sale or transfer of assets and
Subsidiary stock, the issuance or sale of Capital Stock of Restricted
Subsidiaries, the investments of the Company and its Restricted Subsidiaries,
consolidations, mergers and transfers of all or substantially all the assets of
the Company, and transactions with Affiliates. In addition, the Indenture
limits the ability of the Company and certain of its Subsidiaries to restrict
distributions and dividends from Restricted Subsidiaries.
To guarantee the due and punctual payment of the principal, premium and
interest, if any, on the Securities and
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<PAGE> 128
all other amounts payable by the Company under the Indenture and the Securities
when and as the same shall be due and payable, whether at maturity, by
acceleration or otherwise, according to the terms of the Securities and the
Indenture, the Subsidiary Guarantors have unconditionally guaranteed the
Obligations on a senior subordinated basis pursuant to the terms of the
Indenture.
5. Optional Redemption
Except as set forth in the next paragraph, the Securities may not be
redeemed at the option of the Company prior to January 15, 2003. Thereafter,
the Securities will be redeemable, at the Company's option, in whole or in
part, at any time or from time to time, at the following redemption prices
(expressed in percentages of principal amount), plus accrued and unpaid
interest to the redemption date (subject to the right of Holders of record on
the relevant record date to receive interest due on the relevant interest
payment date) if redeemed during the 12-month period commencing on January 15
of the years set forth below:
<TABLE>
<CAPTION>
Period Percentage
- ------ ----------
<S> <C>
2003............... 105.6875%
2004............... 103.7917%
2005............... 101.8958%
2006 and thereafter 100.0000%
</TABLE>
In addition, at any time and from time to time prior to January 15, 2001,
the Company may redeem in the aggregate up to 35% of the original principal
amount of the Securities with the proceeds of one or more Public Equity
Offerings following which there is a Public Market, at a redemption price
(expressed as a percentage of principal amount) of 111.375% plus accrued and
unpaid interest, if any, to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date); provided, however, that at least 65% of the
original aggregate principal amount of the Securities must remain outstanding
after each such redemption.
6. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30 days
but not more than 60 days before the re-
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<PAGE> 129
demption date to each Holder of Securities to be redeemed at his registered
address. Securities in denominations larger than $1,000 may be redeemed in
part but only in whole multiples of $1,000. If money sufficient to pay the
redemption price of and accrued interest on all Securities (or portions
thereof) to be redeemed on the redemption date is deposited with the Paying
Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest ceases to accrue on such Securities
(or such portions thereof) called for redemption. If a notice or communication
is sent in the manner provided in the Indenture, it is duly given, whether or
not the addressee receives it. Failure to send a notice or communication to a
Securityholder or any defect in it shall not affect its sufficiency with
respect to other Securityholders.
In addition, in the event of certain Asset Dispositions, the Company will
be required to make an offer to purchase Securities at a purchase price of 100%
of their principal amount plus accrued interest to the date of purchase
(subject to the rights of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date) as provided in, and
subject to the terms of, the Indenture.
7. Change of Control
Upon a Change of Control, each Holder of Securities will have the right to
require the Company to repurchase all or any part of the Securities of such
Holder at a repurchase price in cash equal to 101% of the principal amount of
the Securities to be repurchased plus accrued and unpaid interest to the date
of repurchase (subject to the right of Holders of record on the relevant record
date to receive interest due on the related interest payment date) as provided
in, and subject to the terms of, the Indenture.
8. The Registration Agreement
The holder of this Security is entitled to the benefits of a Registration
Agreement, dated as of January 22, 1998, among the Company, the Subsidiary
Guarantors and the Initial Purchasers named therein (as such may be amended
from time to time, the "Registration Agreement"). Capitalized terms used in
this subsection but not defined herein have the meanings assigned to them in
the Registration Agreement.
A-9
<PAGE> 130
In the event that (i) neither the Exchange Offer Registration Statement
nor the Shelf Registration Statement has been filed with the Commission within
90 days after the Issue Date, (ii) within 180 days after the Issue Date, either
the Exchange Offer Registration Statement or the Shelf Registration Statement
has not been declared effective (provided that this clause (ii) shall not apply
to any Securities as to which a Shelf Registration Statement is requested by an
Initial Purchaser), (iii) within 210 days of the Issue Date, the Exchange Offer
has not been consummated or, with respect to any Securities as to which a Shelf
Registration Statement is requested by an Initial Purchaser, such Shelf
Registration Statement has not been declared effective within 240 days after
the Issue Date, or (iv) after either the Exchange Offer Registration Statement
or the Shelf Registration Statement has been declared effective, such
Registration Statement thereafter ceases to be effective or usable (subject to
certain exceptions set forth in the Registration Agreement) in connection with
resales of the Securities or the Exchange Securities at any time that the
Company is obligated to maintain the effectiveness thereof pursuant to the
Registration Agreement (each such event referred to in clauses (i) through (iv)
above being referred to herein as a "Registration Default"), interest ("Special
Interest") will accrue on the Securities and the Exchange Securities (in
addition to the interest described above) from and including the date on which
any Registration Default shall occur but excluding the date on which all such
Registration Defaults have been cured. Special Interest shall accrue at a rate
of 0.25% per annum during the 90-day period immediately following the
occurrence of any Registration Default and shall increase by 0.25% per annum at
the end of each subsequent 90-day period, but in no event shall such Special
Interest exceed 1.00% per annum.
9. Subordination
The Securities are subordinated to Senior Indebtedness of the Company, as
defined in the Indenture. To the extent provided in the Indenture, Senior
Indebtedness of the Company must be paid before the Securities may be paid. In
addition, each Subsidiary Guarantee is subordinated to Senior Indebtedness of
the relevant Subsidiary Guarantor, as defined in the Indenture. The Company
and each Subsidiary Guarantor agrees, and each Holder by accepting a Security
agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give it effect and appoints the Trustee as
attorney-in-fact for such purpose.
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<PAGE> 131
10. Denominations; Transfer; Exchange
The Securities are in registered form, without coupons, and in
denominations of $1,000 and integral multiples of $1,000. A Holder may
transfer or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture, including any transfer tax or other similar
governmental charge payable in connection therewith. The Registrar need not
register the transfer of or exchange any Securities selected for redemption
(except, in the case of a Security to be redeemed in part, the portion of the
Security not to be redeemed) or any Securities for a period of 15 days before a
selection of Securities to be redeemed or 15 days before an interest payment
date.
11. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of it
for all purposes.
12. Unclaimed Money
If money for the payment of principal or interest remains unclaimed for
two years, the Trustee or Paying Agent shall pay the money back to the Company
at its written request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only
to the Company and not to the Trustee for payment.
13. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate some
or all of its obligations under the Securities and the Indenture if the Company
deposits with the Trustee money or U.S. Government Obligations for the payment
of principal and interest on the Securities to redemption or maturity, as the
case may be.
14. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the consent of the Holders of
at least a majority in principal amount outstanding of the Securities and (ii)
any past default
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<PAGE> 132
or compliance with any provision may be waived with the consent of the Holders
of a majority in principal amount outstanding of the Securities. Subject to
certain exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company, the Subsidiary Guarantors and the Trustee may
amend the Indenture or the Securities to cure any ambiguity, omission, defect
or inconsistency, to comply with Article 5 of the Indenture, to provide for
uncertificated Securities in addition to or in place of certificated
Securities, to add guarantees with respect to the Securities, to secure the
Securities, to add additional covenants or surrender rights and powers
conferred on the Company, to make any change that does not adversely affect the
rights of any Securityholder or to comply with any request of the SEC in
connection with qualifying the Indenture under the TIA.
15. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30 days in
payment of interest on the Securities; (ii) default in payment of principal on
any Security when due at its Stated Maturity, upon redemption pursuant to
paragraphs 5 or 6 above, upon required repurchase, upon acceleration or
otherwise, (iii) failure by the Company to comply for 60 days after notice with
any of its obligations under Sections 4.3, 4.5, 4.7 and 5.1 of the Indenture;
(iv) failure by the Company to comply for 60 days after notice with other
agreements in the Indenture or the Securities, in certain cases subject to
notice and lapse of time; (v) failure by the Company or any Significant
Subsidiary to pay any Indebtedness within any applicable grace period after
final maturity or acceleration by the Holders thereof because of a default and
the total amount of such Indebtedness unpaid or accelerated exceeds $5.0
million; (vi) certain events of bankruptcy, insolvency or reorganization of the
Company or any Significant Subsidiary; and (vii) the rendering of any judgments
or decrees for the payment of money in excess of $5.0 million is rendered
against the Company or a Restricted Subsidiary.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Securities then outstanding
may declare all the Securities to be due and payable. Certain events of
bankruptcy or insolvency are Events of Default which will result in the
Securities being due and payable immediately upon the occurrence of such Events
of Default.
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Securityholders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Securities unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in the interest of the Holders.
16. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or any of its Affiliates and may otherwise deal with the
Company or any of its Affiliates with the same rights it would have if it were
not Trustee.
17. No Recourse Against Others
No recourse for the payment of the principal of, premium, if any, or
interest on any of the Securities or for any claim based thereon or otherwise
in respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in the Indenture, or in any of the Securities or
because of the creation of any Indebtedness represented hereby and thereby,
shall be had against any incorporator, stockholder, officer, director, employee
or controlling person of the Company, a Subsidiary Guarantor or any Successor
Person thereof. Each Holder, by accepting a Security, waives and releases all
such liability.
18. Guarantees
This Security will be entitled to the benefits of certain Guarantees, if
any, made for the benefit of the Holders. Reference is hereby made to the
Indenture for a statement of the respective rights, limitations of rights,
duties and obligations thereunder of the Subsidiary Guarantors, the Trustee and
the Holders.
A-13
<PAGE> 134
19. Governing Law
The Indenture and the Securities shall be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to
applicable principles of conflict of laws to the extent that the application of
the laws of another jurisdiction would be required thereby.
20. Authentication
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
21. Abbreviations
Customary abbreviations may be used in the name of a Securityholder or an
assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with rights of survivorship and not as
tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gift to Minors
Act).
22. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and have directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation
is made as to the accuracy of such numbers either as printed on the Securities
or as contained in any notice of redemption and reliance may be placed only on
the other identification numbers placed thereon.
The Company will furnish to any Securityholder upon written request and
without charge to the Securityholder a copy of the Indenture. Requests may be
made as follows:
If to the Company:
MSX International, Inc.
275 Rex Boulevard
Auburn Hills, MI 48326
A-14
<PAGE> 135
If to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Corporate Trust Department
Facsimile: (212) 858-2932
Telephone: (212) 858-2000
A-15
<PAGE> 136
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
_____________________________________________________________________________
(Print or type assignee's name, address and zip code)
_____________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint __________ agent to transfer this Security 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
other side of this Security.
Signature Guarantee: _______________
(Signature must be guaranteed)
In connection with any transfer of this Security occurring prior to the
date which is the earlier of (i) the date of the declaration by the Commission
of the effectiveness of a registration statement under the Securities Act of
1933, as amended (the "Securities Act") covering resales of this Security
(which effectiveness shall not have been suspended or terminated at the date of
the transfer) and (ii) [ ], the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer:
[Check One]
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the Securities Act
of 1933, as amended; or
(3) __ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securi-
A-16
<PAGE> 137
ties Act of 1933, as amended) that has furnished to the Trustee a
signed letter containing certain representations and agreements
(the form of which letter can be obtained from the Trustee); or
(4) - outside the United States to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act of 1933, as amended;
or
(5) - pursuant to the exemption from registration provided by Rule 144
under the Securities Act of 1933, as amended; or
(6) - pursuant to an effective registration statement under the Securities
Act of 1933, as amended; or
(7) - pursuant to another available exemption from the registration
requirements of the Securities Act of 1933, as amended.
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):
[ ] The transferee is an Affiliate of the Company.
Unless one of the items is checked, the Trustee will refuse to register
any of the Securities evidenced by this certificate in the name of any person
other than the registered Holder thereof; provided, however, that if item (3),
(4), (5) or (7) is checked, the Company or the Trustee may require, prior to
registering any such transfer of the Securities, in their sole discretion, such
written legal opinions, certifications (including an investment letter in the
case of box (3) or (4)) and other information as the Trustee or the Company has
reasonably requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, as amended.
If none of the foregoing items are checked, the Trustee or Registrar shall
not be obligated to register this Security in the name of any person other than
the Holder hereof unless and until the conditions to any such transfer of
registra-
A-17
<PAGE> 138
tion set forth herein and in Section 2.14 of the Indenture shall have been
satisfied.
Dated: ____________________ Signed:_______________________________
(Sign exactly as name appears
on the otherside of this
Security)
Signature Guarantee: _______________________________________
A-18
<PAGE> 139
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
of 1933, as amended and is aware that the sale to it is being made in reliance
on Rule 144A and acknowledges that it has received such information regarding
the Issuer as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated: ______________ _______________________________________________
NOTICE: To be executed by an executive officer
A-19
<PAGE> 140
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.7 or 4.12 of the Indenture, check the box: / /
If you want to elect to have only part of this Security purchased by the
Company pursuant to Section 4.7 or 4.12 of the Indenture, state the amount: $
Date: ______________ Your Signature: _______________
(Sign exactly as your name appears on the
other side of the Security)
Signature Guarantee: ____________________________
(Signature must be guaranteed)
A-20
<PAGE> 141
EXHIBIT B
FACE OF SECURITY
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES
OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE
REFERRED TO ON THE REVERSE HEREOF.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE OF THE
DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR 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, A NEW YORK CORPORATION
("DTC"), TO AN 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 IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO
B-1
<PAGE> 142
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.14
OF THE INDENTURE.
B-2
<PAGE> 143
No.
$
11 3/8% Senior Subordinated Notes Due 2008
CUSIP No. 553758AA1
MSX INTERNATIONAL, INC., a Delaware corporation, promises to pay to Cede &
Co., or registered assigns, the principal sum of
Dollars on January 15, 2008.
Interest Payment Dates: January 15 and July 15.
Record Dates: January 1 and July 1.
Additional provisions of this Security are set forth on the reverse side
of this Security.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
MSX INTERNATIONAL, INC.
By:____________________
Name:
Title:
Dated:
B-3
<PAGE> 144
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
IBJ Schroder Bank & Trust Company, as Trustee, certifies that this is one of
the Securities referred to in the within-mentioned Indenture.
By:
IBJ SCHRODER BANK & TRUST
COMPANY,
as Trustee
____________________________
Authorized Signatory
Date of Authentication:
B-4
<PAGE> 145
[REVERSE OF SECURITY]
11 3/8% SENIOR SUBORDINATED NOTE DUE 2008
1. Interest
MSX INTERNATIONAL, INC., a Delaware corporation (such entity, and its
successors and assigns under the Indenture hereinafter referred to, and each
other entity which is required to become the Company pursuant to the Indenture,
and its successors and assigns under the Indenture, being herein called the
"Company"), promises to pay interest on the principal amount of this Security
at the rate per annum shown above. The Company will pay interest semi-annually
on January 15 and July 15 of each year, commencing July 15, 1998. Interest on
the Securities will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from January 22, 1998. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. The Company
shall pay interest on overdue principal at 1% per annum in excess of the rate
borne by the Securities, and it shall pay interest on overdue installments of
interest at the same rate to the extent lawful.
2. Method of Payment
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the record date immediately preceding the interest payment date
even if Securities are canceled on registration of transfer or registration of
exchange (including pursuant to an Exchange Offer (as defined in the applicable
Registration Agreement)) after the record date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company will
pay principal and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts ("U.S. Legal
Tender"). However, the Company may pay principal and interest by its check
payable in such U.S. Legal Tender. The Company may deliver any such interest
payment to the Paying Agent or to a Holder's registered address.
3. Paying Agent and Registrar
Initially, IBJ Schroder Bank & Trust Company, a national banking
corporation ("Trustee"), will act as Paying
B-5
<PAGE> 146
Agent and Registrar. The Company may appoint and change any Paying Agent,
Registrar or co-registrar without notice. The Company may act as Paying Agent,
Registrar, co-Registrar or transfer agent.
4. Indenture
The Company issued the Securities under an Indenture dated as of January
15, 1998 (the "Indenture"), among the Company, the Subsidiary Guarantors and
the Trustee. This Security is one of a duly authorized issue of Unrestricted
Securities of the Company designated as its 11 3/8% Senior Subordinated Notes
due 2008 (the "Unrestricted Securities"). The Securities include the 11 3/8%
Senior Subordinated Notes due 2008 (the "Initial Securities") and the Exchange
Securities (as defined in the Indenture) issued in exchange for the Initial
Securities pursuant to the Registration Agreement. The Initial Securities and
the Exchange Securities are treated as a single class of securities under the
Indenture. The terms of the Securities include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the
Indenture (the "TIA"). Terms defined in the Indenture and not defined herein
have the meanings ascribed thereto in the Indenture. The Securities are
subject to all such terms, and Securityholders are referred to the Indenture
and the TIA for a statement of those terms. Any conflict between this Security
and the Indenture will be governed by the Indenture.
The Securities are unsecured senior subordinated obligations of the
Company limited to $130,000,000 aggregate principal amount. The Indenture
imposes certain limitations on the Incurrence of Indebtedness by the Company
and its Restricted Subsidiaries, the existence of liens, the payment of
dividends on, and redemption of, the Capital Stock of the Company and its
Subsidiaries, restricted payments, the sale or transfer of assets and
Subsidiary stock, the issuance or sale of Capital Stock of Restricted
Subsidiaries, the investments of the Company and its Restricted Subsidiaries,
consolidations, mergers and transfers of all or substantially all the assets of
the Company, and transactions with Affiliates. In addition, the Indenture
limits the ability of the Company and certain of its Subsidiaries to restrict
distributions and dividends from Restricted Subsidiaries.
B-6
<PAGE> 147
To guarantee the due and punctual payment of the principal, premium and
interest, if any, on the Securities and all other amounts payable by the
Company under the Indenture and the Securities when and as the same shall be
due and payable, whether at maturity, by acceleration or otherwise, according
to the terms of the Securities and the Indenture, the Subsidiary Guarantors
have unconditionally guaranteed the Obligations on a senior subordinated basis
pursuant to the terms of the Indenture.
5. Optional Redemption
Except as set forth in the next paragraph, the Securities may not be
redeemed prior to January 15, 2003. Thereafter, the Securities will be
redeemable, at the Company's option, in whole or in part, at any time or from
time to time, at the following redemption prices (expressed in percentages of
principal amount), plus accrued and unpaid interest to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date) if redeemed during
the 12-month period commencing on January 15 of the years set forth below:
<TABLE>
<CAPTION>
Period Percentage
- ------ ----------
<S> <C>
2003............... 105.6875%
2004............... 103.7917%
2005............... 101.8958%
2006 and thereafter 100.0000%
</TABLE>
In addition, at any time and from time to time prior to , 2001,
the Company may redeem in the aggregate up to 35% of the original principal
amount of the Securities with the proceeds of one or more Public Equity
Offerings following which there is a Public Market, at a redemption price
(expressed as a percentage of principal amount) of 111.375% plus accrued and
unpaid interest, if any, to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date); provided, however, that at least 65% of the
original aggregate principal amount of the Securities must remain outstanding
after each such redemption.
B-7
<PAGE> 148
6. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30 days
but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after such date
interest ceases to accrue on such Securities (or such portions thereof) called
for redemption. If a notice or communication is sent in the manner provided in
the Indenture, it is duly given, whether or not the addressee receives it.
Failure to send a notice or communication to a Securityholder or any defect in
it shall not affect its sufficiency with respect to other Securityholders.
In addition, in the event of certain Asset Dispositions, the Company will
be required to make an offer to purchase Securities at a purchase price of 100%
of their principal amount plus accrued interest to the date of purchase
(subject to the rights of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date) as provided in, and
subject to the terms of, the Indenture.
7. Change of Control
Upon a Change of Control, each Holder of Securities will have the right to
require the Company to repurchase all or any part of the Securities of such
Holder at a repurchase price in cash equal to 101% of the principal amount of
the Securities to be repurchased plus accrued and unpaid interest to the date
of repurchase (subject to the right of Holders of record on the relevant record
date to receive interest due on the related interest payment date) as provided
in, and subject to the terms of, the Indenture.
8. Subordination
The Securities are subordinated to Senior Indebtedness of the Company, as
defined in the Indenture. To the extent provided in the Indenture, Senior
Indebtedness of the Company must be paid before the Securities may be paid. In
addition, each Subsidiary Guarantee is subordinated to Senior In-
B-8
<PAGE> 149
debtedness of the relevant Subsidiary Guarantor, as defined in the Indenture.
The Company and each Subsidiary Guarantor agrees, and each Holder by accepting
a Security agrees, to the subordination provisions contained in the Indenture
and authorizes the Trustee to give it effect and appoints the Trustee as
attorney-in-fact for such purpose.
9. Denominations; Transfer; Exchange
The Securities are in registered form, without coupons, and in
denominations of $1,000 and integral multiples of $1,000. A Holder may
transfer or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture, including any transfer tax or other similar
governmental charge payable in connection therewith. The Registrar need not
register the transfer of or exchange any Securities selected for redemption
(except, in the case of a Security to be redeemed in part, the portion of the
Security not to be redeemed) or any Securities for a period of 15 days before a
selection of Securities to be redeemed or 15 days before an interest payment
date.
10. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of it
for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed for
two years, the Trustee or Paying Agent shall pay the money back to the Company
at its written request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only
to the Company and not to the Trustee for payment.
12. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate some
or all of its obligations under the Securities and the Indenture if the Company
deposits with the Trustee money or U.S. Government Obligations for the payment
of principal and interest on the Securities to redemption or maturity, as the
case may be.
B-9
<PAGE> 150
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the consent of the Holders of
at least a majority in principal amount outstanding of the Securities and (ii)
any past default or compliance with any provision may be waived with the
consent of the Holders of a majority in principal amount outstanding of the
Securities. Subject to certain exceptions set forth in the Indenture, without
the consent of any Securityholder, the Company, the Subsidiary Guarantors and
the Trustee may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency, to comply with Article 5 of the Indenture,
to provide for uncertificated Securities in addition to or in place of
certificated Securities, to add guarantees with respect to the Securities, to
secure the Securities, to add additional covenants or surrender rights and
powers conferred on the Company, to make any change that does not adversely
affect the rights of any Securityholder or to comply with any request of the
SEC in connection with qualifying the Indenture under the TIA.
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30 days in
payment of interest on the Securities; (ii) default in payment of principal on
any Security when due at its Stated Maturity, upon redemption pursuant to
paragraphs 5 or 6 above, upon required repurchase, upon acceleration or
otherwise; (iii) failure by the Company to comply for 60 days after notice with
any of its obligations under Sections 4.3, 4.5, 4.7 or 5.1 of the Indenture;
(iv) failure by the Company to comply for 60 days after notice with other
agreements in the Indenture or the Securities, in certain cases subject to
notice or lack of time; (v) failure by the Company or any Significant
Subsidiary to pay any Indebtedness within any applicable grace period after
final maturity or acceleration by the Holders thereof because of a default and
the total amount of such Indebtedness unpaid or accelerated exceeds $5.0
million; (vi) certain events of bankruptcy, insolvency or reorganization of the
Company or any Significant Subsidiary; and (vii) the rendering of any judgments
or decrees for the payment of money in excess of $5.0 million is rendered
against the Company or a Restricted Subsidiary.
B-10
<PAGE> 151
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Securities then outstanding
may declare all the Securities to be due and payable. Certain events of
bankruptcy or insolvency are Events of Default which will result in the
Securities being due and payable immediately upon the occurrence of such Events
of Default.
Securityholders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Securities unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in the interest of the Holders.
15. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or any of its Affiliates and may otherwise deal with the
Company or any of its Affiliates with the same rights it would have if it were
not Trustee.
16. No Recourse Against Others
No recourse for the payment of the principal of, premium, if any, or
interest on any of the Securities or for any claim based thereon or otherwise
in respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in the Indenture, or in any of the Securities or
because of the creation of any Indebtedness represented hereby and thereby,
shall be had against any incorporator, stockholder, officer, director, employee
or controlling person of the Company, a Subsidiary Guarantor or any Successor
Person thereof. Each Holder, by accepting a Security, waives and releases all
such liability.
B-11
<PAGE> 152
17. Guarantees
This Security will be entitled to the benefits of certain Guarantees, if
any, made for the benefit of the Holders. Reference is hereby made to the
Indenture for a statement of the respective rights, limitations of rights,
duties and obligations thereunder of the Subsidiary Guarantors, the Trustee and
the Holders.
18. Governing Law
The Indenture and the Securities shall be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to
applicable principles of conflict of laws to the extent that the application of
the laws of another jurisdiction would be required thereby.
19. Authentication
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
20. Abbreviations
Customary abbreviations may be used in the name of a Securityholder or an
assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with rights of survivorship and not as
tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gift to Minors
Act).
21. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and have directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation
is made as to the accuracy of such numbers either as printed on the Securities
or as contained in any notice of redemption and reliance may be placed only on
the other identification numbers placed thereon.
B-12
<PAGE> 153
The Company will furnish to any Securityholder upon written request and
without charge to the Securityholder a copy of the Indenture. Requests may be
made as follows:
If to the Company:
MSX International, Inc.
275 Rex Boulevard
Auburn Hills, MI 48326
If to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Corporate Trust Department
Facsimile: (212) 858-2952
Telephone: (212) 858-2000
B-13
<PAGE> 154
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
___________________________________________________________________________
(Print or type assignee's name, address and zip code)
___________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint __________ agent to transfer this Security 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
other side of this Security.
Signature Guarantee: _______________________________
(Signature must be guaranteed)
B-14
<PAGE> 155
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.7 or 4.12 of the Indenture, check the box:/ /
If you want to elect to have only part of this Security purchased by the
Company pursuant to Section 4.7 or 4.12 of the Indenture, state the amount: $
Date: ______________ Your Signature: _______________
(Sign exactly as your name appears on the
other side of the Security)
Signature Guarantee:______________________________
(Signature must be guaranteed)
B-15
<PAGE> 156
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
[ ], [ ]
[ ]
[ ]
[ ]
Ladies and Gentlemen:
In connection with our proposed purchase of % Senior Subordinated
Notes due 2008 (the "Securities") of MSX International, Inc., a Delaware
corporation (the "Company"), we confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated as of , 1998, relating to the Securities and
such other information as we deem necessary in order to make our
investment decision. We acknowledge that we have read and agreed to the
matters stated in the section entitled "Notice to Investors" of such
Offering Memorandum.
2. We understand that any subsequent transfer of the Securities is
subject to certain restrictions and conditions set forth in the Indenture
relating to the Securities (the "Indenture") as described in the Offering
Memorandum and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Securities except in compliance with,
such restrictions and conditions and the Securities Act of 1933, as
amended (the "Securities Act"), and all applicable state securities laws.
3. We understand that the offer and sale of the Securities have not
been registered under the Securities Act, and that the Securities may not
be offered or sold within the United States or to, or for the account or
benefit of, U.S. persons except as permitted in the following sentence.
We agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinaf-
C-1
<PAGE> 157
ter stated, that if we should sell any Securities, we will do so only (i)
to the Company or any subsidiary thereof, (ii) inside the United States
in accordance with Rule 144A under the Securities Act to a "qualified
institutional buyer" (as defined in Rule 144A promulgated under the
Securities Act), (iii) inside the United States to an institutional
"accredited investor" (as defined below) that, prior to such transfer,
furnishes (or has furnished on its behalf by a U.S. broker-dealer) to the
Trustee (as defined in the Indenture) a signed letter containing certain
representations and agreements relating to the restrictions on transfer
of the Securities (the form of which letter can be obtained from the
Trustee), (iv) outside the United States in accordance with Rule 904 of
Regulation S promulgated under the Securities Act to non-U.S. persons,
(v) pursuant to the exemption from registration provided by Rule 144
under the Securities Act (if available), or (vi) pursuant to an effective
registration statement under the Securities Act, and we further agree to
provide to any person purchasing any of the Securities from us a notice
advising such purchaser that resales of the Securities are restricted as
stated herein.
4. We understand that, on any proposed resale of any Securities, we
will be required to furnish to the Trustee and the Company such
certification, legal opinions and other information as the Trustee and
the Company may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand that the
Securities purchased by us will bear a legend to the foregoing effect.
5. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of our investment in the
Securities, and we and any accounts for which we are acting are each able
to bear the economic risk of our or their investment, as the case may be.
6. We are acquiring the Securities purchased by us for our account
or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
C-2
<PAGE> 158
You, the Company, the Trustee and others are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or a copy hereof
to any interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
--------------------
Name:
Title:
C-3
<PAGE> 159
EXHIBIT D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
[ ], [ ]
[ ]
[ ]
[ ]
[ ]
Re: MSX International, Inc. (the "Company")
% Senior Subordinated Notes due
2008 (the "Securities")
-----------------------
Ladies and Gentlemen:
In connection with our proposed sale of $[ ] aggregate principal
amount of the Securities, we confirm that such sale has been effected pursuant
to and in accordance with Regulation S under the U.S. Securities Act of 1933,
as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in the
United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
D-1
<PAGE> 160
(5) we have advised the transferee of the transfer restrictions
applicable to the Securities.
You, the Company and counsel for the Company are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby. Terms used in
this certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
-----------------------
Authorized Signature
D-2
<PAGE> 161
EXHIBIT E
GUARANTEE
For value received, the undersigned hereby unconditionally guarantees on a
senior subordinated basis, as principal obligor and not only as a surety, to
the Holder of this Security the cash payments in United States dollars of
principal of, premium, if any, and interest on this Security (and including
Additional Interest payable thereon) in the amounts and at the times when due
and interest on the overdue principal, premium, if any, and interest, if any,
of this Security, if lawful, and the payment or performance of all other
obligations of the Company under the Indenture (as defined below) or the
Securities, to the Holder of this Security and the Trustee, all in accordance
with and subject to the terms and limitations of this Security, Article Eleven
of the Indenture and this Guarantee. This Guarantee will become effective in
accordance with Articles Eleven and Twelve of the Indenture and its terms shall
be evidenced therein. The validity and enforceability of any Guarantee shall
not be affected by the fact that it is not affixed to any particular Security.
Capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Indenture dated as of January 15, 1998, by and among MSX
International, Inc., a Delaware corporation, as issuer (the "Company"), each of
the Subsidiary Guarantors named therein and IBJ Schroder Bank & Trust Company,
as trustee (the "Trustee"), as amended or supplemented (the "Indenture").
The obligations of the undersigned to the Holders of Securities and to the
Trustee pursuant to this Guarantee and the Indenture are expressly set forth in
Articles Eleven and Twelve of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Guarantee and all of the other
provisions of the Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS
OF LAW. Each Guarantor hereby agrees to submit to the jurisdiction of the
courts of the State of New York in any action or proceeding arising out of or
relating to this Guarantee.
E-1
<PAGE> 162
This Guarantee is subject to release upon the terms set forth in the
Indenture.
E-2
<PAGE> 163
IN WITNESS WHEREOF, each Guarantor has caused its Guarantee to be duly
executed.
GUARANTORS:
GEOMETRIC RESULTS INCORPORATED
By:
-----------------------------
Name:
Title:
MSX
INTERNATIONAL ENGINEERING SERVICES,
INC.
By:
-----------------------------
Name:
Title:
MSX
INTERNATIONAL BUSINESS SERVICES, INC.
By:
-----------------------------
Name:
Title:
MSX
INTERNATIONAL (USA), INC.
By:
-----------------------------
Name:
Title:
E-3
<PAGE> 164
MSX INTERNATIONAL (HOLDINGS), INC.
By:
---------------------------------
Name:
Title:
E-4
<PAGE> 165
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
_______________, among [Subsidiary Guarantors] (the "New Subsidiary
Guarantor"), a subsidiary of MSX International, Inc. (or its successor), a
Delaware corporation (the "Company"), the Subsidiary Guarantors (the "Existing
Subsidiary Guarantors") under the Indenture referred to below, and IBJ SCHRODER
BANK & TRUST COMPANY, a national banking corporation, as trustee under the
Indenture referred to below (the "Trustee").
W I T N E S S E T H :
WHEREAS the Company has heretofore executed and delivered to the Trustee
an Indenture (as such may be amended from time to time, the "Indenture"), dated
as of January , 1998, providing for the issuance of up to aggregate principal
amount of $130,000,000 of 11 3/8% Senior Subordinated Notes due 2008 (the
"Securities");
WHEREAS Section 4.16 of the Indenture provides that under certain
circumstances the Company is required to cause the New Subsidiary Guarantor to
execute and deliver to the Trustee a supplemental indenture pursuant to which
the New Subsidiary Guarantor shall unconditionally guarantee on a senior
subordinated basis all of the Company's obligations under the Securities
pursuant to a Subsidiary Guarantee on the terms and conditions set forth
herein; and
WHEREAS pursuant to Section 9.1 of the Indenture, the Trustee, the Company
and Existing Subsidiary Guarantors are authorized to execute and deliver this
Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the New
Subsidiary Guarantor, the Company, the Existing Subsidiary Guarantors and the
Trustee mutually covenant and agree for the equal and ratable benefit of the
holders of the Securities as follows:
F-1
<PAGE> 166
1. Definitions. (a) Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
(b) For all purposes of this Supplemental Indenture, except as otherwise
herein expressly provided or unless the context otherwise requires: (i) the
terms and expressions used herein shall have the same meanings as corresponding
terms and expressions used in the Indenture; and (ii) the words "herein,"
"hereof" and "hereby" and other words of similar import used in this
Supplemental Indenture refer to this Supplemental Indenture as a whole and not
to any particular section hereof.
2. Agreement to Guarantee. The New Subsidiary Guarantor hereby agrees,
jointly and severally with all other Subsidiary Guarantors, to guarantee on a
senior subordinated basis the Company's obligations under the Securities on the
terms and subject to the conditions set forth in Article 11 of the Indenture
and to be bound by all other applicable provisions of the Indenture. From and
after the date hereof, the New Subsidiary Guarantor shall be a Subsidiary
Guarantor for all purposes under the Indenture and the Securities.
3. Ratification of Indenture; Supplemental Indentures Part of Indenture.
Except as expressly amended hereby, the Indenture is in all respects ratified
and confirmed and all the terms, conditions and provisions thereof shall remain
in full force and effect. This Supplemental Indenture shall form a part of the
Indenture for all purposes, and every holder of Securities heretofore or
hereafter authenticated and delivered shall be bound hereby.
4. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
5. Trustee Makes No Representation. The Trustee makes no representation
as to the validity or sufficiency of this Supplemental Indenture.
6. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy
F-2
<PAGE> 167
shall be an original, but all of them together represent the same agreement.
7. Effect of Headings. The Section headings herein are for convenience
only and shall not affect the construction thereof.
F-3
<PAGE> 168
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
IBJ
SCHRODER BANK & TRUST COMPANY, as
Trustee
By:______________________________
Name:
Title:
F-4
<PAGE> 1
EXHIBIT 4.2
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF
THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO
NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF
THE ISSUANCE HEREOF (OR A PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT
WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING
THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO
LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A") TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE
OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX
CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY), AND, IF SUCH TRANSFER IS BEING EFFECTED BY CERTAIN TRANSFERORS
SPECIFIED IN THE INDENTURE (AS DEFINED BELOW) PRIOR TO THE EXPIRATION OF THE "40
DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(c)(3) OF REGULATION S
UNDER THE SECURITIES ACT), A CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY
OR THE TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE,
(4) TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2),
1
<PAGE> 2
(3) OR (7) UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT
IS ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND
A CERTIFICATE IN THE FORM ATTACHED TO THIS SECURITY IS DELIVERED BY THE
TRANSFEREE TO THE COMPANY AND THE TRUSTEE (PROVIDED THAT CERTAIN HOLDERS
SPECIFIED IN THE INDENTURE MAY NOT TRANSFER THIS SECURITY PURSUANT TO THIS
CLAUSE (4) PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE
MEANING OF RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT)), (5)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR (6) 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. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES IT
WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES, LEGAL OPINIONS
AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY
TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE
HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE
BENEFIT OF THE COMPANY THAT (1) IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) IT IS AN
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR
INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) IT IS A NON-U.S. PERSON
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE
REQUIREMENTS OF PARAGRAPH (o)(2) OR RULE 902 UNDER) REGULATION S UNDER THE
SECURITIES ACT.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE
OF THE DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR 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, A NEW YORK CORPORATION ("DTC"), TO AN 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 IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
2
<PAGE> 3
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.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.14 OF THE INDENTURE.
3
<PAGE> 4
No. 2
$150,000
11 3/8% Senior Subordinated Notes Due 2008
CUSIP No. U60749AA3
MSX INTERNATIONAL, INC., a Delaware corporation, promises to pay
to Cede & Co., or registered assigns, the principal sum of One Hundred Fifty
Thousand U.S. Dollars on January 15, 2008.
Interest Payment Dates: January 15 and July 15.
Record Dates: January 1 and July 1.
Additional provisions of this Security are set forth on the
reverse side of this Security.
4
<PAGE> 5
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
MSX INTERNATIONAL, INC.
By:
------------------------------------
Name:
Title:
Dated:
5
<PAGE> 6
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
IBJ Schroder Bank & Trust Company, as Trustee, certifies that this is one of the
Securities referred to in the within-mentioned Indenture.
By: IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
By:
--------------------------
Name:
Title:
Date of Authentication:
6
<PAGE> 7
[REVERSE OF SECURITY]
11 3/8% SENIOR SUBORDINATED SECURITY DUE 2008
1. Interest
MSX INTERNATIONAL, INC., a Delaware corporation (such entity, and
its successors and assigns under the Indenture hereinafter referred to, and each
other entity which is required to become the Company pursuant to the Indenture,
and its successors and assigns under the Indenture, being herein called the
"Company"), promises to pay interest on the principal amount of this Security at
the rate per annum shown above. The Company will pay interest semi-annually on
January 15 and July 15 of each year, commencing July 15, 1998. Interest on the
Securities will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from January 22, 1998. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. The Company
shall pay interest on overdue principal at 1% per annum in excess of the rate
borne by the Securities, and it shall pay interest on overdue installments of
interest at the same rate to the extent lawful.
2. Method of Payment
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the record date immediately preceding the interest payment date
even if Securities are canceled on registration of transfer or registration of
exchange (including pursuant to an Exchange Offer (as defined in the applicable
Registration Agreement)) after the record date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company will pay
principal and interest in money of the United States that at the time of payment
is legal tender for payment of public and private debts ("U.S. Legal Tender").
However, the Company may pay principal and interest by its check payable in such
U.S. Legal Tender. The Company may deliver any such interest payment to the
Paying Agent or to a Holder's registered address.
3. Paying Agent and Registrar
Initially, IBJ Schroder Bank & Trust Company, a national banking
corporation ("Trustee"), will act as Paying
7
<PAGE> 8
Agent and Registrar. The Company may appoint and change any Paying Agent,
Registrar or co-registrar without notice. The Company may act as Paying Agent,
Registrar, co-Registrar or transfer agent.
4. Indenture
The Company issued the Securities under an Indenture dated as of
January 15, 1998 (the "Indenture"), among the Company, the Subsidiary
Guarantors and the Trustee. This Security is one of a duly authorized issue of
Initial Securities of the Company designated as its 11 3/8% Senior Subordinated
Notes due 2008 (the "Initial Securities"). The Securities include the Initial
Securities and the Exchange Securities (as defined in the Indenture) issued in
exchange for the Initial Securities pursuant to the Registration Agreement. The
Initial Securities and the Exchange Securities are treated as a single class of
securities under the Indenture. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (15 U.S.C. Sections. 77aaa-77bbbb) as in effect
on the date of the Indenture (the "TIA"). Terms defined in the Indenture and
not defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all such terms, and Securityholders are referred to
the Indenture and the TIA for a statement of those terms. Any conflict between
this Security and the Indenture will be governed by the Indenture.
The Securities are unsecured senior subordinated obligations of
the Company limited to $130,000,000 aggregate principal amount. The Indenture
imposes certain limitations on the Incurrence of Indebtedness by the Company and
its Restricted Subsidiaries, the existence of liens, the payment of dividends
on, and redemption of, the Capital Stock of the Company and its Subsidiaries,
restricted payments, the sale or transfer of assets and Subsidiary stock, the
issuance or sale of Capital Stock of Restricted Subsidiaries, the investments of
the Company and its Restricted Subsidiaries, consolidations, mergers and
transfers of all or substantially all the assets of the Company, and
transactions with Affiliates. In addition, the Indenture limits the ability of
the Company and certain of its Subsidiaries to restrict distributions and
dividends from Restricted Subsidiaries.
To guarantee the due and punctual payment of the principal,
premium and interest, if any, on the Securities and
8
<PAGE> 9
all other amounts payable by the Company under the Indenture and the Securities
when and as the same shall be due and payable, whether at maturity, by
acceleration or otherwise, according to the terms of the Securities and the
Indenture, the Subsidiary Guarantors have unconditionally guaranteed the
Obligations on a senior subordinated basis pursuant to the terms of the
Indenture.
5. Optional Redemption
Except as set forth in the next paragraph, the Securities may not
be redeemed at the option of the Company prior to January 15, 2003. Thereafter,
the Securities will be redeemable, at the Company's option, in whole or in part,
at any time or from time to time, at the following redemption prices (expressed
in percentages of principal amount), plus accrued and unpaid interest to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date) if
redeemed during the 12-month period commencing on January 15 of the years set
forth below:
Period Percentage
------ ----------
2003........................................ 105.6875%
2004........................................ 103.7917%
2005........................................ 101.8958%
2006 and thereafter......................... 100.0000%
In addition, at any time and from time to time prior to January
15, 2001, the Company may redeem in the aggregate up to 35% of the original
principal amount of the Securities with the proceeds of one or more Public
Equity Offerings following which there is a Public Market, at a redemption price
(expressed as a percentage of principal amount) of 111.375% plus accrued and
unpaid interest, if any, to the redemption date (subject to the right of Holders
of record on the relevant record date to receive interest due on the relevant
interest payment date); provided, however, that at least 65% of the original
aggregate principal amount of the Securities must remain outstanding after each
such redemption.
6. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least
30 days but not more than 60 days before the re-
9
<PAGE> 10
demption date to each Holder of Securities to be redeemed at his registered
address. Securities in denominations larger than $1,000 may be redeemed in part
but only in whole multiples of $1,000. If money sufficient to pay the redemption
price of and accrued interest on all Securities (or portions thereof) to be
redeemed on the redemption date is deposited with the Paying Agent on or before
the redemption date and certain other conditions are satisfied, on and after
such date interest ceases to accrue on such Securities (or such portions
thereof) called for redemption. If a notice or communication is sent in the
manner provided in the Indenture, it is duly given, whether or not the addressee
receives it. Failure to send a notice or communication to a Securityholder or
any defect in it shall not affect its sufficiency with respect to other
Securityholders.
In addition, in the event of certain Asset Dispositions, the
Company will be required to make an offer to purchase Securities at a purchase
price of 100% of their principal amount plus accrued interest to the date of
purchase (subject to the rights of Holders of record on the relevant record date
to receive interest due on the relevant interest payment date) as provided in,
and subject to the terms of, the Indenture.
7. Change of Control
Upon a Change of Control, each Holder of Securities will have the
right to require the Company to repurchase all or any part of the Securities of
such Holder at a repurchase price in cash equal to 101% of the principal amount
of the Securities to be repurchased plus accrued and unpaid interest to the date
of repurchase (subject to the right of Holders of record on the relevant record
date to receive interest due on the related interest payment date) as provided
in, and subject to the terms of, the Indenture.
8. The Registration Agreement
The holder of this Security is entitled to the benefits of a
Registration Agreement, dated as of January 22, 1998, among the Company, the
Subsidiary Guarantors and the Initial Purchasers named therein (as such may be
amended from time to time, the "Registration Agreement"). Capitalized terms used
in this subsection but not defined herein have the meanings assigned to them in
the Registration Agreement.
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<PAGE> 11
In the event that (i) neither the Exchange Offer Registration
Statement nor the Shelf Registration Statement has been filed with the
Commission within 90 days after the Issue Date, (ii) within 180 days after the
Issue Date, either the Exchange Offer Registration Statement or the Shelf
Registration Statement has not been declared effective (provided that this
clause (ii) shall not apply to any Securities as to which a Shelf Registration
Statement is requested by an Initial Purchaser), (iii) within 210 days of the
Issue Date, the Exchange Offer has not been consummated or, with respect to any
Securities as to which a Shelf Registration Statement is requested by an Initial
Purchaser, such Shelf Registration Statement has not been declared effective
within 240 days after the Issue Date, or (iv) after either the Exchange Offer
Registration Statement or the Shelf Registration Statement has been declared
effective, such Registration Statement thereafter ceases to be effective or
usable (subject to certain exceptions set forth in the Registration Agreement)
in connection with resales of the Securities or the Exchange Securities at any
time that the Company is obligated to maintain the effectiveness thereof
pursuant to the Registration Agreement (each such event referred to in clauses
(i) through (iv) above being referred to herein as a "Registration Default"),
interest ("Special Interest") will accrue on the Securities and the Exchange
Securities (in addition to the interest described above) from and including the
date on which any Registration Default shall occur but excluding the date on
which all such Registration Defaults have been cured. Special Interest shall
accrue at a rate of 0.25% per annum during the 90-day period immediately
following the occurrence of any Registration Default and shall increase by 0.25%
per annum at the end of each subsequent 90-day period, but in no event shall
such Special Interest exceed 1.00% per annum.
9. Subordination
The Securities are subordinated to Senior Indebtedness of the
Company, as defined in the Indenture. To the extent provided in the Indenture,
Senior Indebtedness of the Company must be paid before the Securities may be
paid. In addition, each Subsidiary Guarantee is subordinated to Senior
Indebtedness of the relevant Subsidiary Guarantor, as defined in the Indenture.
The Company and each Subsidiary Guarantor agrees, and each Holder by accepting a
Security agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give it effect and appoints the Trustee as
attorney-in-fact for such purpose.
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<PAGE> 12
10. Denominations; Transfer; Exchange
The Securities are in registered form, without coupons, and in
denominations of $1,000 and integral multiples of $1,000. A Holder may transfer
or exchange Securities in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture, including any transfer tax or other similar governmental charge
payable in connection therewith. The Registrar need not register the transfer of
or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or any Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.
11. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner
of it for all purposes.
12. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
13. Discharge and Defeasance
Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Securities and the Indenture
if the Company deposits with the Trustee money or U.S. Government Obligations
for the payment of principal and interest on the Securities to redemption or
0aturity, as the case may be.
14. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the consent of the Holders of at
least a majority in principal amount outstanding of the Securities and (ii) any
past default
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<PAGE> 13
or compliance with any provision may be waived with the consent of the Holders
of a majority in principal amount outstanding of the Securities. Subject to
certain exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company, the Subsidiary Guarantors and the Trustee may amend
the Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency, to comply with Article 5 of the Indenture, to provide for
uncertificated Securities in addition to or in place of certificated Securities,
to add guarantees with respect to the Securities, to secure the Securities, to
add additional covenants or surrender rights and powers conferred on the
Company, to make any change that does not adversely affect the rights of any
Securityholder or to comply with any request of the SEC in connection with
qualifying the Indenture under the TIA.
15. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest on the Securities; (ii) default in payment of
principal on any Security when due at its Stated Maturity, upon redemption
pursuant to paragraphs 5 or 6 above, upon required repurchase, upon acceleration
or otherwise, (iii) failure by the Company to comply for 60 days after notice
with any of its obligations under Sections 4.3, 4.5, 4.7 and 5.1 of the
Indenture; (iv) failure by the Company to comply for 60 days after notice with
other agreements in the Indenture or the Securities, in certain cases subject to
notice and lapse of time; (v) failure by the Company or any Significant
Subsidiary to pay any Indebtedness within any applicable grace period after
final maturity or acceleration by the Holders thereof because of a default and
the total amount of such Indebtedness unpaid or accelerated exceeds $5.0
million; (vi) certain events of bankruptcy, insolvency or reorganization of the
Company or any Significant Subsidiary; and (vii) the rendering of any judgments
or decrees for the payment of money in excess of $5.0 million is rendered
against the Company or a Restricted Subsidiary.
If an Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the Securities then
outstanding may declare all the Securities to be due and payable. Certain events
of bankruptcy or insolvency are Events of Default which will result in the
Securities being due and payable immediately upon the occurrence of such Events
of Default.
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<PAGE> 14
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or security.
Subject to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in the interest of the Holders.
16. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or any of its Affiliates and may otherwise
deal with the Company or any of its Affiliates with the same rights it would
have if it were not Trustee.
17 No Recourse Against Others
No recourse for the payment of the principal of, premium, if any,
or interest on any of the Securities or for any claim based thereon or otherwise
in respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in the Indenture, or in any of the Securities or
because of the creation of any Indebtedness represented hereby and thereby,
shall be had against any incorporator, stockholder, officer, director, employee
or controlling person of the Company, a Subsidiary Guarantor or any Successor
Person thereof. Each Holder, by accepting a Security, waives and releases all
such liability.
18. Guarantees
This Security will be entitled to the benefits of certain
Guarantees, if any, made for the benefit of the Holders. Reference is hereby
made to the Indenture for a statement of the respective rights, limitations of
rights, duties and obligations thereunder of the Subsidiary Guarantors, the
Trustee and the Holders.
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<PAGE> 15
19. Governing Law
The Indenture and the Securities shall be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflict of laws to the extent that the
application of the laws of another jurisdiction would be required thereby.
20. Authentication
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
21. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with rights of survivorship
and not as tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gift
to Minors Act).
22. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures the Company has caused CUSIP numbers
to be printed on the Securities and have directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
The Company will furnish to any Securityholder upon written
request and without charge to the Securityholder a copy of the Indenture.
Requests may be made as follows:
If to the Company:
MSX International, Inc.
275 Rex Boulevard
Auburn Hills, MI 48326
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<PAGE> 16
If to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Corporate Trust Department
Facsimile: (212) 858-2932
Telephone: (212) 858-2000
16
<PAGE> 17
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF
THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO
NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY
OF THE ISSUANCE HEREOF (OR A PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER
THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS
PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE
COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED
BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER
THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), AND, IF SUCH TRANSFER
IS BEING EFFECTED BY CERTAIN TRANSFERORS SPECIFIED IN THE INDENTURE (AS DEFINED
BELOW) PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE
MEANING OF RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT), A
CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED
BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (4) TO AN INSTITUTION THAT IS
AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2),
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<PAGE> 18
(3) OR (7) UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT
IS ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND
A CERTIFICATE IN THE FORM ATTACHED TO THIS SECURITY IS DELIVERED BY THE
TRANSFEREE TO THE COMPANY AND THE TRUSTEE (PROVIDED THAT CERTAIN HOLDERS
SPECIFIED IN THE INDENTURE MAY NOT TRANSFER THIS SECURITY PURSUANT TO THIS
CLAUSE (4) PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE
MEANING OF RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT)), (5)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR (6) 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. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES IT
WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES, LEGAL OPINIONS
AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY
TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE
HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE
BENEFIT OF THE COMPANY THAT (1) IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) IT IS AN
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR
INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) IT IS A NON-U.S. PERSON
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE
REQUIREMENTS OF PARAGRAPH (o)(2) OR RULE 902 UNDER) REGULATION S UNDER THE
SECURITIES ACT.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE
OF THE DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR 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, A NEW YORK CORPORATION ("DTC"), TO AN 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 IS
REQUESTED BY AN
2
<PAGE> 19
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.14 OF THE INDENTURE.
3
<PAGE> 20
No. 1
$99,850,000
11 3/8% Senior Subordinated Notes Due 2008
CUSIP No. 553758AA1
MSX INTERNATIONAL, INC., a Delaware corporation, promises to pay
to Cede & Co., or registered assigns, the principal sum of Ninety-Nine Million
Eight Hundred Fifty Thousand U.S. Dollars on January 15, 2008.
Interest Payment Dates: January 15 and July 15.
Record Dates: January 1 and July 1.
Additional provisions of this Security are set forth on the
reverse side of this Security.
4
<PAGE> 21
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
MSX INTERNATIONAL, INC.
By:
---------------------------------
Name:
Title:
Dated:
5
<PAGE> 22
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
IBJ Schroder Bank & Trust Company, as Trustee, certifies that this is one of the
Securities referred to in the within-mentioned Indenture.
By: IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
By:
----------------------------------
Name:
Title:
Date of Authentication:
6
<PAGE> 23
[REVERSE OF SECURITY]
11 3/8% SENIOR SUBORDINATED SECURITY DUE 2008
1. Interest
MSX INTERNATIONAL, INC., a Delaware corporation (such entity, and
its successors and assigns under the Indenture hereinafter referred to, and each
other entity which is required to become the Company pursuant to the Indenture,
and its successors and assigns under the Indenture, being herein called the
"Company"), promises to pay interest on the principal amount of this Security at
the rate per annum shown above. The Company will pay interest semi-annually on
January 15 and July 15 of each year, commencing July 15, 1998. Interest on the
Securities will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from January 22, 1998. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. The Company
shall pay interest on overdue principal at 1% per annum in excess of the rate
borne by the Securities, and it shall pay interest on overdue installments of
interest at the same rate to the extent lawful.
2. Method of Payment
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the record date immediately preceding the interest payment date
even if Securities are canceled on registration of transfer or registration of
exchange (including pursuant to an Exchange Offer (as defined in the applicable
Registration Agreement)) after the record date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company will pay
principal and interest in money of the United States that at the time of payment
is legal tender for payment of public and private debts ("U.S. Legal Tender").
However, the Company may pay principal and interest by its check payable in such
U.S. Legal Tender. The Company may deliver any such interest payment to the
Paying Agent or to a Holder's registered address.
3. Paying Agent and Registrar
Initially, IBJ Schroder Bank & Trust Company, a national banking
corporation ("Trustee"), will act as Paying
7
<PAGE> 24
Agent and Registrar. The Company may appoint and change any Paying Agent,
Registrar or co-registrar without notice. The Company may act as Paying Agent,
Registrar, co-Registrar or transfer agent.
4. Indenture
The Company issued the Securities under an Indenture dated as of
January 15, 1998 (the "Indenture"), among the Company, the Subsidiary Guarantors
and the Trustee. This Security is one of a duly authorized issue of Initial
Securities of the Company designated as its 11 3/8% Senior Subordinated Notes
due 2008 (the "Initial Securities"). The Securities include the Initial
Securities and the Exchange Securities (as defined in the Indenture) issued in
exchange for the Initial Securities pursuant to the Registration Agreement. The
Initial Securities and the Exchange Securities are treated as a single class of
securities under the Indenture. The terms of the Securities include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. ss. 77aaa-77bbbb) as in effect on the date of
the Indenture (the "TIA"). Terms defined in the Indenture and not defined herein
have the meanings ascribed thereto in the Indenture. The Securities are subject
to all such terms, and Securityholders are referred to the Indenture and the TIA
for a statement of those terms. Any conflict between this Security and the
Indenture will be governed by the Indenture.
The Securities are unsecured senior subordinated obligations of
the Company limited to $130,000,000 aggregate principal amount. The Indenture
imposes certain limitations on the Incurrence of Indebtedness by the Company and
its Restricted Subsidiaries, the existence of liens, the payment of dividends
on, and redemption of, the Capital Stock of the Company and its Subsidiaries,
restricted payments, the sale or transfer of assets and Subsidiary stock, the
issuance or sale of Capital Stock of Restricted Subsidiaries, the investments of
the Company and its Restricted Subsidiaries, consolidations, mergers and
transfers of all or substantially all the assets of the Company, and
transactions with Affiliates. In addition, the Indenture limits the ability of
the Company and certain of its Subsidiaries to restrict distributions and
dividends from Restricted Subsidiaries.
To guarantee the due and punctual payment of the principal,
premium and interest, if any, on the Securities and
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<PAGE> 25
all other amounts payable by the Company under the Indenture and the Securities
when and as the same shall be due and payable, whether at maturity, by
acceleration or otherwise, according to the terms of the Securities and the
Indenture, the Subsidiary Guarantors have unconditionally guaranteed the
Obligations on a senior subordinated basis pursuant to the terms of the
Indenture.
5. Optional Redemption
Except as set forth in the next paragraph, the Securities may not
be redeemed at the option of the Company prior to January 15, 2003. Thereafter,
the Securities will be redeemable, at the Company's option, in whole or in part,
at any time or from time to time, at the following redemption prices (expressed
in percentages of principal amount), plus accrued and unpaid interest to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date) if
redeemed during the 12-month period commencing on January 15 of the years set
forth below:
Period Percentage
------ ----------
2003........................................ 105.6875%
2004........................................ 103.7917%
2005........................................ 101.8958%
2006 and thereafter......................... 100.0000%
In addition, at any time and from time to time prior to January
15, 2001, the Company may redeem in the aggregate up to 35% of the original
principal amount of the Securities with the proceeds of one or more Public
Equity Offerings following which there is a Public Market, at a redemption price
(expressed as a percentage of principal amount) of 111.375% plus accrued and
unpaid interest, if any, to the redemption date (subject to the right of Holders
of record on the relevant record date to receive interest due on the relevant
interest payment date); provided, however, that at least 65% of the original
aggregate principal amount of the Securities must remain outstanding after each
such redemption.
6. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least
30 days but not more than 60 days before the re-
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<PAGE> 26
demption date to each Holder of Securities to be redeemed at his registered
address. Securities in denominations larger than $1,000 may be redeemed in part
but only in whole multiples of $1,000. If money sufficient to pay the redemption
price of and accrued interest on all Securities (or portions thereof) to be
redeemed on the redemption date is deposited with the Paying Agent on or before
the redemption date and certain other conditions are satisfied, on and after
such date interest ceases to accrue on such Securities (or such portions
thereof) called for redemption. If a notice or communication is sent in the
manner provided in the Indenture, it is duly given, whether or not the addressee
receives it. Failure to send a notice or communication to a Securityholder or
any defect in it shall not affect its sufficiency with respect to other
Securityholders.
In addition, in the event of certain Asset Dispositions, the
Company will be required to make an offer to purchase Securities at a purchase
price of 100% of their principal amount plus accrued interest to the date of
purchase (subject to the rights of Holders of record on the relevant record date
to receive interest due on the relevant interest payment date) as provided in,
and subject to the terms of, the Indenture.
7. Change of Control
Upon a Change of Control, each Holder of Securities will have the
right to require the Company to repurchase all or any part of the Securities of
such Holder at a repurchase price in cash equal to 101% of the principal amount
of the Securities to be repurchased plus accrued and unpaid interest to the date
of repurchase (subject to the right of Holders of record on the relevant record
date to receive interest due on the related interest payment date) as provided
in, and subject to the terms of, the Indenture.
8. The Registration Agreement
The holder of this Security is entitled to the benefits of a
Registration Agreement, dated as of January 22, 1998, among the Company, the
Subsidiary Guarantors and the Initial Purchasers named therein (as such may be
amended from time to time, the "Registration Agreement"). Capitalized terms used
in this subsection but not defined herein have the meanings assigned to them in
the Registration Agreement.
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<PAGE> 27
In the event that (i) neither the Exchange Offer Registration
Statement nor the Shelf Registration Statement has been filed with the
Commission within 90 days after the Issue Date, (ii) within 180 days after the
Issue Date, either the Exchange Offer Registration Statement or the Shelf
Registration Statement has not been declared effective (provided that this
clause (ii) shall not apply to any Securities as to which a Shelf Registration
Statement is requested by an Initial Purchaser), (iii) within 210 days of the
Issue Date, the Exchange Offer has not been consummated or, with respect to any
Securities as to which a Shelf Registration Statement is requested by an Initial
Purchaser, such Shelf Registration Statement has not been declared effective
within 240 days after the Issue Date, or (iv) after either the Exchange Offer
Registration Statement or the Shelf Registration Statement has been declared
effective, such Registration Statement thereafter ceases to be effective or
usable (subject to certain exceptions set forth in the Registration Agreement)
in connection with resales of the Securities or the Exchange Securities at any
time that the Company is obligated to maintain the effectiveness thereof
pursuant to the Registration Agreement (each such event referred to in clauses
(i) through (iv) above being referred to herein as a "Registration Default"),
interest ("Special Interest") will accrue on the Securities and the Exchange
Securities (in addition to the interest described above) from and including the
date on which any Registration Default shall occur but excluding the date on
which all such Registration Defaults have been cured. Special Interest shall
accrue at a rate of 0.25% per annum during the 90-day period immediately
following the occurrence of any Registration Default and shall increase by 0.25%
per annum at the end of each subsequent 90-day period, but in no event shall
such Special Interest exceed 1.00% per annum.
9. Subordination
The Securities are subordinated to Senior Indebtedness of the
Company, as defined in the Indenture. To the extent provided in the Indenture,
Senior Indebtedness of the Company must be paid before the Securities may be
paid. In addition, each Subsidiary Guarantee is subordinated to Senior
Indebtedness of the relevant Subsidiary Guarantor, as defined in the Indenture.
The Company and each Subsidiary Guarantor agrees, and each Holder by accepting a
Security agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give it effect and appoints the Trustee as
attorney-in-fact for such purpose.
11
<PAGE> 28
10. Denominations; Transfer; Exchange
The Securities are in registered form, without coupons, and in
denominations of $1,000 and integral multiples of $1,000. A Holder may transfer
or exchange Securities in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture, including any transfer tax or other similar governmental charge
payable in connection therewith. The Registrar need not register the transfer of
or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or any Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.
11. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner
of it for all purposes.
12. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
13. Discharge and Defeasance
Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Securities and the Indenture
if the Company deposits with the Trustee money or U.S. Government Obligations
for the payment of principal and interest on the Securities to redemption or
maturity, as the case may be.
14. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the consent of the Holders of at
least a majority in principal amount outstanding of the Securities and (ii) any
past default
12
<PAGE> 29
or compliance with any provision may be waived with the consent of the Holders
of a majority in principal amount outstanding of the Securities. Subject to
certain exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company, the Subsidiary Guarantors and the Trustee may amend
the Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency, to comply with Article 5 of the Indenture, to provide for
uncertificated Securities in addition to or in place of certificated Securities,
to add guarantees with respect to the Securities, to secure the Securities, to
add additional covenants or surrender rights and powers conferred on the
Company, to make any change that does not adversely affect the rights of any
Securityholder or to comply with any request of the SEC in connection with
qualifying the Indenture under the TIA.
15. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest on the Securities; (ii) default in payment of
principal on any Security when due at its Stated Maturity, upon redemption
pursuant to paragraphs 5 or 6 above, upon required repurchase, upon acceleration
or otherwise, (iii) failure by the Company to comply for 60 days after notice
with any of its obligations under Sections 4.3, 4.5, 4.7 and 5.1 of the
Indenture; (iv) failure by the Company to comply for 60 days after notice with
other agreements in the Indenture or the Securities, in certain cases subject to
notice and lapse of time; (v) failure by the Company or any Significant
Subsidiary to pay any Indebtedness within any applicable grace period after
final maturity or acceleration by the Holders thereof because of a default and
the total amount of such Indebtedness unpaid or accelerated exceeds $5.0
million; (vi) certain events of bankruptcy, insolvency or reorganization of the
Company or any Significant Subsidiary; and (vii) the rendering of any judgments
or decrees for the payment of money in excess of $5.0 million is rendered
against the Company or a Restricted Subsidiary.
If an Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the Securities then
outstanding may declare all the Securities to be due and payable. Certain events
of bankruptcy or insolvency are Events of Default which will result in the
Securities being due and payable immediately upon the occurrence of such Events
of Default.
13
<PAGE> 30
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or security.
Subject to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in the interest of the Holders.
16. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or any of its Affiliates and may otherwise
deal with the Company or any of its Affiliates with the same rights it would
have if it were not Trustee.
17. No Recourse Against Others
No recourse for the payment of the principal of, premium, if any,
or interest on any of the Securities or for any claim based thereon or otherwise
in respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in the Indenture, or in any of the Securities or
because of the creation of any Indebtedness represented hereby and thereby,
shall be had against any incorporator, stockholder, officer, director, employee
or controlling person of the Company, a Subsidiary Guarantor or any Successor
Person thereof. Each Holder, by accepting a Security, waives and releases all
such liability.
18. Guarantees
This Security will be entitled to the benefits of certain
Guarantees, if any, made for the benefit of the Holders. Reference is hereby
made to the Indenture for a statement of the respective rights, limitations of
rights, duties and obligations thereunder of the Subsidiary Guarantors, the
Trustee and the Holders.
14
<PAGE> 31
19. Governing Law
The Indenture and the Securities shall be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflict of laws to the extent that the
application of the laws of another jurisdiction would be required thereby.
20. Authentication
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
21. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with rights of survivorship
and not as tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gift
to Minors Act).
22. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures the Company has caused CUSIP numbers
to be printed on the Securities and have directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
The Company will furnish to any Securityholder upon written
request and without charge to the Securityholder a copy of the Indenture.
Requests may be made as follows:
If to the Company:
MSX International, Inc.
275 Rex Boulevard
Auburn Hills, MI 48326
15
<PAGE> 32
If to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Corporate Trust Department
Facsimile: (212) 858-2932
Telephone: (212) 858-2000
16
<PAGE> 1
EXHIBIT 4.3
MSX INTERNATIONAL, INC.
$100,000,000
11 3/8% Senior Subordinated Notes Due 2008
REGISTRATION AGREEMENT
January 22, 1998
Salomon Brothers Inc
Lehman Brothers Inc.
First Chicago Capital Markets, Inc.
c/o Salomon Brothers Inc
Seven World Trade Center
New York, NY 10048
Ladies and Gentlemen:
MSX International, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to certain purchasers (the "Purchasers"), upon the
terms set forth in a purchase agreement of even date herewith (the "Purchase
Agreement"), its $100,000,000 aggregate principal amount 11 3/8% Senior
Subordinated Notes due 2008 (the "Securities"), which securities will be
guaranteed by Geometric Results Incorporated, a Delaware corporation, MSX
International Engineering Services, Inc., a Delaware corporation, MSX
International Business Services, Inc., a Delaware corporation, MSX
International (Holdings), Inc. and MSX International (USA), Inc., a Delaware
corporation, (each a "Subsidiary Guarantor" and collectively, the "Subsidiary
Guarantors") (the "Initial Placement"). The Company and the Subsidiary
Guarantors are referred to herein as the "Issuers." As an inducement to the
Purchasers to enter into the Purchase Agreement and in satisfaction of a
condition to your obligations thereunder, the Issuers agree with you, (i) for
your benefit and the benefit of the other Purchasers and (ii) for the benefit
of the holders from time to time of the Securities (including you and the other
Purchasers) (each of the foregoing, a "Holder" and, together, the "Holders"),
as follows:
1. Definitions. Capitalized terms used herein without definition
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following capitalized defined terms shall have the
following meanings:
<PAGE> 2
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"Act" means the Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"Affiliate" of any specified person means any other person who,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such specified person. For purposes of this definition, control
of a person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such person whether by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Commission" means the Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"Exchange Offer Registration Period" means the 180 day period following
the consummation of the Registered Exchange Offer, exclusive of any period
during which any stop order shall be in effect suspending the effectiveness of
the Exchange Offer Registration Statement.
"Exchange Offer Registration Statement" means a registration statement
of the Company on an appropriate form under the Act with respect to the
Registered Exchange Offer, all amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"Exchanging Dealer" means any Holder (which may include the Purchasers)
which is a broker-dealer, electing to exchange Securities acquired for its own
account as a result of market-making activities or other trading activities,
for New Securities.
"Final Memorandum" means the Offering Memorandum dated January 16,
1998.
"Holder" has the meaning set forth in the preamble hereto.
"Indenture" means the Indenture relating to the Securities dated as of
January 15, 1998, by and among the Company,
<PAGE> 3
-3-
the Subsidiary Guarantors and IBJ Schroder Bank & Trust Company, as trustee,
as the same may be amended from time to time in accordance with the terms
thereof.
"Initial Placement" has the meaning set forth in the preamble hereto.
"Issue Date" has the meaning set forth in the Purchase Agreement.
"Majority Holders" means the Holders of a majority of the aggregate
principal amount of securities registered under a Registration Statement.
"Managing Underwriters" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten offering.
"New Securities" means debt securities of the Company identical in all
material respects to the Securities (except that the interest rate step-up
provisions and the transfer restrictions will be modified or eliminated, as
appropriate) to be issued under the Indenture or the New Securities Indenture.
"New Securities Indenture" means an indenture by and among the Company,
the Subsidiary Guarantors and the New Securities Trustee, identical in all
material respects with the Indenture (except that the interest rate step-up
provisions will be modified or eliminated, as appropriate).
"New Securities Trustee" means a bank or trust company reasonably
satisfactory to the Purchaser, as trustee with respect to the New Securities
under the New Securities Indenture.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Securities or the New Securities, covered by
such Registration Statement, and all amendments and supplements to the
Prospectus, including post-effective amendments.
"Registered Exchange Offer" means the proposed offer to the Holders to
issue and deliver to such Holders, in ex-
<PAGE> 4
-4-
change for the securities, a like principal amount of the New Securities.
"Registration Statement" means any Exchange Offer Registration
Statement or Shelf Registration Statement that covers any of the Securities or
the New Securities pursuant to the provisions of this Agreement, amendments and
supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Securities" has the meaning set forth in the preamble hereto.
"Shelf Registration" means a registration effected pursuant to Section
3 hereof.
"Shelf Registration Period" has the meaning set forth in Section 3(b)
hereof.
"Shelf Registration Statement" means a "shelf" registration statement
of the Company pursuant to the provisions of Section 3 hereof which covers some
or all of the Securities or New Securities, as applicable, on an appropriate
form under Rule 415 under the Act, or any similar rule that may be adopted by
the Commission, amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"Trustee" means the trustee with respect to the Securities under the
Indenture.
"underwriter" means any underwriter of Securities in connection with an
offering thereof under a Shelf Registration Statement.
2. Registered Exchange Offer; Resales of New Securities by
Exchanging Dealers; Private Exchange. (a) The Issuers shall prepare and, not
later than 90 days following the Issue Date, shall file with the Commission the
Exchange Offer Registration Statement with respect to the Registered Exchange
Offer. The Issuers shall use their best efforts to cause the Exchange Offer
Registration Statement to become effective under the Act within 180 days of the
Issue Date.
<PAGE> 5
-5-
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Issuers shall promptly commence the Registered Exchange Offer,
it being the objective of such Registered Exchange Offer to enable each Holder
electing to exchange Securities for New Securities (assuming that such Holder
is not an affiliate of any of the Issuers within the meaning of the Act,
acquires the New Securities in the ordinary course of such Holder's business
and has no arrangements with any person to participate in the distribution of
the New Securities) to trade such New Securities from and after their receipt
without any limitations or restrictions under the Act and without material
restrictions under the securities laws of a substantial proportion of the
several states of the United States.
(c) In connection with the Registered Exchange Offer, the Issuers
shall:
(i) mail to each Holder a copy of the Prospectus forming
part of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(ii) keep the Registered Exchange Offer open for not less than 30
days (or longer if required by applicable law) after the date notice thereof
is mailed to the Holders;
(iii) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, the City of
New York; and
(iv) comply in all respects with all laws applicable to the
Registered Exchange Offer.
(d) As soon as practicable after the close of the Registered
Exchange Offer, the Issuers shall:
(i) accept for exchange all Securities validly tendered and
not validly withdrawn pursuant to the Registered Exchange Offer;
(ii) deliver to the Trustee for cancellation all securities
so accepted for exchange; and
(iii) cause the Trustee or the New Securities Trustee, as the
case may be, promptly to authenticate and deliver to each Holder of
Securities, New Securities equal in
<PAGE> 6
-6-
principal amount to the Securities of such Holder so accepted for exchange.
(e) The Purchasers and the Issuers acknowledge that, pursuant to
interpretations by the Commission's staff of Section 5 of the Act, and in the
absence of an applicable exemption therefrom, each Exchanging Dealer is
required to deliver a Prospectus in connection with a sale of any New
Securities received by such Exchanging Dealer pursuant to the Registered
Exchange Offer in exchange for Securities acquired for its own account as a
result of market-making activities or other trading activities. Accordingly,
the Issuers shall:
(i) include the information set forth in Annex A hereto on the cover
of the Exchange Offer Registration Statement, in Annex B hereto in the
forepart of the Exchange Offer Registration Statement in a section
setting forth details of the Exchange Offer, and in Annex C hereto in the
underwriting or plan of distribution section of the Prospectus forming a
part of the Exchange Offer Registration Statement, and include the
information set forth in Annex D hereto in the Letter of Transmittal
delivered pursuant to the Registered Exchange Offer; and
(ii) use their best efforts to keep the Exchange Offer Registration
Statement continuously effective under the Act during the Exchange Offer
Registration Period for delivery by Exchanging Dealers in connection with
sales of New Securities received pursuant to the Registered Exchange
Offer, as contemplated by Section 4(h) below.
3. Shelf Registration. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff, the Issuers
determine upon advice of their outside counsel that they are not permitted to
effect the Registered Exchange Offer as contemplated by Section 2 hereof, or
(ii) for any other reason the Registered Exchange Offer is not consummated
within 180 days of the date hereof, or (iii) any Purchaser so requests with
respect to Securities not eligible to be exchanged for New Securities in a
Registered Exchange Offer and held by it following consummation of the
Registered Exchange Offer, or (iv) any Holder (other than a Purchaser) shall
notify the Company in writing that it is not eligible under applicable law to
participate in the Registered Exchange Offer (other than because it has an
understanding or arrangement with any person to participate in a distribution
of the New Securities) or (v) in the case of any Purchaser that participates in
the Registered Exchange Offer, such Purchaser does not receive
<PAGE> 7
-7-
freely tradeable New Securities in exchange for Securities constituting any
portion of an unsold allotment (it being understood that, for purposes of this
Section 3, (x) the requirement that a Purchaser deliver a Prospectus containing
the information required by Items 507 and/or 508 of Regulation S-K under the
Act in connection with sales of New Securities acquired in exchange for such
Securities shall result in such New Securities being not "freely tradeable" but
(y) the requirement that an Exchanging Dealer deliver a Prospectus in
connection with sales of New Securities acquired in the Registered Exchange
Offer in exchange for Securities acquired as a result of market-making
activities or other trading activities shall not result in such New Securities
being not "freely tradeable") or (vi) if the Company so elects; provided that
any such election shall not relieve the Company of its obligations pursuant to
Section 2 hereof, the following provisions shall apply:
(a) The Issuers shall as promptly as practicable file with the
Commission and thereafter shall use their best efforts to cause to be
declared effective under the Act a Shelf Registration Statement relating
to the offer and sale of the Securities or the New Securities, as
applicable, by the Holders from time to time in accordance with the
methods of distribution elected by such Holders and set forth in such
Shelf Registration Statement; provided that, with respect to New
Securities received by a Purchaser in exchange for securities
constituting any portion of an unsold allotment, the Issuers may, if
permitted by current interpretations by the Commission's staff, file a
post-effective amendment to the Exchange Offer Registration Statement
containing the information required by Regulation S-K Items 507 and/or
508, as applicable, in satisfaction of their obligations under this
paragraph (a) with respect thereto, and any such Exchange Offer
Registration Statement, as so amended, shall be referred to herein as,
and governed by the provisions herein applicable to, a Shelf Registration
Statement.
(b) The Issuers shall use their best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the
Prospectus forming part thereof to be usable by Holders for a period of
two years (or until one year after its effective date if such Shelf
Registration Statement is filed at the request of any of the Purchasers)
from the date the Shelf Registration Statement is declared effective (the
"Expiration Date") by the Commission or such shorter period that will
terminate when all the Securities or New Securities, as applicable,
covered by
<PAGE> 8
-8-
the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement (in any such case, such period being called the
"Shelf Registration Period"); provided however that during any consecutive
365-day period, the Company shall have the option to suspend availability
of the Shelf Registration Statement for up to two 30-consecutive-day
periods, except for the consecutive 30-day period immediately prior to the
Expiration Date, if the Company's Board of Directors determines in the
exercise of its reasonable judgment that there is a valid business purpose
for such suspension; provided further that if the Shelf Registration Period
terminates and all the Securities or New Securities, as applicable, covered
by the Shelf Registration Statement have not been sold, the Company will
cause the effectiveness to be extended by the number of days during which
the Registration Statement was not usable pursuant to the preceding
proviso. The Issuers shall be deemed not to have used their best efforts
to keep the Shelf Registration Statement effective during the requisite
period if any Issuer voluntarily takes any action that would result in
Holders of securities covered thereby not being able to offer and sell such
securities during that period, unless (i) such action is required by
applicable law, or (ii) such action is taken by such Issuer in good faith
and for valid business reasons (not including avoidance of such Issuer's
obligations hereunder), including the acquisition or divestiture of assets,
so long as such Issuer promptly thereafter complies with the requirements
of Section 4(k) hereof, if applicable.
4. Registration Procedures. In connection with any Shelf
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Issuers shall furnish to you, prior to the filing thereof
with the Commission, a copy of any Shelf Registration Statement and any
Exchange Offer Registration Statement, and each amendment thereof and
each amendment or supplement, if any, to the Prospectus included therein
and shall use their best efforts to reflect in each such document, when
so filed with the Commission, such comments as you reasonably may
propose.
(b) The Issuers shall ensure that (i) any Registration Statement and
any amendment thereto and any Prospectus forming part thereof and any
amendment or supplement thereto complies in all material respects with
the Act and
<PAGE> 9
-9-
the rules and regulations thereunder, (ii) any Registration Statement and
any amendment thereto does not, when it becomes effective, contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading and (iii) any Prospectus forming part of any Registration
Statement, and any amendment or supplement to such Prospectus, does not
include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
(c) (1) The Issuers shall advise you or your representative and, in
the case of a Shelf Registration Statement, the Holders of securities
covered thereby, and, if requested by you or your representative or any
such Holder, confirm such advice in writing:
(i) when a Registration Statement and any amendment thereto
has been filed with the Commission and when the Registration
Statement or any post-effective amendment thereto has become
effective; and
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the Prospectus
included therein or for additional information.
(2) The Issuers shall advise you or your representative and, in the
case of a Shelf Registration Statement, the Holders of securities covered
thereby, and, in the case of an Exchange Offer Registration Statement,
any Exchanging Dealer which has provided in writing to the Company a
telephone or facsimile number and address for notices, and, if requested
by you or your representative or any such Holder or Exchanging Dealer,
confirm such advice in writing:
(i) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(ii) of the receipt by the Issuers of any notification with
respect to the suspension of the qualification of the securities
included therein for sale
<PAGE> 10
-10-
in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(iii) of the happening of any event that requires the making
of any changes in the Registration Statement or the Prospectus so
that, as of such date, the statements therein are not misleading
and do not omit to state a material fact required to be stated
therein or necessary to make the statements therein (in the case of
the Prospectus, in light of the circumstances under which they were
made) not misleading.
(d) The Issuers shall use their best efforts to obtain the
withdrawal of any order suspending the effectiveness of any Registration
Statement at the earliest possible time.
(e) The Issuers shall furnish to each Holder of securities included
within the coverage of any Shelf Registration Statement, without charge,
at least one copy of such Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules, and, if the Holder so requests in writing, all exhibits
(including those incorporated by reference).
(f) The Issuers shall, during the Shelf Registration Period, deliver
to each Holder of securities included within the coverage of any Shelf
Registration Statement, without charge, as many copies of the Prospectus
(including each preliminary Prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such
Holder may reasonably request; and the Issuers consent to the use of the
Prospectus or any amendment or supplement thereto by each of the selling
Holders of securities in connection with the offering and sale of the
securities covered by the Prospectus or any amendment or supplement
thereto.
(g) The Issuers shall furnish to each Exchanging Dealer which so
requests, without charge, at least one copy of the Exchange Offer
Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Exchanging
Dealer so requests in writing, all exhibits (including those incorporated
by reference).
<PAGE> 11
-11-
(h) The Issuers shall, during the Exchange Offer Registration
Period, promptly deliver to each Exchanging Dealer, without charge, as
many copies of the Prospectus included in such Exchange Offer
Registration Statement and any amendment or supplement thereto as such
Exchanging Dealer may reasonably request for delivery by such Exchanging
Dealer in connection with a sale of New Securities received by it
pursuant to the Registered Exchange Offer; and the Issuers consent to the
use of the Prospectus or any amendment or supplement thereto by any such
Exchanging Dealer, as aforesaid.
(i) Prior to the Registered Exchange Offer or any other offering of
securities pursuant to any Registration Statement, the Issuers shall use
their respective best efforts to register or qualify or cooperate with
the Holders of securities included therein and their respective counsel
in connection with the registration or qualification of such securities
for offer and sale under the securities or blue sky laws of such
jurisdictions as any such Holders reasonably request in writing and do
any and all other acts or things necessary or advisable to enable the
offer and sale in such jurisdictions of the securities covered by such
Registration Statement; provided, however, that the Issuers will not be
required to qualify generally to do business in any jurisdiction where
they are not then so qualified or to take any action which would subject
them to general service of process or to taxation in any such
jurisdiction where they are not then so subject.
(j) The Issuers shall cooperate with the Holders of Securities to
facilitate the timely preparation and delivery of certificates
representing Securities to be sold pursuant to any Registration Statement
free of any restrictive legends and in such denominations and registered
in such names as Holders may request prior to sales of securities
pursuant to such Registration Statement.
(k) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) above during the period for which the Issuers are required to
maintain an effective registration statement, the Issuers shall promptly
prepare a post-effective amendment to any Registration Statement or an
amendment or supplement to the related Prospectus or file any other
required document so that, as thereafter delivered to purchasers of the
Securities included therein, the Prospectus will not include an untrue
statement of a material fact or omit to state any material fact
<PAGE> 12
-12-
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(l) Not later than the effective date of any such Registration
Statement hereunder, the Issuers shall provide a CUSIP number for the
Securities or New Securities, as the case may be, registered under such
Registration Statement, and provide the applicable trustee with printed
certificates for such Securities or New Securities, in a form eligible
for deposit with The Depository Trust Company.
(m) The Issuers shall use their best efforts to comply with all
applicable rules and regulations of the Commission and shall make
generally available to their security holders as soon as practicable
after the effective date of the applicable Registration Statement an
earnings statement satisfying the provisions of Section 11(a) of the Act.
(n) The Issuers shall cause the Indenture or the New Securities
Indenture, as the case may be, to be qualified under the Trust Indenture
Act in a timely manner.
(o) The Issuers may require each Holder of Securities to be sold
pursuant to any Shelf Registration Statement to furnish to the Issuers
such information regarding the Holder and the distribution of such
Securities as the Issuers may from time to time reasonably require for
inclusion in such Registration Statement. No Holder may include any of
its Securities in any Shelf Registration Statement pursuant to this
Agreement unless and until such Holder furnishes to the Issuers in
writing, within 10 days after receipt of a written request therefor, such
information as the Issuers may reasonably request, including, but not
limited to, information specified by Regulation S-K or otherwise required
by the Commission for use in connection with any Shelf Registration
Statement or Prospectus or preliminary Prospectus included therein. Each
Holder as to which any Shelf Registration Statement is being effected
agrees to furnish promptly to the Issuers all information required to be
disclosed in order to make the information previously furnished to the
Issuers by such Holder not materially misleading.
(p) The Issuers shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amend-
<PAGE> 13
-13-
ment to a Shelf Registration Statement, such information as the
Managing Underwriters and Majority Holders reasonably agree should be
included therein and shall make all required filings of such Prospectus
supplement or post-effective amendment as soon as notified of the matters
to be incorporated in such Prospectus supplement or post-effective
amendment.
(q) In the case of any Shelf Registration Statement, the Issuers
shall enter into such agreements (including underwriting agreements) and
take all other appropriate actions in order to expedite or facilitate the
registration or the disposition of the Securities, and in connection
therewith, if an underwriting agreement is entered into, cause the same
to contain indemnification provisions and procedures no less favorable
than those set forth in Section 6 (or such other provisions and
procedures acceptable to the Majority Holders and the Managing
Underwriters, if any,) with respect to all parties to be indemnified
pursuant to Section 6 from Holders of Securities to the Company.
(r) In the case of any Shelf Registration Statement, the Issuers
shall (i) make reasonably available for inspection by a representative
acting for a majority in aggregate principal amount of the Holders of
Securities to be registered thereunder, and any underwriter participating
in any disposition pursuant to such Registration Statement, and any
attorney, accountant or other agent retained by the Holders or any such
underwriter all relevant financial and other records, pertinent corporate
documents and properties of the Issuers and their subsidiaries; (ii)
cause the Issuers' officers, directors and employees to supply all
relevant information reasonably requested by the Holders or any such
underwriter, attorney, accountant or agent in connection with any such
Registration Statement as is customary for similar due diligence
examinations; provided, however, that any information that is designated
in writing by the Issuers, in good faith, as confidential at the time of
delivery of such information shall be kept confidential by the Holders or
any such underwriter, attorney, accountant or agent, unless such
disclosure is made in connection with a court proceeding or required by
law, or such information becomes available to the public generally or
through a third party without an accompanying obligation of
confidentiality; (iii) make such representations and warranties to the
Holders of Securities registered thereunder and the underwriters, if
<PAGE> 14
-14-
any, in form, substance and scope as are customarily made by Issuers
to underwriters in primary underwritten offerings and covering matters
including, but not limited to, those set forth in the Purchase Agreement;
(iv) obtain opinions of counsel to the Issuers and updates thereof (which
counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the Managing Underwriters, if any) addressed to each
selling Holder of Securities registered thereunder and the underwriters,
if any, in customary form and covering such matters as are customarily
covered in opinions requested in underwritten offerings; (v) use their
reasonable best efforts to obtain "cold comfort" letters and updates
thereof from the independent certified public accountants of the Issuers
(and, if necessary, any other independent certified public accountants of
any subsidiary of the Issuers or of any business acquired by the Issuers
for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each selling
Holder of securities registered thereunder and the underwriters, if any,
in customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with primary underwritten offerings;
and (vi) deliver such documents and certificates as may be reasonably
requested by the Majority Holders and the Managing Underwriters, if any,
including those to evidence compliance with Section 4(k) and with any
customary conditions contained in the underwriting agreement or other
agreement entered into by the Issuers. The foregoing actions set forth
in clauses (iii), (iv), (v) and (vi) of this Section 4(r) shall be
performed at (A) the effectiveness of such Registration Statement and (B)
each closing under any underwriting or similar agreement as and to the
extent required thereunder.
(s) In the case of any Exchange Offer Registration Statement, the
Issuers shall, to the extent requested by a representative acting for a
majority in aggregate principal amount of the Purchasers, (i) make
reasonably available for inspection by such Purchasers, and any attorney,
accountant or other agent retained by such Purchasers, all relevant
financial and other records, pertinent corporate documents and properties
of the Issuers and any of their subsidiaries; (ii) cause the Issuers
officers, directors and employees to supply all relevant information
reasonably requested by such Purchasers or any such attorney, accountant
or agent in connection with any such Registration Statement as is
customary for similar due diligence exami-
<PAGE> 15
-15-
nations; provided, however, that any information that is designated
in writing by the Issuers, in good faith, as confidential at the time of
delivery of such information shall be kept confidential by such
Purchasers or any such attorney, accountant or agent, unless such
disclosure is made in connection with a court proceeding or required by
law, or such information becomes available to the public generally or
through a third party without an accompanying obligation of
confidentiality; (iii) make such representations and warranties to such
Purchasers, in form, substance and scope as are customarily made by
Issuers to underwriters in primary underwritten offerings and covering
matters including, but not limited to, those set forth in the Purchase
Agreement; (iv) obtain opinions of counsel to the Issuers and updates
thereof which counsel and opinions (in form, scope and substance) shall
be reasonably satisfactory to such Purchasers and its counsel, addressed
to such Purchasers, covering such matters as are customarily covered in
opinions requested in underwritten offerings; (v) use their reasonable
best efforts to obtain "cold comfort" letters and updates thereof from
the independent certified public accountants of the Issuers (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Issuers or of any business acquired by the Issuers for
which financial statements and financial data are, or are required to be,
included in the Registration Statement), addressed to such Purchaser, in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with primary underwritten offerings,
or if requested by such Purchaser or its counsel in lieu of a "cold
comfort" letter, an agreed-upon procedures letter under Statement on
Auditing Standards No. 35, covering matters requested by such Purchaser
or its counsel; and (vi) deliver such documents and certificates as may
be reasonably requested by such Purchaser or its counsel, including those
to evidence compliance with Section 4(k) and with conditions customarily
contained in underwriting agreements. The foregoing actions set forth in
clauses (iii), (iv), (v), and (vi) of this Section 4(s) shall be
performed at the close of the Registered Exchange Offer and the effective
date of any post-effective amendment to the Exchange Offer Registration
Statement.
5. Registration Expenses. The Issuers shall bear all expenses
incurred in connection with the performance of their obligations under Sections
2, 3 and 4 hereof and, in the event of any Shelf Registration Statement, will
reimburse the
<PAGE> 16
-16-
Holders for the reasonable fees and disbursements of one firm or counsel
designated by the Majority Holders to act as counsel for the Holders in
connection therewith, and, in the case of any Exchange Offer Registration
Statement, will reimburse the Purchasers for the reasonable fees and
disbursements of one firm or counsel acting in connection therewith.
6. Indemnification and Contribution. (a) In connection with any
Registration Statement, the Issuers, jointly and severally, agree to indemnify
and hold harmless each Holder of Securities covered thereby (including each
Purchaser and, with respect to any Prospectus delivery as contemplated in
Section 4(h) hereof, each Exchanging Dealer), the directors, officers,
employees and agents of each such Holder and each person who controls any such
Holder within the meaning of either the Act or the Exchange Act against any and
all losses, claims, damages or liabilities to which they or any of them may
become subject under the Act, the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement as originally filed or in
any amendment thereof, or in any preliminary Prospectus or Prospectus, or in
any amendment thereof or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and agrees to reimburse each such indemnified party, as incurred, for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that the Issuers will not be liable in any case to the extent that any
such loss, claim, damage or liability arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Issuers by or on behalf of any such Holder specifically for
inclusion therein and provided, further, with respect to any untrue statement
or omission of a material fact made in any Preliminary Prospectus, the
indemnity agreement contained in this Section 6(a) shall not inure to the
benefit of any Holder (or any of the directors, officers and employees of such
Holder or any controlling person of such Holder) from whom the person asserting
any such loss, claim, damage or liability purchased the Securities concerned,
to the extent that any such loss, claim, damage or liability of such Holder
occurs under circumstances where (x) the Issuers had previously fur-
<PAGE> 17
-17-
nished copies of the Prospectus to the Holder, (y) the untrue statement or
omission of a material fact contained in the Preliminary Prospectus was
corrected in the Prospectus and (z) there was not sent or given to such person,
at or prior to the written confirmation of the sale of such Securities to such
person, a copy of the Prospectus. This indemnity agreement will be in addition
to any liability which the Company may otherwise have.
The Issuers also agree to indemnify or contribute to Losses of, as
provided in Section 6(d), any underwriters of Securities registered under a
Shelf Registration Statement, their officers and directors and each person who
controls such underwriters on substantially the same basis as that of the
indemnification of the Purchaser and the selling Holders provided in this
Section 6(a) and shall, if requested by any Holder, enter into an underwriting
agreement reflecting such agreement, as provided in Section 4(q) hereof.
(b) Each Holder of Securities covered by a Registration Statement
(including each Purchaser and, with respect to any Prospectus delivery as
contemplated in Section 4(h) hereof, each Exchanging Dealer) severally agrees
to indemnify and hold harmless (i) the Issuers, (ii) each of their directors,
(iii) each of their respective officers who signs such Registration Statement
and (iv) each person who controls the Issuers within the meaning of either the
Act or the Exchange Act to the same extent as the foregoing indemnity from the
Issuers to each such Holder, but only with reference to written information
relating to such Holder furnished to the Issuers by or on behalf of such Holder
specifically for inclusion in the documents referred to in the foregoing
indemnity. This indemnity agreement will be in addition to any liability which
any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 6, notify the indemnifying party in
writing of the commencement thereof; but the failure so to notify the
indemnifying party (i) will not relieve it from liability under paragraph (a)
or (b) above unless and to the extent it did not otherwise learn of such action
and such failure results in the forfeiture by the indemnifying party of
substantial rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a)
<PAGE> 18
-18-
or (b) above. The indemnifying party shall be entitled to appoint counsel
of the indemnifying party's choice at the indemnifying party's expense to
represent the indemnified party in any action for which indemnification is
sought (in which case the indemnifying party shall not thereafter be
responsible for the fees and expenses of any separate counsel retained by the
indemnified party or parties except as set forth below); provided, however,
that such counsel shall be reasonably satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel (and local counsel) if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential defendants
in, or targets of, any such action include both the indemnified party and the
indemnifying party and counsel to the indemnified party shall have reasonably
concluded that there may be legal defenses available to such indemnified party
and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, (iii) the indemnifying party shall
not have employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of the
institution of such action or (iv) the indemnifying party shall authorize the
indemnified party to employ separate counsel at the expense of the indemnifying
party. An indemnifying party will not, without the prior written consent of
the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding whether or not such
indemnified party is named as a party to such claim, action, suit or
proceeding.
(d) In the event that the indemnity provided in paragraph (a) or
(b) of this Section 6 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses rea-
<PAGE> 19
-19-
sonably incurred in connection with investigating or defending same)
(collectively, "Losses") to which such indemnified party may be subject in such
proportion as is appropriate to reflect the relative benefits received by such
indemnifying party, on the one hand, and such indemnified party, on the other
hand, from the Initial Placement and the Registration Statement which resulted
in such Losses; provided, however, that in no case shall any Purchaser or any
subsequent Holder of any Security or New Security be responsible, in the
aggregate, for any amount in excess of the purchase discount or commission
applicable to such Security, or in the case of a New Security, applicable to
the Security which was exchangeable into such New Security, as set forth on the
cover page of the Final Memorandum, nor shall any underwriter be responsible
for any amount in excess of the underwriting discount or commission applicable
to the Securities purchased by such underwriter under the Registration
Statement which resulted in such Losses. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the indemnifying
party and the indemnified party shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of such indemnifying party, on the one hand, and such indemnified party,
on the other hand, in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable considerations.
Benefits received by the Issuers shall be deemed to be equal to the proceeds
from the Initial Placement net of purchase discounts and commissions (before
deducting expenses) as set forth on the cover page of the Final Memorandum.
Benefits received by the Purchasers shall be deemed to be equal to the total
purchase discounts and commissions as set forth on the cover page of the Final
Memorandum, and benefits received by any other Holders shall be deemed to be
equal to the value of receiving Securities or New Securities, as applicable,
registered under the Act. Benefits received by any underwriter shall be deemed
to be equal to the total underwriting discounts and commissions, as set forth
on the cover page of the Prospectus forming a part of the Registration
Statement which resulted in such Losses. Relative fault shall be determined by
reference to whether any alleged untrue statement or omission relates to
information provided by the indemnifying party, on the one hand, or by the
indemnified party, on the other hand. The parties agree that it would not be
just and equitable if contribution were determined by pro rata allocation or
any other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be enti-
<PAGE> 20
-20-
tled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 6, each person who controls a
Holder within the meaning of either the Act or the Exchange Act and each
director, officer, employee and agent of such Holder shall have the same rights
to contribution as such Holder, and each person who controls the Issuers within
the meaning of either the Act or the Exchange Act, each officer of the Issuers
who shall have signed the Registration Statement and each director of the
Issuers shall have the same rights to contribution as the Company or the
Subsidiary Guarantors respectively, subject in each case to the applicable
terms and conditions of this paragraph (d).
(e) The provisions of this Section 6 will remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder or
the Issuers or any of the officers, directors or controlling persons referred
to in Section 6 hereof, and will survive the sale by a Holder of securities
covered by a Registration Statement.
7. Miscellaneous.
(a) No Inconsistent Agreements. The Issuers have not, as of the
date hereof, entered into, nor shall they on or after the date hereof, enter
into, any agreement with respect to their securities that is inconsistent with
the rights granted to the Holders herein or otherwise conflicts with the
provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Issuers have obtained the
written consent of the Holders of at least a majority of the then outstanding
aggregate principal amount of Securities (or, after the consummation of any
Exchange Offer in accordance with Section 2 hereof, of New Securities);
provided that, with respect to any matter that directly or indirectly affects
the rights of any Purchaser hereunder, the Issuers shall obtain the written
consent of each such Purchaser against which such amendment, qualification,
supplement, waiver or consent is to be effective. Notwithstanding the
foregoing (except the foregoing proviso), a waiver or consent to departure from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect the rights of other
Holders may be given by the Majority Holders,
<PAGE> 21
-21-
determined on the basis of securities being sold rather than registered under
such Registration Statement.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telex, telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given by such holder
to the Issuers in accordance with the provisions of this Section 7(c),
which address initially is, with respect to each Holder, the address of
such Holder maintained by the Registrar under the Indenture, with a copy
in like manner to Salomon Brothers Inc;
(2) if to you, initially at the respective addresses set forth in
the Purchase Agreement; and
(3) if to the Issuers, initially at the address of the Company set
forth in the Purchase Agreement with copies as indicated therein.
All such notices and communications shall be deemed to have been duly
given when received.
The Purchasers or the Issuers by notice to the other may designate
additional or different addresses for subsequent notices or communications.
(d) 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 the need for an express assignment or any consent
by the Issuers thereto, subsequent Holders of Securities and/or New Securities.
The Issuers hereby agrees to extend the benefits of this Agreement to any
Holder of Securities and/or New Securities and any such Holder may specifically
enforce the provisions of this Agreement as if an original party hereto.
(e) 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.
(f) Headings. The headings in this agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
<PAGE> 22
-22-
(g) Governing Law. This agreement shall be governed by and
construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed in said State.
(h) Severability. In the event that any one of more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
(i) Securities Held by the Issuers, etc. Whenever the consent or
approval of Holders of a specified percentage of principal amount of Securities
or New Securities is required hereunder, Securities or New Securities, as
applicable, held by the Issuers or their Affiliates (other than subsequent
Holders of Securities or New Securities if such subsequent Holders are deemed
to be Affiliates solely by reason of their holdings of such Securities or New
Securities) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
<PAGE> 23
Please confirm that the foregoing correctly sets forth the agreement
among the Issuers and you.
Very truly yours,
MSX INTERNATIONAL, INC.
By: Frederick Minturn
-----------------------------
Name: Frederick Minturn
Title: Secretary
GEOMETRIC RESULTS INCORPORATED
By: Frederick Minturn
-----------------------------
Name: Frederick Minturn
Title: Secretary
MSX INTERNATIONAL ENGINEERING
SERVICES, INC.
By: Frederick Minturn
-----------------------------
Name: Frederick Minturn
Title: Secretary
MSX INTERNATIONAL BUSINESS
SERVICES, INC.
By: Carol Creel
-----------------------------
Name: Carol Creel
Title Secretary
MSX INTERNATIONAL (USA), INC.
By: Frederick Minturn
-----------------------------
Name: Frederick Minturn
Title: Secretary
<PAGE> 24
MSX INTERNATIONAL (HOLDINGS), INC.
By: Frederick Minturn
------------------------------
Name: Frederick Minturn
Title: Secretary
<PAGE> 25
Accepted January 22, 1998
SALOMON BROTHERS INC
LEHMAN BROTHERS INC.
FIRST CHICAGO CAPITAL MARKETS, INC.
By: SALOMON BROTHERS INC
By: Jeffrey Kelly
-----------------------------------
Name: Jeffrey Kelly
Title: Director
<PAGE> 26
ANNEX A
Annex A
Each broker-dealer that receives New Securities for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Securities. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of New
Securities received in exchange for Securities where such New Securities were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. The Issuers have agreed that, starting on the Expiration
Date (as defined herein) and ending on the close of business on the first
anniversary of the Expiration Date, they will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
<PAGE> 27
ANNEX B
Annex B
Each broker-dealer that receives New Securities for its own account in exchange
for Securities, where such Securities were acquired by such 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 New Securities. See "Plan of Distribution."
<PAGE> 28
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of New Securities received in
exchange for Securities where such Securities were acquired as a result of
market-making activities or other trading activities. The Issuers have agreed
that, starting on the Expiration Date and ending on the close of business on
the first anniversary of the Expiration Date, they will make this Prospectus,
as amended or supplemented, available to any broker-dealer for use in
connection with any such resale. In addition, until __________, 199_, all
dealers effecting transactions in the New Securities may be required to
deliver a prospectus.
The Issuers will not receive any proceeds from any sale of New
Securities by broker-dealers. New Securities received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Securities 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 purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such New
Securities. Any broker-dealer that resells New Securities 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 New Securities may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
of any such resale of New Securities and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation
under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
For a period of one year after the Expiration Date, the Issuers will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Issuers have agreed to pay all expenses
inci-
<PAGE> 29
dent to the Exchange Offer (including the expenses of one counsel for the
holders of the Securities) other than commissions or concessions of any brokers
or dealers and will indemnify the holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
If applicable, add information required by Regulation S-K Items 507
and/or 508.
C-2
<PAGE> 30
ANNEX D
Rider A
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS
OR SUPPLEMENTS THERETO.
Name: ____________________________________
Address: _________________________________
_________________________________
Rider B
If the undersigned is not a broker-dealer, the undersigned represents that it
is not engaged in, and does not intend to engage in, a distribution of New
Securities. If the undersigned is a broker-dealer that will receive New
Securities for its own account in exchange for securities, it represents that
the Securities to be exchanged for New Securities were acquired by it as a
result of market-making activities or other trading activities and acknowledges
that it will deliver a prospectus in connection with any resale of such New
Securities; 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.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 and
related Prospectus of MSX International, Inc. for the registration of
$100,000,000 of MSX International, Inc. 11 3/8% Senior Subordinated Notes due
2008 of our report dated March 31, 1998 on our audits of the combined financial
statements of the Technical Services Group of Masco Tech, Inc. for the years
ended December 31, 1995 and 1996 and on our audit of the consolidated financial
statements of MSX International, Inc. for the fiscal year ended December 28,
1997. We also consent to the reference to our firm under the caption
"Experts".
Coopers & Lybrand L.L.P.
Detroit, Michigan
April 9, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 and
related Prospectus of MSX International, Inc. for the registration of
$100,000,000 of MSX International, Inc. 11 3/8% Senior Subordinated Notes due
2008 of our report dated March 4, 1998 on our audits of the consolidated
carve-out financial statements of Geometric Results Incorporated-Service for
the years ended December 31, 1995 and 1996 and, for the eight-month period
ended August 31, 1997. We also consent to the reference to our firm under the
caption "Experts".
Coopers & Lybrand L.L.P.
Detroit, Michigan
April 7, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 and
related Prospectus of MSX International, Inc. for the registration of
$100,000,000 of MSX International, Inc. 11 3/8% Senior Subordinated Notes due
2008 of our report dated November 10, 1997 on our audit of the combined
financial statements of APX International for the period December 31, 1995
to November 6, 1996. We also consent to the reference to our firm under the
caption "Experts".
Coopers & Lybrand L.L.P.
Detroit, Michigan
April 9, 1998
<PAGE> 1
EXHIBIT 23.4
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of MSX International,
Inc. for the registration of $100,000,000 of MSX International, Inc. 11 3/8%
Senior Subordinated Notes due 2008 and to the inclusion of our report dated
April 12, 1996, with respect to the combined financial statements of APX
International for the year ended December 30, 1995.
DRAFT
ERNST & YOUNG LLP
April 6, 1998
Boston, Massachusetts
