<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 3, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
GENERAC PORTABLE PRODUCTS, INC.
GENERAC PORTABLE PRODUCTS, LLC
GPPW, INC.
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR RESPECTIVE CHARTERS)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 3621 13-4006887
DELAWARE (PRIMARY STANDARD INDUSTRIAL 39-1932782
WISCONSIN CLASSIFICATION 13-4012695
(STATE OR OTHER JURISDICTION OF CODE NUMBER) (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBERS)
</TABLE>
------------------------
1 GENERAC WAY
JEFFERSON, WISCONSIN 53549
(920) 674-3750
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
DORRANCE J. NOONAN, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
GENERAC PORTABLE PRODUCTS, LLC
1 GENERAC WAY
JEFFERSON, WISCONSIN 53549
(920) 674-3750
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
WITH A COPY TO:
MARK ZVONKOVIC, ESQ.
KING & SPALDING
1185 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 556-2100
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED EXCHANGE OFFER: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, please check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration number for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier, effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO AGGREGATE PRICE AGGREGATE AMOUNT OF
TITLE OF CLASS OF SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11 1/4% Senior Subordinated Notes Due 2006... $110,000,000 100% $110,000,000 $30,580
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PROSPECTUS
GENERAC PORTABLE PRODUCTS, LLC
GPPW, INC.
ISSUERS
-------------------------
OFFER TO EXCHANGE
11 1/4% SENIOR SUBORDINATED NOTES DUE 2006
FOR ALL OUTSTANDING
11 1/4% SENIOR SUBORDINATED NOTES DUE 2006
-------------------------
THE NEW NOTES --
- -- Identical in all material respects to the Old Notes, except for certain
transfer restrictions, registration rights and additional interest provisions
relating to the Old Notes
- -- Interest accrues from the date of issuance at the rate of 11 1/4% per annum,
payable semi-annually in arrears on each January 1 and July 1, commencing
January 1, 1999
- -- Unsecured and subordinated to all existing and future Senior Debt
- -- Rank without preference with all future senior subordinated indebtedness and
as senior to all future subordinated indebtedness
- -- Fully and unconditionally guaranteed by Generac Portable Products, Inc.
THE EXCHANGE OFFER --
- -- For all of the Old Notes
- -- Expires at 5:00 p.m., New York City time, on [ ],
1999
- -- Subject to customary conditions
CONSIDER CAREFULLY THE "RISK FACTORS" BEGINNING ON PAGE 8 OF THIS PROSPECTUS.
You should rely only on the information contained in this Prospectus or that we
have referred you to. We have not authorized anyone to provide you with
information that is different. We are not offering to sell or asking you to buy
anything other than the New Notes. We are not offering to sell or asking you to
buy anything in any jurisdiction where doing so would be against the law.
Neither the Securities and Exchange Commission nor any state securities
commission has approved the New Notes or determined if this Prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
SUBJECT TO COMPLETION, DATED , 1999.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE AMENDED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE> 3
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission (the "SEC") a
registration statement on Form S-4 (the "Registration Statement") under the
Securities Act with respect to the 11 1/4% Senior Subordinated Notes due 2006
(the "New Notes"). As allowed by SEC rules, this Prospectus does not contain all
of the information included in the Registration Statement. Our descriptions in
this Prospectus concerning the contents of any contract, agreement or document
are not necessarily complete. For those contracts, agreements or documents that
we filed as exhibits to the Registration Statement, you should read the exhibit
for a more complete understanding of the document or subject matter involved.
As a result of the filing of the Registration Statement with the SEC, we
will be required to file annual, quarterly and special reports, proxy statements
and other information with the SEC. You may read and copy any document we file
with the SEC, including the Registration Statement, at the SEC's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference room.
You may also request copies of such documents, upon payment of a duplicating
fee, by writing to the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 or
obtain copies of such documents over the Internet at the SEC's website at
http://www.sec.gov.
FORWARD-LOOKING STATEMENTS
The statements, other than statements of historical facts included in this
Prospectus, including statements set forth under the "Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and "Business" regarding the Issuers' future financial position,
business strategy, budgets, projected costs and plans and objectives of
management for future operations, are forward-looking statements. In addition,
forward-looking statements generally can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "intend,"
"estimate," "anticipate" or "believe" or the negative thereof or variations
thereon or similar terminology. Although we believe that the expectations
reflected in such forward-looking statements will prove to have been correct, we
can give no assurance that such expectations will prove to have been correct.
You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this Prospectus. Except as
required by law, we are not obligated to publicly release any revision to these
forward-looking statements to reflect events or circumstances after the date of
this Prospectus or to reflect the occurrence of unanticipated events. Important
factors that could cause actual results to differ materially from our
expectations (the "Cautionary Statements") are disclosed under "Risk Factors"
and elsewhere in this Prospectus including in conjunction with some of the
forward-looking statements included in this Prospectus. All subsequent written
and oral forward-looking statements attributable to the Issuers, or persons
acting on their behalf, are expressly qualified in their entirety by the
Cautionary Statements.
i
<PAGE> 4
SUMMARY
This summary highlights some information from this Prospectus, but does not
contain all material features of the Exchange Offer. Please read the detailed
information and consolidated financial statements and the notes thereto
appearing elsewhere in this Prospectus. Except as otherwise required by the
context, references in this Prospectus to "we," "us" or the "Issuers" refer to
Generac Portable Products, LLC and GPPW, Inc. References to the "Operating
Company" means Generac Portable Products, LLC. References to "Holdings" means
Generac Portable Products, Inc. Except as noted in the section "Description of
the New Notes," references to the "Company" means Holdings and its subsidiaries,
including the Issuers, on a consolidated basis and, as the context requires, the
Company's predecessor. References to the "Predecessor" refers to the Portable
Products Division of Generac Corporation. The term "Old Notes" refers to the
11 1/4% Senior Subordinated Notes due 2006 that were issued on July 9, 1998. The
term "New Notes" refers to the 11 1/4% Senior Subordinated Notes due 2006 to be
issued in the Exchange Offer. The term "Notes" refers to the Old Notes and the
New Notes collectively. The term "you" refers to prospective investors in the
New Notes.
ABOUT THE COMPANY
The Company designs, manufactures and markets engine-powered tools for use
in both industrial and residential applications, with its two principal product
lines being portable generators and pressure washers. In 1998, as measured by
net sales, the Company believes it was the largest U.S. manufacturer of portable
generator sets and the second largest U.S. manufacturer of consumer pressure
washers, with a domestic market share in each category as follows:
<TABLE>
<CAPTION>
ESTIMATED 1998
PRODUCT U.S. MARKET SHARE
------- -----------------
<S> <C>
Portable generators........................... 29%
Pressure washers.............................. 33%
</TABLE>
The Company sells its portable generators, pressure washers and other
products primarily to home center chains, mass merchants and warehouse clubs as
well as to independent representatives. Since 1961, the Company has been the
major supplier of portable generators to Sears, Roebuck and Co., and has been
one of two suppliers of pressure washers to Sears, both marketed under the
Craftsman(R) label. The Company is also a core supplier of portable generators
and pressure washers, both marketed under the Generac(R) label, to The Home
Depot, Inc., the largest and one of the fastest growing retail home center
chains in North America.
The Company's performance has benefited from strong growth in the
engine-powered tools market as well as favorable demographic trends. Over the
past three years, the Company's net sales have grown at a compound annual rate
of approximately 38%, increasing from $104.8 million in 1995 to $276.4 million
in 1998.
The Company believes that its strength in each product category is the
result of its strategic approach to engineering and manufacturing, its
innovation in product development and its focus on product quality. In addition
to the manufacture of portable generators and pressure washers, the Company
manufactures some of the components for those products, such as alternators,
pressure washer pumps and blow-molded gas tanks. The benefits of this
"strategic" vertical integration for the Company are (1) significant cost
advantages
1
<PAGE> 5
over certain competitors who source components from third party suppliers and
(2) improved operating profitability through the reconfiguration of production
processes and the standardization of components. The Company also has
long-standing customer relationships and a unique, nationwide service network to
build and support its customer base. The Company believes that these strengths
facilitate the Company's ability to serve its increasingly sophisticated and
demanding retail customers.
The Company has been designing, building and marketing portable generators
since its founding in 1959. The principal executive offices of the Company are
located at 1 Generac Way, Jefferson, Wisconsin 53549, telephone (920) 674-3750.
THE EXCHANGE OFFER
New Notes....................... The forms and terms of the New Notes are
identical in all material respects to the
terms of the Old Notes for which they may be
exchanged pursuant to the Exchange Offer,
except for certain transfer restrictions,
registration rights and additional interest
provisions relating to the Old Notes
described elsewhere in this Prospectus under
"Description of the Old Notes" and "Old
Notes Registration Rights Agreement."
The Exchange Offer.............. We are offering to exchange up to
$110,000,000 aggregate principal amount of
the New Notes for up to $110,000,000
aggregate principal amount of Old Notes. Old
Notes may be exchanged only in integral
multiples of $1,000.
Expiration Date; Withdrawal of
Tender........................ Unless we extend the Exchange Offer, it will
expire at 5:00 p.m., New York City time, on
[ ], 1999. We will not extend this
term period to a date later than [ ],
1999. You may withdraw any Old Notes you
tender pursuant to the Exchange Offer at any
time prior to [ ], 1999. We will
return, as promptly as practicable after the
expiration or termination of the Exchange
Offer, any Old Notes not accepted for
exchange for any reason without expense to
you.
Certain Conditions to the
Exchange Offer.................. The Exchange Offer is subject to customary
conditions, which may be waived by us. These
conditions are included in the Letter of
Transmittal we have provided to you with
this Prospectus.
Procedures for Tendering Old
Notes........................... If you wish to accept the Exchange Offer,
you must complete, sign and date the Letter
of Transmittal in accordance with the
instructions and deliver the Letter of
Transmittal, along with the
2
<PAGE> 6
Old Notes and any other required
documentation, to the Exchange Agent. By
executing the Letter of Transmittal, you
will represent to us that, among other
things:
- any New Notes you receive will be acquired
in the ordinary course of your business,
- you have no arrangement with any person to
participate in the distribution of the New
Notes, and
- you are not an "affiliate," as defined in
Rule 405 of the Securities Act of 1933, as
amended, of the Issuers or, if you are an
affiliate, you will comply with the
registration and prospectus delivery
requirements of the Securities Act to the
extent applicable.
If you hold your Old Notes through The
Depository Trust Company ("DTC") and wish to
participate in the Exchange Offer, you may
do so through DTC's Automated Tender Offer
Program ("ATOP"). By participating in the
Exchange Offer, you will agree to be bound
by the Letter of Transmittal as though you
had executed such Letter of Transmittal.
Interest on the New Notes....... Interest on the New Notes:
- accrues from the date of issuance at the
rate of 11 1/4% per annum, and
- is payable semi-annually in arrears on
each January 1 and July 1, commencing on
January 1, 1999.
Interest on the Old Notes accepted for
exchange will stop accruing upon the
issuance of the New Notes.
Special Procedures for
Beneficial Owners............... If you are a beneficial owner whose Old
Notes are registered in the name of a
broker, dealer, commercial bank, trust
company or other nominee and wish to tender
such Old Notes in the Exchange Offer, please
contact the registered holder as soon as
possible and instruct them to tender on your
behalf and comply with our instructions set
forth elsewhere in this Prospectus.
Guaranteed Delivery Procedure... If you wish to tender your Old Notes, you
may, in certain instances, do so according
to the guaranteed delivery procedures set
forth elsewhere in this Prospectus under
"The Exchange Offer -- Proce-
3
<PAGE> 7
dures for Tendering Old Notes -- Guaranteed
Delivery."
Registration Rights Agreement... We sold the Old Notes to the Initial
Purchaser in a transaction exempt from the
registration requirements of the Securities
Act of 1933, as amended, on July 9, 1998. At
that time, the Issuers and the Initial
Purchaser entered into a Registration Rights
Agreement which grants the holders of the
Old Notes certain exchange and registration
rights. This Exchange Offer satisfies those
rights, which terminate upon consummation of
the Exchange Offer. You will not be entitled
to any exchange or registration rights with
respect to the New Notes. Also, after
consummation of the Exchange Offer no
exchange or registration rights will exist
with respect to any Old Notes that remain
outstanding.
Certain Federal Tax
Considerations ..
With respect to the exchange of the Old
Notes for the New Notes:
- the exchange will not constitute a taxable
exchange for U.S. federal income tax
purposes,
- you will not recognize gain or loss upon
receipt of the New Notes,
- you must include interest in gross income
to the same extent as the Old Notes, and
- your holding period for the New Notes will
include the holding period for the Old
Notes.
Use of Proceeds................. We will not receive any proceeds from the
exchange of Notes pursuant to the Exchange
Offer.
Exchange Agent.................. We have appointed Bankers Trust Company as
the Exchange Agent for the Exchange Offer.
The telephone number of the Exchange Agent
is (800) 735-7777.
TERMS OF THE NOTES
The form and terms of the New Notes are substantially the same as the form
and terms of the Old Notes, except that the New Notes are registered under the
Securities Act. As a result, the New Notes will not bear legends restricting
their transfer and will not contain the registration rights and additional
interest provisions contained in the Old Notes.
Issuers......................... Generac Portable Products, LLC and GPPW,
Inc.
Securities Offered.............. $110,000,000 aggregate principal amount of
11 1/4% Senior Subordinated Notes due 2006.
4
<PAGE> 8
Maturity........................ July 1, 2006
Interest Payment Dates.......... January 1 and July 1 of each year,
commencing January 1, 1999.
Sinking Fund.................... None.
Optional Redemption............. Except as described below and under "Change
of Control," we may not redeem the Notes
prior to July 1, 2002. After July 1, 2002,
we may redeem any amount of the Notes at any
time at the respective redemption prices,
together with accrued and unpaid interest,
if any, to the date of redemption. In
addition, at any time prior to July 1, 2001,
we may redeem up to 35% of the original
aggregate principal amount of the Notes with
the cash proceeds of one or more Public
Equity Offerings (as defined) at a
redemption price equal to 111.250% of the
principal amount to be redeemed, together
with accrued and unpaid interest, if any, to
the date of redemption, as long as at least
65% of the original aggregate principal
amount of the Notes remain outstanding after
such redemption.
Holdings Guarantee.............. Holdings will issue a guarantee of the Notes
under which Holdings, as primary obligor,
will fully and unconditionally guarantee the
payment of the Notes when due on a senior
subordinated basis.
Change of Control............... Upon the occurrence of a Change of Control
(as defined), the holders of the Notes have
the right to require us to repurchase the
Notes at a price equal to 101% of the
original aggregate principal amount,
together with accrued and unpaid interest,
if any, to the date of repurchase.
Ranking......................... The Notes will be unsecured and will be
subordinated to all existing and future
Senior Debt of the Issuers. The Notes will
rank without preference with all existing
and future senior subordinated indebtedness
of the Issuers and will rank senior to all
existing and future subordinated
indebtedness of the Issuers.
Restrictive Covenants........... The Indenture under which the New Notes will
be issued and the Old Notes were issued
limits:
- the incurrence of additional indebtedness
by us and our subsidiaries,
- the payment of dividends on, and
redemption of, our capital stock and our
subsidiaries' capital stock and the
redemption of our and our subsidiaries'
subordinated obligations,
5
<PAGE> 9
- investments,
- sales of assets and subsidiary stock,
- transactions with affiliates, and
- liens.
In addition, the Indenture limits our
ability to engage in consolidations, mergers
and transfers of substantially all of our
assets and also contains certain
restrictions on distributions from our
subsidiaries. All of these limitations and
prohibitions are subject to a number of
important qualifications and exceptions.
Absence of a Public Market for
the New Notes................... In general, you may freely transfer the New
Notes. However, there are exceptions to this
general statement described elsewhere in
this Prospectus under the section "The
Exchange Offer -- Resales of New Notes."
Further, the New Notes will be new
securities for which there will not
initially be a market. As a result, the
development or liquidity of any market for
the New Notes may not occur. BT Alex. Brown
Incorporated, the initial purchaser of the
Old Notes, has advised us that it currently
intends to make a market in the New Notes.
However, you should be aware that the
initial purchaser is not obligated to do so.
In the event such a market may develop, the
initial purchaser may discontinue it at any
time without notice. We do not intend to
apply for a listing of the New Notes on any
securities exchange or on any automated
dealer quotation system.
For additional information regarding the New Notes, see "Description of the
New Notes" and "Certain United States Federal Income Tax Consequences."
6
<PAGE> 10
RISK FACTORS
You should consider carefully the information set forth under the caption
"Risk Factors" beginning on page 8 and all the other information set forth in
this Prospectus before deciding whether to participate in the Exchange Offer.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the Company and Predecessor is
set forth below for the periods indicated.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY PRO FORMA(1)
------------------------------- ----------------- -----------------
YEAR ENDED
DECEMBER 31, JANUARY 1, 1998 JULY 10, 1998
------------- THROUGH THROUGH YEAR ENDED
1996 1997 JULY 9, 1998 DECEMBER 31, 1998 DECEMBER 31, 1998
----- ----- --------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges....... 4.0x 9.3x 10.2x 1.6x 1.4x
==== ==== ===== ==== ====
</TABLE>
- -------------------------
(1) To reflect the transactions described later in this Prospectus under the
section "The Transaction."
In computing the ratio of earnings to fixed charges, "earnings" represents
income (loss) before income taxes plus fixed charges. "Fixed charges" consists
of interest, amortization of debt issuance costs and a portion of rent, which is
representative of the interest factor (approximately one-third of rent expense).
7
<PAGE> 11
RISK FACTORS
Holders tendering Old Notes in the Exchange Offer should carefully review
the information contained elsewhere in this Prospectus and should particularly
consider the matters set forth below.
SIGNIFICANT LEVERAGE; ABILITY TO SERVICE DEBT
Because of the July 9, 1998 acquisition of the Portable Products Division
of Generac Corporation as described under the caption "The Transaction" later in
this Prospectus, we have a significant amount of debt outstanding. You should be
aware that this significant amount of debt could have important consequences to
you as a holder of the Notes. Below we have identified for you many, but not
all, of the consequences resulting from this significant amount of debt that we
now owe.
- We may be unable to obtain additional financing in the future for working
capital, capital expenditures, acquisitions and general corporate
purposes.
- A significant portion of our cash flow from operations must be dedicated
to the repayment of the indebtedness, thereby reducing the amount of cash
we have available for other purposes.
- We may be disadvantaged as compared to our competitors as a result of the
significant amount of debt we now owe.
- Our ability to adjust to changing market conditions and our ability to
withstand competition may be hampered by the amount of debt we now owe.
It may also make us more vulnerable in a downturned market or a
recession.
You should be aware that our ability to repay or refinance our current debt
depends on our successful financial and operating performance. Our ability to
meet our payment obligations may depend on our ability to successfully implement
our business strategy. Unfortunately, we cannot assure you that we will be
successful in implementing our strategy or in realizing our anticipated
financial results. You should also be aware that our financial and operational
performance depends upon a number of factors, many of which are beyond our
control. These factors include:
- the current economic and competitive conditions in the engine-powered
tools industry,
- any operating difficulties, operating costs or pricing pressures we may
experience,
- the passage of legislation or other regulatory developments that affects
us adversely, and
- any delays in implementing any strategic projects we may have.
Our inability to repay our current debt may result in a number of serious
consequences, including (1) a reduction or delay of expansion, (2) a sale of
some of our assets, or (3) a reorganization or recapitalization of the Company.
Any one or more of these consequences could adversely affect your investment in
the Notes. For more information about the Company's indebtedness or business
strategy, you should read the information we have included under the captions
"Description of the Senior Secured Credit Facility," "Description of the New
Notes," and "Business -- Business Strategy" later in this Prospectus.
8
<PAGE> 12
ABSENCE OF INDEPENDENT OPERATING HISTORY; DEPENDENCE ON GENERAC CORPORATION
We have operated as an independent entity only since July 1998, when the
Company acquired the Portable Products Division of Generac Corporation. The
principal operations of the Company were established in 1959. In January, 1997,
as part of a corporate reorganization, the Company's operations were placed in a
separate division of Generac Corporation. The Company has historically been
dependent on Generac Corporation for certain financial support and
administrative systems and services. Our future results depend largely upon our
ability to operate effectively as an independent company. We believe that we can
accomplish this task. However, we cannot guarantee to you that we will.
In addition, we have used the Generac-Nagano overhead valve industrial
engine (the "GN OHVI engine") in certain of our products since 1992. At the time
of the acquisition of the Portable Products Division of Generac Corporation, we
entered into an engine supply agreement with Generac Corporation. This agreement
provides that Generac Corporation will exclusively supply us with the GN OHVI
engine for use on welders, pressure washers and consumer portable generators,
and for other approved applications. The engine supply agreement obligates us to
make minimum annual purchases of the GN OHVI engine over the next nine years and
gives us the right to increase the amount of engines purchased based on its
forecast requirements. Assuming that we make the minimum annual purchases,
Generac Corporation may not sell the GN OHVI engine to other manufacturers or
assemblers for use in pressure washers, consumer portable generators and
welders. Although we believe the terms of the engine supply agreement are fair
and reasonable, we cannot assure you that the engine supply agreement will
adequately provide for the Company's future engine requirements. On the one
hand, Generac Corporation may not be able to supply all the GN OHVI engines we
may require, and on the other, the annual minimum purchase requirement may be
for a greater number of engines than what we require in any given year. Our
inability to obtain all of the engines we need or our obligation to buy more
engines than we need could affect the Company's financial performance in a
negative way.
GOVERNMENT REGULATION
As is the case with most businesses, we are subject to certain governmental
regulations with respect to environmental and health and safety matters, many of
which provide for substantial fines and criminal sanctions for violations. We
believe that our operations and facilities have been and are being operated in
compliance in all material respects with applicable environmental and health and
safety laws and regulations. However, the operation of manufacturing plants
entails risks in these areas. We cannot assure you that the Company will not
incur costs related to such matters in the future that will negatively affect
us. In addition, potentially significant expenditures could be required in order
to comply with evolving environmental and health and safety laws or regulations
that may be adopted or imposed in the future. You should also read the section
entitled "Business -- Environmental Matters" appearing later in this Prospectus
for additional discussion related to this matter.
DEPENDENCE UPON KEY PERSONNEL
As a holder of Notes, you have no right to participate in the Company's
management. The Company's continued success is highly dependent upon the
personal efforts and abilities of our senior management, including Dorrance J.
Noonan, Jr., our President and
9
<PAGE> 13
Chief Executive Officer, Gary J. Lato, our Chief Financial Officer, and James H.
Deneffe, our Senior Vice President of Sales and Marketing. We do not have
employment contracts with any of these officers and the loss of any one of them
could impact the Company in a negative way. Please also read the "Management"
section later in this Prospectus for additional information.
CONTROL BY PRINCIPAL STOCKHOLDER
You should be aware that a total of approximately 55% of Generac Portable
Products, Inc.'s voting stock is controlled by The Beacon Group III -- Focus
Value Fund, L.P. ("Beacon"). Accordingly, Beacon indirectly owns a majority of
the equity interest in the Issuers. As a result, it has the ability to exercise
practical control over the outcome of actions requiring the approval of our
equity holders, including potential acquisitions, elections of the Issuers'
Boards of Directors and sales or changes in control of the Issuers. You should
read the section entitled "Security Ownership" later in this Prospectus for
additional information.
YEAR 2000
Year 2000 issues exist when dates are recorded in computers using two
digits (rather than four) and are then used for arithmetic operations,
comparisons or sorting. A two-digit recording may recognize a date using "00" as
1900 rather than 2000, which could cause our computer systems to perform
inaccurate computations. We have adopted a three phase approach of assessment,
correction and testing. Although we have not yet completed our Year 2000
project, we currently estimate that our information technology systems will be
Year 2000 compliant by September 1, 1999. You should be aware that Year 2000
issues relate not only to our systems, but also to those used by our suppliers.
We anticipate that system replacements and modifications will resolve any Year
2000 issues that may exist with our suppliers or their suppliers. However, we
cannot guarantee to you that such replacements or modifications will be
completed successfully or on time and, as a result, any failure to complete such
modification on time may materially affect our financial and operating results
in a negative way. You should read the section "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Year 2000 Strategy"
later in this Prospectus for additional information.
RESTRICTIVE DEBT COVENANTS
The Indenture and our Credit Facility (as defined below) impose significant
operating and financial restrictions on us and our subsidiaries. These
restrictions may significantly limit or prohibit us from engaging in certain
transactions, including the following:
- borrowing additional money,
- paying dividends or other distributions to our stockholders,
- making certain investments,
- creating certain liens on our assets,
- selling certain assets currently held by us,
- entering into transactions with any of our affiliates, and
- engaging in certain mergers or consolidations.
10
<PAGE> 14
The senior subordinated credit facility we entered into in financing the
acquisition of the Portable Products Division of Generac Corporation (the
"Credit Facility") imposes significant restrictive covenants and requires
Generac Portable Products, LLC to maintain specified financial ratios and
satisfy certain financial tests. Our ability to meet these financial ratios and
tests may be affected by events beyond our control and, as a result, we cannot
guarantee to you that we will be able to meet such tests. In addition, the
restrictions contained in the Credit Facility could limit our ability to obtain
future financing, make needed capital expenditures, withstand a future downturn
in our business or in the economy or otherwise conduct necessary corporate
activities. Our failure to comply with the restrictions in the Indenture and the
Credit Facility could lead to a default under the terms of those documents. In
the event of such a default, the applicable lender could declare all amounts
borrowed and all amounts due under other instruments that contain certain
provisions of cross-acceleration or cross-default due and payable, including all
interest that is accrued and unpaid. In addition, the lenders under such
agreements could terminate their commitments to lend to us. If that does occur,
we cannot assure you that we would be able to make the necessary payments to the
lenders and we cannot give you any assurance that we would be able to find
additional alternative financing. Even if we could obtain additional alternative
financing, we cannot assure you that it would be on terms that are favorable or
acceptable to us.
You should also be aware that the existing indebtedness under the Credit
Facility is secured by substantially all of our and our affiliates' assets.
Should a default or acceleration of such indebtedness occur, the holders of such
indebtedness could seize these assets securing the indebtedness and sell the
assets to satisfy all or a part of what is owed. Please refer to the sections in
this Prospectus entitled "Description of the New Notes -- Certain Covenants" and
"Description of the Senior Secured Credit Facility" later in this Prospectus for
additional information.
HOLDINGS GUARANTEE
Holdings will issue a guarantee of the Notes under which Holdings, as
primary obligor, will fully and unconditionally guarantee the payment of the
Notes when due on a senior subordinated basis. This guarantee will be
subordinated in right of payment to all senior indebtedness of Holdings and
effectively subordinated to all indebtedness and other liabilities (including
trade payables) of Holdings' subsidiaries. Since Holdings is a holding company
with no significant operations and no significant investments in businesses
other than the Issuers, this guarantee by Holdings provides little, if any,
additional credit support for the Notes. Investors should not rely on this
guarantee in evaluating an investment in the Notes.
COMPETITION
We operate in a highly competitive industry. Competition is based primarily
on price, availability, product differentiation, quality of products and breadth
of product offerings. Several of our competitors have significantly greater
financial and operating resources and name recognition than we have. As a result
of these competitive conditions, we may not be able to sustain past levels of
revenue or continue our recent revenue growth or profitability. Please refer to
the section entitled "Business -- Competition" later in this Prospectus for
additional information.
11
<PAGE> 15
DEPENDENCE ON LIMITED NUMBER OF CUSTOMERS
Our three largest customers, Home Depot, Sears and Costco, accounted for
approximately 74% of the Company's sales for each of 1998 and 1997. We do not
have contractual agreements with any of these customers for the supply of
products. The loss of any of these customers or a significant decrease in the
volume of products supplied to any of these customers, particularly Home Depot
or Sears, could affect our financial performance in a negative way. Please read
the section entitled "Business -- Distribution and Marketing" later in this
Prospectus for additional information.
AVAILABILITY AND PRICING OF RAW MATERIALS AND COMPONENTS
We obtain some raw materials and components (including, among others, steel
and copper and small engines used in the Company's product lines) from third
parties. We believe that we have developed reliable sources for these raw
materials and components and that we could find qualified alternative sources to
supply such materials and components. Our operating results could suffer if we
are unable to obtain raw materials or components for a prolonged period of time.
Increases in the prices of raw materials or components resulting from tight
supplies could affect our financial performance in a negative way.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
We expect that international sales will continue to represent a significant
percentage of our total sales. In addition, we have significant operations
outside the United States, including a plant located in the United Kingdom. A
number of factors could adversely effect our international sales and operations,
including (1) periodic economic downturns, (2) fluctuations in interest and
foreign currency exchange rates, (3) the imposition of government controls, (4)
export license requirements, (5) political instability or nationalization of
businesses, (6) trade restrictions and changes in tariffs and (7) difficulties
in staffing and managing international operations. We cannot assure you that
such risks will not affect our financial performance in a negative way in the
future. As a result, we may need to modify our current business practices.
RISKS ASSOCIATED WITH LIMITED MANUFACTURING FACILITIES
The Company produces all of its United States products in its manufacturing
facility located in Jefferson, Wisconsin. The Company produces all of the
products required for its European operations at its manufacturing facility
located in Cheshire, England. The Company's manufacturing processes are highly
complex and require sophisticated and costly equipment. As a result, any
prolonged interruption in the operations of either of the Company's
manufacturing facilities could result in delays or cancellations of shipments. A
number of factors could cause interruptions, including labor difficulties,
equipment failures or destruction of or damage to a facility. We cannot assure
you that alternative qualified capacity would be available on a timely basis or
at all. Interruptions could result in a loss of customers and could affect our
financial performance in a negative way.
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements concerning our
operations, economic performances and financial condition. These statements are
based upon a number of assumptions and estimates which are inherently subject to
significant uncertainties and contingencies, many of which are beyond our
control, and reflect future
12
<PAGE> 16
business decisions which are subject to change. Some of these assumptions
inevitably will not materialize, and unanticipated events will occur which will
affect our results of operations.
FRAUDULENT TRANSFER CONSIDERATIONS
The incurrence of indebtedness by the Issuers, such as the Notes, may be
subject to review under federal bankruptcy law or relevant state fraudulent
conveyance or transfer laws if a bankruptcy case or lawsuit is commenced by or
on behalf of unpaid creditors of the Issuers. In such a case, if a court were to
find under such laws that the Issuers had actual intent to defraud or did not
receive fair consideration or reasonably equivalent value for incurring the debt
represented by the Notes, and that, at the time the Issuers incurred
indebtedness (including indebtedness under the Notes), the Issuers (1) were
insolvent, (2) were rendered insolvent by reason of such incurrence, (3) were
engaged in a business or transaction for which the assets remaining with the
Issuers constituted unreasonably small capital, or (4) intended to incur, or
believed that they would incur, debts beyond their ability to pay such debts as
they matured, then such court could void or subordinate the amounts owing under
the Notes to presently existing and future indebtedness of the Issuers and take
other actions detrimental to the holders of the Notes. We believe that at the
time we incurred the indebtedness constituting the Notes, we did not meet any of
the criteria that would permit a court to void or subordinate the Notes. Our
belief is based upon our analyses of internal cash flow projections and
estimated values of our assets and liabilities. We cannot assure you, however,
that a court would agree with us.
ABSENCE OF PUBLIC MARKET
Currently, there is no public market for the New Notes or the Old Notes. We
do not intend to apply for listing of the Notes on any securities exchange or on
any automated dealer quotation system. Although the Initial Purchaser has
informed us that it intends to make a market in the Notes, it is not obligated
to do so and may discontinue any such market at any time without notice. In
addition, such market making activity may be limited during this Exchange Offer
or the effectiveness of a shelf registration statement in lieu thereof. As a
result, we can make no assurances to you as to the development or liquidity of
any market for the Notes, your ability to sell the Notes, or the price at which
you may be able to sell the Notes. Future trading prices of the Notes will
depend on many factors, including among other things, prevailing interest rates,
our operating results and the market for similar securities. Historically, the
market for securities similar to the Notes, including non-investment grade debt,
has been subject to disruptions that have caused substantial volatility in the
prices of such securities. We cannot assure you that, if a market develops, it
will not be subject to similar disruptions.
PROCEDURES FOR TENDER OF OLD NOTES
The New Notes will be issued in exchange for the Old Notes only after
timely receipt by the Exchange Agent of certificates for Old Notes and a
properly completed and duly executed Letter of Transmittal or a book-entry
confirmation of a book-entry transfer of Old Notes into the Exchange Agent's
account at DTC, and all other required documentation. If you desire to tender
your Old Notes in exchange for New Notes, you should allow sufficient time to
ensure timely delivery. Neither the Exchange Agent nor we are under any duty to
give you notification of defects or irregularities with respect to tenders of
Old Notes for exchange. Old Notes that are not tendered or are tendered but not
accepted will, following the consummation of the Exchange Offer, continue to be
13
<PAGE> 17
subject to the existing transfer restrictions. In addition, if you tender the
Old Notes in the Exchange Offer for the purpose of participating in a
distribution of the New Notes, you will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. For additional information, please refer
to the sections entitled "The Exchange Offer" and "Plan of Distribution" later
in this Prospectus.
CONSEQUENCES OF A FAILURE TO EXCHANGE OLD NOTES
We did not register the sale of the Old Notes under the Securities Act. As
a result, the Old Notes are subject to substantial transfer restrictions. Old
Notes that are not tendered in exchange for New Notes or are tendered but not
accepted will, following consummation of the Exchange Offer, continue to be
subject to the existing transfer restrictions. We do not currently anticipate
that after the Exchange Offer we will register any additional resale of the Old
Notes under the Securities Act. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Old Notes could be adversely affected due to the limited amount,
or "float," of the Old Notes that are expected to remain outstanding following
the Exchange Offer. Generally, a lower "float" of a security could result in
less demand to purchase such security and, as a result, could result in lower
prices for such security. For the same reason, to the extent that a large amount
of Old Notes are not tendered or are tendered and not accepted in the Exchange
Offer, the trading market for the New Notes could be adversely affected. For
additional information, please refer to the sections entitled "The Exchange
Offer" and "Plan of Distribution" later in this Prospectus.
THE ISSUERS
Generac Portable Products, Inc., a Delaware corporation ("Holdings"),
together with its subsidiaries, is a leader in the design, manufacture and sales
of portable generators and pressure washers as described under "Business."
Holdings was formed on April 29, 1998 as a Delaware corporation. The primary
business activity of Holdings consists of its indirect ownership of 100% of the
limited liability company interests in Generac Portable Products, LLC, a
Delaware limited liability company (the "Operating Company"), through two wholly
owned subsidiaries: GPPW, Inc., a Wisconsin corporation ("GPPW"), and GPPD,
Inc., a Delaware corporation ("GPPD"). GPPW and GPPD hold, respectively, 5% and
95% limited liability company interests in the Operating Company.
GPPW was incorporated in Wisconsin on May 28, 1998. GPPW does not conduct
any operations. Accordingly, investors in the Notes should look only to the cash
flow and assets of the Operating Company for payment of the Notes.
The Operating Company was formed on June 1, 1998 as a Delaware limited
liability company. On July 9, 1998, the Operating Company purchased
substantially all of the assets, and assumed certain of the liabilities, of
Generac Corporation's Portable Products Division, consisting of its production,
marketing, sales, engineering, research and development (and in the U.K., Spain
and Germany, importation) and administration operations located at its
facilities in Wisconsin, England, Spain and Germany.
The principal executive offices of the Issuers are located at 1 Generac
Way, Jefferson, Wisconsin 53549, telephone (920) 674-3750.
14
<PAGE> 18
THE TRANSACTION
Holdings and Generac Corporation are parties to an Asset Purchase and Sale
Agreement dated as of May 5, 1998 (the "Asset Purchase Agreement"), pursuant to
which Holdings caused the Operating Company to purchase substantially all of the
assets, and assume certain of the liabilities, of Generac Corporation's Portable
Products Division (the "Division") for $305.5 million in cash after post closing
adjustments estimated to total $1.0 million. In connection with the Transaction,
Beacon, certain members of management of the Company and certain other investors
(collectively, the "Equity Investors") purchased an aggregate of $110.0 million
of common stock, par value $.01 per share, of Holdings (the "Holdings Common
Stock"), constituting 100% of the outstanding Holdings Common Stock. The
investments by the Equity Investors are collectively referred to herein as the
"Equity Investment."
The Operating Company entered into a new bank credit facility (the "Credit
Facility") in connection with the Transaction that provided for (i) two senior
secured term loan facilities in the aggregate amount of $85.0 million and (ii) a
senior secured revolving credit facility of up to $30.0 million. At the closing
of the Transaction, $85.0 million was borrowed under the term loans and
borrowings of $11.6 million were made under the revolving credit facility to
fund the Transaction. The balance of the funds available under the revolving
credit facility are available to fund the Company's general corporate and
additional working capital requirements. The Credit Facility has availability
for letter of credit usage, is secured by substantially all the assets of the
Operating Company, GPPW and, upon the occurrence of certain events, GPPD and is
guaranteed by Holdings, GPPW and, upon the occurrence of certain events, GPPD.
Additionally, the Operating Company entered into a capital lease arrangement
with Generac Corporation for manufacturing equipment with a fair value of
approximately $2.6 million (the "Capital Lease").
The acquisition of the Division by the Operating Company, the borrowings by
the Operating Company of funds under the Credit Facility, the Equity Investment,
the Capital Lease and the issuance of the Old Notes are referred to herein
collectively as the "Transaction."
The following table illustrates the sources and uses of funds in the
Transaction (dollars in millions):
<TABLE>
<CAPTION>
SOURCES USES
- ------- ----
<S> <C> <C> <C>
Credit Facility............... $ 94.2(1) Purchase Price................ $305.5
Transaction Fees and
Old Notes..................... 110.0 Expenses...................... 8.7
------
Equity Investment............. 110.0
------
Total Sources............ $314.2 Total Uses.................... $314.2
====== ======
</TABLE>
- -------------------------
(1) Amount borrowed by the Operating Company under the Credit Facility at the
closing of the Transaction was $96.6 million, which was subsequently reduced
by $2.4 million on account of post closing adjustments and a refund of an
overpayment of transaction expenses.
15
<PAGE> 19
USE OF PROCEEDS OF THE NEW NOTES
This Exchange Offer is intended to satisfy obligations of the Issuers under
the Registration Rights Agreement dated as of July 2, 1998 (the "Registration
Rights Agreement") by and among the Issuers and BT Alex. Brown Incorporated (the
"Initial Purchaser"). The Issuers will not receive any proceeds from the
issuance of the New Notes offered hereby. In consideration for issuing the New
Notes in exchange for Old Notes as described in this Prospectus, the Issuers
will receive Old Notes in like principal amount. The Old Notes surrendered in
exchange for the New Notes will be retired and canceled and cannot be reissued.
Accordingly, issuance of the New Notes will not result in any increase in the
outstanding debt of the Issuers.
16
<PAGE> 20
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at December 31, 1998 and July 9, 1998 after giving effect to the
Transaction. This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
the consolidated financial statements of the Company and the notes thereto
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, JULY 9,
1998 1998(4)
------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
LONG-TERM DEBT, INCLUDING CURRENT PORTION:
Revolving credit facility(1)......................... $ 600 $ 11,608
Term loans(1)........................................ 84,800 85,000
Notes................................................ 110,000 110,000
Capital lease obligations(2)......................... 2,383 2,617
-------- --------
Total long-term debt.............................. 197,783 209,225
-------- --------
STOCKHOLDERS' EQUITY:
Common stock and additional paid-in capital.......... 110,000 110,000
Retained earnings.................................... 4,202 --
Accumulated other comprehensive income............... 723 --
Excess of purchase price over book value of net
assets acquired from entities partially under
common control(3)................................. (11,658) (11,658)
-------- --------
Total stockholders' equity........................ 103,267 98,342
-------- --------
Total capitalization.............................. $301,050 $307,567
======== ========
</TABLE>
- -------------------------
(1) The senior secured credit facility consists of a revolving credit facility
providing for $30.0 million of borrowings and term loans aggregating $85.0
million.
(2) Represents the lease of certain manufacturing equipment from Generac
Corporation resulting in capital lease treatment for accounting purposes.
(3) The Company has limited its accounting basis resulting from the Transaction
as a result of certain stockholders which also owned an interest in Generac
Corporation. The difference between the total consideration paid in
connection with the Transaction and the accounting basis recognized is
reported as a separate component of stockholders' equity.
(4) Amounts presented give effect to the Transaction.
17
<PAGE> 21
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the sale of the Old Notes, the Issuers entered into the
Registration Rights Agreement with the Initial Purchaser, pursuant to which the
Issuers agreed to file and to use their reasonable best efforts to cause to
become effective with the Commission a registration statement with respect to
the exchange of the Old Notes for senior subordinated notes with terms identical
in all material respects to the terms of the Old Notes. A copy of the
Registration Rights Agreement has been filed as an Exhibit to the Registration
Statement of which this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual obligations of
the Issuers under the Registration Rights Agreement. The forms and terms of the
New Notes are identical in all material respect to the forms and terms of the
Old Notes, except that the New Notes have been registered under the Securities
Act and therefore will not be subject to certain restrictions on transfer
applicable to the Old Notes and will not provide for any increase in the
interest rate thereon. In that regard, the Old Notes provide, among other
things, that if a registration statement relating to the Exchange Offer has not
been filed on or by February 4, 1999 and declared effective on or by April 5,
1999 the interest rate borne by the Old Notes commencing on July 9, 1998 will
increase by 0.50% per annum until the Exchange Offer is consummated. Upon
consummation of the Exchange Offer, holders of Old Notes will not be entitled to
any increase in the interest rate thereon or any further registration rights
under the Registration Rights Agreement, except under limited circumstances. See
"Risk Factors -- Consequences of a Failure to Exchange Old Notes" and
"Description of the Old Notes."
The Exchange Offer is not being made to, nor will the Issuers accept
tenders for exchange from, holders of Old Notes in any jurisdiction in which the
Exchange Offer or the acceptance thereof would not be in compliance with the
securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to
the Exchange Offer means any person in whose name the Old Notes are registered
on the books of the Issuers or any other person who has obtained a properly
completed bond power from the registered holder, or any person who beneficially
owns Old Notes which are held of record by DTC who desires to deliver such Old
Notes by book-entry transfer into the Exchange Agent's account at DTC, or any
person who beneficially owns Old Notes which are held of record by a nominee
other than DTC (or its nominee).
Pursuant to the Exchange Offer, the Issuers will exchange as soon as
practicable after the date hereof, all of the Old Notes, of which $110,000,000
aggregate principal amount is outstanding, for a like aggregate principal amount
of the New Notes. The issuance of the New Notes has been registered under the
Securities Act.
TERMS OF THE EXCHANGE OFFER
The Issuers hereby offer, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $110,000,000 aggregate principal amount of New Notes for a like
aggregate principal amount of Old Notes properly tendered on or prior to the
Expiration Date and not properly withdrawn in accordance with the procedures
described below. The Issuers will issue, promptly after the Expiration Date, an
aggregate principal amount of up to $110,000,000 of New Notes in
18
<PAGE> 22
exchange for a like aggregate principal amount of outstanding Old Notes tendered
and accepted in connection with the Exchange Offer. Holders may tender their Old
Notes for exchange in whole or in part in any integral multiple of $1,000. The
Exchange Offer is not conditioned upon any minimum principal amount of Old Notes
being tendered.
Holders of Old Notes do not have any appraisal or dissenters' rights in
connection with the Exchange Offer. Old Notes which are not tendered for or are
tendered but not accepted in connection with the Exchange Offer will remain
outstanding and remain entitled to the benefits of the Indenture, but will not
be entitled to any further registration rights under the Registration Rights
Agreement, except under limited circumstances. See "Risk Factors -- Consequences
of a Failure to Exchange Old Notes" and "Description of the Old Notes."
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof promptly after the Expiration
Date.
Holders who tender Old Notes in connection with the Exchange Offer will not
be required to pay brokerage commissions or fees or transfer taxes with respect
to the exchange of Old Notes in connection with the Exchange Offer, except under
those circumstances described in the Letter of Transmittal. The Issuers will pay
all charges and expenses, other than certain applicable taxes described below,
in connection with the Exchange Offer. See "-- Fees and Expenses."
THE BOARDS OF DIRECTORS OF THE ISSUERS MAKE NO RECOMMENDATION TO HOLDERS OF
OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION
OF THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN
AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD NOTES MUST MAKE THEIR
OWN DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE
AGGREGATE PRINCIPAL AMOUNT OF OLD NOTES TO TENDER AFTER READING THIS PROSPECTUS
AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR ADVISERS, IF ANY, BASED
ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on
, 1999 unless the Exchange Offer is extended by the Issuers (in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended).
The Issuers expressly reserve the right in their sole and absolute
discretion, 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 (whether or not any Old Notes have been accepted for exchange) if
the Issuers determine, in their sole and absolute discretion, that any of the
conditions referred to under "-- Conditions to the Exchange Offer" has occurred
or exist or has not been satisfied, (iii) to extend the Expiration Date 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 as
described under "-- Withdrawal Rights," and (iv) to waive any condition or
otherwise amend the terms of
19
<PAGE> 23
the Exchange Offer in any respect. If the Exchange Offer is amended in a manner
determined by the Issuers to constitute a material change, or if the Issuers
waive a material condition of the Exchange Offer, the Issuers will promptly
disclose such amendment by means of a prospectus supplement that will be
distributed to the registered holders of the Old Notes, and the Issuers will
extend the Exchange Offer to the extent required by Rule 14e-1 under the
Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral (promptly confirmed in writing) or written notice
thereof to the Exchange Agent and by making a public announcement thereof, and
such announcement in the case of an extension will be made no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Without limiting the manner in which the Issuers may
choose to make any public announcement and subject to applicable law, the
Issuers shall have no obligation to publish, advertise or otherwise communicate
any such public announcement other than by issuing a release to an appropriate
news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF NEW NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
Issuers will exchange New Notes for Old Notes validly tendered and not withdrawn
(pursuant to the withdrawal rights described under "-- Withdrawal Rights")
promptly after the Expiration Date.
Subject to the conditions set forth under "-- Conditions to the Exchange
Offer," delivery of New Notes in exchange for Old Notes tendered and accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of (i) certificates for Old Notes or a book-entry
confirmation of a book-entry transfer of Old Notes into the Exchange Agent's
account at DTC, including an Agent's Message if the tendering holder does not
deliver a Letter of Transmittal, (ii) a completed and signed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees, or,
in the case of a book-entry transfer, an Agent's Message in lieu of the Letter
of Transmittal, and (iii) any other documents required by the Letter of
Transmittal. Accordingly, the delivery of New Notes might not be made to all
tendering holders at the same time, and will depend upon when certificates for
Old Notes, book-entry confirmations with respect to Old Notes and other required
documents are received by the Exchange Agent.
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of Old Notes into the Exchange Agent's account at DTC. See
"-- Procedures for Tendering Old Notes -- Book-Entry Transfer." The term
"Agent's Message" means a message, transmitted by DTC to 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 the tendering participant,
which acknowledgment states that such participant has received and agrees to be
bound by the Letter of Transmittal and that the Issuers may enforce such Letter
of Transmittal against such participant.
Subject to the terms and conditions of the Exchange Offer, the Issuers will
be deemed to have accepted for exchange, and thereby exchanged, Old Notes
validly tendered and not withdrawn as, if and when the Issuers give oral
(promptly confirmed in writing) or written notice to the Exchange Agent of the
Issuers' acceptance of such Old Notes for exchange pursuant to the Exchange
Offer. The Exchange Agent will act as agent for the Issuers for the purpose of
receiving tenders of Old Notes, Letters of Transmittal and
20
<PAGE> 24
related documents, and as agent for tendering holders for the purpose of
receiving Old Notes, Letters of Transmittal and related documents and
transmitting New Notes which will not be held in global form by DTC or a nominee
of DTC to validly tendering holders. Such exchange will be made promptly after
the Expiration Date. If for any reason whatsoever, acceptance for exchange or
the exchange of any Old Notes tendered pursuant to the Exchange Offer is delayed
(whether before or after the Issuers' acceptance for exchange of Old Notes) or
the Issuers extend the Exchange Offer or are unable to accept for exchange or
exchange Old Notes tendered pursuant to the Exchange Offer, then, without
prejudice to the Issuers' rights set forth herein, the Exchange Agent may,
nevertheless, on behalf of the Issuers and subject to Rule 14e-l(c) under the
Exchange Act, retain tendered Old Notes and such Old Notes may not be withdrawn
except to the extent tendering holders are entitled to withdrawal rights as
described under "-- Withdrawal Rights."
Pursuant to an Agent's Message or a Letter of Transmittal, a holder of Old
Notes will represent, warrant and agree in the Agent's Message or Letter of
Transmittal that it has full power and authority to tender, exchange, sell,
assign and transfer Old Notes, that the Issuers will acquire good, marketable
and unencumbered title to the tendered Old Notes, free and clear of all liens,
restrictions, charges and encumbrances, and the Old Notes tendered for exchange
are not subject to any adverse claims or proxies. The holder also will warrant
and agree that it will, upon request, execute and deliver any additional
documents deemed by the Issuers or the Exchange Agent to be necessary or
desirable to complete the exchange, sale, assignment, and transfer of the Old
Notes tendered pursuant to the Exchange Offer.
PROCEDURES FOR TENDERING OLD NOTES
VALID TENDER. Except as set forth below, in order for Old Notes to be
validly tendered by book-entry transfer, an Agent's Message must be transmitted
by DTC to the Exchange Agent or a completed and signed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees, and in either case
any other documents required by the Letter of Transmittal, must be delivered to
the Exchange Agent by mail, facsimile, hand delivery or overnight carrier at one
of the Exchange Agent's addresses set forth under "-- Exchange Agent" on or
prior to the Expiration Date and either (i) such Old Notes must be tendered
pursuant to the procedures for book-entry transfer set forth below or (ii) the
guaranteed delivery procedures set forth below must be complied with.
Except as set forth below, in order for Old Notes to be validly tendered by
a means other than by book-entry transfer, a completed and signed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees, and
any other documents required by the Letter of Transmittal, must be delivered to
the Exchange Agent by mail, facsimile, hand delivery or overnight carrier at one
of the Exchange Agent's addresses set forth under "-- Exchange Agent" on or
prior to the Expiration Date and either (i) such Old Notes must be delivered to
the Exchange Agent on or prior to the Expiration Date or (ii) the guaranteed
delivery procedures set forth below must be complied with.
If less than all Old Notes are tendered, a tendering holder should fill in
the amount of Old Notes being tendered in the appropriate box on the Letter of
Transmittal. The entire amount of Old Notes delivered to the Exchange Agent will
be deemed to have been tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE
21
<PAGE> 25
OPTION AND SOLE RISK OF THE TENDERING HOLDER, AND DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS TO BE BY MAIL,
THE USE OF REGISTERED MAIL, RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR AN
OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD
BE ALLOWED TO ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER. The Exchange Agent and DTC have confirmed that any
participant in DTC's book-entry transfer facility system may utilize DTC's ATOP
procedures to tender Old Notes. The Exchange Agent will establish an account
with respect to the Old Notes at DTC for purposes of the Exchange Offer within
two business days after the date of this Prospectus. Any participant may make a
book-entry delivery of the Old Notes by causing DTC to transfer such Old Notes
into the Exchange Agent's account at DTC in accordance with DTC's ATOP
procedures for transfer. However, although delivery of Old Notes may be effected
through book-entry transfer into the Exchange Agent's account at DTC, an Agent's
Message or a completed and signed Letter of Transmittal (or facsimile thereof),
with any required signature guarantees and any other documents required by the
Letter of Transmittal, must in any case be delivered to and received by the
Exchange Agent at one of its addresses 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 DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
SIGNATURE GUARANTEES. Certificates for Old Notes need not be endorsed and
signature guarantees on a Letter of Transmittal are unnecessary unless (a) a
certificate for the Old Notes is registered in a name other than that of the
person surrendering the certificate or (b) such registered holder completes the
box entitled "Special Issuance Instructions" or "Special Delivery Instructions"
in the Letter of Transmittal. In the case of (a) or (b) above, such certificates
for Old Notes must be duly endorsed or accompanied by a properly executed bond
power, with the endorsement or signature on the bond power and on the Letter of
Transmittal guaranteed by a firm or other entity identified in Rule 17Ad-15
under the Exchange Act as an "eligible guarantor institution," including (as
such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal
securities broker or dealer or government securities broker or dealer; (iii) a
credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association (each, an "Eligible
Institution"), unless surrendered on behalf of such Eligible Institution. See
Instructions 2 and 6 to the Letter of Transmittal.
GUARANTEED DELIVERY. If a holder desires to tender Old Notes pursuant to
the Exchange Offer and the certificates for such Old Notes are not immediately
available or time will not permit all required documents to reach the Exchange
Agent on or before the Expiration Date, or the procedures for book-entry
transfer cannot be completed on a timely
22
<PAGE> 26
basis, such Old Notes may nevertheless be tendered, provided that all of the
following guaranteed delivery procedures are complied with:
(i) such tenders are made by or through an Eligible Institution;
(ii) a completed and signed Notice of Guaranteed Delivery,
substantially in the form accompanying the Letter of Transmittal, is
delivered to the Exchange Agent, as provided below, on or prior to
Expiration Date; and
(iii) the certificates (or a book-entry confirmation) representing all
tendered Old Notes, in proper form for transfer, together with a completed
and signed Letter of Transmittal (or facsimile thereof) or, in the case of
a book-entry transfer, an Agent's Message in lieu of the Letter of
Transmittal, with any required signature guarantees and any other documents
required by the Letter of Transmittal, are received by the Exchange Agent
within three New York Stock Exchange trading days after the date of
execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
The Issuers' acceptance for exchange of Old Notes tendered pursuant to any
of the procedures described above will constitute a binding agreement between
the tendering holder and the Issuers upon the terms and subject to the
conditions of the Exchange Offer.
DETERMINATION OF VALIDITY. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange of
any tendered Old Notes will be determined by the Issuers, in their sole
discretion, whose determination shall be final and binding on all parties. The
Issuers reserve the absolute right, in their sole and absolute discretion, to
reject any and all tenders determined by them not to be in proper form or the
acceptance of which, or exchange for, may, in the view of counsel to the
Issuers, be unlawful. The Issuers also reserve the absolute right, subject to
applicable law, to waive any of the conditions of the Exchange Offer as set
forth under "-- Conditions to the Exchange Offer" or any condition, defect or
irregularity in any tender of Old Notes of any particular holder whether or not
similar conditions, defects or irregularities are waived in the case of other
holders.
The Issuers' interpretation of the terms and conditions of the Exchange
Offer (including the Letter of Transmittal and the instructions thereto) will be
final and binding on all parties. No tender of Old Notes will be deemed to have
been validly made until all irregularities with respect to such tender have been
cured or waived. Neither the Issuers, any affiliates or assigns of the Issuers,
the Exchange Agent nor any other person shall be under any duty to give any
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney or
any other document required by the Letter of Transmittal is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, such person
should so indicate when signing and, unless waived by the Issuers, proper
evidence satisfactory to the Issuers, in their sole discretion, of such person's
authority to so act must be submitted.
A beneficial owner of Old Notes that are held by or registered in the name
of a broker, dealer, commercial bank, trust companies or other nominee or
custodian is urged to
23
<PAGE> 27
contact such entity promptly if such beneficial holder wishes to participate in
the Exchange Offer.
RESALES OF NEW NOTES
The Issuers are making the Exchange Offer for the Old Notes in reliance on
the position of the SEC staff as set forth in certain interpretive letters
addressed to third parties in other transactions. However, the Issuers have not
sought their own interpretive letter and there can be no assurance that the SEC
staff 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 SEC staff, and subject to the two immediately following
sentences, the Issuers believe that New 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 New 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 New Notes. However, any holder of Old Notes who is an "affiliate" of the
Issuers or who intends to participate in the Exchange Offer for the purpose of
distributing New Notes, or any broker-dealer who purchased Old Notes from the
Issuers 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
SEC staff 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. In
addition, as described below, if any broker-dealer holds Old Notes acquired for
its own account as a result of market-making or other trading activities and
exchanges such Old Notes for New Notes, then such broker-dealer must deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resales of such New Notes.
Each holder of Old Notes who wishes to exchange Old Notes for New Notes in
the Exchange Offer will be required to represent that (i) it is not an
"affiliate" of the Issuers or Holdings, (ii) any New Notes to be received by it
are being acquired in the ordinary course of its business, (iii) it has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of such New Notes, and (iv) if such
holder is not a broker-dealer, such holder is not engaged in, and does not
intend to engage in, a distribution (within the meaning of the Securities Act)
of such New Notes. The Letter of Transmittal contains the foregoing
representations.
In addition, the Issuers may require a holder, as a condition to such
holder's eligibility to participate in the Exchange Offer, to furnish to the
Issuers (or an agent thereof) in writing information as to the number of
"beneficial owners" (within the meaning of Rule 13d-3 under the Exchange Act) on
behalf of whom such holder holds the Notes to be exchanged in the Exchange
Offer. Each broker-dealer that receives New Notes for its own account pursuant
to the Exchange Offer must acknowledge that it acquired the Old Notes for its
own account as the result of market-making activities or other trading
activities and must agree that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be
24
<PAGE> 28
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. Based on the position taken by the SEC staff in the interpretive letters
referred to above, the Issuers believe that broker-dealers who acquired Old
Notes for their own accounts as a result of market-making activities or other
trading activities ("Participating Broker-Dealers") may fulfill their prospectus
delivery requirements with respect to the New Notes received upon exchange of
such Old Notes (other than Old Notes which represent an unsold allotment from
the original sale of the Old Notes) with a prospectus meeting the requirements
of the Securities Act, which may be the prospectus prepared for an Exchange
Offer so long as it contains a description of the plan of distribution with
respect to the resale of such New Notes. Accordingly, this Prospectus, as it may
be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer during the 90-day period referred to below in connection with
resales of New Notes received in exchange for Old Notes where such Old Notes
were acquired by such Participating 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 Rights Agreement and to the limitations
described herein, the Issuers have agreed that this Prospectus, as it may be
amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of such New Notes for a period ending
90 days after the Expiration Date or, if earlier, when all such New Notes have
been disposed of by such Participating Broker-Dealer. See "Plan of
Distribution." Any person, including any Participating Broker-Dealer, who is an
"affiliate" of the Issuers 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.
In that regard, each Participating Broker-Dealer who surrenders Old Notes
pursuant to the Exchange Offer will be deemed to have agreed, by execution of
the Letter of Transmittal or delivery of any Agent's Message in lieu thereof,
that, upon receipt of notice from the Issuers of the occurrence of any event or
the discovery of any fact which makes any statement contained 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 herein, in
light of the circumstances under which they were made, not misleading or of the
occurrence of certain other events specified in the Registration Rights
Agreement, such Participating Broker-Dealer will suspend the sale of New Notes
pursuant to this Prospectus until the Issuers have amended or supplemented this
Prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented Prospectus to such Participating Broker-Dealer or
the Issuers have given notice that the sale of the New Notes may be resumed, as
the case may be.
WITHDRAWAL RIGHTS
As set forth below, tenders of Old Notes may be withdrawn at any time on or
prior to the Expiration Date.
In order for a withdrawal to be effective a written or facsimile
transmission of such notice of withdrawal must be received by the Exchange Agent
at one of its addresses set forth under "-- Exchange Agent" on or prior to the
Expiration Date. Any such notice of withdrawal must specify the name of the
person who tendered the Old Notes to be withdrawn, the aggregate principal
amount of Old Notes to be withdrawn, and (if certificates for such Old Notes
have been tendered) the name of the registered holder of the Old Notes as set
forth on the certificate for the Old Notes, if different from that of the person
who tendered such Old Notes. If certificates for the Old Notes have been
delivered or otherwise identified to the Exchange Agent, then prior to the
physical release of such
25
<PAGE> 29
certificates for the Old Notes, the tendering holder must submit the serial
numbers shown on the particular certificates for the Old Notes to be withdrawn
and the signature on the notice of withdrawal must be guaranteed by an Eligible
Institution, except in the case of Old Notes tendered for the account of an
Eligible Institution. If Old Notes have been tendered pursuant to the procedures
for book-entry transfer set forth in "-- Procedures for Tendering Old Notes,"
the notice of withdrawal must specify the name and number of the account at DTC
to be credited with the withdrawn Old Notes. Withdrawals of tenders of Old Notes
may not be rescinded. Old Notes properly withdrawn will not be deemed validly
tendered for purposes of the Exchange Offer, but may be retendered at any
subsequent time on or prior to the Expiration Date by following any of the
procedures described above under "-- Procedures for Tendering Old Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Issuers, in their
sole discretion, whose determination shall be final and binding on all parties.
None of the Issuers, any affiliates or assigns of the Issuers, the Exchange
Agent or any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. Any Old Notes which have been tendered
but which are withdrawn will be returned to the holder thereof promptly after
withdrawal.
INTEREST ON NEW NOTES
Each New Note will accrue interest from the most recent interest payment
date on the Old Notes surrendered in exchange for such New Notes or, if no
interest has been paid or provided for on such Old Notes, from July 9, 1998. As
a result, holders of Old Notes that are accepted for exchange will not receive
accrued and unpaid interest on such Old Notes for any period from and after the
most recent interest payment date on such Old Notes or, if no interest has been
paid or provided for on such Old Notes, from and after July 9, 1998, and such
holders will be deemed to have waived the right to receive any interest on such
Old Notes.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Issuers will not be required to accept any
Old Notes for exchange or to exchange any New Notes for any Old Notes, and, as
described below, may terminate the Exchange Offer (whether or not any Old Notes
have been accepted for exchange) or may waive any conditions to or amend the
Exchange Offer, if any of the following conditions have occurred or exists or
have not been satisfied:
(a) there shall occur a change in the current interpretation by the
SEC staff which permits the New Notes issued pursuant to the Exchange Offer
in exchange for Old Notes to be offered for resale, resold and otherwise
transferred by holders thereof (other than broker-dealers and any such
holder which is an "affiliate" of the Issuers within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such New
Notes are acquired in the ordinary course of such holders' business and
such holders have no arrangement or understanding with any person to
participate in the distribution of such New Notes;
(b) any action or proceeding shall have been instituted or threatened
in any court or by or before any governmental agency or body with respect
to the Exchange
26
<PAGE> 30
Offer which, in the Issuers' judgment, would reasonably be expected to
impair the ability of the Issuers to proceed with the Exchange Offer;
(c) any law, statute, rule or regulation shall have been adopted or
enacted which, in the Issuers' judgment, would reasonably be expected to
impair the ability of the Issuers to proceed with the Exchange Offer;
(d) trading on the New York Stock Exchange or generally in the United
States over-the-counter market shall have been suspended by order of the
SEC or any other governmental authority which, in the Issuers' judgment,
would reasonably be expected to impair the ability of the Issuers to
proceed with the Exchange Offer;
(e) a stop order shall have been issued by the SEC or any state
securities authority suspending the effectiveness of the Registration
Statement or proceedings shall have been initiated or, to the knowledge of
the Issuers, threatened for that purpose, or any governmental approval has
not been obtained, which approval the Issuers shall, in their sole
discretion, deem necessary for the consummation of the Exchange Offer as
contemplated hereby; or
(f) any change, or any development involving a prospective change, in
the business or financial affairs of the Issuers or any of their
subsidiaries has occurred which, in the sole judgment of the Issuers, might
materially impair the ability of the Issuers to proceed with the Exchange
Offer.
If the Issuers determine in their sole and absolute discretion that any of
the foregoing events or conditions has occurred or exists or has not been
satisfied, the Issuers may, subject to applicable law, terminate the Exchange
Offer (whether or not any Old Notes have theretofore been accepted for exchange)
or may waive any such condition or otherwise amend the terms of the Exchange
Offer in any respect. If such waiver or amendment constitutes a material change
to the Exchange Offer, the Issuers will promptly disclose such waiver by means
of a prospectus supplement that will be distributed to the registered holders of
the Old Notes, and the Issuers will extend the Exchange Offer to the extent
required by Rule 14e-1 under the Exchange Act.
EXCHANGE AGENT
Bankers Trust Company has been appointed as Exchange Agent for the Exchange
Offer. Delivery of a Letter of Transmittal and any other documents required by
the Letter of Transmittal, questions, requests for assistance, and requests for
additional copies of this Prospectus or of a Letter of Transmittal should be
directed to the Exchange Agent as follows:
<TABLE>
<S> <C> <C>
By Facsimile: By Overnight Mail or Courier: By Hand Delivery:
BT Services Tennessee, Inc. BT Services Tennessee, Inc. Bankers Trust Company
Reorganization Unit Corporate Trust & Agency Group Corporate Trust & Agency Group
P.O. Box 292737 Reorganization Unit Attn: Reorganization Department
Nashville, Tennessee 648 Grassmere Park Road Receipt & Delivery Window
372229-2737 Nashville, Tennessee 37211 123 Washington Street, 1st Floor
New York, New York 10006
Facsimile Transmission Confirm by Telephone:
Number: Information:
(615) 835-3572
(615) 835-3701 (800) 735-7777
</TABLE>
27
<PAGE> 31
Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
FEES AND EXPENSES
The Issuers have agreed to pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for its reasonable out-of-pocket
expenses in connection therewith. The Issuers will also pay brokerage houses and
other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus and related documents
to the beneficial owners of Old Notes, and in handling or tendering for their
customers.
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith. If, however, New Notes are to be
delivered to, or are to be issued in the name of, any person other than the
registered holder of the Old Notes tendered, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes in connection with the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
The Issuers will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following Unaudited Pro Forma Consolidated Financial Information of the
Company for the year ended December 31, 1998 has been prepared to reflect (i)
the July 2, 1998 Offer and Sale of the Old Notes (the "Offering") and (ii) the
consummation of the Transaction as if it had occurred on January 1, 1998 using
the purchase method of accounting. The Unaudited Pro Forma Consolidated
Financial Information does not purport to be indicative of the operating results
of the Company that would have actually been obtained if the Offering and the
Transaction had been consummated as of and for the dates and periods presented
or that may be obtained in the future. The pro forma adjustments as described in
the Notes to Unaudited Pro Forma Consolidated Financial Information are based on
available information and upon certain assumptions that management believes are
reasonable. The Unaudited Pro Forma Consolidated Financial Information should be
read in conjunction with the audited financial statements and the notes thereto
appearing elsewhere in this Prospectus.
28
<PAGE> 32
GENERAC PORTABLE PRODUCTS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
JULY 10 THROUGH JANUARY 1 YEAR ENDED
DECEMBER 31, THROUGH JULY 9, DECEMBER 31,
1998 1998 1998
--------------- --------------- ------------
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
--------------- --------------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales...................... $136,862 $139,551 $ -- $276,413
Cost of goods sold............. 98,245 104,537 (162)(a) 202,620
-------- -------- -------- --------
Gross profit................... 38,617 35,014 162 73,793
-------- -------- -------- --------
Operating expenses:
Selling and service
expense................... 16,935 16,624 -- 33,559
General and administrative
expense................... 2,865 2,380 -- 5,245
Intangible asset
amortization.............. 2,531 -- 2,813(b) 5,344
-------- -------- -------- --------
Total operating expenses..... 22,331 19,004 2,813 44,148
-------- -------- -------- --------
Income from operations......... 16,286 16,010 (2,651) 29,645
-------- -------- -------- --------
Other (income) expense:
Interest expense............. 9,674 1,409 10,314(c) 19,988
(1,409)(d)
Deferred financing cost
amortization.............. 401 -- 424(e) 825
Other........................ (171) 108 -- (63)
-------- -------- -------- --------
9,904 1,517 9,329 20,750
-------- -------- -------- --------
Income before income taxes..... 6,382 14,493 (11,980) 8,895
Provision for income taxes..... 2,180 -- 880(f) 3,060
-------- -------- -------- --------
Net Income..................... $ 4,202 $ 14,493 $(12,860) $ 5,835
======== ======== ======== ========
</TABLE>
29
<PAGE> 33
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The Transaction was accounted for under the purchase method of accounting.
The unaudited pro forma consolidated results of operations were determined based
on the fair value of the assets acquired and liabilities assumed and associated
amortization of goodwill and other acquired intangibles. Prior to July 9, 1998,
certain costs and expenses were allocated to the Company from Generac
Corporation. Management believes that the allocation of these costs and expenses
approximate the equivalent costs expected to be incurred on a stand alone basis.
(a) Reflects the effect on cost of sales of the recognition of a
capital lease obligation as part of the Transaction arising from certain
equipment leases:
<TABLE>
<S> <C>
Actual lease expense incurred.......................... $(336)
Amortization of assets under capital lease
obligations.......................................... 174
-----
$(162)
=====
</TABLE>
(b) Reflects the amortization of goodwill of $213,738 over a 40 year
period and other intangible assets of $200 over a 10 year period. Goodwill
was calculated as the purchase price of $306,865 (including acquisition
costs of $1,385) less the fair value of net assets acquired and liabilities
assumed of $81,469 and less the excess of purchase price over book value of
net assets acquired from entities partially under common control of
$11,658. Other intangible assets are comprised of patents, trademarks and a
non-compete agreement with Generac Corporation which have a remaining life
and/or contractual term of approximately 10 years.
(c) Interest expense reflects the following:
<TABLE>
<S> <C>
Senior Secured Credit Facility........................ $ 3,754
Senior Subordinated Notes at 11.25%................... 6,462
Interest on capitalized leases........................ 98
-------
$10,314
=======
</TABLE>
Borrowings under the Senior Secured Credit Facility bear interest at the
Eurodollar rate, plus an applicable percentage, as defined. For the purposes of
the pro forma interest expense adjustment, the Eurodollar rate is estimated to
be 5.76% for the period January 1 through July 9, 1998. The rate approximates
the average Eurodollar rate during the period. A 1/8% variance in Eurodollar
rates for the Senior Secured Credit Facility would change assumed interest
expense by approximately $106. A commitment fee of .5% per annum is charged on
the unused portion of the Senior Secured Credit Facility.
(d) Reflects the elimination of historical interest expense allocated
from Generac Corporation.
(e) The deferred financing costs are amortized using the effective
interest rate and straight line methods over the term of the associated
debt as follows:
<TABLE>
<S> <C>
Senior Secured Credit Facility.......................... $201
Senior Subordinated Notes............................... 223
----
$424
====
</TABLE>
30
<PAGE> 34
(f) Reflects adjustment for income tax expense to provide taxes at a
pro forma effective tax rate of 35% for the respective period.
Historically, the Company's taxable income was included in Generac
Corporation's taxable income. Generac Corporation and its stockholders
elected to be treated as an S Corporation for federal and certain state
income tax purposes. Accordingly, no provision for income taxes is included
in the historical financial statements prior to July 9, 1998.
31
<PAGE> 35
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The selected historical financial information of the Company for July 10,
1998 through December 31, 1998 has been derived from, and should be read in
conjunction with, the audited historical financial statements of the Company
(including the notes thereto) appearing elsewhere in this Prospectus. The
selected historical financial information of the Predecessor from January 1,
1998 through July 9, 1998 and for each of the years in the two year period ended
December 31, 1997 have been derived from, and should be read in conjunction
with, the audited historical financial statements of Generac Corporation's
Portable Products Division (including the notes thereto) appearing elsewhere in
this Prospectus. The selected historical financial information for the years
ended December 31, 1995 and 1994 have been derived from the Company's unaudited
financial statements and include, in the opinion of the Company's management,
all adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the data for such periods. The pro forma financial information
for the year ended December 31, 1998 has been derived from and should be read in
conjunction with the "Unaudited Pro Forma Consolidated Financial Information"
appearing elsewhere in this Prospectus. The following table should also be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY PRO FORMA
---------------------------------------------------------- ------------- ------------
JANUARY 1, JULY 10, 1998 FOR THE YEAR
FOR THE YEAR ENDED DECEMBER 31, 1998 THROUGH ENDED
------------------------------------------- THROUGH DECEMBER 31, DECEMBER 31,
1994(a) 1995(a) 1996 1997 JULY 9, 1998 1998 1998
----------- ----------- ------ ------ ------------ ------------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................ $72.3 $104.8 $122.6 $178.0 $139.6 $136.9 $276.4
Gross profit..................... N/A N/A 27.3 46.9 35.0 38.6 73.8
Selling and service expense...... N/A N/A 13.9 21.7 16.6 16.9 33.6
General and administrative
expense........................ N/A N/A 4.4 4.2 2.4 2.9 5.3
Intangible asset amortization.... N/A N/A -- -- -- 2.5 5.3
Direct expenses.................. 69.1 98.5
----- ------ ------ ------ ------ ------ ------
Income from operations........... N/A N/A 9.0 21.0 16.0 16.3 29.6
Interest expense................. N/A N/A 2.2 2.1 1.4 9.7 20.0
Deferred financing cost
amortization................... N/A N/A -- -- -- 0.4 0.8
Other (income) expense........... N/A N/A -- 0.2 0.1 (0.2) (0.1)
Income taxes(b).................. N/A N/A -- -- -- 2.2 3.1
Excess of revenues over direct
expenses(c).................... $ 3.2 $ 6.3
----- ------ ------ ------ ------ ------ ------
Net income....................... N/A N/A $ 6.8 $ 18.7 $ 14.5 $ 4.2 $ 5.8
===== ====== ====== ====== ====== ====== ======
</TABLE>
32
<PAGE> 36
<TABLE>
<CAPTION>
PREDECESSOR COMPANY PRO FORMA
---------------------------------------------------------- ------------- ------------
JANUARY 1, JULY 10, 1998 FOR THE YEAR
FOR THE YEAR ENDED DECEMBER 31, 1998 THROUGH ENDED
------------------------------------------- THROUGH DECEMBER 31, DECEMBER 31,
1994(a) 1995(a) 1996 1997 JULY 9, 1998 1998 1998
----------- ----------- ------ ------ ------------ ------------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................. N/A N/A $ 29.3 $ 40.5 $ 68.5 $ 57.5
Total assets..................... N/A N/A 53.1 65.3 105.8 332.0
Divisional assets(d)............. N/A $ 57.4
Total debt, including current
portion........................ N/A N/A -- -- -- 197.8
Stockholders' equity(e).......... N/A N/A 41.6 52.8 81.9 103.3
OTHER FINANCIAL DATA:
EBITDA(f)........................ N/A N/A 10.5 22.3 16.7 20.0 37.0
Depreciation and amortization.... 0.9 1.0 1.5 1.5 0.8 3.9 8.1
Interest expense................. N/A N/A 2.2 2.1 1.4 9.7 20.0
Capital expenditures............. 5.9 4.0 2.3 1.4 1.6 3.8 5.4
Ratio of earnings to fixed
charges(g)..................... N/A N/A 4.0x 9.3x 10.2x 1.6x 1.4x
CASH FLOW DATA:
Net cash provided by (used in)
operating activities........... N/A N/A 17.3 8.2 (13.6) 16.2
Net cash provided by (used in)
investing activities........... N/A N/A (2.3) (1.4) (1.6) (3.8)
Net cash provided by (used in)
financing activities........... N/A N/A (14.2) (6.8) 14.8 (11.5)
</TABLE>
33
<PAGE> 37
NOTES TO SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
(a) Beginning in 1997, the Company operated as a business unit of
Generac Corporation with separate financial reporting. During 1995, a
dedicated manufacturing facility was completed to accommodate the portable
products business. In connection with its move to this new facility, the
Company began to separately identify certain assets and liabilities as
specific to the portable products business which enabled the preparation of
carve out financial statements as of and for the year ended December 31,
1996, albeit on a basis that includes certain estimates and allocations
that, in the opinion of management, are considered to be reasonable. Prior
to 1996, all financial information of the Company was commingled with that
of Generac Corporation and, therefore, the Company's summary data as of and
for the years ended December 31, 1995 and 1994 is limited and certain
historical financial data is not available.
(b) Historically, the Company's taxable income was included in Generac
Corporation's taxable income. Generac Corporation and its stockholders
elected to be treated as an S Corporation for federal and certain state
income tax purposes. Accordingly, no provision for income taxes is included
in the Predecessor financial statements. The Company is subject to state
and federal income taxes after July 9, 1998.
(c) Direct expenses are those costs of goods sold, selling and
service expenses and general and administrative expenses associated with
the Division.
(d) Divisional assets include property, plant and equipment, cash,
accounts receivable and inventories.
(e) Stockholders' equity represents business unit investment for all
Predecessor periods shown and represents common stock, paid-in-capital,
retained earnings, accumulated other comprehensive income and excess of
purchase price over book value of net assets acquired from entities
partially under common control for periods subsequent to the Transaction.
(f) EBITDA represents earnings before interest, taxes, depreciation
and amortization. EBITDA is a widely recognized financial indicator of a
company's ability to service or incur debt. EBITDA is not a measure of
operating performance computed in accordance with generally accepted
accounting principles and should not be considered as a substitute for
operating performance computed in accordance with generally accepted
accounting principles and should not be considered as a substitute for
operating income, net income, cash flows from operations, or other
statement of operations or cash flow data prepared in conformity with
generally accepted accounting principles, or as a measure of profitability
or liquidity. In addition, EBITDA may not be comparable to similarly titled
measures of other companies. EBITDA may not be indicative of the historical
operating results of the Company or the Predecessor, nor is it meant to be
predictive of future results of operations or cash flows. See also the
statement of cash flows contained within the historical financial
statements included elsewhere in this document.
(g) In computing the ratio of earnings to fixed charges, "earnings"
represents income (loss) before income taxes plus fixed charges. "Fixed
charges" consists of interest, amortization of debt issuance costs and a
portion of rent, which is representative of the interest factor
(approximately one-third of rent expense).
34
<PAGE> 38
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the financial statements of the
Company, and the notes thereto, and the other financial information appearing
elsewhere in this Prospectus. The following discussion includes forward-looking
statements that involve certain risks and uncertainties. See "Risk Factors."
References to the "Company" means Generac Portable Products, Inc. and its
subsidiaries, on a consolidated basis and, as the context requires, the
Company's predecessor. The "Predecessor" refers to the Portable Products
Division of Generac Corporation.
GENERAL
The Company has experienced strong growth, with net sales, operating income
and EBITDA increasing at compounded annual growth rates of 50%, 81% and 88%,
respectively, from 1996 through 1998 (pro forma). The Company's growth has been
driven by product innovation, cost competitiveness, and proactive category
management in the Company's main product lines of portable generators and
pressure washers. The most important factors influencing demand for the
Company's products are increased awareness of consumer utility, favorable
demographic trends, broadened channels of distribution, and improved price
performance. The expected continuing growth of the home center and warehouse
club retail distribution channel should provide the Company with an opportunity
to increase its market share. Moreover, the Company has long-standing core
relationships with those retailers best positioned to take advantage of this
channel's rapid growth.
The table below sets forth the Company's results of operations for the
periods indicated (dollars in millions).
<TABLE>
<CAPTION>
PRO FORMA PREDECESSOR
-------------------- -------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, % OF DECEMBER 31, % OF DECEMBER 31, % OF
1998 SALES 1997 SALES 1996 SALES
------------ ----- ------------ ----- ------------ -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net sales
Domestic............. $255.4 92.4% $164.0 92.1% $110.1 89.8%
International........ 21.0 7.6% 14.0 7.9% 12.5 10.2%
------ ----- ------ ----- ------ -----
Total net sales........ 276.4 100.0% 178.0 100.0% 122.6 100.0%
Gross profit........... 73.8 26.7% 46.9 26.3% 27.3 22.3%
Operating expenses..... 44.2 16.0% 25.9 14.6% 18.3 14.9%
Operating income....... 29.6 10.7% 21.0 11.8% 9.0 7.3%
Net income............. 5.8 2.1% 18.7 10.5% 6.8 5.5%
EBITDA................. 37.0 13.4% 22.3 12.5% 10.5 8.6%
</TABLE>
35
<PAGE> 39
<TABLE>
<CAPTION>
COMPANY PRO FORMA PREDECESSOR
------------------------- ------------------------- -----------------------------------------------
JULY 10, 1998 SIX MONTHS JANUARY 1, 1998 SIX MONTHS
THROUGH % OF ENDED % OF THROUGH % OF ENDED % OF
DECEMBER 31, 1998 SALES DECEMBER 31, 1997 SALES JULY 9, 1998 SALES JUNE 30, 1997 SALES
----------------- ----- ----------------- ----- --------------- ----- ------------- -----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales
Domestic........... $126.8 92.6% $72.8 91.9% $128.6 92.1% $91.2 92.3%
International...... 10.1 7.4% 6.4 8.1% 11.0 7.9% 7.6 7.7%
------ ----- ----- ----- ------ ----- ----- -----
Total net sales...... 136.9 100.0% 79.2 100.0% 139.6 100.0% 98.8 100.0%
Gross profit......... 38.6 28.2% 22.6 28.5% 35.0 25.1% 24.4 24.7%
Operating expenses... 22.3 16.3% 15.8 19.9% 19.0 13.6% 12.8 13.0%
Operating income..... 16.3 11.9% 6.8 8.6% 16.0 11.5% 11.6 11.7%
Net income........... 4.2 3.1% (2.4) (3.0%) 14.5 10.4% 10.4 10.5%
EBITDA............... 20.0 14.6% 10.3 13.0% 16.7 12.0% 12.2 12.3%
</TABLE>
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 (PRO FORMA) COMPARED TO YEAR ENDED DECEMBER 31,
1997 (PREDECESSOR BASIS)
NET SALES. Net sales increased $98.4 million, or 55.3%, to $276.4 million
for 1998 pro forma from $178.0 million for 1997.
Domestic sales increased $91.4 million, or 55.7%, to $255.4 million for
1998 pro forma from $164.0 million for 1997. This increase was primarily due to
strong overall consumer demand for generator and pressure washer product
categories throughout 1998. The broad sales increase was further reflective of
the store growth for existing customers, expanded pressure washer product
offerings to Home Depot, and strong overall generator sales resulting from
winter and summer storm activity.
International sales increased $7.0 million, or 50.0%, to $21.0 million for
1998 pro forma from $14.0 million for 1997. This increase was primarily due to
increased penetration into European home center accounts.
GROSS PROFIT. Gross profit increased $26.9 million, or 57.4%, to $73.8
million for 1998 pro forma from $46.9 million for 1997. This increase was
primarily due to increased sales volume as described above and improved gross
margins. Gross profit margin increased to 26.7% in 1998 pro forma from 26.3% in
1997 as a result of the improved mix of higher margin generator sales versus
lower margin pressure washer sales and improved gross margins for International
sales.
OPERATING EXPENSES. Operating expenses increased $18.3 million, or 70.7%,
to $44.2 million for 1998 pro forma from $25.9 million for 1997. This increase
was primarily a result of increased selling and distribution expenses related to
the shift of domestic sales distribution into national home center markets, and
increased sales distribution costs into German home centers. In addition, 1998
pro forma operating expenses include $5.3 million (1.9% as a percentage of
sales) in amortization of goodwill and other intangible assets recorded in
connection with the Transaction. As a percentage of sales, operating expenses
increased to 16.0% in 1998 pro forma from 14.6% in 1997.
NET INCOME. Net income decreased $12.9 million, or 69.0%, to $5.8 million
for 1998 pro forma from $18.7 million for 1997. This decrease in net income was
primarily due to increases in certain expenses resulting from effects of the
Transaction including interest expense; amortization of goodwill, deferred
financing costs and other intangibles assets; and
36
<PAGE> 40
provision for income taxes. These expenses decreased 1998 pro forma net income
by an additional $27.1 million (9.8% as a percentage of sales) as compared to
1997. As a percentage of sales, net income decreased to 2.1% in 1998 pro forma
from 10.5% in 1997.
EBITDA. EBITDA increased $14.7 million, or 65.9%, to $37.0 million in 1998
pro forma from $22.3 million for 1997. This increase was primarily due to
increased sales volume and improved gross margins as described above. As a
percentage of sales, EBITDA increased to 13.4% in 1998 pro forma from 12.5% in
1997.
JULY 10, 1998 THROUGH DECEMBER 31, 1998 (NEW BASIS) COMPARED TO SIX MONTHS ENDED
DECEMBER 31, 1997 (PRO FORMA)
NET SALES. Net sales increased $57.7 million, or 72.9%, to $136.9 million
for the period July 10, 1998 through December 31, 1998 from $79.2 million for
the pro forma six months ended December 31, 1997.
Domestic sales increased $54.0 million, or 74.2%, to $126.8 million for the
period July 10, 1998 through December 31, 1998 from $72.8 million for the pro
forma six months ended December 31, 1997. This increase was primarily due to
strong demand for generator products sold through existing customers resulting
from summer storm activity and increased consumer awareness.
International sales increased $3.7 million, or 57.8%, to $10.1 million for
the period July 10, 1998 through December 31, 1998 from $6.4 million for the pro
forma six months ended December 31, 1997. This increase was primarily due to
increased penetration into European home center accounts.
GROSS PROFIT. Gross profit increased $16.0 million, or 70.8%, to $38.6
million for the period July 10, 1998 through December 31, 1998 from $22.6
million for the pro forma six months ended December 31, 1997. This increase was
primarily due to increased sales volume as described above. Gross profit margin
decreased slightly to 28.2% for the period July 10, 1998 through December 31,
1998 from 28.5% for the pro forma six months ended December 31, 1997 as a result
of reduced gross margins on international sales due to heavy promotional pricing
into German home centers.
OPERATING EXPENSES. Operating expenses increased $6.5 million, or 41.1%,
to $22.3 million for the period July 10, 1998 through December 31, 1998 from
$15.8 million for the pro forma six months ended December 31, 1997. This
increase was attributable to increased sales volume as described above. As a
percent of sales, operating expenses decreased to 16.3% for the period July 10,
1998 through December 31, 1998 from 19.9% for the pro forma six months ended
December 31, 1997 due to the leveraging of fixed operating expenses, including
goodwill amortization.
NET INCOME. Net income increased $6.6 million for the period July 10, 1998
through December 31, 1998 to $4.2 million from a $2.4 million net loss for the
pro forma six months ended December 31, 1997. This increase was primarily due to
the availability of operating earnings from the increased sales volume to cover
certain fixed charges including interest expense; amortization of goodwill,
deferred financing costs, and other intangibles; and other operating expenses.
As a percentage of sales, net income increased to 3.1% for the period July 10,
1998 through December 31, 1998 from a net loss of 3.0% for the pro forma six
months ended December 31, 1997.
EBITDA. EBITDA increased $9.7 million or 94.2% to $20.0 million for the
period July 10, 1998 through December 31, 1998 from $10.3 million for the pro
forma six months ended December 31, 1997. This increase was due to the increased
sales volume and
37
<PAGE> 41
improved coverage of fixed operating expenses as described above. As a
percentage of sales, EBITDA increased to 14.6% for the period July 10, 1998
through December 31, 1998 from 13.0% for the pro forma six months ended December
31, 1997.
JANUARY 1, 1998 THROUGH JULY 9, 1998 (PREDECESSOR BASIS) COMPARED TO SIX MONTHS
ENDED JUNE 30, 1997 (PREDECESSOR BASIS)
NET SALES. Net sales increased $40.8 million, or 41.3%, to $139.6 million
for the period January 1, 1998 through July 9, 1998 from $98.8 million for the
six months ended June 30, 1997.
Domestic sales increased $37.4 million, or 41.0%, to $128.6 million for the
period January 1, 1998 through July 9, 1998, from $91.2 million for the six
months ended June 30, 1997. This increase was primarily due to product
placements into new home center accounts, strong sales of generators to
customers located in the northeastern United States and Canada following the
winter 1998 ice storm and subsequent prolonged power outages, and expansion of
pressure washer offerings to Home Depot.
International sales increased $3.4 million, or 44.7%, to $11.0 million for
the period January 1, 1998 through July 9, 1998, from $7.6 million for the six
months ended June 30, 1997. This increase was primarily due to increased
penetration into German home center accounts.
GROSS PROFIT. Gross profit increased $10.6 million, or 43.4%, to $35.0
million for the period January 1, 1998 through July 9, 1998, from $24.4 million
for the six months ended June 30, 1997. This increase was primarily due to
increased sales volume as described above and improved gross margins. Gross
profit margin increased to 25.1% for the period January 1, 1998 through July 9,
1998, from 24.7% for the six months ended June 30, 1997, as a result of the
improved mix of higher margin generator sales versus lower margin pressure
washer sales.
OPERATING EXPENSES. Operating expenses increased $6.2 million, or 48.4%,
to $19.0 million for the period January 1, 1998 through July 9, 1998, from $12.8
million for the six months ended June 30, 1997. This increase was primarily a
result of increased selling and distribution expenses related to the shift of
sales distribution into national home center markets. As a percentage of sales,
operating expenses increased to 13.6% for the period January 1, 1998 through
July 9, 1998, from 13.0% for the six months ended June 30, 1997.
NET INCOME. Net income increased $4.1 million, or 39.4%, to $14.5 million
for the period January 1, 1998 through July 9, 1998, from $10.4 million for the
six months ended June 30, 1997. This increase was primarily due to increased
sales volume and improved gross margins, offset by increased operating expenses
as described above. As a percentage of sales, net income decreased to 10.4% for
the period January 1, 1998 through July 9, 1998, from 10.5% for the six months
ended June 30, 1997.
EBITDA. EBITDA increased $4.5 million, or 36.9%, to $16.7 million for the
period January 1, 1998 through July 9, 1998, from $12.2 million for the six
months ended June 30, 1997. This increase was primarily due to increased sales
volume and improved gross margins, offset by increased operating expenses as
described above. As a percentage of sales, EBITDA decreased to 12.0% for the
period January 1, 1998 through July 9, 1998, from 12.3% for the six months ended
June 30, 1997.
38
<PAGE> 42
YEAR ENDED DECEMBER 31, 1997 (PREDECESSOR BASIS) COMPARED TO THE YEAR ENDED
DECEMBER 31, 1996 (PREDECESSOR BASIS)
NET SALES. Net sales increased $55.4 million, or 45.2%, to $178.0 million
for 1997 from $122.6 million for 1996.
Domestic sales increased $53.9 million, or 49.0%, to $164.0 million for
1997 from $110.1 million for 1996. This increase was primarily due to increased
sales volume of overhead valve industrial engine driven generators to Home
Depot, improved pressure washer sales to Sears and expansion of product
offerings into other home center accounts.
International sales increased $1.5 million, or 12.0%, to $14.0 million for
1997 from $12.5 million for 1996. This increase was primarily due to increased
penetration into European home center accounts.
GROSS PROFIT. Gross profit increased $19.6 million, or 71.8%, to $46.9
million for 1997 from $27.3 million for 1996. This increase was primarily due to
increased sales volume as described above and improved gross margins. Gross
profit margin increased to 26.3% in 1997 from 22.3% in 1996 as a result of the
migration into higher margin portable generator products, improved mix of sales
distribution, continued product cost reductions for both generator and pressure
washer product lines, and overall product cost improvements due to
diversification of worldwide supply arrangements.
OPERATING EXPENSES. Operating expenses increased $7.6 million, or 41.5%,
to $25.9 million for 1997 from $18.3 million for 1996. This increase was
primarily a result of increased selling and distribution expenses related to the
shift of sales distribution into national home center markets and incremental
warranty costs of $2.8 million related to the launch of new pressure washer
products. As a percentage of sales, operating expenses decreased to 14.6% in
1997 from 14.9% in 1996.
NET INCOME. Net income increased $11.9 million, or 175.0%, to $18.7
million for 1997 from $6.8 million for 1996. This increase was primarily due to
increased sales volume and improved gross margins as described above. As a
percentage of sales, net income increased to 10.5% in 1997 from 5.5% in 1996.
EBITDA. EBITDA increased $11.8 million, or 112.4%, to $22.3 million in
1997 from $10.5 million in 1996. This increase was primarily due to increased
sales volume and improved gross margins as described above. As a percentage of
sales, EBITDA increased to 12.5% in 1997 from 8.6% in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Following the Transaction, the Company's principal sources of liquidity are
cash flow generated from operations and borrowings under the $30 million
revolving credit portion of the Credit Facility. See "Description of the Senior
Secured Credit Facility" later in this Prospectus. The Company's principal uses
of liquidity are to meet debt service requirements, finance the Company's
capital expenditures and provide working capital. The Company expects that the
ongoing uses of liquidity will be adequately funded by the principal sources of
liquidity.
The Company has incurred substantial indebtedness in connection with the
Transaction. Following the Transaction, the Company had approximately $209.2
million of combined indebtedness outstanding. The Company's ability to make
scheduled payments of principal of, or to pay the interest on its indebtedness,
or to fund planned capital expenditures, will depend upon its future
performance, which in turn, is subject to general
39
<PAGE> 43
economic, financial, competitive and other factors that are beyond its control.
Based upon the current level of operations and anticipated growth, the Company
believes that future cash flow from operations, together with available
borrowings under the Credit Facility, will be adequate to meet the Company's
anticipated requirements for capital expenditures, working capital, interest
payments and scheduled principal payments. There can be no assurance, however,
that the Company's business will continue to generate sufficient cash flow from
operations in the future to service its debt and make necessary capital
expenditures after satisfying certain liabilities arising in the ordinary course
of business. If unable to generate sufficient cash flow, the Company may be
required to delay necessary capital expenditures, refinance all or a portion of
its existing debt, including the Notes, to sell assets or to obtain additional
financing. There can be no assurance that any such refinancing would be
available or that any such sales of assets or additional financing could be
obtained. See "Risk Factors -- Significant Leverage; Ability to Service Debt."
Prior to the Transaction, the Company historically met its working capital
needs and capital expenditure requirements through a combination of operating
cash flow and availability under a revolving credit agreement maintained by, and
industrial revenue bonds supported by, Generac Corporation.
Cash provided by operating activities totaled $16.2 million for the period
July 10, 1998 through December 31, 1998 and cash used for operating activities
totaled $13.6 million for the period January 1, 1998 through July 9, 1998. This
increase in cash generated from operations during the second half of 1998
resulted primarily from seasonal factors related to sales of pressure washers in
which the Company's level of receivables is typically highest during the second
quarter of the year as compared to other quarters.
Cash provided by operating activities totaled $8.2 million for the year
ended December 31, 1997 as compared to $17.3 million for the year ended December
31, 1996. This decrease in cash generated from operating activities was
primarily a result of reductions in inventory during 1996 and the subsequent
build-up of inventory during 1997 to support increased sales activity.
The Company's receivables are largely derived from large, well-established
retailers. Three customers accounted for approximately 74% of net sales for both
1998 and 1997, and account for 59% of total accounts receivable as of both
December 31, 1998 and 1997.
CAPITAL EXPENDITURES
The Company's capital expenditures were $5.4 million, $1.4 million and $2.3
million in 1998, 1997, and 1996, respectively. The 1998 capital expenditures
related primarily to plant expansions at the Company's facilities, production
machinery and equipment and software. In an economic downturn, the Company
believes it will be able to adjust the amount spent on capital expenditures
without compromising the base requirements of its operations. The Company
expects to spend approximately $6.5 million in 1999 for various capital
projects, including increased capacity through plant expansion, cost improvement
and quality enhancement initiatives, and updating management information
systems. The Company spent approximately $1.9 million, $1.7 million and $2.5
million in 1998, 1997, and 1996, respectively, on research and development.
SEASONALITY, WORKING CAPITAL AND CYCLICALITY
Sales of certain products of the Company are subject to seasonal variation.
Due to seasonal and regional weather factors, sales of pressure washers and
related working capital are typically higher during the second quarter than at
other times of the year. The
40
<PAGE> 44
residential and commercial construction markets are sensitive to cyclical
changes in the economy.
RAW MATERIAL COSTS AND INFLATION
The rate of inflation over recent years has been relatively low and has not
had a significant effect on the Company's results of operations. Approximately
44% of the Company's cost of goods sold relate to small gasoline engines which
have not been subject to material price fluctuations. The Company purchases
steel, copper, paperboard, and plastics from various suppliers. While all such
materials are available from numerous independent suppliers, commodity raw
materials are subject to price fluctuations.
YEAR 2000 STRATEGY
Many currently installed computer systems and software products use two
digits rather than four to define the applicable year. For example,
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in systems failures or miscalculations
causing disruptions of the Company's operations. The Company is continuing a
process of making all necessary software changes to ensure that it does not
experience any loss of critical business functionality due to the Year 2000
issue. The Company has adopted and is implementing a three phase approach of
assessment, correction and testing. The scope of the project includes all
internal software, hardware, operating systems, and assessment of risk to the
business from vendors and other parties' Year 2000 issues. The Company believes
that this formal assessment (including prioritization by business risk),
correction (including conversions to new software), and testing of necessary
changes will minimize the business risk of Year 2000 from internal systems.
Although the Company has not yet fully completed its Year 2000 project,
many of the Company's information sub-systems are currently Year 2000 ready. The
balance of the Company's systems are currently being modified or replaced, with
all significant systems targeted for Year 2000 readiness by September 1, 1999.
The need for contingency plans will be evaluated as this target date approaches.
In most instances, the Company has replaced, or is in the process of replacing,
older software with new programs and systems, rather than modifying existing
systems solely to become Year 2000 ready. Replacing these systems results in a
significant upgrade in systems and capabilities, as well as providing the
ability to properly interpret Year 2000 data. Although the timing of the system
replacements is influenced by the Year 2000, in most instances these systems
would have been replaced in the normal course of business.
The Company is currently unable to predict the extent to which Year 2000
issues will affect vendors with which the Company does a material amount of
business, or the extent to which the Company would be vulnerable to the failure
of any of these vendors to convert their systems on a timely basis. The Company
could face a material financial risk if its customers or suppliers are unable to
complete critical Year 2000 readiness efforts in a timely manner. The Company is
continuing to work with its customers and suppliers to evaluate their Year 2000
readiness, identify material risks, and develop solutions so that all critical
processes needed to conduct its business are Year 2000 ready. In addition, the
Company's exposure to these external risks is partially mitigated by the size
and sophistication of its primary customers, as well as by the diversity of its
suppliers and geographic locations.
41
<PAGE> 45
The Company has spent approximately $0.9 million during 1998 to upgrade and
replace its systems to ensure Year 2000 readiness. The Company estimates it will
incur additional costs of approximately $1.8 million to upgrade and replace its
systems, the majority of which will be incurred in fiscal 1999. The Company
believes it continues to appropriately reduce the risks of not being Year 2000
ready through the identification and remediation process described above. During
1999, the Company will continue to evaluate the need for contingency planning as
it relates to the readiness for each business related software and hardware
item.
EURO CONVERSION
On January 1, 1999, member countries of the European Monetary Union (EMU)
began a three-year transition from their national currencies to a new common
currency, the "Euro". In the first phase, the permanent rates of exchange
between the members' national currency and the Euro has been established and
monetary, capital, foreign exchange, and interbank markets will be converted to
the Euro. National currencies will continue to exist as legal tender and may
continue to be used in commercial transactions. By January 2002, Euro currency
will be issued and by July 2002, the respective national currencies will be
withdrawn. The Company has operations in member countries of the EMU and,
accordingly, has established action plans that are continuing to be implemented
to address the Euro's impact on information systems, currency exchange rate
risk, taxation, contracts, competition and pricing. Based on its current
assessment, management believes that the costs of the Euro conversion will not
have a material impact on the operations, cash flows or financial condition of
the Company.
FUTURE ACCOUNTING CHANGES
The Financial Accounting Standards Board has issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities" which is
effective for periods beginning after June 15, 1999. Due to the Company's
current limited use of derivative instruments, the adoption of this statement is
not expected to have a material effect on the Company's financial condition or
results of operations.
RISK MANAGEMENT
The Company is exposed to market risk from changes in interest rates and,
to a lesser extent, foreign exchange rates and commodities. To reduce such
risks, the Company selectively uses financial instruments. All hedging
transactions are authorized and executed pursuant to clearly defined policies
and procedures, which strictly prohibit the use of financial instruments for
trading purposes. A discussion of the Company's accounting policies for
derivative financial instruments is included in the summary of Significant
Accounting Policies in Note 2 to the Consolidated Financial Statements included
herein.
The fair value of the Company's Notes is estimated as $110 million as of
December 31, 1998 based upon the average yield of similar debt instruments as of
that date. The Company estimates that this fair value would increase by
approximately $6 million based upon an assumed 10% decrease in market interest
rates and that the fair value would decrease by approximately $6 million based
upon an assumed 10% increase in market interest rates, compared with the average
yield on similar debt instruments on December 31, 1998.
The Company uses interest rate swaps to modify the Company's exposure to
interest rate movements. Net interest payments or receipts from interest rate
swaps are recorded as
42
<PAGE> 46
adjustments to interest expense in the consolidated statement of income on a
current basis. The Company's earnings exposure related to adverse movements in
interest rates is primarily derived from outstanding floating rate debt
instruments that are indexed to Eurodollar money rates. A 10% increase/decrease
in the average cost of the Company's debt under its bank credit facility would
result in an increase/decrease in annual pre-tax interest expense of
approximately $356,000 after giving effect to an outstanding interest rate swap.
A 10% increase/decrease in Eurodollar rates would not have a material effect on
the fair value of the interest rate swap as compared to its fair value at
December 31, 1998.
The Company has manufacturing, sales and distribution facilities throughout
Europe and sources raw materials from around the world. Accordingly, the Company
makes investments and enters into transactions denominated in various foreign
currencies. The Company is primarily exposed to fluctuations in various European
currencies. Due to the relative stability of these currencies, management has
not deemed it necessary to currently pursue a foreign currency hedging strategy.
This exposure is not material to the Company.
The Company's exposure to commodity price changes relates to certain
manufacturing operations that utilize raw commodities. The Company manages its
exposure to changes in those prices primarily through its procurement and sales
practices. This exposure is not material to the Company.
43
<PAGE> 47
BUSINESS
GENERAL
The Company designs, manufacturers and markets engine-powered tools for use
in both industrial and residential applications, with its two principal product
lines being portable generators and pressure washers. Management estimates that
in 1998, as measured by net sales, the Company was the largest U.S. manufacturer
of portable generator sets, with an overall domestic market share of
approximately 29%, and the second largest U.S. manufacturer of consumer pressure
washers, with a domestic market share of approximately 33%. In both product
categories, the Company offers one of the broadest lines of innovative products
across all major price points. The Company sells its products through multiple
channels of retail distribution, including the leading home center chains, mass
merchants and warehouse clubs as well as independent representatives. Since
1961, the Company has been a major supplier of portable generators to Sears, and
has been one of two suppliers to Sears of pressure washers, both marketed under
the Craftsman(R) label. The Company is also a core supplier of portable
generators and pressure washers, both marketed under the Generac(R) label, to
Home Depot, the largest and one of the fastest growing retail home center chains
in the U.S.
The Company has benefited from strong growth in the engine-powered tools
market as well as favorable demographic trends. The Company believes that its
strength in each product category is the result of its strategic approach to
engineering and manufacturing which emphasizes delivering superior customer
value through innovation in product development and focus on product quality.
The Company is a vertically integrated manufacturer. In addition to the
manufacture of portable generators and pressure washers, the Company also
manufactures components for those products, including alternators, pressure
washer pumps and blow-molded gas tanks. As a vertically integrated manufacturer,
the Company believes it enjoys significant cost advantages over its competitors
who source many of their components from third party suppliers. In addition, the
Company has been successful in improving operating profitability through the
strategic integration of its manufacturing processes, the reconfiguration of
production processes and the standardization of components. The Company has
long-standing customer relationships and effectively utilizes its unique,
nationwide service network to build and support its customer base. These
strengths have enabled the Company to service the increasingly sophisticated and
demanding customers in the retail channel. Over the past three years, the
Company's net sales have grown at a compound annual rate of approximately 38%,
increasing from $104.8 million in 1995 to $276.4 million in 1998.
The Company, based in Jefferson, Wisconsin, has been designing, building
and marketing portable generators since its founding in 1959. The Company has
exclusive supply rights to the GN OHVI family of engines for use in consumer
portable generators, pressure washers and welders.
COMPETITIVE STRENGTHS
The Company attributes its excellent performance, market leadership and
significant opportunities for continued growth and increased profitability to
the following competitive strengths:
LEADING MARKET POSITIONS. The Company is a market leader in the U.S.
engine-powered tools industry, with an overall domestic market share of
approximately 29% in portable generators in 1998 (up from approximately 26% in
1997) and approximately 33%
44
<PAGE> 48
in pressure washers in 1998 (up from approximately 31% in 1997). In 1997, as
measured by net sales, the Company was the largest U.S. supplier of portable
generators and the second largest U.S. supplier of pressure washers. In
addition, the Company is a core supplier for many of the leading retail home
centers and Do-it-Yourself ("DIY") retailers. The Company believes that its
broad and innovative product offerings, its commitment to quality and its
reputation for customer service have enabled it to achieve rapid revenue and
earnings growth and its leading market positions.
LEADING DESIGN AND ENGINEERING CAPABILITIES. The Company attributes much
of its success to its innovative design and engineering expertise. The Company's
portable generators and pressure washers are highly engineered, durable,
precision manufactured products. The Company has capitalized on its design and
engineering capabilities by strategically integrating certain manufacturing
processes, such as the Company-designed alternator and the Company-designed and
manufactured pressure washer pumps. As a strategically integrated manufacturer,
the Company believes it is better able to control product quality and therefore
offer a consistently superior finished product. In addition, the Company
believes its vertical integration allows it to enjoy significant cost advantages
and differentiates it from many of its competitors who source many of their
components from third party suppliers. The Company believes such engineering and
design expertise is readily extendible to new product categories, as well.
STRENGTH IN MULTIPLE DISTRIBUTION CHANNELS. For over 35 years, the
Company's portable generators have been sold under the Craftsman(R) label
through Sears' mall-based stores and, more recently, through Sears' growing
chain of freestanding hardware and dealer stores. Over the last five years, the
Company has expanded the distribution of its products marketed under the
Generac(R) name to include seven of the top ten "big box" retailers. Its
products are also well represented in other mass merchants, warehouse clubs,
home centers and hardware stores as well as through the Company's independent
dealer network. The Company believes that its distribution strategy maximizes
the Company's market penetration, as the Company can sell its products into the
same geographic market under different brand names and through different
distribution channels. In addition, since 1995, the Company has significantly
increased its sales to Home Depot, the largest and one of the fastest growing
home center chains in North America. The Company believes that its strong
strategic relationships with leading DIY hardware vendors, such as Sears and
Home Depot, will facilitate continued market share gains as these chains grow
and as hardware channels of distribution continue to consolidate.
LOW COST MANUFACTURING OPERATIONS AND STATE-OF-THE-ART FACILITIES. The
Company believes that its low cost operations are attributable to its strategic
integration and increased levels of standardization in its manufacturing
processes resulting primarily from commonality of design. This commonality,
along with the Company's efficient manufacturing processes, enable it to realize
savings through reduced inventory levels, greater leverage with suppliers and
improved production flexibility. In 1994, the Company built its current facility
in Jefferson, Wisconsin, which was expanded in 1996. This facility incorporates
state-of-the-art manufacturing technology and processes and was custom designed
to manufacture both of the Company's major product lines. The Company is
currently in the process of expanding capacity in its Jefferson facility which
it expects to complete in the second quarter of 1999. The Company believes that
it is one of the more vertically integrated manufacturers of portable generators
and pressure washers in the U.S., and therefore is more cost-efficient and
better able to respond to customer demands than its competitors.
45
<PAGE> 49
SUPERIOR CUSTOMER SERVICE AND COMMITMENT TO QUALITY. The Company has
developed strong relationships with several of the leading home center chains
and DIY retailers, including Sears and Home Depot. These relationships are
supported by its program sales approach, which includes innovative sales and
marketing programs to educate end-users and increase retailers' effectiveness in
selling the Company's full line of products. To this end, the Company has
developed comprehensive category management services which include merchandising
and providing informational materials, sales associate training and product
support. To ensure after-sale support, the Company differentiates itself by
maintaining a competitive independent dealer network, consisting of over 2,700
outdoor power equipment dealers. The Company believes that the independent
dealer network serves as a strong incentive for retailers to allocate shelf
space to the Company's products and minimizes customer returns. In addition, the
Company maintains strict quality inspection procedures throughout the
manufacturing process. These procedures, which include the testing of each unit
prior to shipment, enable the Company to ensure consistent quality. As evidence
of its strong position with its customers and its ability to provide reliable,
high quality products, the Company has been selected as a core supplier of
portable generators and pressure washers to Home Depot, and is the largest
supplier of portable generators and pressure washers to Sears.
ESTABLISHED BRAND NAME AND REPUTATION. The Generac brand name has a 35
year heritage in the engine-powered tools industry. The Company has established
its leading brand name primarily by providing high-quality, innovative, reliable
products as well as a high level of customer service. The Company is a key
supplier to leading home center chains, including Sears, Home Depot, Lowe's and
Costco Companies, Inc. ("Costco"), and has reinforced its reputation with these
chains by tailoring its product offerings and product features to suit certain
major customers' desires for differentiated product lines.
EXPERIENCED AND COMMITTED MANAGEMENT TEAM WITH SIGNIFICANT EQUITY
INCENTIVE. The Company has assembled a strong management team with over 100
years of collective experience in the engine-powered tools industry. The
management team has successfully demonstrated its ability to manage the
Company's rapid revenue and earnings growth through maintenance of high quality
standards, continuous product innovation and commitment to customer service. The
Company's senior management team has a substantial financial interest in the
Company's continued success through its direct investment in Holdings and
participation in an incentive option program.
BUSINESS STRATEGY
The key elements of the Company's strategy include:
STRATEGIC ALLIANCES WITH STRONG, FAST-GROWING CUSTOMERS IN THE DIY HOME
CENTER CHANNELS. The Company believes that its strong strategic relationships
with leading DIY hardware vendors such as Sears and Home Depot will enable it to
gain market share as these chains grow and as hardware channels of distribution
continue to consolidate. For example, Sears and Home Depot together plan to have
approximately 3,800 stores by the year 2000, up from approximately 2,300 in
1997. In addition, these leading retailers are continuing to develop a variety
of store formats to broaden their customer reach. These dominant retailers are
actively expanding beyond the traditional DIY market and into the commercial
contractor markets and the Company intends to develop products to support these
retailers' commercial needs. The effectiveness of the Company's customer
strategy is best illustrated by its relationship with Home Depot. In 1995, the
Company sold three generator stock keeping units ("SKUs") in three of Home
Depot's seven regions and no
46
<PAGE> 50
pressure washer SKUs. Currently, the Company sells two pressure washer SKUs and
six generator SKUs in all eight of Home Depot's regions. In addition, the
Company will be implementing full point-of-purchase support to Home Depot. The
Company believes that it has the potential to add important new DIY accounts
and, upon the completion of the planned expansion of its Jefferson facility,
will have the capacity to meet expected demand.
WELL DEFINED AND STRATEGICALLY MANAGED PRODUCT LINES. The Company's
strategy is to develop a continuous stream of innovative products which are
regarded as delivering the highest quality and best overall value in the
industry. A driving force behind the Company's growth in both product categories
and in expanding its gross margins has been its proven ability to develop and
deliver new products at entry-level price points and then to successfully
migrate end-users to more sophisticated products with unique features, designed
around the Company's proprietary components. This strategy has been a key
attribute for leading retailers, such as Home Depot, who consider the Company a
core supplier in both product categories. By offering the broadest selection of
portable generators and pressure washers supported by comprehensive sales
associate training, field merchandising support and informative
point-of-purchase signage and packaging, the Company has become a preferred
supplier to its key customers such as Home Depot and Sears.
CONTINUED COST REDUCTIONS AND PRODUCTIVITY IMPROVEMENTS. The Company
believes that it can maintain its position as a low cost, high-quality
manufacturer by continuing to take advantage of further opportunities to
strategically integrate and manufacture components. The Company's decision to
manufacture certain core components, including pressure washer pumps,
alternators and blow-molded gas tanks, enables it to lower costs, better control
product quality, shorten supply lead times, maintain lower inventory levels and
achieve greater overall manufacturing flexibility. The Company believes that it
is one of the U.S. industry's more vertically integrated manufacturers and
intends to continue to improve operating profitability and maintain a high
standard of product quality by focusing on reducing costs and developing
performance-enhancing product features. In addition, the Company intends to
continue to improve productivity and profitability through focused industrial
engineering efforts and the standardization of components.
PRODUCT INNOVATION AND DIVERSIFICATION INTO NEW AND RELATED PRODUCTS. High
level engineering capabilities and efficient manufacturing operations provide
the Company with significant resources for continued product innovations as well
as new product development. Its product development program for the portable
generator product line includes: (i) computer controlled features; (ii) manual
transfer switches for home and commercial use; (iii) a family of new home
security packages; (iv) development of higher kilowatt ("KW") output units for
commercial use; and (v) new vertical shaft units. Its product development
program for the pressure washer product line includes: (i) a new commercial line
of gasoline-powered pressure washers; (ii) development of an engine idle down
system; (iii) an expanded line of accessories; and (iv) a pump family for
products with higher pounds per square inch ("PSI") ratings. The Company also
has new product categories under development. The Company's research and
development group is developing and field testing various prototypes, which the
Company expects to introduce as new products over the next 12 to 24 months.
INTERNATIONAL MARKET OPPORTUNITIES. The Company offers its portable
generators throughout Europe and has been successful in building long-term
customer relationships with leading "big box" retailers in six markets: the
U.K., Germany, Switzerland, Spain, Belgium and France. Management expects its
European sales growth to accelerate over the
47
<PAGE> 51
next five years as the Company leverages its product line breadth and brand
equity to gain shelf space and placements in new and existing European markets.
Management believes that, as the major U.S.-based DIY home center chains expand
internationally, there will be a growing need for their relationship suppliers,
such as the Company, to establish a direct presence overseas. The Company plans
to use its U.K. manufacturing base to support its marketing efforts in Europe,
thus realizing enhanced operating leverage at that facility.
INDUSTRY
The Company competes primarily in the portable generator and pressure
washer product lines of the engine-powered tools industry.
PORTABLE GENERATORS.
The Company estimates that the U.S. portable generator market was $492
million in 1998, and has grown at a 16% compounded annual growth rate ("CAGR")
from $230 million since 1993. The Company believes that this market will
continue to grow at a 16% CAGR to reach approximately $900 million in 2002. In
1998, the U.S. portable generator market consisted of approximately ten
manufacturers, ranging from small regional producers to large manufacturers with
nationwide distribution capabilities. Sales of the six largest manufacturers
accounted for approximately 85% of the total market in 1997. Growth in this
market is driven by (i) increased consumer awareness of utility; (ii) favorable
demographic trends; (iii) the momentum of home center retailers; and (iv)
improving price performance.
INCREASED CONSUMER AWARENESS OF UTILITY. Historically, applications for
portable generators have included (i) running power tools and other appliances
at residential as well as remote construction sites and (ii) providing
electrical power in connection with the use of recreational vehicles and at
camping sites. In recent years, growth in the portable generator market has
increasingly been driven by the demand by homeowners for alternative, or
stand-by, power sources. The Company believes that demand for stand-by power has
increased in part by the trend toward utility deregulation, which has increased
the threat of power supply interruptions, and by increasing requirements of
homeowners for home security. Power generator sales are not highly seasonal, nor
are sales significantly affected by storms or other natural disasters, as the
Company's consumer research indicates that only approximately 4% of generator
sales are attributable to an immediate need for electrical power. In 1998, the
stand-by power product line represented approximately 75% of total portable
generator sales, and the Company believes that the demand for stand-by power
will continue to be a primary factor in the growth of the overall market.
FAVORABLE DEMOGRAPHIC TRENDS. Recent industry data indicate that
approximately 60% of portable generator purchasers are between 45 and 65 years
old. According to U.S. census estimates, this segment of the population is
expected to grow by approximately 25% over the next six years. In addition, the
U.S. census projects that there will be over three million new homeowners over
the next five years.
BROADENING CHANNELS OF DISTRIBUTION. Channels of distribution for portable
generators were historically independent dealers, commercial and industrial
supply houses and lawn and garden outlets. These channels were fragmented, and
retailers assumed many costs associated with these products, such as the costs
of freight, inventory and handling and in-store product support. These costs
were passed on to consumers in higher prices. In
48
<PAGE> 52
recent years, the emergence of home center chains and warehouse clubs has
enhanced the market and distribution infrastructure for engine powered tools,
including portable generators. These retailers have also driven their suppliers
to offer more competitively-priced products with higher perceived value, to
offer continuous product innovation, and to assist in the development of
marketing and merchandising efforts. As a result, these home center chains have
been instrumental in driving the growth of products such as portable generators.
IMPROVING PRICE PERFORMANCE. Improved price-performance has led to
increased demand for portable generators. Improvements in customer value can be
attributed to significant strides in the design, engineering and manufacturing
cost of overhead valve industrial ("OHVI") engines, pressure washer pumps and,
to a lesser degree, electric motors and lawn mower-type gasoline engines. The
most significant enhancement to customer value has been the development of the
OHVI engine, a highly engineered product that established new industry standards
for the highest power-to-weight ratio, the lowest noise level and the longest
operating life. In 1998, portable generators equipped with OHVI engines
represented approximately 30% of the total portable generator market, up from
less than approximately 6% of the market in 1993. By the year 2002, the Company
believes that approximately 40% of the portable generators sold in the U.S. will
be powered by OHVI engines.
PRESSURE WASHERS.
The Company estimates that the U.S. consumer pressure washer market was
$300 million in 1998, and has grown at a 43% CAGR from $50 million since 1993.
The Company believes that this market will grow at a 15% CAGR to reach
approximately $527 million in 2002. In addition, the commercial pressure washer
market was approximately $120 million in 1998. In 1998, the U.S. pressure washer
market consisted of approximately ten manufacturers, ranging from small regional
producers to large manufacturers with nationwide distribution capabilities. The
market is consolidating, with sales of the four largest manufacturers accounting
for an estimated 80% of the total market in 1998, which reflects the exit of a
leading manufacturer of consumer pressure washers during that year. Growth in
the market is driven by (i) increased awareness of consumer applications; (ii)
broadening channels of distribution; and (iii) improved price-performance.
INCREASED AWARENESS OF CONSUMER APPLICATIONS. Pressure washers have been
used in commercial applications for over 50 years. In recent years, the consumer
pressure washer market has evolved, driven by increasing awareness of utility
and the ease of use of the products. Consumer applications include car washing,
deck cleaning, and pre-treating exterior surfaces prior to painting. Common
commercial applications include stripping paint, removing graffiti, farm and
agricultural uses, automotive uses, and factory and warehouse applications.
Consumer demand for pressure washers reflects the considerable increase in home
ownership, real estate values, boat and recreational vehicle ownership and
consumers' desire to preserve the value of, and enhance the appearance of, these
investments. Pressure washers also have a strong appeal to homeowners faced with
increasing demands on their time.
BROADENING CHANNELS OF DISTRIBUTION. In 1993, Sears was the first retailer
to offer an effectively merchandised and well-balanced assortment of pressure
washers for consumer applications, including car washing, deck cleaning and
paint surface preparation. Other leading home center chains began offering
pressure washers shortly thereafter, and contributed to the rapid development of
the consumer market. These home center chains
49
<PAGE> 53
have required their suppliers to provide broader product lines and to
continually improve quality, price and product performance. The Company believes
that such pressure from the home center chains will lead to further industry
consolidation to the detriment of the smaller participants.
IMPROVING PRICE PERFORMANCE. Improved price-performance has led to
increased consumer demand for gasoline powered pressure washers. These products
offer a significant step up in cleaning power, durability, engine life and
safety features at only a modest premium to the opening price point of a basic
electric pressure washer. The axial cam pump, introduced in 1994, significantly
lowered the manufacturing cost of a pressure washer in addition to improving
quality and overall customer satisfaction. The shift to axial cam pumps from
crank shaft pumps allowed the use of high-volume, low-cost vertical shaft
engines. This innovation has not only reduced retail prices but has also made
this product more convenient to use, adding to its continued growth in the
consumer market.
PRODUCTS
The Company primarily produces portable generators and pressure washers
built around (i) commercially available lawn mower-type engines and (ii) the GN
OHVI engine. The GN OHVI engine, to which the Company has exclusive access for
its portable generators, pressure washers and welders, offers several
value-added features to home, recreational and commercial end-users. For
example, a typical lawn mower-type engine is expected to provide a 400-700 hour
operating life, while the GN OHVI engine has a life expectancy of up to 3,000
hours. Engines comparable to the GN OHVI which are available to the Company's
competitors tend to sell at a premium relative to a comparable proprietary GN
OHVI engine. This has enabled the Company to gain market share by offering a
superior value to consumers and a differentiated product to retailers.
PORTABLE GENERATORS
The Company believes it manufactures and markets the broadest line of
portable generator products in the industry. The Company's product offering
ranges from premium-priced models, incorporating advanced operating features and
performance characteristics built around the Company's proprietary GN OHVI
engine, to value-priced products built around conventional commercially
available lawn mower-type engines. The Company's generator line includes the
most basic units without protective frames to complete units, and the simplest
electrical outlet features to full control panels with related features that are
attractive to the industrial and contractor markets. The Company's entire
product line incorporates various value-added features such as low oil shutdown
and reduced noise levels.
The Company's competitive position in the portable generator category is
the result of its state-of-the-art product design and engineering capabilities.
Many of the Company's premium GN OHVI engine-powered generators are equipped
with voltage regulators which provide superior voltage control and surge
capacity for starting large electrical loads. The GN OHVI engine-powered units
also feature lighter weight for portability, compact size, reduced maintenance
and lower fuel consumption. Electric start is available on certain models and
the contractor units incorporate a unique idle control device which further
reduces noise, greatly extends engine operating life and additionally reduces
fuel consumption. Oversized fuel tanks for longer operating times are standard
with these units.
50
<PAGE> 54
PRESSURE WASHERS
The Company's engine-driven pressure washers incorporate unique value added
features such as a thermal overload device, which prevents overheating and
resulting failures, and an exclusive unloading circuit which makes starting
easier. The Company's electric pressure washer product line offers reduced noise
levels, a long operating life and an automatic start-stop feature which protects
against damage from overheating or running dry. The Company's proprietary pump,
based on different combinations of internally designed components and a low-cost
aluminum pump head, promotes greater manufacturing flexibility and a faster
response to evolving end-user needs. As with portable generators, end-users are
offered a premium GN OHVI engine-powered product which features lower fuel
consumption, longer life and lower noise levels, all of which the Company
believes are of great value to the end-user. The Company believes it is the only
U.S. manufacturer in this industry to have this level of integration in the
manufacture of pressure washers.
NEW AND RELATED PRODUCTS
All of the Company's new product initiatives are based on the Company's
core manufacturing and marketing philosophy. The Company's strategy to expand
its presence in related product lines has three major components. In the power
generator market, the Company plans to leverage its exclusive access to the GN
OHVI engine to introduce high value models at competitive price points. For
example, the Company's 4000XL model, as currently priced to the end-user, will
offer technically advanced consumer benefits at half to 2/3 the retail price of
a Honda product. Management anticipates that this compelling price performance
ratio will significantly increase demand in the premium-priced line relative to
low-end, lower-margin generator sets.
In the pressure washer category, the Company plans to introduce its first
product designed specifically for the commercial market in 1998. This commercial
product has been designed around the same GN OHVI engine as used in portable
generators, providing longer life for trouble-free power compared to competitive
offerings. Management believes that as the large home center chains focus
increasingly on the commercial contractor and home construction markets, the
Company's established position in these channels, as well as in various catalogs
directed at professionals, should enable the Company to penetrate this segment
rapidly. The Company estimates that the market for these products was
approximately $120 million in 1998.
Finally, over the next 12 to 24 months, the Company plans to continue to
competitively position its entry level vertical shaft gasoline pressure washer
to encourage the present electric pressure washer owner to trade-up to a higher
powered gasoline unit. The Company's product positioning is focused on providing
significantly greater cleaning power, longer engine life and user-friendly
accessories at a modest premium to competitive electric pressure washers.
Superior design and engineering capabilities and low-cost manufacturing
operations provide the Company with a significant resource for developing new
product categories. The Company has identified several new product and business
opportunities in which the Company can provide added value to end-users and
attractive profit margins to retailers. The Company's research and development
group is in the latter stages of developing and field testing these products.
Management expects to introduce these products over the next 12 to 24 months.
51
<PAGE> 55
DISTRIBUTION AND MARKETING
The Company's three largest customers are Home Depot, Sears and Costco,
which together accounted for approximately 74% of sales for the year ended
December 31, 1998. The Company also sells to other consumer home centers and
warehouse clubs, as well as outdoor power equipment dealers. In addition to
traditional retail distribution, the Company offers its products through
national catalog companies such as Northern Hydraulic, Sears Power Tool catalog
and the Company's own "special-order" service.
Since 1961, the Company has been the major supplier of portable generators
to Sears, and one of two suppliers of pressure washers since Sears first
introduced that product category in 1994. Sears and the Company have developed a
longstanding partnership involving the development of exclusive product
offerings under the Craftsman(R) label, high levels of in-store sales support,
well-coordinated merchandising and promotional campaigns and access to Sears'
nationwide service network. This partnership is considered to have been highly
effective in building up both product categories for Sears. In both the portable
generator and pressure washer categories, the Company has collaborated with
Sears to create high-impact in-store displays that provide both an assortment of
products and informative point-of-purchase materials to help guide end-users in
their purchasing decision. The Company continues to increase its sales through
Sears' expanding hardware distribution channels including its new local hardware
stores, dealer stores and Orchard Supply.
Over the past three years, the Company has expanded the distribution of its
products, marketed under the Generac(R) name, to home centers and warehouse
clubs. Borrowing from its experience at Sears, the Company offers to its
customers a total category management approach, including value-added, in-store
services such as merchandising, informational materials, sales associate
training and product support. The Company believes that its ability to affect
merchandise presentation at the point-of-purchase, particularly its visual
merchandising and packaging, has had a strong impact on retailers' portable
generator and pressure washer sales and profitability. Major U.S. retail
customers now include Home Depot, Lowe's, Costco and Tru-Serve Incorporated. The
Company is well-represented in seven of the top ten "big box" retailers in the
U.S.
The Company employs a two-tiered sales force to sell its products through
mass merchants, home centers and independent dealer channels. Product Managers
are responsible for developing sales programs tailored to retailer-specific
needs in the home center and warehouse club channels. Territory Sales Managers
("TSMs") are responsible for establishing new independent dealers, training
sales associates at a store level, and managing and reducing product returns.
TSMs also serve as the primary interface between the Company's manufacturing
operation and its independent dealer network.
The Company has assembled a comprehensive after-sales service network in
North America for generator sets and pressure washers comprised of: (i) 2,700
authorized independent dealers; (ii) 11 independently owned master parts
distributors ("Master Generac Express Network" or "Master G.E.N."); and (iii) a
Company-owned fleet of mobile service training vehicles. In today's retail
environment, most independent dealers do not generate the traffic to be
competitive with mass merchants, home centers or warehouse clubs. Nevertheless,
the Company has made a strategic decision to maintain the viability of the
independent dealer network for the express purpose of providing a service that
supports the Company's product. The Company has positioned itself not only to
respond to short-term warranty needs but to maintain service capability
throughout the life of the
52
<PAGE> 56
product as well. Many of the Master G.E.N.s have their own sales force, which
effectively broadens the availability of the Company's products and spare parts.
PRODUCT DEVELOPMENT; ENGINEERING
The Company's ability to serve both retailers and end-users is effectively
driven by the strength of its engineering and product development capabilities,
particularly in alternator and pump design. In 1959, the Company was the first
to exploit silicon-diode technology to completely redesign the alternator,
thereby fundamentally improving the manufacturing economics and performance
characteristics of portable generators. Similar performance improvements have
been associated with the GN OHVI engine, the pressure washer pump and the
computer-controlled generator. In recognition of its design and engineering
competency, the Company was contracted by Briggs & Stratton ("B&S"), one of the
world's largest commercial engine manufacturers, to design and set up
manufacturing for B&S of its first V Twin Vanguard engine. The Company was
instrumental in assisting in the establishment of the joint venture company of
Dihatsu Briggs & Stratton in Japan, which is the manufacturer of the Vanguard
engine.
In the pressure washer category, the Company has leveraged its
engineering-driven culture to turn areas of potential vulnerability into
competitive strengths. For example, in response to the constrained supply chain
for highly engineered pressure washer pumps from inflexible and often
unpredictable overseas suppliers, the Company designed and now manufactures its
own pressure washer pump. This pump is based on its axial cam technology,
resulting in increased responsiveness to market demands and avoiding the costly
air freight expenses incurred in the past.
The Company's ability to successfully commercialize technical innovations
is a core competency and is expected to continue to contribute to revenue and
profit growth. Today's retail environment demands a continuous flow of new,
value-enhanced offerings to maintain product placements and shelf space
allocations. The majority of the Company's new product development initiatives
are based on the portable generator and pressure washer markets. However, the
Company's new product development group is in the latter stages of developing
and field testing products outside of these core markets that the Company
expects to introduce over the next 12 to 24 months. See "-- Products -- New and
Related Products."
INTERNATIONAL SALES AND DISTRIBUTION
The Company has been successful in building long-term customer
relationships with the leading "big box" retailers in six European markets: the
U.K., Germany, Switzerland, Spain, Belgium and France. To support the Company's
growing European power generator business, local sales offices have been
established in Manchester, Cologne and Barcelona. To service its European
customer base more effectively, the Company designs and assembles its European
products in its Cheshire, England facility. This facility imports alternators,
engines and pumps and other components, and assembles portable generators to
meet local product requirements and quality assurance regulations.
The Company's international operations have contributed approximately 8% of
total net sales for calendar year 1998. The Company plans to focus on
international expansion as a key part of its strategy. See "-- Business
Strategy -- International Market Opportunities."
53
<PAGE> 57
COMPETITION
The U.S. engine powered tools industry has experienced significant
consolidation over the last 10 to 15 years. The number of competitors in its
product categories has decreased from approximately 20 in 1985 to approximately
ten today, of which only four companies have national distribution capabilities.
Although the Company experiences substantial competition from these competitors,
the Company believes that it is a market leader in each of its core products. In
the manufacture and sale of portable generators, the Company competes primarily
with Coleman Powermate, a division of The Coleman Company, Inc. and Honda. In
the manufacture and sale of pressure washers, the Company competes primarily
with DeVilbiss Air Power Company, a subsidiary of Falcon Building Products,
Inc., and, to a lesser extent, with Alfred Karcher GmbH & Co. and Campbell
Hausfeld, a division of The Campbell Group.
MANUFACTURING
The Company believes that it is one of the more vertically-integrated
manufacturers of portable generators and pressure washers in the U.S. Management
believes that sustained levels of capital investment and a commitment to
manufacturing and technological excellence are important to remain competitive
from both a price and product offering perspective.
The Company operates a state-of-the-art manufacturing facility in
Jefferson, Wisconsin. Completed in January 1995, the original 120,000-square
foot facility was expanded by 57,500 square feet in January 1997 to add capacity
for the manufacturing of electric pressure washers and pressure washer pumps.
The Company is currently in the process of further expanding capacity in this
facility by approximately 72,000 square feet and expects to complete this
expansion in the second quarter of 1999.
The Jefferson plant incorporates facilities for blow molding of plastic
tanks; robotic welding of cradles; powder coat painting of metal components;
machining; a complete rotor and stator production line with an automated
varnishing system representing the latest winding technology available;
high-volume assembly lines for one to 12 KW portable generators and 1300 PSI to
3500 PSI pressure washers; and on-line testing, packaging and warehousing
facilities.
The Company also owns and operates a manufacturing facility in Cheshire,
England, which was built in 1990 and recently expanded from approximately 18,000
square feet to approximately 45,000 square feet.
Pursuant to the terms of the Engine Supply Agreement, the Company has the
exclusive right to purchase certain models of Generac Corporation's GN OHVI
engines for use in its pressure washers, consumer portable generators and
welders. The initial term of the Engine Supply Agreement is for a period of nine
years, with provision for three year renewals, subject to certain conditions.
See "Risk Factors -- Absence of Independent Operating History; Dependence on
Generac Corporation."
EMPLOYEES
As of December 31, 1998, the Company employed approximately 980 persons,
the majority of whom were involved in production and distribution, with the
balance engaged in technical, administration, sales and clerical work. Of these
employees, 930 were employed in the United States and 50 in the U.K. Although
all the Company's production employees are covered by a collective bargaining
agreement, only up to ten of the
54
<PAGE> 58
Company's employees have been unionized. The collective bargaining agreement
expires in October 1999, which the Company expects to negotiate and renew when
it expires. The Company believes that its relationship with its employees is
good.
ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state and local laws and
regulations governing, among other things, emissions to air, discharge to
waters, the generation, handling, storage, transportation, treatment and
disposal of waste and other materials and health and safety matters. The Company
believes that its business, operations and facilities have been and are being
operated in compliance in all material respects with applicable environmental
and health and safety laws and regulations, many of which provide for
substantial fines and criminal sanctions for violations. However, the operation
of manufacturing plants entails risks in these areas, and there can be no
assurance that the Company will not incur material costs or liabilities in the
future. In addition, potentially significant expenditures could be required in
order to comply with evolving environmental and health and safety laws,
regulations or requirements that may be adopted or imposed in the future.
LEGAL PROCEEDINGS
The Company is involved from time to time in litigation arising out of its
business operations. Most of such litigation involves claims for personal
injury, property damage, breach of contract and claims involving employee
relations and certain administrative proceedings. The Company believes such
claims are either adequately covered by insurance or do not involve a risk of
material loss to the Company.
PROPERTIES
The Company currently owns and operates an approximately 177,500 square
foot manufacturing and warehouse facility in Jefferson, Wisconsin, which will be
expanded by approximately 72,000 square feet by the second quarter of 1999, and
an approximately 45,000 square foot manufacturing facility in Cheshire, England.
The Company believes that its manufacturing plants are generally
well-maintained, in good condition and, upon completion of the expansion, are
adequate to meet its present needs. In addition, the Company has sales offices
in Cologne, Germany and Barcelona, Spain, and warehousing facilities in
Jefferson and Waukesha, Wisconsin, all of which are leased. The Company does not
believe that it will have any difficulty renewing any real property lease or
finding alternative sites.
55
<PAGE> 59
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position of each of the
directors and executive officers of the Issuers and Holdings.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
OPERATING COMPANY:
Dorrance J. Noonan, Jr............... 46 President, Chief Executive Officer and
Director
Gary J. Lato......................... 39 Chief Financial Officer and Secretary
James H. Deneffe..................... 54 Senior Vice President -- Sales and
Marketing
Wesley C. Sodemann................... 55 Vice President of Engineering
Jay C. Sugar......................... 38 Vice President of Operations
J. David Bramhill.................... 43 Vice President of International Operations
Robert M. Saeger..................... 53 Vice President of Planning
Richard A. Aube...................... 30 Director
GPPW:
Faith Rosenfeld...................... 47 President
Richard A. Aube...................... 30 Secretary, Treasurer and Director
HOLDINGS:
Eric R. Wilkinson(1)................. 43 President and Director
Richard A. Aube...................... 30 Secretary and Treasurer
R. Eugene Cartledge(1),(2)........... 69 Chairman of the Board
Robert D. Kern(1),(2)................ 72 Director
Thomas G. Mendell.................... 51 Director
Dorrance J. Noonan, Jr............... 46 Director
R. Ralph Parks(1),(2)................ 55 Director
Richard A. Van Deuren(2)............. 69 Director
</TABLE>
- -------------------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
DORRANCE J. NOONAN, JR., President, Chief Executive Officer and Director of
the Operating Company and Director of Holdings, served in various management
positions with Generac Corporation from 1990 to 1998, most recently as Chief
Operating Officer from 1997 to 1998. Prior to joining Generac Corporation, Mr.
Noonan was Manager of Sales and Marketing at Artcraft Industries from 1988 to
1990, a registered securities broker at Prudential-Bache Securities from 1985 to
1988, and Manager of International Sales and Marketing at the Perfex Division of
McQuay-Perfex from 1981 to 1985.
GARY J. LATO, Chief Financial Officer and Secretary of the Operating
Company, joined Generac Corporation in 1991, serving as Director of Finance in
1991 and as Vice President -- Finance from 1992 to 1998. Prior to joining
Generac Corporation, Mr. Lato held various positions, including Senior Audit
Manager, at Price Waterhouse LLP from 1981 to 1991.
56
<PAGE> 60
JAMES H. DENEFFE, Senior Vice President -- Sales and Marketing of the
Operating Company, held that position at Generac Corporation from 1996 to 1998.
Mr. Deneffe has been with Generac Corporation since 1978, serving as Vice
President -- Consumer Products Sales and Marketing from 1982 to 1995 and as
Group Sales Manager from 1978 to 1981.
WESLEY C. SODEMANN, Vice President of Engineering of the Operating Company,
held that position at Generac Corporation from 1996 to 1998. Mr. Sodemann also
served as Chief Engineer of Generac Corporation from 1979 to 1996 and as
Associate Engineer from 1965 to 1979.
JAY C. SUGAR, Vice President of Operations of the Operating Company, held
that position at Generac Corporation from 1996 to 1998. Mr. Sugar also served as
Manufacturing Manager of Generac Corporation from 1993 to 1996 and as Manager of
Production and Inventory Control in 1993. Prior to joining Generac Corporation,
Mr. Sugar held various positions at Cadence Design Systems -- ASI Division (1990
to 1992), Data General Corporation (1987 to 1990) and General Dynamics (1982 to
1985).
J. DAVID BRAMHILL, Vice President of International Operations, has held
that position since 1997 and served as European Operations Manager for Generac
Corporation from 1992 to 1996. Prior to joining the Company, Mr. Bramhill served
in various management and engineering positions at Heulins Manufacturing, Crewe,
Cheshire, England (1991 to 1992) and Rolls-Royce Motor Car Company, Ltd. and
Rolls-Royce Aerospace, Crewe, Cheshire, England (1972 to 1991).
ROBERT M. SAEGER, Vice President of Planning of the Operating Company, has
held that position since 1998. From 1997 to 1998, Mr. Saeger served as Director
of Accounting/Controller with Generac Corporation and also served as Director of
Accounting and Financial Control from 1990 to 1996, as Accounting Manager from
1983 to 1990 and as Assistant Controller from 1976 to 1983.
ERIC R. WILKINSON, President and Director of Holdings, has been a managing
director of The Beacon Group, LLC (an affiliate of Beacon) since 1994. Prior to
joining The Beacon Group, LLC, Mr. Wilkinson was a partner of Apax Partners &
Cie SA, a European private equity firm, from 1989 to 1994 and a partner of Bain
& Company, the strategy consulting firm, from 1983 to 1989. Mr. Wilkinson is a
director of Doctors Health Systems, Intek Information Inc., Hollywood Theaters,
Inc., The Identity Group, OnCare Inc., National Century Financial Enterprises,
Inc. and International Components Corporation.
RICHARD A. AUBE, Secretary and Treasurer of Holdings, Director of the
Operating Company and Secretary, Treasurer and Director of GPPW, has been with
The Beacon Group, LLC since 1993, most recently as Director. Prior to joining
The Beacon Group, LLC, Mr. Aube was a financial analyst in the Natural Resources
Group of Morgan Stanley & Co. Mr. Aube is a director of Vessels Energy, Inc.
R. EUGENE CARTLEDGE, Chairman of the Board of Holdings, was Chairman of the
Board and Chief Executive Officer of Union Camp Corp. from 1986 until his
retirement in June 1994. Mr. Cartledge is a director of Blount, Inc., Chase
Brass Industries, Inc., Delta Airlines Incorporated, Sunoco, Inc., Union Camp
Corp. and UCAR International Inc.
ROBERT D. KERN, Director of Holdings, has been Chairman and Chief Executive
Officer of Generac Corporation since its founding in 1959.
57
<PAGE> 61
THOMAS G. MENDELL, Director of Holdings, has been a managing director of
The Beacon Group, LLC since 1994. Prior to joining The Beacon Group, LLC, Mr.
Mendell was employed by Goldman, Sachs & Co. for nineteen years where he served
as a member of the firm's Investment Committee and head of GS Capital. Mr.
Mendell is a director of Doctors Health Systems, Hollywood Theaters, Inc.,
SmartMaps, International, Inc., The Identity Group and OnCare Inc.
R. RALPH PARKS, Director of Holdings, has been a limited partner of The
Beacon Group, LP (an affiliate of Beacon) since 1997. Prior to joining The
Beacon Group, LP, Mr. Parks was a partner of Goldman, Sachs & Co. and head of
its Investment Banking Services for Europe and Canada.
RICHARD A. VAN DEUREN, Director of Holdings, has been a partner in the law
firm of Reinhart, Boerner, Van Deuren, Norris & Rieselbach, s.c., Attorneys at
Law. Mr. Van Deuren is a director of Allen Edmonds Corporation, Allrubber
Products & Supply Co., Arandell Corporation, Ataco Steel Products Corporation,
F.W. Busch Corp., Campbell, Newman, Pottinger & Associates, Inc., Construction
Forms, Inc., Energy Ventures, Ltd., Foran Spice Company, Inc., Generac
Corporation, Marshall W. Nelson & Associates, Inc., MSI General Corporation,
UNICO, INC., Valuation Research Corporation and Waukee Engineering Company, Inc.
FAITH ROSENFELD, President of GPPW, has been a managing director of The
Beacon Group, LLC since its inception in 1993. Prior to joining The Beacon
Group, LLC, Ms. Rosenfeld was employed by Goldman, Sachs & Co. for 14 years
where she held various positions, including, most recently, Vice President,
Investment Banking Division. Ms. Rosenfeld is a director of SBL, Inc. and Savia
International, Ltd.
Directors of each of the Issuers will hold office until his or her
successor has been elected and qualified. Officers of each of the Issuers and
Holdings will be elected by the respective Boards of Directors at the annual
meeting of stockholders and will serve at the discretion of such Board of
Directors.
EXECUTIVE COMPENSATION
The following table sets forth information regarding the compensation paid
during the Company's last completed fiscal year to the Chief Executive Officer
and each of the other four most highly compensated executive officers of the
Company as of December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------- ------------
OTHER AWARDS
ANNUAL SECURITIES ALL OTHER
NAME AND COMPEN- UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SATION($) OPTIONS(#) SATION($)(1)
- ------------------ ---- --------- -------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Dorrance J. Noonan, 1998 136,500 26,340 -- -- 5,287
Jr.....................
Chief Executive Officer
Gary J. Lato............. 1998 131,250 25,500 -- -- 3,127
Chief Financial Officer
James H. Deneffe......... 1998 131,250 25,500 -- -- 11,737
Senior Vice
President --
Sales and Marketing
</TABLE>
58
<PAGE> 62
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------- ------------
OTHER AWARDS
ANNUAL SECURITIES ALL OTHER
NAME AND COMPEN- UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SATION($) OPTIONS(#) SATION($)(1)
- ------------------ ---- --------- -------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Wesley C. Sodemann....... 1998 101,923 24,000 47,500 -- 8,758
Vice President of
Engineering
Jay C. Sugar............. 1998 101,923 19,000 47,500 -- 1,882
Vice President of
Operations
</TABLE>
- -------------------------
(1) All other compensation includes the value of deferred compensation
agreements maintained with the officers of the Operating Company.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to the executive
officers named in the Summary Compensation Table concerning the grants of
options made under the Company's Stock Option Plan during fiscal 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES PERCENT OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE OR FOR OPTION TERM(1)
OPTION TO EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ---------- ---------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Dorrance J. Noonan,
Jr. .................... 252.976 23.8% $12,941.00 7/8/08 $2,062,090 $5,236,889
Gary J. Lato.............. 202.381 19.0% 12,941.00 7/8/08 1,649,672 4,189,511
James H. Deneffe.......... 101.190 9.5% 12,941.00 7/8/08 824,836 2,094,755
Wesley C. Sodemann........ 101.190 9.5% 12,941.00 7/8/08 824,836 2,094,755
Jay C. Sugar.............. 101.190 9.5% 12,941.00 7/8/08 824,836 2,094,755
</TABLE>
- -------------------------
(1) These gains are based on arbitrary compounded rates of growth of stock
prices mandated by the Securities and Exchange Commission of 5% and 10% per
year from the date the option was granted over the full option term. These
rates do not represent the Company's estimate or projection of future prices
of Holdings Common Stock. There is no assurance that the values that may be
realized by any executive officer upon exercise of his options will be at or
near the value estimated in the foregoing table.
59
<PAGE> 63
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the executive
officers named in the Summary Compensation Table concerning the options granted
during fiscal 1998. To date, no such options have been exercised.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END AT FY-END(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dorrance J. Noonan,
Jr. ................... -- -- -- 252.976 0 0
Gary J. Lato............. -- -- -- 202.381 0 0
James H. Deneffe......... -- -- -- 101.190 0 0
Wesley C. Sodemann....... -- -- -- 101.190 0 0
Jay C. Sugar............. -- -- -- 101.190 0 0
</TABLE>
- -------------------------
(1) Assumes the fair market value of the shares underlying the options is the
same as the exercise price ($12,941.00 per share) payable for such shares.
DIRECTORS' COMPENSATION
Directors of the Company do not receive director's fees or attendance fees.
Directors are reimbursed for their reasonable expenses incurred in connection
with attending meetings and performing their duties as directors. Outside
directors are eligible to receive options to purchase Holdings Common Stock
pursuant to the Stock Option Plan (as defined). See "-- Stock Option Plan."
Options to purchase 101.19 shares of Holdings Common Stock were granted to
certain directors during 1998.
BENEFIT PLANS
In connection with the Transaction, the Company established two
non-contributory defined benefit plans covering substantially all employees:
bargaining/hourly and non-bargaining/salaried groups. Participants begin vesting
after three years of service and fully vest after seven years of service. The
benefits paid under the salaried plan are based upon years of service and the
participant's defined final monthly compensation. Benefits paid under the hourly
plan are based on a unit amount at the date of termination multiplied by the
participants' credited service. The plans provide for a continuation of
participant's years of service credited with Generac Corporation.
In connection with the Transaction, the Company also established 401(k)
employee retirement savings plans for the benefit of its employees. The Company
pays all administrative costs of the plans but makes no contributions. There are
unfunded deferred compensation plans for certain key employees.
STOCK OPTION PLAN
In order to attract, retain and motivate selected employees, officers and
directors, and to encourage such persons to devote their best efforts to the
business and financial success of the Company, the Company has adopted the
Generac Portable Products, Inc. Stock Option Plan (the "Stock Option Plan").
Under the Stock Option Plan, stock options to acquire up to 1,619 shares, or
approximately 16.0% on a fully diluted basis, of Holdings Common Stock, in the
aggregate, may be granted under a time-vesting formula at an
60
<PAGE> 64
exercise price equal to the fair market value of the Holdings Common Stock at
the date of grant. On July 9, 1998, 1,063 options, or approximately 10.5% on a
fully diluted basis (assuming the grant of all available options), were granted
at an exercise price of $12,941.00 per share to certain members of management
and the Company's board of directors.
The Stock Option Plan is administered by Holding's Board of Directors (the
"Board"). The Board will designate which employees of the Company shall be
eligible to receive awards under the Stock Option Plan, and the amount, timing
and other terms and conditions applicable to such awards. Approximately 5.5% of
the outstanding shares of such stock will be reserved for future grants. Options
are exercisable in accordance with the terms established by the Board.
61
<PAGE> 65
SECURITY OWNERSHIP
All of the common stock of GPPW is held by Holdings. All of the equity
interest in the Operating Company is held indirectly by Holdings through two
wholly owned subsidiaries: GPPD and GPPW. GPPD and GPPW hold 95% and 5% limited
liability company interests, respectively, in the Operating Company.
The following table sets forth certain information with respect to the
beneficial ownership of Holdings Common Stock by (i) each person who
beneficially owns more than 5% of such shares; (ii) certain directors of the
Company; (iii) each of the executive officers named in the Summary Compensation
Table; and (iv) all executive officers and directors of the Company as a group.
Unless otherwise indicated, the address for each officer and director of the
Company is c/o Generac Portable Products, Inc., 1 Generac Way, Jefferson,
Wisconsin 53549.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF CLASS
- ------------------------ ---------------- ----------------
<S> <C> <C>
5% HOLDERS:
The Beacon Group III -- Focus Value Fund,
L.P.(1)....................................... 4,698.182 55.3%
California Public Employees' Retirement
System(2)..................................... 1,931.818 22.7%
Capital d'Amerique CDPQ Inc.(3)................. 571.818 6.7%
DIRECTORS:
R. Eugene Cartledge............................. 46.364 *
Robert D. Kern.................................. 77.273 *
Thomas G. Mendell............................... 4,698.182(4) 55.3%
Richard A. Van Deuren........................... 7.727 *
Eric R. Wilkinson............................... 4,698.182(4) 55.3%
OFFICERS:
Dorrance J. Noonan, Jr.......................... 77.273 *
Gary J. Lato.................................... 77.273 *
James H. Deneffe................................ 77.273 *
Wesley C. Sodemann.............................. 1.932 *
Jay C. Sugar.................................... 1.159 *
Faith Rosenfeld................................. 4,698.182(4) 55.3%
All directors and executive officers as a group
(15 individuals)(5)........................... 370.136 4.4%
</TABLE>
- -------------------------
* Less than 1%.
(1) The address of The Beacon Group III -- Focus Value Fund, L.P. ("Beacon") is
399 Park Avenue, New York, New York 10022.
(2) The address of California Public Employees' Retirement System is Lincoln
Plaza -- 400 P Street, P.O. Box 942707, Sacramento, California 94229.
(3) The address of Capital d'Amerique CDPQ Inc. is 1981, Avenue McGill College,
9th Floor, Montreal, Quebec H3A3C7.
(4) Messrs. Wilkinson and Mendell and Ms. Rosenfeld may be deemed to share
beneficial ownership of shares of Holdings Common Stock owned of record by
Beacon by virtue of their status as partners of The Beacon Group, an
affiliate of the general partner of
62
<PAGE> 66
Beacon. Messrs. Wilkinson and Mendell and Ms. Rosenfeld disclaim beneficial
ownership of the shares of Holdings Common Stock owned by Beacon. The
business address of Messrs. Wilkinson and Mendell and Ms. Rosenfeld is c/o
The Beacon Group III -- Focus Value Fund, L.P., 399 Park Avenue, New York,
New York 10022.
(5) Does not include 4,698.182 shares as to which Messrs. Wilkinson and Mendell
and Ms. Rosenfeld may be deemed to have beneficial ownership by virtue of
their indirect control of Beacon. See "Management -- Directors and Executive
Officers."
63
<PAGE> 67
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
STOCKHOLDERS AGREEMENTS
Beacon, the other stockholders of Holdings and Holdings are parties to a
Stockholders' Agreement which includes certain transfer restrictions, voting
agreements and registration rights. Employees who own stock of Holdings are also
subject to agreements that restrict their right to transfer their stock and,
under certain conditions, will require them to sell a pro rata portion of their
stock in a transaction in which Beacon is selling its stock.
DESCRIPTION OF THE SENIOR SECURED CREDIT FACILITY
The Operating Company has entered into a senior secured credit facility
with a group of lenders and Bankers Trust Company, as administrative agent and
arranger, providing for up to $115.0 million of loans. The credit facility
consists of (i) a $45.0 million senior secured term loan facility (the "A Term
Loan Facility"), (ii) a $40.0 million senior secured term loan facility (the "B
Term Loan Facility" and together with the A Term Loan Facility, the "Term Loan
Facilities"), and (iii) a $30.0 million senior secured revolving credit
facility. The revolving credit facility will have a letter of credit sublimit to
be agreed upon.
USE OF PROCEEDS; MATURITY. Proceeds of the Term Loan Facilities, together
with the Equity Investment and the net proceeds of the issuance of the Old
Notes, were used to fund the Operating Company's acquisition of the Portable
Products Division of Generac Corporation and pay the fees and expenses related
thereto. Proceeds of the revolving credit facility will be used for general
corporate and working capital purposes. The A Term Loan Facility will mature
5 1/2 years from the closing date. The B Term Loan Facility will mature seven
years from the closing date. The A Term Loan Facility will provide for
amortization of $2.5 million in the first year, $6.25 million in the second
year, $7.5 million in the third year, $10.0 million in the fourth year, $12.5
million in the fifth year and $6.25 million in the sixth year. The B Term Loan
Facility will provide for nominal annual amortization in the first five years
and amortization of $19 million in each of the sixth and seventh years. The
revolving credit facility will mature 5 1/2 years from the closing date.
PREPAYMENT; REDUCTION OF COMMITMENTS. Borrowings under the credit facility
will be required to be prepaid, subject to certain exceptions, from (i) 100% of
the net proceeds of asset sales by the Operating Company and its subsidiaries
(subject to (a) exceptions for reinvestment of certain asset sale proceeds and
(b) certain de minimis exceptions); (ii) 100% of the net proceeds from certain
issuances of debt obligations by Holdings, the Operating Company or their
subsidiaries; (iii) 100% of the first $50.0 million and 75% thereafter of net
proceeds from issuances of equity by Holdings or the Operating Company; (iv)
certain percentages of annual excess cash flow; and (v) 100% of the net proceeds
from certain insurance recovery events of Holdings and its subsidiaries.
Voluntary prepayments will be permitted, without premium or penalty,
subject to reimbursement of lenders' costs in the case of voluntary prepayment
of Eurodollar borrowings other than on the last day of the relevant interest
period. Voluntary prepayments under the Term Loan Facilities will be allocated
among those facilities on a pro rata basis, with the amounts so allocated to be
applied to reduce future scheduled amortization payments on a pro rata basis.
64
<PAGE> 68
INTEREST. The interest rates under the A Term Loan Facility and the
revolving credit facility will be based, at the option of the Operating Company,
on either a Eurodollar rate plus 2.25% per annum or a base rate plus 1.25% per
annum, subject to a pricing grid that will provide for reductions in the
applicable interest rate margins based on Holdings' consolidated debt to EBITDA
ratio. The interest rate under the B Term Loan Facility is based, at the option
of the Operating Company, on a Eurodollar rate plus 2.75% or a base rate plus
1.75%, subject to a pricing grid that will provide for reductions in the
applicable interest rate margins based on Holdings' consolidated debt to EBITDA
ratio. A commitment fee of 0.50% per annum will be charged on the unused portion
of the Senior Secured Credit Facility, subject to a pricing grid that will
provide for reductions in the applicable commitment fee margin based on
Holdings' consolidated debt to EBITDA ratio.
COLLATERAL AND GUARANTEES. The credit facility will be guaranteed by
Holdings, GPPW, all of the Operating Company's existing and future domestic
subsidiaries and, upon the occurrence of certain events, GPPD. The credit
facility will be secured by a first priority lien on substantially all, subject
to certain exceptions, of the properties and assets of Holdings, the Operating
Company, each direct or indirect subsidiary of the Operating Company, GPPW and,
upon the occurrence of certain events, GPPD.
COVENANTS. The credit facility will contain covenants restricting the
ability of the Operating Company and its subsidiaries to, among other, (i) incur
additional debt; (ii) engage in mergers, acquisitions and asset sales; (iii)
engage in sale-leaseback transactions; (iv) declare dividends and make other
restricted payments; (v) prepay, redeem or purchase debt or amend existing debt
agreements; (vi) engage in transactions with affiliates; (vii) make investments;
(viii) incur liens; and (ix) make capital expenditures. The Company will also be
required to comply with financial covenants with respect to (a) a maximum
leverage ratio, (b) a minimum interest coverage ratio, and (c) a minimum EBITDA
test.
EVENTS OF DEFAULT. Events of default under the credit facility will
include but are not limited to (i) the Operating Company's failure to pay
principal when due or interest after a grace period; (ii) material breach of any
covenant, representation or warranty contained in the loan documents; (iii)
customary cross-default and cross-acceleration provisions; (iv) certain events
of bankruptcy, insolvency or dissolution of Holdings or its subsidiaries; (v)
certain judgments against Holdings and its subsidiaries or their assets; (vi)
the actual or asserted invalidity of security documents or guarantees of
Holdings, the Operating Company or the Operating Company's subsidiaries; and
(vii) a Change in Control (as defined) of Holdings or the Operating Company.
The preceding discussion of certain of the provisions of the credit
facility is not intended to be exhaustive and is qualified in its entirety by
reference to the provisions of the credit facility.
65
<PAGE> 69
DESCRIPTION OF THE NEW NOTES
The Old Notes were issued and the New Notes will be issued under an
Indenture (the "Indenture"), dated as of July 1, 1998, by and among the Issuers
and Marine Midland Bank, as Trustee (the "Trustee"). 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, the Trust
Indenture Act of 1939, as amended (the "TIA"), and to all of the provisions of
the Indenture, including the definitions of certain terms therein and those
terms made a part of the Indenture by reference to the TIA as in effect on the
date of the Indenture. A copy of the Indenture may be obtained from the Company
or the Initial Purchaser. The definitions of certain capitalized terms used in
the following summary are set forth below under "-- Certain Definitions." For
purposes of this section, references to the "Company" mean the Operating Company
and the terms "Company" and "Issuers" do not include their respective
Subsidiaries or Holdings.
The New Notes will be unsecured obligations of the Issuers, ranking
subordinate in right of payment to all Senior Debt of the Issuers.
The New Notes will be issued in fully registered form only, without
coupons, in denominations of $1,000 and integral multiples thereof. Initially,
Bankers Trust Company will act as Paying Agent and Registrar for the New Notes.
The New Notes may be presented for registration or transfer and exchange at the
offices of the Registrar, which initially will be Bankers Trust Company's
corporate trust office. The Issuers may change any Paying Agent and Registrar
without notice to holders of the New Notes (the "Holders"). The Issuers will pay
principal (and premium, if any) on the New Notes at Bankers Trust Company's
corporate office in New York, New York. At the Issuers' option, interest may be
paid at Bankers Trust Company's corporate trust office or by check mailed to the
registered address of Holders. Any Old Notes that remain outstanding after the
completion of the Exchange Offer, together with the Exchange Notes issued in
connection with the Exchange Offer, will be treated as a single class of
securities under the Indenture.
PRINCIPAL, MATURITY AND INTEREST
Under the Indenture, the New Notes will be limited in aggregate principal
amount to $160.0 million, of which $110.0 million in aggregate principal amount
has been issued, and all of which will mature on July 1, 2006. Additional Notes
in an aggregate amount of up to $50.0 million may be issued from time to time,
subject to the limitations set forth under "-- Certain Covenants -- Limitation
on Incurrence of Additional Indebtedness." Interest on the New Notes will accrue
at the rate of 11 1/4% per annum and will be payable semiannually in arrears in
cash on each January 1 and July 1 commencing on January 1, 1999, to the persons
who are registered Holders at the close of business on the December 15 and June
15 immediately preceding the applicable interest payment date. Interest on the
New Notes will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from and including the date of issuance.
The New Notes will not be entitled to the benefit of any mandatory sinking
fund.
REDEMPTION
OPTIONAL REDEMPTION. The New Notes will be redeemable, at the Issuers'
option, in whole at any time or in part from time to time, on and after July 1,
2002, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period
66
<PAGE> 70
commencing on July 1 of the year set forth below, plus, in each case, accrued
and unpaid interest thereon, if any, to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2002........................................ 107.625%
2003........................................ 104.750%
2004........................................ 102.875%
2005 and thereafter......................... 100.000%
</TABLE>
OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERINGS. At any time, or from
time to time, on or prior to July 1, 2001, the Issuers may, at their option, use
the net cash proceeds of one or more Public Equity Offerings (as defined below)
to redeem the New Notes at a redemption price equal to 111.25% of the principal
amount thereof plus accrued and unpaid interest thereon, if any, to the date of
redemption; provided that at least 65% of the principal amount of Notes
originally issued remains outstanding immediately after any such redemption. In
order to effect the foregoing redemption with the proceeds of any Public Equity
Offering, the Issuers shall make such redemption not more than 120 days after
the consummation of any such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of Holdings or the
Company pursuant to a registration statement filed with the Commission in
accordance with the Securities Act, other than an offering pursuant to Form S-8
(or any successor thereto); provided that, in the event of a Public Equity
Offering by Holdings, Holdings contributes to the capital of the Company the
portion of the net cash proceeds of such Public Equity Offering necessary to pay
the aggregate redemption price (plus accrued interest to the redemption date) of
the New Notes to be redeemed pursuant to the preceding paragraph.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the New Notes are to be redeemed at any
time, selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such Notes are listed or, if such Notes are not then listed on
a national securities exchange, on a pro rata basis, by lot or by such method as
the Trustee shall deem fair and appropriate; provided, however, that no Notes of
a principal amount of $1,000 or less shall be redeemed in part; provided,
further, that if a partial redemption is made with the proceeds of a Public
Equity Offering, selection of the New Notes or portions thereof for redemption
shall be made by the Trustee only on a pro rata basis or on as nearly a pro rata
basis as is practicable (subject to DTC procedures), unless such method is
otherwise prohibited. Notice of redemption shall be mailed by first-class mail
at least 30 but not more than 60 days before the redemption date to each Holder
of Notes to be redeemed at its registered address. If any Note is to be redeemed
in part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Note in a
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. On and after
the redemption date, interest will cease to accrue on Notes or portions thereof
called for redemption as long as the Company has deposited with the Paying Agent
funds in satisfaction of the applicable redemption price pursuant to the
Indenture.
67
<PAGE> 71
SUBORDINATION
The payment of all Obligations on the New Notes is subordinated in right of
payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on Senior Debt subject to the limitations described below. Upon any
payment or distribution of assets of the Issuers of any kind or character,
whether in cash, property or securities, to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of creditors
or marshaling of assets of the Company or in a bankruptcy, reorganization,
insolvency, receivership or other similar proceeding relating to the Issuers or
their property, whether voluntary or involuntary, all Obligations due or to
become due upon all Senior Debt shall first be paid in full in cash or Cash
Equivalents, or such payment duly provided for to the satisfaction of the
holders of Senior Debt, before any payment or distribution of any kind or
character is made on account of any Obligations on the New Notes, or for the
acquisition of any of the New Notes for cash or property or otherwise. If any
default occurs and is continuing in the payment when due, whether at maturity,
upon any redemption, by acceleration or otherwise, of any principal of, interest
on, unpaid drawings for letters of credit issued in respect of, or regularly
accruing fees with respect to, any Senior Debt, no payment of any kind or
character shall be made by or on behalf of the Issuers or any other Person on
its or their behalf with respect to any Obligations on the New Notes or to
acquire any of the New Notes for cash or property or otherwise (except that
holders of the New Notes may receive payments from a trust described under
"Legal Defeasance and Covenant Defeasance" below so long as, on the date or
dates the respective amounts were paid into the trust, such payments were made
with respect to the New Notes without violating the subordination provisions
described therein).
In addition, if any other event of default occurs and is continuing with
respect to any Designated Senior Debt, as such event of default is defined in
the instrument creating or evidencing such Designated Senior Debt, permitting
the holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of
Designated Senior Debt gives written notice of the event of default to the
Trustee (a "Payment Blockage Notice"), then, unless and until all events of
default have been cured or waived or have ceased to exist or the Trustee
receives notice from the Representative for the respective issue of Designated
Senior Debt terminating the Payment Blockage Period (as defined below), during
the 180 days after the delivery of such Payment Blockage Notice (the "Payment
Blockage Period"), neither the Issuers nor any other Person on their behalf
shall (x) make any payment of any kind or character with respect to any
Obligations on the New Notes or (y) acquire any of the New Notes for cash or
property or otherwise (except that holders of the New Notes may receive payments
from a trust described under "Legal Defeasance and Covenant Defeasance" below so
long as, on the date or dates the respective amounts were paid into the trust,
such payments were made with respect to the New Notes without violating the
subordination provisions described therein). Notwithstanding anything herein to
the contrary, in no event will a Payment Blockage Period extend beyond 180 days
from the date the payment on the New Notes was due and only one such Payment
Blockage Period may be commenced within any 360 consecutive days. No event of
default which existed or was continuing on the date of the commencement of any
Payment Blockage Period with respect to the Designated Senior Debt shall be, or
be made, the basis for commencement of a second Payment Blockage Period by the
Representative of such Designated Senior Debt whether or not within a period of
360 consecutive days, unless such event of default shall have been cured or
waived for a period of not less than 90 consecutive days (it being acknowledged
that any subsequent action, or any breach of any financial covenants for a
68
<PAGE> 72
period commencing after the date of commencement of such Payment Blockage Period
that, in either case, would give rise to an event of default pursuant to any
provisions under which an event of default previously existed or was continuing
shall constitute a new event of default for this purpose).
By reason of such subordination, in the event of the insolvency of either
of the Issuers, creditors of either of the Issuers who are not holders of Senior
Debt, including the Holders of the New Notes, may recover less, ratably, than
holders of Senior Debt.
At , 1999, the aggregate amount of Senior Debt was
approximately $ million.
HOLDINGS GUARANTEE
The obligations of the Issuers under the Notes and the Indenture will be
guaranteed (the "Holdings Guarantee") on a senior subordinated basis by
Holdings. The Holdings Guarantee will be subordinated in right of payment to all
Senior Debt of Holdings to the same extent that the Notes are subordinated to
the Senior Debt of the Issuers. Since Holdings is a holding company with no
significant operations, the Holdings Guarantee provides little, if any,
additional credit support for the Notes, and investors should not rely on the
Holdings Guarantee in evaluating an investment in the Notes.
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control,
each Holder will have the right to require that the Issuers purchase all or a
portion of such Holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the principal
amount thereof plus accrued interest to the date of purchase.
The Indenture provides that, prior to the mailing of the notice referred to
below, but in any event within 30 days following any Change of Control, the
Issuers covenant to (i) repay in full and terminate all commitments under
Indebtedness under the Credit Agreement and all other Senior Debt the terms of
which require repayment upon a Change of Control or offer to repay in full and
terminate all commitments under all Indebtedness under the Credit Agreement and
all other such Senior Debt and to repay the Indebtedness owed to each lender
which has accepted such offer or (ii) obtain the requisite consents under the
Credit Agreement and all other Senior Debt to permit the repurchase of the New
Notes as provided below. The Issuers shall first comply with the covenant in the
immediately preceding sentence before they shall be required to repurchase Notes
pursuant to the provisions described below. The Issuers' failure to comply with
the covenant described in the second preceding sentence shall constitute an
Event of Default described in clause (iii) and not in clause (ii) under "Events
of Default" below.
Within 30 days following the date upon which the Change of Control
occurred, the Issuers must send, by first class mail, a notice to each Holder,
with a copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state, among other things, the purchase date,
which must be no earlier than 30 days nor later than 60 days from the date such
notice is mailed, other than as may be required by law (the "Change of Control
Payment Date"). Holders electing to have a Note purchased pursuant to a Change
of Control Offer will be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the third business day prior to the Change of Control Payment Date.
69
<PAGE> 73
If a Change of Control Offer is made, there can be no assurance that the
Issuers will have available funds sufficient to pay the Change of Control
purchase price for all the New Notes that might be delivered by Holders seeking
to accept the Change of Control Offer. In the event the Issuers are required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Issuers
expect that they would seek third party financing to the extent they do not have
available funds to meet their purchase obligations. However, there can be no
assurance that the Issuers would be able to obtain such financing.
None of the Board of Directors of either of the Issuers or the Trustee may
waive the covenant relating to a Holder's right to redemption upon a Change of
Control. Restrictions in the Indenture described herein on the ability of the
Issuers and its Restricted Subsidiaries to incur additional Indebtedness, to
grant liens on their property, to make Restricted Payments and to make Asset
Sales may also make more difficult or discourage a takeover of Holdings or the
Issuers, whether favored or opposed by the management of Holdings or the
Issuers. Consummation of any such transaction in certain circumstances may
require redemption or repurchase of the New Notes, and there can be no assurance
that the Issuers or the acquiring party will have sufficient financial resources
to effect such redemption or repurchase. Such restrictions and the restrictions
on transactions with Affiliates may, in certain circumstances, make more
difficult or discourage any leveraged buyout of the Issuers or any of their
respective Subsidiaries by the management of the Issuers. While such
restrictions cover a wide variety of arrangements traditionally used to effect
highly leveraged transactions, the Indenture may not afford the Holders of Notes
protection in all circumstances from the adverse aspects of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction.
The Issuers will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Issuers shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached their obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS. The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
payment of (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness); provided, however, that if no Default or Event of Default shall
have occurred and be continuing at the time of or as a consequence of the
incurrence of any such Indebtedness, the Company may incur Indebtedness
(including, without limitation, Acquired Indebtedness) and Restricted
Subsidiaries of the Company may incur Acquired Indebtedness, in each case if on
the date of the incurrence of such Indebtedness, after giving effect to the
incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company
is greater than (a) 2.0 to 1.0 if the date of such incurrence is on or prior to
December 31, 1999, or (b) 2.25 to 1.0 if the date of such incurrence is after
December 31, 1999.
70
<PAGE> 74
LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and will not
cause or permit any of its Restricted Subsidiaries to, directly or indirectly,
(a) declare or pay any dividend or make any distribution (other than dividends
or distributions by the Company payable in Qualified Capital Stock of the
Company) on or in respect of shares of the Company's Capital Stock to holders of
such Capital Stock, (b) purchase, redeem or otherwise acquire or retire for
value any Capital Stock of the Company or any warrants, rights or options to
purchase or acquire shares of any class of such Capital Stock, (c) make any
principal payment on, purchase, defease, redeem, prepay, decrease or otherwise
acquire or retire for value, prior to any scheduled final maturity, scheduled
repayment or scheduled sinking fund payment, any Indebtedness of the Company
that is subordinate or junior in right of payment to the New Notes or (d) make
any Investment (other than Permitted Investments) (each of the foregoing actions
set forth in clauses (a), (b), (c) and (d) being referred to as a "Restricted
Payment"), if at the time of such Restricted Payment or immediately after giving
effect thereto, (i) a Default or an Event of Default shall have occurred and be
continuing; or (ii) the Company is not able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in compliance with
the "Limitation on Incurrence of Additional Indebtedness" covenant; or (iii) the
aggregate amount of Restricted Payments (including such proposed Restricted
Payment) made subsequent to the Issue Date (the amount expended for such
purposes, if other than in cash, being the fair market value of such property as
determined in good faith by the Board of Directors of the Company) shall exceed
the sum of: (w) 50% of the cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss) of the Company
earned subsequent to the Issue Date and on or prior to the date the Restricted
Payment occurs (the "Reference Date") (treating such period as a single
accounting period); plus (x) 100% of the aggregate net cash proceeds received by
the Company from any Person (other than a Subsidiary of the Company) from the
issuance and sale subsequent to the Issue Date and on or prior to the Reference
Date of Qualified Capital Stock of the Company; plus (y) without duplication of
any amounts included in clause (iii)(x) above, 100% of the aggregate net cash
proceeds of any equity contribution received by the Company from a holder of the
Company's Capital Stock (excluding, in the case of clauses (iii)(x) and (y), any
net cash proceeds from a Public Equity Offering to the extent used to redeem the
New Notes in compliance with the provisions set forth under
"Redemption -- Optional Redemption Upon Public Equity Offerings"); plus (z)
without duplication, the sum of (1) the aggregate amount returned in cash on or
with respect to Investments (other than Permitted Investments) made subsequent
to the Issue Date whether through interest payments, principal payments,
dividends or other distributions or payments; (2) the net cash proceeds received
by the Company or any of its Restricted Subsidiaries from the disposition of all
or any portion of such Investments (other than to a Subsidiary of the Company);
and (3) upon redesignation of an Unrestricted Subsidiary as a Restricted
Subsidiary, the fair market value of such Subsidiary; provided, however, that
the sum of clauses (1), (2) and (3) above shall not exceed the aggregate amount
of all such Investments made subsequent to the Issue Date.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit: (1) the payment of any dividend within 60
days after the date of declaration of such dividend if the dividend would have
been permitted on the date of declaration; (2) the acquisition of any shares of
Capital Stock of the Company, either (i) solely in exchange for shares of
Qualified Capital Stock of the Company or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Subsidiary
of the Company) of shares of Qualified Capital Stock of the
71
<PAGE> 75
Company; (3) the acquisition of any Indebtedness of the Company that is
subordinate or junior in right of payment to the New Notes either (i) solely in
exchange for shares of Qualified Capital Stock of the Company or (ii) through
the application of net proceeds of a substantially concurrent sale for cash
(other than to a Subsidiary of the Company) of (A) shares of Qualified Capital
Stock of the Company or (B) Refinancing Indebtedness; (4) if no Default or Event
of Default shall have occurred and be continuing, repurchases by the Company of
Common Stock of the Company or Holdings from employees of the Company or any of
its Subsidiaries or their authorized representatives upon the death, disability
or termination of employment of such employees; provided that the aggregate
amount of all such repurchases shall not exceed $3.0 million in any fiscal year
and $10.0 million in aggregate; provided, further, that at the time of any such
repurchase, the Consolidated Fixed Charge Coverage Ratio of the Company is
greater than 2.0 to 1.0; (5) the payment of any dividend or distribution to the
extent necessary to permit direct or indirect beneficial owners of shares of
Capital Stock of the Company, including Holdings, to pay federal, state or local
income tax liabilities arising from income of the Company and attributable to
them solely as a result of the Company (and any intermediate entity through
which the Holder owns such shares) being a limited liability company,
partnership or similar entity for federal income tax purposes ("Permitted Tax
Distributions"); and (6) any dividend or distribution to Holdings in respect of
overhead expenses, legal, accounting, SEC reporting and other professional fees
and expenses of Holdings directly attributable to the operations of the Company
and its Restricted Subsidiaries. In determining the aggregate amount of
Restricted Payments made subsequent to the Issue Date in accordance with clause
(iii) of the immediately preceding paragraph, amounts expended pursuant to
clauses (1), (2) (ii) and (4) shall be included in such calculation.
LIMITATION ON ASSET SALES. The Company will not, and will not permit any
of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (as determined in good faith
by the Company's Board of Directors) and (ii) at least 75% of the consideration
received by the Company or the Restricted Subsidiary, as the case may be, from
such Asset Sale shall be in the form of cash or Cash Equivalents; provided that
the amount of (x) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet) of the Company or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by their
terms subordinated to the New Notes or any guarantee thereof) that are assumed
by the transferee of any such assets and (y) any securities, notes or other
obligations received by the Company or any such Restricted Subsidiary from such
transferee that are converted within 180 days by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received) shall be deemed to be
cash for purposes of this provision. Upon the consummation of an Asset Sale, the
Company shall apply, or cause such Restricted Subsidiary to apply, the Net Cash
Proceeds relating to such Asset Sale within 270 days of receipt thereof either
(A) to prepay any Senior Debt and, in the case of any Senior Debt under any
revolving credit facility, effect a permanent reduction in the availability
under such revolving credit facility; (B) to make an investment in properties
and assets that replace the properties and assets that were the subject of such
Asset Sale or in properties and assets that will be used in the business of the
Company and its Restricted Subsidiaries as existing on the Issue Date or in
businesses reasonably related thereto ("Replacement Assets"); or (C) a
combination of prepayment and investment permitted by the foregoing clauses (A)
and (B). On the 271st day after an Asset Sale or such earlier date, if any, as
the Board of Directors of the Company or of such Restricted Subsidiary
determines not to
72
<PAGE> 76
apply the Net Cash Proceeds relating to such Asset Sale as set forth in the
preceding sentence (each, a "Net Proceeds Offer Trigger Date"), such aggregate
amount of Net Cash Proceeds that is an integral multiple of $1,000 which have
not been applied on or before such Net Proceeds Offer Trigger Date as permitted
in the preceding sentence (each a "Net Proceeds Offer Amount") shall be applied
by the Company or such Restricted Subsidiary to make an offer to purchase (the
"Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less
than 30 nor more than 60 days following the applicable Net Proceeds Offer
Trigger Date, from all Holders on a pro rata basis, that amount of Notes equal
to the Net Proceeds Offer Amount at a price equal to 100% of the principal
amount of the New Notes to be purchased, plus accrued and unpaid interest
thereon, if any, to the date of purchase; provided, however, that if at any time
any non-cash consideration received by the Company or any Restricted Subsidiary
of the Company, as the case may be, in connection with any Asset Sale is
converted into or sold or otherwise disposed of for cash (other than interest
received with respect to any such non-cash consideration), then such conversion
or disposition shall be deemed to constitute an Asset Sale hereunder and the Net
Cash Proceeds thereof shall be applied in accordance with this covenant. The
Company may defer the Net Proceeds Offer until there is an aggregate unutilized
Net Proceeds Offer Amount equal to or in excess of $10.0 million resulting from
one or more Asset Sales (at which time, the entire unutilized Net Proceeds Offer
Amount, and not just the amount in excess of $10.0 million, shall be applied as
required pursuant to this paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "-- Merger, Consolidation
and Sale of Assets," the successor corporation shall be deemed to have sold the
properties and assets of the Company and its Restricted Subsidiaries not so
transferred for purposes of this covenant, and shall comply with the provisions
of this covenant with respect to deemed net cash proceeds from such deemed sale.
In addition, the fair market value of such properties and assets of the Company
or its Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash
Proceeds for purposes of this covenant.
Notwithstanding the two immediately preceding paragraphs, the Company and
its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent (i) at least 75% of the
consideration for such Asset Sale constitutes Replacement Assets and (ii) such
Asset Sale is for fair market value; provided that any consideration not
constituting Replacement Assets received by the Company or any of its Restricted
Subsidiaries in connection with any Asset Sale permitted to be consummated under
this paragraph shall constitute Net Cash Proceeds subject to the provisions of
the two preceding paragraphs.
Each Net Proceeds Offer will be mailed to the record Holders as shown on
the register of Holders within 25 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set forth
in the Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may
elect to tender their Notes in whole or in part in integral multiples of $1,000
in exchange for cash. To the extent Holders properly tender Notes in an amount
exceeding the Net Proceeds Offer Amount, Notes of tendering Holders will be
purchased on a pro rata basis (based on amounts tendered). A Net Proceeds Offer
shall remain open for a period of 20 business days or such longer period as may
be required by law.
73
<PAGE> 77
The Issuers will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of the Indenture, the Issuers shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the "Asset Sale" provisions of the Indenture by virtue
thereof.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or make
any other distributions on or in respect of its Capital Stock; (b) make loans or
advances or to pay any Indebtedness or other obligation owed to the Company or
any other Restricted Subsidiary of the Company; or (c) transfer any of its
property or assets to the Company or any other Restricted Subsidiary of the
Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) the Indenture; (3) the Credit Agreement; (4)
customary non-assignment provisions of any contract or any lease governing a
leasehold interest of any Restricted Subsidiary of the Company; (5) any
instrument governing Acquired Indebtedness, which encumbrance or restriction is
not applicable to any Person, or the properties or assets of any Person, other
than the Person or the properties or assets of the Person so acquired; (6)
agreements existing on the Issue Date to the extent and in the manner such
agreements are in effect on the Issue Date; (7) an agreement governing
Indebtedness incurred to Refinance the Indebtedness issued, assumed or incurred
pursuant to an agreement referred to in clause (2), (3), (5) or (6) above;
provided, however, that the provisions relating to such encumbrance or
restriction contained in any such Indebtedness are no less favorable to the
Company in any material respect as determined by the Board of Directors of the
Company in their reasonable and good faith judgment than the provisions relating
to such encumbrance or restriction contained in agreements referred to in such
clause (2), (3), (5) or (6); or (8) any agreement or instrument governing
Indebtedness (whether or not outstanding) of Foreign Restricted Subsidiaries
incurred in reliance on clause (xiii) of the definition of Permitted
Indebtedness.
LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES. The Company will
not permit any of its Restricted Subsidiaries to issue any Preferred Stock
(other than to the Company or to a Wholly Owned Restricted Subsidiary of the
Company) or permit any Person (other than the Company or a Wholly Owned
Restricted Subsidiary of the Company) to own any Preferred Stock of any
Restricted Subsidiary of the Company.
LIMITATION ON LIENS. The Company will not, and will not cause or permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or permit or suffer to exist any Liens of any kind against or upon any
property or assets of the Company or any of its Restricted Subsidiaries whether
owned on the Issue Date or acquired after the Issue Date, or any proceeds
therefrom, or assign or otherwise convey any right to receive income or profits
therefrom unless (i) in the case of Liens securing Indebtedness that is
expressly subordinate or junior in right of payment to the New Notes, the New
Notes are secured by a Lien on such property, assets or proceeds that is senior
in priority to such Liens and (ii) in all other cases, the New Notes are equally
and ratably secured, except for (A) Liens existing as of the Issue Date to the
extent and in the manner such Liens are in effect on the Issue Date; (B) Liens
securing Senior Debt; (C) Liens securing the New Notes; (D) Liens of the Company
or a Wholly Owned Restricted Subsidiary of the
74
<PAGE> 78
Company on assets of any Restricted Subsidiary of the Company; (E) Liens
securing Refinancing Indebtedness incurred to Refinance any Indebtedness
incurred in accordance with the provisions of the Indenture and secured by a
Lien permitted thereunder; provided, however, that such Liens (x) are no less
favorable to the Holders and are not more favorable to the lienholders with
respect to such Liens than the Liens in respect of the Indebtedness being
Refinanced and (y) do not extend to or cover any property or assets of the
Company or any of its Restricted Subsidiaries not securing the Indebtedness so
Refinanced; and (F) Permitted Liens.
PROHIBITION ON INCURRENCE OF SENIOR SUBORDINATED DEBT. The Company will
not incur or suffer to exist Indebtedness that is both senior in right of
payment to the New Notes and subordinate in right of payment to any other
Indebtedness of the Company.
MERGER, CONSOLIDATION AND SALE OF ASSETS. The Company will not, in a
single transaction or series of related transactions, consolidate or merge with
or into any Person, or sell, assign, transfer, lease, convey or otherwise
dispose of (or cause or permit any Restricted Subsidiary of the Company to sell,
assign, transfer, lease, convey or otherwise dispose of) all or substantially
all of the Company's assets (determined on a consolidated basis for the Company
and the Company's Restricted Subsidiaries) whether as an entirety or
substantially as an entirety to any Person unless: (i) either (1) the Company
shall be the surviving or continuing entity or (2) the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or the
Person which acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Company and of the Company's
Restricted Subsidiaries substantially as an entirety (the "Surviving Entity")
(x) shall be a corporation or a partnership or a limited liability company, in
each case organized and validly existing under the laws of the United States or
any State thereof or the District of Columbia and (y) shall expressly assume, by
supplemental Indenture (in form and substance satisfactory to the Trustee),
executed and delivered to the Trustee, the due and punctual payment of the
principal of, and premium, if any, and interest on all of the New Notes and the
performance of every covenant of the New Notes, the Indenture and the
Registration Rights Agreement on the part of the Company to be performed or
observed, provided that at any time the Company or its successor is a limited
liability company, there shall be a co-issuer of the New Notes that is a
corporation; (ii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i)(2)(y) above (including giving effect to
any Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), the Company or
such Surviving Entity, as the case may be, shall be able to incur at least $1.00
of additional Indebtedness (other than Permitted Indebtedness) pursuant to the
"-- Limitation on Incurrence of Additional Indebtedness" covenant; (iii)
immediately before and immediately after giving effect to such transaction and
the assumption contemplated by clause (i)(2)(y) above (including, without
limitation, giving effect to any Indebtedness and Acquired Indebtedness incurred
or anticipated to be incurred and any Lien granted in connection with or in
respect of the transaction), no Default or Event of Default shall have occurred
or be continuing; and (iv) the Company or the Surviving Entity shall have
delivered to the Trustee an officers' certificate and an opinion of counsel,
each stating that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition and, if a supplemental Indenture is required in
connection with such transaction, such supplemental Indenture comply with the
applicable provisions of the Indenture and that all conditions precedent in the
Indenture relating to such transaction have been satisfied. Notwithstanding the
foregoing clauses (ii) and (iii), (a) any Restricted Subsidiary may consolidate
with, merge
75
<PAGE> 79
into or transfer all or part of its properties and assets to the Company or to
another Restricted Subsidiary and (b) the Company may merge with or transfer all
of its properties and assets to an Affiliate incorporated or formed solely for
the purpose of either reforming the Company in another State of the United
States or changing the legal structure of the Company to a corporation so long
as the amount of Indebtedness of the Company and its Restricted Subsidiaries is
not increased thereby (it being understood that after the transfer of such
property and assets for the purpose of changing its legal structure to a
corporation, the Company may dissolve).
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
The Indenture provides that upon any consolidation, combination or merger
or any transfer of all or substantially all of the assets of the Company in
accordance with the foregoing, in which the Company is not the continuing
corporation, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, lease or transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture and the New Notes with the same effect as if
such surviving entity had been named as such.
LIMITATIONS ON TRANSACTIONS WITH AFFILIATES. (a) The Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of related transactions
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with, or for the benefit of, any of
its Affiliates (each an "Affiliate Transaction"), other than (x) Affiliate
Transactions permitted under paragraph (b) below and (y) Affiliate Transactions
on terms that are no less favorable than those that might reasonably have been
obtained in a comparable transaction at such time on an arm's-length basis from
a Person that is not an Affiliate of the Company or such Restricted Subsidiary.
All Affiliate Transactions (and each series of related Affiliate Transactions
which are similar or part of a common plan) involving aggregate payments or
other property with a fair market value in excess of $1.0 million shall be
approved by the Board of Directors of the Company or such Restricted Subsidiary,
as the case may be, such approval to be evidenced by a Board Resolution stating
that such Board of Directors has determined that such transaction complies with
the foregoing provisions. If the Company or any Restricted Subsidiary of the
Company enters into an Affiliate Transaction (or a series of related Affiliate
Transactions related to a common plan) that involves an aggregate fair market
value of more than $5.0 million, the Company or such Restricted Subsidiary, as
the case may be, shall, prior to the consummation thereof, obtain a favorable
opinion as to the fairness of such transaction or series of related transactions
to the Company or the relevant Restricted Subsidiary, as the case may be, from a
financial point of view, from an Independent Financial Advisor and file the same
with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees or consultants of the Company or any Restricted
Subsidiary of the Company as determined in good faith by the Company's Board of
Directors or senior management; (ii) transactions exclusively between or among
the Company and any of its Wholly Owned Restricted
76
<PAGE> 80
Subsidiaries or exclusively between or among such Wholly Owned Restricted
Subsidiaries, provided such transactions are not otherwise prohibited by the
Indenture; (iii) any agreement as in effect as of the Issue Date or any
amendment thereto or any transaction contemplated thereby (including pursuant to
any amendment thereto) in any replacement agreement thereto so long as any such
amendment or replacement agreement is not more disadvantageous to the Holders in
any material respect than the original agreement as in effect on the Issue Date;
(iv) Restricted Payments permitted by the Indenture; and (v) transactions with
customers, clients, suppliers or purchasers or sellers of goods or services, in
each case in the ordinary course of business and otherwise in compliance with
the Indenture and on terms fair to the Company and its Restricted Subsidiaries
in the reasonable determination of the Board of Directors of the Company, or at
least as favorable as might reasonably have been obtained at such time from an
unaffiliated party.
LIMITATION OF GUARANTEES BY RESTRICTED SUBSIDIARIES. The Company will not
permit any of its Restricted Subsidiaries, directly or indirectly, by way of the
pledge of any intercompany note or otherwise, to assume, guarantee or in any
other manner become liable with respect to any Indebtedness of the Company or
any other Restricted Subsidiary of the Company (other than (A) Indebtedness and
other obligations under the Credit Agreement; (B) Permitted Indebtedness of a
Restricted Subsidiary of the Company; (C) Indebtedness under Currency Agreements
in reliance on clause (v) of the definition of Permitted Indebtedness; or (D)
Interest Swap Obligations incurred in reliance on clause (iv) of the definition
of Permitted Indebtedness), unless, in any such case (a) such Restricted
Subsidiary executes and delivers a supplemental indenture to the Indenture,
providing a guarantee of payment of the New Notes by such Restricted Subsidiary
(the "Guarantee") and (b) (x) if any such assumption, guarantee or other
liability of such Restricted Subsidiary is provided in respect of Senior Debt,
the guarantee or other instrument provided by such Restricted Subsidiary in
respect of such Senior Debt may be superior to the Guarantee pursuant to
subordination provisions no less favorable to the Holders of the New Notes than
those contained in the Indenture and (y) if such assumption, guarantee or other
liability of such Restricted Subsidiary is provided in respect of Indebtedness
that is expressly subordinated to the New Notes, the guarantee or other
instrument provided by such Restricted Subsidiary in respect of such
subordinated Indebtedness shall be subordinated to the Guarantee pursuant to
subordination provisions no less favorable to the Holders of the New Notes than
those contained in the Indenture.
Notwithstanding the foregoing, any such Guarantee by a Restricted
Subsidiary of the New Notes shall provide by its terms that it shall be
automatically and unconditionally released and discharged, without any further
action required on the part of the Trustee or any Holder, upon: (i) the
unconditional release of such Restricted Subsidiary from its liability in
respect of the Indebtedness in connection with which such Guarantee was executed
and delivered pursuant to the preceding paragraph; or (ii) any sale or other
disposition (by merger or otherwise) to any Person which is not a Restricted
Subsidiary of the Company of all of the Company's Capital Stock in, or all or
substantially all of the assets of, such Restricted Subsidiary; provided that
(a) such sale or disposition of such Capital Stock or assets is otherwise in
compliance with the terms of the Indenture and (b) such assumption, guarantee or
other liability of such Restricted Subsidiary has been released by the holders
of the other Indebtedness so guaranteed.
CONDUCT OF BUSINESS OF THE COMPANY AND THE CO-ISSUER. The Company and its
Restricted Subsidiaries will not engage in any businesses which are not the
same, similar or reasonably related to the businesses in which the Company and
its Restricted Subsidiaries are engaged on the Issue Date. Co-Issuer will not
own any operating assets or
77
<PAGE> 81
conduct any business other than to own equity interests in the Company and serve
as an issuer and an obligor on the New Notes.
REPORTS TO HOLDERS. The Indenture provides that the Issuers will deliver
to the Trustee within 15 days after the filing of the same with the Commission,
copies of the quarterly and annual reports and of the information, documents and
other reports, if any, which the Issuers are required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act. The Indenture
further provides that, notwithstanding that the Issuers may not be subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Issuers will file with the Commission, to the extent permitted, and provide the
Trustee and Holders with such annual reports and such information, documents and
other reports specified in Sections 13 and 15(d) of the Exchange Act. The
Issuers will also comply with the other provisions of TIA sec. 314(a).
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) the failure to pay interest on any Notes when the same becomes due
and payable and the default continues for a period of 30 days (whether or
not such payment shall be prohibited by the subordination provisions of the
Indenture);
(ii) the failure to pay the principal on any Notes, when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer
which has actually been made) (whether or not such payment shall be
prohibited by the subordination provisions of the Indenture);
(iii) a default in the observance or performance of any other covenant
or agreement contained in the Indenture which default continues for a
period of 60 days after the Company receives written notice specifying the
default (and demanding that such default be remedied) from the Trustee or
the Holders of at least 25% of the outstanding principal amount of the New
Notes (except in the case of a default with respect to the "Merger,
Consolidation and Sale of Assets" covenant, which will constitute an Event
of Default with such notice requirement but without such passage of time
requirement);
(iv) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Restricted Subsidiary of the
Company, or the acceleration of the final stated maturity of any such
Indebtedness (which acceleration is not rescinded, annulled or otherwise
cured within 20 days of receipt by the Company or such Restricted
Subsidiary of notice of any such acceleration) if the aggregate principal
amount of such Indebtedness, together with the principal amount of any
other such Indebtedness in default for failure to pay principal at final
maturity or which has been accelerated, aggregates $10.0 million or more at
any time;
(v) one or more judgments in an aggregate amount in excess of $10.0
million shall have been rendered against the Company or any of its
Restricted Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and non-appealable; or
(vi) certain events of bankruptcy affecting the Company or any of its
Significant Subsidiaries.
78
<PAGE> 82
If an Event of Default (other than an Event of Default specified in clause
(vi) above with respect to the Company) shall occur and be continuing, the
Trustee or the Holders of at least 25% in principal amount of outstanding Notes
may declare the principal of and accrued interest on all the New Notes to be due
and payable by notice in writing to the Company and the Trustee specifying the
respective Event of Default and that it is a "notice of acceleration" (the
"Acceleration Notice"), and the same (i) shall become immediately due and
payable or (ii) if there are any amounts outstanding under the Credit Agreement,
shall become immediately due and payable upon the first to occur of an
acceleration under the Credit Agreement or 5 business days after receipt by the
Company and the Representative under the Credit Agreement of such Acceleration
Notice but only if such Event of Default is then continuing. If an Event of
Default specified in clause (vi) above with respect to the Company occurs and is
continuing, then all unpaid principal of, and premium, if any, and accrued and
unpaid interest on all of the outstanding Notes shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder.
The Indenture provides that, at any time after a declaration of
acceleration with respect to the New Notes as described in the preceding
paragraph, the Holders of a majority in principal amount of the New Notes may
rescind and cancel such declaration and its consequences (i) if the rescission
would not conflict with any judgment or decree; (ii) if all existing Events of
Default have been cured or waived except nonpayment of principal or interest
that has become due solely because of the acceleration; (iii) to the extent the
payment of such interest is lawful, interest on overdue installments of interest
and overdue principal, which has become due otherwise than by such declaration
of acceleration, has been paid but only if such Event of Default is then
continuing; and (iv) if the Company has paid the Trustee its reasonable
compensation and reimbursed the Trustee for its expenses, disbursements and
advances. No such rescission shall affect any subsequent Default or impair any
right consequent thereto.
The Holders of a majority in principal amount of the New Notes may waive
any existing Default or Event of Default under the Indenture, and its
consequences, except a default in the payment of the principal of or interest on
any Notes.
Holders of the New Notes may not enforce the Indenture or the New Notes
except as provided in the Indenture and under the TIA. Subject to the provisions
of the Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the then outstanding Notes have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee.
Under the Indenture, the Company is required to provide to the Trustee
annually, an officers' certificate as to such officers' knowledge of the
Issuers' compliance with all conditions and covenants under the Indenture and
promptly, upon any such officer obtaining knowledge of any Default or Event of
Default that has occurred, an officers' certificate describing such Default or
Event of Default and the status thereof.
79
<PAGE> 83
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, STOCKHOLDERS AND
MEMBERS
No director, officer, employee, stockholder or member of the Issuers, as
such, shall have any liability for any obligations of the Issuers under the New
Notes, the Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder of Notes, by accepting a Note,
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the New Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Issuers may, at their option and at any time, elect to have their
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance"). Such Legal Defeasance means that the Issuers shall be deemed to
have paid and discharged the entire indebtedness represented by the outstanding
Notes, except for (i) the rights of Holders to receive payments in respect of
the principal of, premium, if any, and interest on the New Notes when such
payments are due; (ii) the Issuers' obligations with respect to the New Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payments;
(iii) the rights, powers, trust, duties and immunities of the Trustee and the
Issuers' obligations in connection therewith; and (iv) the Legal Defeasance
provisions of the Indenture. In addition, the Issuers may, at their option and
at any time, elect to have the obligations of the Issuers released with respect
to certain covenants described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the New Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, reorganization and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the New
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Issuers must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders cash in U.S. dollars, non-callable U.S. government obligations,
or a combination thereof, in such amounts as will be sufficient, in the opinion
of a nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the New Notes on the stated date
for payment thereof or on the applicable redemption date, as the case may be;
(ii) in the case of Legal Defeasance, the Issuers shall have delivered to the
Trustee an opinion of counsel in the United States reasonably acceptable to the
Trustee confirming that (A) the Issuers have received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred; (iii) in
the case of Covenant Defeasance, the Issuers shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall
80
<PAGE> 84
have occurred and be continuing on the date of such deposit or insofar as Events
of Default from bankruptcy or insolvency events are concerned, at any time in
the period ending on the 91st day after the date of deposit; (v) such Legal
Defeasance or Covenant Defeasance shall not result in a breach or violation of,
or constitute a default under the Indenture or any other material agreement or
instrument to which the Issuers or any of their Subsidiaries is a party or by
which the Issuers or any of their Subsidiaries is bound; (vi) each of the
Issuers shall have delivered to the Trustee an officers' certificate stating
that the deposit was not made by the Issuers with the intent of preferring the
Holders over any other creditors of the Issuers or with the intent of defeating,
hindering, delaying or defrauding any other creditors of the Issuers or others;
(vii) each of the Issuers shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with; (viii) each of the Issuers shall have
delivered to the Trustee an opinion of counsel to the effect that (A) the trust
funds will not be subject to any rights of holders of Senior Debt, including,
without limitation, those arising under the Indenture and (B) after the 91st day
following the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; and (ix) certain other customary conditions
precedent are satisfied. Notwithstanding the foregoing, the opinion of counsel
required by clause (ii) above with respect to a Legal Defeasance need not be
delivered if all Notes not theretofore delivered to the Trustee for cancellation
(x) have become due and payable or (y) will become due and payable on the
maturity date within one year under arrangements satisfactory to the Trustee for
the giving of notice of redemption by the Trustee in the name, and at the
expense, of the Company.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
New Notes, as expressly provided for in the Indenture) as to all outstanding
Notes when (i) either (a) all the New Notes theretofore authenticated and
delivered (except lost, stolen or destroyed Notes which have been replaced or
paid and Notes for whose payment money has theretofore been deposited in trust
or segregated and held in trust by the Issuers and thereafter repaid to the
Issuers or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Issuers have irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the New Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the New Notes to the date of deposit together
with irrevocable instructions from the Issuers directing the Trustee to apply
such funds to the payment thereof at maturity or redemption, as the case may be;
(ii) the Issuers have paid all other sums payable under the Indenture by the
Issuers; and (iii) each of the Issuers have delivered to the Trustee an
officers' certificate and an opinion of counsel stating that all conditions
precedent under the Indenture relating to the satisfaction and discharge of the
Indenture have been complied with.
MODIFICATION OF THE INDENTURE
From time to time, the Issuers and the Trustee, without the consent of the
Holders, may amend the Indenture for certain specified purposes, including
curing ambiguities, defects or inconsistencies, so long as such change does not,
in the opinion of the Trustee,
81
<PAGE> 85
adversely affect the rights of any of the Holders in any material respect. In
formulating its opinion on such matters, the Trustee will be entitled to rely on
such evidence as it deems appropriate, including, without limitation, solely on
an opinion of counsel. Other modifications and amendments of the Indenture may
be made with the consent of the Holders of a majority in principal amount of the
then outstanding Notes issued under the Indenture, except that, without the
consent of each Holder affected thereby, no amendment may: (i) reduce the amount
of Notes whose Holders must consent to an amendment; (ii) reduce the rate of or
change or have the effect of changing the time for payment of interest,
including defaulted interest, on any Notes; (iii) reduce the principal of or
change or have the effect of changing the fixed maturity of any Notes, or change
the date on which any Notes may be subject to redemption or reduce the
redemption price therefor; (iv) make any Notes payable in money other than that
stated in the New Notes; (v) make any change in provisions of the Indenture
protecting the right of each Holder to receive payment of principal of and
interest on such Note on or after the due date thereof or to bring suit to
enforce such payment, or permitting Holders of a majority in principal amount of
Notes to waive Defaults or Events of Default; (vi) after the Company's
obligation to purchase Notes arises thereunder, amend, change or modify in any
material respect the obligation of the Company to make and consummate a Change
of Control Offer in the event of a Change of Control or make and consummate a
Net Proceeds Offer with respect to any Asset Sale that has been consummated or,
after such Change of Control has occurred or such Asset Sale has been
consummated, modify any of the provisions or definitions with respect thereto;
or (vii) modify or change any provision of the Indenture or the related
definitions affecting the subordination or ranking of the New Notes in a manner
which adversely affects the Holders.
GOVERNING LAW
The Indenture provides that it and the New Notes will 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 law of another jurisdiction would be required thereby.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it by the Indenture, and use the same
degree of care and skill in its exercise as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
Trustee will be permitted to engage in other transactions; provided that if the
Trustee acquires any conflicting interest as described in the TIA, it must
eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
82
<PAGE> 86
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
the Company or at the time it merges or consolidates with the Company or any of
its Subsidiaries or assumed in connection with the acquisition of assets from
such Person and in each case not incurred by such Person in connection with, or
in anticipation or contemplation of, such Person becoming a Restricted
Subsidiary of the Company or such acquisition, merger or consolidation.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative of the foregoing.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person (other than
a Restricted Subsidiary of the Company) which constitute all or substantially
all of the assets of such Person or comprises any division or line of business
of such Person or any other properties or assets of such Person other than in
the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than the Company or a Wholly Owned Restricted Subsidiary of the
Company of (a) any Capital Stock of any Restricted Subsidiary of the Company or
(b) any other property or assets of the Company or any Restricted Subsidiary of
the Company other than in the ordinary course of business; provided, however,
that Asset Sales shall not include (i) a transaction or series of related
transactions for which the Company or its Restricted Subsidiaries receive
aggregate consideration of less than $1,000,000 or (ii) the sale, lease,
conveyance, disposition or other transfer of all or substantially all of the
assets of the Company as permitted under "Merger, Consolidation and Sale of
Assets."
"Beacon" means The Beacon Group III -- Focus Value Fund, L.P., a limited
partnership organized under the laws of the State of Delaware.
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and (ii) with respect to any
Person that is not a corporation, any and all
83
<PAGE> 87
partnership, membership or other equity interests conferring to the holder
thereof the right to receive a share of the profits, losses or distributions of
assets of such Person.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit, time deposits, eurodollar time deposits or bankers'
acceptances maturing within one year from the date of acquisition thereof and
overnight bank deposits issued by any bank organized under the laws of the
United States of America or any state thereof or the District of Columbia or any
U.S. branch of a foreign bank having at the date of acquisition thereof combined
capital and surplus of not less than $250,000,000; (v) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clauses (i) and (iv) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company or Holdings to any Person or group of related Persons for purposes of
Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates
thereof (whether or not otherwise in compliance with the provisions of the
Indenture) other than to the Permitted Holders; (ii) the approval by the holders
of Capital Stock of the Company or Holdings of any plan or proposal for the
liquidation or dissolution of the Company or Holdings, as the case may be,
(whether or not otherwise in compliance with the provisions of the Indenture);
(iii) any Person or Group (other than the Permitted Holders) shall become the
owner, directly or indirectly, beneficially or of record, of shares representing
more than 50% of the aggregate ordinary voting power represented by the issued
and outstanding Capital Stock of the Company or Holdings; or (iv) the
replacement of a majority of the Board of Directors of the Company or Holdings
over a two-year period from the directors who constituted the Board of Directors
of the Company or Holdings, as the case may be, at the beginning of such period,
and such replacement shall not have been approved by a vote of at least a
majority of the Board of Directors of the Company or Holdings, as the case may
be, then still in office who either were members of such Board of Directors at
the beginning of such period or whose election as a member of such Board of
Directors was previously so approved.
84
<PAGE> 88
"Co-Issuer" means GPPW, Inc., a corporation incorporated under the laws of
the State of Wisconsin.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes of
such Person and its Restricted Subsidiaries, or Permitted Tax Distributions made
by such Person, paid or accrued in accordance with GAAP for such period (other
than income taxes attributable to extraordinary, unusual or nonrecurring gains
or losses or taxes attributable to sales or dispositions outside the ordinary
course of business); (B) Consolidated Interest Expense and; (C) Consolidated
Non-cash Charges less any non-cash items increasing Consolidated Net Income for
such period, all as determined on a consolidated basis for such Person and its
Restricted Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence or
repayment of any Indebtedness of such Person or any of its Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period and (ii) any
asset sales or other dispositions or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including any Consolidated EBITDA (including any pro forma
expense and cost reductions calculated on a basis consistent with Regulation S-X
of the Exchange Act) attributable to the assets which are the subject of the
Asset Acquisition or asset sale or other disposition during the Four Quarter
Period) occurring during the Four Quarter Period or at any time subsequent to
the last day of the Four Quarter Period and on or prior to the Transaction Date,
as if such asset sale or other disposition or Asset Acquisition (including the
incurrence, assumption or liability for any such Acquired Indebtedness) occurred
on the first day of the Four Quarter Period. If such Person or any of its
Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, the preceding sentence shall give effect to the incurrence of such
guaranteed Indebtedness as if such Person or any Restricted Subsidiary of such
Person had directly incurred or otherwise
85
<PAGE> 89
assumed such guaranteed Indebtedness. Furthermore, in calculating "Consolidated
Fixed Charges" for purposes of determining the denominator (but not the
numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1) interest on
outstanding Indebtedness determined on a fluctuating basis as of the Transaction
Date and which will continue to be so determined thereafter shall be deemed to
have accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date and (2) notwithstanding clause
(1) above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Swap
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense, plus
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person (other than dividends paid in Qualified Capital
Stock) paid, accrued or scheduled to be paid or accrued during such period times
(y) a fraction, the numerator of which is one and the denominator of which is
one minus the then current effective consolidated federal, state and local tax
rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (a) any amortization of debt discount and amortization or write-off
deferred financing costs; (b) the net costs under Interest Swap Obligations; (c)
all capitalized interest; and (d) the interest portion of any deferred payment
obligation; and (ii) the interest component of Capitalized Lease Obligations
paid, accrued and/or scheduled to be paid or accrued by such Person and its
Restricted Subsidiaries during such period as determined on a consolidated basis
in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) the amount of
Permitted Tax Distributions with respect to such period; (b) after-tax gains
from Asset Sales or abandonments or reserves relating thereto; (c) after-tax
items classified as extraordinary or nonrecurring gains; (d) the net income of
any Person acquired in a "pooling of interests" transaction accrued prior to the
date it becomes a Restricted Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Restricted Subsidiary of the
referent Person; (e) the net income (but not loss) of any Restricted Subsidiary
of the referent Person to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is restricted
by a contract, operation of law or otherwise; (f) the net income of any Person,
other than a Restricted Subsidiary of the referent Person, except to the extent
of cash dividends or distributions paid to the referent Person or to a Wholly
Owned Restricted Subsidiary of the referent Person by such Person; (g) any
restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Issue Date; (h) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued); and (i) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets, any
earnings of the successor corporation prior to such consolidation, merger or
transfer of assets.
86
<PAGE> 90
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Capital
Stock of such Person.
"Consolidated Non-cash Charges" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Restricted Subsidiaries reducing Consolidated Net Income of
such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary item or loss or any such charge which requires an
accrual of or a reserve for cash charges for any future period).
"Credit Agreement" means the Credit Agreement dated as of July 9, 1998,
among the Company, Holdings, the lenders party thereto in their capacities as
lenders thereunder and Bankers Trust Company, as administrative agent, together
with the related documents thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder (provided that such
increase in borrowings is permitted by the "Limitation on Incurrence of
Additional Indebtedness" covenant above) or adding Restricted Subsidiaries of
the Company as additional borrowers or guarantors thereunder) all or any portion
of the Indebtedness under such agreement or any successor or replacement
agreement and whether by the same or any other agent, lender or group of
lenders.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"Designated Senior Debt" means (i) Indebtedness under or in respect of the
Credit Agreement and (ii) any other Indebtedness constituting Senior Debt which,
at the time of determination, has an aggregate principal amount of at least
$25.0 million and is specifically designated in the instrument evidencing such
Senior Debt as "Designated Senior Debt" by the Company.
"Disqualified Capital Stock" means that portion of 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, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof on or prior to the final
maturity date of the Senior Subordinated Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Company acting reasonably
and in good faith and shall be
87
<PAGE> 91
evidenced by a Board Resolution of the Board of Directors of the Company
delivered to the Trustee.
"Foreign Restricted Subsidiary" means any Restricted Subsidiary of the
Company that 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 set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Guarantor" means each of the Company's Restricted Subsidiaries that in the
future executes a supplemental Indenture in which such Restricted Subsidiary
agrees to be bound by the terms of the Indenture as a Guarantor; provided that
any Person constituting a Guarantor as described above shall cease to constitute
a Guarantor when its respective Guarantee is released in accordance with the
terms of the Indenture.
"Holdings" means Generac Portable Products, Inc., a corporation
incorporated under the laws of the State of Delaware.
"Indebtedness" means with respect to any Person, without duplication, (i)
all Obligations of such Person for borrowed money; (ii) all Obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments; (iii)
all Capitalized Lease Obligations of such Person; (iv) all Obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90 days or
more or are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted); (v) all Obligations for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction; (vi) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (i) through (v) above and clause (viii)
below; (vii) all Obligations of any other Person of the type referred to in
clauses (i) through (vi) which are secured by any lien on any property or asset
of such Person, the amount of such Obligation being deemed to be the lesser of
the fair market value of such property or asset or the amount of the Obligation
so secured; (viii) all Obligations under currency agreements and interest swap
agreements of such Person; and (ix) all Disqualified Capital Stock issued by
such Person with the amount of Indebtedness represented by such Disqualified
Capital Stock being equal to the greater of its voluntary or involuntary
liquidation preference and its maximum fixed repurchase price, but excluding
accrued dividends, if any. For purposes hereof, the "maximum fixed repurchase
price" of any Disqualified Capital Stock which does not have a fixed repurchase
price shall be calculated in accordance with the terms of such Disqualified
Capital Stock as if such Disqualified Capital Stock were purchased on any date
on which Indebtedness shall be required to be determined pursuant to the
Indenture, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock, such fair market value shall be
determined reasonably and in good faith by the Board of Directors of the issuer
of such Disqualified Capital Stock.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial
88
<PAGE> 92
interest in the Company and (ii) which, in the judgment of the Board of
Directors of the Company, is otherwise independent and qualified to perform the
task for which it is to be engaged.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" shall exclude extensions of trade credit by the
Company and its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. For the purposes of the "Limitation on
Restricted Payments" covenant, (i) "Investment" shall include and be valued at
the fair market value of the net assets of any Restricted Subsidiary at the time
that such Restricted Subsidiary is designated an Unrestricted Subsidiary and
shall exclude the fair market value of the net assets of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary and (ii) the amount of any Investment shall be the
original cost of such Investment plus the cost of all additional Investments by
the Company or any of its Restricted Subsidiaries, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment, reduced by the payment of dividends or distributions
in connection with such Investment or any other amounts received in respect of
such Investment; provided that no such payment of dividends or distributions or
receipt of any such other amounts shall reduce the amount of any Investment if
such payment of dividends or distributions or receipt of any such amounts would
be included in Consolidated Net Income. If the Company or any Restricted
Subsidiary of the Company sells or otherwise disposes of any Common Stock of any
direct or indirect Restricted Subsidiary of the Company such that, after giving
effect to any such sale or disposition, the Company no longer owns, directly or
indirectly, 100% of the outstanding Common Stock of such Restricted Subsidiary,
the Company shall be deemed to have made an Investment on the date of any such
sale or disposition equal to the fair market value of the Common Stock of such
Restricted Subsidiary not sold or disposed of.
"Issue Date" means the date of original issuance of the Notes.
"Issuers" means the Operating Company and Co-Issuer.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such
89
<PAGE> 93
deferred payment constituting interest) received by the Company or any of its
Restricted Subsidiaries from such Asset Sale net of (a) reasonable out-of-pocket
expenses and fees relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees and sales commissions); (b) taxes
paid or payable after taking into account any reduction in consolidated tax
liability due to available tax credits or deductions and any tax sharing
arrangements; (c) repayment of Indebtedness that is required to be repaid in
connection with such Asset Sale; and (d) appropriate amounts to be provided by
the Company or any Restricted Subsidiary, as the case may be, as a reserve, in
accordance with GAAP, against any liabilities associated with such Asset Sale
and retained by the Company or any Restricted Subsidiary, as the case may be,
after such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnification, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Operating Company" or "Company" means Generac Portable Products, LLC, a
limited liability company organized under the laws of the State of Delaware.
"Permitted Holder(s)" means Beacon and its Affiliates.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the Notes issued in the Offering in an
aggregate amount of $110.0 million;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate outstanding principal amount at any time outstanding not to
exceed $115.0 million (A) less the amount of all mandatory principal
payments actually made in respect of the term loans thereunder and (B)
reduced by any required permanent repayments (which are accompanied by a
corresponding permanent commitment reduction) thereunder, in each case,
actually effected in satisfaction of the Net Cash Proceeds requirement
described under the covenant described under "Limitation on Asset Sales"
(it being recognized that a reduction in any borrowing base thereunder in
and of itself shall not be deemed a required permanent repayment);
(iii) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually paid
or permanent reductions thereon;
(iv) Interest Swap Obligations of the Company covering Indebtedness of
Holdings, the Company or any of its Restricted Subsidiaries and Interest
Swap Obligations of any Restricted Subsidiary of the Company covering
Indebtedness of such Restricted Subsidiary; provided, however, that such
Interest Swap Obligations are entered into to protect the Company and its
Restricted Subsidiaries from fluctuations in interest rates on Indebtedness
incurred in accordance with the Senior Subordinated Indenture to the extent
the notional principal amount of such Interest Swap Obligation does not
exceed the principal amount of the Indebtedness to which such Interest Swap
Obligation relates;
(v) Indebtedness under Currency Agreements; provided that in the case
of Currency Agreements which relate to Indebtedness, such Currency
Agreements do
90
<PAGE> 94
not increase the Indebtedness of the Company and its Restricted
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;
(vi) Indebtedness of a Wholly Owned Restricted Subsidiary of the
Company to the Company or to a Wholly Owned Restricted Subsidiary of the
Company for so long as such Indebtedness is held by the Company or a Wholly
Owned Restricted Subsidiary of the Company, in each case subject to no Lien
held by a Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company or the lenders and collateral agent under the
Credit Agreement; provided that if as of any date any Person other than the
Company or a Wholly Owned Restricted Subsidiary of the Company or the
lenders and collateral agent under the Credit Agreement owns or holds any
such Indebtedness or holds a Lien in respect of such Indebtedness, such
date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the issuer of such Indebtedness unless such
Indebtedness is otherwise permitted hereunder;
(vii) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary of the Company for so long as such Indebtedness is held by a
Wholly Owned Restricted Subsidiary of the Company or the lenders and
collateral agent under the Credit Agreement, in each case subject to no
Lien other than under the Credit Agreement; provided that (a) any
Indebtedness of the Company to any Wholly Owned Restricted Subsidiary of
the Company is unsecured and subordinated, pursuant to a written agreement,
to the Company's obligations under the Indenture and the Notes and (b) if
as of any date any Person other than a Wholly Owned Restricted Subsidiary
of the Company owns or holds any such Indebtedness or any Person holds a
Lien in respect of such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness by the
Company unless such Indebtedness is otherwise permitted hereunder;
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within two business days of incurrence;
(ix) Indebtedness of the Company or any of its Restricted Subsidiaries
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of business;
(x) Indebtedness represented by Capitalized Lease Obligations and
Purchase Money Indebtedness of the Company and its Restricted Subsidiaries
incurred in the ordinary course of business not to exceed $7.5 million at
any one time outstanding;
(xi) Refinancing Indebtedness;
(xii) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $20.0 million
at any one time outstanding; and
(xiii) Indebtedness of Foreign Restricted Subsidiaries not to exceed
$10.0 million at any one time outstanding; provided that no Indebtedness
may be incurred under
91
<PAGE> 95
this clause (xiii) if after giving effect to such incurrence the sum of the
Indebtedness outstanding under clause (ii) above and the Indebtedness
outstanding under this clause (xiii) would exceed the maximum amount of
Indebtedness permitted to be outstanding under clause (ii) above.
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Wholly Owned Restricted Subsidiary of the
Company or that will merge or consolidate into the Company or a Wholly Owned
Restricted Subsidiary of the Company; (ii) Investments in the Company by any
Restricted Subsidiary of the Company; provided that any Indebtedness evidencing
such Investment is unsecured and subordinated, pursuant to a written agreement,
to the Company's obligations under the Notes and the Indenture; (iii)
investments in cash and Cash Equivalents; (iv) loans and advances to employees
and officers of the Company and its Restricted Subsidiaries in the ordinary
course of business for bona fide business purposes not in excess of $1.0 million
at any one time outstanding; (v) Currency Agreements and Interest Swap
Obligations entered into in the ordinary course of the Company's or its
Restricted Subsidiaries' businesses and otherwise in compliance with the
Indenture; (vi) additional Investments not to exceed $7.5 million at any one
time outstanding; (vii) Investments in securities of trade creditors or
customers received pursuant to any plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such trade creditors or customers; and
(viii) Investments made by the Company or its Restricted Subsidiaries as a
result of consideration received in connection with an Asset Sale made in
compliance with the "Limitation on Asset Sales" covenant.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required pursuant
to GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters of
credit issued in the ordinary course of business consistent with past
practice in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with
92
<PAGE> 96
the ordinary conduct of the business of the Company or any of its
Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(vii) purchase money Liens to finance property or assets of the
Company or any Restricted Subsidiary of the Company acquired in the
ordinary course of business; provided, however, that (A) the related
purchase money Indebtedness shall not exceed the cost of such property or
assets and shall not be secured by any property or assets of the Company or
any Restricted Subsidiary of the Company other than the property and assets
so acquired and (B) the Lien securing such Indebtedness shall be created
within 90 days of such acquisition;
(viii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and
set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(xii) Liens securing Capitalized Lease Obligations and Purchase Money
Indebtedness permitted pursuant to clause (x) of the definition of
"Permitted Indebtedness"; provided, however, that in the case of Purchase
Money Indebtedness (A) the Indebtedness shall not exceed the cost of such
property or assets and shall not be secured by any property or assets of
the Company or any Restricted Subsidiary of the Company other than the
property and assets so acquired or constructed and (B) the Lien securing
such Indebtedness shall be created within 180 days of such acquisition or
construction or, in the case of a refinancing of any Purchase Money
Indebtedness, within 180 days of such refinancing;
(xiii) Liens securing Indebtedness under Currency Agreements; and
(xiv) Liens securing Acquired Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant;
provided that (A) such Liens secured such Acquired Indebtedness at the time
of and prior to the incurrence of such Acquired Indebtedness by the Company
or a Restricted Subsidiary of the Company and were not granted in
connection with, or in anticipation of, the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary of the Company and
(B) such Liens do not extend to or cover any property or assets of the
Company or of any of its Restricted Subsidiaries other than the property or
assets that secured the Acquired Indebtedness prior to the time such
Indebtedness became Acquired Indebtedness of the Company or a Restricted
Subsidiary of the Company and are no more favorable to the lienholders than
those securing the
93
<PAGE> 97
Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness
by the Company or a Restricted Subsidiary of the Company.
"Permitted Tax Distributions" has the meaning given such term in the
"Limitation on Restricted Payments" covenant.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Purchase Money Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries incurred in the normal course of business for the
purpose of financing all or any part of the purchase price, or the cost of
installation, construction or improvement, of property or equipment.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant or permitted
under the definition of "Permitted Indebtedness" (other than pursuant to clause
(ii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xii) or (xiii) of the
definition of Permitted Indebtedness), in each case that does not (1) result in
an increase in the aggregate principal amount of Indebtedness of such Person as
of the date of such proposed Refinancing (plus the amount of any premium
required to be paid under the terms of the instrument governing such
Indebtedness and the amount of reasonable expenses incurred by the Company in
connection with such Refinancing) or (2) create Indebtedness with (A) a Weighted
Average Life to Maturity that is less than the Weighted Average Life to Maturity
of the Indebtedness being Refinanced or (B) a final maturity earlier than the
final maturity of the Indebtedness being Refinanced; provided that (x) if such
Indebtedness being Refinanced is Indebtedness of the Company, then such
Refinancing Indebtedness shall be Indebtedness solely of the Company and (y) if
such Indebtedness being Refinanced is subordinate or junior to the Senior
Subordinated Notes, then such Refinancing Indebtedness shall be subordinate to
the Senior Subordinated Notes at least to the same extent and in the same manner
as the Indebtedness being Refinanced.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt in respect of any Designated Senior Debt.
"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
94
<PAGE> 98
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether owned
by the Company or any Restricted Subsidiary at the Issue Date or later acquired,
which has been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such Property.
"Senior Debt" means the principal of, premium, if any, and interest
(including 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) on any
Indebtedness of the Company, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the generality
of the foregoing, "Senior Debt" shall also include the principal of, premium, if
any, interest (including 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) on, and all other amounts owing in respect of, (x) all monetary
obligations of every nature of the Company under the Credit Agreement,
including, without limitation, obligations to pay principal and interest,
reimbursement obligations under letters of credit, fees, expenses and
indemnities; (y) all Interest Swap Obligations; and (z) all obligations under
Currency Agreements, in each case whether outstanding on the Issue Date or
thereafter incurred. Notwithstanding the foregoing, "Senior Debt" shall not
include (i) any Indebtedness of the Company to a Subsidiary of the Company or
any Affiliate of the Company or any of such Affiliate's Subsidiaries; (ii)
Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer
or employee of the Company or any Subsidiary of the Company (including, without
limitation, amounts owed for compensation); (iii) Indebtedness to trade
creditors and other amounts incurred in connection with obtaining goods,
materials or services; (iv) Indebtedness represented by Disqualified Capital
Stock; (v) any liability for federal, state, local or other taxes owed or owing
by the Company; (vi) Indebtedness incurred in violation of the Indenture
provisions set forth under "Limitation on Incurrence of Additional Indebtedness"
(but, as to any such Indebtedness, no such violation shall be deemed to exist
for purposes of this clause (vi) if the holder(s) of such obligation or their
representative shall have received an officers' certificate of the Company to
the effect that the incurrence of such Indebtedness (or, in the case of
revolving credit Indebtedness, that the entire committed amount thereof at the
date on which the initial borrowing thereunder is made would not violate such
provisions of the Indenture); (vii) Indebtedness which, when incurred and
without respect to any election under Section 1111(b) of Title 11, United States
Code, is without recourse to the Company; (viii) Indebtedness represented by
Capitalized Lease Obligations existing on the Issue Date; and (ix) any
Indebtedness which is, by its express terms, subordinated in right of payment to
any other Indebtedness of the Company.
"Significant Subsidiary", with respect to any Person, means any Restricted
Subsidiary of such Person that satisfies the criteria for a "significant
subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the Securities
Act.
"Subsidiary", with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the
95
<PAGE> 99
election of directors under ordinary circumstances shall at the time be owned,
directly or indirectly, by such Person or (ii) any other Person of which at
least a majority of the voting interest under ordinary circumstances is at the
time, directly or indirectly, owned by such Person.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the Board of Directors of such Person in the
manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The
Board of Directors may designate any Subsidiary (including any newly acquired or
newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary
owns any Capital Stock of, or owns or holds any Lien on any property of, the
Company or any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; provided that (x) the Company certifies to the
Trustee that such designation complies with the "Limitation on Restricted
Payments" covenant and (y) each Subsidiary to be so designated and each of its
Subsidiaries has not at the time of designation, and does not thereafter,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to any Indebtedness pursuant to which the lender
has recourse to any of the assets of the Company or any of its Restricted
Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary only if (x) immediately after giving effect to
such designation, the Company is able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant and (y)
immediately before and immediately after giving effect to such designation, no
Default or Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect to
such designation and an officers' certificate certifying that such designation
complied with the foregoing provisions.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any Restricted
Subsidiary of such Person of which all the outstanding voting securities (other
than in the case of a foreign Restricted Subsidiary, directors' qualifying
shares or an immaterial amount of shares required to be owned by other Persons
pursuant to applicable law) are owned by such Person or any Wholly Owned
Restricted Subsidiary of such Person.
96
<PAGE> 100
DESCRIPTION OF THE OLD NOTES
The form and terms of the Old Notes are identical in all material respects
to the forms and terms of the New Notes, except that (i) the Old Notes have not
been registered under the Securities Act, are subject to certain restrictions on
transfer and are entitled to certain rights under the Registration Rights
Agreement (which rights will terminate upon consummation of the Exchange Offer,
except under limited circumstances) and (ii) the Old Notes will not provide for
any increase in the interest rate thereon. The Old Notes provide that, in the
event that if a registration statement relating to the Exchange Offer has not
been filed on or by February 4, 1999 and declared effective by April 5, 1999,
then interest will accrue (in addition to the stated interest rate on the Old
Notes) at the rate of 0.50% per annum on the principal amount of the Notes for
the period from the occurrence of such event until such time as the Exchange
Offer is consummated or any required Shelf Registration Statement is effective.
The New Notes are not, and upon consummation of the Exchange Offer the Old Notes
will not be, entitled to any such additional interest. Accordingly, holders of
Old Notes should review the information set forth under "Risk Factors -- Certain
Consequences of a Failure to Exchange Old Notes" and "Description of the New
Notes."
97
<PAGE> 101
OLD NOTES REGISTRATION RIGHTS AGREEMENT
The summary set forth below of certain provisions of the Registration
Rights Agreement does not purport to be complete and is qualified in its
entirety by reference to all the provisions of the Registration Rights
Agreement, which is filed as an exhibit to the Registration Statement of which
this Prospectus is a part.
The Issuers and the Initial Purchaser entered into a registration rights
agreement (the "Registration Rights Agreement") on July 2, 1998 pursuant to
which the Issuers agreed, for the benefit of holders of the Old Notes, that they
would, at their expense, use their reasonable best efforts to (i) within 210
days after the Issue Date, file a registration statement on an appropriate
registration form (the "Registration Statement") with the SEC with respect to
the Exchange Offer to exchange the Old Notes for the New Notes and (ii) cause
the Registration Statement to be declared effective under the Securities Act
within 270 days after the Issue Date. Upon the Registration Statement being
declared effective, the Issuers will offer to all holders of the Old Notes an
opportunity to exchange their securities for a like principal amount of the New
Notes. The Issuers will keep the Exchange Offer open for acceptance for not less
than 20 business days (or longer if required by applicable law) after the date
on which notice of the Exchange Offer is mailed to the holders. For each Old
Note surrendered for exchange pursuant to the Exchange Offer, the holder of such
Old Note will receive a New Note having a principal amount equal to that of the
surrendered Old Note. Interest on each New Note will accrue (A) from the later
of (i) the last interest payment date on which interest was paid on the Old Note
surrendered in exchange therefor or (ii) if the Old Note is surrendered for
exchange on a date in a period which includes the record date for an interest
payment date to occur on or after the date of such exchange and as to which
interest will be paid, the date of such interest payment date or (B) if no
interest has been paid on such Old Note, from the Issue Date.
Under existing interpretations of the SEC contained in several no-action
letters to third parties, the New Notes will be freely transferable by holders
thereof (other than affiliates of the Issuers) after the Exchange Offer without
further registration under the Securities Act; provided, however, that each
holder that wishes to exchange its Old Notes for New Notes will be required to
represent (i) that any New Notes to be received by it will be acquired in the
ordinary course of its business; (ii) that at the time of the commencement of
the Exchange Offer, it has no arrangement or understanding with any person to
participate in the distribution (within the meaning of Securities Act) of the
New Notes in violation of the Securities Act; (iii) that it is not an
"affiliate" (as defined in Rule 405 promulgated under the Securities Act) of the
Issuers; (iv) if such holder is not a broker-dealer, that it is not engaged in,
and does not intend to engage in, the distribution of New Notes; and (v) if such
holder is a broker-dealer (a "Participating Broker-Dealer") that will receive
New Notes for its own account in exchange for Old Notes that were acquired as a
result of market-making or other trading activities, that it will deliver a
prospectus in connection with any resale of such New Notes. The SEC has taken
the position that Participating Broker-Dealers may fulfill their prospectus
delivery requirements with respect to the New Notes (other than a resale of an
unsold allotment from the original sale of the Old Notes) with the prospectus
contained in the Registration Statement. The Issuers will agree to make
available, for a period of 180 days after the consummation of the Exchange
Offer, a prospectus meeting the requirements of the Securities Act for use by
Participating Broker-Dealers and other persons, if any, with similar prospectus
delivery requirements for use in connection with any resale of New Notes.
98
<PAGE> 102
If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, the Issuers are not permitted to effect
an Exchange Offer; (ii) the Exchange Offer is not consummated within 300 days of
the Issue Date; or (iii) in the case of any holder that participates in the
Exchange Offer, such holder does not receive New Notes on the date of the
exchange that may be sold without restriction under state and federal securities
laws (other than due solely to the status of such holder as an affiliate of the
Issuers within the meaning of the Securities Act), then in each case, the
Issuers will (x) promptly deliver to the holders and the applicable Trustee
written notice thereof and (y) at their sole expense, (a) as promptly as
practicable, file a shelf registration statement covering resales of the Old
Notes (the "Shelf Registration Statement"); (b) use their reasonable best
efforts to cause the Shelf Registration Statement to be declared effective under
the Securities Act; and (c) use their reasonable best efforts to keep effective
the Shelf Registration Statement until the earlier of two years after the Issue
Date or such time as all of the applicable Old Notes have been sold thereunder.
The Issuers will, in the event that a Shelf Registration Statement is filed,
provide to each holder copies of the prospectus that is a part of the Shelf
Registration Statement, notify each such holder when the Shelf Registration
Statement for the Old Notes has become effective and take certain other actions
as are required to permit unrestricted resales of the Old Notes. A holder that
sells Old Notes pursuant to the Shelf Registration Statement will be required to
be named as a selling securityholder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement that are applicable
to such holder (including certain indemnification rights and obligations).
If the Issuers fail to comply with the above provisions or if the
Registration Statement or the Shelf Registration Statement fails to become
effective, then, as liquidated damages, additional interest (the "Additional
Interest") shall become payable in respect of the Old Notes as follows:
(i) if (A) the Registration Statement is not filed with the SEC within 210
days following the Issue Date or (B) notwithstanding that the Issuers have
consummated or will consummate an Exchange Offer, the Issuers are required to
file a Shelf Registration Statement and such Shelf Registration Statement is not
filed on or prior to the 60th day following the date on which the obligation to
file such Shelf Registration Statement arises, then commencing on the day after
either such required filing date, Additional Interest shall accrue on the
principal amount of the Old Notes at a rate of .50% per annum for the first 90
days immediately following each such filing date, such Additional Interest rate
increasing by an additional .50% per annum at the beginning of each subsequent
90-day period; or
(ii) if (A) the Registration Statement is not declared effective by the SEC
within 270 days following the Issue Date or (B) notwithstanding that the Issuers
have consummated or will consummate an Exchange Offer, the Issuers are required
to file a Shelf Registration Statement and such Shelf Registration Statement is
not declared effective by the SEC on or prior to the 270th day following the
date on which the obligation to file such Shelf Registration Statement arises,
then, commencing on the day after either such required effective date,
Additional Interest shall accrue on the principal amount of the Old Notes at a
rate of .50% per annum for the first 90 days immediately following such date,
such Additional Interest rate increasing by an additional .50% per annum at the
beginning of each subsequent 90-day period; or
99
<PAGE> 103
(iii) if (A) the Issuers have not exchanged New Notes for all Old Notes
validly tendered in accordance with the terms of the Exchange Offer on or prior
to the later of the 45th day after the date on which the Registration Statement
was declared effective or the 300th day after the Issue Date or (B) if
applicable, the Shelf Registration Statement has been declared effective and
such Shelf Registration Statement ceases to be effective at any time prior to
the second anniversary of the Issue Date (other than after such time as all Old
Notes have been disposed of thereunder), then Additional Interest shall accrue
on the principal amount of the Old Notes at a rate of .50% per annum for the
first 90 days commencing on (x) the 46th or 301st, as the case may be, day after
such effective date, in the case of (A) above, or (y) the day such Shelf
Registration Statement ceases to be effective in the case of (B) above, such
Additional Interest rate increasing by an additional .50% per annum at the
beginning of each subsequent 90-day period;
provided, however, that the Additional Interest rate on the Old Notes may not
exceed in the aggregate 1.00% per annum; provided, further, however, that (1)
upon the filing of the Registration Statement or a Shelf Registration Statement
(in the case of clause (i) above); (2) upon the effectiveness of the
Registration Statement or a Shelf Registration Statement (in the case of clause
(ii) above); or (3) upon the exchange of New Notes for all Old Notes tendered
(in the case of clause (iii) (A) above), or upon the effectiveness of the Shelf
Registration Statement which had ceased to remain effective (in the case of
clause (iii) (B) above), Additional Interest on the Old Notes as a result of
such clause (or the relevant subclause thereof), as the case may be, shall cease
to accrue.
Any amounts of Additional Interest due pursuant to clause (i), (ii) or
(iii) above will be payable in cash on the same original interest payment dates
as provided in the terms of the Old Notes.
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the Notes will be issued in fully registered
form without interest coupons.
Except as set forth below, the New Notes will be represented by one or more
permanent global Notes in fully registered form without interest coupons (each a
"Global Note") and will be deposited with the Trustee as custodian for DTC and
registered in the name of a nominee of such depositary.
THE GLOBAL NOTES
The Issuers expect that pursuant to procedures established by DTC (i) upon
the issuance of the Global Notes, DTC or its custodian will credit, on its
internal system, the principal amount at maturity of the individual beneficial
interests represented by such Global Notes to the respective accounts of persons
who have accounts with such depositary and (ii) ownership of beneficial
interests in the Global Notes will be shown on, and the transfer of such
ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants).
So long as DTC, or its nominee, is the registered owner or holder of the
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by such Global Notes for all purposes
under the Indenture. No beneficial owner of an interest in the Global Notes will
be able to transfer that interest
100
<PAGE> 104
except in accordance with DTC's procedures, in addition to those provided for
under the Indenture.
Payments of the principal of, premium (if any), and interest on, the Global
Notes will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. None of the Issuers, the Trustee or any paying agent will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Issuers expect that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest on the Global Notes, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount at maturity of the
Global Notes as shown on the records of DTC or its nominee. The Issuers also
expect that payments by participants to owners of beneficial interests in the
Global Notes held through such participants will be governed by standing
instructions and customary practice, as is now the case with securities held for
the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same day funds. If a holder requires physical delivery of a
Certificated Security for any reason, including to sell Notes to persons in
states that require physical delivery of the Notes, or to pledge such
securities, such holder must transfer its interest in the Global Notes, in
accordance with the normal procedures of DTC and with the procedures set forth
in the applicable Indenture.
DTC has advised the Issuers that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more participants to whose
accounts the DTC interests in the Global Notes are credited and only in respect
of such portion of the aggregate principal amount at maturity of Notes as to
which such participant or participants has or have given such direction.
However, if there is an Event of Default under the Indenture, DTC will exchange
the Global Notes for Certificated Securities, which it will distribute to its
participants.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Notes among participants of DTC, it is
under no obligation to perform such procedures and such procedures may be
discontinued at any time. Neither the Issuers nor the Trustee for the Notes will
have any responsibility for the performance by DTC or its participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
CERTIFICATED SECURITIES
Certificated Securities shall be issued in exchange for beneficial
interests in the Global Notes (i) if requested by a holder of such interests or
(ii) if DTC is at any time unwilling or unable to continue as a depositary for
the Global Notes and a successor depositary is not appointed by the Issuers
within 90 days.
101
<PAGE> 105
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
King & Spalding, counsel to the Company, has advised the Company that the
following discussion expresses its opinion as to certain United States federal
income tax consequences of the exchange, holding and disposition of the New
Notes. This discussion is based on the Internal Revenue Code, Treasury
Regulations (including proposed regulations) promulgated thereunder,
administrative pronouncements and judicial decisions each as now in effect, all
of which are subject to change, possibly with retroactive effect. This
discussion does not purport to deal with all aspects of United States federal
income taxation that may be relevant to holders of New Notes in light of such
holders' personal circumstances. This summary deals only with United States
persons that will acquire New Notes pursuant to the terms of the Exchange Offer
and will hold New Notes as capital assets and does not address tax
considerations applicable to investors that may be subject to special tax rules,
such as financial institutions, S corporations, tax-exempt organizations,
insurance companies, dealers in securities or currencies, persons other than
United States persons or persons that will hold New Notes as a position in a
"straddle," as part of a hedging transaction for tax purposes, as part of a
"synthetic debt instrument" or other integrated investment (including a
"conversion transaction") or holders that have a "functional currency" other
than the United States dollar. No ruling on any of the issues discussed below
will be sought from the United States Internal Revenue Services (the "IRS").
EXCHANGE OF NEW NOTES
The exchange of Old Notes for the New Notes pursuant to the Exchange Offer
will not be treated as an "exchange" for federal income tax purposes, because
the New Notes do not differ materially in kind or extent from the Old Notes.
Rather, the New Notes received by a holder will be treated as a continuation of
the Old Notes in the hands of such holder. As a result, no gain or loss will be
recognized on the exchange of Old Notes for New Notes pursuant to the Exchange
Offer.
INTEREST ON NEW NOTES
A holder of a New Note generally will be required to report as ordinary
interest income for federal income tax purposes interest earned on the New Note
in accordance with the holder's method of tax accounting.
DISPOSITION OF NEW NOTES
A holder's tax basis for a New Note will be the holder's tax basis for the
Old Note immediately before the exchange. A holder's tax basis for the Old Note
immediately before the exchange generally will equal the cost of the Old Note to
the holder, reduced by any amortized bond premium (as described below) and any
payments other than interest made on the Old Note and increased by any market
discount (as described below) included in the holder's income. Upon the sale,
exchange or retirement of a New Note, a holder generally will recognize gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement (less the amount attributable to any accrued but unpaid interest
on the New Note, which amount will be taxable as interest if it has not been
included in income under such holder's method of accounting) and the holder's
tax basis in the New Note. Except as discussed below with respect to gain
attributable to market discount, gain or loss will be long-term capital gain or
loss if, on the date of the sale, a holder has a holding period for the New Note
(which would include the holding
102
<PAGE> 106
period of the Old Note) of more than one year. Otherwise, except as discussed
below with respect to gain attributable to market discount, the gain or loss
will be short-term capital gain or loss.
AMORTIZABLE BOND PREMIUM AND MARKET DISCOUNT
A Note acquired with an adjusted basis (for purposes of determining loss on
a sale or exchange) in excess of the outstanding principal amount of the Note at
the time of acquisition will be considered to have amortizable bond premium. A
holder of a Note acquired with such premium generally may elect to amortize such
premium as an offset to interest income, using a constant yield method, over the
remaining term of the Note. Corresponding adjustments are made to such holder's
basis in the Note. This election would apply to all taxable debt instruments
held by such holder at the beginning of the taxable year in which the election
applies and to all taxable debt instruments thereafter acquired.
A Note acquired with an adjusted basis that is less than its outstanding
principal amount at the time of acquisition by more than a de minimis amount
will be considered to have "market discount" in the hands of the acquiring
holder. Under the de minimis exception, there is no market discount if the
excess of the outstanding principal amount of the Note over the holder's tax
basis in the Note is less than .25% of the principal amount multiplied by the
number of complete years after the acquisition date to the maturity date of the
Note. Market discount generally accrues ratably during the period immediately
after the date of acquisition up to (and including) the maturity date of the
Note, unless the holder elects to accrue such discount on the basis of the
constant interest method.
The holder of a Note acquired at a market discount will be required to
treat all or a portion of the gain, if any, realized upon the sale or other
disposition of the Note as ordinary income to the extent of accrued market
discount. If a holder's interest expense deductions for a taxable year
attributable to indebtedness treated as incurred or continued to purchase or
carry a Note acquired at a market discount exceed interest and market discount
included in income with respect to the Note for such taxable year, a holder may
be required to defer all or a portion of such excess. The rules described above
with respect to the recharacterization of gain realized on a disposition of a
Note and deferral of interest expense will not apply if the holder elects to
include market discount in income currently as it accrues. Such election, if
made, applies with respect to all market discount bonds acquired by the holder
on or after the first day of the first taxable year to which the election
applies and is irrevocable without the consent of the IRS.
Holders who were subject to the bond premium and market discount provisions
discussed above with respect to the Old Notes will continue to be subject to
those provisions with respect to the New Notes received in exchange for Old
Notes under the Exchange Offer. Holders should consult their own tax advisors
regarding the specific application of those provisions to the Notes acquired at
a premium or at a discount.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A 31% "backup" withholding and information reporting requirements apply to
certain holders with respect to certain payments of principal, interest and
premium on a debt instrument and proceeds from the sale, redemption, or
retirement of a debt instrument. A holder of a New Note may be subject to backup
withholding at the rate of 31% with respect to interest paid on the New Note and
proceeds from the sale, exchange, redemption or retirement of the New Note,
unless such holder (a) is a corporation or
103
<PAGE> 107
comes within certain other exempt categories and , when required, demonstrates
that fact or (b) provides a correct taxpayer identification number, certifies as
to exemption from backup withholding and otherwise complies with applicable
requirements of the backup withholding rules. A holder of a New Note who does
not provide the Issuers with his correct taxpayer identification number may be
subject to penalties imposed by the IRS. Any amount paid as backup withholding
will be creditable against the holder's federal income tax liability provided
that the required information is furnished to the IRS.
EACH HOLDER SHOULD BE AWARE THAT THE FOREGOING DISCUSSION DOES NOT ADDRESS
ALL ASPECTS OF UNITED STATES FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO A
PARTICULAR HOLDER IN LIGHT OF SUCH HOLDER'S PARTICULAR CIRCUMSTANCES. EACH
HOLDER SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR AS TO THE SPECIFIC FEDERAL,
STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE OWNERSHIP AND
DISPOSITION OF THE NEW NOTES.
PLAN OF DISTRIBUTION
Each broker-deal that receives New Notes for its own account in connection
with the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by Participating
Broker-Dealers during the period referred to below in connection with resales of
New Notes received in exchange for Old Notes if such Old Notes were acquired by
such Participating Broker-Dealers for their own accounts as a result of
market-making activities or other trading activities. The Issuers have agreed
that this Prospectus, as it may be amended or supplemented from time to time,
may be used by a Participating Broker-Dealer in connection with resales of such
New Notes for a period ending 90 days (subject to extension under certain
limited circumstances described herein) after the Expiration Date or, if
earlier, when all such New Notes have been disposed of by such Participating
Broker-Dealer. However, a Participating Broker-Dealer who intends to use this
Prospectus in connection with the resale of New Notes received in exchange for
Old Notes pursuant to the Exchange Offer must notify the Issuers, or cause the
Issuers to be notified, on or prior to the Expiration Date, that it is a
Participating Broker-Dealer. Such notice may be given in the space provided for
that purpose in the Letter of Transmittal or may be delivered to the Exchange
Agent at one of the addresses set forth herein under "The Exchange
Offer -- Exchange Agent." See "The Exchange Offer -- Resales of New Notes."
The Company will not receive any cash or other proceeds from the issuance
of the New Notes offered hereby. New Notes received by broker-dealers for their
own accounts in connection with 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 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 New Notes. Any
broker-dealer that resells New Notes that were received by it for its own
account in connection with the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the
104
<PAGE> 108
meaning of the Securities Act, and any profit on any such resale of New 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.
EXPERTS
The financial statements of Generac Portable Products, Inc. as of July 9,
1998 and December 31, 1998 and for the period July 10, 1998 through December 31,
1998 included in this Prospectus have been so included in reliance on the report
of PricewaterhouseCoopers LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
The financial statements of the Portable Products Division, a Business Unit
of Generac Corporation, as of and for each of the two years in the period ended
December 31, 1997 and for the period January 1, 1998 through July 9, 1998
included in this Prospectus and the related financial statement schedule
included elsewhere in the Registration Statement have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports appearing herein
and elsewhere in the registration statement and have been so included in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
VALIDITY OF NOTES
Certain matters of Delaware law relating to the validity of the New Notes
and certain matters relating to United States federal income tax considerations
will be passed upon for the Issuers by King & Spalding, New York, New York.
105
<PAGE> 109
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF GENERAC PORTABLE
PRODUCTS, INC. PAGE
----
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets as of December 31, 1998 and July
9, 1998................................................... F-3
Consolidated Statement of Income for the period July 10,
1998 through December 31, 1998............................ F-4
Consolidated Statement of Changes in Stockholders' Equity
for the period July 10, 1998 through December 31, 1998.... F-5
Consolidated Statement of Cash Flows for the period July 10,
1998 through December 31, 1998............................ F-6
Notes to Consolidated Financial Statements.................. F-7
FINANCIAL STATEMENTS OF THE PORTABLE PRODUCTS DIVISION,
A BUSINESS UNIT OF GENERAC CORPORATION PAGE
----
Report of Independent Auditors.............................. F-19
Balance Sheets as of July 9, 1998, December 31, 1997 and
1996...................................................... F-20
Statements of Income for the Six Months and Nine Days Ended
July 9, 1998 and the Years Ended December 31, 1997 and
1996...................................................... F-21
Statements of Cash Flows for the Six Months and Nine Days
Ended July 9, 1998 and the Years Ended December 31, 1997
and 1996.................................................. F-22
Notes to Financial Statements............................... F-23
</TABLE>
F-1
<PAGE> 110
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Generac Portable Products, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, of changes in stockholders' equity
and of cash flows present fairly, in all material respects, the financial
position of Generac Portable Products, Inc. and its subsidiaries at December 31,
1998 and July 9, 1998, and the results of their operations and their cash flows
for the period July 10, 1998 through December 31, 1998, in conformity with
generally accepted accounting principles. 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
of these statements in accordance with generally accepted auditing standards
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Milwaukee, Wisconsin
February 22, 1999
F-2
<PAGE> 111
GENERAC PORTABLE PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JULY 9,
1998 1998
------------ --------
($ IN 000'S)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 1,528 $ 599
Accounts receivable (less allowances of $242 and $225,
respectively).......................................... 44,695 51,028
Inventories............................................... 46,651 42,663
Deferred income taxes..................................... 139 --
Prepaid expenses and other current assets................. 898 429
-------- --------
Total current assets................................... 93,911 94,719
Property, plant and equipment, net.......................... 19,437 16,633
Intangible assets, net...................................... 211,407 213,938
Deferred financing costs.................................... 6,985 7,309
Other....................................................... 262 --
-------- --------
Total assets........................................... $332,002 $332,599
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt......................... $ 7,922 $ 3,372
Trade accounts payable.................................... 12,839 14,904
Accrued employee compensation, benefits and payroll
withholdings........................................... 1,185 1,063
Other accrued liabilities................................. 14,424 8,070
-------- --------
Total current liabilities.............................. 36,370 27,409
Long-term debt obligations.................................. 189,861 205,853
Other long-term obligations................................. 999 995
Deferred income taxes....................................... 1,505 --
Commitments and contingencies (Note 13)
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 12,000 shares authorized;
8,500 shares issued and outstanding.................... 1 1
Additional paid-in capital................................ 109,999 109,999
Retained earnings......................................... 4,202 --
Accumulated other comprehensive income.................... 723 --
Excess of purchase price over book value of net assets
acquired from entities partially under common
control................................................ (11,658) (11,658)
-------- --------
Total stockholders' equity............................. 103,267 98,342
-------- --------
Total liabilities and stockholders' equity............. $332,002 $332,599
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 112
GENERAC PORTABLE PRODUCTS, INC.
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 10, 1998
THROUGH
DECEMBER 31,
1998
--------------
($ IN 000'S)
<S> <C>
Net sales................................................... $136,862
Cost of sales............................................... 98,245
--------
Gross profit........................................... 38,617
Operating expenses:
Selling and service....................................... 16,935
General and administrative................................ 2,865
Intangible asset amortization............................. 2,531
--------
Income from operations................................. 16,286
Other expense (income):
Interest expense.......................................... 9,674
Deferred financing cost amortization...................... 401
Other income, net......................................... (171)
--------
Income before income taxes............................. 6,382
Provision for income taxes.................................. 2,180
--------
Net income............................................. $ 4,202
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 113
GENERAC PORTABLE PRODUCTS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD JULY 10, 1998 THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER
--------------- PAID-IN RETAINED COMPREHENSIVE
SHARES AMOUNT CAPITAL EARNINGS INCOME OTHER(A) TOTAL
------ ------ ---------- -------- ------------- -------- --------
($ IN 000'S)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 9,
1998............... 8,500 $1 $109,999 $ -- $ -- $(11,658) $ 98,342
Comprehensive income:
Net income......... -- -- -- 4,202 -- -- 4,202
Translation
adjustments..... -- -- -- -- 723 -- 723
----- -- -------- ------ ---- -------- --------
Total comprehensive
income............. -- -- -- 4,202 723 -- 4,925
----- -- -------- ------ ---- -------- --------
Balance at December
31,
1998............... 8,500 $1 $109,999 $4,202 $723 $(11,658) $103,267
===== == ======== ====== ==== ======== ========
</TABLE>
- -------------------------
(A) Amount represents the excess of the purchase price paid in connection with
the Acquisition over the book value of net assets acquired not recognized as
a result of certain continuing shareholder interests.
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 114
GENERAC PORTABLE PRODUCTS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 10, 1998
THROUGH
DECEMBER 31,
1998
--------------
($ IN 000'S)
<S> <C>
Operating activities:
Net income................................................ $ 4,202
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation........................................... 1,022
Amortization........................................... 2,932
Deferred income taxes.................................. 1,366
Increase (decrease) in cash due to changes in:
Accounts receivable.................................. 6,696
Inventories.......................................... (3,627)
Other assets......................................... (726)
Trade accounts payable............................... (2,106)
Accrued liabilities.................................. 6,454
--------
Net cash provided by operating activities............ 16,213
--------
Investing activities:
Capital expenditures...................................... (3,814)
Proceeds from sale of property, plant and equipment....... 34
--------
Net cash used for investing activities................. (3,780)
--------
Financing activities:
Net payments under revolving loan facility................ (11,008)
Payments on other long-term debt obligations.............. (434)
Payment of deferred financing costs....................... (77)
--------
Net cash used for financing activities................. (11,519)
--------
Effect of exchange rate changes on cash..................... 15
--------
Net increase in cash and cash equivalents................... 929
Cash and cash equivalents:
Beginning of period....................................... 599
--------
End of period............................................. $ 1,528
========
Supplemental cash flow information:
Cash paid for interest.................................... $ 2,260
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 115
GENERAC PORTABLE PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS UNLESS INDICATED)
1. FORMATION OF THE COMPANY AND NATURE OF BUSINESS
Generac Portable Products, Inc. (the "Company"), a Delaware corporation,
was formed on April 29, 1998 by an investor group organized by The Beacon Group
III -- Focus Value Fund L.P. ("Beacon") for the purpose of acquiring, through
its indirect wholly-owned limited liability company, Generac Portable Products,
L.L.C., net assets of the Portable Products Division of Generac Corporation. The
primary business activity of the Company consists of its indirect ownership of
100% of the limited liability company interests in Generac Portable Products,
L.L.C., a Delaware limited liability company (the "Operating Company"), through
two wholly-owned subsidiaries: GPPW, Inc. a Wisconsin corporation ("GPPW"), and
GPPD, Inc. a Delaware corporation ("GPPD"). GPPW and GPPD hold, respectively, 5%
and 95% limited liability company interests in the Operating Company. The
Company had no operations during the period April 29, 1998 through July 8, 1998;
its only business activity involved the issuance of $110 million of common stock
to finance a portion of the purchase price discussed below.
On July 9, 1998, the Company caused the Operating Company to purchase
substantially all of the assets, and assume certain of the liabilities, of the
Portable Products Division (the "Predecessor") of Generac Corporation (the
"Acquisition"). The aggregate consideration paid for the net assets of the
Predecessor was approximately $330 million, which includes cash acquired of $.6
million, direct acquisition costs of $1.4 million and assumed liabilities of
$23.9 million. The purchase price paid for the Predecessor was subject to a
post-closing adjustment based on net working capital at July 9, 1998, as
defined. The Company has recorded a receivable of $1.0 million at December 31,
1998 relating to this adjustment.
The Acquisition has been accounted for using the purchase method of
accounting and accordingly, the purchase price has been allocated to
identifiable assets acquired and liabilities assumed based upon their estimated
fair values, subject to certain limitations (see Note 2), with the excess
purchase price recorded as goodwill. Goodwill of approximately $214 million has
been recorded as a result of the Acquisition.
The following table sets forth the pro forma information for the Company as
if the Acquisition had occurred on January 1, 1998. This information is
unaudited and does not purport to represent actual sales or net income had the
Acquisition actually occurred on January 1, 1998.
<TABLE>
<CAPTION>
PRO FORMA INFORMATION
(UNAUDITED) FOR THE YEAR
ENDED DECEMBER 31, 1998
------------------------
<S> <C>
Net sales................................ $276,413
Net income............................... 5,835
</TABLE>
In addition to the issuance of common stock by the Company, the purchase
price was financed through the issuance of senior subordinated notes of $110
million and borrowings of $96.6 million under a $115 million bank credit
facility (see Note 7).
The Company, with domestic operations located in Jefferson, Wisconsin and
branch operations in the United Kingdom and Germany, is a leader in the design,
manufacture
F-7
<PAGE> 116
GENERAC PORTABLE PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and sale of portable generators and pressure washers for use in both industrial
and residential applications.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES: The Company prepares its financial statements in
conformity with generally accepted accounting principles, which require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosures of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
PRINCIPLES OF CONSOLIDATION: The Company's consolidated financial
statements include the accounts of its wholly-owned subsidiaries. All
significant intercompany transactions and balances have been eliminated.
BASIS OF ACCOUNTING: Pursuant to the Financial Accounting Standards
Board's Emerging Issues Task Force Issue No. 88-16, "Basis in Leveraged Buyout
Transactions," the Company has limited its accounting basis resulting from the
Acquisition as a result of certain shareholders which also owned an interest in
the Predecessor. Such limitation was based upon the lesser of each continuing
shareholder's interest in the Company or the Predecessor, and the Predecessor's
historical book value at July 9, 1998. The difference between the continuing
shareholders' basis in the Predecessor and their proportionate equity in the
book value of the Predecessor was not material. The difference between the total
consideration paid in connection with the Acquisition and the accounting basis
recognized is reported as a separate component of stockholders' equity.
CASH AND CASH EQUIVALENTS: The Company considers all investments with a
maturity of three months or less at the date of purchase to be cash equivalents.
INVENTORIES: Inventories are stated at the lower of cost (first-in,
first-out method) or market (replacement cost or estimated net realizable
value).
RESEARCH AND DEVELOPMENT COSTS: The Company has an ongoing program of new
product development and existing product enhancement through redesign of
existing products and the addition of new models. Costs related to these
programs are expensed as incurred and totaled $1,011 for the period ended
December 31, 1998. Costs related to manufacturing start-up activities for new
products are included in cost of sales as incurred.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is recorded
at cost and includes equipment under leases which have been capitalized.
Maintenance and repair costs are charged to expense as incurred. Gains and
losses on disposition of property, plant and equipment are reflected in income.
Depreciation of property, plant and equipment are
F-8
<PAGE> 117
GENERAC PORTABLE PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
recorded using principally the straight-line method for financial reporting
purposes over the estimated useful lives of the assets or terms of related
leases as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Land improvements..................................... 20
Buildings............................................. 40
Machinery and equipment............................... 7-10
Dies and tools........................................ 3-5
Office equipment...................................... 5-10
Vehicles.............................................. 3-4
</TABLE>
INTANGIBLE ASSETS: Goodwill, representing the recognized portion of the
cost of the Acquisition in excess of the fair values assigned to identifiable
net assets acquired, is being amortized on a straight-line basis over 40 years.
The non-compete agreement and patents and trademarks are being amortized on a
straight-line basis over 10 years. The Company assesses the carrying value of
goodwill and other intangibles at each balance sheet date. Consistent with
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of", such assessments include, as appropriate, a comparison of (a) the estimated
future nondiscounted cash flows anticipated to be generated during the remaining
amortization period to (b) the net carrying value of the asset. The Company
recognizes diminution in value, if any, on a current basis. Impairment
assessments of goodwill made in accordance with SFAS No. 121 are made in
connection with an analysis of related long-lived assets acquired in the
Acquisition.
DEFERRED FINANCING COSTS: Expenses associated with the issuance of debt
instruments are capitalized and are being amortized over the terms of the
respective financing arrangement using the effective interest rate and
straight-line methods over periods ranging from 5 to 8 years.
INTEREST RATE SWAPS: To limit the effect of increases in interest rates,
the Company has entered into an interest rate swap arrangement. The differential
between the contract floating and fixed rates is accrued each period and
recorded as an adjustment of interest expense.
PRODUCT WARRANTIES: The Company provides that warranted products are
merchantable and free of defects in workmanship and material generally for a
period of one year. Warranty reserves are provided as charges to operations
under selling and service expense for estimated normal warranty costs and, if
applicable, for any significant problems known to exist on products sold.
Warranty expense totaled $1,989 for the period ended December 31, 1998.
INCOME TAXES: Deferred income tax assets and liabilities are determined
based upon the difference between the financial statement and tax bases of
assets and liabilities, as measured by enacted tax rates which will be in effect
when these differences are expected to reverse. Deferred income tax expense is
the result of changes in the deferred tax assets and liabilities. A valuation
allowance is provided when it is considered more likely than not that some
portion or all of recorded deferred income tax assets will not be realized.
F-9
<PAGE> 118
GENERAC PORTABLE PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying amounts reported in the
consolidated balance sheets for cash and cash equivalents, accounts receivable,
accounts payable, and short-term borrowings approximate fair value due to the
short-term maturity of these financial instruments. The amounts reported for
borrowings under the bank credit facility approximate fair value since the
underlying instruments bear interest at a variable rate that reprices
frequently. The fair value of the Company's senior subordinated notes at
December 31, 1998 is estimated based upon the average yield on similar debt
instruments as of such date. The fair value of the interest rate swap
arrangement is the amount at which it could be settled, based on a quote
obtained from the respective financial institution (see Note 7).
REVENUE RECOGNITION: Net sales and costs of sales are recognized as the
related products are shipped. Provisions for estimated sales returns and sales
incentives are recorded in the period in which the sales are recognized.
FOREIGN CURRENCY TRANSLATION: The translation of the assets and
liabilities of the Company's international branch operations into U.S. dollars
is performed for balance sheet accounts using current exchange rates in effect
at the balance sheet date and for revenue and expense accounts using an average
exchange rate during the period. The gains or (losses) resulting from such
translation are reflected as translation adjustments in accumulated other
comprehensive income.
FUTURE ACCOUNTING CHANGES: The Financial Accounting Standards Board has
issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities" which is effective for periods beginning after June 15, 1999. Due to
the Company's current limited use of derivative instruments, the adoption of
this statement is not expected to have a material effect on the Company's
financial condition or results of operations.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JULY 9,
1998 1998
------------ -------
<S> <C> <C>
Raw materials and sub-assemblies................ $27,721 $26,423
Finished goods.................................. 18,930 16,240
------- -------
$46,651 $42,663
======= =======
</TABLE>
Work-in-process is not a significant separate component of inventories and
is included in the raw materials and sub-assemblies component.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JULY 9,
1998 1998
------------ -------
<S> <C> <C>
Land and land improvements...................... $ 980 $ 972
Buildings....................................... 5,940 5,781
</TABLE>
F-10
<PAGE> 119
GENERAC PORTABLE PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, JULY 9,
1998 1998
------------ -------
<S> <C> <C>
Machinery and equipment......................... 8,056 7,179
Dies and tools.................................. 2,742 2,266
Office equipment................................ 1,357 377
Vehicles........................................ 56 58
------- -------
19,131 16,633
Accumulated depreciation........................ (1,023) --
------- -------
18,108 16,633
Construction in progress........................ 1,329 --
------- -------
$19,437 $16,633
======= =======
</TABLE>
5. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JULY 9,
1998 1998
------------ --------
<S> <C> <C>
Goodwill....................................... $213,738 $213,738
Trademarks and patents......................... 100 100
Noncompete agreement........................... 100 100
-------- --------
213,938 213,938
Accumulated amortization....................... (2,531) --
-------- --------
$211,407 $213,938
======== ========
</TABLE>
6. OTHER ACCRUED LIABILITIES
Other accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JULY 9,
1998 1998
------------ -------
<S> <C> <C>
Sales incentives................................. $ 4,430 $6,236
Product warranty................................. 1,229 1,020
Accrued interest................................. 7,414 --
Other............................................ 1,351 814
------- ------
$14,424 $8,070
======= ======
</TABLE>
F-11
<PAGE> 120
GENERAC PORTABLE PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. LONG-TERM DEBT OBLIGATIONS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JULY 9,
1998 1998
------------ --------
<S> <C> <C>
Bank credit facility........................... $ 85,400 $ 96,608
Senior subordinated notes...................... 110,000 110,000
Capital lease obligations...................... 2,383 2,617
-------- --------
197,783 209,225
Less: current portion.......................... (7,922) (3,372)
-------- --------
$189,861 $205,853
======== ========
</TABLE>
In connection with the Acquisition, the Company entered into a $115 million
bank credit facility (the "Senior Secured Credit Facility"). The Senior Secured
Credit Facility provides for maximum borrowings under two term loans of $45
million ("A Term Loan") and $40 million ("B Term Loan"), respectively, with
balances outstanding at December 31, 1998 of $45 million and $39.8 million,
respectively. The Senior Secured Credit Facility also provides for maximum
borrowings of $30 million, less the amount outstanding under letters of credit,
under revolving loan arrangements due December 31, 2003, with a balance
outstanding at December 31, 1998 of $600. The A Term Loan Facility will mature 5
1/2 years from July 9, 1998. The B Term Loan Facility will mature seven years
from July 9, 1998. The A Term Loan Facility will provide for amortization of
$2.5 million in the first year, $6.25 million in the second year, $7.5 million
in the third year, $10.0 million in the fourth year, $12.5 million in the fifth
year and $6.25 million in the sixth year. The B Term Loan Facility will provide
for nominal annual amortization in the first five years and amortization of $19
million in each of the sixth and seventh years. Additionally, the Company is
also required to make an annual principal payment equal to its excess cash flow,
as defined. The required excess cash flow payment for the period ended December
31, 1998 is approximately $2.1 million and will be applied to reduce the
scheduled repayments under both the A and B Term Loan Facilities described
above, on a pro rata basis. The interest rates under the A Term Loan Facility
and the revolving loan portion of the facility will be based, at the option of
the Operating Company, on either a Eurodollar rate plus 2.25% per annum or a
base rate plus 1.25% per annum, subject to a pricing grid that will provide for
reductions in the applicable interest rate margins based on the Company's
consolidated debt to earnings before interest, income taxes, depreciation and
amortization ("EBITDA") ratio. The interest rate under the B Term Loan Facility
is based, at the option of the Operating Company, on a Eurodollar rate plus
2.75% or a base rate plus 1.75%, subject to a pricing grid that will provide for
reductions in the applicable interest rate margins based on the Company's
consolidated debt to EBITDA ratio. The weighted average interest rate for the
term loans as of December 31, 1998 was 7.84%. Borrowings under the revolving
loans bear interest at the Prime Rate plus 1.25% (9% at December 31, 1998). A
commitment fee of 0.50% per annum will be charged on the unused revolving loan
portion of the Senior Secured Credit Facility, subject to a pricing grid that
will provide for reductions in the applicable commitment fee margin based on the
F-12
<PAGE> 121
GENERAC PORTABLE PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company's consolidated debt to EBITDA ratio. Substantially all of the Company's
assets are pledged as collateral under the Senior Secured Credit Facility.
Effective October 15, 1998, the Company entered into an interest rate swap
agreement with a major financial institution to reduce the impact of changes in
interest rates on its floating rate long-term debt. The notional amount of this
agreement was $40 million at December 31, 1998. Interest expense has been
adjusted for the net amount payable under this agreement. The effect of this
agreement on the Company's interest expense for the period ended December 31,
1998 was not significant. The fair value of the interest rate swap agreement was
$903 at December 31, 1998, which is the amount the Company would have paid to
settle the instrument at such date. The Company is exposed to credit loss in the
event of non-performance by the financial institution, however, management does
not anticipate such non-performance.
Also on July 9, 1998, the Company issued $110 million of 11.25% Senior
Subordinated Notes due June 30, 2006, (the "Notes") to BT Alex. Brown,
Incorporated (the "Initial Purchaser"). The Initial Purchaser subsequently
resold the Notes to qualified institutional buyers pursuant to Rule 144A of the
Securities Exchange Act and to a limited number of institutional accredited
investors that agreed to comply with certain transfer restrictions and other
conditions. The estimated fair value of the Notes at December 31, 1998
approximates par.
The Notes are redeemable, at the Company's option, in whole at any time or
in part from time to time, on and after July 1, 2002, upon not less than 30 nor
more than 60 days' notice, at the following redemption prices (expressed as
percentages of the principal amount thereof) if redeemed during the twelve-month
period commencing on July 1 of the year set forth below, plus, in each case,
accrued and unpaid interest thereon, if any, to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2002........................................ 107.625%
2003........................................ 104.750%
2004........................................ 102.875%
2005 and thereafter......................... 100.000%
</TABLE>
At any time, or from time to time, on or prior to July 1, 2001, the Company
may, at its option, use the net cash proceeds of one or more Public Equity
Offerings, as defined, to redeem the Notes at a redemption price equal to
111.25% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of redemption; provided that at least 65% of the
principal amount of Notes originally issued remains outstanding immediately
after any such redemption.
The Senior Secured Credit Facility and the indenture governing the Notes
contain a number of covenants that, among other things, restrict the ability of
the Company to dispose of assets, repay other indebtedness, incur additional
indebtedness, pay dividends, prepay subordinated indebtedness (including, in the
case of the Senior Secured Credit Facility, the Notes), incur liens, make
capital expenditures and make certain investments or acquisitions, engage in
mergers or consolidations, engage in certain transactions with
F-13
<PAGE> 122
GENERAC PORTABLE PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
affiliates and otherwise restrict the activities of the Company. In addition,
under the Senior Secured Credit Facility, the Operating Company will be required
to satisfy specified financial ratios and tests, including a minimum level of
earnings before interest, income taxes, depreciation and amortization.
Capital lease obligations relate to the Company's obligations on leases for
industrial equipment. These obligations are due in monthly installments
including principal and interest at a rate of 8.6% and mature November 30, 2002.
The aggregate scheduled maturities of long-term debt and capital lease
obligations in subsequent years are as follows:
<TABLE>
<S> <C>
1999......................................... $ 7,922
2000......................................... 8,228
2001......................................... 8,275
2002......................................... 13,358
2003......................................... 22,231
Thereafter................................... 137,769
--------
$197,783
========
</TABLE>
8. EMPLOYEE RETIREMENT AND SAVINGS PLANS
In connection with the Acquisition, the Company established noncontributory
defined benefit pension plans (salaried and hourly) covering substantially all
of its employees. The unfunded benefit obligation assumed as of the Acquisition
date totaled $678. Benefits under the salaried plan are based upon years of
service and the participants' defined final average monthly compensation.
Benefits under the hourly plan are based on a unit amount at the date of
termination multiplied by the participants' credited service. The plans provide
for a continuation of participants' years of service as credited with Generac
Corporation. The Company's funding policy is to contribute amounts that equal or
exceed the minimum requirements of the Employee Retirement Income Security Act
of 1974 (ERISA). As of December 31, 1998 and July 9, 1998, no assets have been
contributed to the plans. Net pension expense for the period ended December 31,
1998 is comprised of the following components:
<TABLE>
<S> <C>
Service cost............................................. $48
Interest cost on projected benefit obligation............ 24
---
$72
===
</TABLE>
F-14
<PAGE> 123
GENERAC PORTABLE PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes those items comprising the change in the
benefit obligation for the period ended December 31, 1998:
<TABLE>
<S> <C>
Unfunded benefit obligation assumed as of July 9,
1998.................................................. $678
Service cost............................................ 48
Interest cost........................................... 24
----
Benefit obligation as of December 31, 1998.............. $750
====
</TABLE>
The assumptions used in developing the pension information as of December
31, 1998 and July 9, 1998 were as follows:
<TABLE>
<S> <C>
Discount rate............................................ 7.00%
Return on plan assets.................................... 8.00%
Rate of compensation increase............................ 4.50%
</TABLE>
In connection with the Acquisition, the Company established deferred
compensation plans for certain key employees and at December 31, 1998 and July
9, 1998, approximately $340 and $317, respectively, was included in other
long-term obligations related to such plans. Deferred compensation expense
charged to operations was $23 for the period ended December 31, 1998.
In connection with the Acquisition, the Company established a qualified
401(k) profit sharing plan covering substantially all full-time employees. No
contributions were made to the plan for the period ended December 31, 1998.
9. INCOME TAXES
The provision for income taxes for the period ended December 31, 1998
consists of the following:
<TABLE>
<S> <C>
Current:
Federal.............................................. $ 781
State................................................ 33
------
Total current..................................... 814
Deferred:
Federal and state.................................... 1,366
------
Total provision for income taxes.................. $2,180
======
</TABLE>
The following reconciles the U.S. federal statutory income tax rate with
the Company's effective tax rate for the period ended December 31, 1998:
<TABLE>
<S> <C>
U.S. federal statutory income tax rate................... 34.0%
State income taxes, net of federal benefit............... 1.0
Nondeductible expenses and other......................... (.8)
----
34.2%
====
</TABLE>
F-15
<PAGE> 124
GENERAC PORTABLE PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes reflected in the balance sheet consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
1998
------------
<S> <C>
Deferred tax assets:
Inventories and receivables..................... $ 267
Accrued warranty................................ 76
-------
343
-------
Deferred tax liabilities:
Intangible assets............................... (1,512)
Sales incentives................................ (161)
Other........................................... (36)
-------
(1,709)
-------
Total net deferred tax liability.................. $(1,366)
=======
</TABLE>
10. STOCKHOLDERS' EQUITY
In connection with the initial capitalization of the Company, The Beacon
Group III -- Focus Value Fund, L.P. ("Beacon"), management of the Company and
certain other investors purchased an aggregate of $110 million of common stock,
par value of $.01 per share, constituting 100% of the Company's outstanding
common stock. Upon consummation of the Acquisition, Beacon and the other
stockholders of the Company, and the Company, entered into a Stockholders'
Agreement which includes certain transfer restrictions, voting agreements and
registration rights. Employees who own stock of the Company are also subject to
agreements that restrict their right to transfer their stock and, under certain
conditions, require them to sell a pro rata portion of their stock in a
transaction in which Beacon is selling its stock.
Effective July 9, 1998, the Company's board of directors approved the
Generac Portable Products, Inc. Stock Option Plan which provides for the
granting of stock options as an incentive to certain key employees. Under this
Plan, stock options to acquire up to 1,619 shares of common stock, in the
aggregate, may be granted under a time-vesting formula at an exercise price
equal to the fair market value of the common stock at the date of grant. The
options become exercisable in equal increments beginning on the first
anniversary of the grant date over a five-year period and expire ten years
subsequent to the grant date. On July 9, 1998, 1,063 options were granted at an
exercise price of $12,941.00 per share to certain members of management and the
Company's board of directors. The options have a remaining contractual life of
9.5 years. No options were granted or forfeited subsequent to the initial grant.
The fair value of the options at the date of grant was $4,335.00 per option. The
fair value was estimated using the minimum value method in accordance with SFAS
No. 123, "Accounting for Stock-Based Compensation", assuming an expected option
life of 7 years and a risk-free interest rate of 6%.
The Company applies Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for its stock option plan. Accordingly, no
compensation
F-16
<PAGE> 125
GENERAC PORTABLE PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
expense has been recognized in the statement of income. If compensation cost had
been determined in accordance with SFAS No. 123, net income would have decreased
approximately $283 during the period ended December 31, 1998.
11. LEASES
The Company leases certain manufacturing equipment, computer equipment and
vehicles under operating leases with lease terms ranging up to 3 years.
Additionally, in connection with the Acquisition, the Company entered into a
capital lease arrangement with Generac Corporation for certain manufacturing
equipment. Property, plant and equipment at December 31, 1998 includes $2,451
for equipment under capital leases, which is net of $165 in accumulated
depreciation. Following is a summary of future minimum payments under
capitalized leases and operating leases that have initial or remaining
non-cancelable lease terms in excess of one year at December 31, 1998:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- -------
<S> <C> <C>
1999........................................ $348 $ 673
2000........................................ 208 673
2001........................................ 147 673
2002........................................ -- 830
---- ------
$703 2,849
====
Less amount representing interest........... (466)
------
Present value of minimum lease payments..... $2,383
======
</TABLE>
Total rent expense recognized by the Company for the period ended December
31, 1998 is $142.
12. SEGMENT INFORMATION
The Company is a leader in the design, manufacture and sale of portable
generators and pressure washers. Engineering, manufacturing, marketing and
administrative resources are generally not product specific and the Company
evaluates operating performance based upon the combined results of these product
lines.
Information regarding the Company's geographic areas is summarized below:
<TABLE>
<CAPTION>
UNITED
STATES EUROPE CONSOLIDATED
-------- ------- ------------
<S> <C> <C> <C>
Net sales to unaffiliated
customers.......................... $126,740 $10,122 $136,862
Long-lived assets.................... 235,341 2,574 237,915
</TABLE>
The Company sells primarily to large home center retailers. Three customers
accounted for approximately 74% of net sales for the period ended December 31,
1998. All three customers individually comprise more than 10% of the Company's
net sales. Included
F-17
<PAGE> 126
GENERAC PORTABLE PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
in accounts receivable at December 31, 1998 and July 9, 1998 are amounts due
from these three customers aggregating $29,862 and $34,998, respectively.
13. COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS
In the normal course of business the Company is involved in certain legal
actions and claims. It is the opinion of management that such litigation and
claims are either covered by insurance or will be resolved without material
adverse effect on the Company's financial position, results of operations or
cash flows.
In connection with the Acquisition, the Company entered into an OEM engine
supply agreement with Generac Corporation, to supply it with the engine used in
certain of the Company's pressure washers and consumer portable generators. The
engine supply agreement allows for the Company to make minimum purchases of
engines from Generac Corporation in each of the next nine years and gives the
Company the right to increase the amount purchased based upon forecasted
requirements. This agreement is an exclusive arrangement related to such
products subject to the minimum purchase requirements. As the Company maintains
relationships with other major engine suppliers, management believes that the
minimum purchase quantities and unit prices under this agreement will not have
an adverse effect on the Company. Management also considers the provisions of
the engine supply agreement to reflect arms-length terms. For the period ended
December 31, 1998, the Company purchased product approximating $14.4 million
under this agreement. In addition, the Company also purchased other components
from Generac Corporation approximating $6.5 million for the period ended
December 31, 1998. Included in accounts payable are amounts due to Generac
Corporation of approximately $4.7 million at December 31, 1998.
14. SEPARATE FINANCIAL INFORMATION OF CO-ISSUERS AND GUARANTOR
In connection with the Acquisition, the Operating Company and GPPW
co-issued the Notes, and while the Operating Company and GPPW are jointly and
severally liable for the obligations under the Notes, GPPW does not conduct any
operations, or have any assets of any kind other than its investment in the
Operating Company. The Company has provided a full and unconditional guarantee
of the Notes. However, because the Company has no operating activities
independent of the Operating Company, the Company's consolidated financial
statements are essentially the same as those of the Operating Company.
Accordingly, no separate financial information of the Company, or the co-issuers
of the Notes is presented herein as management does not believe such information
would be meaningful to investors.
F-18
<PAGE> 127
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of Generac Corporation:
We have audited the accompanying balance sheets of the Portable Products
Division, a Business Unit ("Business Unit") of Generac Corporation ("Company"),
as of July 9, 1998, December 31, 1997 and 1996, and the related statements of
income and cash flows for the six months and nine days ended July 9, 1998 and
the years ended December 31, 1997 and 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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.
The accompanying financial statements have been prepared from the separate
records maintained by the Business Unit and may not necessarily be indicative of
the conditions that would have existed or the results of operations if the
Business Unit had been operated as an unaffiliated company. Portions of certain
income and expenses represent allocations made from Generac Corporation of items
applicable to the Company as a whole.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Portable Products Division, a Business
Unit of Generac Corporation, at July 9, 1998, December 31, 1997 and 1996, and
the results of its operations and its cash flows for the six months and nine
days ended July 9, 1998 and the years ended December 31, 1997 and 1996 in
conformity with generally accepted accounting principles.
January 29, 1999
F-19
<PAGE> 128
PORTABLE PRODUCTS DIVISION, A BUSINESS UNIT
OF GENERAC CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
JULY 9, ------------------
1998 1997 1996
-------- ------- -------
($ IN 000'S)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents..................... $ 599 $ 1,065 $ 1,122
Accounts receivable........................... 48,528 18,766 14,263
Inventories................................... 42,839 33,023 24,707
Prepaid expenses.............................. 429 206 630
-------- ------- -------
Total current assets....................... 92,395 53,060 40,722
Property, Plant and Equipment:
At cost:
Land and land improvements................. 972 943 942
Building................................... 5,781 5,210 5,226
Machinery and equipment.................... 6,708 5,511 5,295
Dies and tools............................. 4,552 4,404 3,375
Vehicles................................... 265 227 215
Office equipment........................... 668 536 449
-------- ------- -------
18,946 16,831 15,502
Less accumulated depreciation................... 5,577 4,591 3,145
-------- ------- -------
13,369 12,240 12,357
-------- ------- -------
Total...................................... $105,764 $65,300 $53,079
======== ======= =======
LIABILITIES AND BUSINESS UNIT INVESTMENT
Current Liabilities:
Trade accounts payable........................ $ 14,904 $ 6,998 $ 6,961
Accrued employee compensation, benefits and
payroll withholdings....................... 1,245 1,020 427
Other accrued liabilities..................... 7,705 4,519 4,055
-------- ------- -------
Total current liabilities.................. 23,854 12,537 11,443
Commitments and contingencies (Notes 9 and 12)
Business Unit Investment........................ 81,910 52,763 41,636
-------- ------- -------
Total...................................... $105,764 $65,300 $53,079
======== ======= =======
</TABLE>
See notes to financial statements.
F-20
<PAGE> 129
PORTABLE PRODUCTS DIVISION, A BUSINESS UNIT
OF GENERAC CORPORATION
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
FOR THE SIX MONTHS DECEMBER 31,
AND NINE DAYS ENDED --------------------
JULY 9, 1998 1997 1996
------------------- -------- --------
($ IN 000'S)
<S> <C> <C> <C>
Net sales............................ $139,551 $178,014 $122,550
Cost of sales........................ 104,537 131,095 95,246
-------- -------- --------
Gross profit.................... 35,014 46,919 27,304
-------- -------- --------
Expenses
Selling and service................ 16,624 21,729 13,860
General and administrative......... 2,380 4,161 4,435
-------- -------- --------
Total expenses.................. 19,004 25,890 18,295
-------- -------- --------
Income from operations............... 16,010 21,029 9,009
Other expenses
Interest expense................... 1,409 2,100 2,237
Foreign currency................... 108 186 15
-------- -------- --------
Total other expense............. 1,517 2,286 2,252
-------- -------- --------
Net income........................... $ 14,493 $ 18,743 $ 6,757
======== ======== ========
</TABLE>
See notes to financial statements.
F-21
<PAGE> 130
PORTABLE PRODUCTS DIVISION, A BUSINESS UNIT
OF GENERAC CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
FOR THE SIX MONTHS DECEMBER 31,
AND NINE DAYS ENDED -------------------
JULY 9, 1998 1997 1996
------------------- ------- --------
($ IN 000'S)
<S> <C> <C> <C>
Operating activities:
Net income.......................... $ 14,493 $18,743 $ 6,757
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation........................ 796 1,466 1,498
(Increase) decrease in assets:
Accounts receivable.............. (29,943) (4,753) (2,533)
Inventories...................... (10,054) (8,696) 9,661
Prepaid expenses................. (224) 276 (533)
Increase in liabilities:
Accounts payable................. 7,936 95 866
Accrued liabilities.............. 3,428 1,084 1,581
-------- ------- --------
Net cash (used in) provided by
operating activities........ (13,568) 8,215 17,297
Investing activities -- Capital
expenditures........................ (1,553) (1,413) (2,272)
Financing activities -- Increase
(decrease) in business unit
investment, net..................... 14,787 (6,784) (14,157)
Effect of exchange rate changes on
cash................................ (132) (75) 11
-------- ------- --------
Net increase (decrease) in cash and
cash equivalents.................... (466) (57) 879
Cash and cash equivalents:
Beginning of Period................. 1,065 1,122 243
-------- ------- --------
End of Period....................... $ 599 $ 1,065 $ 1,122
======== ======= ========
</TABLE>
See notes to financial statements.
F-22
<PAGE> 131
PORTABLE PRODUCTS DIVISION, A BUSINESS UNIT
OF GENERAC CORPORATION
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS AND NINE DAYS ENDED JULY 9, 1998
AND YEARS ENDED DECEMBER 31, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements include the accounts of the Portable
Products Division located in Jefferson, Wisconsin and its branches in the United
Kingdom and Germany, a Business Unit ("Business Unit") of Generac Corporation
("Generac"). The Business Unit designs and manufactures portable generator sets,
pressure washers and other engine-powered tools for the world market.
CASH EQUIVALENTS -- The Business Unit considers all investments purchased
with a maturity of three months or less to be cash equivalents.
INVENTORIES -- Inventories are stated at the lower of cost (first-in,
first-out method) or market (replacement cost or estimated net realizable
value).
REVENUE RECOGNITION -- Net sales and costs of sales are recognized as the
related products are shipped. A provision for estimated sales returns is
recorded in the period in which the sales are recognized.
RESEARCH AND DEVELOPMENT COSTS -- The Business Unit has an ongoing program
of new product development and existing product enhancement through redesign of
existing products and the addition of new models. Costs related to these
programs are expensed as incurred and totalled the following amounts for the
respective periods shown:
<TABLE>
<CAPTION>
($ IN 000'S)
------------
<S> <C>
For the six months and nine days ended July 9,
1998........................................... $ 925
For the years ended December 31,
1997........................................... 1,743
1996........................................... 2,494
</TABLE>
DEPRECIATION -- Costs of property, plant and equipment are depreciated
using the straight-line method over the estimated useful lives of the assets as
follows:
<TABLE>
<CAPTION>
YEARS
-------
<S> <C>
Land improvements................................... 20
Buildings........................................... 40
Machinery and equipment............................. 10
Dies and tools...................................... 3 to 5
Vehicles............................................ 4
Office equipment.................................... 5 to 10
</TABLE>
PRODUCT WARRANTIES -- The Business Unit provides that warranted products
are merchantable and free of defects in workmanship and material generally for a
period of one year. Warranty reserves are provided as charges to operations
under selling and service expense for estimated normal warranty costs and, if
applicable, for any significant problems
F-23
<PAGE> 132
PORTABLE PRODUCTS DIVISION, A BUSINESS UNIT
OF GENERAC CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
known to exist on products sold. Warranty expense totalled the following amounts
for the respective periods shown:
<TABLE>
<CAPTION>
($ IN 000'S)
------------
<S> <C>
For the six months and nine days ended July 9,
1998........................................... $1,848
For the years ended December 31,
1997........................................... 5,305
1996........................................... 1,941
</TABLE>
FOREIGN CURRENCY TRANSLATION -- The translation of the branch accounts into
U. S. dollars is performed for balance sheet accounts using current exchange
rates in effect at the balance sheet date and for revenue and expense accounts
using an average exchange rate during the period. The gains or (losses)
resulting from such translation are reflected as "cumulative translation
adjustments" in business unit investment. Such adjustments amounted to
$(703,000) through July 9, 1998.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- The Business Unit believes the
carrying amount of its financial instruments (cash and cash equivalents,
accounts receivable and accounts payable) is a reasonable estimate of the fair
value of these instruments.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
2. INTERCOMPANY TRANSACTIONS
The Business Unit is an operating unit of Generac. The Business Unit
investment balance reflects opening net assets, accumulated earnings for the six
months and nine days ended July 9, 1998 ("1998") and for the years ended
December 31, 1997 ("1997") and 1996 ("1996"), and various activities between the
Business Unit and Generac. Domestic cash management is centralized at Generac
and, as such, the Business Unit's cash funding requirements are met by Generac.
The financial statements for 1996 present the results of operations and
cash flows of the carved out Portable Products operations of Generac.
Receivables, inventories, property, plant and equipment, accounts payable,
accrued liabilities, net sales, cost of sales, and selling expenses were
specifically identified for each operation. Liabilities related to employee
compensation were allocated to each operation based upon either employee head
count or payroll. Other expenses relating to service, research and development,
and general and administrative were allocated to each operation based upon
either specific activities or sales levels. Management believes the allocations
are reasonable. Beginning in 1997, the Business Unit operated as a division of
Generac with separate financial reporting.
The financial statements for 1998 and 1997 include allocations by Generac
for certain operating and employee benefit costs incurred on behalf of the
Business Unit. These costs
F-24
<PAGE> 133
PORTABLE PRODUCTS DIVISION, A BUSINESS UNIT
OF GENERAC CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
are allocated based on estimates of time and services provided, specifically
identifiable charges, or relevant criteria that establish the Business Unit's
pro rata charge of costs common to all Generac operating units. Allocated
support costs from Generac to the Business Unit during 1998 and 1997 included
manufacturing support of $125,000 and $587,000, service support of $11,000 and
$789,000, research and development support of $21,000 and $410,000, general and
administrative support of $152,000 and $280,000, and human resource and employee
benefits support of $76,000 and $228,000, respectively.
Research and development expenses totaling $131,000, $246,000 and $235,000
were incurred by the Business Unit's United Kingdom branch during 1998, 1997 and
1996, respectively, on behalf of Generac and charged to Generac.
The Business Unit and Generac supply each other with certain inventories.
Total inventories transferred during 1998, 1997 and 1996 were $7,855,000,
$9,541,000 and $11,374,000, respectively, from Generac to the Business Unit and
$350,000, $1,330,000 and $0, respectively, from the Business Unit to Generac.
Commencing February 1, 1998, certain production was transferred from the
Business Unit to Generac. During the five months and nine days ended July 9,
1998, the Business Unit purchased $12,223,000 of inventories related to such
transferred production. At July 9, 1998, such inventory represented
approximately $2,673,000 including profit of approximately $508,000. All other
inventory is transferred at cost.
The Business Unit is also charged a portion of Generac's interest expense
based upon levels of Business Unit investment. This interest charge aggregated
$1,354,000, $1,999,000 and $2,237,000 during 1998, 1997 and 1996, respectively.
Management believes the allocations and activities between the Business
Unit and Generac are reasonable under the circumstances; however, they may not
be indicative of amounts that would be required to be incurred if the Business
Unit operated on a stand-alone basis.
3. S CORPORATION ELECTION
Generac and its Stockholders have elected for federal and certain state
income tax purposes to be treated as a S Corporation under provisions of the
Internal Revenue Code. Accordingly, Generac's taxable income is includable in
the individual tax returns of its Stockholders and no provision for income taxes
is included in the accompanying financial statements.
F-25
<PAGE> 134
PORTABLE PRODUCTS DIVISION, A BUSINESS UNIT
OF GENERAC CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. RECEIVABLES
Accounts receivable consisted of the following at:
<TABLE>
<CAPTION>
DECEMBER 31,
JULY 9, ------------------
1998 1997 1996
------- ------- -------
(IN 000'S)
<S> <C> <C> <C>
Accounts receivable...................... $48,753 $18,938 $14,414
Allowance for doubtful accounts.......... (225) (172) (151)
------- ------- -------
$48,528 $18,766 $14,263
======= ======= =======
</TABLE>
There are no accounts receivable having a due date more than one year after
the balance sheet date. The provision for doubtful accounts charged (credited)
to operations was as follows:
<TABLE>
<CAPTION>
($ IN 000'S)
------------
<S> <C>
For the six months and nine days ended July 9, 1998...... $ 67
For the years ended December 31,
1997................................................... 21
1996................................................... (155)
</TABLE>
5. INVENTORIES
Inventories consisted of the following at:
<TABLE>
<CAPTION>
DECEMBER 31,
JULY 9, ------------------
1998 1997 1996
------- ------- -------
($ IN 000'S)
<S> <C> <C> <C>
Raw materials and sub-assemblies......... $26,599 $20,490 $15,377
Finished goods........................... 16,240 12,533 9,330
------- ------- -------
Total.................................... $42,839 $33,023 $24,707
======= ======= =======
</TABLE>
Work-in-process is not a significant separate component of inventories and
is included in the raw materials and sub-assemblies component.
6. PROPERTY, PLANT AND EQUIPMENT
In 1994, Generac entered into an Industrial Development Revenue Bond
agreement with the City of Jefferson, Wisconsin. The proceeds from these
Industrial Development Revenue Bonds, aggregating $7,200,000, were used to
construct and equip the Business Unit's manufacturing facility in Jefferson.
Property, plant and equipment with a net carrying amount of $8,762,000 and
$8,644,000 at December 31, 1997 and 1996, respectively, were pledged as
collateral under a related letter of credit agreement which was terminated in
June 1998.
F-26
<PAGE> 135
PORTABLE PRODUCTS DIVISION, A BUSINESS UNIT
OF GENERAC CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. OTHER ACCRUED LIABILITIES
Other accrued liabilities consisted of the following at:
<TABLE>
<CAPTION>
DECEMBER 31,
JULY 9, ----------------
1998 1997 1996
------- ------ ------
($ IN 000'S)
<S> <C> <C> <C>
Sales incentives............................ $5,936 $2,768 $2,843
Product warranty............................ 1,020 987 659
Other....................................... 749 764 553
------ ------ ------
$7,705 $4,519 $4,055
====== ====== ======
</TABLE>
8. EMPLOYEE RETIREMENT AND SAVINGS PLANS
Generac has noncontributory pension plans (salaried and hourly) covering
substantially all of its employees including the employees of the Business Unit.
The benefits under the salaried plan are based upon years of service and the
participants' defined final average monthly compensation. The benefits under the
hourly plan are based on a unit amount at the date of termination multiplied by
the participants' credited service. Generac's funding policy for these plans is
to contribute amounts at least equal to the minimum annual amount required by
applicable regulations. Total pension expense allocated to the Business Unit for
the six months and nine days ended July 9, 1998 and the years ended December 31,
1997 and 1996 was $231,000, $293,000 and $255,000, respectively.
Generac maintains deferred compensation plans for key employees of the
Business Unit and at July 9, 1998, approximately $182,000 of deferred
compensation was included in accrued employee benefits. Deferred compensation
expense charged to operations was $18,000, $40,000 and $23,000, for the six
months and nine days ended July 9, 1998 and for the years ended December 31,
1997 and 1996, respectively.
9. LEASE COMMITMENTS
Generac leases certain manufacturing equipment, computer equipment and
vehicles used in the Business Unit under operating leases for lease terms
ranging up to five years.
The aggregate minimum rental commitments at July 9, 1998 are as follows:
<TABLE>
<S> <C>
Five months and 22 days
ended December 31, 1998........................ $ 389,000
Years ended:
1999........................................... 746,000
2000........................................... 701,000
2001........................................... 674,000
2002........................................... 287,000
----------
$2,797,000
==========
</TABLE>
F-27
<PAGE> 136
PORTABLE PRODUCTS DIVISION, A BUSINESS UNIT
OF GENERAC CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Total rent expense for the six months and nine days ended July 9, 1998 and
the years ended December 31, 1997 and 1996 was approximately $476,000, $462,000
and $100,000, respectively.
Certain manufacturing equipment with an original cost of $3,178,000 is
leased under a five-year master lease arrangement and accounts for $353,000 and
$385,000 of total rental expense for the six months and nine days ended July 9,
1998 and for the year ended December 31, 1997, respectively; $673,000 of future
annual commitments through 2001; and all of the year 2002 commitments. At the
end of the lease term, Generac has the option to purchase the equipment at a
purchase price equal to the then fair market value which shall not be less than
15% nor more than 25% of the original equipment cost.
10. MAJOR CUSTOMERS
Two customers accounted for approximately 69% of net sales for the six
months and nine days ended July 9, 1998, and included in accounts receivable at
July 9, 1998 are amounts due from these two customers aggregating $34,998,000.
Three customers accounted for approximately 74% of net sales for the year ended
December 31, 1997, and included in accounts receivable at December 31, 1997 are
amounts due from these three customers aggregating $11,076,000. Two customers
accounted for approximately 56% of net sales for the year ended December 31,
1996, and included in accounts receivable at December 31, 1996 are amounts due
from these two customers aggregating $6,608,000.
11. FOREIGN OPERATIONS
The Business Unit's European operations accounted for approximately 19%,
18% and 20% of the total Business Unit's assets as of July 9, 1998, December 31,
1997 and December 31, 1996, respectively. Sales for these European operations
accounted for approximately 8%, 8% and 10% of net sales for the six months and
nine days ended July 9, 1998 and for the years ended December 31, 1997 and 1996,
respectively.
12. CONTINGENCIES
In the normal course of business the Business Unit is involved in certain
legal actions and claims. It is the opinion of management that such litigation
and claims are either covered by insurance or will be resolved without material
effect on the Business Unit's financial position or results of operations.
13. SUBSEQUENT EVENT
On July 9, 1998, Generac completed the sale of substantially all of the
assets and the assumption of certain liabilities of the Business Unit to Generac
Portable Products, LLC (a company formed by The Beacon Group III -- Focus Value
Fund, L.P.) for a net purchase price of approximately $305 million.
F-28
<PAGE> 137
- ---------------------------------------------------------
- ---------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE ISSUERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUERS SINCE THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR 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
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Where You Can Find More Information.... i
Forward-Looking Statements............. i
Summary................................ 1
Risk Factors........................... 8
The Issuers............................ 14
The Transaction........................ 15
Use of Proceeds of the New Notes....... 16
Capitalization......................... 17
The Exchange Offer..................... 18
Unaudited Pro Forma Consolidated
Financial Information................ 28
Selected Historical Financial Data..... 32
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 35
Business............................... 44
Management............................. 56
Security Ownership..................... 62
Certain Relationships and Related Party
Transactions......................... 64
Description of the Senior Secured
Credit Facility...................... 64
Description of the New Notes........... 66
Description of the Old Notes...........
Old Notes Registration Rights
Agreement............................ 98
Book-Entry; Delivery and Form.......... 100
Certain United States Federal Income
Tax Considerations................... 102
Plan of Distribution................... 104
Experts................................ 105
Validity of Notes...................... 105
Index to Financial Statements.......... F-1
</TABLE>
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
GENERAC PORTABLE PRODUCTS, LLC
GPPW, INC.
LOGO
OFFER TO EXCHANGE
11 1/4% SENIOR SUBORDINATED
NOTES DUE 2006
FOR ALL OUTSTANDING
11 1/4% SENIOR SUBORDINATED
NOTES DUE 2006
-------------------------
PROSPECTUS
-------------------------
, 1998
- ---------------------------------------------------------
- ---------------------------------------------------------
<PAGE> 138
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
In general, the Wisconsin Business Corporation Law provides that a
corporation shall indemnify directors and officers for all reasonable expenses
incurred in connection with the successful defense of actions arising in
connection with their service as directors and officers of the corporation. In
other cases, the Wisconsin Business Corporation Law provides that the
corporation shall indemnify a director or officer against liability unless the
director or officer breached or failed to perform a duty owed to the corporation
and such breach or failure meets certain specified criteria constituting, in
general, some act of misconduct. In addition, the corporation may reimburse a
director or officer for his expenses in defending against actions as they are
incurred upon the director's or officer's written request accompanied by a
written affirmation of his good faith belief that he has not breached or failed
to perform his duties to the corporation and a written undertaking to repay
amounts advanced if it is ultimately determined that indemnification is not
required under the Wisconsin Business Corporation Law. A court of law may order
that the corporation provide indemnification to a director or officer if it
finds that the director or officer is entitled thereto under the applicable
statutory provision or is fairly and reasonably entitled thereto in view of all
the relevant circumstances, whether or not such indemnification is required
under the applicable statutory provision.
The Wisconsin Business Corporation Law specifies various procedures
pursuant to which a director or officer may establish his right to
indemnification.
Provided that it is not determined by or on behalf of the corporation that
the director or officer breached or failed to perform a duty owed to the
corporation and such breach or failure meets certain specified criteria
constituting, in general, some act of misconduct, a Wisconsin corporation may
provide additional rights to indemnification under its articles of incorporation
or by-laws, by vote, by agreement or by resolution.
GPPW's Articles of Incorporation provide for indemnification and
advancement of expenses of directors and officers to the fullest extent
permitted by the Wisconsin Business Corporation Law. The indemnification
provided by GPPW's Articles of Incorporation is not deemed to be exclusive of
any other rights to which an officer or director may be entitled under any
by-law, vote of shareholders or disinterested directors or otherwise.
Section 18-108 of the Delaware Limited Liability Company Act grants a
Delaware limited liability company the power, subject to the standards and
restrictions, if any, as are set forth in its limited liability company
agreement, to indemnify any member or manager or other person from and against
any and all claims and demands whatsoever.
Pursuant to Article VIII of the Limited Liability Company Agreement of
Generac Portable Products, LLC (the "LLC Agreement"), the Operating Company will
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 (other than an action by or in
the right of the Operating Company) by reason of the fact that such person is or
was a director or officer of the Operating Company, or is or was serving, at the
Operating Company's request, in a similar capacity with another enterprise. The
Operating Company will indemnify such officers and directors in an action by or
in the right of the Operating Company to procure a judgment in its favor under
the same conditions, except that no indemnification is permitted without
judicial approval if
II-1
<PAGE> 139
the officer or director is adjudged to be liable to the Operating Company. Where
an officer or director is successful on the merits or otherwise in the defense
of any action referred to above, the Operating Company must indemnify him or her
against the expenses (including attorneys' fees) which he or she actually and
reasonably incurred in connection therewith.
The Operating Company will, in connection with his or her appearance as a
witness or other participation in a proceeding, pay the expenses actually or
reasonably incurred or anticipated by any officer or director participating in
such proceeding, provided that the director or officer undertakes to repay such
amount if it shall ultimately be determined that he or she is not entitled to be
indemnified by the Operating Company as authorized by Article VIII of the LLC
Agreement.
The indemnification provided by the LLC Agreement is not deemed to be
exclusive of any other rights to which an officer or director may be entitled
under any law, agreement, vote or otherwise.
The Operating Company may grant indemnification rights to other employees
or agents of, or other persons serving, the Operating Company. The Operating
Company is also permitted to purchase directors' and officers' liability
insurance. Article VIII of the LLC Agreement also provides that the Operating
Company will indemnify its officers and directors to the fullest extent
permitted by applicable law in effect from time to time.
The foregoing statements are subject to the detailed provisions of Article
VIII of the LLC Agreement.
II-2
<PAGE> 140
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S> <C>
3.1 -- Certificate of Incorporation of GPPC, Inc.
3.2 -- Certificate of Amendment of Certificate of Incorporation
Before Payment of Any Part of the Capital of GPPC, Inc.
3.3 -- Certificate of Amendment of Certificate of Incorporation
Before Payment of Any Part of the Capital of Generac
Portable Products, Inc.
3.4 -- By-Laws of Generac Portable Products, Inc.
3.5 -- Certificate of Formation of Generac Portable Products, LLC
3.6 -- Limited Liability Company Agreement of Generac Portable
Products, LLC
3.7 -- Articles of Incorporation of GPPW, Inc.
3.8 -- By-laws of GPPW, Inc.
4.1 -- Indenture, dated as of July 1, 1998 among Generac Portable
Products, LLC, GPPW, Inc. and Marine Midland Bank, as
trustee.
4.2 -- Registration Rights Agreement, dated as of July 2, 1998
among Generac Portable Products, LLC, GPPW, Inc. and BT
Alex. Brown Incorporated.
4.3 -- Form of Security for 11 1/4% Senior Subordinated Notes due
2006 originally issued by Generac Portable Products, LLC and
GPPW, Inc. on July 9, 1998.
4.4 -- Form of Security for 11 1/4% Senior Subordinated Notes due
2006 to be issued by Generac Portable Products, LLC and
GPPW, Inc. and registered under the Securities Act of 1933,
as amended (including the form of Guarantee).
5.1 -- Opinion of King & Spalding (including the consent of such
counsel).
12.1 -- Computation of the ratios of earnings to fixed charges.
23.1 -- Consent of Deloitte & Touche LLP.
23.2 -- Consent of PricewaterhouseCoopers LLP.
23.3 -- Consent of King & Spalding (included in Exhibit 5.1).
24.1 -- Powers of Attorney (included in the signature pages of this
Registration Statement).
25.1 -- Statement of Eligibility of Trustee.
27.1 -- Financial Data Schedule.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Exchange Agent Agreement.
</TABLE>
II-3
<PAGE> 141
(b) FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
SCHEDULE
NUMBER DESCRIPTION OF SCHEDULE
- -------- -----------------------
<C> <S> <C>
-- Report of PricewaterhouseCoopers LLP on Financial Statement
Schedule
-- Report on Schedule of Deloitte & Touche LLP (included in
Exhibit 23.1)
I -- Generac Portable Products, Inc. Schedule of Combined
Valuation Accounts.
II -- Portable Products Division, a Business Unit of Generac
Corporation Schedule of Combined Valuation Accounts.
</TABLE>
ITEM 22. UNDERTAKINGS
Each of the undersigned registrants (the "Registrants") hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of any Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(2) That, insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrants pursuant to the foregoing
provisions, or otherwise, the Registrants have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by any Registrant of
expenses incurred or paid by a director, officer or controlling person of
such 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 Registrants will,
unless in the opinion of their counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
(3) To respond for requests for information that is incorporated by
reference into the Prospectus pursuant to Item 4, 10(b), 11 or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of responding
to the request.
(4) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired or involved
therein, that was not the subject of and included in the Registration
Statement when it became effective.
II-4
<PAGE> 142
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on March 1, 1999.
GENERAC PORTABLE PRODUCTS, INC.
By: /s/ ERIC R. WILKINSON
------------------------------------
Eric R. Wilkinson
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints ERIC R. WILKINSON, President of Generac Portable
Products, Inc., and RICHARD A. AUBE, Secretary and Treasurer of Generac Portable
Products, Inc., or either of them, and any agent for service named in this
Registration Statement and each of them, his true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any registration
statements filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended and 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 attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agents or any of them, 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, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Generac Portable Products, LLC and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ERIC R. WILKINSON President and Director, Generac March 1, 1999
- --------------------------------------------- Portable Products, Inc.
Eric R. Wilkinson
/s/ RICHARD A. AUBE Secretary and Treasurer, Generac March 1, 1999
- --------------------------------------------- Portable Products, Inc.
Richard A. Aube
/s/ R. EUGENE CARTLEDGE Chairman of the Board, Generac March 1, 1999
- --------------------------------------------- Portable Products, Inc.
R. Eugene Cartledge
</TABLE>
II-5
<PAGE> 143
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ROBERT D. KERN Director, Generac Portable March 1, 1999
- --------------------------------------------- Products, Inc.
Robert D. Kern
/s/ THOMAS G. MENDELL Director, Generac Portable March 1, 1999
- --------------------------------------------- Products, Inc.
Thomas G. Mendell
/s/ DORRANCE J. NOONAN, JR. Director, Generac Portable March 1, 1999
- --------------------------------------------- Products, Inc.
Dorrance J. Noonan, Jr.
/s/ R. RALPH PARKS Director, Generac Portable March 1, 1999
- --------------------------------------------- Products, Inc.
R. Ralph Parks
/s/ RICHARD A. VAN DEUREN Director, Generac Portable March 1, 1999
- --------------------------------------------- Products, Inc.
Richard A. Van Deuren
</TABLE>
II-6
<PAGE> 144
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Jefferson, State of
Wisconsin, on March 1, 1999.
GENERAC PORTABLE PRODUCTS, LLC
By: /s/ DORRANCE J. NOONAN, JR.
------------------------------------
Dorrance J. Noonan, Jr.
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints DORRANCE J. NOONAN, JR., President and Chief
Executive Officer of Generac Portable Products, LLC, and GARY J. LATO, Chief
Financial Officer of Generac Portable Products, LLC, or either of them, and any
agent for service named in this Registration Statement and each of them, his
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any registration statements filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and 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
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, 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, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Generac Portable Products, LLC and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DORRANCE J. NOONAN, JR. President, Chief Executive Officer March 1, 1999
- --------------------------------------------- and Director, Generac Portable
Dorrance J. Noonan, Jr. Products, LLC
/s/ GARY J. LATO Chief Financial Officer, Generac March 1, 1999
- --------------------------------------------- Portable
Gary J. Lato Products, LLC
/s/ RICHARD A. AUBE Director, Generac Portable March 1, 1999
- --------------------------------------------- Products, LLC
Richard A. Aube
</TABLE>
II-7
<PAGE> 145
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on March 1, 1999.
GPPW, INC.
By: /s/ FAITH ROSENFELD
------------------------------------
Faith Rosenfeld
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints RICHARD A. AUBE, Secretary and Treasurer of GPPW,
Inc., and any agent for service named in this Registration Statement and each of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any registration statements filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended and 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 attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, 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, as amended,
this Registration Statement has been signed by the following persons in the
capacities with GPPW, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ FAITH ROSENFELD President, GPPW, Inc. March 1, 1999
- ---------------------------------------------
Faith Rosenfeld
/s/ RICHARD A. AUBE Secretary, Treasurer and March 1, 1999
- --------------------------------------------- Director of GPPW, Inc.
Richard A. Aube
</TABLE>
II-8
<PAGE> 146
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Generac Portable Products, Inc.
Our audit of the consolidated financial statements referred to in our
report dated February 22, 1999 appearing in Part I of this Registration
Statement on Form S-4 also included an audit of the accompanying Financial
Statement Schedule of Generac Portable Products, Inc. included in Part II of
this Registration Statement on Form S-4. In our opinion, this Financial
Statement Schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
February 22, 1999
S-1
<PAGE> 147
SCHEDULE I
GENERAC PORTABLE PRODUCTS, INC.
SCHEDULE OF COMBINED VALUATION ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING CHARGES TO BALANCE AT
OF PERIOD EXPENSE DEDUCTIONS END OF PERIOD
---------- ---------- ---------- -------------
($ IN 000'S)
<S> <C> <C> <C> <C>
ACCOUNTS RECEIVABLE:
For the Period July 10, 1998 through December
31, 1998.................................... $225 $ 17 $ -- $242
</TABLE>
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING CHARGES TO BALANCE AT
OF PERIOD EXPENSE DEDUCTIONS END OF PERIOD
---------- ---------- ---------- -------------
($ IN 000'S)
<S> <C> <C> <C> <C>
INVENTORY:
For the Period July 10, 1998 through December
31, 1998.................................... $500 $593 $319 $774
</TABLE>
S-2
<PAGE> 148
SCHEDULE II
PORTABLE PRODUCTS DIVISION, A BUSINESS UNIT
OF GENERAC CORPORATION
SCHEDULE OF COMBINED VALUATION ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING CHARGES TO BALANCE AT
OF PERIOD EXPENSE DEDUCTIONS END OF PERIOD
---------- ---------- ---------- -------------
($ IN 000'S)
<S> <C> <C> <C> <C>
ACCOUNTS RECEIVABLE:
Year Ended:
December 31, 1996........................... $444 $(155) $138 $151
December 31, 1997........................... 151 21 -- 172
Six Months and Nine Days Ended:
July 9, 1998................................ 172 67 14 225
</TABLE>
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING CHARGES TO BALANCE AT
OF PERIOD EXPENSE DEDUCTIONS END OF PERIOD
---------- ---------- ---------- -------------
($ IN 000'S)
<S> <C> <C> <C> <C>
INVENTORY:
Year Ended:
December 31, 1996........................... $190 $331 $396 $125
December 31, 1997........................... 125 781 556 350
Six Months and Nine Days Ended:
July 9, 1998................................ 350 412 262 500
</TABLE>
S-3
<PAGE> 149
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <C> <S>
3.1 -- Certificate of Incorporation of GPPC, Inc.
3.2 -- Certificate of Amendment of Certificate of Incorporation
Before Payment of Any Part of the Capital of GPPC, Inc.
3.3 -- Certificate of Amendment of Certificate of Incorporation
Before Payment of Any Part of the Capital of Generac
Portable Products, Inc.
3.4 -- By-Laws of Generac Portable Products, Inc.
3.5 -- Certificate of Formation of Generac Portable Products, LLC
3.6 -- Limited Liability Company Agreement of Generac Portable
Products, LLC
3.7 -- Articles of Incorporation of GPPW, Inc.
3.8 -- By-laws of GPPW, Inc.
4.1 -- Indenture, dated as of July 1, 1998 among Generac Portable
Products, LLC, GPPW, Inc. and Marine Midland Bank, as
trustee.
4.2 -- Registration Rights Agreement, dated as of July 2, 1998
among Generac Portable Products, LLC, GPPW, Inc. and BT
Alex. Brown Incorporated.
4.3 -- Form of Security for 11 1/4% Senior Subordinated Notes due
2006 originally issued by Generac Portable Products, LLC and
GPPW, Inc. on July 9, 1998.
4.4 -- Form of Security for 11 1/4% Senior Subordinated Notes due
2006 to be issued by Generac Portable Products, LLC and
GPPW, Inc. and registered under the Securities Act of 1933,
as amended (including the form of Guarantee).
5.1 -- Opinion of King & Spalding (including the consent of such
counsel).
12.1 -- Computation of the ratios of earnings to fixed charges.
23.1 -- Consent of Deloitte & Touche LLP.
23.2 -- Consent of PricewaterhouseCoopers LLP.
23.3 -- Consent of King & Spalding (included in Exhibit 5.1).
24.1 -- Powers of Attorney (included in the signature pages of this
Registration Statement).
25.1 -- Statement of Eligibility of Trustee.
27.1 -- Financial Data Schedule.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Exchange Agent Agreement.
</TABLE>
<PAGE> 1
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
GPPC, INC.
FIRST: NAME. The name of the corporation (the "CORPORATION") is GPPC,
INC.
SECOND: REGISTERED OFFICE AND AGENT. The address of the registered
office of the Corporation in the State of Delaware is Corporation Service
Company, 1013 Centre Road, Wilmington, County of New Castle, Delaware 19805. The
name of the registered agent at such address is Corporation Service Company.
THIRD: PURPOSES. The purposes for which the Corporation is formed are
to engage in any lawful act or activity for which corporations may be organized
under the Delaware General Corporation Law and to possess and exercise all of
the powers and privileges granted by such law and any other law of Delaware.
FOURTH: CAPITALIZATION. The total number of shares of stock which the
Corporation shall have authority to issue is One Thousand (1,000) shares of
Common Stock, with a par value of $.01 per share.
FIFTH: INCORPORATOR. The name and mailing address of the sole
incorporator is as follows:
NAME MAILING ADDRESS
---- ---------------
Andrew M. Metcalf King & Spalding
1185 Avenue of the Americas
New York, New York 10036-4003
<PAGE> 2
SIXTH: ADDITIONAL POWERS OF BOARD OF DIRECTORS. The Board of Directors
shall have the power, without stockholder action, to make bylaws for the
Corporation and to amend, alter or repeal the bylaws of the Corporation.
SEVENTH: VOTING BY BALLOT. Elections of Directors need not be by ballot
unless the bylaws of the Corporation provide otherwise.
EIGHTH: STOCKHOLDERS MEETINGS. Any action required to be, or which may
be, taken at a meeting of stockholders, may be taken without a meeting if
written consent, setting forth the action so taken, shall be signed and dated by
all stockholders then entitled to vote. Such consent shall have the same force
and effect as an affirmative vote of the stockholders then entitled to vote and
shall be filed with the minutes of the proceedings of the stockholders.
NINTH: LIMITED LIABILITY OF DIRECTORS. The directors of the Corporation
shall be entitled to the benefits of all limitations on the liability of
directors generally that are now or hereafter become available under the
Delaware General Corporation Law. Without limiting the generality of the
foregoing, no director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for any acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the Delaware General Corporation Law or (iv)
for any transaction from which the director derived an improper personal
benefit. Any repeal or modification of this Article NINTH shall be prospective
only, and shall not affect, to the detriment of any director, any limitation on
the personal liability of a director of the Corporation existing at the time of
such repeal or modification.
2
<PAGE> 3
IN WITNESS WHEREOF, the undersigned, being the sole incorporator named
herein, for the purpose of forming a corporation pursuant to the Delaware
General Corporation Law does make this certificate, hereby declaring and
certifying that the facts herein stated are true, and accordingly has hereunto
set his hand this 29th day of April, 1998.
/s/ Andrew M. Metcalf
---------------------------
Andrew M. Metcalf
Sole Incorporator
S-1
<PAGE> 1
Exhibit 3.2
CERTIFICATE OF AMENDMENT OF CERTIFICATE
OF INCORPORATION BEFORE PAYMENT OF
ANY PART OF THE CAPITAL
OF
GPPC, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "CORPORATION")
is GPPC, Inc.
2. The Corporation has not received any payment for any of its stock.
3. The certificate of incorporation of the Corporation is hereby
amended by striking our Article FIRST thereof and by substituting in lieu of
said Article the following new Article:
"FIRST: Name. The name of the Corporation is Generac Portable
Products, Inc."
4. The amendment of the certificate of incorporation of the Corporation
herein certified was duly adopted, pursuant to the provisions of Section 241 of
the General Corporation Law of the State of Delaware, by at least a majority of
the directors who have been elected and qualified.
Signed on this 19 day of May, 1998
/s/ Richard A. Aube
-------------------------------
Name: Richard A. Aube
Title: Vice President
<PAGE> 1
Exhibit 3.3
CERTIFICATE OF AMENDMENT OF CERTIFICATE
OF INCORPORATION BEFORE PAYMENT OF
ANY PART OF THE CAPITAL
OF
GENERAC PORTABLE PRODUCTS, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "CORPORATION")
is Generac Portable Products, Inc.
2. The Corporation has not received any payment for any of its stock.
3. The certificate of incorporation of the Corporation is hereby
amended by striking out Article FOURTH thereof and by substituting in lieu of
said Article the following new Article:
"FOURTH: CAPITALIZATION. The total number of shares of stock
which the Corporation shall have authority to issue is Twelve Thousand
(12,000) shares of Common Stock, with a par value of $.01 per share."
4. The amendment of the certificate of incorporation of the Corporation
herein certified was duly adopted, pursuant to the provisions of Section 241 of
the General Corporation Law of the State of Delaware, by at least a majority of
the directors who have been elected and qualified.
Signed on this 7th day of July, 1998
/s/ Richard A. Aube
------------------------------
Richard A. Aube
Secretary and Treasurer
<PAGE> 1
Exhibit 3.4
BY-LAWS OF
GPPC, INC.
ARTICLE I
STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. The annual meeting of the stockholders for
the election of directors and for the transaction of such other business as may
properly come before the meeting, shall be held at such place, either within or
without the State of Delaware, on such date and at such time as the Board of
Directors may by resolution provide, or, if the Board of Directors fails to
provide, then such meeting shall be held at the principal office of the
Corporation at 10:00 a.m. on the second Tuesday in April of each year or, if
such date is a legal holiday, on the next succeeding business day. The Board of
Directors may specify by resolution prior to any special meeting of stockholders
held within the year that such meeting shall be in lieu of the annual meeting.
SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders may
be called at any time by any member of the Board of Directors, the President or
upon written request of the holders of at least twenty-five percent (25%) of the
outstanding shares of stockholders then entitled to vote. Such written request
shall specify the time and purpose of the proposed meeting. Such meeting shall
be held at such place, either within or without the State of Delaware, as is
stated in the call and notice thereof.
SECTION 3. NOTICE OF MEETINGS. Written notice of each meeting of
stockholders, stating the time and place of the meeting, and the purpose of any
special meeting, shall be mailed to each stockholder entitled to vote at or to
notice of, such meeting at the address shown on the books of the Corporation not
less than ten (10) nor more than sixty (60) days prior to such meeting unless
such stockholder waives notice of the meeting. If an agreement of merger or
consolidation or a sale, lease, exchange, or other disposition of all or
substantially all of the property and assets of the Corporation is to be
considered at any annual or special meeting, the written notice shall state the
purpose of such meeting and shall be given to each stockholder, whether or not
entitled to vote thereon, not less than twenty (20) days before such meeting.
Any stockholder may execute a waiver of notice, in person or by proxy, either
before or after any meeting, and shall be deemed to have waived notice if such
stockholder is present at such meeting in person or by proxy. Neither the
business transacted at, nor the purpose of, any meeting need be stated in the
waiver of notice of such meeting.
Notice of any meeting may be given by the President, the Secretary or
the person or persons calling such meeting. No notice need be given of the time
and place of reconvening of any adjourned meeting, if the time and place to
which the meeting is adjourned are announced at the adjourned meeting, unless
the adjournment is for more than thirty days.
<PAGE> 2
2
SECTION 4. LIST OF STOCKHOLDERS. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present. The stock ledger shall be the only evidence as to
who are (i) the stockholders entitled to examine the stock ledger, (ii) the
stockholders listed on the books of the Corporation or (iii) entitled to vote in
person or by proxy at any meeting of the stockholders.
SECTION 5. QUORUM; REQUIRED STOCKHOLDER VOTE. A quorum for the
transaction of business at any annual or special meeting of stockholders shall
exist when the holders of a majority of the outstanding shares entitled to vote
are represented either in person or by proxy at such meeting. If a quorum is
present, corporate action to be taken by stockholder vote, including the
election of directors, shall be authorized in the manner specified in the
Certificate of Incorporation of the Corporation, except as otherwise provided by
law. When a quorum is once present to organize a meeting, the stockholders
present may continue to do business at the meeting or at any adjournment thereof
notwithstanding withdrawal of enough stockholders to leave less than a quorum.
The holders of a majority of the voting shares represented at a meeting, whether
or not a quorum is present, may adjourn such meeting from time to time.
SECTION 6. PROXIES. A stockholder may vote either in person or by a
proxy which such stockholder has duly executed in writing. No proxy shall be
valid after three years from the date of its execution unless a longer period is
expressly provided in the proxy.
SECTION 7. ORGANIZATION. Meetings of stockholders shall be presided
over by the Chairman of the Board, if any, or in his absence by the President,
or in the absence of the foregoing persons by a chairman designated by the Board
of Directors, or in the absence of such designation by a chairman chosen at the
meeting. The Secretary shall act as secretary of the meeting, but in his absence
the chairman of the meeting may appoint any person to act as secretary of the
meeting.
SECTION 8. RECORD DATE. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment
<PAGE> 3
3
of any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for any other lawful purpose, the Board of Directors of the Corporation may fix
a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date (i) in the case of the determination of stockholders entitled
to vote at any meeting of stockholders or adjournment thereof, shall not be more
than sixty (60) nor less than ten (10) days before the date of such meeting,
(ii) in the case of the determination of stockholders entitled to express
consent to corporate action in writing without a meeting, shall not be more than
ten (10) days after the date upon which the resolution fixing the record date is
adopted by the Board of Directors and (iii) in the case of any other action,
shall not be more than sixty (60) days prior to such other action. If no record
date is fixed: (x) the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held, (y) the record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting
when no prior action of the Board of Directors is required by law, shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation in accordance with
applicable law, or, if prior action by the Board of Directors is required by
law, shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action and (z) the record date
for determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 9. NOTICE OF STOCKHOLDER BUSINESS. At any meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before a meeting, business
must be (i) specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the Board of Directors, (ii) otherwise properly
brought before the meeting by or at the direction of the Board of Directors or
(iii) otherwise properly brought before the meeting by a stockholder. For
business to be properly brought before a meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation, not
less than sixty (60) days nor more than ninety (90) days prior to the meeting;
provided, however, that in the event that less than sixty (60) days' notice or
prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the day on which such
notice of the date of the
<PAGE> 4
4
meeting was mailed or such public disclosure was made. A stockholder's notice to
the Secretary shall set forth as to each matter the stockholder proposes to
bring before the meeting (i) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at the
meeting, (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business, (iii) the class and number of shares
of the Corporation which are beneficially owned by the stockholder and (iv) any
material interest of the stockholder in such business. Notwithstanding anything
in these By-Laws to the contrary, no business shall be conducted at any meeting
except in accordance with the procedures set forth in this Section 9. The
Chairman of the meeting shall, if the facts warrant, determine that business was
not properly brought before the meeting in accordance with the provisions of
this Section 9, and if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting shall not
be transacted.
SECTION 10. NOTICE OF STOCKHOLDER NOMINEES. Only persons who are
nominated in accordance with the procedures set forth in this Section 10 shall
be eligible for election as directors. Nominations of persons for election to
the Board of Directors of the Corporation may be made at a meeting of
stockholders by or at the direction of the Board of Directors or by any
stockholder of the Corporation then entitled to vote for the election of
directors who complies with the notice procedures set forth in this Section 10.
Such nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than sixty (60) days nor more than ninety (90) days prior to the meeting;
provided, however, that in the event that less than sixty (60) days' notice or
prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder must be so received no later than the
close of business on the 10th day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made. Such
stockholder's notice shall set forth (A) as to each person whom the stockholder
proposes to nominate for election or re-election as a director, (i) the name,
age, business address and residence address of such person, (ii) the principal
occupation or employment of such person, (iii) the class and number of shares of
the Corporation which are beneficially owned by such person and (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (the "SECURITIES EXCHANGE ACT") (including, without limitation, a
copy of such person's written consent to being named as a nominee and to serving
as a director if elected) and (B) as to the stockholder giving the notice, (i)
the name and address, as they appear on the Corporation's books, of such
stockholder and (ii) the series, class and number of shares of the Corporation
which are beneficially owned by such stockholder. At the request of the Board of
Directors, any person nominated by the Board of Directors for election as a
director shall furnish
<PAGE> 5
5
to the Secretary of the Corporation that information required to be set forth in
a stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the Corporation unless nominated
in accordance with the procedures set forth in this Section 10. The Chairman of
the meeting shall, if the facts warrant, determine that a nomination was not
made in accordance with the procedure prescribed by this Section 10, and if he
should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded. Nothing in this Section 10 shall be construed
to affect the requirements for proxy statements of the Corporation under
Regulation 14A of the Securities Exchange Act.
SECTION 11. BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS The
Corporation shall not be governed by Section 203 of the Delaware General
Corporation Law.
ARTICLE II
DIRECTORS
SECTION 1. DIRECTORS. The number of directors which shall constitute
the whole Board shall be not less than one (1) nor more than seven (7). The
first Board shall consist of six (6) directors. The directors need not be
stockholders. The directors shall be elected at the annual meeting of the
stockholders by a majority of the stockholders then entitled to vote, except as
provided in Section 2 of this Article, and each director elected shall hold
office until his or her successor is elected and qualified; provided, however,
that unless otherwise restricted by the Certificate of Incorporation or by-law,
any director or the entire Board of Directors may be removed, either with or
without cause, from the Board of Directors at any meeting of stockholders by a
majority of the stock represented and entitled to vote thereat.
SECTION 2. VACANCIES. Vacancies on the Board of Directors by reason of
death, resignation, retirement, disqualification, removal from office, or
otherwise, and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority of the directors then
in office, although less than a quorum, or by a sole remaining director. The
directors so chosen shall hold office until the next annual election of
directors and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by the Delaware General Corporation
Law or any successor statute. If, at the time of filling any vacancy or any
newly created directorship, the directors then in office shall constitute less
than a majority of the whole Board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent of the total number of the shares at
the time outstanding then having the right to vote for such directors, summarily
order an election to be held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the directors then in
office.
<PAGE> 6
6
SECTION 3. MANAGEMENT. The property and business of the Corporation
shall be managed by or under the direction of its Board of Directors. In
addition to the powers and authorities by these By-Laws expressly conferred upon
them, the Board may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these By-Laws directed or required to be exercised or done
by the stockholders.
SECTION 4. MEETINGS OF THE BOARD; NOTICE OF MEETINGS; WAIVER OF NOTICE.
The annual meeting of the Board of Directors for the purpose of electing
officers and transacting such other business as may be brought before the
meeting shall be held each year immediately following the annual meeting of
stockholders. The Board of Directors may by resolution provide for the time and
place of other regular meetings and no notice of such regular meetings need be
given. Special meetings of the Board of Directors may be called by the President
or by any two directors, unless the Board consists of one director, in which
case special meetings may be called by the sole director. Written notice of the
time and place of such meetings shall be given to each director by first class
mail or facsimile at least four (4) days before the meeting or by telephone,
telegraph, cablegram or in person at least two (2) days before the meeting. Any
director may execute a waiver of notice, either before or after any meeting, and
shall be deemed to have waived notice if he is present at such meeting. Neither
the business to be transacted at, nor the purpose of, any meeting of the Board
of Directors need be stated in the notice or waiver of notice of such meeting.
Any meeting may be held at any place within or without the State of Delaware.
SECTION 5. QUORUM; VOTE REQUIREMENT. A majority of the authorized
number of directors shall constitute a quorum for the transaction of business at
any meeting. When a quorum is present, the vote of a majority of the votes
represented by directors present shall be the act of the Board of Directors,
unless a greater vote is required by law, by the Certificate of Incorporation or
by these By-Laws. In the absence of a quorum, a majority of the directors
present may adjourn any meeting from time to time until a quorum is present.
SECTION 6. ACTION OF BOARD WITHOUT MEETING. Any action required or
permitted to be taken at a meeting of the Board of Directors or any committee
thereof may be taken without a meeting if written consent, setting forth the
action so taken, is signed by all the directors or committee members and filed
with the minutes of proceedings of the Board of Directors or committee, as the
case may be. Such consent shall have the same force and effect as a unanimous
affirmative vote of the Board of Directors or committee, as the case may be.
SECTION 7. TELEPHONE CONFERENCE MEETINGS. Unless the Certificate of
Incorporation otherwise provides, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board or any committee by means of telephone
<PAGE> 7
7
conference or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this Section 7 shall constitute presence in person at such meeting.
SECTION 8. COMMITTEES. The Board of Directors, by resolution adopted by
a majority of all of the directors, may designate such committees as it deems
necessary or desirable, each such committee to consist of one or more of the
directors of the Corporation. Vacancies in the membership of such committees
shall be filled by the Board of Directors at a regular or special meeting of the
Board of Directors. Any such committee may authorize the seal of the Corporation
to be affixed to all papers which may require it and, to the extent provided in
the resolution of the Board of Directors, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation; provided that no committee shall have the
authority of the Board of Directors in reference to (i) an amendment to the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors as provided in Section 151(a) of the
Delaware General Corporation Law fix any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the Corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the Corporation), (ii) the adoption of an
agreement of merger or consolidation, (iii) the sale, lease or exchange or other
disposition of all or substantially all of the property and assets of the
Corporation, (iv) a voluntary dissolution of the Corporation or a revocation
thereof or (v) an amendment to the By-Laws of the Corporation; and, unless the
resolution or the Certificate of Incorporation expressly so provides, no such
committee shall have the power or authority to declare a dividend, to authorize
the issuance of stock, or to adopt a certificate of ownership and merger. Each
committee shall keep minutes of its proceedings and actions and shall report
regularly to the Board of Directors.
SECTION 9. COMPENSATION. Compensation for the directors shall be
determined by the Board of Directors; provided, that no officer of the
Corporation who is also a director shall receive any compensation which would
otherwise be payable to such person as a director. All directors, including a
director who is also an officer, shall be entitled to recover reasonable
out-of-pocket expenses relating to such person's serving as a director. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
<PAGE> 8
8
ARTICLE III
OFFICERS
SECTION 1. OFFICERS.
(a) The officers of the Corporation shall be chosen by the Board of
Directors and shall include a President and a Secretary. The Corporation may
also have at the discretion of the Board of Directors such other officers as are
desired, including a Chairman of the Board, one or more Vice Presidents, a
Treasurer, one or more Assistant Secretaries and Assistant Treasurers, and such
other officers as may be appointed in accordance with the provisions of
paragraph (c) of this Section 1. In the event there are two or more Vice
Presidents, then one or more may be designated as Executive Vice President,
Senior Vice President, or other similar or dissimilar title. At the time of the
election of officers, the directors may by resolution determine the order of
their rank. Any number of offices may be held by the same person, unless the
Certificate of Incorporation or these By-Laws otherwise provide. The office of
Secretary and Treasurer may be occupied by the same person.
(b) The Board of Directors, at its first meeting after each annual
meeting of stockholders, shall choose the officers of the Corporation.
(c) The Board of Directors may appoint such other officers and agents
as it shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board.
(d) The salaries of all officers and agents of the Corporation shall be
fixed by the Board of Directors.
(e) The officers of the Corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. If the office of any
officer or officers becomes vacant for any reason, the vacancy shall be filled
by the Board of Directors.
SECTION 2. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an
officer be elected, shall, if present, preside at all meetings of the Board of
Directors and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Directors or prescribed by these
By-Laws.
<PAGE> 9
9
SECTION 3. PRESIDENT. Subject to such supervisory powers, if any, as
may be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President of the Corporation shall, subject to the control
of the Board of Directors, oversee the development of the Corporation's
business, including, without limitation, strategic planning, technological
application and product enhancements, and have control of the Corporation's
business and manage the officers of the Corporation. The President shall preside
at all meetings of the stockholders and, in the absence of the Chairman of the
Board, or if there be none, at all meetings of the Board of Directors. The
President shall be an ex-officio member of all committees and shall have the
general powers and duties of management usually vested in the office of
President of corporations, and shall have such other powers and duties as may be
prescribed by the Board of Directors or these By-Laws.
SECTION 4. VICE PRESIDENTS. In the absence or disability of the
President, the Vice Presidents in order of their rank as fixed by the Board of
Directors, or if not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
President. The Vice Presidents shall have such other duties as from time to time
may be prescribed for them, respectively, by the Board of Directors.
SECTION 5. SECRETARY AND ASSISTANT SECRETARY.
(a) The Secretary shall attend all sessions of the Board of Directors
and all meetings of the stockholders and record all votes and the minutes of all
proceedings in a book to be kept for that purpose; and shall perform like duties
for the standing committees when required by the Board of Directors. The
Secretary shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or these By-Laws. The Secretary
shall keep in safe custody the seal of the Corporation, and when authorized by
the Board, affix the same to any instrument requiring it, and when so affixed it
shall be attested by his signature or by the signature of an Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by such
officer's signature.
(b) The Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the Board of Directors, or if
there be no such determination, the Assistant Secretary designated by the Board
of Directors, shall, in the absence or disability of the Secretary, perform the
duties and exercise the powers of the Secretary and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
<PAGE> 10
10
SECTION 6. TREASURER AND ASSISTANT TREASURER.
(a) The Treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all
moneys, and other valuable effects in the name and to the credit of the
Corporation, in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all of the
Treasurer's transactions undertaken as Treasurer and of the financial condition
of the Corporation. If required by the Board of Directors, the Treasurer shall
give the Corporation a bond, in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors, for the faithful performance of
the duties of such office and for the restoration to the Corporation, in case of
the Treasurer's death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in the
possession or under the Treasurer's control belonging to the Corporation.
(b) The Assistant Treasurer, or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors, or if
there be no such determination, the Assistant Treasurer designated by the Board
of Directors, shall, in the absence or disability of the Treasurer, perform the
duties and exercise the powers of the Treasurer and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
ARTICLE IV
STOCK
SECTION 1. STOCK CERTIFICATES. The shares of stock of the Corporation
shall be represented by certificates or shall be uncertificated. Certificates
shall be in such form as may be approved by the Board of Directors, which
certificates shall be issued to stockholders of the Corporation in numerical
order from the stock book of the Corporation, and each of which shall bear the
name of the stockholder, the number of shares represented, and the date of
issue; and which shall be signed by the President or a Vice President and the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the Corporation; and which shall be sealed with the seal of the Corporation.
Within a reasonable time after the issuance or transfer of
uncertificated stock, the Corporation shall send to the registered owner thereof
a written notice containing the information required to be set forth or stated
on certificates pursuant to Section 151, 156, 202(a) or 218(a) of
<PAGE> 11
11
the Delaware General Corporation Law or a statement that the Corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
SECTION 2. TRANSFER OF STOCK. Shares of stock of the Corporation shall
be transferred only on the books of the Corporation upon surrender to the
Corporation of the certificate or certificates representing the shares to be
transferred accompanied by an assignment in writing of such shares properly
executed by the stockholder of record or such stockholder's duly authorized
attorney-in-fact and with all taxes on the transfer having been paid. The
Corporation may refuse any requested transfer until furnished evidence
satisfactory to it that such transfer is proper. Upon the surrender of a
certificate for transfer of stock, such certificate shall at once be
conspicuously marked on its face "CANCELED" and filed with the permanent stock
records of the Corporation. Upon receipt of proper transfer instructions from
the registered owner of uncertificated shares such uncertificated shares shall
be canceled and issuance of new equivalent uncertificated shares or certificated
shares shall be made to the person entitled thereto and the transaction shall be
recorded upon the books of the Corporation. The Board of Directors may make such
additional rules concerning the issuance, transfer and registration of stock and
requirements regarding the establishment of lost, destroyed or wrongfully taken
stock certificates (including any requirement of an indemnity bond prior to
issuance of any replacement certificate) as it deems appropriate.
SECTION 3. REGISTERED STOCKHOLDERS. The Corporation may deem and treat
the holder of record of any stock as the absolute owner for all purposes and
shall not be required to take any notice of any right or claim of right of any
other person.
ARTICLE V
DEPOSITORIES, SIGNATURES AND SEAL
SECTION 1. DEPOSITORIES. All funds of the Corporation shall be
deposited in the name of the Corporation in such bank, banks, or other financial
institutions as the Board of Directors may from time to time designate and shall
be drawn out on checks, drafts or other orders signed on behalf of the
Corporation by such person or persons as the Board of Directors may from time to
time designate.
SECTION 2. CONTRACTS AND DEEDS. All contracts, deeds and other
instruments shall be signed on behalf of the Corporation by the President or by
such other officer, officers, agent or agents as the Board of Directors may from
time to time by resolution provide.
<PAGE> 12
12
SECTION 3. SEAL. The seal of the Corporation shall be in such form as
the Board of Directors shall so prescribe:
If the seal is affixed to a document, the signature of the
Secretary or an Assistant Secretary shall attest the seal. The seal and
its attestation may be lithographed or otherwise printed on any
document and shall have, to the extent permitted by law, the same force
and effect as if it had been affixed and attested manually.
ARTICLE VI
INDEMNIFICATION
SECTION 1. POWER OF INDEMNIFICATION. The Corporation shall have the
power to indemnify and hold harmless, to the fullest extent permitted by
applicable law as it presently exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), any person who was or is
made a party or is threatened to be made a party to or is otherwise involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "PROCEEDING"), by reason of the fact that he, or a
person for whom he is the legal representative, is or was an officer, employee
or agent of the Corporation or is or was serving at the request of the
Corporation as an officer, employee or agent of another corporation or of a
partnership, joint venture, trust, enterprise or non-profit entity, including
service with respect to employee benefit plans, against all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts to be paid in settlement) reasonably incurred by such
person in connection therewith and such indemnification may be continued as to a
person who has ceased to be an officer, employee or agent of the Corporation (or
other entity) and shall inure to the benefit of his heirs, executors and
administrators.
SECTION 2. PREPAYMENT OF EXPENSES. The Corporation shall pay the
expenses incurred in defending any Proceeding in advance of its final
disposition; provided, however, that, if the Delaware General Corporation Law
requires, the payment of such expenses incurred by a director or officer in his
or her capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of the Proceeding shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Article VI or
otherwise.
<PAGE> 13
13
SECTION 3. PAYMENT OF INDEMNIFICATION. If a claim for indemnification
or payment of expenses under this Article VI is not paid in full by the
Corporation within ninety (90) days after a written claim therefor has been
received by the Corporation, the claimant may at any time thereafter file suit
against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, shall be entitled to be paid also the expense of
prosecuting such claim. In any such action the Corporation shall have the burden
of proving that the claimant was not entitled to the requested indemnification
or payment of expenses under applicable law.
SECTION 4. INDEMNIFICATION NOT EXCLUSIVE. The right to indemnification
and the payment of expenses incurred in defending a Proceeding in advance of its
final disposition conferred in this Article VI shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, these By-laws, agreement, vote of
stockholders or disinterested directors or otherwise.
SECTION 5. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director or officer of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Delaware General Corporation Law.
SECTION 6. OTHER INDEMNIFICATION. The Corporation's obligation, if any,
to indemnify any person who was or is serving at its request as a director of
another corporation, partnership, joint venture, trust, enterprise or non-profit
entity shall be reduced by any amount such person may collect as indemnification
from such other corporation, partnership, joint venture, trust, enterprise or
non-profit enterprise.
SECTION 7. AMENDMENT OR REPEAL. Any repeal or modification of the
foregoing provisions of this Article VI shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
ARTICLE VII
DIVIDENDS
SECTION 1. PAYMENT OF DIVIDENDS. Subject to the provisions of the
Certificate of Incorporation relating thereto, if any, dividends may be declared
by the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in shares of the capital stock or in the
Corporation's bonds or its property, including the shares or bonds of other
corporations subject to any provisions of law and of the certificate of
incorporation.
<PAGE> 14
14
SECTION 2. RESERVE FUND. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the directors from time to time, in their absolute discretion, think
proper as a reserve fund to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ARTICLE VIII
AMENDMENT OF BY-LAWS
The Board of Directors shall have the power to alter, amend or repeal
the By-laws or adopt new by-laws, but any by-laws adopted by the Board of
Directors may be altered, amended, or repealed and new by-laws adopted by the
stockholders. The stockholders may prescribe that any bylaw or by-laws adopted
by them shall not be altered, amended or repealed by the Board of Directors.
<PAGE> 1
Exhibit 3.5
CERTIFICATE OF FORMATION OF
GENERAC PORTABLE PRODUCTS, LLC
This Certificate of Formation of GENERAC PORTABLE PRODUCTS, LLC (the
"LLC"), dated as of the 1st day of June, 1998, is being duly executed and filed
by Andrew M. Metcalf as an authorized person, to form a limited liability
company under the Delaware Limited Liability Company Act (6 Del.C. Section
18-101, et seq.).
I.
The name of the limited liability company is Generac Products, LLC.
II.
The address of the registered office of the LCC in the State of
Delaware is 1013 Centre Road, New Castle County, Wilmington, Delaware 19805.
III.
The name and address of the registered agent for service of process on
the LLC in the State of Delaware is Corporation Service Company, 1013 Centre
Road, New Castle County, Wilmington, Delaware 19805.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Formation as of the date first written above.
/s/ Andrew M. Metcalf
-------------------------------
Andrew M. Metcalf
Authorized Person
<PAGE> 1
EXHIBIT 3.6
LIMITED LIABILITY COMPANY AGREEMENT
OF
GENERAC PORTABLE PRODUCTS, LLC
EFFECTIVE AS OF JUNE 1, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I
DEFINITIONS................................................. 1
ARTICLE II
FORMATION OF THE COMPANY............................................ 8
2.1 Formation.............................................................................. 8
2.2 Name................................................................................... 8
2.3 Place of Business...................................................................... 8
2.4 Registered Office and Registered Agent................................................. 8
2.5 Term................................................................................... 8
2.6 Purpose of the Company................................................................. 8
ARTICLE III
INITIAL MEMBERS............................................... 8
ARTICLE IV
CAPITAL OF THE COMPANY........................................ 9
4.1 Capital Contributions; Member Interests; Capital Percentages........................... 9
4.2 Additional Contributions............................................................... 9
4.3 Record of Contributions................................................................ 10
4.4 Interest............................................................................... 10
4.5 Withdrawal or Reduction of Members' Capital Contributions.............................. 10
4.6 Loans to Company....................................................................... 10
4.7 Borrowing.............................................................................. 10
ARTICLE V
RIGHTS AND OBLIGATIONS OF MEMBERS................................... 10
5.1 Limitation of Members' Responsibility, Liability....................................... 10
5.2 Return of Distributions................................................................ 11
5.3 Priority and Return of Capital......................................................... 11
5.4 Competition............................................................................ 11
5.5 Admission of Additional Members........................................................ 11
5.6 Resignation............................................................................ 11
5.7 Indemnification........................................................................ 11
</TABLE>
- i -
<PAGE> 3
ARTICLE VI
<TABLE>
<S> <C>
MEETINGS OF MEMBERS............................................. 12
6.1 Meetings............................................................................... 12
6.2 Place of Meetings...................................................................... 12
6.3 Notice of Meetings..................................................................... 12
6.4 Meeting of All Members................................................................. 12
6.5 Action by Members Without a Meeting.................................................... 12
6.6 Waiver of Notice....................................................................... 12
6.7 Delegation to Board.................................................................... 12
ARTICLE VII
RIGHTS AND DUTIES OF DIRECTORS AND OFFICERS.............................. 13
7.1 Management............................................................................. 13
7.2 Vacancies.............................................................................. 13
7.3 Regular Meetings....................................................................... 13
7.4 Special Meetings....................................................................... 13
7.5 Meetings by Conference Telephone....................................................... 14
7.6 Quorum: Vote Required for Action...................................................... 14
7.7 Organization........................................................................... 14
7.8 Actions of the Board by Consent in Lieu of Meeting..................................... 14
7.9 Committees............................................................................. 14
7.10 Compensation and Reimbursement of Expenses............................................. 15
7.11 Powers of Board of Directors........................................................... 15
7.12 Liability of Directors................................................................. 17
7.13 Officers............................................................................... 17
7.14 Member Contributions................................................................... 20
ARTICLE VIII
INDEMNIFICATION.................................................. 20
8.1 Indemnification........................................................................ 20
8.2 Power to Indemnify in Actions, Suits or Proceedings Other
Than Those by or in the Right of the Company....................................... 21
8.3 Power to Indemnify in Actions, Suits or Proceedings
by or in the Right of the Company.................................................. 21
8.4 Authorization of Indemnification....................................................... 21
8.5 Good Faith Defined..................................................................... 22
8.6 Indemnification by a Court............................................................. 22
8.7 Advancement or Reimbursement of Expenses............................................... 22
8.8 Nonexclusivity and Survival of Indemnification......................................... 23
8.9 Insurance.............................................................................. 23
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<S> <C>
8.10 Terms...................................................................................... 23
ARTICLE IX
ALLOCATIONS......................................................... 24
9.1 Profits.................................................................................... 24
9.2 Losses..................................................................................... 24
ARTICLE X
NET CASH FLOW AND DISTRIBUTIONS........................................ 27
10.1 Free Cash Flow............................................................................. 27
10.2 Distributions of Free Cash Flow............................................................ 27
10.3 Limitation Upon Distributions.............................................................. 28
ARTICLE XI
ACCOUNTING METHOD, PERIOD, RECORDS AND REPORTS.......................... 28
11.1 Accounting Method.......................................................................... 28
11.2 Accounting Period.......................................................................... 28
11.3 Records, Audits and Reports................................................................ 28
11.4 Inspection................................................................................. 28
11.5 Preparation of Financial Statements........................................................ 28
ARTICLE XII
TAX MATTERS............................................................. 29
12.2 Tax Information............................................................................ 29
ARTICLE XIII
RESTRICTIONS ON TRANSFERABILITY......................................... 29
13.1 Transfer Restrictions...................................................................... 29
ARTICLE XIV
DISSOLUTION AND TERMINATION............................................. 29
14.1 Dissolution Events............................................................................ 30
14.2 Winding Up.................................................................................... 31
14.3 Compliance With Certain Requirements of Regulations; Deficit Capital Accounts................. 32
14.4 Deemed Distribution and Recontribution........................................................ 32
14.5 Rights of Members............................................................................. 32
14.6 Notice of Dissolution/Termination............................................................. 33
</TABLE>
- iii -
<PAGE> 5
<TABLE>
<S> <C>
14.7 Allocations During Period of Liquidation...................................................... 33
14.8 Character of Liquidating Distributions........................................................ 33
14.9 The Liquidator................................................................................ 33
14.10 Form of Liquidating Distributions............................................................ 34
ARTICLE XV
MISCELLANEOUS PROVISIONS............................................. 34
15.1 Notices.................................................................................... 34
15.2 Application of Delaware Law................................................................ 34
15.3 Waiver of Action for Partition............................................................. 34
15.4 Execution of Additional Instruments........................................................ 35
15.5 Headings................................................................................... 35
15.6 Waivers.................................................................................... 35
15.7 Rights and Remedies Cumulative............................................................. 35
15.8 Severability............................................................................... 35
15.9 Heirs, Successors and Assigns.............................................................. 35
15.10 Beneficiaries.............................................................................. 35
15.11 Counterparts............................................................................... 35
15.12 Amendments................................................................................. 35
15.13 Waiver of Consequential and Punitive Damages............................................... 35
15.14 Other Terms................................................................................ 36
</TABLE>
- iv -
<PAGE> 6
LIMITED LIABILITY COMPANY AGREEMENT
This Limited Liability Company Agreement (this "Agreement") is
made and entered into as of June 1, 1998, by GPPD, Inc., a Delaware corporation,
and GPPW, Inc., a Wisconsin corporation (the "Initial Members").
WHEREAS, the Initial Members desire to form a limited
liability company named General Portable Products, LLC (the "Company") pursuant
to the Delaware Limited Liability Company Act, 6 Del. C. Section 18-101, et.
seq. as amended (the "Delaware Act"), to engage in any lawful act or activity
for which limited liability companies may be organized under the Delaware Act
(the "Business"); and
WHEREAS, the Initial Members desire to provide for the orderly
management of the affairs of the Company;
NOW, THEREFORE, in consideration of the foregoing and the
covenants and agreements herein contained, the Initial Members and all
subsequent parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms used in this Agreement shall have the
following meanings (unless otherwise expressly provided herein):
"Adjusted Capital Account Deficit" shall mean, with respect to
any Member, the deficit balance, if any, in such Member's Capital Account as of
the end of the relevant Allocation Year, after giving effect to the following
adjustments:
(i) Credit to such Capital Account any amounts which such
Member is deemed to be obligated to restore pursuant to the penultimate
sentences in Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and
(ii) Debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
"Agreement" shall mean this Agreement as originally executed
and as it may be amended from time to time hereafter.
<PAGE> 7
"Allocation Year" shall mean (i) the period commencing on the
Effective Date and ending on December 31, 1998, (ii) any subsequent twelve (12)
month period commencing on January 1 and ending on December 31 or (iii) any
portion of the period described in clauses (i) or (ii) for which the Company is
required to allocate Profits, Losses and other items of Company income, gain,
loss or deduction pursuant to Section 9 hereof.
"Bankruptcy" shall mean, with respect to any Person, a
"Voluntary Bankruptcy" or an "Involuntary Bankruptcy." A "Voluntary Bankruptcy"
means, with respect to any Person (i) the inability of such Person generally to
pay its debts as such debts become due, or an admission in writing by such
Person of its inability to pay its debts generally or a general assignment by
such Person for the benefit of creditors, (ii) the filing of any petition or
answer by such Person seeking to adjudicate itself as bankrupt or insolvent, or
seeking for itself any liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of such Person or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking, consenting to, or acquiescing in the entry of an order for
relief or the appointment of a receiver, trustee, custodian or other similar
official for such Person or for any substantial part of its Property or (iii)
corporate action taken by such Person to authorize any of the actions set forth
above. An "Involuntary Bankruptcy" means, with respect to any Person, without
the consent or acquiescence of such Person, the entering of an order for relief
or approving a petition for relief or reorganization or any other petition
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or other similar relief under any present or future bankruptcy,
insolvency or similar statute, law or regulation, or the filing of any such
petition against such Person which petition shall not be dismissed within ninety
(90) days, or without the consent or acquiescence of such Person, the entering
of an order appointing a trustee, custodian, receiver or liquidator of such
Person or of all or any substantial part of the Property of such Person which
order shall not be dismissed within ninety (90) days.
"Board of Directors" shall mean the board of directors of the
Company.
"Business" shall have the meaning specified in the preamble.
"Business Day" shall mean any day except a Saturday, Sunday or
other day on which commercial banking institutions in New York, New York are
authorized by law or executive order to close.
"Capital Account" shall mean, with respect to any Member, the
Capital Account maintained for such Member in accordance with the following
provisions:
(i) To each Member's Capital Account there shall be credited
(A) such Member's Capital Contributions, (B) such Member's distributive share of
Profits and any items in the nature of income or gain which are specially
allocated pursuant to Section 9.3 or Section 9.4 hereof, and (C) the amount of
any Company liabilities assumed by such Member or which are secured by any
Property distributed to such Member. The principal amount of a promissory note
which is not
- 2 -
<PAGE> 8
readily traded on an established securities market and which is contributed to
the Company by the maker of the note (or a Member related to the maker of the
note within the meaning of Regulations Section 1.704-1(b)(2)(ii)(c)) shall not
be included in the Capital Account of any Member until the Company makes a
taxable disposition of the note or until (and to the extent) principal payments
are made on the note, all in accordance with Regulations Section
1.704-1(b)(2)(iv)(d)(2);
(ii) To each Member's Capital Account there shall be debited
(A) the amount of money and the Gross Asset Value of any Property distributed to
such Member pursuant to any provision of this Agreement, (B) such Member's
distributive share of Losses and any items in the nature of expenses or losses
which are specially allocated pursuant to Section 9.3 or Section 9.4 hereof, and
(C) the amount of any liabilities of such Member assumed by the Company or which
are secured by any Property contributed by such Member to the Company;
(iii) In the event Member Interests are transferred in
accordance with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it relates to the transferred
Member Interests; and
(iv) In determining the amount of any liability for purposes
of subparagraphs (i) and (ii) above there shall be taken into account Code
Section 752(c) and any other applicable provisions of the Code and Regulations.
The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Regulations Section 1.704-1(b), and shall be interpreted and applied in a
manner consistent with such Regulations. In the event the Board of Directors
shall determine that it is prudent to modify the manner in which the Capital
Accounts, or any debits or credits thereto (including, without limitation,
debits or credits relating to liabilities which are secured by contributed or
distributed property or which are assumed by the Company or any Members, are
computed in order to comply with such Regulations, the Board of Directors may
make such modification, provided that it is not likely to have a material effect
on the amounts distributed to any Person pursuant to Article XIV hereof upon the
dissolution of the Company. The Board of Directors also shall (i) make any
adjustments that are necessary or appropriate to maintain equality between the
Capital Accounts of the Members and the amount of capital reflected on the
Company's balance sheet, as computed for book purposes, in accordance with
Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Regulations Section 1.704-1(b).
"Capital Contribution" shall mean any contribution to the
capital of the Company in cash or property by a Member whenever made.
"Capital Percentage" shall mean a Member's percentage
ownership interest in the Company, which initially shall be as set forth in
Section 4.1.
- 3 -
<PAGE> 9
"Certificate of Formation" shall mean the Certificate of
Formation of the Company filed with the Secretary of State of the State of
Delaware pursuant to the Delaware Act to form the Company, as originally
executed and amended, modified, supplemented or restated from time to time, as
the context requires.
"Code" shall mean the United States Internal Revenue Code of
1986, as amended, from time to time.
"Company Minimum Gain" has the meaning given the term
"partnership minimum gain"in Sections 1.704-2(b)(2) and 1.704-2(d) of the
Regulations.
"Debt" shall mean (i) any indebtedness for borrowed money or
the deferred purchase price of property as evidenced by a note, bonds, or other
instruments, (ii) obligations as lessee under capital leases, (iii) obligations
secured by any mortgage, pledge, security interest, encumbrance, lien or charge
of any kind existing on any asset owned or held by the Company whether or not
the Company has assumed or become liable for the obligations secured thereby,
(iv) any obligation under any interest rate swap agreement, (v) accounts payable
and (vi) obligations under direct or indirect guarantees of (including
obligations (contingent or otherwise) to assure a creditor against loss in
respect of) indebtedness or obligations of the kinds referred to in clauses (i),
(ii), (iii), (iv) and (v) above, provided that Debt shall not include
obligations in respect of any accounts payable that are incurred in the ordinary
course of the Company's business and are not delinquent or are being contested
in good faith by appropriate proceedings.
"Delaware Act" shall have the meaning specified in the
preamble.
"Delaware Law" shall mean the laws of the State of Delaware,
including without limitation, the Delaware Act and the Delaware General
Corporation Law.
"Depreciation" shall mean, for each Allocation Year, an amount
equal to the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such Allocation Year, except that if the
Gross Asset Value of an asset differs from its adjusted basis for federal income
tax purposes at the beginning of such Allocation Year, Depreciation shall be an
amount which bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such Allocation Year bears to such beginning adjusted tax basis; provided,
however, that if the adjusted basis for federal income tax purposes of an asset
at the beginning of such Allocation Year is zero, Depreciation shall be
determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the Board of Directors.
"Director" shall mean any Person appointed or elected to serve
as a director of the Company under this Agreement. As used herein, the term
"Director" shall mean a "manager" of the Company, as such term is defined in
Section 18-101 of the Delaware Act.
- 4 -
<PAGE> 10
"Dissolution Event" has the meaning set forth in Section
14.1(a) of this Agreement.
"Entity" shall mean any foreign or domestic general
partnership, limited partnership, limited liability company, corporation, joint
enterprise, trust, business trust, employee benefit plan, cooperative or
association.
"Fiscal Year" shall mean the Company's fiscal year, which
shall be a calendar year unless otherwise determined by the Board of Directors
in accordance with Section 706(b) of the Code.
"Gross Asset Value" shall mean with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset (other than
cash) contributed by a Member to the Company shall be the gross fair market
value of such asset, as determined by the Board of Directors;
(ii) The Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross fair market values (taking Code Section
7701(g) into account) as determined by the Board of Directors as of the
following times: (A) the acquisition of an additional interest in the Company by
any new or existing Member in exchange for more than a de minimis Capital
Contribution; (B) the distribution by the Company to a Member of more than a de
minimis amount of Company property as consideration for an interest in the
Company; and (C) the liquidation of the Company within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), provided that an adjustment described
in clauses (A) and (B) of this paragraph shall be made only if the Board of
Directors reasonably determines that such adjustment is necessary to reflect the
relative economic interests of the Members in the Company;
(iii) The Gross Asset Value of any item of Company assets
distributed to any Member shall be adjusted to equal the gross fair market value
(taking Code Section 7701(g) into account) of such asset on the date of
distribution as determined by the Board of Directors; and
(iv) The Gross Asset Values of Company assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph
(vi) of the definition of "Profits" and "Losses" or Section 9.3(c) hereof;
provided, however, that Gross Asset Values shall not be adjusted pursuant to
this subparagraph (iv) to the extent that an adjustment pursuant to subparagraph
(ii) is required in connection with a transaction that would otherwise result in
an adjustment pursuant to this subparagraph (iv).
- 5 -
<PAGE> 11
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
subparagraph (ii) or (iv), such Gross Asset Value shall thereafter be adjusted
by the Depreciation taken into account with respect to such asset, for purposes
of computing Profits and Losses.
"Initial Capital Contribution" shall mean the initial Capital
Contribution by a Member pursuant to Section 4.1 of this Agreement.
"Issuance Items" has the meaning set forth in Section 9.3(h)
hereof.
"Member" shall mean each Initial Member and each Person who at
any time executes a counterpart of this Agreement as a member of the Company
pursuant to the terms of this Agreement and who has not ceased to be a Member.
"Member Interest" shall mean a Member's ownership interest in
the Company, including such Member's share of the profits and losses of the
Company, such Member's right to receive distributions of the Company's assets
and such Member's other rights as a Member.
"Member Nonrecourse Debt" has the same meaning as the term
"Member nonrecourse debt" in Section 1.704-2(b)(4) of the Regulations.
"Member Nonrecourse Debt Minimum Gain" shall mean an amount,
with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain
that would result if such Member Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Section 1.704-2(i)(3) of the
Regulations.
"Member Nonrecourse Deductions" has the same meaning as the
term "Member nonrecourse deductions" in Sections 1.704-2(i)(1) and 1.704-2(i)(2)
of the Regulations.
"Net Cash Flow" means the gross cash proceeds of the Company
less the portion thereof used to pay or establish reserves for all Company
expenses, debt payments, capital improvements, replacements, and contingencies,
all as determined by the Board of Directors. "Net Cash Flow" shall not be
reduced by depreciation, amortization, cost recovery deductions, or similar
allowances, but shall be increased by any reductions of reserves previously
established pursuant to the first sentence of this definition.
"Nonrecourse Deductions" has the meaning set forth in Section
1.704-2(b)(1) of the Regulations.
"Nonrecourse Liability" has the meaning set forth in Section
1.704-2(b)(3) of the Regulations.
"Person" shall mean any individual or Entity, and any heir,
executor, administrator, legal representative, successor or assign thereof where
the context so admits.
- 6 -
<PAGE> 12
"Profits" and "Losses" mean, for each Allocation Year, an
amount equal to the Company's taxable income or loss for such Allocation Year,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss, or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments (without duplication):
(i) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or Losses
pursuant to this definition of "Profits" and "Losses" shall be added to such
taxable income or loss;
(ii) Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
in computing Profits or Losses pursuant to this definition of "Profits" and
"Losses" shall be subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any Company asset
is adjusted pursuant to subparagraphs (ii) or (iii) of the definition of Gross
Asset Value, the amount of such adjustment shall be treated as an item of gain
(if the adjustment increases the Gross Asset Value of the asset) or an item of
loss (if the adjustment decreases the Gross Asset Value of the asset) from the
disposition of such asset and shall be taken into account for purposes of
computing Profits or Losses;
(iv) Gain or loss resulting from any disposition of Property
with respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the Property disposed
of, notwithstanding that the adjusted tax basis of such Property differs from
its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Allocation Year,
computed in accordance with the definition of Depreciation;
(vi) To the extent an adjustment to the adjusted tax basis of
any Company asset pursuant to Code Section 734(b) is required, pursuant to
Regulations Section 1.704-(b)(2)(iv)(m)(4), to be taken into account in
determining Capital Accounts as a result of a distribution other than in
liquidation of a Member's interest in the Company, the amount of such adjustment
shall be treated as an item of gain (if the adjustment increases the basis of
the asset) or loss (if the adjustment decreases such basis) from the disposition
of such asset and shall be taken into account for purposes of computing Profits
or Losses; and
(vii) Notwithstanding any other provision of this definition,
any items which are specially allocated pursuant to Section 9.3 or Section 9.4
hereof shall not be taken into account in computing Profits or Losses.
- 7 -
<PAGE> 13
The amounts of the items of Company income, gain, loss or
deduction available to be specially allocated pursuant to Sections 9.3 and 9.4
hereof shall be determined by applying rules analogous to those set forth in
subparagraphs (i) through (vi) above.
"Property" shall mean all real and personal property acquired
by the Company, including cash, and any improvements thereto, and shall include
both tangible and intangible property.
"Regulations" shall mean the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as such regulations are
amended from time to time.
"Regulatory Allocations" has the meaning set forth in Section
9.4 hereof.
"Tax Matters Member" has the meaning set forth in Section 12.1
hereof.
In addition to the foregoing defined terms, certain additional
terms are defined in the text hereof.
ARTICLE II
FORMATION OF THE COMPANY
2.1 Formation. The Certificate of Formation of the Company has
been filed or will be filed with the Secretary of State of the State of Delaware
pursuant to the Delaware Act.
2.2 Name. The name of the Company is General Portable
Products, LLC. If the Company shall conduct business in any jurisdiction other
than the State of Delaware, it shall register the Company or its trade name with
the appropriate authorities in such state in order to have the legal existence
of the Company recognized.
2.3 Place of Business. The Company may locate its places of
business and registered office at any place or places as the Board of Directors
of the Company may from time to time deem advisable.
2.4 Registered Office and Registered Agent. The Company's
registered office shall be at the office of its registered agent at 1013 Centre
Road, Wilmington, Delaware 19805, and the name of its initial registered agent
at such address shall be Corporation Service Company.
2.5 Term. The term of the Company commenced on the date the
Certificate of Formation was filed with the Secretary of State of the State of
Delaware pursuant to the Delaware Act and the term of the Company and this
Agreement shall not be perpetual, but shall continue until the winding up and
dissolution of the Company and its business is completed following a
dissolution, as provided in Article XIV.
- 8 -
<PAGE> 14
2.6 Purpose of the Company. The purpose of the Company shall
be to conduct the Business and to engage in any and all activities related or
incidental to the foregoing. The Company shall have any and all powers necessary
or desirable to carry out such purpose and the Business to the extent the same
may be legally exercised by limited liability companies under the Delaware Act.
The Company shall carry out the foregoing activities pursuant to the Certificate
of Formation and this Agreement.
ARTICLE III
INITIAL MEMBERS
The name and place of business or mailing address of each of
the Initial Members is as follows:
GPPD, Inc.
c/o The Beacon Group
399 Park Avenue, 17th Floor
New York, New York 10022
GPPW, Inc.
c/o The Beacon Group
399 Park Avenue, 17th Floor
New York, NY 10022
ARTICLE IV
CAPITAL OF THE COMPANY
4.1 Capital Contributions; Member Interests; Capital
Percentages. Simultaneously with the execution and delivery of this Agreement,
each Initial Member is acquiring a Member Interest, which interest shall be
expressed as a Capital Percentage, in exchange for a Capital Contribution in
cash as follows:
- 9 -
<PAGE> 15
<TABLE>
<CAPTION>
Initial Capital Initial Capital
Member Contribution Percentage
------ ------------ ----------
<S> <C> <C>
GPPD, Inc. $95.00 95%
GPPW, Inc. $ 5.00 5%
</TABLE>
4.2 Additional Contributions. Except as expressly provided for in
Section 4.1 or the next sentence of this Section 4.2, no Member shall have any
obligation to provide funds to the Company, whether by Capital Contributions,
loans, return of monies received pursuant to the terms of this Agreement or
otherwise. Each Member shall be required to make additional Capital
Contributions at such times and in such amounts as may be approved by the
Members unanimously. The existence of liabilities of the Company in excess of
the amount of assets available to discharge such liabilities shall not, in the
absence of a call by the Members for further contributions, create a liability
on the part of any Member for additional Capital Contributions to meet such
deficit. The obligations of Members to make additional Capital Contributions and
their liability to the Company and other Members with respect thereto shall not
confer any rights on any third parties. Unless otherwise determined by the
Members unanimously, all additional Capital Contributions shall be made in
proportion to the relative Capital Percentages of the Members.
4.3 Record of Contributions. The books and records of the Company
shall reflect the amount of cash, cash equivalents and the fair value of any
other property contributed by each Member to the Company.
4.4 Interest. No interest shall be paid by the Company on Capital
Contributions.
4.5 Withdrawal or Reduction of Members' Capital Contributions.
(a) A Member shall not be entitled to withdraw any part of its
Capital Contribution or to receive any distribution from the Company, except as
otherwise provided in this Agreement.
(b) A Member shall not receive out of the Company's property any
part of its Capital Contributions until all liabilities of the Company, except
liabilities to Members on account of their Capital Contributions, have been paid
or there remains property of the Company sufficient to pay them.
(c) A Member, irrespective of the nature of its Capital
Contribution, shall have no right to receive anything other than cash upon any
return of its Capital Contribution provided for by this Agreement.
- 10 -
<PAGE> 16
4.6 Loans to Company. Nothing in this Agreement shall prevent any
Member from making secured or unsecured loans to the Company by agreement with
the Company. Loans by a Member to the Company shall not be considered Capital
Contributions.
4.7 Borrowing. In the event that the Company, in order to
discharge costs, expenses or indebtedness, requires funds in excess of the funds
provided by Capital Contributions of the Members and by revenues, the Board of
Directors shall be authorized, at any time and from time to time, but subject to
the other provisions of this Agreement, to cause the Company to borrow
additional funds, as shall in the judgment of the Board of Directors be
sufficient for such purposes and upon such terms as the Board of Directors may
deem advisable.
ARTICLE V
RIGHTS AND OBLIGATIONS OF MEMBERS
5.1 Limitation of Members' Responsibility, Liability. The Members
shall not perform any act on behalf of the Company, incur any expense,
obligation or indebtedness of any nature on behalf of the Company, or in any
manner participate in the management of the Company, except as specifically
contemplated hereunder. No Member shall be liable under a judgment, decree or
order of a court, or in any other manner, except as agreed to by any such
Member, for the indebtedness or any other obligations or liabilities of the
Company or liable, responsible or accountable in damages to the Company or its
Members for breach of fiduciary duty as a Member, for any acts performed within
the scope of the authority conferred on it by this Agreement, or for its failure
or refusal to perform any acts except those expressly required by or pursuant to
the terms of this Agreement, or for any debt or loss in connection with the
affairs of the Company, except as required by the Delaware Act.
5.2 Return of Distributions. In accordance with Section 18-607 of
the Delaware Act, a Member will be obligated to return any distribution from the
Company only as provided by applicable law.
5.3 Priority and Return of Capital. Except as may be provided in
this Agreement, no Member shall have priority over any other Member, either as
to the return of Capital Contributions or as to profits, losses or
distributions; provided that this Section shall not apply to loans (as
distinguished from Capital Contributions) that a Member has made to the Company.
5.4 Competition. Except as otherwise expressly provided in this
Agreement, each Member may engage in or possess an interest in any other
business venture or ventures, including any activity that is competitive with
the Company without offering any such opportunity to the Company, and neither
the Company nor the other Member shall have any rights in or to such venture or
ventures or activity or the income or profits derived therefrom.
- 11 -
<PAGE> 17
5.5 Admission of Additional Members. The Company shall not admit
additional Members without the prior written consent of all of the Members.
5.6 Resignation. Without the prior approval of all other Members,
no Member may resign from the Company.
5.7 Indemnification. To the extent permitted by law, the Company
shall (to the extent of the assets of the Company) indemnify, defend and hold
harmless each Member and each officer, employee and director of such Member from
and against all losses, expenses, claims or liabilities, including reasonable
attorneys' fees and disbursements, arising out of or in connection with the
indebtedness or any other obligation or liabilities of the Company, other than
losses, expenses, claims or liabilities of such indemnified Member which result
from a violation in any material respect of any of the provisions of this
Agreement or fraud, willful misconduct, gross negligence or misappropriation of
funds. The foregoing indemnity expressly includes an indemnity with respect to
the negligence (excluding the gross negligence) of a Member.
ARTICLE VI
MEETINGS OF MEMBERS
6.1 Meetings. Meetings of the Members, for any purpose or
purposes, unless otherwise prescribed by law, may be called by the Chairman of
the Board of Directors or the President of the Company or by any Member. The
chairperson at any meeting shall be designated by the Chairman of the Board of
Directors or the President of the Company.
6.2 Place of Meetings. Meetings of the Members shall be held at
the principal place of business of the Company or at such other place as may be
designated by the Chairman of the Board of Directors or the President of the
Company.
6.3 Notice of Meetings. Except as provided in Section 6.4,
written notice stating the place, day and hour of the meeting and the purpose or
purposes for which the meeting is called shall be sent not less than five (5)
days before the date of the meeting, either personally, by facsimile or by mail,
by or at the direction of the person calling the meeting, to each Member.
6.4 Meeting of All Members. If all of the Members shall meet at
any time and place and consent to the holding of a meeting at such time and
place, such meeting shall be valid without call or notice, and at such meeting
any lawful action may be taken.
6.5 Action by Members Without a Meeting. Action required or
permitted to be taken at a meeting of Members may be taken without a meeting if
the action is evidenced by one or more written consents describing the action
taken, signed by all Members and
- 12 -
<PAGE> 18
delivered to the Secretary or any Assistant Secretary of the Company for
inclusion in the minutes or for filing with the Company records. Action taken
under this Section is effective when all Members have signed the consent, unless
the consent specifies a different effective date.
6.6 Waiver of Notice. When any notice is required to be given to
any Member, a waiver thereof in writing signed by the Person entitled to such
notice, whether before, at or after the time stated therein, shall be equivalent
to the giving of such notice.
6.7 Delegation to Board. Except as may be otherwise specifically
provided in this Agreement or the Delaware Act, the Members agree that they
shall act solely through the mechanisms provided herein relating to the
appointment and authority of the Board of Directors.
ARTICLE VII
RIGHTS AND DUTIES OF DIRECTORS AND OFFICERS
7.1 Management. Subject to any powers reserved to the Members
under this Agreement, the powers of the Company shall be exercised by or under
the authority of, and the business and affairs of the Company shall be managed
by, a Board of Directors consisting of at least one Director, which shall be
responsible for the management and operations of the Company and shall have all
powers necessary to manage and control the Company, to conduct its business, and
to implement any decision of the Members adopted pursuant to this Agreement. In
managing the business and affairs of the Company and exercising its powers, the
Board of Directors may delegate power and authority to one or more officers of
the Company, who shall exercise such powers and perform such duties as are
specified in Section 7.13. The number of Directors constituting the initial
Board of Directors shall be [___]. The number of Directors constituting the
Board of Directors may be increased or decreased from time to time by resolution
of the Members. Except as provided in Section 7.2 hereof, Directors shall be
elected by the Members holding a plurality of the Member Interests, and each
Director so elected shall hold office for the full term to which he shall have
been elected and until his successor is duly elected and qualified, or until his
earlier death, resignation or removal. Any Director may resign at any time upon
notice to the Company. A Director need not be a Member of the Company or a
resident of the State of Delaware.
7.2 Vacancies. Any newly created directorship or any vacancy
occurring in the Board of Directors for any cause may be filled by an
affirmative vote of a majority of the remaining Directors then in office, though
less than a quorum, or by a sole remaining Director, and each Director so
elected shall hold office for the remainder of the full term in which the new
directorship was created or the vacancy occurred and until such Director's
successor is duly elected and qualified, or until his earlier death, resignation
or removal.
- 13 -
<PAGE> 19
7.3 Regular Meetings. Regular meetings of the Board of Directors
may be held at such places within or without the State of Delaware and at such
times as the Board of Directors may from time to time determine, and if so
determined, notices thereof need not be given.
7.4 Special Meetings. Special meetings of the Board of Directors
may be held at any time, whenever called by the Chairman of the Board of
Directors, the President of the Company or a majority of Directors then in
office, at such place or places within or without the State of Delaware as may
be stated in the notice of the meeting. Notice of the time and place of a
special meeting must be given by the person or persons calling such meeting at
least twenty-four (24) hours, before the special meeting. The attendance of a
Director at any meeting shall constitute a waiver of notice of such meeting,
except where a Director attends a meeting for the sole purpose of objecting to
the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
special meeting of the Board of Directors need be specified in the notice or
waiver of notice of such meeting.
7.5 Meetings by Conference Telephone. Unless otherwise restricted
by this Agreement or the Delaware Act, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors or such committee by means of conference telephone or
similar communications equipment by means of which all Persons participating in
the meeting can hear each other, and participation in a meeting pursuant to this
Section 7.5 shall constitute presence in person at such meeting.
7.6 Quorum: Vote Required for Action. Except as may be otherwise
specifically provided by law or this Agreement, at all meetings of the Board of
Directors a majority of the whole Board of Directors shall constitute a quorum
for the transaction of business. The vote of a majority of the Directors present
at any meeting of the Board of Directors at which there is a quorum shall be the
act of the Board of Directors. If a quorum shall not be present at any meeting
of the Board of Directors, the Directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
7.7 Organization. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board of Directors, or, in his absence, by
the President of the Company. The Secretary of the Company shall act as
secretary of the meeting, but in his or her absence the chairman of the meeting
may appoint any Person to act as secretary of the meeting.
7.8 Actions of the Board by Consent in Lieu of Meeting. Unless
otherwise restricted by this Agreement or the Delaware Act, any action required
or permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without
- 14 -
<PAGE> 20
a meeting, if all the members of the Board of Directors or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board of Directors or such committee.
7.9 Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board of Directors, designate one or more committees,
each committee to consist of one or more of the Directors of the Company. The
Board of Directors may designate one or more Directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee. In the absence or disqualification of a member of a committee,
and in the absence of a designation by the Board of Directors of an alternate
member to replace the absent or disqualified member, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he, she or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in place of any absent or
disqualified member. Any committee, to the extent provided in the resolution of
the Board of Directors establishing such committee, shall have and may exercise
all the powers and authority of the Board of Directors in the management of the
business and affairs of the Company, and may authorize the seal of the Company
to be affixed to all papers which may require it. Each committee shall keep
regular minutes and report to the Board of Directors when required.
The designation of any such committee and the delegation thereto
of authority shall not operate to relieve the Board of Directors, or any member
thereof, of any responsibility imposed upon it or him by law, nor shall such
committee function where action of the Board of Directors is required under
applicable law. The Board of Directors shall have the power at any time to
change the membership of any such committee and to fill vacancies in it. A
majority of the members of any such committee shall constitute a quorum. Each
such committee may elect a chairman and appoint such subcommittees and
assistants as it may deem necessary. Except as otherwise provided by the Board
of Directors, meetings of any committee shall be conducted in the same manner as
the Board of Directors conducts its business pursuant to this Agreement, as the
same shall from time to time be amended. Any member of any such committee
elected or appointed by the Board of Directors may be removed by the Board of
Directors whenever in its judgment the best interests of the Company will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of a member of
a committee shall not of itself create contract rights.
7.10 Compensation and Reimbursement of Expenses. The Directors
shall receive such compensation for their services as shall be determined by the
Board of Directors. The Directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors as a stated salary as
Director. No such reimbursement shall preclude any Director from serving the
Company in any other capacity and receiving compensation therefor.
- 15 -
<PAGE> 21
Members of special or standing committees may be allowed like reimbursement for
attending committee meetings.
7.11 Powers of Board of Directors. Without limiting the
generality of Section 7.1, the Board of Directors shall have power and authority
to cause the Company to take any of the following actions:
(a) To construct, operate, maintain, improve, expand,
buy, acquire, own, hold, sell, convey, assign, mortgage, finance,
refinance, rent or lease real or personal property, foreign or domestic,
in the name of the Company;
(b) To incur debt or liabilities, secured or unsecured,
on behalf of the Company and to secure the same by mortgaging, assigning
for security purposes, pledging, or otherwise hypothecating, all or any
part of the property and assets of the Company (and in connection
therewith to place record title to any such property or assets in the name
or names of a nominee or nominees);
(c) To purchase liability and other insurance to protect
the Company's property and business;
(d) To invest any Company funds temporarily (by way of
example but not limitation) in time deposits, short-term governmental
obligations, commercial paper or other investments, and to pay and
otherwise perform the Company's debts, liabilities and other obligations;
(e) To sell or otherwise dispose of the assets of the
Company;
(f) To execute on behalf of the Company instruments and
other documents, including, without limitation, checks, drafts, notes and
other negotiable instruments, mortgages or deeds of trust, security
agreements, financing statements, documents providing for the acquisition,
mortgage or disposition of the Company's property, assignments, bills of
sale, leases, partnership agreements, and other instruments or documents
necessary or appropriate to the business of the Company (including any
agreement between the Company and one or more Members and any agreements
between the Company and the Directors or officers including
indemnification agreements providing for the advancement of expenses,
among other things);
(g) To employ accountants, legal counsel, managing
agents or other experts to perform services for the Company;
(h) To execute, deliver, enter into, perform and carry
out any and all other agreements and contracts on behalf of the Company,
with any other Person for any purpose, in such forms as the Board of
Directors may approve;
- 16 -
<PAGE> 22
(i) To bring, defend and settle actions and suits at
law, in equity or otherwise and to pursue appeals thereof;
(j) To adopt policies and guidelines for the Company
consistent with this Agreement;
(k) To issue Member Interests or other equity
securities; and
(l) To do and perform all other acts as may be necessary
or appropriate to the conduct of the Company's business.
Unless authorized to do so by this Agreement (reference being made specifically
to the authority conferred upon officers pursuant to Section 7.13) or by the
Board of Directors, no Member, agent or employee of the Company shall have any
power or authority to bind the Company in any way, to pledge its credit or to
render it liable pecuniarily for any purpose.
7.12 Liability of Directors. No Director shall be liable under
any judgment, decree or order of a court, or in any other manner, for any debt,
obligation or liability of the Company by reason of his acting as a Director of
the Company. A Director of the Company shall not be personally liable to the
Company or its Members for monetary damages for breach of fiduciary duty as a
Director, except for (i) liability for any acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law or (ii) for a
distribution, redemption or purchase of or with respect to Member Interests in
violation of Delaware Law. If the laws of the State of Delaware are amended
after the date of this Agreement to authorize action further eliminating or
limiting the personal liability of a Director, then the liability of a Director
of the Company, in addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by the amended laws of
the State of Delaware. Any repeal or modification of this Section 7.12 shall be
prospective only, and shall not adversely affect any limitation on the personal
liability of a Director of the Company existing at the time of such repeal or
modification or thereafter arising as a result of acts or omissions prior to the
time of such repeal or modification.
7.13 Officers.
(a) General. The officers of the Company shall be appointed by
the Board of Directors and shall be a President, a Secretary and a Treasurer.
Additionally, the Board of Directors, in its discretion, may appoint a Chairman
of the Board of Directors (who must be a Director), a Chief Executive Officer,
and one or more Vice Presidents (including any Executive Vice President or
Assistant Vice President), Assistant Secretaries, Assistant Treasurers and such
other officers as the Board of Directors may from time to time designate. Any
number of offices may be held by the same person. The salaries of all officers
of the Company shall be fixed by the Board of Directors and may be altered by
the Board of Directors from time to time except as otherwise provided by
contract. All officers shall be
- 17 -
<PAGE> 23
entitled to be paid or reimbursed for all costs and expenditures incurred on
behalf of the Company.
(b) Election; Vacancies; Removal. The officers of the Company
shall hold their offices for such terms and shall exercise such powers and
perform such duties as described in this Agreement and as shall be determined
from time to time by the Board of Directors; and all officers of the Company
shall hold office until their successors are chosen and qualified or until their
earlier resignation or removal. Whenever any vacancies shall occur in any office
by death, resignation, removal, increase in the number of officers of the
Company, or otherwise, the same shall be filled by the Board of Directors, and
the officer so appointed shall hold office until his successor is chosen and
qualified. Any officer or agent elected or appointed by the Board of Directors
may be removed by the Board of Directors. Such removal may be with or without
prejudice to the contract rights, if any, of the person so removed. Election or
appointment of an officer or agent shall not of itself create contract rights.
(c) Chairman of the Board of Directors. The Chairman of the Board
of Directors, if any, shall preside, if present, at all meetings of the Board of
Directors and shall perform such additional functions and duties as the Board of
Directors may prescribe from time to time.
(d) Chief Executive Officer. The Chief Executive Officer, who may
be the Chairman or Vice Chairman of the Board of Directors and/or the President,
shall have general and active management of the business of the Company and
shall see that all orders and resolutions of the Board of Directors are carried
into effect. The Chief Executive Officer may sign deeds, mortgages, bonds,
contracts or other instruments, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by this
Agreement to some other officer or agent of the Company, or shall be required by
law to be otherwise signed and executed. The Chief Executive Officer shall also
perform all duties incident to the office of Chief Executive Officer and such
other duties and may exercise such other powers as may be assigned by this
Agreement or prescribed by the Board of Directors from time to time.
(e) President. The President shall, subject to the control of the
Board of Directors and the Chief Executive Officer, in general, supervise and
control all of the business and affairs of the Company. The President shall
preside at all meetings of the Members. The President may sign any deeds,
mortgages, bonds, contracts or other instruments, except in cases where the
signing and execution thereof shall be expressly delegated by the Board of
Directors or by this Agreement to some other officer or agent of the Company, or
shall be required by law to be otherwise signed and executed. The President
shall also perform all duties incident to the office of President and such other
duties as may be prescribed by the Board of Directors from time to time.
- 18 -
<PAGE> 24
(f) Vice Presidents. Any Vice President, in the order of
seniority, unless otherwise determined by the Board of Directors, shall, in the
absence or disability of the President, perform the duties and exercise the
powers of the President. They shall also perform the usual and customary duties
that pertain to such office and generally assist the President by executing
contracts and agreements and exercising such other powers and performing such
other duties as are delegated to them by the President and as the Board of
Directors may further prescribe.
(g) Secretary. The Secretary shall attend, to the extent
possible, all meetings of Members and record all the proceedings thereat in a
book or books to be kept for that purpose. The Secretary shall give, or cause to
be given, notice of all meetings of the Members, and shall perform such other
duties as may be prescribed by the Board of Directors or President, under whose
supervision the Secretary shall be. If the Secretary shall be unable or shall
refuse to cause to be given notice of meetings of the Members, and if there is
no Assistant Secretary, then the Board of Directors or President may choose
another officer to cause such notice to be given. The Secretary shall have
custody of the seal of the Company and the Secretary shall have authority to
affix the same to any instrument requiring it, and when so affixed, it may be
attested by the signature of the Secretary. The Board of Directors or President
may give general authority to any other officer to affix the seal of the Company
and to attest the affixing by his or her signature. The Secretary shall see that
all books, reports, statements, certificates and other documents and records
required by law to be kept or filed are properly kept or filed, as the case may
be. The duties of the Secretary may be performed by any Assistant Secretary.
(h) Treasurer. The Treasurer shall have custody of the funds of
the Company as may be entrusted to his or her keeping and account for the same.
The Treasurer shall be prepared at all times to give information as to the
condition of the Company and shall make an annual report of the entire business
and financial condition of the Company. The Treasurer shall also perform, under
the direction and subject to the control of the Board of Directors, such other
duties as may be assigned to him or her. The duties of the Treasurer may also be
performed by any Assistant Treasurer.
(i) Assistant Vice Presidents. The Assistant Vice President(s)
shall generally assist the President and Vice President(s) and exercise such
other powers and perform such other duties as may be prescribed by the Board of
Directors from time to time.
(j) Assistant Secretaries. Except as may be otherwise provided in
this Agreement, any Assistant Secretary shall perform such duties and have such
powers as from time to time may be assigned to him or her by the Board of
Directors, the President or the Secretary and, in the absence of the Secretary,
or in the event of his or her disability or refusal to act, shall perform the
duties of the Secretary, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the Secretary.
- 19 -
<PAGE> 25
(k) Assistant Treasurers. Except as may be otherwise provided in
this Agreement, any Assistant Treasurer shall perform such duties and have such
powers as from time to time may be assigned to him or her by the Board of
Directors, the President or the Treasurer, if there is one, and, in the absence
of the Treasurer or in the event of his or her disability or refusal to act,
shall perform the duties of the Treasurer, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the Treasurer.
(l) Other Officers. Such other officers as the Board of Directors
may appoint shall perform such duties and have such powers as from time to time
may be assigned to them by the Board of Directors. The Board of Directors may
delegate to any other officer of the Company the power to choose such other
officers and to prescribe their respective duties and powers.
(m) Delegation of Authority. In the case of any absence of any
officer of the Company or for any other reason that the Board of Directors may
deem sufficient, the Board of Directors may delegate some or all of the powers
or duties of such officer to any other officer or to any Director, employee,
Member, unitholder or agent for whatever period of time seems desirable.
(n) Voting Securities Owned by the Company. Powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Company may be executed in the name and on behalf of
the Company by the Chief Executive Officer, the President or any Vice President,
and any such officer may, in the name of and on behalf of the Company, take all
such action as any such officer may deem advisable to vote in person or by proxy
at any meeting of security holders of any entity in which the Company may own
securities and at any such meeting shall possess and may exercise any and all
rights and powers incident to the ownership of such securities and which, as the
owner thereof, the Company might have exercised and possessed if present. The
Board of Directors may confer like powers upon any other person or persons.
7.14 Member Contributions. The directors and officers of the
Company shall not have any personal liability for the repayment of any Capital
Contributions of any Member.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification. Each person who at any time shall be, or
shall have been, Director, officer, employee or agent of the Company, or any
person who, while a Director, officer, employee or agent of the Company, is or
was serving at the request of the Company as a director, member, manager,
officer, partner, venturer, proprietor, trustee, employee, agent or similar
functionary of another Entity, shall be entitled to indemnification as and to
the fullest extent permitted by the provisions of Delaware Law or any successor
statutory
- 20 -
<PAGE> 26
provisions, as from time to time amended. The foregoing right of indemnification
shall not be deemed exclusive of any other rights to which one to be indemnified
may be entitled as a matter of law or under this Agreement, any other agreement,
by vote of the Members or determination of the Board of Directors or otherwise,
both as to any action in an official capacity and as to action in another
capacity while holding such office. Any repeal of this Section 8.1 shall be
prospective only, and shall not adversely affect any right of indemnification
existing at the time of such repeal or modification or thereafter arising as a
result of acts or omissions prior to the time of such repeal or modification.
8.2 Power to Indemnify in Actions, Suits or Proceedings Other
Than Those by or in the Right of the Company. Without limiting the provisions of
Section 8.1, subject to Section 8.4 the Company shall indemnify, to the full
extent not prohibited by law, any person who was or is a party or is threatened
to be made a party (including a witness) to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company) by reason
of the fact that he is or was a Director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
member, manager, officer, employee or agent of another Entity, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Company, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
8.3 Power to Indemnify in Actions, Suits or Proceedings by or in
the Right of the Company. Without limiting the provisions of Section 8.1,
subject to Section 8.4, the Company shall, to the full extent not prohibited by
law, indemnify any person who was or is a party or is threatened to be made a
party (including a witness) to any threatened, pending or completed action, suit
or proceeding by or in the right of the Company to procure a judgment in its
favor by reason of the fact that he is or was a Director, officer, employee or
agent of the Company, or is or was serving at the request of the Company as a
director, member, manager, officer, employee or agent of another Entity against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Company; except that 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 Company unless and only to the extent that the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but
- 21 -
<PAGE> 27
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper.
8.4 Authorization of Indemnification. Any indemnification under
this Article VIII (unless ordered by a court) shall be made by the Company as
permitted by Delaware Law or as authorized in the specific case upon a
determination that indemnification is proper in the circumstances because it is
permitted under Delaware Law or the applicable standards of conduct set forth in
Section 8.2 or Section 8.3, as the case may be, have been met. Such
determination shall be made, in the case of any Director or officer, (i) by a
vote of the disinterested Directors, (ii) if a majority of Directors are not
disinterested by independent legal counsel in a written opinion or (iii) by the
Members. Such determination shall be made, in the case of an employee or agent
of the Company who is not a Director or officer of the Company, as specified in
the preceding sentence or by the President or any officer authorized by the
President. To the extent, however, that the Director, officer, employee or agent
of the Company has been successful on the merits or otherwise in defense of any
action, suit or proceeding described above, or in the defense of any claim,
issue or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith, without the necessity of authorization in the specific case.
8.5 Good Faith Defined. For purposes of any determination under
this Article VIII, a person shall be deemed to have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company, or, with respect to any criminal action or proceeding, to have had
no reasonable cause to believe his conduct was unlawful, if his action is based
upon the records of the Company and upon such information, opinions, reports or
statements presented to the Company by any of the other Directors, Members,
officers, employees or committees of the Company or by any other person as to
matters the person seeking indemnification reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Company, including information, opinions,
reports or statements as to the value and amount of assets, liabilities, profits
or losses of the Company or any other facts pertinent to the existence and
amount of assets from which distributions to the Members might properly be paid.
The provisions of this Section 8.5 shall not be deemed to be exclusive or to
limit in any way the circumstances in which a person may be deemed to have met
the applicable standards of conduct set forth in the provisions of Delaware Law,
or in Section 8.2 or Section 8.3, as the case may be.
8.6 Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 8.4, and notwithstanding the
absence of any determination thereunder, any Director, officer, employee or
agent may apply to any court of competent jurisdiction for indemnification to
the extent otherwise permissible under Delaware Law or this Article VIII. The
basis of such indemnification by a court shall be a determination by such court
that indemnification of the Director, officer, employee or agent is proper in
the circumstances because it is permitted under the provisions of the Delaware
Law, or the
- 22 -
<PAGE> 28
Director, officer, employee or agent has met the applicable standards of conduct
set forth in Section 8.2 or Section 8.3, as the case may be. Notice of any
application for indemnification pursuant to this Section 8.6 shall be given to
the Company promptly upon the filing of such application.
8.7 Advancement or Reimbursement of Expenses. The Company shall
pay in advance or reimburse expenses actually or reasonably incurred or
anticipated by such Director or officer in connection with his appearance as a
witness or other participation in a proceeding whether or not such Director or
officer is a named defendant or a respondent in the proceeding. To obtain
indemnification or an expense advance, the person requesting indemnification
shall submit to the Company a written request with such information as is
reasonably available to him. If the expense advance is to be paid prior to final
disposition of the proceeding, there shall be included a written statement of
such person's good faith belief that he has met the necessary standard of
conduct under the Delaware Law and an undertaking to repay any amount paid if it
is ultimately determined that those conduct requirements were not met. If,
within sixty days of the Company's receipt of the request, the request for
payment is not acted on or the Company refuses to indemnify or advance expenses
as required by this Article VIII, such person shall have the right to an
adjudication in any court of competent jurisdiction of such person's entitlement
to such indemnification or expense advance.
8.8 Nonexclusivity and Survival of Indemnification. The
indemnification and advancement of expenses provided by, or granted pursuant to,
the other subsections of this Article VIII shall not be deemed exclusive of any
other rights to which one seeking indemnification and advancement of expenses
may be entitled under this Agreement, any other agreement, by vote of Members or
determination of the Board of Directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, it being the policy of the Company that indemnification of any person
specified in this Article VIII shall be made to the fullest extent permitted by
law. The provisions of this Article VIII shall not be deemed to preclude the
indemnification of any person who is not specified in this Article VIII but whom
the Company has the power or obligation to indemnify under the provisions of the
Delaware Act or otherwise.
8.9 Insurance. The Company may purchase and maintain insurance on
behalf of any person who is or was a Member, Director, officer, employee or
agent of the Company, or is or was serving at the request of the Company as a
member, manager, director, officer, employee or agent of an Entity against any
liability asserted against him and incurred by him in any such capacity or
arising out of his status as such, whether or not the Company would have the
power or the obligation to indemnify him against such liability under the
provisions of this Article VIII.
8.10 Terms. For purposes of this Article VIII, references to "the
Company" shall include, in addition to the resulting limited liability company,
any constituent entity (including any constituent of a constituent) absorbed in
a consolidation or merger, which, if
- 23 -
<PAGE> 29
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees or agents, so that any person who
is or was a director, officer, employee or agent of such constituent entity, or
is or was serving at the request of such constituent entity as a director,
officer, employee or agent of another entity, shall stand in the same position
under the provisions of this Article VIII in respect of the resulting or
surviving entity as he would have with respect to such constituent entity if its
separate existence had continued.
ARTICLE IX
ALLOCATIONS
9.1 Profits. For After giving effect to the special allocations
set forth in Sections 9.3 and 9.4, Profits for any Allocation Year shall be
allocated to the Members in proportion to their Capital Percentages.
9.2 Losses. After giving effect to the special allocations set
forth in Sections 9.3 and 9.4 and subject to Section 9.5, Losses for any
Allocation Year shall be allocated to the Members in proportion to their Capital
Percentages.
9.3 Special Allocations. The following special allocations shall
be made in the following order:
(a) Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-2(f) of the Regulations, notwithstanding any other provision of
this Section 9, if there is a net decrease in Company Minimum Gain during any
Allocation Year, each Member shall be specially allocated items of Company
income and gain for such Allocation Year (and, if necessary, subsequent
Allocation Years) in an amount equal to such Member's share of the net decrease
in Company Minimum Gain, determined in accordance with Regulations Section
1.704-2(g). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Member
pursuant thereto. The items to be so allocated shall be determined in accordance
with sections 1.704-2(f)(6) and 1.704-2(j) (2) of the Regulations. This Section
9.3(a) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(f) of the Regulations and shall be interpreted consistently
therewith.
(b) Member Minimum Gain Chargeback. Except as otherwise provided
in Section 1.704-2(i)(4) of the Regulations, notwithstanding any other provision
of this Section 9, if there is a net decrease in Member Nonrecourse Debt Minimum
Gain attributable to a Member Nonrecourse Debt during any Allocation Year, each
Member who has a share of the Member Nonrecourse Debt Minimum Gain attributable
to such Member Nonrecourse Debt, determined in accordance with Section
1.704-2(i)(5) of the Regulations, shall be specially allocated items of Company
income and gain for such Allocation Year (and, if necessary,
- 24 -
<PAGE> 30
subsequent Allocation Years) in an amount equal to such Member's share of the
net decrease in Member Nonrecourse Debt, determined in accordance with
Regulations Section 1.704- 2(i)(4). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the
Regulations. This Section 9.3(b) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-2(i)(4) of the Regulations and shall be
interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6) of
the Regulations, items of Company income and gain shall be specially allocated
to such Member in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, the Adjusted Capital Account Deficit of the Member
as quickly as possible, provided that an allocation pursuant to this Section
9.3(c) shall be made only if and to the extent that the Member would have an
Adjusted Capital Account Deficit after all other allocations provided for in
this Section 9 have been tentatively made as if this Section 9.3(c) were not in
the Agreement.
(d) Gross Income Allocation. In the event any Member has a
deficit Capital Account at the end of any Allocation Year which is in excess of
the sum of (i) the amount such Member is obligated to restore pursuant to the
penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5),
each such Member shall be specially allocated items of Company income and gain
in the amount of such excess as quickly as possible, provided that an allocation
pursuant to this Section 9.3(d) shall be made only if and to the extent that
such Member would have a deficit Capital Account in excess of such sum after all
other allocations provided for in this Section 9 have been made as if Section
9.3(c) and this Section 9.3(d) were not in the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any
Allocation Year shall be specially allocated to the Members in proportion to
their respective Capital Percentages.
(f) Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions for any Allocation Year shall be specially allocated to the Member
who bears the economic risk of loss with respect to the Member Nonrecourse Debt
to which such Member Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i)(1).
(g) Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Company asset, pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken into account in
determining Capital Accounts as the result of a distribution to a Member in
complete liquidation of such Member's interest in the Company, the amount of
- 25 -
<PAGE> 31
such adjustment to Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to the
Members in accordance with their interests in the Company in the event
Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom
such distribution was made in the event Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(h) Allocations Relating to Taxable Issuance of Member Interests.
Any income, gain, loss or deduction realized as a direct or indirect result of
the issuance of Member Interests by the Company to a Member (the "Issuance
Items") shall be allocated among the Members so that, to the extent possible,
the net amount of such Issuance Items, together with all other allocations under
this Agreement to each Member shall be equal to the net amount that would have
been allocated to each such Member if the Issuance Items had not been realized.
9.4 Curative Allocations. The allocations set forth in Sections
9.3(a), 9.3(b), 9.3(c), 9.3(d), 9.3(e), 9.3(f), 9.3(g) and 9.5 (the "Regulatory
Allocations") are intended to comply with certain requirements of the
Regulations. It is the intent of the Members that, to the extent possible, all
Regulatory Allocations shall be offset either with other Regulatory Allocations
or with special allocations of other items of Company income, gain, loss or
deduction pursuant to this Section 9.4. Therefore, notwithstanding any other
provision of this Section 9 (other than the Regulatory Allocations), the Board
of Directors shall make such offsetting special allocations of Company income,
gain, loss or deduction in whatever manner it determines appropriate so that,
after such offsetting allocations are made, each Member's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Member would have had if the Regulatory Allocations were not part of the
Agreement and all Company items were allocated pursuant to Sections 9.1, 9.2,
and 9.3(h).
9.5 Loss Limitation. Losses allocated pursuant to Section 9.2
hereof shall not exceed the maximum amount of Losses that can be allocated
without causing any Member to have an Adjusted Capital Account Deficit at the
end of any Allocation Year. In the event some but not all of the Members would
have Adjusted Capital Account Deficits as a consequence of an allocation of
Losses pursuant to Section 9.2 hereof, the limitation set forth in this Section
9.5 shall be applied on a Member by Member basis and Losses not allocable to any
Member as a result of such limitation shall be allocated to the other Members in
accordance with the positive balances in such Member's Capital Accounts so as to
allocate the maximum permissible Losses to each Member under Section
1.704-1(b)(2)(ii)(d) of the Regulations.
9.6 Other Allocation Rules. (a) For purposes of determining the
Profits, Losses, or any other items allocable to any period, Profits, Losses,
and any such other items shall be determined on a daily, monthly, or other
basis, as determined by Board of Directors using any permissible method under
Code Section 706 and the Regulations thereunder.
- 26 -
<PAGE> 32
(b) The Members are aware of the income tax consequences of the
allocations made by this Section 9 and hereby agree to be bound by the
provisions of this Section 9 in reporting their shares of Company income and
loss for income tax purposes.
(c) Solely for purposes of determining a Member's proportionate
share of the "excess nonrecourse liabilities" of the Company within the meaning
of Regulations Section 1.752-3(a)(3), the Members' interests in Company profits
are in proportion to their Capital Percentages.
To the extent permitted by Section 1.704-2(h)(3) of the
Regulations, the Board of Directors shall endeavor to treat distributions of Net
Cash Flow as having been made from the proceeds of a Nonrecourse Liability or a
Member Nonrecourse Debt only to the extent that such distributions would cause
or increase an Adjusted Capital Account Deficit for any Member.
9.7 Tax Allocations: Code Section 704(c). In accordance with Code
Section 704(c) and the Regulations thereunder, income, gain, loss, and deduction
with respect to any Property contributed to the capital of the Company shall,
solely for tax purposes, be allocated among the Members so as to take account of
any variation between the adjusted basis of such Property to the Company for
federal income tax purposes and its initial Gross Asset Value (computed in
accordance with the definition of Gross Asset Value).
In the event the Gross Asset Value of any Company asset is
adjusted pursuant to subparagraph (ii) of the definition of Gross Asset Value,
subsequent allocations of income, gain, loss, and deduction with respect to such
asset shall take account of any variation between the adjusted basis of such
asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Code Section 704(c) and the Regulations thereunder.
Any elections or other decisions relating to such allocations
shall be made by the Board of Directors in any manner that reasonably reflects
the purpose and intention of this Agreement. Allocations pursuant to this
Section 9.7 are solely for purposes of federal, state, and local taxes and shall
not affect, or in any way be taken into account in computing, any Member's
Capital Account or share of Profits, Losses, other items, or distributions
pursuant to any provision of this Agreement.
ARTICLE X
NET CASH FLOW AND DISTRIBUTIONS
10.1 Free Cash Flow. "Free Cash Flow" shall mean all income and
revenues of the Company less (i) all expenses and costs, (ii) all accrued and
unpaid or unfunded costs and expenses, (iii) all principal and interest paid or
payable on indebtedness and (iv) all
- 27 -
<PAGE> 33
reasonable reserves established by the Board of Directors for working capital
requirements, to pay costs or expenses, for debt service or to provide funds for
other contingencies.
10.2 Distributions of Free Cash Flow. The Board of Directors
shall determine the availability of Free Cash Flow for distribution, and shall
distribute such available Free Cash Flow at such reasonable intervals as it may
select. To the extent Free Cash Flow is distributed, such distributions shall be
made to the Members in accordance with their respective Capital Percentages.
10.3 Limitation Upon Distributions. No distribution shall be
declared and paid unless, after the distribution is made, the fair value of the
assets of the Company are in excess of the fair value of all liabilities of the
Company, except liabilities to Members on account of their Capital Contributions
and liabilities for which the recourse of creditors is limited to a specified
property of the Company.
ARTICLE XI
ACCOUNTING METHOD, PERIOD, RECORDS AND REPORTS
11.1 Accounting Method. The books and records of account of the
Company shall be maintained in accordance with the accrual method of accounting.
11.2 Accounting Period. The Company's accounting period shall be
the Fiscal Year.
11.3 Records, Audits and Reports. At the expense of the Company,
the Board of Directors shall maintain books and records of account of all
operations and expenditures of the Company.
11.4 Inspection. The books and records of account of the Company
shall be maintained at the principal place of business of the Company or such
other location as shall be determined by the Board of Directors and shall be
open to inspection by the Members at all reasonable times during any business
day.
11.5 Preparation of Financial Statements. The Board of Directors
shall cause to be prepared from the books of the Company and sent to the Members
quarterly (a) a balance sheet as at the end of such period, (b) statements of
net profit or loss and cash flow of the Company for such period and (c)
statements of the aggregate amounts distributed to the Members pursuant to this
Agreement for such period and the Members' respective shares thereof for such
period.
- 28 -
<PAGE> 34
ARTICLE XII
TAX MATTERS
12.1 Tax Elections. The Board of Directors shall, without any
further consent of the Members being required (except as specifically required
herein), make any and all elections for federal, state, local, and foreign tax
purposes including, without limitation, any election, if permitted by applicable
law: (i) to adjust the basis of Property pursuant to Code Sections 754, 734(b)
and 743(b), or comparable provisions of state, local or foreign law, in
connection with transfers of Member Interests and Company distributions; (ii)
with the consent of all of the Members, to extend the statute of limitations for
assessment of tax deficiencies against the Members with respect to adjustments
to the Company's federal, state, local or foreign tax returns; and (iii) to the
extent provided in Code Sections 6221 through 6231 and similar provisions of
federal, state, local, or foreign law, to represent the Company and the Members
before taxing authorities or courts of competent jurisdiction in tax matters
affecting the Company or the Members in their capacities as Members, and to file
any tax returns and execute any agreements or other documents relating to or
affecting such tax matters, including agreements or other documents that bind
the Members with respect to such tax matters or otherwise affect the rights of
the Company and the Members. [___] is specifically authorized to act as the "Tax
Matters Member" under the Code and in any similar capacity under state or local
law.
12.2 Tax Information. Necessary tax information shall be
delivered to each Member as soon as practicable after the end of each Fiscal
Year of the Company but not later than five (5) months after the end of each
Fiscal Year.
ARTICLE XIII
RESTRICTIONS ON TRANSFERABILITY
13.1 Transfer Restrictions. Except as otherwise provided herein,
no Member shall be permitted to sell, assign, transfer or otherwise dispose of,
or mortgage, hypothecate or otherwise encumber, or permit or suffer any
encumbrance of, all or any portion of its Member Interest without the prior
written consent of all other Members (which consent may be withheld in the sole
discretion of such Members).
- 29 -
<PAGE> 35
ARTICLE XIV
DISSOLUTION AND TERMINATION
14.1 Dissolution Events.
(a) Dissolution. The Company shall dissolve and shall commence
winding up and liquidating upon the first to occur of any of the following (each
a "Dissolution Event"):
(i) The unanimous vote of the Members to dissolve, wind
up, and liquidate the Company;
(ii) A judicial determination that an event has occurred
that makes it unlawful, impossible or impractical to carry on the Business; or
(iii) The Bankruptcy, dissolution, retirement,
resignation or expulsion of any Member; provided, that any such event will not
be deemed a Dissolution Event in the event that there are at least two remaining
Members and each remaining Member agrees to continue the business of the Company
within ninety (90) days after the occurrence of such an event.
The Members hereby agree that, notwithstanding any provision of the Act, the
Company shall not dissolve prior to the occurrence of a Dissolution Event.
(b) Reconstitution. If it is determined, by a court of competent
jurisdiction, that the Company has dissolved prior to the occurrence of a
Dissolution Event, then within an additional ninety (90) days after such
determination (the "Reconstitution Period"), all of the Members may elect to
reconstitute the Company and continue its business on the same terms and
conditions set forth in this Agreement by forming a new limited liability
company on terms identical to those set forth in this Agreement. Unless such an
election is made within the Reconstitution Period, the Company shall liquidate
and wind up its affairs in accordance with Section 14.2 hereof. If such an
election is made within the Reconstitution Period, then:
(i) The reconstituted limited liability company shall
continue until the occurrence of a Dissolution Event as provided in Section
14.1(a);
(ii) Unless otherwise agreed to by a majority of the
Members, the Certificate of Formation and this Agreement shall automatically
constitute the Certificate of Formation and Agreement of such new Company. All
of the assets and liabilities of the dissolved Company shall be deemed to have
been automatically assigned, assumed, conveyed and transferred to the new
Company. No bond, collateral, assumption or release of any Member's or the
Company's liabilities shall be required;
- 30 -
<PAGE> 36
provided that the right of the Members to select successor managers and to
reconstitute and continue the Business shall not exist and may not be exercised
unless the Company has received an opinion of counsel that the exercise of the
right would not result in the loss of limited liability of any Member and
neither the Company nor the reconstituted limited liability company would cease
to be treated as a partnership for federal income tax purposes upon the exercise
of such right to continue.
14.2 Winding Up. Upon the occurrence of (i) a Dissolution Event or (ii)
the determination by a court of competent jurisdiction that the Company has
dissolved prior to the occurrence of a Dissolution Event (unless the Company is
reconstituted pursuant to Section 14.1(b) hereof), the Company shall continue
solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying the claims of its creditors and Members,
and no Member shall take any action that is inconsistent with, or not necessary
to or appropriate for, the winding up of the Company's business and affairs,
provided that all covenants contained in this Agreement and obligations provided
for in this Agreement shall continue to be fully binding upon the Members until
such time as the Property has been distributed pursuant to this Section 14.2 and
the Certificate of Formation has been canceled pursuant to the Delaware Act. The
Liquidator shall be responsible for overseeing the winding up and dissolution of
the Company, which winding up and dissolution shall be completed within ninety
(90) days of the occurrence of the Dissolution Event and within ninety (90) days
after the last day on which the Company may be reconstituted pursuant to Section
14.1(b) hereof. The Liquidator shall take full account of the Company's
liabilities and Property and shall cause the Property or the proceeds from the
sale thereof (as determined pursuant to Section 14.10 hereof), to the extent
sufficient therefor, to be applied and distributed, to the maximum extent
permitted by law, in the following order:
(a) First, to creditors (including Members who are creditors, to
the extent otherwise permitted by law) in satisfaction of all of the Company's
Debts and other liabilities (whether by payment or the making of reasonable
provision for payment thereof), other than liabilities for which reasonable
provision for payment has been made and liabilities for distribution to Members
under Section 18-601 or 18-604 of the Delaware Act;
(b) Second, except as provided in this Agreement, to Members and
former Members of the Company in satisfaction of liabilities for distribution
under Sections 18-601 or 18-604 of the Delaware Act; and
(c) The balance, if any, to the Members in accordance with the
positive balance in their Capital Accounts, after giving effect to all
contributions, distributions and allocations for all periods.
No Member shall receive additional compensation for any services performed
pursuant to this Article XIV.
- 31 -
<PAGE> 37
14.3 Compliance With Certain Requirements of Regulations; Deficit Capital
Accounts. In the event the Company is "liquidated" within the meaning of
Regulations Section 1.704- 1(b)(2)(ii)(g), distributions shall be made pursuant
to this Article XIV to the Members who have positive Capital Accounts in
compliance with Regulations Section 1.704- 1(b)(2)(ii)(b)(2). If any Member has
a deficit balance in his Capital Account (after giving effect to all
contributions, distributions and allocations for all Allocation Years, including
the Allocation Year during which such liquidation occurs), such Member shall
have no obligation to make any contribution to the capital of the Company with
respect to such deficit, and such deficit shall not be considered a debt owed to
the Company or to any other Person for any purpose whatsoever. In the discretion
of the Liquidator, a pro rata portion of the distributions that would otherwise
be made to the Members pursuant to this Article XIV may be:
(a) Distributed to a trust established for the benefit of the
Members for the purposes of liquidating Company assets, collecting amounts owed
to the Company, and paying any contingent or unforeseen liabilities or
obligations of the Company. The assets of any such trust shall be distributed to
the Members from time to time, in the reasonable discretion of the Liquidator,
in the same proportions as the amount distributed to such trust by the Company
would otherwise have been distributed to the Members pursuant to Section 14.2
hereof; or
(b) Withheld to provide a reasonable reserve for Company
liabilities (contingent or otherwise) and to reflect the unrealized portion of
any installment obligations owed to the Company, provided that such withheld
amounts shall be distributed to the Members as soon as practicable.
14.4 Deemed Distribution and Recontribution. Notwithstanding any other
provision of this Article XIV, in the event the Company is liquidated within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no Dissolution Event has
occurred, the Property shall not be liquidated, the Company's Debts and other
liabilities shall not be paid or discharged, and the Company's affairs shall not
be wound up. Instead, solely for federal income tax purposes, the Company shall
be deemed to have contributed all of its Property and liabilities to a new
limited liability company in exchange for an interest in such new company and,
immediately thereafter, the Company will be deemed to liquidate by distributing
interests in the new company to the Members.
14.5 Rights of Members. Except as otherwise provided in this Agreement,
each Member shall look solely to the Property of the Company for the return of
its Capital Contribution and has no right or power to demand or receive Property
other than cash from the Company. If the assets of the Company remaining after
payment or discharge of the debts or liabilities of the Company are insufficient
to return such Capital Contribution, the Members shall have no recourse against
the Company or any other Member.
- 32 -
<PAGE> 38
14.6 Notice of Dissolution/Termination.
(a) In the event a Dissolution Event occurs or an event occurs
that would, but for provisions of Section 14.1, result in a dissolution of the
Company, the Board of Directors shall, within thirty (30) days thereafter,
provide written notice thereof to each of the Members and to all other parties
with whom the Company regularly conducts business (as determined in the
discretion of the Board of Directors) and shall publish notice thereof in a
newspaper of general circulation in each place in which the Company regularly
conducts business (as determined in the discretion of the Board of Directors).
(b) Upon completion of the distribution of the Company's Property
as provided in this Article XIV, the Company shall be terminated, and the
Liquidator shall cause the filing of the certificate of cancellation pursuant to
Section 18-203 of the Delaware Act and shall take all such other actions as may
be necessary to terminate the Company.
14.7 Allocations During Period of Liquidation. During the period
commencing on the first day of the Fiscal Year during which a Dissolution Event
occurs and ending on the date on which all of the assets of the Company have
been distributed to the Members pursuant to Section 14.2 hereof (the
"Liquidation Period"), the Members shall continue to share Profits, Losses,
gain, loss and other items of Company income, gain, loss or deduction in the
manner provided in Section 9 hereof.
14.8 Character of Liquidating Distributions. All payments made in
liquidation of the interest of a Member in the Company shall be made in exchange
for the interest of such Member in Property pursuant to Section 736(b)(1) of the
Code, including the interest of such Member in Company goodwill.
14.9 The Liquidator.
(a) Definition. The "Liquidator" shall mean a Person appointed by
the Board of Directors to oversee the liquidation of the Company.
(b) Fees. The Company is authorized to pay a reasonable fee to
the Liquidator for its services performed pursuant to this Article XIV and to
reimburse the Liquidator for its reasonable costs and expenses incurred in
performing those services.
(c) Indemnification. The Company shall indemnify, save harmless,
and pay all judgments and claims against such Liquidator or any officers,
directors, agents or employees of the Liquidator relating to any liability or
damage incurred by reason of any act performed or omitted to be performed by the
Liquidator, or any officers, directors, agents or employees of the Liquidator in
connection with the liquidation of the Company, including reasonable attorneys'
fees incurred by the Liquidator, officer, director, agent or employee in
connection with the defense of any action based on any such act or omission,
which attorneys' fees may
- 33 -
<PAGE> 39
be paid as incurred, except to the extent such liability or damage is caused by
the fraud or intentional misconduct of, or a knowing violation of the laws by,
the Liquidator which was material to the cause of action.
14.10 Form of Liquidating Distributions. For purposes of making
distributions required by Section 14.2 hereof, the Liquidator may determine
whether to distribute all or any portion of the Property in-kind or to sell all
or any portion of the Property and distribute the proceeds therefrom.
ARTICLE XV
MISCELLANEOUS PROVISIONS
15.1 Notices. Any notice, demand or communication required or
permitted to be given by any provision of this Agreement shall be deemed to have
been sufficiently given or served for all purposes if delivered in writing
personally to the party or to an executive officer of the party to whom the same
is directed or if sent by recognized overnight courier or registered or
certified mail, postage and charges prepaid, addressed to the Member's and/or
Company's address, as appropriate, which is set forth in this Agreement. If
mailed, any such written notice shall be deemed to be delivered two calendar
days after being deposited in the United States mail with postage thereon
prepaid, addressed and sent as aforesaid. If sent by recognized overnight
courier, any such written notice shall be deemed to be delivered the date such
overnight delivery is delivered or its delivery is attempted.
15.2 Application of Delaware Law. This Agreement, and the
application of interpretation hereof, shall be governed exclusively by its terms
and by the laws of the State of Delaware, and specifically the Delaware Act.
15.3 Waiver of Action for Partition. Each Member hereby
irrevocably waives, during the term of the Company, any right that such Member
may have to maintain any action for partition with respect to the property of
the Company.
15.4 Execution of Additional Instruments. Each Member hereby
agrees to execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply with
any laws, rules or regulations.
15.5 Headings. The headings in this Agreement are inserted for
convenience only and are in no way intended to describe, interpret, define or
limit the scope, extent or intent of this Agreement or any provision hereof.
15.6 Waivers. No waiver of any right under this Agreement shall
be effective unless evidenced in writing and executed by the Person entitled to
the benefits thereof. The
- 34 -
<PAGE> 40
failure of any party to seek redress for violation of or to insist upon the
strict performance of any covenant or condition of this Agreement shall not
prevent another act or omission, which would have originally constituted a
violation, from having the effect of an original violation.
15.7 Rights and Remedies Cumulative. The rights and remedies
provided by this Agreement are cumulative and the use of any one right or remedy
by any party shall not preclude or waive the right to use any or all other
rights or remedies. Said rights and remedies are given in addition to any other
rights the parties may have by law, statute, ordinance or otherwise.
15.8 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid, illegal or
unenforceable to any extent, the remainder of this Agreement and the application
thereof shall not be affected and shall be enforceable to the fullest extent
permitted by law.
15.9 Heirs, Successors and Assigns. Each and all of the
covenants, terms, provisions and agreements herein contained shall be binding
upon and inure to the benefit of the parties hereto and, to the extent permitted
by this Agreement, their respective heirs, legal representatives, successors and
assigns.
15.10 Beneficiaries. None of the provisions of this Agreement
shall be for the benefit of or enforceable by any Person other than the parties
hereto.
15.11 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
15.12 Amendments. This Agreement may not be amended except by an
instrument in writing signed by all of the Members.
15.13 Waiver of Consequential and Punitive Damages. No party to
this Agreement shall be liable to any other party for indirect, consequential or
punitive damages resulting from or arising out of this Agreement, including, but
not limited to, loss of use of property, loss of profits, loss of products or
business interruption.
15.14 Other Terms. Unless the context shall require otherwise:
(a) Words importing the singular number or plural number shall
include the plural number and singular number respectively;
(b) Words importing the masculine gender shall include the
feminine and neuter genders and vice versa;
- 35 -
<PAGE> 41
(c) Reference to "include," "includes," and "including" shall be
deemed to be followed by the phrase "without limitation;"
(d) Reference in this Agreement to "herein," "hereby" or
"hereunder", or any similar formulation, shall be deemed to refer to this
Agreement as a whole, including the Exhibits; and
(e) Reference to "or" shall be deemed to mean "and/or."
- 36 -
<PAGE> 42
EXECUTED as of this ____th day of ______, 1998.
GPPW, INC.
By: /s/ Faith Rosenfeld
-----------------------
Name: Faith Rosenfeld
Title: President
GPPD, INC.
By: /s/ Faith Rosenfeld
-----------------------
Name: Faith Rosenfeld
Title: President
SIGNATURE PAGE TO LIMITED LIABILITY COMPANY AGREEMENT
OF GENERAL PORTABLE PRODUCTS, LLC
<PAGE> 1
EXHIBIT 3.7
ARTICLES OF INCORPORATION
OF
GPPW, INC.
The undersigned, an individual, does hereby act as incorporator in
adopting the following Articles of Incorporation for the purpose of organizing a
business corporation (hereinafter called the "CORPORATION") pursuant to the
provisions of the Wisconsin Business Corporation Law.
FIRST: The Corporation is incorporated under the Wisconsin Business
Corporation Law.
SECOND: The corporate name of the Corporation is GPPW, Inc.
THIRD: The number of shares that the Corporation is authorized to issue
is 1,000, all of which are of par value of $.01 dollars each and are of the same
class and are to be Common shares.
FOURTH: The street address of the initial registered office of the
Corporation in the State of Wisconsin is 25 West Main Street, Madison, Wisconsin
53703.
The name of the initial registered agent of the Corporation at the said
registered office is CSC-Lawyers Incorporating Service Company.
FIFTH: The name and the address of the incorporator is:
NAME ADDRESS
Andrew Metcalf c/o King & Spalding
1185 Avenue of the Americas
New York, New York 10036
SIXTH: The purposes for which the Corporation is organized, which shall
include the authority of the Corporation to engage in any lawful business as
provided in Section 180.0301 of the Wisconsin Business Corporation Law, are as
follows:
To have all of the general powers granted to corporations
organized under the Wisconsin Business Corporation Law, whether granted
by specific statutory authority or by construction of law.
<PAGE> 2
2
SEVENTH: Except as may otherwise be provided by Section 180.0704 of the
Wisconsin Business Corporation Law, and subject to the applicable requirements
of that Section, action required or permitted by the Wisconsin Business
Corporation Law to be taken at a shareholders' meeting may be taken without a
meeting by shareholders who would be entitled to vote at a meeting those shares
with voting power to cast not less than the minimum number or, in the case of
voting by voting groups, the minimum numbers of votes that would be necessary to
authorize or take the action at a meeting at which all shares entitled to vote
were present and voted.
EIGHTH: The Corporation shall, to the fullest extent permitted by the
provisions of the Wisconsin Business Corporation Law, as the same may be amended
and supplemented, indemnify any and all persons whom it shall have power to
indemnify under said provisions from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said provisions, and
the indemnification provided for herein shall not be deemed exclusive of any
other rights to which those indemnified may be entitled under any Bylaw, vote of
shareholders or disinterested directors, or otherwise, both as to action in the
indemnified person's official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee, or agent.
<PAGE> 3
3
NINTH: The duration of the Corporation shall be perpetual.
Signed on May 21, 1998.
/s/ Andrew M. Metcalf
----------------------------
Andrew Metcalf, Incorporator
This document was drafted by
Andrew Metcalf
c/o CSC-Lawyers Incorporation Service Company
Address: 25 West Main Street
Madison, Wisconsin 53703
<PAGE> 1
EXHIBIT 3.8
BY-LAWS
OF
GPPW, INC.
(A WISCONSIN CORPORATION)
<PAGE> 2
BY-LAWS
OF
GPPW, INC.
(A WISCONSIN CORPORATION)
Introduction - Variable References
0.01 Date of annual shareholders' meeting (See Section 2.01):
10:00 a.m. second Tuesday April each year
(HOUR) (DAY) (MONTH) (FIRST YEAR)
0.02 Required notice of shareholders' meeting (See Section
2.04): not less than ten (10) days.
0.03 Authorized number of Directors (See Section 3.01): one
(1).
0.04 Required notice of Directors' meeting (See Section 3.05):
not less than one (1) hour, but not less than two (2)
days if given by mail.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I. OFFICES
1.01 Principal and Business Offices................................................................ 1
1.02 Registered Office............................................................................. 1
ARTICLE II. SHAREHOLDERS
2.01 Annual Meeting................................................................................ 1
2.02 Special Meeting............................................................................... 1
2.03 Place of Meeting.............................................................................. 1
2.04 Notice of Meeting............................................................................. 2
2.05 Fixing of Record Date......................................................................... 2
2.06 Voting Record................................................................................. 3
2.07 Quorum and Voting Requirements; Postponements;
Adjournments.................................................................................. 3
2.08 Conduct of Meetings........................................................................... 5
2.09 Proxies....................................................................................... 5
2.10 Voting of Shares.............................................................................. 5
2.11 Voting of Shares by Certain Holders........................................................... 5
(a) Other Corporations................................................................... 5
(b) Legal Representatives and Fiduciaries................................................ 5
(c) Pledgees............................................................................. 6
(d) Treasury Stock and Subsidiaries...................................................... 6
(e) Minors............................................................................... 6
(f) Incompetents and Spendthrifts........................................................ 6
(g) Joint Tenants........................................................................ 7
2.12 Waiver of Notice by Shareholders.............................................................. 7
2.13 Unanimous Consent Without Meeting............................................................. 7
2.13 Majority Consent Without Meeting.............................................................. 7
ARTICLE III. BOARD OF DIRECTORS
3.01 General Powers and Number..................................................................... 8
3.02 Tenure and Qualifications..................................................................... 8
3.03 Regular Meetings.............................................................................. 8
3.04 Special Meetings.............................................................................. 8
3.05 Notice; Waiver................................................................................ 9
3.06 Quorum........................................................................................ 9
3.07 Manner of Acting.............................................................................. 10
3.08 Conduct of Meetings........................................................................... 10
3.09 Vacancies..................................................................................... 10
3.10 Compensation.................................................................................. 10
3.11 Presumption of Assent......................................................................... 10
3.12 Committees.................................................................................... 11
3.13 Unanimous Consent Without Meeting............................................................. 11
</TABLE>
(i)
<PAGE> 4
<TABLE>
<S> <C> <C>
3.14 Meetings By Telephone Or By Other Communication
Technology.................................................................................... 11
ARTICLE IV. OFFICERS
4.01 Number........................................................................................ 12
4.02 Election and Term of Office................................................................... 12
4.03 Removal....................................................................................... 12
4.04 Vacancies..................................................................................... 12
4.05 Chairman of the Board......................................................................... 12
4.06 President..................................................................................... 12
4.07 The Executive Vice President.................................................................. 13
4.08 The Vice Presidents........................................................................... 13
4.09 The Secretary................................................................................. 13
4.10 The Treasurer................................................................................. 14
4.11 Assistant Secretaries and Assistant Treasurers................................................ 14
4.12 Other Assistants and Acting Officers.......................................................... 14
4.13 Salaries...................................................................................... 14
ARTICLE V. CONFLICT OF INTEREST TRANSACTIONS,
CONTRACTS, LOANS, CHECKS AND DEPOSITS: SPECIAL CORPORATE ACTS
5.01 Conflict of Interest Transactions............................................................. 15
5.02 Contracts..................................................................................... 15
5.03 Loans......................................................................................... 15
5.04 Checks, Drafts, etc........................................................................... 15
5.05 Deposits...................................................................................... 15
5.06 Voting of Securities Owned by this Corporation................................................ 15
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.01 Certificates for Shares....................................................................... 16
6.02 Facsimile Signatures.......................................................................... 16
6.03 Signature by Former Officers.................................................................. 16
6.04 Transfer of Shares............................................................................ 16
6.05 Restrictions on Transfer...................................................................... 17
6.06 Lost, Destroyed or Stolen Certificates........................................................ 17
6.07 Consideration for Shares...................................................................... 17
6.08 Stock Regulations............................................................................. 17
ARTICLE VII. INDEMNIFICATION
7.01 Indemnification for Successful Defense........................................................ 18
7.02 Other Indemnification......................................................................... 18
7.03 Allowance of Expenses......................................................................... 18
</TABLE>
ARTICLE VIII. SEAL
ARTICLE IX. AMENDMENTS
(ii)
<PAGE> 5
<TABLE>
<S> <C> <C>
9.01 By Shareholders............................................................................... 19
9.02 By Directors.................................................................................. 19
9.03 Implied Amendments............................................................................ 19
</TABLE>
(iii)
<PAGE> 6
ARTICLE I. OFFICES
1.01 PRINCIPAL AND BUSINESS OFFICES. The Corporation may have
such principal and other business offices, either within or without the State of
Wisconsin, as the Board of Directors may designate or as the business of the
Corporation may require from time to time.
1.02 REGISTERED OFFICE. The registered office of the
Corporation required by the Wisconsin Business Corporation Law to be maintained
in the State of Wisconsin may be, but need not be, identical with the principal
office in the State of Wisconsin, and the address of the registered office may
be changed from time to time by the Board of Directors or by the registered
agent. The business office of the registered agent of the Corporation shall be
identical to such registered office.
ARTICLE II. SHAREHOLDERS
2.01 ANNUAL MEETING. The annual meeting of the shareholders
shall be held at the date and hour in each year set forth in Section 0.01, or at
such other time and date within 30 days before or after said date as may be
fixed by or under the authority of the Board of Directors, for the purpose of
electing Directors and for the transaction of such other business as may come
before the meeting. If the day fixed for the annual meeting shall be a legal
holiday in the State of Wisconsin, such meeting shall be held on the next
succeeding business day. If the election of Directors shall not be held on the
day designated herein, or fixed as herein provided, for any annual meeting of
the shareholders, or at any adjournment thereof, the Board of Directors shall
cause the election to be held at a special meeting of the shareholders as soon
thereafter as conveniently may be.
2.02 SPECIAL MEETING. Special meetings of the shareholders,
for any purpose or purposes, unless otherwise prescribed by the Wisconsin
Business Corporation Law, may be called by the Chairman of the Board of
Directors (if one is designated), the President, the Board of Directors, or the
holders of at least twenty-five percent (25%) of all the votes entitled to be
cast on any issue proposed to be considered at the proposed special meeting who
sign, date and deliver to the Corporation one or more written demands for the
meeting describing one or more purposes for which it is to be held. The record
date for determining shareholders
1
<PAGE> 7
entitled to demand a special meeting shall be the date that the first
shareholder signs the demand. If duly called, the Corporation shall communicate
notice of a special meeting as set forth in Section 2.04.
2.03 PLACE OF MEETING. The Board of Directors may designate
any place, either within or without the State of Wisconsin, as the place of
meeting for any annual or special meeting. If no designation is made, the place
of meeting shall be the principal business office of the Corporation in the
State of Wisconsin or such other suitable place in the county of such principal
office as may be designated by the person calling such meeting, but any meeting
may be adjourned to reconvene at any place designated by vote of a majority of
the shares represented thereat.
2.04 NOTICE OF MEETING. Notice may be communicated in person,
by telephone, telegraph, teletype, facsimile or other form of wire or wireless
communication, or by mail or private carrier, and, if these forms of personal
notice are impracticable, notice may be communicated by a newspaper of general
circulation in the area where published, or by radio, television or other form
of public broadcast communication. Such notice stating the place, day and hour
of the meeting and, in case of a special meeting, a description of each purpose
for which the meeting is called, shall be communicated or sent not less than the
number of days set forth in Section 0.02 (unless a longer period is required by
the Wisconsin Business Corporation Law or the Articles of Incorporation) nor
more than 60 days before the date of the meeting, by or at the direction of the
Chairman of the Board (if one is designated), the President, the Secretary, or
other Officer or persons calling the meeting, to each shareholder of record
entitled to vote at such meeting. Written notice is effective at the earliest of
the following:
(i) when received;
(ii) on deposit in the U.S. mail, if mailed postpaid and
correctly addressed; or
(iii) on the date shown on the return receipt, if sent by
registered or certified mail, return receipt
requested and the receipt is signed by or on behalf
of the addressee.
2
<PAGE> 8
Written notice to a shareholder shall be deemed correctly addressed if it is
addressed to the shareholder's address shown in the Corporation's current record
of shareholders. Oral notice is effective when communicated and the Corporation
shall maintain a record setting forth the date, time, manner and recipient of
the notice.
2.05 FIXING OF RECORD DATE. A "shareholder" of the Corporation
shall mean the person in whose name shares are registered in the stock transfer
books of the Corporation or the beneficial owner of shares to the extent of the
rights granted by a nominee certificate on file with the Corporation. Such
nominee certificates, if any, shall be reflected in the stock transfer books of
the Corporation. For the purpose of determining shareholders entitled to notice
of or to vote at any meeting of shareholders or any adjournment thereof, the
Board of Directors shall fix a future date not less than ten days and not more
than 70 days prior to the date of any meeting of shareholders for the
determination of the shareholders entitled to notice of, or to vote at, such
meeting. If no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, the close of
business on the day before the notice of the meeting is mailed shall be the
record date for such determination of shareholders. The Board of Directors also
may fix a future date as the record date for the purpose of determining
shareholders entitled to take any other action or determining shareholders for
any other purpose, which record date shall not be more than 70 days prior to the
date on which the particular action, requiring such determination of
shareholders, is to be taken. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this Section,
such determination shall be applied to any adjournment thereof unless the Board
of Directors fixes a new record date, which it shall do if the meeting is
adjourned to a date more than 120 days after the date fixed for the original
meeting. The record date for determining shareholders entitled to a distribution
or a share dividend shall be the date on which the Board of Directors authorizes
the distribution or share dividend, as the case may be, unless the Board of
Directors fixes a different record date.
2.06 VOTING RECORD. The Officer or agent having charge of the
stock transfer books for shares of the Corporation shall, before each meeting of
shareholders, make a complete list of the shareholders entitled to vote at such
meeting, or any adjournment thereof, with the address of and the number of
shares held by each.
3
<PAGE> 9
The Corporation shall make the shareholders' list available for inspection by
any shareholder beginning two business days after the notice of meeting is given
for which the list was prepared and continuing to the date of the meeting, at
the Corporation's principal office. Such record also shall be produced and kept
open at the time and place of the meeting and shall be subject to the inspection
of any shareholder during the whole time of the meeting for the purposes of the
meeting. A shareholder or his or her agent or attorney may, on written demand,
inspect and copy the list subject to the requirements set forth in Sections
180.1602 and 180.0720 of the Wisconsin Business Corporation Law. The original
stock transfer books shall be prima facie evidence as to who are the
shareholders entitled to examine such record or transfer books or to vote at any
meeting of shareholders. Failure to comply with the requirements of this Section
shall not affect the validity of any action taken at such meeting.
2.07 QUORUM AND VOTING REQUIREMENTS; POSTPONEMENTS;
ADJOURNMENTS. Shares entitled to vote as a separate voting group as defined in
the Wisconsin Business Corporation Law may take action on a matter at a meeting
only if a quorum of those shares exists with respect to that matter. Unless the
Articles of Incorporation or the Wisconsin Business Corporation Law provides
otherwise, a majority of the votes entitled to be cast on the matter by the
voting group constitutes a quorum of that voting group for action on that
matter.
Once a share is represented for any purpose at a meeting,
other than for the purpose of objecting to holding the meeting or transacting
business at the meeting, it is considered present for purposes of determining
whether a quorum exists, for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
If a quorum exists, action on a matter, other than the
election of directors, by a voting group is approved if the votes cast within
the voting group favoring the action exceed the votes cast opposing the action,
unless the Articles of Incorporation or the Wisconsin Business Corporation Law
requires a greater number of affirmative votes. Unless otherwise provided in the
Articles of Incorporation of the Corporation, directors are elected by a
plurality of the votes cast by the shares entitled to vote in the election at a
meeting at which a quorum is present. "Plurality" means that the individuals
with the largest number of votes are
4
<PAGE> 10
elected as directors up to the maximum number of directors to be chosen at the
election.
"Voting group" means any of the following:
(i) All shares of one or more classes or series that under
the Articles of Incorporation or the Wisconsin Business Corporation Law
are entitled to vote and be counted together collectively on a matter
at a meeting of shareholders.
(ii) All shares that under the Articles of Incorporation or
the Wisconsin Business Corporation Law are entitled to vote generally
on a matter.
The Board of Directors acting by resolution may postpone and
reschedule any previously scheduled meeting, provided, however, that a special
meeting called by at least 10% of the shareholders may not be postponed beyond
the 30th day following the originally scheduled meeting. Any meeting may be
adjourned from time to time, whether or not there is a quorum:
(i) at any time, upon a resolution of shareholders if the
votes cast in favor of such resolution by the holders of shares of each
voting group entitled to vote on any matter theretofore properly
brought before the meeting exceed the number of votes cast against such
resolution by the holders of shares of each such voting group; or
(ii) at any time prior to the transaction of any business at
a meeting which was not called by at least 10% of the shareholders, by
the Chairman of the Board (if one is designated), the President or
pursuant to a resolution of the Board of Directors.
No notice of the time and place of adjourned meetings need be given except as
required by the Wisconsin Business Corporation Law. At any adjourned meeting at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally noticed.
2.08 CONDUCT OF MEETINGS. The Chairman of the Board (if one is
designated), or in the Chairman's absence, the President, or in the President's
absence, the Executive Vice President (if one is designated), or in the
Executive Vice President's absence, a Vice President in the order provided under
Section 4.08, and in their
5
<PAGE> 11
absence, any person chosen by the shareholders present shall call the meeting of
the shareholders to order and shall act as chairman of the meeting, and the
Secretary of the Corporation shall act as Secretary of all meetings of the
shareholders, but, in the absence of the Secretary, the presiding Officer may
appoint any other person to act as Secretary of the meeting.
2.09 PROXIES. At all meetings of shareholders, a shareholder
entitled to vote may vote in person or by proxy. A shareholder may appoint a
proxy to vote or otherwise act for the shareholder by signing an appointment
form, either personally or by his or her attorney-in-fact. Such proxy
appointment is effective when received by the Secretary of the Corporation
before or at the time of the meeting. Unless otherwise provided in the
appointment form of proxy, a proxy appointment may be revoked at any time before
it is voted, either by written notice filed with the Secretary or the acting
Secretary of the meeting or by oral notice given by the shareholder to the
presiding Officer during the meeting. The presence of a shareholder who has
filed his or her proxy appointment shall not of itself constitute a revocation.
No proxy appointment shall be valid after eleven months from the date of its
execution, unless otherwise provided in the appointment form of proxy. In
addition to the presumptions set forth in Section 2.11 below, the Board of
Directors shall have the power and authority to make rules establishing
presumptions as to the validity and sufficiency of proxy appointments.
2.10 VOTING OF SHARES. Each outstanding share shall be
entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders, except to the extent that the voting rights of the shares of any
voting group or groups are enlarged, limited or denied by the Articles of
Incorporation.
2.11 VOTING OF SHARES BY CERTAIN HOLDERS.
(a) Other Corporations. Shares standing in the name
of another corporation may be voted either in person or by proxy, by
the president of such corporation or any other officer appointed by
such president. An appointment form of proxy executed by any principal
officer of such other corporation or assistant thereto shall be
conclusive evidence of the signer's authority to act, in the absence of
express notice to this Corporation, given in writing to the Secretary
of this Corporation, or the designation of some other person
6
<PAGE> 12
by the board of directors or by the by-laws of such other corporation.
(b) Legal Representatives and Fiduciaries. Shares
held by an administrator, executor, guardian, conservator, trustee in
bankruptcy, receiver or assignee for creditors may be voted by him,
either in person or by proxy, without a transfer of such shares into
his or her name, provided there is filed with the Secretary before or
at the time of meeting proper evidence of his or her incumbency and the
number of shares held by him or her. Shares standing in the name of a
fiduciary may be voted by him or her, either in person or by proxy. An
appointment form of proxy executed by a fiduciary shall be conclusive
evidence of the signer's authority to act, in the absence of express
notice to this Corporation, given in writing to the Secretary of this
Corporation, that such manner of voting is expressly prohibited or
otherwise directed by the document creating the fiduciary relationship.
(c) Pledgees. A shareholder whose shares are pledged
shall be entitled to vote such shares until the shares have been
transferred into the name of the pledgee, and thereafter the pledgee
shall be entitled to vote the shares so transferred; provided, however,
a pledgee shall be entitled to vote shares held of record by the
pledgor if the Corporation receives acceptable evidence of the
pledgee's authority to sign.
(d) Treasury Stock and Subsidiaries. Neither treasury
shares, nor shares held by another corporation if a majority of the
shares entitled to vote for the election of directors of such other
corporation is held by this Corporation, shall be voted at any meeting
or counted in determining the total number of outstanding shares
entitled to vote, but shares of its own issue held by this Corporation
in a fiduciary capacity, or held by such other corporation in a
fiduciary capacity, may be voted and shall be counted in determining
the total number of outstanding shares entitled to vote.
(e) Minors. Shares held by a minor may be voted by
such minor in person or by proxy and no such vote shall be subject to
disaffirmance or avoidance, unless prior to such vote the Secretary of
the Corporation has received written notice or has actual knowledge
that such shareholder is a
7
<PAGE> 13
minor. Shares held by a minor may be voted by a personal
representative, administrator, executor, guardian or conservator
representing the minor if evidence of such fiduciary status is
presented and acceptable to the Corporation.
(f) Incompetents and Spendthrifts. Shares held by an
incompetent or spendthrift may be voted by such incompetent or
spendthrift in person or by proxy and no such vote shall be subject to
disaffirmance or avoidance, unless prior to such vote the Secretary of
the Corporation has actual knowledge that such shareholder has been
adjudicated an incompetent or spendthrift or actual knowledge of filing
of judicial proceedings for appointment of a guardian. Shares held by
an incompetent or spendthrift may be voted by a personal
representative, administrator, executor, guardian or conservator
representing the minor if evidence of such fiduciary status is
presented and acceptable to the Corporation.
(g) Joint Tenants. Shares registered in the names of
two or more individuals who are named in the registration as joint
tenants may be voted in person or by proxy signed by any one or more of
such individuals if either (i) no other such individual or his or her
legal representative is present and claims the right to participate in
the voting of such shares or prior to the vote files with the Secretary
of the Corporation a contrary written voting authorization or direction
or written denial or authority of the individual present or signing the
appointment form of proxy proposed to be voted or (ii) all such other
individuals are deceased and the Secretary of the Corporation has no
actual knowledge that the survivor has been adjudicated not to be the
successor to the interests of those deceased.
2.12 WAIVER OF NOTICE BY SHAREHOLDERS. Whenever any notice
whatsoever is required to be given to any shareholder of the Corporation under
the Articles of Incorporation or By-laws or any provision of law, a waiver
thereof in writing, signed at any time, whether before or after the time of
meeting, by the shareholder entitled to such notice, shall be deemed equivalent
to the giving of such notice and the Corporation shall include copies of such
waivers in its corporate records; provided that such waiver in respect to any
matter of which notice is required under any provision of the Wisconsin Business
Corporation Law, shall contain
8
<PAGE> 14
the same information as would have been required to be included in such notice,
except the time and place of meeting. A shareholder's attendance at a meeting,
in person or by proxy, waives objection to the following:
(i) lack of notice or defective notice of the meeting
unless the shareholder at the beginning of the meeting or promptly upon
arrival objects to holding the meeting or transacting business at the
meeting; and
(ii) consideration of a particular matter at the meeting
that is not within the purpose described in the meeting notice, unless
the shareholder objects to considering the matter when it is presented.
2.13 UNANIMOUS CONSENT WITHOUT MEETING. Any action required or
permitted by the Articles of Incorporation or By-laws or any provision of law to
be taken at a meeting of the shareholders may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all of
the shareholders entitled to vote with respect to the subject matter thereof.
2.14 MAJORITY CONSENT WITHOUT MEETING. As provided in the
Articles of Incorporation of this Corporation, any action required or permitted
to be taken at a meeting of the shareholders of the Corporation may be taken
without a meeting by shareholders who would be entitled to vote at a meeting
those shares with voting power to cast no less than the minimum number or, in
the case of voting by voting groups, numbers of votes that would be necessary to
authorize or take the action at a meeting at which all shares entitled to vote
were present and voted. Any action so taken must be evidenced by one or more
written consents describing the action taken, signed by the number of
shareholders necessary to take the action and delivered to the Corporation for
inclusion in the corporate records.
ARTICLE III. BOARD OF DIRECTORS
3.01 GENERAL POWERS AND NUMBER. All corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
Corporation managed under the direction of, the Board of Directors, subject to
any limitation set forth in the Articles of Incorporation. The number of
Directors of the
9
<PAGE> 15
Corporation shall be as provided in Section 0.03. The number of Directors may be
increased or decreased from time to time by amendment to this Section adopted by
the shareholders or the Board of Directors but no decrease shall have the effect
of shortening the term of an incumbent director.
3.02 TENURE AND QUALIFICATIONS. Each Director shall hold
office until the next annual meeting of shareholders and until his or her
successor shall have been elected, or until his or her prior death, resignation
or removal. A Director may be removed from office by the shareholders if, at a
meeting of shareholders called for that purpose, the number of votes cast to
remove the Director exceeds the number of votes cast not to remove him or her;
provided, however, if a Director is elected by a voting group of shareholders,
only the shareholders of that voting group may participate in the vote to remove
that Director. A Director may resign at any time by filing his or her written
resignation with the Secretary of the Corporation. Directors need not be
residents of the State of Wisconsin or shareholders of the Corporation.
3.03 REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held without other notice than this by-law immediately after
the annual meeting of shareholders, and each adjourned session thereof. The
place of such regular meeting shall be the same as the place of the meeting of
shareholders which precedes it, or such other suitable place as may be announced
at such meeting of shareholders. The Board of Directors may provide, by
resolution, the time and place, either within or without the State of Wisconsin,
for the holding of additional regular meetings without other notice than such
resolution.
3.04 SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the Chairman of the Board (if
one is designated), President, Secretary or any two Directors. The Chairman of
the Board (if one is designated), President, Secretary or Directors calling any
special meeting of the Board of Directors may fix any place, either within or
without the State of Wisconsin, as the place for holding any special meeting of
the Board of Directors called by them, and if no other place is fixed, the place
of meeting shall be the principal business office of the Corporation in the
State of Wisconsin.
3.05 NOTICE; WAIVER. Notice may be communicated in person, by
telephone, telegraph, teletype, facsimile or other form of wire or wireless
communication, or by mail or private carrier,
10
<PAGE> 16
and, if these forms of personal notice are impracticable, notice may be
communicated by a newspaper of general circulation in the area where published,
or by radio, television or other form of public broadcast communication. Notice
of each meeting of the Board of Directors (unless otherwise provided in or
pursuant to Section 3.03) shall be communicated to each Director at his or her
business address or telephone number or at such other address or telephone
number as such Director shall have designated in writing filed with the
Secretary, in each case not less than that number of hours prior thereto as set
forth in Section 0.04. Written notice is effective at the earliest of the
following:
(i) when received;
(ii) on deposit in the U.S. Mail, if mailed postpaid and
correctly addressed; or
(iii) on the date shown on the return receipt, if sent by
registered or certified mail, return receipt
requested and the receipt is signed by or on behalf
of the addressee.
Oral notice is effective when communicated and the Corporation shall maintain a
record setting forth the date, time, manner and recipient of the notice.
Whenever any notice whatsoever is required to be given to any
Director of the Corporation under the Articles of Incorporation or By-laws or
any provision of law, a waiver thereof in writing, signed at any time, whether
before or after the time of meeting, by the Director entitled to such notice,
shall be deemed equivalent to the giving of such notice, and the Corporation
shall retain copies of such waivers in its corporate records. A Director's
attendance at or participation in a meeting waives any required notice to him or
her of the meeting unless the Director at the beginning of the meeting or
promptly upon his or her arrival objects to holding the meeting or transacting
business at the meeting and does not thereafter vote for or assert to action
taken at the meeting. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Board of Directors need be specified
in the notice or waiver of notice of such meeting.
3.06 QUORUM. Except as otherwise provided by the Wisconsin
Business Corporation Law or by the Articles of Incorporation or the By-laws, a
majority of the number of Directors
11
<PAGE> 17
as provided in Section 0.03 shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, but a majority of the
Directors present or participating (though less than such quorum) may adjourn
the meeting from time to time without further notice.
3.07 MANNER OF ACTING. If a quorum is present or participating
when a vote is taken, the affirmative vote of a majority of Directors present or
participating is the act of the Board of Directors or a committee of the Board
of Directors, unless the Wisconsin Business Corporation Law or the Articles of
Incorporation or the By-laws require the vote of a greater number of Directors.
3.08 CONDUCT OF MEETINGS. The Chairman of the Board (if one is
designated), or in the Chairman's absence, the President, or in the President's
absence, the Executive Vice President (if one is designated), or in the
Executive Vice President's absence, a Vice President in the order provided under
Section 4.08, and in their absence, any Director chosen by the Directors
present, shall call meetings of the Board of Directors to order and shall act as
chairman of the meeting. The Secretary of the Corporation shall act as Secretary
of all meetings of the Board of Directors, but in the absence of the Secretary,
the presiding Officer may appoint any Assistant Secretary or any Director or
other person present or participating to act as Secretary of the meeting.
3.09 VACANCIES. Any vacancy occurring in the Board of
Directors, including a vacancy created by an increase in the number of
Directors, may be filled until the next succeeding annual election by the
affirmative vote of a majority of the Directors then in office, though less than
a quorum of the Board of Directors, or by the shareholders; provided, that in
case of a vacancy created by the removal of a Director by vote of the
shareholders, the shareholders shall have the right to fill such vacancy at the
same meeting or any adjournment thereof.
3.10 COMPENSATION. The Board of Directors, by affirmative vote
of a majority of the Directors then in office, and irrespective of any personal
interest of any of its members, may establish reasonable compensation of all
Directors for services to the Corporation as Directors, Officers or otherwise,
or may delegate such authority to an appropriate committee. The Board of
Directors also shall have authority to provide for or to delegate authority to
an appropriate committee to provide for reasonable
12
<PAGE> 18
pensions, disability or death benefits, and other benefits of payments, to
Directors, Officers and employees and to their estates, families, dependents or
beneficiaries on account of prior services rendered by such Directors, Officers
and employees to the Corporation.
3.11 PRESUMPTION OF ASSENT. A Director of the Corporation who
is present at or participates in a meeting of the Board of Directors or a
committee thereof of which he or she is a member, at which action on any
corporate matter is taken, shall be presumed to have assented to the action
taken unless his or her dissent shall be entered in the minutes of the meeting
or unless he or she shall file his or her written dissent to such action with
the person acting as the Secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered mail to the Secretary of the
Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a Director who voted in favor of such action.
3.12 COMMITTEES. The Board of Directors, by resolution adopted
by the affirmative vote of a majority of the number of Directors as provided in
Section 0.03, may designate one or more committees, each committee to consist of
two or more Directors elected by the Board of Directors, which to the extent
provided in said resolution as initially adopted, and as thereafter supplemented
or amended by further resolution adopted by a like vote, shall have and may
exercise, when the Board of Directors is not in session, the powers of the Board
of Directors in the management of the business and affairs of the Corporation,
except that a committee may not do any of the following: (i) authorize
distributions; (ii) approve or propose to shareholders action that the Wisconsin
Business Corporation Law requires be approved by shareholders; (iii) fill
vacancies on the Board of Directors or on any of its committees, unless the
Board of Directors provides by resolution that any vacancies on a committee
shall be filled by the affirmative vote of a majority of the remaining committee
members; (iv) amend the Articles of Incorporation under Section 180.1002 of the
Wisconsin Business Corporation Law; (v) adopt, amend or repeal the By-laws; (vi)
approve a plan of merger not requiring shareholder approval; (vii) authorize or
approve reacquisition of shares, except according to a formula or method
prescribed by the Board of Directors; or (viii) authorize or approve the
issuance or sale or contract for sale of shares, or determine the designation
and relative rights, preferences and limitations of a class or series of shares,
except that the Board of Directors may authorize
13
<PAGE> 19
a committee or a senior executive officer of the Corporation to do so within
limits prescribed by the Board of Directors. The Board of Directors may elect
one or more of its members as alternate members of any such committee who may
take the place of any absent member or members at any meeting of such committee,
upon request by the President or upon request by the chairman of such meeting.
Each such committee shall fix its own rules governing the conduct of its
activities and shall make such reports to the Board of Directors of its
activities as the Board of Directors may request.
3.13 UNANIMOUS CONSENT WITHOUT MEETING. Any action required or
permitted by the Articles of Incorporation or the By-laws or any provision of
law to be taken by the Board of Directors at a meeting or by resolution may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all of the Directors then in office.
3.14 MEETINGS BY TELEPHONE OR BY OTHER COMMUNICATION
TECHNOLOGY. Meetings of the Board of Directors or committees may be conducted by
telephone or by other communication technology in accordance with Section
180.0820 of the Wisconsin Business Corporation Law (or any successor statutory
provision).
ARTICLE IV. OFFICERS
4.01 NUMBER. The principal Officers of the Corporation shall
be a President, the number of Vice Presidents as may be determined by the Board
of Directors, a Secretary, and a Treasurer, each of whom the Board of Directors
shall from time to time determine. Such other Officers and Assistant Officers as
may be deemed necessary may be elected or appointed by the Board of Directors.
The Board of Directors may authorize a duly appointed Officer to appoint one or
more Officers or Assistant Officers. The same natural person may simultaneously
hold more than one office in the Corporation.
4.02 ELECTION AND TERM OF OFFICE. The Officers of the
Corporation to be elected by the Board of Directors shall be elected annually by
the Board of Directors at the first meeting of the Board of Directors held after
each annual meeting of the shareholders. If the election of Officers shall not
be held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each Officer shall hold office until his or
14
<PAGE> 20
her successor shall have been duly elected or until his or her prior death,
resignation or removal.
4.03 REMOVAL. Any Officer or agent may be removed by the Board
of Directors whenever in its judgment the best interests of the Corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment shall not of
itself create contract rights.
4.04 VACANCIES. A vacancy in any principal office because of
death, resignation, removal, disqualification or otherwise, shall be filled by
the Board of Directors for the unexpired portion of the term.
4.05 CHAIRMAN OF THE BOARD. The Board of Directors may at
their discretion elect a Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the shareholders and Board of Directors, and shall
carry out such other duties and have such responsibilities as may be specified
by the Board of Directors.
4.06 PRESIDENT. The President shall be the chief executive
officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the Corporation. In the absence of the Chairman of the Board, or if
one is not designated, he or she shall preside at all meetings of the
shareholders and of the Board of Directors. He or she shall have authority,
subject to such rules as may be prescribed by the Board of Directors, to appoint
such agents and employees of the Corporation as he or she shall deem necessary,
to prescribe their powers, duties and compensation, and to delegate authority to
them. Such agents and employees shall hold office at the discretion of the
President. He or she shall have authority to sign, execute and acknowledge, on
behalf of the Corporation, all deeds, mortgages, bonds, stock certificates,
contracts, leases, reports and all other documents or instruments necessary or
proper to be executed in the course of the Corporation's regular business, or
which shall be authorized by resolution of the Board of Directors; and, except
as otherwise provided by law or the Board of Directors, he or she may authorize
any Vice President or other Officer or agent of the Corporation to sign, execute
and acknowledge such documents or instruments in his or her place and stead. In
general, he or she shall perform all duties incident to the office of chief
executive officer and such
15
<PAGE> 21
other duties as may be prescribed by the Board of Directors from time to time.
4.07 THE EXECUTIVE VICE PRESIDENT. The Executive Vice
President, if one is designated, shall assist the President in the discharge of
supervisory, managerial and executive duties and functions. In the absence of
the President or in the event of his or her death, inability or refusal to act,
the Executive Vice President shall perform the duties of the President and when
so acting shall have all the powers and duties of the President. He or she shall
perform such other duties as from time to time may be assigned to him or her by
the Board of Directors or the President.
4.08 THE VICE PRESIDENTS. In the absence of the President and
the Executive Vice President or in the event of their death, inability or
refusal to act, or in the event for any reason it shall be impracticable for
them to act personally, the Vice President (or in the event there is more than
one Vice President, the Vice Presidents in the order designated by the Board of
Directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. Any Vice President shall perform such other duties and have such
authority as from time to time may be delegated or assigned to him or her by the
President, the Executive Vice President or by the Board of Directors. The
execution of any instrument of the Corporation by any Vice President shall be
conclusive evidence, as to third parties, of his or her authority to act in the
stead of the President.
4.09 THE SECRETARY. The Secretary shall: (i) keep the minutes
of the meetings of the shareholders and of the Board of Directors in one or more
books provided for that purpose; (ii) see that all notices are duly given in
accordance with the provisions of the By-laws or as required by law; (iii) be
custodian of the corporate records; (iv) keep or arrange for the keeping of a
register of the post office address of each shareholder which shall be furnished
to the Secretary by such shareholder; (v) have general charge of the stock
transfer books of the Corporation; and (vi) in general, perform all duties
incident to the office of Secretary and have such other duties and exercise such
authority as from time to time may be delegated or assigned to him or her by the
President or by the Board of Directors.
16
<PAGE> 22
4.10 THE TREASURER. The Treasurer shall: (i) have charge and
custody of and be responsible for all funds and securities of the Corporation;
(ii) receive and give receipts for monies due and payable to the Corporation
from any source whatsoever, and deposit all such monies in the name of the
Corporation in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of Section 5.05 hereof; and (iii) in
general, perform all of the duties incident to the office of Treasurer and have
such other duties and exercise such other authority as from time to time may be
delegated or assigned to him or her by the President or by the Board of
Directors. If required by the Board of Directors, the Treasurer shall give a
bond for the faithful discharge of his duties in such sum and with such surety
or sureties as the Board of Directors shall determine.
4.11 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. There
shall be such number of Assistant Secretaries and Assistant Treasurers as the
Board of Directors may from time to time authorize. The Assistant Treasurers
shall, if required by the Board of Directors, give bonds for the faithful
discharge of their duties in such sums and with such sureties as the Board of
Directors shall determine. The Assistant Secretaries and Assistant Treasurers,
in general, shall perform such duties and have such authority as shall from time
to time be delegated or assigned to them by the Secretary or the Treasurer,
respectively, or by the President or the Board of Directors.
4.12 OTHER ASSISTANTS AND ACTING OFFICERS. The Board of
Directors shall have the power to appoint any person to act as assistant to any
Officer, or as agent for the Corporation in his or her stead, or to perform the
duties of such Officer whenever, for any reason, it is impracticable for such
Officer to act personally and such assistant or acting Officer or other agent so
appointed by the Board of Directors shall have the power to perform all the
duties of the office to which he or she is so appointed to be assistant, or as
to which he or she is so appointed to act, except as such power may be otherwise
defined or restricted by the Board of Directors.
4.13 SALARIES. The salaries of the principal Officers shall be
fixed from time to time by the Board of Directors or by a duly authorized
committee thereof, and no Officer shall be prevented from receiving such salary
by reason of the fact that he or she is also a Director of the Corporation.
17
<PAGE> 23
ARTICLE V. CONFLICT OF INTEREST TRANSACTIONS,
CONTRACTS, LOANS, CHECKS AND DEPOSITS: SPECIAL CORPORATE ACTS
5.01 CONFLICT OF INTEREST TRANSACTIONS. A "conflict of
interest" transaction means a transaction with the Corporation in which a
Director of the Corporation has a direct or indirect interest. The circumstances
in which a Director of the Corporation has an indirect interest in a transaction
include but are not limited to a transaction under any of the following
circumstances: (i) another entity in which the Director has a material financial
interest or in which the Director is a general partner is a party to the
transaction; or (ii) another entity of which the Director is a director, officer
or trustee is a party to the transaction and the transaction is or, because of
its significance to the Corporation should be, considered by the Board of
Directors of the Corporation. A conflict of interest transaction is not voidable
by the Corporation solely because of the Director's interest in the transaction
if any of the circumstances set forth in Section 180.0831 of the Wisconsin
Business Corporation Law (or any successor statutory provision) are true or
occur.
5.02 CONTRACTS. The Board of Directors may authorize any
Officer or Officers, agent or agents, to enter into any contract or execute or
deliver any instrument in the name of and on behalf of the Corporation, and such
authorization may be general or confined to specific instances.
5.03 LOANS. No indebtedness for borrowed money shall be
contracted on behalf of the Corporation and no evidences of such indebtedness
shall be issued in its name unless authorized by or under the authority of a
resolution of the Board of Directors. Such authorization may be general or
confined to specific instances.
5.04 CHECKS, DRAFTS, ETC. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation, shall be signed by such Officer or Officers, agent or
agents of the Corporation and in such manner as shall from time to time be
determined by or under the authority of a resolution of the Board of Directors.
5.05 DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other
18
<PAGE> 24
depositories as may be selected by or under the authority of a resolution of the
Board of Directors.
5.06 VOTING OF SECURITIES OWNED BY THIS CORPORATION. Subject
always to the specific directions of the Board of Directors, (i) any shares or
other securities issued by any other corporation and owned or controlled by this
Corporation may be voted at any meeting of security holders of such other
corporation by the President of this Corporation if he or she is present, or in
the President's absence by the Executive Vice President (if one is designated),
or in the Executive Vice President's absence, by any Vice President of this
Corporation who may be present, and (ii) whenever, in the judgment of the
President, or in his absence, of the Executive Vice President (if one is
designated), or in the Executive Vice President's absence, of any Vice
President, it is desirable for this Corporation to execute an appointment of
proxy or written consent in respect to any shares or other securities issued by
any other corporation and owned by this Corporation, such proxy appointment or
consent shall be executed in the name of this Corporation by the President,
Executive Vice President or one of the Vice Presidents of this Corporation in
the order as provided in clause (i) of this Section, without necessity of any
authorization by the Board of Directors or countersignature or attestation by
another Officer. Any person or persons designated in the manner above stated as
the proxy or proxies of this Corporation shall have full right, power and
authority to vote the shares or other securities issued by such other
corporation and owned by this Corporation the same as such shares or other
securities might be voted by this Corporation.
ARTICLE VI. CERTIFICATES FOR
SHARES AND THEIR TRANSFER
6.01 CERTIFICATES FOR SHARES. Certificates representing shares
of the Corporation shall be in such form, consistent with law, as shall be
determined by the Board of Directors. Such certificates shall be signed by the
President or by another Officer designated by the President or the Board of
Directors. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the Corporation. All
certificates surrendered to the Corporation for transfer shall be cancelled and
no new certificate
19
<PAGE> 25
shall be issued until the former certificate for a like number of shares shall
have been surrendered and cancelled, except as provided in Section 6.06 hereof.
6.02 FACSIMILE SIGNATURES. The signature of the President or
other authorized Officer upon a certificate may be a facsimile if the
certificate is manually signed on behalf of a transfer agent, or a registrar,
other than the Corporation itself or an employee of the Corporation.
6.03 SIGNATURE BY FORMER OFFICERS. In case any Officer, who
has signed or whose facsimile signature has been placed upon, any certificate
for shares, shall have ceased to be such Officer before such certificate is
issued, it may be issued by the Corporation with the same effect as if he or she
were such Officer at the date of its issue.
6.04 TRANSFER OF SHARES. Prior to due presentment of a
certificate for shares for registration of transfer, the Corporation may treat
the shareholder of such shares as the person exclusively entitled to vote, to
receive notifications and otherwise to have and exercise all the rights and
powers of an owner. Where a certificate for shares is presented to the
Corporation with a request to register for transfer, the Corporation shall not
be liable to the owner or any other person suffering loss as a result of such
registration of transfer if (i) there were on or with the certificate the
necessary endorsements, and (ii) the Corporation had no duty to inquire into
adverse claims or has discharged any such duty. The Corporation may require
reasonable assurance that said endorsements are genuine and effective and in
compliance with such other regulations as may be prescribed by or under the
authority of the Board of Directors.
6.05 RESTRICTIONS ON TRANSFER. The face or reverse side of
each certificate representing shares shall bear a conspicuous notation of any
restriction imposed by the Corporation upon the transfer of such shares.
6.06 LOST, DESTROYED OR STOLEN CERTIFICATES. Where the owner
claims that his or her certificate for shares has been lost, destroyed or
wrongfully taken, a new certificate shall be issued in place thereof if the
owner (i) so requests before the Corporation has notice that such shares have
been acquired by a bona fide purchaser, and (ii) files with the Corporation a
sufficient indemnity bond, and (iii) satisfies such other reasonable
20
<PAGE> 26
requirements as may be prescribed by or under the authority of the Board of
Directors.
6.07 CONSIDERATION FOR SHARES. The shares of the Corporation
may be issued for such consideration as shall be fixed from time to time by the
Board of Directors, provided that any shares having a par value shall not be
issued for a consideration less than the par value thereof. The consideration to
be received for shares may consist of any tangible or intangible property or
benefit to the Corporation, including cash, promissory notes, services
performed, contracts for services to be performed or other securities of the
Corporation. When the Corporation receives the consideration for which the Board
of Directors authorized the issuance of shares, the shares issued for that
consideration are fully paid and nonassessable, except as provided by Section
180.0622 of the Wisconsin Business Corporation Law (or any successor statutory
provision) which may require further assessment for unpaid wages to employees
under certain circumstances. The Corporation may place in escrow shares issued
for a contract for future services or benefits or a promissory note, or make
other arrangements to restrict the transfer of the shares, and may credit
distributions in respect of the shares against their purchase price, until the
services are performed, the benefits are received or the note is paid. If the
services are not performed, the benefits are not received or the note is not
paid, the Corporation may cancel, in whole or in part, the shares escrowed or
restricted and the distributions credited.
6.08 STOCK REGULATIONS. The Board of Directors shall have the
power and authority to make all such further rules and regulations not
inconsistent with the statutes of the State of Wisconsin as it may deem
expedient concerning the issue, transfer and registration of certificates
representing shares of the Corporation.
ARTICLE VII. INDEMNIFICATION
7.01 INDEMNIFICATION FOR SUCCESSFUL DEFENSE. As required by
the Wisconsin Business Corporation Law, the Corporation shall indemnify a
Director, Officer or Employee to the extent he or she has been successful on the
merits or otherwise in the defense of a proceeding, for all reasonable expenses
incurred in the proceeding if the Director, Officer or Employee was a party
because he or she is a Director, Officer or Employee of the Corporation.
21
<PAGE> 27
7.02 OTHER INDEMNIFICATION. In cases not included under
Section 7.01 hereof, and as provided by Section 180.0851(2) of the Wisconsin
Business Corporation Law (or any successor statutory provision), the Corporation
shall indemnify a Director or Officer against liability incurred by the Director
or Officer in a proceeding to which the Director or Officer was a party because
he or she is a Director or Officer of the Corporation, unless liability was
incurred because the Director or Officer breached or failed to perform a duty
that he or she owes to the Corporation and the breach or failure to perform
constitutes any of the following:
(i) A wilful failure to deal fairly with the Corporation
or its shareholders in connection with a matter in
which the Director or Officer has a material conflict
of interest;
(ii) A violation of the criminal law, unless the Director
or Officer has reasonable cause to believe that his
or her conduct was lawful or no reasonable cause to
believe that his or her conduct was unlawful;
(iii) A transaction from which the Director or Officer
derived an improper personal profit; or
(iv) Wilful misconduct.
7.03 ALLOWANCE OF EXPENSES. Within ten days after receipt of a
written request by a Director or Officer who is a party to a proceeding, the
Corporation shall pay or reimburse his or her reasonable expenses as incurred if
the Director or Officer provides the Corporation with all of the following:
(i) A written affirmation of his or her good faith
belief that he or she has not breached or failed to
perform his or her duties to the Corporation; and
(ii) A written undertaking, executed personally or on
his or her behalf, to repay the allowance (together
with reasonable interest thereon) to the extent
that it is ultimately determined under Sections
7.01 and 7.02 hereof and pursuant to Section
180.0855 of the Wisconsin Business Corporation Law
(or any successor statutory provision) that
22
<PAGE> 28
indemnification is not required, will not be
provided, or is not so ordered by a court under
Section 180.0854 of the Wisconsin Business
Corporation Law (or any successor statutory
provision). The undertaking under this subsection
shall be an unlimited general obligation of the
Director or Officer, and may be accepted without
reference to his or her ability to repay the
allowance. The undertaking may be secured or
unsecured as determined by the Board of Directors.
ARTICLE VIII. SEAL
There shall be no corporate seal.
ARTICLE IX. AMENDMENTS
9.01 BY SHAREHOLDERS. The By-laws may be altered, amended or
repealed and new By-laws may be adopted by the shareholders by the affirmative
vote specified in Section 2.07 of these By-laws.
9.02 BY DIRECTORS. The By-laws may also be altered, amended or
repealed and new By-laws may be adopted by the Board of Directors by affirmative
vote of a majority of the number of Directors present at or participating in any
meeting at which a quorum is in attendance; but no By-law adopted by the
shareholders shall be amended or repealed by the Board of Directors if the
By-law so adopted so provides.
9.03 IMPLIED AMENDMENTS. Any action taken or authorized by the
shareholders or by the Board of Directors, which would be inconsistent with the
By-laws then in effect but is taken or authorized by affirmative vote of not
less than the number of shares or the number of Directors required to amend the
By-laws so that the By-laws would be consistent with such action, shall be given
the same effect as though the By-laws had been temporarily amended or suspended
so far, but only so far, as is necessary to permit the specific action so taken
or authorized.
23
<PAGE> 1
Exhibit 4.1
INDENTURE
DATED AS OF JULY 1, 1998
AMONG
GENERAC PORTABLE PRODUCTS, LLC
AND
GPPW, INC.,
AS ISSUERS,
AND
MARINE MIDLAND BANK,
AS TRUSTEE
------------------
UP TO $160,000,000 AGGREGATE PRINCIPAL AMOUNT OF
11 1/4% SENIOR SUBORDINATED NOTES DUE 2006
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
----------- -------
<S> <C>
Section 310(a)(1)............................................. 7.10
(a)(2).................................................. 7.10
(a)(3).................................................. N.A.
(a)(4).................................................. N.A.
(a)(5).................................................. 7.08, 7.10.
(b)..................................................... 7.08; 7.10; 13.02
(c)..................................................... N.A.
Section 311(a)................................................ 7.11
(b)..................................................... 7.11
(c)..................................................... N.A.
Section 312(a)................................................ 2.05
(b)..................................................... 13.03
(c)..................................................... 13.03
Section 313(a)................................................ 7.06
(b)(1).................................................. 7.06
(b)(2).................................................. 7.06
(c)..................................................... 7.06; 13.02
(d)..................................................... 7.06
Section 314(a)................................................ 4.11; 4.12; 13.02
(b)..................................................... N.A.
(c)(1).................................................. 13.04
(c)(2).................................................. 13.04
(c)(3).................................................. N.A.
(d)..................................................... N.A.
(e)..................................................... 13.05
(f)..................................................... N.A.
Section 315(a)................................................ 7.01(b)
(b)..................................................... 7.05; 13.02
(c)..................................................... 7.01(a)
(d)..................................................... 7.01(c)
(e)..................................................... 6.11
Section 316(a)(last sentence)................................. 2.09
(a)(1)(A)............................................... 6.05
(a)(1)(B)............................................... 6.04
(a)(2).................................................. N.A.
(b)..................................................... 6.07
(c)..................................................... 10.04
Section 317(a)(1)............................................. 6.08
(a)(2).................................................. 6.09
(b)..................................................... 2.04
Section 318(a)................................................ 13.01
</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
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.....................................................................................1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act..............................................18
SECTION 1.03. Rules of Construction..........................................................................18
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating................................................................................19
SECTION 2.02. Execution and Authentication...................................................................19
SECTION 2.03. Registrar and Paying Agent.....................................................................20
SECTION 2.04. Paying Agent To Hold Assets in Trust...........................................................21
SECTION 2.05. Holder Lists...................................................................................21
SECTION 2.06. Transfer and Exchange..........................................................................21
SECTION 2.07. Replacement Notes..............................................................................22
SECTION 2.08. Outstanding Notes..............................................................................22
SECTION 2.09. Treasury Notes.................................................................................23
SECTION 2.10. Temporary Notes................................................................................23
SECTION 2.11. Cancellation...................................................................................23
SECTION 2.12. Defaulted Interest.............................................................................24
SECTION 2.13. CUSIP Number...................................................................................24
SECTION 2.14. Deposit of Moneys..............................................................................24
SECTION 2.15. Book-Entry Provisions for Global Notes.........................................................24
SECTION 2.16. Registration of Transfers and Exchanges........................................................25
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.............................................................................29
SECTION 3.02. Selection of Notes To Be Redeemed..............................................................29
SECTION 3.03. Notice of Redemption...........................................................................29
SECTION 3.04. Effect of Notice of Redemption.................................................................30
SECTION 3.05. Deposit of Redemption Price....................................................................30
SECTION 3.06. Notes Redeemed in Part.........................................................................31
</TABLE>
-i-
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes...............................................................................31
SECTION 4.02. Maintenance of Office or Agency................................................................31
SECTION 4.03. Limitations on Transactions with Affiliates....................................................31
SECTION 4.04. Limitation on Incurrence of Additional Indebtedness............................................32
SECTION 4.05. Limitation on Asset Sales......................................................................32
SECTION 4.06. Limitation on Restricted Payments..............................................................35
SECTION 4.07. Compliance with Laws...........................................................................36
SECTION 4.08. Payment of Taxes and Other Claims..............................................................36
SECTION 4.09. Notice of Defaults.............................................................................37
SECTION 4.10. Maintenance of Properties and Insurance........................................................37
SECTION 4.11. Compliance Certificate.........................................................................37
SECTION 4.12. Reports to Holders.............................................................................38
SECTION 4.13. Waiver of Stay, Extension or Usury Laws........................................................38
SECTION 4.14. Change of Control..............................................................................38
SECTION 4.15. Prohibition on Incurrence of Senior Subordinated Debt..........................................40
SECTION 4.16. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries...................40
SECTION 4.17. Limitation on Preferred Stock of Restricted Subsidiaries.......................................40
SECTION 4.18. Limitation on Liens............................................................................40
SECTION 4.19. Limitation of Guarantees by Restricted Subsidiaries............................................41
SECTION 4.20. Conduct of Business of the Company and the Co-Issuer...........................................41
ARTICLE FIVE
MERGERS; SUCCESSORS
SECTION 5.01. Merger, Consolidation and Sale of Assets.......................................................42
SECTION 5.02. Successor Substituted..........................................................................43
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default..............................................................................43
SECTION 6.02. Acceleration...................................................................................44
SECTION 6.03. Other Remedies.................................................................................45
SECTION 6.04. Waiver of Past Default.........................................................................45
SECTION 6.05. Control by Majority............................................................................45
SECTION 6.06. Limitation on Suits............................................................................45
SECTION 6.07. Rights of Holders To Receive Payment...........................................................46
SECTION 6.08. Collection Suit by Trustee.....................................................................46
SECTION 6.09. Trustee May File Proofs of Claim...............................................................46
SECTION 6.10. Priorities.....................................................................................47
</TABLE>
-ii-
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 6.11. Undertaking for Costs..........................................................................47
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee..............................................................................47
SECTION 7.02. Rights of Trustee and Agents...................................................................48
SECTION 7.03. Individual Rights of Trustee...................................................................49
SECTION 7.04. Trustee's Disclaimer...........................................................................49
SECTION 7.05. Notice of Defaults.............................................................................50
SECTION 7.06. Reports by Trustee to Holders..................................................................50
SECTION 7.07. Compensation and Indemnity.....................................................................50
SECTION 7.08. Replacement of Trustee.........................................................................51
SECTION 7.09. Successor Trustee by Merger, etc...............................................................52
SECTION 7.10. Eligibility; Disqualification..................................................................52
SECTION 7.11. Preferential Collection of Claims Against Issuers..............................................52
ARTICLE EIGHT
SUBORDINATION OF NOTES
SECTION 8.01. Notes Subordinated to Senior Debt..............................................................53
SECTION 8.02. No Payment on Notes in Certain Circumstances...................................................53
SECTION 8.03. Payment Over of Proceeds upon Dissolution, etc.................................................54
SECTION 8.04. Subrogation....................................................................................55
SECTION 8.05. Obligations of Issuers Unconditional...........................................................55
SECTION 8.06. Notice to Trustee and Paying Agent.............................................................55
SECTION 8.07. Reliance on Judicial Order or Certificate of Liquidating Agent.................................56
SECTION 8.08. Trustee's Relation to Senior Debt..............................................................56
SECTION 8.09. Subordination Rights Not Impaired by Acts or Omissions of the Issuers or Holders
of Senior Debt........................................................................57
SECTION 8.10. Holders Authorize Trustee To Effectuate Subordination of Notes.................................57
SECTION 8.11. This Article Not To Prevent Events of Default..................................................57
SECTION 8.12. Trustee's Compensation Not Prejudiced..........................................................57
SECTION 8.13. No Waiver of Subordination Provisions..........................................................57
SECTION 8.14. Subordination Provisions Not Applicable to Money Held in Trust for Holders.....................58
ARTICLE NINE
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 9.01. Termination of the Issuers' Obligations........................................................58
SECTION 9.02. Legal Defeasance and Covenant Defeasance.......................................................59
SECTION 9.03. Conditions to Legal Defeasance or Covenant Defeasance..........................................60
SECTION 9.04. Application of Trust Money.....................................................................61
SECTION 9.05. Repayment to Issuers...........................................................................62
</TABLE>
-iii-
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 9.06. Reinstatement..................................................................................62
ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders....................................................................62
SECTION 10.02. With Consent of Holders.......................................................................63
SECTION 10.03. Compliance with Trust Indenture Act...........................................................64
SECTION 10.04. Revocation and Effect of Consents.............................................................64
SECTION 10.05. Notation on or Exchange of Notes..............................................................65
SECTION 10.06. Trustee To Sign Amendments, etc...............................................................65
ARTICLE ELEVEN
GUARANTEE
SECTION 11.01. Unconditional Guarantee.......................................................................65
SECTION 11.02. Severability..................................................................................66
SECTION 11.03. Limitation of Guarantor's Liability...........................................................66
SECTION 11.04. Execution of Guarantee........................................................................66
SECTION 11.05. Subordination of Subrogation and Other Rights.................................................67
ARTICLE TWELVE
SUBORDINATION OF GUARANTEE
SECTION 12.01. Guarantee Obligations Subordinated to Senior Debt.............................................67
SECTION 12.02. No Payment in Certain Circumstances; Payment Over of Proceeds upon Dissolution, etc...........67
SECTION 12.03. Subrogation...................................................................................69
SECTION 12.04. Obligations of Guarantors Unconditional.......................................................69
SECTION 12.05. Notice to Trustee and Paying Agent............................................................70
SECTION 12.06. Reliance on Judicial Order or Certificate of Liquidating Agent................................70
SECTION 12.07. Trustee's Relation to Senior Debt of a Guarantor..............................................70
SECTION 12.08. Subordination Rights Not Impaired by Acts or Omissions of Holders of Senior Debt.............71
SECTION 12.09. Holders Authorize Trustee To Effectuate Subordination of Guarantee............................71
SECTION 12.10. This Article Not To Prevent Events of Default.................................................71
SECTION 12.11. Trustee's Compensation Not Prejudiced.........................................................71
SECTION 12.12. No Waiver of Guarantee Subordination Provisions...............................................71
</TABLE>
-iv-
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls..................................................................72
SECTION 13.02. Notices.......................................................................................72
SECTION 13.03. Communications by Holders with Other Holders..................................................74
SECTION 13.04. Certificate and Opinion as to Conditions Precedent............................................74
SECTION 13.05. Statements Required in Certificate or Opinion.................................................74
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar.....................................................75
SECTION 13.07. Governing Law.................................................................................75
SECTION 13.08. No Recourse Against Others....................................................................75
SECTION 13.09. Successors....................................................................................75
SECTION 13.10. Counterpart Originals.........................................................................75
SECTION 13.11. Severability..................................................................................75
SECTION 13.12. No Adverse Interpretation of Other Agreements.................................................75
SECTION 13.13. Legal Holidays................................................................................75
SIGNATURES..................................................................................................S-1
EXHIBIT A Form of Series A Note.....................................................................A-1
EXHIBIT B Form of Series B Note.....................................................................B-1
EXHIBIT C Form of Legend for Global Notes...........................................................C-1
EXHIBIT D Form of Transfer Certificate..............................................................D-1
EXHIBIT E Form of Transfer Certificate for Institutional Accredited Investors.......................E-1
</TABLE>
- -----------------
NOTE: This Table of Contents shall not, for any purpose, be deemed to be a part
of the Indenture.
-v-
<PAGE> 8
INDENTURE dated as of July 1, 1998, among GENERAC PORTABLE
PRODUCTS, LLC, a Delaware limited liability company (the "Company"), GPPW, INC.,
a Wisconsin corporation ("Co-Issuer" and together with the Company the
"Issuers"), as issuers, and MARINE MIDLAND BANK, a New York banking corporation
and trust company, as trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of each
other party and for the equal and ratable benefit of the Holders of the Notes:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person or any
of its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary of the Company or at the time it merges or consolidates with the
Company or any of its Subsidiaries or assumed in connection with the acquisition
of assets from such Person and in each case not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary of the Company or such acquisition, merger or
consolidation.
"Additional Interest" has the meaning provided in the
Registration Rights Agreement.
"Affiliate" means, with respect to any specified Person, any
other Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person. The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative of the foregoing.
"Affiliate Transaction" see Section 4.03.
"Agent" means any Registrar, Paying Agent, Authenticating
Agent or co-Registrar.
"Asset Acquisition" means (a) an Investment by the Company or
any Restricted Subsidiary of the Company in any other Person pursuant to which
such Person shall become a Restricted Subsidiary of the Company or any
Restricted Subsidiary of the Company, or shall be merged with or into the
Company or any Restricted Subsidiary of the Company, or (b) the acquisition by
the Company or any Restricted Subsidiary of the Company of the assets of any
Person (other than a Restricted Subsidiary of the Company) which constitute all
or substantially all of the assets of such Person or comprise any division or
line of business of such Person or any other properties or assets of such Person
other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer for value by the
Company or any of its Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company of (a) any Capital Stock of any Restricted Subsidiary
of the Company; or (b) any other property or assets of the Company or any
Restricted Subsidiary of the Company other than in the ordinary course of
business; provided, however, that Asset Sales
<PAGE> 9
-2-
shall not include (i) a transaction or series of related transactions for which
the Company or its Restricted Subsidiaries receive aggregate consideration of
less than $1,000,000 or (ii) the sale, lease, conveyance, disposition or other
transfer of all or substantially all of the assets of the Company as permitted
under Section 5.01.
"Authenticating Agent" means the Agent appointed to
authenticate the Notes pursuant to Section 2.02.
"Bankruptcy Law" see Section 6.01.
"Beacon" means The Beacon Group III--Focus Value Fund, L.P., a
limited partnership organized under the laws of the State of Delaware.
"Board of Directors" means, as to any Person, the board of
directors of such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy
of a resolution certified by the Secretary or an Assistant Secretary of such
Person to have been duly adopted by the Board of Directors of such Person and to
be in full force and effect on the date of such certification, and delivered to
the Trustee.
"Business Day" means a day that is not a Saturday, a Sunday or
a day on which banking institutions in New York, New York are not required to be
open.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of Common Stock and Preferred Stock of such Person and (ii) with
respect to any Person that is not a corporation, any and all partnership,
membership or other equity interests conferring to the holder thereof the right
to receive a share of the profits, losses or distributions of assets of such
Person.
"Capitalized Lease Obligation" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations
issued by, or unconditionally guaranteed by, the United States Government or
issued by any agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Ratings Group ("S&P")
or Moody's Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing
no more than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit, time deposits, eurodollar time deposits
or bankers' acceptances maturing within one year from the date of acquisition
thereof and overnight bank deposits issued by any bank organized under the laws
of the United States of America or any state thereof or the District of Columbia
or any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $250,000,000; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (i) and (iv) above entered into with any bank
meeting the
<PAGE> 10
-3-
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company or Holdings to any Person or group of related Persons
for purposes of Section 13(d) of the Exchange Act (a "Group"), together with any
Affiliates thereof (whether or not otherwise in compliance with the provisions
of this Indenture) other than to the Permitted Holders; (ii) the approval by the
holders of Capital Stock of the Company or Holdings of any plan or proposal for
the liquidation or dissolution of the Company or Holdings, as the case may be,
(whether or not otherwise in compliance with the provisions of this Indenture);
(iii) any Person or Group (other than the Permitted Holders) shall become the
owner, directly or indirectly, beneficially or of record, of shares representing
more than 50% of the aggregate ordinary voting power represented by the issued
and outstanding Capital Stock of the Company or Holdings; or (iv) the
replacement of a majority of the Board of Directors of the Company or Holdings
over a two-year period from the directors who constituted the Board of Directors
of the Company or Holdings, as the case may be, at the beginning of such period,
and such replacement shall not have been approved by a vote of at least a
majority of the Board of Directors of the Company or Holdings, as the case may
be, then still in office who either were members of such Board of Directors at
the beginning of such period or whose election as a member of such Board of
Directors was previously so approved.
"Change of Control Payment Date" see Section 4.14(c).
"Co-Issuer" means GPPW, Inc., a corporation incorporated under
the laws of the State of Wisconsin.
"Common Stock" of any Person means any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or non-voting) of such Person's common stock, whether
outstanding on the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor.
"Consolidated EBITDA" means, with respect to any Person, for
any period, the sum (without duplication) of (i) Consolidated Net Income and
(ii) to the extent Consolidated Net Income has been reduced thereby, (A) all
income taxes of such Person and its Restricted Subsidiaries, or Permitted Tax
Distributions made by such Person, paid or accrued in accordance with GAAP for
such period (other than income taxes attributable to extraordinary, unusual or
nonrecurring gains or losses or taxes attributable to sales or dispositions
outside the ordinary course of business); (B) Consolidated Interest Expense; and
(C) Consolidated Non-cash Charges less any non-cash items increasing
Consolidated Net Income for such period, all as determined on a consolidated
basis for such Person and its Restricted Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect
to any Person, the ratio of Consolidated EBITDA of such Person during the four
full fiscal quarters (the "Four Quarter Period") ending on or prior to the date
of the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA"
<PAGE> 11
-4-
and "Consolidated Fixed Charges" shall be calculated after giving effect on a
pro forma basis for the period of such calculation to (i) the incurrence or
repayment of any Indebtedness of such Person or any of its Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period and (ii) any
asset sales or other dispositions or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including any Consolidated EBITDA (including any pro forma
expense and cost reductions calculated on a basis consistent with Regulation S-X
of the Exchange Act) attributable to the assets which are the subject of the
Asset Acquisition or asset sale or other disposition during the Four Quarter
Period) occurring during the Four Quarter Period or at any time subsequent to
the last day of the Four Quarter Period and on or prior to the Transaction Date,
as if such asset sale or other disposition or Asset Acquisition (including the
incurrence, assumption or liability for any such Acquired Indebtedness) occurred
on the first day of the Four Quarter Period. If such Person or any of its
Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, the preceding sentence shall give effect to the incurrence of such
guaranteed Indebtedness as if such Person or any Restricted Subsidiary of such
Person had directly incurred or otherwise assumed such guaranteed Indebtedness.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio," (1) interest on outstanding Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Indebtedness in effect on the Transaction
Date and (2) notwithstanding clause (1) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered by
agreements relating to Interest Swap Obligations, shall be deemed to accrue at
the rate per annum resulting after giving effect to the operation of such
agreements.
"Consolidated Fixed Charges" means, with respect to any Person
for any period, the sum, without duplication, of (i) Consolidated Interest
Expense, plus (ii) the product of (x) the amount of all dividend payments on any
series of Preferred Stock of such Person (other than dividends paid in Qualified
Capital Stock) paid, accrued or scheduled to be paid or accrued during such
period times (y) a fraction, the numerator of which is one and the denominator
of which is one minus the then current effective consolidated federal, state and
local tax rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any
Person for any period, the sum of, without duplication: (i) the aggregate of the
interest expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (a) any amortization of debt discount and amortization or write-off
of deferred financing costs; (b) the net costs under Interest Swap Obligations,
(c) all capitalized interest and (d) the interest portion of any deferred
payment obligation; and (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such Person
and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person,
for any period, the aggregate net income (or loss) of such Person and its
Restricted Subsidiaries for such period on a consolidated basis, determined in
accordance with GAAP; provided that there shall be excluded therefrom (a) the
amount of Permitted
<PAGE> 12
-5-
Tax Distributions with respect to such period; (b) after-tax gains from Asset
Sales or abandonments or reserves relating thereto; (c) after-tax items
classified as extraordinary or nonrecurring gains; (d) the net income of any
Person acquired in a "pooling of interests" transaction accrued prior to the
date it becomes a Restricted Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Restricted Subsidiary of the
referent Person; (e) the net income (but not loss) of any Restricted Subsidiary
of the referent Person to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is restricted
by a contract, operation of law or otherwise; (f) the net income of any Person,
other than a Restricted Subsidiary of the referent Person, except to the extent
of cash dividends or distributions paid to the referent Person or to a Wholly
Owned Restricted Subsidiary of the referent Person by such Person; (g) any
restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Issue Date; (h) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued); and (i) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets, any
earnings of the successor corporation prior to such consolidation, merger or
transfer of assets.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Capital Stock of such Person.
"Consolidated Non-cash Charges" means, with respect to any
Person, for any period, the aggregate depreciation, amortization and other
non-cash expenses of such Person and its Restricted Subsidiaries reducing
Consolidated Net Income of such Person and its Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP (excluding
any such charges constituting an extraordinary item or loss or any such charge
which requires an accrual of or a reserve for cash charges for any future
period).
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 13.02 or such other address as the
Trustee may give notice to the Company.
"Credit Agreement" means the Credit Agreement dated as of July
9, 1998, among the Company, Holdings, the lenders party thereto in their
capacities as lenders thereunder and Bankers Trust Company, as administrative
agent, together with the related documents thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder (provided that such increase in borrowings is permitted by Section
4.04 hereunder) or adding Restricted Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness under
such agreement or any successor or replacement agreement and whether by the same
or any other agent, lender or group of lenders.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect the Company or any Restricted Subsidiary of the Company against
fluctuations in currency values.
"Custodian" see Section 6.01.
"Default" means an event or condition the occurrence of which
is, or with the lapse of time or the giving of notice or both would be, an Event
of Default.
<PAGE> 13
-6-
"Defeasance Trust Payment" see Section 8.01.
"Depositary" means, with respect to the Notes issued in the
form of one or more Global Notes, DTC or another Person designated as Depositary
by the Company, which must be a clearing agency registered under the Exchange
Act.
"Designated Senior Debt" means (i) Indebtedness under or in
respect of the Credit Agreement and (ii) any other Indebtedness constituting
Senior Debt which, at the time of determination, has an aggregate principal
amount of at least $25.0 million and is specifically designated in the
instrument evidencing such Senior Debt as "Designated Senior Debt" by the
Company in an Officers' Certificate executed by the principal Executive Officer
and principal Financial Officer of the Company.
"Disqualified Capital Stock" means that portion of 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, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof on or prior to the final maturity date of the Notes.
"DTC" means The Depository Trust Company.
"Event of Default" see Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.
"Exchange Notes" means the 11 1/4% Senior Subordinated Notes
due 2006, Series B, to be issued in exchange for the Initial Notes pursuant to
the Registration Rights Agreement.
"fair market value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length, free market
transaction, for cash, between a willing seller and a willing and able buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction. Fair market value shall be determined by the Board of Directors of
the Company acting reasonably and in good faith and shall be evidenced by a
Board Resolution of the Board of Directors of the Company delivered to the
Trustee.
"Final Maturity Date" means July 1, 2006.
"Foreign Restricted Subsidiary" means any Restricted
Subsidiary of the Company that 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 set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which are in effect as of the
Issue Date.
"Global Notes" means one or more IAI Global Notes, Reg. S
Global Notes and 144A Global Notes.
<PAGE> 14
-7-
"guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness or other obligations.
"Guarantee" has the meaning given such term in Section 4.19.
"Guarantor" means each of the Company's Restricted
Subsidiaries that in the future executes a supplemental Indenture in which such
Restricted Subsidiary agrees to be bound by the terms of this Indenture as a
Guarantor; provided that any Person constituting a Guarantor as described above
shall cease to constitute a Guarantor when its respective Guarantee is released
in accordance with the terms of this Indenture.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) currency exchange or interest rate swap
agreements, currency exchange or interest rate cap agreements and currency
exchange or interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in currency
exchange or interest rates or commodity prices.
"Holder" means the registered holder of any Note.
"Holdings" means Generac Portable Products, Inc., a
corporation incorporated under the laws of the State of Delaware.
"IAI Global Note" means a permanent global note in registered
form representing the aggregate principal amount of Notes sold to Institutional
Accredited Investors.
"incur" see Section 4.04.
"Indebtedness" means with respect to any Person, without
duplication, (i) all Obligations of such Person for borrowed money; (ii) all
Obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments; (iii) all Capitalized Lease Obligations of such Person;
(iv) all Obligations of such Person issued or assumed as the deferred purchase
price of property, all conditional sale obligations and all Obligations under
any title retention agreement (but excluding trade accounts payable and other
accrued liabilities arising in the ordinary course of business that are not
overdue by 90 days or more or are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted); (v) all Obligations
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction; (vi) guarantees and other contingent
obligations in respect of Indebtedness referred to in clauses (i) through (v)
above and clause (viii) below; (vii) all Obligations of any other Person of the
type referred to in clauses (i) through (vi) which are secured by any lien on
any property or asset of such Person, the amount of such Obligation being deemed
to be the lesser of the fair market value of such property or asset or the
amount of the Obligation so secured; (viii) all Obligations under currency
agreements and interest swap agreements of such Person; and (ix) all
Disqualified Capital Stock issued by such Person with the amount of Indebtedness
represented by such Disqualified Capital Stock being equal to the greater of its
voluntary or involuntary liquidation preference and its maximum fixed repurchase
price, but excluding accrued dividends, if any. For purposes hereof, the
"maximum fixed repurchase price" of any Disqualified Capital Stock which does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Disqualified Capital Stock as if such Disqualified Capital Stock
were purchased on any date on which Indebtedness shall be required to be
determined pursuant to this Indenture, and if such price is based upon, or
measured by, the fair market value of such Disqualified Capital Stock, such
<PAGE> 15
-8-
fair market value shall be determined reasonably and in good faith by the Board
of Directors of the issuer of such Disqualified Capital Stock.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Independent Financial Advisor" means a firm (i) which does
not, and whose directors, officers and employees or Affiliates do not, have a
direct or indirect financial interest in the Company and (ii) which, in the
judgment of the Board of Directors of the Company, is otherwise independent and
qualified to perform the task for which it is to be engaged.
"Initial Notes" means the 11 1/4% Senior Subordinated Notes
due 2006, Series A, of the Issuers.
"Initial Purchaser" means BT Alex. Brown Incorporated.
"Insolvency or Liquidation Proceeding" means, with respect to
any Person, any liquidation, dissolution or winding up of such Person, or any
bankruptcy, reorganization, insolvency, receivership or similar proceeding with
respect to such Person, whether voluntary or involuntary.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act.
"interest" means, with respect to any Notes, the sum of any
cash interest and any Additional Interest on such Notes.
"Interest Payment Date" means each semiannual interest payment
date on January 1 and July 1 of each year, commencing January 1, 1999.
"Interest Record Date" for the interest payable on any
Interest Payment Date (except a date for payment of defaulted interest) means
the June 15 or December 15 (whether or not a Business Day), as the case may be,
immediately preceding such Interest Payment Date.
"Interest Swap Obligations" means the obligations of any
Person pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Investment" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without limitation, a
guarantee) or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase or acquisition by such Person of any Capital
Stock, bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude extensions of trade credit by
the Company and its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. For the purposes of Section 4.06, (i)
"Investment" shall include and be valued at the fair market value of the net
assets of any Restricted Subsidiary at the time that such Restricted Subsidiary
is designated an Unrestricted Subsidiary and shall exclude the fair
<PAGE> 16
-9-
market value of the net assets of any Unrestricted Subsidiary at the time that
such Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii) the
amount of any Investment shall be the original cost of such Investment plus the
cost of all additional Investments by the Company or any of its Restricted
Subsidiaries, without any adjustments for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such Investment, reduced by
the payment of dividends or distributions in connection with such Investment or
any other amounts received in respect of such Investment; provided that no such
payment of dividends or distributions or receipt of any such other amounts shall
reduce the amount of any Investment if such payment of dividends or
distributions or receipt of any such amounts would be included in Consolidated
Net Income. If the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Common Stock of any direct or indirect Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, the Company no longer owns, directly or indirectly, 100% of the
outstanding Common Stock of such Restricted Subsidiary, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Common Stock of such Restricted Subsidiary
not sold or disposed of.
"Issue Date" means July 9, 1998.
"Issuers" means the Company and Co-Issuer.
"Lien" means any lien, mortgage, deed of trust, pledge,
security interest, charge or encumbrance of any kind (including any conditional
sale or other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Restricted Subsidiaries from
such Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid or payable after
taking into account any reduction in consolidated tax liability due to available
tax credits or deductions and any tax sharing arrangements, (c) repayment of
Indebtedness that is required to be repaid in connection with such Asset Sale
and (d) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
any Restricted Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale.
"Net Proceeds Offer" see Section 4.05.
"Net Proceeds Offer Amount" see Section 4.05.
"Net Proceeds Offer Payment Date" see Section 4.05.
"Net Proceeds Offer Trigger Date" see Section 4.05.
"Notes" means, collectively, the Initial Notes, the Private
Exchange Notes and the Unrestricted Notes treated as a single class of Notes, as
amended or supplemented from time to time in accordance with the terms of this
Indenture.
<PAGE> 17
-10-
"Obligations" means all obligations for principal, premium,
interest, penalties, fees, indemnification, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Offering" means the offer and sale of the $110,000,000
aggregate principal amount of Initial Notes to the Initial Purchaser on the
Issue Date.
"Officer" of any Person means the Chairman of the Board, the
President, any Executive Vice President, Senior Vice President or Vice President
(whether or not such title is preceded or followed by one or more words or
phrases), the Treasurer or any Assistant Treasurer or the Secretary or any
Assistant Secretary of such Person.
"Officers' Certificate" of any Person means a certificate
signed on behalf of such Person or the general partner, in the case of a limited
partnership, or member, in the case of a limited liability company, of such
Person by the Chairman of the Board, the President, any Executive Vice
President, Senior Vice President or Vice President (whether or not such title is
preceded or followed by one or more words or phrases) and by the Treasurer or
any Assistant Treasurer or the Secretary or any Assistant Secretary of such
Person, that meets the requirements set forth in Sections 13.04 and 13.05 of
this Indenture.
"144A Global Note" means a permanent global note in registered
form representing the aggregate principal amount of Notes sold in reliance on
Rule 144A.
"Operating Company" or "Company" means Generac Portable
Products, LLC, a limited liability company organized under the laws of the State
of Delaware.
"Opinion of Counsel" means a written opinion from legal
counsel who is reasonably acceptable to the Trustee. The counsel may be an
employee of or counsel to the Issuers or the Trustee.
"Pari Passu Indebtedness" means with respect to the Notes or a
Guarantee, Indebtedness which ranks pari passu in right of payment to the Notes
or such Guarantee, as the case may be.
"Participant" has the meaning set forth in Section 2.15.
"Paying Agent" has the meaning provided in Section 2.03.
"Payment Blockage Notice" see Section 8.02.
"Payment Blockage Period" see Section 8.02.
"Permitted Holder(s)" means Beacon and its Affiliates.
"Permitted Indebtedness" means, without duplication, each of
the following:
(i) Indebtedness under the Notes issued in the Offering in an
aggregate amount of $110.0 million;
(ii) Indebtedness incurred pursuant to the Credit Agreement in
an aggregate outstanding principal amount at any time outstanding not
to exceed $115.0 million (A) less the amount of all mandatory principal
payments actually made in respect of the term loans thereunder and (B)
reduced by any
<PAGE> 18
-11-
required permanent repayments (which are accompanied by a corresponding
permanent commitment reduction) thereunder, in each case, actually
effected in satisfaction of the Net Cash Proceeds requirement of
Section 4.05 (it being recognized that a reduction in any borrowing
base thereunder in and of itself shall not be deemed a required
permanent repayment);
(iii) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually
paid or permanent reductions thereon;
(iv) Interest Swap Obligations of the Company covering
Indebtedness of Holdings, the Company or any of its Restricted
Subsidiaries and Interest Swap Obligations of any Restricted Subsidiary
of the Company covering Indebtedness of such Restricted Subsidiary;
provided, however, that such Interest Swap Obligations are entered into
to protect the Company and its Restricted Subsidiaries from
fluctuations in interest rates on Indebtedness incurred in accordance
with this Indenture to the extent the notional principal amount of such
Interest Swap Obligation does not exceed the principal amount of the
Indebtedness to which such Interest Swap Obligation relates;
(v) Indebtedness under Currency Agreements; provided that in
the case of Currency Agreements which relate to Indebtedness, such
Currency Agreements do not increase the Indebtedness of the Company and
its Restricted Subsidiaries outstanding other than as a result of
fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;
(vi) Indebtedness of a Wholly Owned Restricted Subsidiary of
the Company to the Company or to a Wholly Owned Restricted Subsidiary
of the Company for so long as such Indebtedness is held by the Company
or a Wholly Owned Restricted Subsidiary of the Company, in each case
subject to no Lien held by a Person other than the Company or a Wholly
Owned Restricted Subsidiary of the Company or the lenders and
collateral agent under the Credit Agreement; provided that if as of any
date any Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company or the lenders and collateral agent under the
Credit Agreement owns or holds any such Indebtedness or holds a Lien in
respect of such Indebtedness, such date shall be deemed the incurrence
of Indebtedness not constituting Permitted Indebtedness by the issuer
of such Indebtedness unless such Indebtedness is otherwise permitted
hereunder;
(vii) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary of the Company for so long as such Indebtedness is held by a
Wholly Owned Restricted Subsidiary of the Company or the lenders and
collateral agent under the Credit Agreement, in each case subject to no
Lien other than under the Credit Agreement; provided that (a) any
Indebtedness of the Company to any Wholly Owned Restricted Subsidiary
of the Company is unsecured and subordinated, pursuant to a written
agreement, to the Company's obligations under this Indenture and the
Notes and (b) if as of any date any Person other than a Wholly Owned
Restricted Subsidiary of the Company owns or holds any such
Indebtedness or any Person holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness
not constituting Permitted Indebtedness by the Company unless such
Indebtedness is otherwise permitted hereunder;
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; provided,
however, that such Indebtedness is extinguished within two business
days of incurrence;
(ix) Indebtedness of the Company or any of its Restricted
Subsidiaries represented by letters of credit for the account of the
Company or such Restricted Subsidiary, as the case may be, in order
<PAGE> 19
-12-
to provide security for workers' compensation claims, payment
obligations in connection with self-insurance or similar requirements
in the ordinary course of business;
(x) Indebtedness represented by Capitalized Lease Obligations
and Purchase Money Indebtedness of the Company and its Restricted
Subsidiaries incurred in the ordinary course of business not to exceed
$7.5 million at any one time outstanding;
(xi) Refinancing Indebtedness;
(xii) additional Indebtedness of the Company and its
Restricted Subsidiaries in an aggregate principal amount not to exceed
$20.0 million at any one time outstanding; and
(xiii) Indebtedness of Foreign Restricted Subsidiaries not to
exceed $10.0 million at any one time outstanding; provided that no
Indebtedness may be incurred under this clause (xiii) if after giving
effect to such incurrence the sum of the Indebtedness outstanding under
clause (ii) above and the Indebtedness outstanding under this clause
(xiii) would exceed the maximum amount of Indebtedness permitted to be
outstanding under clause (ii) above.
"Permitted Investments" means (i) Investments by the Company
or any Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Wholly Owned Restricted Subsidiary of the
Company or that will merge or consolidate into the Company or a Wholly Owned
Restricted Subsidiary of the Company; (ii) Investments in the Company by any
Restricted Subsidiary of the Company; provided that any Indebtedness evidencing
such Investment is unsecured and subordinated, pursuant to a written agreement,
to the Company's obligations under the Notes and this Indenture; (iii)
investments in cash and Cash Equivalents; (iv) loans and advances to employees
and officers of the Company and its Restricted Subsidiaries in the ordinary
course of business for bona fide business purposes not in excess of $1.0 million
at any one time outstanding; (v) Currency Agreements and Interest Swap
Obligations entered into in the ordinary course of the Company's or its
Restricted Subsidiaries' businesses and otherwise in compliance with this
Indenture; (vi) additional Investments not to exceed $7.5 million at any one
time outstanding; (vii) Investments in securities of trade creditors or
customers received pursuant to any plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such trade creditors or customers; and
(viii) Investments made by the Company or its Restricted Subsidiaries as a
result of consideration received in connection with an Asset Sale made in
compliance with Section 4.05.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or
claims either (a) not delinquent or (b) contested in good faith by
appropriate proceedings and as to which the Company or its Restricted
Subsidiaries shall have set aside on its books such reserves as may be
required pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other
Liens imposed by law incurred in the ordinary course of business for
sums not yet delinquent or being contested in good faith, if such
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made in respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security, including any Lien
securing letters of credit issued in the ordinary course of business
consistent with past practice in connection therewith, or to secure the
performance of tenders, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
<PAGE> 20
-13-
(iv) judgment Liens not giving rise to an Event of Default so
long as such Lien is adequately bonded and any appropriate legal
proceedings which may have been duly initiated for the review of such
judgment shall not have been finally terminated or the period within
which such proceedings may be initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other
similar charges or encumbrances in respect of real property not
interfering in any material respect with the ordinary conduct of the
business of the Company or any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized
Lease Obligation; provided that such Liens do not extend to any
property or assets which is not leased property subject to such
Capitalized Lease Obligation;
(vii) purchase money Liens to finance property or assets of the
Company or any Restricted Subsidiary of the Company acquired in the
ordinary course of business; provided, however, that (A) the related
Purchase Money Indebtedness shall not exceed the cost of such property
or assets and shall not be secured by any property or assets of the
Company or any Restricted Subsidiary of the Company other than the
property and assets so acquired and (B) the Lien securing such
Indebtedness shall be created within 90 days of such acquisition;
(viii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person
to facilitate the purchase, shipment or storage of such inventory or
other goods;
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other
property relating to such letters of credit and products and proceeds
thereof;
(x) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual, or warranty
requirements of the Company or any of its Restricted Subsidiaries,
including rights of offset and set-off;
(xi) Liens securing Interest Swap Obligations which Interest
Swap Obligations relate to Indebtedness that is otherwise permitted
under this Indenture;
(xii) Liens securing Capitalized Lease Obligations and Purchase
Money Indebtedness permitted pursuant to clause (x) of the definition
of "Permitted Indebtedness"; provided, however, that in the case of
Purchase Money Indebtedness (A) the Indebtedness shall not exceed the
cost of such property or assets and shall not be secured by any
property or assets of the Company or any Restricted Subsidiary of the
Company other than the property and assets so acquired or constructed
and (B) the Lien securing such Indebtedness shall be created within 180
days of such acquisition or construction or, in the case of a
refinancing of any Purchase Money Indebtedness, within 180 days of such
refinancing;
(xiii) Liens securing Indebtedness under Currency Agreements;
and
(xiv) Liens securing Acquired Indebtedness incurred in
accordance with Section 4.04; provided that (A) such Liens secured such
Acquired Indebtedness at the time of and prior to the incurrence of
such Acquired Indebtedness by the Company or a Restricted Subsidiary of
the Company and were not granted in connection with, or in anticipation
of, the incurrence of such Acquired Indebtedness by the Company or a
Restricted Subsidiary of the Company and (B) such Liens do not extend
to or cover any property or assets of the Company or of any of its
Restricted Subsidiaries other than the property or assets that secured
the Acquired Indebtedness prior to the time such Indebtedness became
Acquired Indebtedness of the Company or a Restricted Subsidiary of the
Company and are no more favorable to the
<PAGE> 21
-14-
lienholders than those securing the Acquired Indebtedness prior to the
incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary of the Company.
"Permitted Tax Distributions" see Section 4.06.
"Person" means an individual, partnership, corporation,
unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"Physical Notes" means one or more certificated Notes in
registered form.
"Preferred Stock" of any Person means any Capital Stock of
such Person that has preferential rights to any other Capital Stock of
such Person with respect to dividends or redemptions or upon
liquidation.
"principal" of a debt note means the principal of the note,
plus, when appropriate, the premium, if any, on the note.
"Private Exchange Notes" means the Private Exchange Notes as
defined in the Registration Rights Agreement.
"Private Placement Legend" means the legend initially set
forth on the Initial Notes in the form set forth on Exhibit A hereto.
"Proceeds Purchase Date" see Section 4.05(b).
"Purchase Money Indebtedness" means Indebtedness of the
Company and its Restricted Subsidiaries incurred in the normal course of
business for the purpose of financing all or any part of the purchase price, or
the cost of installation, construction or improvement, of property or equipment.
"Purchase Agreement" means the Purchase Agreement dated as of
July 2, 1998 by and among the Issuers and the Initial Purchaser.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" means a "qualified
institutional buyer" as that term is defined in Rule 144A under the
Securities Act.
"Redemption Date," when used with respect to any Note to be
redeemed, means the date fixed for such redemption pursuant to this Indenture.
"redemption price," when used with respect to any Note to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
as set forth in the form of Note annexed hereto as Exhibit A.
"Refinance" means, in respect of any security or Indebtedness,
to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire,
or to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the
Company or any Restricted Subsidiary of the Company of Indebtedness incurred in
accordance with Section 4.04 or permitted under the defini-
<PAGE> 22
-15-
tion of "Permitted Indebtedness" (other than pursuant to clause (ii), (iv), (v),
(vi), (vii), (viii), (ix), (x), (xii) or (xiii) of the definition of Permitted
Indebtedness), in each case that does not (1) result in an increase in the
aggregate principal amount of Indebtedness of such Person as of the date of such
proposed Refinancing (plus the amount of any premium required to be paid under
the terms of the instrument governing such Indebtedness and the amount of
reasonable expenses incurred by the Company in connection with such Refinancing)
or (2) create Indebtedness with (A) a Weighted Average Life to Maturity that is
less than the Weighted Average Life to Maturity of the Indebtedness being
Refinanced or (B) a final maturity earlier than the final maturity of the
Indebtedness being Refinanced; provided that (x) if such Indebtedness being
Refinanced is Indebtedness of the Company, then such Refinancing Indebtedness
shall be Indebtedness solely of the Company and (y) if such Indebtedness being
Refinanced is subordinate or junior to the Notes, then such Refinancing
Indebtedness shall be subordinate to the Notes at least to the same extent and
in the same manner as the Indebtedness being Refinanced.
"Reg. S Global Note" means a global note in registered form
representing the aggregate principal amount of Notes sold pursuant to Regulation
S under the Securities Act.
"Registrar" see Section 2.03.
"Registration" means a registered exchange offer for the Notes
by the Issuers or other registration of the Notes under the Securities Act
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of July 2, 1998 by and among the Issuers and the Initial
Purchaser.
"Representative" means the indenture trustee or other trustee,
agent or representative in respect of any Designated Senior Debt; provided that
if, and for so long as, any Designated Senior Debt lacks such a representative,
then the Representative for such Designated Senior Debt shall at all times
constitute the holders of a majority in outstanding principal amount of such
Designated Senior Debt in respect of any Designated Senior Debt.
"Restricted Payments" see Section 4.06.
"Restricted Note" of any Person means any Subsidiary of such
Person which at the time of determination is not an Unrestricted Subsidiary.
"Restricted Subsidiary" of any Person means any Subsidiary of
such Person which at the time of determination is not an Unrestricted
Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary at the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such Person or to any other Person from whom funds
have been or are to be advanced by such Person on the note of such Property.
"SEC" or "Commission" means the Securities and Exchange
Commission.
<PAGE> 23
-16-
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"Senior Debt" means the principal of, premium, if any, and
interest (including 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)
on any Indebtedness of the Company, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the generality
of the foregoing, "Senior Debt" shall also include the principal of, premium, if
any, interest (including 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) on, and all other amounts owing in respect of, (x) all monetary
obligations of every nature of the Company under the Credit Agreement,
including, without limitation, obligations to pay principal and interest,
reimbursement obligations under letters of credit, fees, expenses and
indemnities, (y) all Interest Swap Obligations and (z) all obligations under
Currency Agreements, in each case whether outstanding on the Issue Date or
thereafter incurred. Notwithstanding the foregoing, "Senior Debt" shall not
include (i) any Indebtedness of the Company to a Subsidiary of the Company or
any Affiliate of the Company or any of such Affiliate's Subsidiaries, (ii)
Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer
or employee of the Company or any Subsidiary of the Company (including, without
limitation, amounts owed for compensation), (iii) Indebtedness to trade
creditors and other amounts incurred in connection with obtaining goods,
materials or services, (iv) Indebtedness represented by Disqualified Capital
Stock, (v) any liability for federal, state, local or other taxes owed or owing
by the Company, (vi) Indebtedness incurred in violation of Section 4.04 (but, as
to any such Indebtedness, no such violation shall be deemed to exist for
purposes of this clause (vi) if the holder(s) of such obligation or their
representative shall have received an officers' certificate of the Company to
the effect that the incurrence of such Indebtedness (or, in the case of
revolving credit Indebtedness, that the entire committed amount thereof at the
date on which the initial borrowing thereunder is made) would not violate such
provisions of this Indenture; (vii) Indebtedness which, when incurred and
without respect to any election under Section 1111(b) of Title 11, United States
Code, is without recourse to the Company; (viii) Indebtedness represented by
Capitalized Lease Obligations existing on the Issue Date: and (ix) any
Indebtedness which is, by its express terms, subordinated in right of payment to
any other Indebtedness of the Company.
"Significant Subsidiary", with respect to any Person, means
any Restricted Subsidiary of such Person that satisfies the criteria for a
"significant subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the
Securities Act.
"Subsidiary", with respect to any Person, means (i) any
corporation of which the outstanding Capital Stock having at least a majority of
the votes entitled to be cast in the election of directors under ordinary
circumstances shall at the time be owned, directly or indirectly, by such Person
or (ii) any other Person of which at least a majority of the voting interest
under ordinary circumstances is at the time, directly or indirectly, owned by
such Person.
"TIA" means the Trust Indenture Act of 1939, as amended, as in
effect on the date of this Indenture (except as provided in Section 10.03) until
such time as this Indenture is qualified under the TIA, and thereafter as in
effect on the date on which this Indenture is qualified under the TIA.
"Trustee" means the party named as such in the first paragraph
of this Indenture until a successor replaces it in accordance with the
provisions of this Indenture and thereafter means such successor.
<PAGE> 24
-17-
"Trust Officer" means any officer within the corporate trust
department (or any successor group of the Trustee) including any vice president,
assistant vice president, assistant secretary or any other officer or assistant
officer of the Trustee customarily performing functions similar to those
performed by the persons who at that time shall be such officers, and also
means, with respect to a particular corporate trust matter, any other officer to
whom such trust matter is referred because of his knowledge of and familiarity
with the particular subject.
"United States Government Obligations" means direct
non-callable obligations of the United States for the payment of which the full
faith and credit of the United States is pledged.
"United States Legal Tender" means such coin or currency of
the United States of America as at the time of payment shall be legal tender for
the payment of public and private debts.
"Unrestricted Notes" means one or more Notes that do not and
are not required to bear the Private Placement Legend in the form set forth in
Exhibit A hereto, including, without limitation, the Exchange Notes and any
Notes registered under the Securities Act pursuant to and in accordance with the
Registration Rights Agreement.
"Unrestricted Subsidiary" of any Person means (i) any
Subsidiary of such Person that at the time of determination shall be or continue
to be designated an Unrestricted Subsidiary by the Board of Directors of such
Person in the manner provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Subsidiary (including any
newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, the Company or any other Subsidiary of the Company that is not
a Subsidiary of the Subsidiary to be so designated; provided that (x) the
Company certifies to the Trustee that such designation complies with Section
4.06 and (y) each Subsidiary to be so designated and each of its Subsidiaries
has not at the time of designation, and does not thereafter, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable with
respect to any Indebtedness pursuant to which the lender has recourse to any of
the assets of the Company or any of its Restricted Subsidiaries. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary only if (x) immediately after giving effect to such designation, the
Company is able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with Section 4.04 and (y) immediately
before and immediately after giving effect to such designation, no Default or
Event of Default shall have occurred and be continuing. Any such designation by
the Board of Directors shall be evidenced to the Trustee by promptly filing with
the Trustee a copy of the Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any
Restricted Subsidiary of such Person of which all the outstanding voting
securities (other than in the case of a Foreign Restricted Subsidiary,
directors' qualifying shares or an immaterial amount of shares required to be
owned by other Persons pursuant to applicable law) are owned by such Person or
any Wholly Owned Restricted Subsidiary of such Person.
<PAGE> 25
-18-
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the Notes means the Company, a Guarantor, if any,
or any other obligor on the Notes.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule and
not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles in effect from time to time, and any other reference in this
Indenture to "generally accepted accounting principles" refers to GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions;
and
(6) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section
or other subdivision.
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.
The Initial Notes and the Trustee's certificate of
authentication thereof shall be substantially in the form of Exhibit A hereto,
with such appropriate insertions, substitutions and other variations as are
required
<PAGE> 26
-19-
or permitted by this Indenture which is hereby incorporated in and expressly
made a part of this Indenture. The Exchange Notes and the Trustee's certificate
of authentication thereof shall be substantially in the form of Exhibit B
hereto, which is hereby incorporated in and expressly made a part of this
Indenture. The Notes may have notations, legends or endorsements required by
this Indenture, law, stock exchange rule, dispository rule, agreements to which
the issuers are subject or usage. The Issuers shall approve the forms of the
Notes and any notation, legend or endorsement on them. Each Note shall be dated
the date of its issuance and shall show the date of its authentication. Global
Notes shall bear the legend set forth in Exhibit C hereto. The aggregate
principal amount of the Global Notes may from time to time be increased or
decreased by adjustments made on the records of Bankers Trust Company, as
Registrar, as custodian for the Depositary, as hereinafter provided.
SECTION 2.02. Execution and Authentication.
Two Officers, including no more than one signing solely as
Assistant Secretary, shall sign, or one Officer (other than as an Assistant
Secretary) shall sign and the Secretary or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to such Officer's signature, the Notes for each of the
Issuers by manual or facsimile signature.
If an Officer whose signature is on a Note was an Officer at
the time of such execution but no longer holds that office at the time the
Trustee authenticates the Note, the Note shall be valid nevertheless.
A Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Note. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Initial Notes for original
issue in an aggregate principal amount not to exceed $160,000,000 in one or more
series; provided that the aggregate principal amount of Initial Notes on the
Issue Date shall not exceed $110,000,000, (ii) Private Exchange Notes from time
to time only in exchange for a like principal amount of the same type of Initial
Notes and (iii) Unrestricted Notes from time to time (A) in exchange for a like
principal amount of the same type of Initial Notes or a like principal amount of
the same type of Private Exchange Notes or (B) as the Issuers may determine in
accordance with this Indenture, in each case upon a written order of each of the
Issuers in the form of an Officers' Certificate. Each such written order shall
specify the amount of and the type of Notes to be authenticated and the date on
which the Notes are to be authenticated, whether the Notes are to be Initial
Notes, Private Exchange Notes or Unrestricted Notes and whether the Notes are to
be issued as Physical Notes or Global Notes and such other information as the
Trustee may reasonably request. The aggregate principal amount of Notes
outstanding at any time may not exceed $160,000,000, except as provided in
Sections 2.07 and 2.08.
In the event that the Issuers shall issue and the Trustee
shall authenticate any Notes issued under this Indenture subsequent to the Issue
Date pursuant to clauses (i) and (iii) of the first sentence of the immediately
preceding paragraph, the Issuers shall use their best efforts to obtain the same
"CUSIP" number for such Notes as is printed on the Notes outstanding at such
time; provided, however, that if any series of Notes issued under this Indenture
subsequent to the Issue Date is determined, pursuant to an Opinion of Counsel of
the Issuers in a form reasonably satisfactory to the Trustee to be a different
class of security than the Notes outstanding at such time for federal income tax
purposes, the Issuers may obtain a "CUSIP" number for such Notes that is
different than the "CUSIP" number printed on the Notes then outstanding.
<PAGE> 27
-20-
Notwithstanding the foregoing, all Notes issued under this
Indenture shall vote and consent together on all matters (as to which any of
such Notes may vote or consent) as one class and no series of Notes will have
the right to vote or consent as a separate class on any matter.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Issuers to authenticate Notes. Unless otherwise provided in
the appointment, an authenticating agent may authenticate Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent shall
have the same rights as an Agent to deal with the Issuers and Affiliates of the
Issuers. The Trustee hereby appoints Bankers Trust Company to be the
authenticating agent on the Issue Date.
The Notes shall be issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Issuers shall maintain an office or agency in the Borough
of Manhattan, The City of New York, where (a) Notes may be presented or
surrendered for registration of transfer or for exchange (the "Registrar"), (b)
Notes may be presented or surrendered for payment (the "Paying Agent") and (c)
notices and demands in respect of the Notes and this Indenture may be served.
The Registrar shall keep a register of the Notes and of their transfer and
exchange. The Issuers, upon notice to the Trustee, may appoint one or more
co-Registrars and one or more additional Paying Agents. The term "Paying Agent"
includes any additional Paying Agent and the term "Registrar" includes any
co-registrar. The Issuers may change any Paying Agent or Registrar without
notice to any Holder. Except as provided herein, the Company or any Guarantor
may act as Paying Agent, Registrar or co-Registrar.
The Issuers shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture, which shall incorporate the
provisions of the TIA. The agreement shall implement the provisions of this
Indenture that relate to such Agent. The Issuers shall notify the Trustee of the
name and address of any such Agent. If the Issuers fail to maintain a Registrar
or Paying Agent, or fail to give the foregoing notice, the Trustee shall act as
such and shall be entitled to appropriate compensation in accordance with
Section 7.07.
The Issuers initially appoint Bankers Trust Company as
Registrar, Paying Agent and agent for service of demands and notices in
connection with the Notes until such time as Bankers Trust Company has resigned
or a successor has been appointed. The Issuers initially appoint The Depository
Trust Company (DTC) to act as Depositary with respect to the Global Notes.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Issuers shall require each Paying Agent other than the
Trustee to agree in writing that each Paying Agent shall hold in trust for the
benefit of Holders or the Trustee all assets held by the Paying Agent for the
payment of principal of, or interest on, the Notes, and shall notify the Trustee
of any Default by the Issuers in making any such payment. The Issuers at any
time may require a Paying Agent to distribute all assets held by it to the
Trustee and account for any assets disbursed and the Trustee may at any time
during the continuance of any payment Default, upon written request to a Paying
Agent, require such Paying Agent to distribute all assets held by it to the
Trustee and to account for any assets distributed. Upon distribution to the
Trustee of all assets that shall have been delivered by the Issuers to the
Paying Agent (if other than an Issuer), the Paying Agent shall have no further
liability for such assets. If an Issuer, any Guarantor or any of their
respective Affiliates acts as
<PAGE> 28
-21-
Paying Agent, it shall, on or before each due date of the principal of or
interest on the Notes, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal or interest so
becoming due until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and will promptly notify the Trustee of its action or
failure so to act.
SECTION 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Holders. If the Trustee is not the Registrar, the Issuers shall
furnish to the Trustee at least five days before each Interest Record Date and
at such other times as the Trustee may request in writing a list as of such date
and in such form as the Trustee may reasonably require of the names and
addresses of Holders, which list may be conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
Subject to the provisions of Sections 2.15 and 2.16, when
Notes are presented to the Registrar with a request to register the transfer of
such Notes or to exchange such Notes for an equal principal amount of Notes of
other authorized denominations of the same series, the Registrar shall register
the transfer or make the exchange as requested if its requirements for such
transaction are met; provided, however, that the Notes surrendered for transfer
or exchange shall be duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Issuers and the Registrar, duly executed by
the Holder thereof or his attorney duly authorized in writing. To permit
registrations of transfers and exchanges, the Issuers shall execute and the
Trustee shall authenticate Notes at the Registrar's written request. No service
charge shall be made for any registration of transfer or exchange, but the
Issuers may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith payable by the
transferor of such Notes (other than any such transfer taxes or other
governmental charge payable upon exchanges or transfers pursuant to Section
2.10, 3.06, 4.05, 4.14, or 10.05). Neither the Issuers nor the Registrar shall
be required to register the transfer or exchange of any Note (i) during a period
beginning at the opening of business 15 days before the mailing of a notice of
redemption of Notes and ending at the close of business on the day of such
mailing and (ii) selected for redemption in whole or in part pursuant to Article
Three hereof, except the unredeemed portion of any Note being redeemed in part.
None of the Issuers or the Trustee or the Registrar shall be
liable for any delay by the Depositary in identifying the beneficial owners of
the Notes and each such person may conclusively rely on, and shall be protected
in relying on, instructions from the Depositary for all purposes (including with
respect to the registration and delivery, and the respective principal amounts,
of any Notes to be issued).
Members of, or participants in, the Depositary shall have no
rights under this Indenture with respect to any Global Note held on their behalf
by the Depositary or the Registrar, or under the Global Note, and the Depositary
may be treated by the Issuers, the Trustee and any agent of the Issuers or the
Trustee as the absolute owner of the Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall (x) prevent the Issuers, the
Trustee or any agent of the Issuers or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or (y) impair, as between the Depositary and members of, or participants in, the
Depositary, the operation of customary practices governing the exercise of the
rights of a Holder of any Note.
Prior to the registration of any transfer by a Holder as
provided herein, the Issuers, the Trustee and any Agent shall treat the person
in whose name the Note is registered as the owner thereof for all purposes
<PAGE> 29
-22-
whether or not the Note shall be overdue, and neither the Issuers, the Trustee
nor any Agent shall be affected by notice to the contrary. Any Holder of a
beneficial interest in a Global Note shall, by acceptance of such beneficial
interest in a Global Note, agree that transfers of beneficial interests in such
Global Note may be effected only through a book-entry system maintained by the
Depositary (or its agent), and that ownership of a beneficial interest in a
Global Note shall be required to be reflected in a book entry.
SECTION 2.07. Replacement Notes.
If a mutilated Note is surrendered to the Trustee or if the
Issuers and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Note, the Issuers shall issue and the Trustee
shall authenticate a replacement Note if the Trustee's requirements for
replacement of Notes are met. If required by the Issuers or the Trustee, such
Holder must provide an indemnity bond or other indemnity, sufficient in the
judgment of both the Issuers and the Trustee, to protect the Issuers, the
Trustee and any Agent from any loss which any of them may suffer if a Note is
replaced. The Issuers and the Trustee may charge such Holder for its reasonable
out-of-pocket expenses in replacing a Note, including reasonable fees and
expenses of counsel. If after the delivery of such new Note, a bona fide
purchaser of the original Note in lieu of which such new Note was issued
presents for payment such original Note, the Issuers and the Trustee shall be
entitled to recover such new Note from the person to whom it was delivered or
any transferee thereof, except a bona fide purchaser, and shall be entitled to
recover upon the security or indemnity provided therefor to the extent of any
loss, damage, cost or expense incurred by the Issuers or the Trustee in
connection therewith.
Every replacement Note is an additional obligation of the
Issuers.
SECTION 2.08. Outstanding Notes.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those cancelled by it, those delivered to it
for cancellation and those described in this Section 2.08 as not outstanding.
Subject to Section 2.09, a Note does not cease to be outstanding because an
Issuer or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a
mutilated Note surrendered for replacement), it ceases to be outstanding unless
the Trustee receives proof satisfactory to it that the replaced Note is held by
a bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date, Purchase Date or the Final Maturity
Date the Paying Agent holds money sufficient to pay all of the principal and
interest due on the Notes payable on that date (or the portion thereof to be
redeemed or maturing, as the case may be), and is not prohibited from paying
such money to the Holders pursuant to the terms of this Indenture, then on and
after that date such Notes (or portions thereof) cease to be outstanding and
interest on them ceases to accrue.
SECTION 2.09. Treasury Notes.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by an Issuer, a Guarantor or any of their respective Affiliates shall be
disregarded, except that, for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes that a Trust Officer of the Trustee actually knows are so owned shall be
disregarded.
<PAGE> 30
-23-
The Issuers shall notify the Trustee, in writing, when an
Issuer, a Guarantor or any of their respective Affiliates repurchases or
otherwise acquires Notes and of the aggregate principal amount of such Notes so
repurchased or otherwise acquired.
SECTION 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Issuers may
prepare and the Trustee shall authenticate temporary Notes upon receipt of a
written order of the Issuers in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Notes to be
authenticated and the date on which the temporary Notes are to be authenticated.
Temporary Notes shall be substantially in the form of
definitive Notes but may have variations that the Issuers consider appropriate
for temporary Notes. Without unreasonable delay, the Issuers shall prepare and
the Trustee shall authenticate upon receipt of a written order of the Issuers
pursuant to Section 2.02 definitive Notes in exchange for temporary Notes.
SECTION 2.11. Cancellation.
The Issuers at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee, or
at the direction of the Trustee, the Registrar or the Paying Agent, and no one
else, shall cancel, and at the written direction of the Issuers, dispose of and
deliver evidence of such disposal of all Notes surrendered for transfer,
exchange, payment or cancellation. Subject to Section 2.07, the Issuers may not
issue new Notes to replace Notes that it has paid or delivered to the Trustee
for cancellation. If an Issuer or any Guarantor shall acquire any of the Notes,
such acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Notes unless and until the same are surrendered
to the Trustee for cancellation pursuant to this Section 2.11.
SECTION 2.12. Defaulted Interest.
The Issuers shall pay interest on overdue principal from time
to time on demand at the applicable rate of interest then borne by the Notes.
The Issuers shall, to the extent lawful, pay interest on overdue installments of
interest (without regard to any applicable grace periods) at the rate of
interest then borne by the Notes.
If the Issuers default in a payment of interest on the Notes,
they shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest to the Persons who are Holders on a subsequent
special record date, which date shall be the fifteenth day preceding the date
fixed by the Issuers for the payment of defaulted interest or the next
succeeding Business Day if such date is not a Business Day. At least 15 days
before the subsequent special record date, the Issuers shall mail to each
Holder, with a copy to the Trustee, a notice that states the subsequent special
record date, the payment date and the amount of defaulted interest, and interest
payable on such defaulted interest, if any, to be paid.
Notwithstanding the foregoing, any interest which is paid
prior to the expiration of the 30-day period set forth in Section 6.01(i) shall
be paid to Holders as of the Interest Record Date for the Interest Payment Date
for which interest has not been paid.
<PAGE> 31
-24-
SECTION 2.13. CUSIP Number.
The Issuers in issuing the Notes will use a "CUSIP" number and
the Trustee shall use the CUSIP number in notices of redemption or exchange as a
convenience to Holders; provided , however, that any such notice may state that
no representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes, and that reliance may be placed only on
the other identification numbers printed on the Notes. The Issuers shall
promptly notify the Trustee of any changes in CUSIP numbers.
SECTION 2.14. Deposit of Moneys.
Prior to 10:00 a.m. New York Time on each Interest Payment
Date, Redemption Date, Purchase Date and the Final Maturity Date, the Issuers
shall deposit with the Paying Agent in immediately available funds money
sufficient to make cash payments, if any, due on such Interest Payment Date,
Redemption Date, Purchase Date or Final Maturity Date, as the case may be, in a
timely manner which permits the Paying Agent to remit payment to the Holders on
such Interest Payment Date, Redemption Date, Purchase Date or Final Maturity
Date, as the case may be.
SECTION 2.15. Book-Entry Provisions for Global Notes.
(a) The Global Notes initially shall (i) be registered in the
name of the Depositary or the nominee of such Depositary, (ii) be delivered to
Bankers Trust Company as custodian for such Depositary and (iii) bear legends as
set forth in Exhibit C.
Members of, or participants in, the Depositary
("Participants") shall have no rights under this Indenture with respect to any
Global Note held on their behalf by the Depositary, or Bankers Trust Company as
its custodian, or under the Global Note, and the Depositary may be treated by
the Issuers, the Trustee and any agent of the Issuers or the Trustee as the
absolute owner of the Global Note for all purposes whatsoever. Notwithstanding
the foregoing, nothing herein shall prevent the Issuers, the Trustee or any
agent of the Issuers or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or
impair, as between the Depositary and Participants, the operation of customary
practices governing the exercise of the rights of a Holder of any Note.
(b) Transfers of Global Notes shall be limited to transfers in
whole, but not in part, to the Depositary, its successors or their respective
nominees. Interests of beneficial owners in the Global Notes may be transferred
or exchanged for Physical Notes in accordance with the rules and procedures of
the Depositary and the provisions of Section 2.16; provided, however, that
Physical Notes shall be transferred to all beneficial owners in exchange for
their beneficial interests in Global Notes if (i) the Depositary notifies the
Issuers that it is unwilling or unable to continue as Depositary for any Global
Note and a successor Depositary is not appointed by the Issuers within 90 days
of such notice or (ii) an Event of Default has occurred and is continuing and
the Registrar has received a request from the Depositary to issue Physical
Notes.
(c) In connection with the transfer of Global Notes as an
entirety to beneficial owners pursuant to paragraph (b) of this Section 2.15,
the Global Notes shall be deemed to be surrendered to the Trustee for
cancellation, and the Issuers shall execute, and the Trustee shall upon written
instructions from the Issuers authenticate and deliver or mail, to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in the Global Notes, an equal aggregate principal amount of Physical
Notes of authorized denominations.
<PAGE> 32
-25-
(d) Any Physical Note constituting a Restricted Note delivered
in exchange for an interest in a Global Note pursuant to paragraph (b) of this
Section 2.15 shall, except as otherwise provided by Section 2.16, bear the
Private Placement Legend.
(e) The Holder of any Global Note may grant proxies and
otherwise authorize any Person, including Participants and Persons that may hold
interests through Participants, to take any action which a Holder is entitled to
take under this Indenture or the Notes.
SECTION 2.16. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Physical Notes. When Physical
Notes are presented to the Registrar with a request:
(i) to register the transfer of the Physical Notes; or
(ii) to exchange such Physical Notes for an equal principal
amount of Physical Notes of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
the requirements under this Indenture as set forth in this Section 2.16 for such
transactions are met; provided, however, that the Physical Notes presented or
surrendered for Registration of transfer or exchange:
(I) shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Registrar, duly
executed by the Holder thereof or his attorney duly authorized in
writing; and
(II) in the case of Physical Notes the offer and sale of which
have not been registered under the Securities Act, such Physical Notes
shall be accompanied, in the sole discretion of the Issuers, by the
following additional information and documents, as applicable:
(A) if such Physical Note is being delivered to the
Registrar by a Holder for Registration in the name of
such Holder, without transfer, a certification from
such Holder to that effect (substantially in the form
of Exhibit D hereto); or
(B) if such Physical Note is being transferred to a QIB
in accordance with Rule 144A, a certification to that
effect (substantially in the form of Exhibit D
hereto); or
(C) if such Physical Note is being transferred to an
Institutional Accredited Investor, delivery of a
certification to that effect (substantially in the
form of Exhibit D hereto) and a transferee letter of
representation substantially in the form of Exhibit E
hereto and, at the option of the Issuers, an Opinion
of Counsel reasonably satisfactory to the Issuers to
the effect that such transfer is in compliance with
the Securities Act; or
(D) if such Physical Note is being transferred in
reliance on Rule 144 under the Securities Act,
delivery of a certification to that effect
(substantially in the form of Exhibit D hereto) and,
at the option of the Issuers, an Opinion of Counsel
reasonably satisfactory to the Issuers to the effect
that such transfer is in compliance with the
Securities Act; or
<PAGE> 33
-26-
(E) if such Physical Note is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification
to that effect (substantially in the form of Exhibit
D hereto) and, at the option of the Issuers, an
Opinion of Counsel reasonably acceptable to the
Issuers to the effect that such transfer is in
compliance with the Securities Act.
(b) Restrictions on Transfer of a Physical Note for a
Beneficial Interest in a Global Note. A Physical Note the offer and sale of
which has not been registered under the Securities Act may not be exchanged for
a beneficial interest in a Global Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Registrar of a Physical Note,
duly endorsed or accompanied by appropriate instruments of transfer, in form
satisfactory to the Registrar, together with:
(A) certification, substantially in the form of Exhibit D
hereto, that such Physical Note is being transferred
(I) to a QIB or (II) to an Accredited Investor and,
with respect to (II), at the option of the Issuers,
an Opinion of Counsel reasonably acceptable to the
Issuers to the effect that such transfer is in
compliance with the Securities Act; and
(B) written instructions directing the Registrar to make,
or to direct the Depositary to make, an endorsement
on the applicable Global Note to reflect an increase
in the aggregate amount of the Notes represented by
the Global Note,
then the Registrar shall cancel such Physical Note in accordance with Section
2.11 hereof and cause, or direct the Depositary to cause, in accordance with the
standing instructions and procedures existing between the Depositary and the
Registrar, the principal amount of Notes represented by the applicable Global
Note to be increased accordingly. If no Global Note is then outstanding, the
Issuers shall, unless either of the events in the proviso to Section 2.15(b)
have occurred and are continuing, issue and the Trustee shall, upon written
instructions from the Issuers in accordance with Section 2.02, authenticate such
a Global Note in the appropriate principal amount.
(c) Transfer and Exchange of Global Notes. The transfer and
exchange of Global Notes or beneficial interests therein shall be effected
through the Depositary in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the Depositary
therefor. Upon receipt by the Registrar or Co-Registrar of written instructions,
or such other instruction as is customary for the Depositary, from the
Depositary or its nominee, requesting the Registration of transfer of an
interest in a Global Note to another type of Global Note, together with the
applicable Global Notes (or, if the applicable type of Global Note required to
represent the interest as requested to be transferred is not then outstanding,
only the Global Note representing the interest being transferred), the Registrar
or Co-Registrar shall cancel such Global Notes (or Global Note) and the Issuers
shall issue and the Trustee shall, upon written instructions from the Issuers in
accordance with Section 2.02, authenticate new Global Notes of the types so
cancelled (or the type so cancelled and applicable type required to represent
the interest as requested to be transferred) reflecting the applicable increase
and decrease of the principal amount of Notes represented by such types of
Global Notes, giving effect to such transfer. If the applicable type of Global
Note required to represent the interest as requested to be transferred is not
outstanding at the time of such request, the Issuers shall issue and the Trustee
shall, upon written instructions from the Issuers in accordance with Section
2.02, authenticate a new Global Note of such type in principal amount equal to
the principal amount of the interest requested to be transferred.
<PAGE> 34
-27-
(d) Transfer of a Beneficial Interest in a Global Note for a
Physical Note.
(i) Any Person having a beneficial interest in a Global Note
may upon request exchange such beneficial interest for a Physical Note;
provided, however, that prior to the Registration, a transferee that is
a QIB or Institutional Accredited Investor may not exchange a
beneficial interest in Global Note for a Physical Note. Upon receipt by
the Registrar of written instructions, or such other form of
instructions as is customary for the Depositary, from the Depositary or
its nominee on behalf of any Person (subject to the previous sentence)
having a beneficial interest in a Global Note and upon receipt by the
Trustee of a written order or such other form of instructions as is
customary for the Depositary or the Person designated by the Depositary
as having such a beneficial interest containing registration
instructions and, in the case of any such transfer or exchange of a
beneficial interest in Notes the offer and sale of which have not been
registered under the Securities Act, the following additional
information and documents:
(A) if such beneficial interest is being transferred in
reliance on Rule 144 under the Securities Act,
delivery of a certification to that effect
(substantially in the form of Exhibit D hereto) and,
at the option of the Issuers, an Opinion of Counsel
reasonably satisfactory to the Issuers to the effect
that such transfer is in compliance with the
Securities Act; or
(B) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification
to that effect (substantially in the form of Exhibit
D hereto) and, at the option of the Issuers, an
Opinion of Counsel reasonably satisfactory to the
Issuers to the effect that such transfer is in
compliance with the Securities Act,
then the Registrar will cause, in accordance with the standing
instructions and procedures existing between the Depositary and the
Registrar, the aggregate principal amount of the applicable Global Note
to be reduced and, following such reduction, the Issuers will execute
and, upon receipt of an authentication order in the form of an
Officers' Certificate in accordance with Section 2.02, the Trustee will
authenticate and deliver or mail to the transferee a Physical Note in
the appropriate principal amount.
(ii) Notes issued in exchange for a beneficial interest in a
Global Note pursuant to this Section 2.16(d) shall be registered in
such names and in such authorized denominations as the Depositary,
pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Registrar in writing. The Registrar shall
deliver such Physical Notes to the Persons in whose names such Physical
Notes are so registered.
(e) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection 2.15(b)), a Global Note may not be
transferred except as a whole by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary or
a nominee of such successor Depositary.
(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless, and the Registrar is hereby authorized to deliver Notes without the
Private Placement Legend if, (i) there is delivered to the Registrar an Opinion
<PAGE> 35
-28-
of Counsel reasonably satisfactory to the Issuers 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; (ii)
such Note has been sold pursuant to an effective registration statement under
the Securities Act (including pursuant to a Registration); or (iii) the date of
such transfer, exchange or replacement is two years after the later of (x) the
Issue Date and (y) the last date that an Issuer or any affiliate (as defined in
Rule 144 under the Securities Act) of an Issuer was the owner of such Notes (or
any predecessor thereto).
(g) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
Neither the Trustee nor the Registrar shall have any
obligation or duty to monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Indenture or under applicable law
with respect to any transfer of any interest in any Note (including any
transfers between or among Participants or beneficial owners of interest in any
Global Note) other than the Registrar, to require delivery of such certificates
and other documentation or evidence as are expressly required by, and to do so
if and when expressly required by the terms of, this Indenture, and to examine
the same to determine substantial compliance as to form with the express
requirements hereof.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.15 or this Section
2.16. The Issuers shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Registrar.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Issuers want to redeem Notes pursuant to paragraph 6 or
7 of the Notes at the applicable redemption price set forth thereon, they shall
notify the Trustee in writing of the Redemption Date and the principal amount of
Notes to be redeemed. The Issuers shall give such notice to the Trustee at least
60 days before the Redemption Date (unless a shorter notice shall be agreed to
by the Trustee in writing), together with an Officers' Certificate stating that
such redemption will comply with the conditions contained herein.
SECTION 3.02. Selection of Notes To Be Redeemed.
If less than all of the Notes are to be redeemed, the Trustee
shall select the Notes to be redeemed in compliance with the requirements of the
principal national securities exchange, if any, on which such Notes are listed
or, if such Notes are not so listed, on a pro rata basis, by lot or in such
other manner as the Trustee shall deem fair and appropriate.
The Trustee may select for redemption portions of the
principal amount of Notes that have denominations equal to or larger than $1,000
principal amount. Notes and portions of them the Trustee so selects
<PAGE> 36
-29-
shall be in amounts of $1,000 principal amount or integral multiples thereof.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption
Date, the Issuers shall mail a notice of redemption by first-class mail to each
Holder whose Notes are to be redeemed at such Holder's registered address.
Each notice of redemption shall identify the Notes to be
redeemed (including the CUSIP number thereon) and shall state:
(1) the paragraph of the Notes pursuant to which the Notes are
being redeemed;
(2) the Redemption Date;
(3) the redemption price;
(4) the name and address of the Paying Agent to which the
Notes are to be surrendered for redemption;
(5) that Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(6) that, unless the Issuers default in making the redemption
payment, interest on Notes called for redemption ceases to accrue on
and after the Redemption Date and the only remaining right of the
Holders is to receive payment of the redemption price upon surrender to
the Paying Agent;
(7) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
Redemption Date, upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion thereof will be
issued; and
(8) the CUSIP number, if any, pursuant to Section 2.13.
At the Issuers' request, the Trustee shall give the notice of
redemption on behalf of the Issuers, in the Issuers' name and at the Issuers'
expense.
SECTION 3.04. Effect of Notice of Redemption.
Once a notice of redemption is mailed, Notes called for
redemption become due and payable on the Redemption Date and at the redemption
price. Upon surrender to the Paying Agent, such Notes shall be paid at the
redemption price, plus accrued interest thereon, if any, to the Redemption Date,
but interest installments whose maturity is on or prior to such Redemption Date
shall be payable to the Holders of record at the close of business on the
relevant Interest Record Date.
<PAGE> 37
-30-
SECTION 3.05. Deposit of Redemption Price.
On or before 10:00 a.m., New York Time, on the Redemption
Date, the Issuers shall deposit with the Paying Agent (or if an Issuer is Paying
Agent, shall, on or before the Redemption Date, segregate and hold in trust)
money sufficient to pay the redemption price of and accrued interest, if any, on
all Notes to be redeemed on that date other than Notes or portions thereof
called for redemption on that date which have been delivered by the Issuers to
the Trustee for cancellation. The Trustee or the Paying Agent shall return to
the Issuers any money deposited with the Trustee or Paying Agent by the Issuers
in excess of the amount necessary to pay the redemption price of and accrued
interest, if any, on all Notes to be redeemed.
If the Issuers comply with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an Interest Record Date but on or prior to the related Interest
Payment Date, then any accrued and unpaid interest shall be paid to the person
in whose name such Note was registered at the close of business on such record
date. Upon surrender of a Note for redemption in accordance with the notice
given pursuant to Section 3.03 hereof, such Note shall be purchased by the
Issuers at the redemption price, together with accrued and unpaid interest to
the redemption date.
If any Note surrendered for redemption in the manner provided
in the Notes shall not be so paid on the Redemption Date due to the failure of
the Issuers to deposit with the Paying Agent money sufficient to pay the
redemption price thereof, the principal and accrued and unpaid interest, if any,
thereon shall, until paid or duly provided for, bear interest as provided in
Sections 2.12 and 4.01 with respect to any payment default.
SECTION 3.06. Notes Redeemed in Part.
Upon surrender and cancellation of a Note that is redeemed in
part, the Issuers shall issue and the Trustee shall authenticate for the Holder
a new Note equal in principal amount to the unredeemed portion of the Note
surrendered and cancelled.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes.
The Company shall pay the principal of and interest on the
Notes in the manner provided in the Notes and the Registration Rights Agreement.
An installment of principal or interest shall be considered paid on the date due
if the Trustee or Paying Agent (other than an Issuer, a Guarantor or any of
their respective Affiliates) holds on that date money designated for and
sufficient to pay the installment in full and is not prohibited from paying such
money to the Holders of the Notes pursuant to the terms of this Indenture.
The Issuers shall pay cash interest on overdue principal at
the same rate per annum borne by the applicable Notes. The Issuers shall pay
cash interest on overdue installments of interest at the same rate per annum
borne by the applicable Notes, to the extent lawful, as provided in Section
2.12.
<PAGE> 38
-31-
SECTION 4.02. Maintenance of Office or Agency.
The Issuers shall maintain in the Borough of Manhattan, The
City of New York, the office or agency required under Section 2.03. The Issuers
shall give prompt written notice to the Trustee of the location, and any change
in the location, of such office or agency. If at any time the Issuers shall fail
to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the address of the Trustee set forth in Section
13. The Issuers hereby initially designate Bankers Trust Company at its address
set forth in Section 13.02 as their office or agency in The Borough of
Manhattan, The City of New York, for such purposes.
SECTION 4.03. Limitations on Transactions with Affiliates
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into or permit to
exist any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with, or for the benefit of, any of its Affiliates
(each, an "Affiliate Transaction"), other than (x) Affiliate Transactions
permitted under paragraph (b) below and (y) Affiliate Transactions on terms that
are no less favorable than those that might reasonably have been obtained in a
comparable transaction at such time on an arm's-length basis from a Person that
is not an Affiliate of the Company or such Restricted Subsidiary. All Affiliate
Transactions (and each series of related Affiliate Transactions which are
similar or part of a common plan) involving aggregate payments or other property
with a fair market value in excess of $1.0 million shall be approved by the
Board of Directors of the Company or such Restricted Subsidiary, as the case may
be, such approval to be evidenced by a Board Resolution stating that such Board
of Directors has determined that such transaction complies with the foregoing
provisions. If the Company or any Restricted Subsidiary of the Company enters
into an Affiliate Transaction (or a series of related Affiliate Transactions
related to a common plan) that involves an aggregate fair market value of more
than $5.0 million, the Company or such Restricted Subsidiary, as the case may
be, shall, prior to the consummation thereof, obtain a favorable opinion as to
the fairness of such transaction or series of related transactions to the
Company or the relevant Restricted Subsidiary, as the case may be, from a
financial point of view, from an Independent Financial Advisor and file the same
with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply
to (i) reasonable fees and compensation paid to and indemnity provided on behalf
of, officers, directors, employees or consultants of the Company or any
Restricted Subsidiary of the Company as determined in good faith by the
Company's Board of Directors or senior management; (ii) transactions exclusively
between or among the Company and any of its Wholly Owned Restricted Subsidiaries
or exclusively between or among such Wholly Owned Restricted Subsidiaries,
provided such transactions are not otherwise prohibited by this Indenture; (iii)
any agreement as in effect as of the Issue Date or any amendment thereto or any
transaction contemplated thereby (including pursuant to any amendment thereto)
in any replacement agreement thereto so long as any such amendment or
replacement agreement is not more disadvantageous to the Holders in any material
respect than the original agreement as in effect on the Issue Date; (iv)
Restricted Payments permitted by Section 4.06 of this Indenture; and (v)
transactions with customers, clients, suppliers or purchasers or sellers of
goods or services, in each case in the ordinary course of business and otherwise
in compliance with this Indenture and on terms fair to the Company and its
Restricted Subsidiaries in the reasonable determination of the Board of
Directors of the Company, or at least as favorable as might reasonably have been
obtained at such time from an unaffiliated party.
<PAGE> 39
-32-
SECTION 4.04. Limitation on Incurrence of Additional Indebtedness.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee,
acquire, become liable, contingently or otherwise, with respect to, or otherwise
become responsible for payment of (collectively, "incur") any Indebtedness
(other than Permitted Indebtedness); provided, however, that if no Default or
Event of Default shall have occurred and be continuing at the time of or as a
consequence of the incurrence of any such Indebtedness, the Company may incur
Indebtedness (including, without limitation, Acquired Indebtedness) and
Restricted Subsidiaries of the Company may incur Acquired Indebtedness, in each
case if on the date of the incurrence of such Indebtedness, after giving effect
to the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the
Company is greater than (a) 2.0 to 1.0 if the date of such incurrence is on or
prior to December 31, 1999, or (b) 2.25 to 1.0 if the date of such incurrence is
after December 31, 1999.
SECTION 4.05. Limitation on Asset Sales.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company or the
applicable Restricted Subsidiary, as the case may be, receives consideration at
the time of such Asset Sale at least equal to the fair market value of the
assets sold or otherwise disposed of (as determined in good faith by the
Company's Board of Directors) and (ii) at least 75% of the consideration
received by the Company or the Restricted Subsidiary, as the case may be, from
such Asset Sale shall be in the form of cash or Cash Equivalents; provided that
the amount of (x) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet) of the Company or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by their
terms subordinated to the Notes or any guarantee thereof) that are assumed by
the transferee of any such assets and (y) any securities, notes or other
obligations received by the Company or any such Restricted Subsidiary from such
transferee that are converted within 180 days by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received) shall be deemed to be
cash for purposes of this provision. Upon the consummation of an Asset Sale, the
Company shall apply, or cause such Restricted Subsidiary to apply, the Net Cash
Proceeds relating to such Asset Sale within 270 days of receipt thereof either
(A) to prepay any Senior Debt and, in the case of any Senior Debt under any
revolving credit facility, effect a permanent reduction in the availability
under such revolving credit facility, (B) to make an investment in properties
and assets that replace the properties and assets that were the subject of such
Asset Sale or in properties and assets that will be used in the business of the
Company and its Restricted Subsidiaries as existing on the Issue Date or in
businesses reasonably related thereto ("Replacement Assets"), or (C) a
combination of prepayment and investment permitted by the foregoing clauses (A)
and (B). On the 271st day after an Asset Sale or such earlier date, if any, as
the Board of Directors of the Company or of such Restricted Subsidiary
determines not to apply the Net Cash Proceeds relating to such Asset Sale as set
forth in the preceding sentence (each, a "Net Proceeds Offer Trigger Date"),
such aggregate amount of Net Cash Proceeds that is an integral multiple of
$1,000 which have not been applied on or before such Net Proceeds Offer Trigger
Date as permitted in the preceding sentence (each, a "Net Proceeds Offer
Amount") shall be applied by the Company or such Restricted Subsidiary to make
an offer to purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds
Offer Payment Date") not less than 30 nor more than 60 days following the
applicable Net Proceeds Offer Trigger Date, from all Holders on a pro rata
basis, that amount of the Notes equal to the Net Proceeds Offer Amount at a
price equal to 100% of the principal amount of the Notes to be purchased, plus
accrued and unpaid interest thereon, if any, to the date of purchase; provided,
however, that if at any time any non-cash consideration received by the Company
or any Restricted Subsidiary of the Company, as the case may be, in connection
with any Asset Sale is converted into or sold or otherwise disposed of for cash
(other than interest received with respect to any such non-cash consideration),
then such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
this
<PAGE> 40
-33-
covenant. The Company may defer the Net Proceeds Offer until there is an
aggregate unutilized Net Proceeds Offer Amount equal to or in excess of $10.0
million resulting from one or more Asset Sales (at which time, the entire
unutilized Net Proceeds Offer Amount, and not just the amount in excess of $10.0
million, shall be applied as required pursuant to this paragraph).
In the event of the transfer of substantially all (but not all) of
the property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under Section 5.01, the
successor corporation shall be deemed to have sold the properties and assets of
the Company and its Restricted Subsidiaries not so transferred for purposes of
this covenant, and shall comply with the provisions of this covenant with
respect to deemed net cash proceeds from such deemed sale. In addition, the fair
market value of such properties and assets of the Company or its Restricted
Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for
purposes of this covenant.
Notwithstanding the two immediately preceding paragraphs, the
Company and its Restricted Subsidiaries will be permitted to consummate an Asset
Sale without complying with such paragraphs to the extent (i) at least 75% of
the consideration for such Asset Sale constitutes Replacement Assets and (ii)
such Asset Sale is for fair market value; provided that any consideration not
constituting Replacement Assets received by the Company or any of its Restricted
Subsidiaries in connection with any Asset Sale permitted to be consummated under
this paragraph shall constitute Net Cash Proceeds subject to the provisions of
the two preceding paragraphs.
Each Net Proceeds Offer will be mailed to the record Holders as
shown on the register of Holders within 25 days following the Net Proceeds Offer
Trigger Date, with a copy to the Trustee, and shall comply with the procedures
set forth herein. Upon receiving notice of the Net Proceeds Offer, Holders may
elect to tender their Notes in whole or in part in integral multiples of $1,000
in exchange for cash. To the extent Holders properly tender Notes in an amount
exceeding the Net Proceeds Offer Amount, Notes of tendering Holders will be
purchased on a pro rata basis (based on amounts tendered). A Net Proceeds Offer
shall remain open for a period of 20 Business Days or such longer period as may
be required by law.
(b) Subject to the deferral of the Net Proceeds Offer Trigger Date
contained in the first paragraph of subsection (a) above, each notice of a Net
Proceeds Offer pursuant to this Section 4.05 shall be mailed or caused to be
mailed, by first class mail, by the Company not more than 25 days after the Net
Proceeds Offer Trigger Date to all Holders at their last registered addresses as
of a date within 15 days of the mailing of such notice, with a copy to the
Trustee. The notice shall contain all instructions and materials necessary to
enable such Holders to tender Notes pursuant to the Net Proceeds Offer and shall
state the following terms:
(1) that the Net Proceeds Offer is being made pursuant to Section
4.05 and that all Notes tendered will be accepted for payment; provided,
however, that if the aggregate principal amount of Notes tendered in a Net
Proceeds Offer exceeds the aggregate amount of the Net Proceeds Offer, the
Company shall select the Notes to be purchased on a pro rata basis based
on the amounts tendered (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000
or multiples thereof shall be purchased);
(2) the purchase price (including the amount of accrued interest)
and the purchase date (which shall be at least 20 and not more than 30
Business Days from the date of mailing of notice of such Net Proceeds
Offer, or such longer period as required by law) (the "Proceeds Purchase
Date");
(3) that any Note not tendered will continue to accrue interest;
<PAGE> 41
-34-
(4) that, unless the Issuers default in making payment therefor, any
Note accepted for payment pursuant to the Net Proceeds Offer shall cease
to accrue interest after the Proceeds Purchase Date;
(5) that Holders electing to have a Note purchased pursuant to a Net
Proceeds Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day prior to the
Proceeds Purchase Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than five Business Days prior to the
Proceeds Purchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Notes the Holder delivered for purchase and a statement that such Holder
is withdrawing his election to have such Note purchased; and
(7) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion of
the Notes surrendered; provided that each Note purchased and each new Note
issued shall be in an original principal amount of $1,000 or integral
multiples thereof;
On or before 10:00 a.m. New York Time, on the Proceeds Purchase
Date, the Issuers shall (i) accept for payment Notes or portions thereof validly
tendered pursuant to the Net Proceeds Offer which are to be purchased in
accordance with item (b)(1) above, (ii) deposit with the Paying Agent United
States Legal Tender sufficient to pay the purchase price plus accrued interest,
if any, of all Notes to be purchased and (iii) deliver to the Trustee Notes so
accepted together with an Officers' Certificate stating the Notes or portions
thereof being purchased by the Issuers. The Paying Agent shall promptly mail to
the Holders of Notes so accepted payment in an amount equal to the purchase
price plus accrued interest, if any.
Any amounts remaining after the purchase of Notes pursuant to a Net
Proceeds Offer shall be returned by the Trustee to the Company.
The Company shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with this Section
4.05, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.05 by virtue thereof.
SECTION 4.06. Limitation on Restricted Payments.
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, (a) declare or pay any
dividend or make any distribution (other than dividends or distributions by the
Company payable in Qualified Capital Stock of the Company) on or in respect of
shares of the Company's Capital Stock to holders of such Capital Stock, (b)
purchase, redeem or otherwise acquire or retire for value any Capital Stock of
the Company or any warrants, rights or options to purchase or acquire shares of
any class of such Capital Stock, (c) make any principal payment on, purchase,
defease, redeem, prepay, decrease or otherwise acquire or retire for value,
prior to any scheduled final maturity, scheduled repayment or scheduled sinking
fund payment, any Indebtedness of the Company that is subordinate or junior in
right of payment to the
<PAGE> 42
-35-
Notes or (d) make any Investment (other than Permitted Investments) (each of the
foregoing actions set forth in clauses (a), (b), (c) and (d) being referred to
as a "Restricted Payment"), if at the time of such Restricted Payment or
immediately after giving effect thereto, (i) a Default or an Event of Default
shall have occurred and be continuing; or (ii) the Company is not able to incur
at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with Section 4.04 or (iii) the aggregate amount of Restricted
Payments (including such proposed Restricted Payment) made subsequent to the
Issue Date (the amount expended for such purposes, if other than in cash, being
the fair market value of such property as determined in good faith by the Board
of Directors of the Company) shall exceed the sum of: (w) 50% of the cumulative
Consolidated Net Income (or if cumulative Consolidated Net Income shall be a
loss, minus 100% of such loss) of the Company earned subsequent to the Issue
Date and on or prior to the date the Restricted Payment occurs (the "Reference
Date") (treating such period as a single accounting period); plus (x) 100% of
the aggregate net cash proceeds received by the Company from any Person (other
than a Subsidiary of the Company) from the issuance and sale subsequent to the
Issue Date and on or prior to the Reference Date of Qualified Capital Stock of
the Company; plus (y) without duplication of any amounts included in clause
(iii)(x) above, 100% of the aggregate net cash proceeds of any equity
contribution received by the Company from a holder of the Company's Capital
Stock (excluding, in the case of clauses (iii)(x) and (y), any net cash proceeds
from a Public Equity Offering to the extent used to redeem the Notes in
compliance with the provisions set forth under paragraph 8 of the Note); plus
(z) without duplication, the sum of (1) the aggregate amount returned in cash on
or with respect to Investments (other than Permitted Investments) made
subsequent to the Issue Date whether through interest payments, principal
payments, dividends or other distributions or payments; (2) the net cash
proceeds received by the Company or any of its Restricted Subsidiaries from the
disposition of all or any portion of such Investments (other than to a
Subsidiary of the Company); and (3) upon redesignation of an Unrestricted
Subsidiary as a Restricted Subsidiary, the fair market value of such Subsidiary;
provided, however, that the sum of clauses (1), (2) and (3) above shall not
exceed the aggregate amount of all such Investments made subsequent to the Issue
Date.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any dividend
within 60 days after the date of declaration of such dividend if the dividend
would have been permitted on the date of declaration; (2) the acquisition of any
shares of Capital Stock of the Company, either (i) solely in exchange for shares
of Qualified Capital Stock of the Company or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Subsidiary
of the Company) of shares of Qualified Capital Stock of the Company; (3) the
acquisition of any Indebtedness of the Company that is subordinate or junior in
right of payment to the Notes either (i) solely in exchange for shares of
Qualified Capital Stock of the Company, or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Subsidiary
of the Company) of (A) shares of Qualified Capital Stock of the Company or (B)
Refinancing Indebtedness; (4) if no Default or Event of Default shall have
occurred and be continuing, repurchases by the Company of Common Stock of the
Company or Holdings from employees of the Company or any of its Subsidiaries or
their authorized representatives upon the death, disability or termination of
employment of such employees; provided that the aggregate amount of all such
repurchases shall not exceed $3.0 million in any fiscal year and $10.0 million
in aggregate; provided, further, that at the time of any such repurchase, the
Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.0 to
1.0; (5) the payment of any dividend or distribution to the extent necessary to
permit direct or indirect beneficial owners of shares of Capital Stock of the
Company, including Holdings, to pay federal, state or local income tax
liabilities arising from income of the Company and attributable to them solely
as a result of the Company (and any intermediate entity through which the Holder
owns such shares) being a limited liability company, partnership or similar
entity for federal income tax purposes ("Permitted Tax Distributions"); and (6)
any dividend or distribution to Holdings in respect of overhead expenses, legal,
accounting, SEC reporting and other professional fees and expenses of Holdings
directly attributable to the operations of the Company and its Restricted
Subsidiaries. In determining the aggregate amount of Restricted Payments made
subsequent to the Issue Date in
<PAGE> 43
-36-
accordance with clause (iii) of the immediately preceding paragraph, amounts
expended pursuant to clauses (1), (2) (ii) and (4) shall be included in such
calculation.
SECTION 4.07. Compliance with Laws.
The Company shall comply, and shall cause each of its Restricted
Subsidiaries to comply, with all applicable statutes, rules, regulations, orders
and restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their respective
properties, except for such noncompliances as are not in the aggregate
reasonably likely to have a material adverse effect on the financial condition
or results of operations of the Company and its Restricted Subsidiaries, taken
as a whole.
SECTION 4.08. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (1) all material taxes,
assessments and governmental charges levied or imposed upon the Company or any
Restricted Subsidiary or upon the income, profits or property of the Company or
any Restricted Subsidiary and (2) all lawful claims for labor, materials and
supplies which, in each case, if unpaid, might by law become a material
liability, or Lien upon the property, of the Company or any Restricted
Subsidiary; provided, however, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings and for which appropriate provision has been made.
SECTION 4.09. Notice of Defaults.
(a) In the event that any Indebtedness of the Company or any of its
Subsidiaries is declared due and payable before its maturity because of the
occurrence of any default (or any event which, with notice or lapse of time, or
both, would constitute such a default) under such Indebtedness, the Company
shall promptly give written notice to the Trustee of such declaration, the
status of such default or event and what action the Company is taking or
proposes to take with respect thereto.
(b) Upon becoming aware of any Default or Event of Default, the
Company shall promptly deliver an Officers' Certificate to the Trustee
specifying the Default or Event of Default.
SECTION 4.10. Maintenance of Properties and Insurance.
(a) Subject to Article Five, the Company shall cause all material
properties owned by or leased to it or any Restricted Subsidiary and used or
useful in the conduct of its business or the business of any Restricted
Subsidiary to be maintained and kept in normal condition, repair and working
order and supplied with all necessary equipment and shall cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Company may be necessary, so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, that nothing in this Section 4.10 shall prevent
the Company or any Restricted Subsidiary from discontinuing the use, operation
or maintenance of any of such properties, or disposing of any of them, if such
discontinuance or disposal is, in the judgment of the Board of Directors of the
Company or the Restricted Subsidiary concerned, or of an Officer (or other agent
employed by the Company or of any Restricted Subsidiary) of the Company or such
<PAGE> 44
-37-
Restricted Subsidiary having managerial responsibility for any such property,
desirable in the conduct of the business of the Company or any Restricted
Subsidiary as, in the judgment of the Company, may be necessary.
(b) The Company shall maintain, and shall cause the Restricted
Subsidiaries to maintain, insurance with responsible carriers against such risks
and in such amounts, and with such deductibles, retentions, self-insured amounts
and co-insurance provisions as, in the judgment of the Company, may be
necessary.
SECTION 4.11. Compliance Certificate.
The Company shall deliver to the Trustee within 45 days after the
end of each of the first three fiscal quarters of the Company and within 90 days
after the close of each fiscal year a certificate signed by the principal
executive officer, principal financial officer or principal accounting officer
stating that a review of the activities of the Issuers has been made under the
supervision of the signing officers with a view to determining whether a Default
or Event of Default has occurred and whether or not the signers know of any
Default or Event of Default by the Issuers that occurred during such fiscal
quarter or fiscal year. If they do know of such a Default or Event of Default,
the certificate shall describe all such Defaults or Events of Default, their
status and the action the Company is taking or proposes to take with respect
thereto. The first certificate to be delivered by the Company pursuant to this
Section 4.11 shall be for the period commencing July 1, 1998 and ending
September 30, 1998.
SECTION 4.12. Reports to Holders.
The Issuers will deliver to the Trustee within 15 days after the
filing of the same with the Commission, copies of the quarterly and annual
reports and of the information, documents and other reports, if any, which the
Issuers are required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act. Notwithstanding that the Issuers may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Issuers
will file with the Commission, to the extent permitted, and provide the Trustee
and Holders with such annual reports and such information, documents and other
reports specified in Sections 13 and 15(d) of the Exchange Act. The Issuers will
also comply with the other provisions of TIA Section 314(a).
SECTION 4.13. Waiver of Stay, Extension or Usury Laws.
Each of the Issuers and the Guarantors covenants (to the extent that
it may lawfully do so) that it shall not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law, which would prohibit or forgive the
Issuers or such Guarantor from paying all or any portion of the principal of
and/or interest, if any, on the Notes as contemplated herein, wherever enacted,
now or at any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do so)
the Issuers and each Guarantor hereby expressly waive all benefit or advantage
of any such law, and covenants that it 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.
SECTION 4.14. Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder will
have the right to require that the Issuers purchase all or a portion of such
Holder's Notes pursuant to the offer described below (the "Change of Control
Offer"), at a purchase price equal to 101% of the principal amount thereof plus
accrued interest to the date of purchase.
<PAGE> 45
-38-
(b) Prior to the mailing of the notice referred to below, but in any
event within 30 days following any Change of Control, the Issuers covenant to
(i) repay in full and terminate all commitments under Indebtedness under the
Credit Agreement and all other Senior Debt the terms of which require repayment
upon a Change of Control or offer to repay in full and terminate all commitments
under all Indebtedness under the Credit Agreement and all other such Senior Debt
and to repay the Indebtedness owed to each lender which has accepted such offer
or (ii) obtain the requisite consents under the Credit Agreement and all other
Senior Debt to permit the repurchase of the Notes as provided below. The Issuers
shall first comply with this Section 4.14(b) before they shall be required to
repurchase Notes pursuant to Section 4.14(c). The Issuers' failure to comply
with this Section 4.14(b) shall constitute an Event of Default described in
clause (iii) and not in clause (ii) under Section 6.01.
(c) Within 30 days following the date upon which the Change of
Control occurred, the Issuers must send, by first class mail, a notice to each
Holder, with a copy to the Trustee, which notice shall govern the terms of the
Change of Control Offer. Such notice shall state:
(1) that the Change of Control Offer is being made pursuant to this
Section 4.15 and that all Notes tendered and not withdrawn will be
accepted for payment;
(2) the purchase price (including the amount of accrued interest)
and the purchase date (which shall be no earlier than 30 days nor later
than 60 days from the date such notice is mailed, other than as may be
required by law) (the "Change of Control Payment Date");
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor,
any Note accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control Payment Date;
(5) that Holders electing to have a Note purchased pursuant to a
Change of Control Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day prior to the
Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than five Business Days prior to the
Change of Control Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of
the Notes the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Notes purchased;
(7) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion of
the Notes surrendered; provided that each Note purchased and each new Note
issued shall be in an original principal amount of $1,000 or integral
multiples thereof; and
(8) the circumstances and relevant facts regarding such Change of
Control.
On or before 10:00 a.m., New York Time, on the Change of Control
Payment Date, the Company shall (i) accept for payment Notes or portions thereof
validly tendered pursuant to the Change of Control
<PAGE> 46
-39-
Offer, (ii) deposit with the Paying Agent United States Legal Tender sufficient
to pay the purchase price plus accrued interest, if any, of all Notes so
tendered and (iii) deliver to the Trustee Notes so accepted together with an
Officers' Certificate stating the Notes or portions thereof being purchased by
the Company. The Paying Agent shall promptly mail to the Holders of Notes so
accepted payment in an amount equal to the purchase price plus accrued interest,
if any, and the Trustee shall promptly authenticate and mail to such Holders new
Notes equal in principal amount to any unpurchased portion of the Notes
surrendered. Any Notes not so accepted shall be promptly mailed by the Company
to the Holder thereof.
Any amounts remaining after the purchase of Notes pursuant to a
Change of Control Offer shall be returned by the Trustee to the Company.
The Issuers shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent the
provisions of any securities laws or regulations conflict with this Section
4.14, the Issuers shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.14 by virtue thereof. Holders electing to have a Note purchased
pursuant to a Change of Control Offer will be required to surrender the Note,
with the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third business day prior to the Change of
Control Payment Date.
SECTION 4.15. Prohibition on Incurrence of Senior Subordinated Debt.
The Company will not incur or suffer to exist Indebtedness that is
both senior in right of payment to the Notes and subordinate in right of payment
to any other Indebtedness of the Company.
SECTION 4.16. Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries.
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or make
any other distributions on or in respect of its Capital Stock; (b) make loans or
advances or to pay any Indebtedness or other obligation owed to the Company or
any other Restricted Subsidiary of the Company; or (c) transfer any of its
property or assets to the Company or any other Restricted Subsidiary of the
Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) this Indenture; (3) the Credit Agreement; (4)
customary non-assignment provisions of any contract or any lease governing a
leasehold interest of any Restricted Subsidiary of the Company; (5) any
instrument governing Acquired Indebtedness, which encumbrance or restriction is
not applicable to any Person, or the properties or assets of any Person, other
than the Person or the properties or assets of the Person so acquired; (6)
agreements existing on the Issue Date to the extent and in the manner such
agreements are in effect on the Issue Date; (7) an agreement governing
Indebtedness incurred to Refinance the Indebtedness issued, assumed or incurred
pursuant to an agreement referred to in clause (2), (3), (5) or (6) above;
provided, however, that the provisions relating to such encumbrance or
restriction contained in any such Indebtedness are no less favorable to the
Company in any material respect as determined by the Board of Directors of the
Company in their reasonable and good faith judgment than the provisions relating
to such encumbrance or restriction contained in agreements referred to in such
clause (2), (3), (5) or (6); or (8) any agreement or instrument governing
Indebtedness (whether or not outstanding) of Foreign Restricted Subsidiaries
incurred in reliance on clause (xiii) of the definition of Permitted
Indebtedness.
<PAGE> 47
-40-
SECTION 4.17. Limitation on Preferred Stock of Restricted Subsidiaries.
The Company will not permit any of its Restricted Subsidiaries to
issue any Preferred Stock (other than to the Company or to a Wholly Owned
Restricted Subsidiary of the Company) or permit any Person (other than the
Company or a Wholly Owned Restricted Subsidiary of the Company) to own any
Preferred Stock of any Restricted Subsidiary of the Company.
SECTION 4.18. Limitation on Liens.
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens of any kind against or upon any property or
assets of the Company or any of its Restricted Subsidiaries whether owned on the
Issue Date or acquired after the Issue Date, or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom
unless (i) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Notes, the Notes are secured by
a Lien on such property, assets or proceeds that is senior in priority to such
Liens and (ii) in all other cases, the Notes are equally and ratably secured,
except for (A) Liens existing as of the Issue Date to the extent and in the
manner such Liens are in effect on the Issue Date; (B) Liens securing Senior
Debt; (C) Liens securing the Notes; (D) Liens of the Company or a Wholly Owned
Restricted Subsidiary of the Company on assets of any Restricted Subsidiary of
the Company; (E) Liens securing Refinancing Indebtedness incurred to Refinance
any Indebtedness incurred in accordance with the provisions of this Indenture
and secured by a Lien permitted thereunder; provided, however, that such Liens
(x) are no less favorable to the Holders and are not more favorable to the
lienholders with respect to such Liens than the Liens in respect of the
Indebtedness being Refinanced and (y) do not extend to or cover any property or
assets of the Company or any of its Restricted Subsidiaries not securing the
Indebtedness so Refinanced; and (F) Permitted Liens.
SECTION 4.19. Limitation of Guarantees by Restricted Subsidiaries.
The Company will not permit any of its Restricted Subsidiaries,
directly or indirectly, by way of the pledge of any intercompany note or
otherwise, to assume, guarantee or in any other manner become liable with
respect to any Indebtedness of the Company or any other Restricted Subsidiary of
the Company (other than (A) Indebtedness and other obligations under the Credit
Agreement, (B) Permitted Indebtedness of a Restricted Subsidiary of the Company,
(C) Indebtedness under Currency Agreements in reliance on clause (v) of the
definition of Permitted Indebtedness, or (D) Interest Swap Obligations incurred
in reliance on clause (iv) of the definition of Permitted Indebtedness), unless,
in any such case (a) such Restricted Subsidiary executes and delivers a
supplemental indenture to this Indenture, providing a Guarantee of payment of
the Notes by such Restricted Subsidiary (each a "Guarantee") and (b) (x) if any
such assumption, guarantee or other liability of such Restricted Subsidiary is
provided in respect of Senior Debt, the guarantee or other instrument provided
by such Restricted Subsidiary in respect of such Senior Debt may be superior to
the Guarantee pursuant to subordination provisions no less favorable to the
Holders of the Notes than those contained in this Indenture and (y) if such
assumption, guarantee or other liability of such Restricted Subsidiary is
provided in respect of Indebtedness that is expressly subordinated to the Notes,
the guarantee or other instrument provided by such Restricted Subsidiary in
respect of such subordinated Indebtedness shall be subordinated to such
Guarantee pursuant to subordination provisions no less favorable to the Holders
of the Notes than those contained in this Indenture.
Notwithstanding the foregoing, any such Guarantee by a Restricted
Subsidiary of the Notes shall provide by its terms that it shall be
automatically and unconditionally released and discharged, without any further
action required on the part of the Trustee or any Holder, upon: (i) the
unconditional release of such Re-
<PAGE> 48
-41-
stricted Subsidiary from its liability in respect of the Indebtedness in
connection with which such Guarantee was executed and delivered pursuant to the
preceding paragraph; or (ii) any sale or other disposition (by merger or
otherwise) to any Person which is not a Restricted Subsidiary of the Company of
all of the Company's Capital Stock in, or all or substantially all of the assets
of, such Restricted Subsidiary; provided that (a) such sale or disposition of
such Capital Stock or assets is otherwise in compliance with the terms of this
Indenture and (b) such assumption, guarantee or other liability of such
Restricted Subsidiary has been released by the holders of the other Indebtedness
so guaranteed.
SECTION 4.20. Conduct of Business of the Company and the Co-Issuer.
The Company and its Restricted Subsidiaries will not engage in any businesses
which are not the same, similar or reasonably related to the businesses in which
the Company and its Restricted Subsidiaries are engaged on the Issue Date.
Co-Issuer will not own any operating assets or conduct any business other than
to own equity interests in the Company and serve as an issuer and an obligor on
the Notes.
ARTICLE FIVE
MERGERS; SUCCESSORS
SECTION 5.01. Merger, Consolidation and Sale of Assets.
The Company will not, in a single transaction or series of related
transactions, consolidate or merge with or into any Person, or sell, assign,
transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary of the Company to sell, assign, transfer, lease, convey or
otherwise dispose of) all or substantially all of the Company's assets
(determined on a consolidated basis for the Company and the Company's Restricted
Subsidiaries) whether as an entirety or substantially as an entirety to any
Person unless: (i) either (1) the Company shall be the surviving or continuing
entity or (2) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which acquires
by sale, assignment, transfer, lease, conveyance or other disposition the
properties and assets of the Company and of the Company's Restricted
Subsidiaries substantially as an entirety (the "Surviving Entity") (x) shall be
a corporation or a partnership or a limited liability company, in each case
organized and validly existing under the laws of the United States or any State
thereof or the District of Columbia and (y) shall expressly assume, by
supplemental Indenture (in form and substance satisfactory to the Trustee),
executed and delivered to the Trustee, the due and punctual payment of the
principal of, and premium, if any, and interest on all of the Notes and the
performance of every covenant of the Notes, this Indenture and the Registration
Rights Agreement on the part of the Company to be performed or observed,
provided that at any time the Company or its successor is a limited liability
company, there shall be a co-issuer of the Notes that is a corporation; (ii)
immediately after giving effect to such transaction and the assumption
contemplated by clause (i)(2)(y) above (including giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction), the Company or such
Surviving Entity, as the case may be, shall be able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to Section
4.04; (iii) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including, without limitation, giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred and any Lien granted in
connection with or in respect of the transaction), no Default or Event of
Default shall have occurred or be continuing; and (iv) the Company or the
Surviving Entity shall have delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation,
<PAGE> 49
-42-
merger, sale, assignment, transfer, lease, conveyance or other disposition and,
if a supplemental Indenture is required in connection with such transaction,
such supplemental Indenture comply with the applicable provisions of this
Indenture and that all conditions precedent in this Indenture relating to such
transaction have been satisfied. Notwithstanding the foregoing clauses (ii) and
(iii), (a) any Restricted Subsidiary may consolidate with, merge into or
transfer all or part of its properties and assets to the Company or to another
Restricted Subsidiary and (b) the Company may merge with or transfer all of its
properties and assets to an Affiliate incorporated or formed solely for the
purpose of either reforming the Company in another State of the United States or
changing the legal structure of the Company to a corporation so long as the
amount of Indebtedness of the Company and its Restricted Subsidiaries is not
increased thereby (it being understood that after the transfer of such property
and assets for the purpose of changing its legal structure to a corporation, the
Company may dissolve).
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
SECTION 5.02. Successor Substituted.
Upon any consolidation, combination or merger or any transfer of all
or substantially all of the assets of the Company in accordance with Section
5.01, in which the Company is not the continuing corporation, the successor
Person formed by such consolidation or into which the Company is merged or to
which such conveyance, lease or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture and the Notes with the same effect as if such surviving entity
had been named as such herein.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
Each of the following shall be an "Event of Default" for purposes of
this Indenture:
(i) the failure to pay interest on any Notes when the same becomes
due and payable and the default continues for a period of 30 days (whether
or not such payment shall be prohibited by the subordination provisions of
this Indenture);
(ii) the failure to pay the principal on any Notes, when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer
which has actually been made) (whether or not such payment shall be
prohibited by the subordination provisions of this Indenture);
(iii) a default in the observance or performance of any other
covenant or agreement contained in this Indenture which default continues
for a period of 60 days after the Company receives written notice
specifying the default (and demanding that such default be remedied) from
the Trustee or
<PAGE> 50
-43-
the Holders of at least 25% of the outstanding principal amount of the
Notes (except in the case of a default with respect to Section 5.01, which
will constitute an Event of Default with such notice requirement but
without such passage of time requirement);
(iv) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Restricted Subsidiary of the
Company, or the acceleration of the final stated maturity of any such
Indebtedness (which acceleration is not rescinded, annulled or otherwise
cured within 20 days of receipt by the Company or such Restricted
Subsidiary of notice of any such acceleration) if the aggregate principal
amount of such Indebtedness, together with the principal amount of any
other such Indebtedness in default for failure to pay principal at final
maturity or which has been accelerated, aggregates $10.0 million or more
at any time;
(v) one or more judgments in an aggregate amount in excess of $10.0
million shall have been rendered against the Company or any of its
Restricted Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and non-appealable;
(vi) the Company or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law: (a) admits in writing its inability to
pay its debts generally as they become due; (b) commences a voluntary case
or proceeding; (c) consents to the entry of an order for relief against it
in an involuntary case or proceeding; (d) consents or acquiesces in the
institution of a bankruptcy or insolvency proceeding against it; (e)
consents to the appointment of a Custodian of it or for all or
substantially all of its property; or (f) makes a general assignment for
the benefit of its creditors, or any of them takes any action to authorize
or effect any of the foregoing; or
(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 in an involuntary case or proceeding; (b)
appoints a Custodian of the Company or any Significant Subsidiary for all
or substantially all of its property; or (c) orders the liquidation of the
Company or any Significant Subsidiary; and in each case the order or
decree remains unstayed and in effect for 60 days; provided, however, that
if the entry of such order or decree is appealed and dismissed on appeal,
then the Event of Default hereunder by reason of the entry of such order
or decree shall be deemed to have been cured.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, sequestrator or similar
official under any Bankruptcy Law.
SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of Default specified in
clause (vi) or (vii) of Section 6.01 with respect to the Company) shall occur
and be continuing, the Trustee or the Holders of at least 25% in principal
amount of outstanding Notes may declare the principal of and accrued interest on
all the Notes to be due and payable by notice in writing to the Company and the
Trustee specifying the respective Event of Default and that it is a "notice of
acceleration" (the "Acceleration Notice"), and the same (i) shall become
immediately due and payable or (ii) if there are any amounts outstanding under
the Credit Agreement, shall become immediately due and payable upon the first to
occur of an acceleration under the Credit Agreement or 5 business days after
receipt by the Company and the Representative under the Credit Agreement of such
Acceleration Notice but only if such Event of Default is then continuing. If an
Event of Default specified in clause (vi) or (vii) of Section 6.01 with respect
to the Company occurs and is continuing, then all unpaid principal of, and
premium, if
<PAGE> 51
-44-
any, and accrued and unpaid interest on all of the outstanding Notes shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Holder.
At any time after a declaration of acceleration with respect to the
Notes as described in the preceding paragraph, the Holders of a majority in
principal amount of the then outstanding Notes may rescind and cancel such
declaration and its consequences (i) if the rescission would not conflict with
any judgment or decree, (ii) if all existing Events of Default have been cured
or waived except nonpayment of principal or interest that has become due solely
because of the acceleration, (iii) to the extent the payment of such interest is
lawful, interest on overdue installments of interest and overdue principal,
which has become due otherwise than by such declaration of acceleration, has
been paid but only if such Event of Default is then continuing, and (iv) if the
Issuers have paid the Trustee its reasonable compensation and reimbursed the
Trustee for its expenses, disbursements and advances. No such rescission shall
affect any subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Notes or to enforce the performance
of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy maturing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy is exclusive of any
other remedy. All available remedies are cumulative to the extent permitted by
law.
SECTION 6.04. Waiver of Past Default.
Subject to Sections 2.09, 6.07 and 10.02, the Holders of not less
than a majority in aggregate principal amount of the outstanding Notes by
written notice to the Trustee may waive an existing Default or Event of Default
and its consequences, except a continuing Default in the payment of the
principal of or interest on any Notes. The Issuers shall deliver to the Trustee
an Officers' Certificate stating that the requisite percentage of Holders have
consented to such waiver and attaching copies of such consents. In case of any
such waiver, the Issuers, the Trustee and the Holders shall be restored to their
former positions and rights hereunder and under the Notes, respectively. This
paragraph of this Section 6.04 shall be in lieu of Section 316(a)(1)(B) of the
TIA and such Section 316(a)(1)(B) of the TIA is hereby expressly excluded from
this Indenture and the Notes, as permitted by the TIA.
Upon any such waiver, such Default shall cease to exist and be
deemed to have been cured and not to have occurred, and any Event of Default
arising therefrom shall be deemed to have been cured and not to have occurred
for every purpose of this Indenture and the Notes, but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereon.
SECTION 6.05. Control by Majority.
Subject to Section 2.09, the Holders of a majority in principal
amount of the then outstanding Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on it. However, the Trustee may refuse to follow
any direc-
<PAGE> 52
-45-
tion that conflicts with law or this Indenture that the Trustee determines may
be unduly prejudicial to the rights of another Holder, or that may involve the
Trustee in personal liability; provided, however, that the Trustee may take any
other action deemed proper by the Trustee which is not inconsistent with such
direction. In the event the Trustee takes any action or follows any direction
pursuant to this Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against any loss or expense caused by
taking such action or following such direction. This Section 6.05 shall be in
lieu of Section 316(a)(1)(A) of the TIA, and such Section 316(a)(1)(A) of the
TIA is hereby expressly excluded from this Indenture and the Notes, as permitted
by the TIA.
SECTION 6.06. Limitation on Suits.
A Holder may not pursue any remedy with respect to this Indenture or
the Notes unless:
(i) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of
the outstanding Notes make a written request to the Trustee to pursue a
remedy;
(iii) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(iv) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(v) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
which, in the opinion of the Trustee, is inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and premium, if any, or interest
on a Note, on or after the respective due dates expressed in the Note, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of the Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest specified
in Section 6.01(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 Issuers
or any other obligor on the Notes for the whole amount of principal and accrued
interest remaining unpaid, together with interest overdue on principal and to
the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum borne by the Notes
and such further amount as shall be sufficient to cover the costs and expenses
of collection, including the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel.
<PAGE> 53
-46-
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to the Issuers (or any
other obligor upon the Notes), their respective creditors or their respective
property and shall be entitled and empowered to participate as a member, voting
or otherwise, of any official committee of creditors appointed in such matter
and to collect and receive any monies or other property payable or deliverable
on any such claims and to distribute the same, and any Custodian in any such
judicial proceedings is hereby authorized by each Holder to make such payments
to the Trustee and, in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agent and counsel, and any other amounts due the Trustee under
Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money or property pursuant to this
Article Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the Notes for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for principal
and interest, respectively; and
Third: to the Issuers.
The Trustee, upon prior written notice to the Issuers, may fix a
record date and payment date for any payment to Holders pursuant to this Section
6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees and expenses, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 shall not apply to a suit by the Trustee, a suit by
a Holder or group of Holders of more than 10% in aggregate principal amount of
the outstanding Notes, or to any suit instituted by any Holder for the
enforcement or the payment of the principal or interest on any Notes on or after
the respective due dates expressed in the Note.
<PAGE> 54
-47-
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in 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 actually
known to the Trustee:
(1) The Trustee and the Agents shall not be liable except for the
performance of such duties as are specifically set forth in the TIA or
herein; and
(2) In the absence of bad faith on its part, the Trustee or any
Agent 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 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 or any Agent, the Trustee or such Agent shall examine such
certificates and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee shall not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01;
(2) Neither the Trustee nor any Agent shall be liable for any error
of judgment made in good faith by a Trust Officer or officer of the Agent,
unless it is proved that the Trustee or such Agent 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 Section 6.05.
(d) No provision of this Indenture shall require the Trustee or any
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or to take or omit to take any
action under this Indenture or take any action at the request or direction of
Holders if it shall have reasonable grounds for believing that repayment of such
funds is not assured to it or it does not receive from such Holders an indemnity
satisfactory to it in its sole discretion against such risk, liability, loss,
fee or expense which might be incurred by it in compliance with such request or
direction.
(e) Whether or not herein expressly so provided 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 7.01.
(f) Neither the Trustee nor any Agent shall be liable for interest
on any money received by it except as the Trustee may agree in writing with the
Issuers. Money held in trust by the Trustee or any Agent need not be segregated
from other funds except to the extent required by law.
<PAGE> 55
-48-
SECTION 7.02. Rights of Trustee and Agents.
Subject to Section 7.01:
(a) The Trustee and each Agent may rely on any document believed by
it to be genuine and to have been signed or presented by the proper
person. Neither the Trustee nor any Agent need investigate any fact or
matter stated in the document.
(b) Before the Trustee or any Agent acts or refrains from acting, it
may require an Officers' Certificate and/or an Opinion of Counsel, which
shall conform to the provisions of Section 13.05. Neither the Trustee nor
any Agent shall be liable for any action it takes or omits to take in good
faith in reliance on such certificate or opinion.
(c) The Trustee and any Agent may act through attorneys and agents
of its selection and shall not be responsible for the misconduct or
negligence of any agent or attorney (other than an agent who is an
employee of the Trustee) appointed with due care.
(d) Neither the Trustee nor any Agent shall be liable for any action
it takes or omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers conferred upon it by this
Indenture.
(e) The Trustee and any Agent may consult with counsel of its
selection and the advice or opinion of such counsel as to matters of law
shall be full and complete authorization and protection from liability in
respect of any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.
(f) Any request or direction of the Issuers mentioned herein shall
be sufficiently evidenced by an Officers' Certificate and any resolution
of the Board of Directors may be sufficiently evidenced by a Board
Resolution.
(g) 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.
(h) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and
premises of the Issuers, personally or by agent or attorney.
(i) The Trustee shall not be deemed to have notice of any Event of
Default unless a Trust Officer of the Trustee has actual knowledge thereof
or unless the Trustee shall have received written notice thereof at the
Corporate Trust Office of the Trustee, and such notice references the
Notes and this Indenture.
<PAGE> 56
-49-
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Issuers or their
respective Affiliates with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights. However, the Trustee is subject to
Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
Neither the Trustee nor any Agent shall be responsible for and makes
any representation as to the validity or adequacy of this Indenture or the
Notes, it shall not be accountable for the Company's use of the proceeds from
the Notes, and it shall not be responsible for any statement of the Issuers or
the Company in this Indenture or any document issued in connection with the sale
of Notes or any statement in the Notes other than the Trustee's certificate of
authentication.
SECTION 7.05. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing and the
Trustee knows of such Defaults or Events of Default, the Trustee shall mail to
each Holder notice of the Default or Event of Default within 30 days after the
occurrence thereof. Except in the case of a Default or an Event of Default in
payment of principal of or interest on any Note or a Default or Event of Default
in complying with Section 5.01, the Trustee may withhold the notice if and so
long as a committee of its Trust Officers in good faith determines that
withholding the notice is in the interest of Holders. This Section 7.05 shall be
in lieu of the proviso to Section 315(b) of the TIA and such proviso to Section
315(b) of the TIA is hereby expressly excluded from this Indenture and the
Notes, as permitted by the TIA.
SECTION 7.06. Reports by Trustee to Holders.
If required by TIA Section 313(a), within 60 days after each July 1
beginning with the July 1 following the date of this Indenture, the Trustee
shall mail to each Holder a report dated as of such July 1 that complies with
TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred
within the twelve months preceding the reporting date, no report need be
transmitted). The Trustee also shall comply with TIA Section 313(b), (c) and
(d).
A copy of each such report at the time of its mailing to Holders
shall be filed with the SEC and each stock exchange, if any, on which the Notes
are listed.
The Issuers shall promptly notify the Trustee in writing if the
Notes become listed on any stock exchange or of any delisting thereof.
SECTION 7.07. Compensation and Indemnity.
The Issuers shall pay to the Trustee and any Agent as such from time
to time such compensation as the Issuers and the Trustee or such Agent shall
from time to time agree in writing for its services. The Trustee's and the
Agent's compensation shall not be limited by any law on compensation of a
trustee of an express trust. Except as otherwise provided herein, the Issuers
shall reimburse the Trustee and any Agent upon request for all reasonable
disbursements, expenses and advances (including fees, disbursements and expenses
of its agents and counsel) incurred or made by them in addition to the
compensation for their services except any
<PAGE> 57
-50-
such disbursements, expenses and advances as may be attributable to the
Trustee's negligence or bad faith. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's and Agent's
accountants, experts and counsel (a) in connection with the preparation,
execution and delivery of this Indenture, any waiver or consent hereunder, any
modification or termination hereof, or any Event of Default or alleged Event of
Default; (b) if an Event of Default occurs in connection with such Event of
Default and collection, bankruptcy, insolvency or other enforcement proceedings
relating thereto; (c) in connection with the administration of the Trustee's
rights pursuant hereto; or (d) in connection with any removal of the Trustee
pursuant to Section 7.08 hereof and any taxes or other expenses incurred by a
trust created pursuant to Section 9.01 hereof.
The Issuers shall indemnify the Trustee and the Agents for, and hold
them harmless against any and all loss, damage, claims, liability or expense,
including taxes (other than franchise taxes imposed on the Trustee and taxes
based upon, measured by or determined by the income of the Trustee), arising out
of or in connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder. The Trustee and the Agents shall notify the Issuers
promptly of any claim asserted against the Trustee or any agent for which they
may seek indemnity. However, the failure by the Trustee or any agent to so
notify the Issuers shall not relieve the Issuers of their obligations hereunder.
The Issuers shall defend the claim and the Trustee and the Agents shall
cooperate in the defense (and may employ its own counsel) at the Issuers'
expense; provided, however, that the Issuers' reimbursement obligation with
respect to counsel employed by the Trustee and the Agents will be limited to the
reasonable fees and expenses of such counsel.
The Issuers need not pay for any settlement made without their
written consent, which consent shall not be unreasonably withheld or delayed.
The Issuers need not reimburse any expense or indemnify against any loss or
liability incurred by the Trustee or any agent as a result of the violation of
this Indenture by the Trustee or any agent.
To secure the Issuers' payment obligations in this Section 7.07, the
Trustee and the Agents shall have a Lien prior to the Notes against all money or
property held or collected by the Trustee and the Agents, in their capacity as
Trustee or Agent, except money or property held in trust to pay principal of or
interest on particular Notes.
When the Trustee or an agent incurs expenses or renders services
after an Event of Default specified in Section 6.01(vi) or (vii) occurs, the
expenses (including the reasonable fees and expenses of its agents and counsel)
and the compensation for the services shall be preferred over the status of the
Holders in a proceeding under any Bankruptcy Law and are intended to constitute
expenses of administration under any Bankruptcy Law. The Issuers' obligations
under this Section 7.07 and any claim arising hereunder shall survive the
resignation or removal of any Trustee or any agent, the discharge of the
Issuers' obligations pursuant to Article Nine and any rejection or termination
under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Issuers in
writing. The Holders of a majority in principal amount of the then outstanding
Notes may remove the Trustee by so notifying the Trustee and the Issuers in
writing and may appoint a successor Trustee with the Issuers' consent. The
Issuers may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
<PAGE> 58
-51-
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a custodian or other public officer takes charge of the Trustee
or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Issuers shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the Notes may appoint a successor Trustee
to replace the successor Trustee appointed by the Issuers.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. As promptly as
practicable after that, the retiring Trustee shall transfer, after payment of
all sums then owing to the Trustee pursuant to Section 7.07, all property held
by it as Trustee to the successor Trustee, subject to the Lien provided in
Section 7.07, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have the rights, powers and duties of
the Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuers or the
Holders of at least 10% in principal amount of the then outstanding Notes may
petition, at the expense of the Issuers, any court of competent jurisdiction for
the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Issuers' obligations under Section 7.07 shall continue for the benefit
of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or banking corporation, the resulting, surviving or transferee
corporation or banking corporation without any further act shall be the
successor Trustee, provided that such successor is otherwise eligible hereunder.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee which shall be eligible
to act as Trustee under TIA Sections 310(a)(1) and 310(a)(2). The Trustee
shall have a combined capital and surplus of at least $50,000,000 as set forth
in its most recent published annual report of condition. If the Trustee has or
shall acquire any "conflicting interest" within the meaning of TIA Section
310(b), the Trustee and the Issuers shall comply with the provisions of 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
Notes or certificates of interest or participation in other Notes of the Issuers
are outstanding if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met. If at any time
<PAGE> 59
-52-
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 hereinbefore specified in this Article Seven.
SECTION 7.11. Preferential Collection of Claims Against Issuers.
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
therein.
ARTICLE EIGHT
SUBORDINATION OF NOTES
SECTION 8.01. Notes Subordinated to Senior Debt.
The Issuers covenant and agree, and the Trustee and each Holder of
the Notes by his acceptance thereof likewise covenant and agree, that all Notes
shall be issued subject to the provisions of this Article Eight; and each person
holding any Note, whether upon original issue or upon transfer, assignment or
exchange thereof, accepts and agrees that all payments of the principal of and
interest on the Notes by the Issuers shall, to the extent and in the manner set
forth in this Article Eight, be subordinated and junior in right of payment to
the prior payment in full in cash or Cash Equivalents of all amounts payable
under Senior Debt of the Issuers.
SECTION 8.02. No Payment on Notes in Certain Circumstances.
If any default occurs and is continuing in the payment when due,
whether at maturity, upon any redemption, by acceleration or otherwise, of any
principal of, interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees with respect to, any Senior Debt, no
payment of any kind or character shall be made by or on behalf of either of the
Issuers or any other Person on either of their behalf with respect to any
Obligations on the Notes or to acquire any of the Notes for cash or property or
otherwise (except that holders of the Notes may receive payments from a trust
described under Article Nine so long as, on the date or dates the respective
amounts were paid into the trust, such payments were made with respect to the
Notes without violating the provisions of Article Eight or Article Twelve of
this Indenture (a "Defeasance Trust Payment")).
In addition, if any other event of default occurs and is continuing
with respect to any Designated Senior Debt, as such event of default is defined
in the instrument creating or evidencing such Designated Senior Debt, permitting
the holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of
Designated Senior Debt gives written notice of the event of default to the
Trustee (a "Payment Blockage Notice"), then, unless and until all events of
default have been cured or waived or have ceased to exist or the Trustee
receives notice from the Representative for the respective issue of Designated
Senior Debt terminating the Payment Blockage Period, during the 180 days after
the delivery of such Payment Blockage Notice (the "Payment Blockage Period"),
neither of the Issuers nor any other Person on either of their behalf shall (x)
make any payment of any kind or character with respect to any Obligations on the
Notes or (y) acquire any of the Notes for cash or property or otherwise (except
that holders of the Notes may receive Defeasance Trust Payments).
<PAGE> 60
-53-
Notwithstanding anything herein to the contrary, in no event will a
Payment Blockage Period extend beyond 180 days from the date the payment on the
Notes was due and only one such Payment Blockage Period may be commenced within
any 360 consecutive days. No event of default which existed or was continuing on
the date of the commencement of any Payment Blockage Period with respect to the
Designated Senior Debt shall be, or be made, the basis for commencement of a
second Payment Blockage Period by the Representative of such Designated Senior
Debt whether or not within a period of 360 consecutive days, unless such event
of default shall have been cured or waived for a period of not less than 90
consecutive days (it being acknowledged that any subsequent action, or any
breach of any financial covenants for a period commencing after the date of
commencement of such Payment Blockage Period that, in either case, would give
rise to an event of default pursuant to any provisions under which an event of
default previously existed or was continuing shall constitute a new event of
default for this purpose).
SECTION 8.03. Payment Over of Proceeds upon Dissolution, etc.
(a) Upon any payment or distribution of assets of either of the
Issuers of any kind or character, whether in cash, property or securities, to
creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors or marshaling of assets of either of the
Issuers or in a bankruptcy, reorganization, insolvency, receivership or other
similar proceeding relating to either of the Issuers or their respective
property, whether voluntary or involuntary, all Obligations due or to become due
upon all Senior Debt shall first be paid in full in cash or Cash Equivalents, or
such payment duly provided for to the satisfaction of the holders of Senior
Debt, before any payment or distribution of any kind or character is made on
account of any Obligations on the Notes, or for the acquisition of any of the
Notes for cash or property or otherwise (except that holders of the Notes may
receive Defeasance Trust Payments). Before any payment may be made by, or on
behalf of, such Issuers of the principal of, premium, if any, or interest on the
Notes upon any such dissolution or winding-up or total liquidation or
reorganization, any payment or distribution of assets or securities of such
Issuers of any kind or character, whether in cash, property or securities
(excluding any Defeasance Trust Payment), to which the Holders of the Notes or
the Trustee on their behalf would be entitled, but for the subordination
provisions of this Indenture, shall be made by such Issuers or by any receiver,
trustee in bankruptcy, liquidation trustee, agent or other Person making such
payment or distribution, directly to the holders of the Senior Debt of such
Issuers (pro rata to such holders on the basis of the respective amounts of
Senior Debt held by such holders) or their representatives or to the trustee or
trustees or agent or agents under any agreement or indenture pursuant to which
any of such Senior Debt may have been issued, as their respective interests may
appear, to the extent necessary to pay all such Senior Debt in full in cash
after giving effect to any prior or concurrent payment, distribution or
provision therefor to or for the holders of such Senior Debt.
(b) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
or securities of the Issuers of any kind or character, whether in cash, property
or securities (excluding any Defeasance Trust Payment), shall be received by the
Trustee or any Holder of Notes at a time when such payment or distribution is
prohibited by Section 8.03(a) and before all obligations in respect of Senior
Debt of such Issuers are paid in full in cash or Cash Equivalents, such payment
or distribution shall be received and held for the benefit of, and shall be paid
over or delivered to, the holders of Senior Debt of such Issuers (pro rata to
such holders on the basis of the respective amounts of Senior Debt held by such
holders) or their respective representatives, or to the trustee or trustees or
agent or agents under any indenture pursuant to which any of such Senior Debt
may have been issued, as their respective interests may appear, for application
to the payment of such Senior Debt remaining unpaid until all such Senior Debt
has been paid in full in cash or Cash Equivalents after giving effect to any
prior or concurrent payment, distribution or provision therefor to or for the
holders of such Senior Debt.
<PAGE> 61
-54-
The consolidation of the Company with, or the merger of the Company
with or into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided in Article Five shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section 8.03
if such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions stated in Article Five.
SECTION 8.04. Subrogation.
Upon the payment in full in cash or Cash Equivalents of all Senior
Debt of the Issuers, or provision for payment, the Holders of the Notes shall be
subrogated to the rights of the holders of such Senior Debt to receive payments
or distributions of cash, property or securities of the Issuers made on such
Senior Debt until the principal of and interest on the Notes shall be paid in
full in cash or Cash Equivalents; and, for the purposes of such subrogation, no
payments or distributions to the holders of the Senior Debt of the Issuers of
any cash, property or securities to which the Holders of the Notes or the
Trustee on their behalf would be entitled except for the provisions of this
Article Eight, and no payment over pursuant to the provisions of this Article
Eight to the holders of Senior Debt of the Issuers by Holders of the Notes or
the Trustee on their behalf shall, as between an Issuer, its creditors other
than holders of Senior Debt of such Issuer, and the Holders of the Notes, be
deemed to be a payment by such Issuers to or on account of the Senior Debt of
such Issuers. It is understood that the provisions of this Article Eight are and
are intended solely for the purpose of defining the relative rights of the
Holders of the Notes, on the one hand, and the holders of the Senior Debt of the
Issuers, on the other hand.
If any payment or distribution to which the Holders of the Notes
would otherwise have been entitled but for the provisions of this Article Eight
shall have been applied, pursuant to the provisions of this Article Eight, to
the payment of all amounts payable under Senior Debt, then and in such case, the
Holders of the Notes shall be entitled to receive from the holders of such
Senior Debt any payments or distributions received by such holders of Senior
Debt in excess of the amount required to make payment in full in cash of such
Senior Debt.
SECTION 8.05. Obligations of Issuers Unconditional.
Nothing contained in this Article Eight or elsewhere in this
Indenture or in the Notes is intended to or shall impair, as among the Issuers
and the Holders, the obligation of the Issuers, which is absolute and
unconditional, to pay to the Holders the principal of and interest on the Notes
as and when the same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights of the Holders and
creditors of the Issuers other than the holders of the Senior Debt of the
Issuers, nor shall anything herein or therein prevent any Holder or the Trustee
on their behalf from exercising all remedies otherwise permitted by applicable
law upon default or Event of Default, subject to the rights, if any, under this
Article Eight of the holders of the Senior Debt of the Issuers in respect of
cash, property or securities of the Issuers received upon the exercise of any
such remedy.
Without limiting the generality of the foregoing, nothing contained
in this Article Eight shall restrict the right of the Trustee or the Holders to
take any action to declare the Notes to be due and payable prior to their stated
maturity pursuant to Section 6.02 or to pursue any rights or remedies hereunder;
provided, however, that all Senior Debt of the Issuers then due and payable
shall first be paid in full in cash or Cash Equivalents before the Holders or
the Trustee are entitled to receive any direct or indirect payment from the
Issuers of principal of or interest on the Notes.
<PAGE> 62
-55-
SECTION 8.06. Notice to Trustee and Paying Agent.
The Issuers shall give prompt written notice to the Trustee and the
Paying Agent of any fact known to the Issuers which would prohibit the making of
any payment to or by the Trustee or the Paying Agent in respect of the Notes
pursuant to the provisions of this Article Eight. Neither the Trustee nor the
Paying Agent shall be charged with knowledge of the existence of any event of
default with respect to any Senior Debt of the Issuers or of any other facts
which would prohibit the making of any payment to or by the Trustee or the
Paying Agent unless and until the Trustee shall have received notice in writing
at its Corporate Trust Office to that effect signed by an Officer of an Issuer,
or by a holder of Senior Debt or trustee or agent therefor; and prior to the
receipt of any such written notice, the Trustee and the Paying Agent shall,
subject to Article Seven, be entitled to assume that no such facts exist;
provided, however, that if the Trustee shall not have received the notice
provided for in this Section 8.06 at least two Business Days prior to the date
upon which by the terms of this Indenture any moneys shall become payable for
any purpose (including, without limitation, the payment of the principal of or
interest on any Note), then, regardless of anything herein to the contrary, the
Trustee and the Paying Agent shall have full power and authority to receive any
moneys from the Issuers and to apply the same to the purpose for which they were
received, and shall not be affected by any notice to the contrary which may be
received by it on or after such prior date. Nothing contained in this Section
8.06 shall limit the right of the holders of Senior Debt of the Issuers to
recover payments as contemplated by Section 8.03. Each of the Trustee and the
Paying Agent shall be entitled to rely on the delivery to it of a written notice
by a Person representing himself or itself to be a holder of any Senior Debt of
the Issuers (or a trustee on behalf of, or other representative of, such holder)
to establish that such notice has been given by a holder of such Senior Debt or
a trustee or representative on behalf of any such holder.
In the event that either the Trustee or the Paying Agent determines
in good faith that any evidence is required with respect to the right of any
Person as a holder of Senior Debt of the Issuers to participate in any payment
or distribution pursuant to this Article Eight, the Trustee may request such
Person to furnish evidence to the reasonable satisfaction of the Trustee or the
Paying Agent, as the case may be, as to the amount of Senior Debt of the Issuers
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article Eight, and if such evidence is not furnished, the
Trustee and the Paying Agent may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such payment.
SECTION 8.07. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets or securities referred to
in this Article Eight, the Trustee and the Holders of the Notes shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction in which bankruptcy, dissolution, winding-up, liquidation or
reorganization proceedings are pending, or upon a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, delivered to the Trustee or to the Holders of the Notes
for the purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Debt of the Issuers and other
indebtedness of a Issuers, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto or to
this Article Eight.
SECTION 8.08. Trustee's Relation to Senior Debt.
The Trustee, the Agents and any other Agent shall be entitled to all
the rights set forth in this Article Eight with respect to any Senior Debt of
the Issuers which may at any time be held by it in its individual
<PAGE> 63
-56-
or any other capacity to the same extent as any other holder of Senior Debt of
an Issuer, and nothing in this Indenture shall deprive the Trustee, the Agents
or any other Agent of any of its rights as such holder.
With respect to the holders of Senior Debt of an Issuer, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Eight, and no implied covenants or
obligations with respect to the holders of Senior Debt of the Issuers shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of Senior Debt of the Issuers. The Trustee
shall not be liable to any such holders if the Trustee shall in good faith
mistakenly pay over or distribute to Holders of Notes or to the Issuers or to
any other person cash, property or securities to which any holders of Senior
Debt of the Issuers shall be entitled by virtue of this Article Eight or
otherwise.
SECTION 8.09. Subordination Rights Not Impaired by Acts or Omissions of the
Issuers or Holders of Senior Debt.
No right of any present or future holders of any Senior Debt of the
Issuers to enforce subordination as provided herein shall at any time in any way
be prejudiced or impaired by any act or failure to act on the part of the
Issuers or by any act or failure to act, in good faith, by any such holder, or
by any noncompliance by the Issuers with the terms of this Indenture, regardless
of any knowledge thereof which any such holder may have or otherwise be charged
with. The provisions of this Article Eight are intended to be for the benefit
of, and shall be enforceable directly by, the holders of Senior Debt of the
Issuers.
SECTION 8.10. Holders Authorize Trustee To Effectuate Subordination of Notes.
Each Holder of Notes by his acceptance of such Notes authorizes and
expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article Eight, and appoints the Trustee his attorney-in-fact for such purposes,
including, in the event of any dissolution, winding-up, total liquidation or
reorganization of the Issuers (whether in bankruptcy, insolvency, receivership,
reorganization or similar proceedings or upon an assignment for the benefit of
creditors or otherwise) tending towards liquidation of the business and assets
of the Issuers, the filing of a claim for the unpaid balance of its or his Notes
in the form required in those proceedings.
SECTION 8.11. This Article Not To Prevent Events of Default.
The failure to make a payment on account of principal of or interest
on the Notes by reason of any provision of this Article Eight shall not be
construed as preventing the occurrence of an Event of Default specified in
clauses (a), (b) or (c) of Section 6.01.
SECTION 8.12. Trustee's Compensation Not Prejudiced.
Nothing in this Article Eight shall apply to amounts due to the
Trustee or the Agents pursuant to other sections in this Indenture.
SECTION 8.13. No Waiver of Subordination Provisions.
Without in any way limiting the generality of Section 8.09, the
holders of Senior Debt of the Issuers may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders, without
incurring responsibility to the Holders and without impairing or releasing the
subordination provided in
<PAGE> 64
-57-
this Article Eight or the obligations hereunder of the Holders to the holders of
Senior Debt of an Issuer, do any one or more of the following: (a) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, such Senior Debt or any instrument evidencing the same or any agreement
under which such Senior Debt is outstanding or secured; (b) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing such Senior Debt; (c) release any Person liable in any manner for the
collection of such Senior Debt; and (d) exercise or refrain from exercising any
rights against the Issuers and any other Person.
SECTION 8.14. Subordination Provisions Not Applicable to Money Held in Trust for
Holders.
All money and United States Government Obligations deposited in
trust with the Trustee pursuant to and in accordance with Article Nine shall be
for the sole benefit of the Holders and shall not be subject to this Article
Eight.
ARTICLE NINE
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 9.01. Termination of the Issuers' Obligations.
The Issuers may terminate their obligations under the Notes and this
Indenture, except those obligations referred to in the penultimate paragraph of
this Section 9.01, if all Notes previously authenticated and delivered (other
than destroyed, lost or stolen Notes which have been replaced or paid or Notes
for whose payment United States Legal Tender or non-callable United States
Government Obligations, or a combination thereof, has theretofore been deposited
with the Trustee or the Paying Agent in trust or segregated and held in trust by
the Issuers and thereafter repaid to the Issuers, as provided in Section 9.05)
have been delivered to the Trustee for cancellation and the Issuers have paid
all sums payable by it hereunder, or if:
(a) either (i) pursuant to Article Three, the Issuers shall have
given notice to the Trustee and mailed a notice of redemption to each
Holder of the redemption of all of the Notes under arrangements
satisfactory to the Trustee for the giving of such notice or (ii) all
Notes have otherwise become due and payable hereunder;
(b) the Issuers shall have irrevocably deposited or caused to be
deposited with the Trustee or a trustee satisfactory to the Trustee, under
the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds in trust solely for the
benefit of the Holders for that purpose, United States Legal Tender or
non-callable United States Government Obligations, or a combination
thereof, in such amount as is sufficient without consideration of
reinvestment of such interest, to pay principal and interest on the
outstanding Notes to maturity or redemption, as well as the Trustee's fees
and expenses; provided that the Trustee shall have been irrevocably
instructed to apply such United States Legal Tender to the payment of said
principal and interest with respect to the Notes; provided, further, that
no deposits made pursuant to this Section 9.01(b) shall cause the Trustee
to have a conflicting interest as defined in and for the purposes of the
TIA; provided, further, that from and after the time of deposit, the money
deposited shall not be subject to the rights of holders of Senior Debt
pursuant to the provisions of Article Eight and provided, further, that,
as confirmed by an Opinion of
<PAGE> 65
-58-
Counsel, no such deposit shall result in the Company, the Trustee or the
trust becoming or being deemed to be an "investment company" under the
Investment Company Act of 1940;
(c) no Default or Event of Default with respect to this Indenture or
the Notes shall have occurred and be continuing on the date of such
deposit or shall occur as a result of such deposit and such deposit will
not result in a breach or violation of, or constitute a default under, any
other material instrument to which either of the Issuers is a party or by
which it is bound (other than a Default or Event of Default resulting from
the incurrence of Indebtedness, all or a portion of which will be used to
defease the Notes concurrently with such incurrence);
(d) the Issuers shall have paid all other sums payable by it
hereunder; and
(e) each of the Issuers shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent providing for or relating to the termination of such
Issuer's obligations under the Notes and this Indenture have been complied
with. Such Opinion of Counsel shall also state that such satisfaction and
discharge does not result in a default under any agreement or instrument
then known to such counsel that binds or affects either of the Issuers.
Notwithstanding the foregoing paragraph, the Issuers' obligations in
Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 7.07, 9.05 and 9.06 shall survive
until the Notes are no longer outstanding pursuant to the last paragraph of
Section 2.08. After the Notes are no longer outstanding, the Issuers'
obligations in Sections 7.07, 9.05 and 9.06 shall survive.
After such delivery or irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Issuers' obligations under the
Notes and this Indenture except for those surviving obligations specified above.
SECTION 9.02. Legal Defeasance and Covenant Defeasance.
(a) The Issuers may, at their option by Board Resolution of the
Board of Directors of each such Issuer, at any time, elect to have either
paragraph (b) or (c) below be applied to all outstanding Notes upon compliance
with the conditions set forth in Section 9.03.
(b) Upon exercise under paragraph (a) hereof of the option
applicable to this paragraph (b), each Issuer shall, subject to the satisfaction
of the conditions set forth in Section 9.03, be deemed to have been discharged
from its obligations with respect to all outstanding Notes on the date the
conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For
this purpose, Legal Defeasance means that each Issuer shall be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Notes, which shall thereafter be deemed to be "outstanding" only for the
purposes of Section 9.04 hereof and the other Sections of this Indenture
referred to in (i) and (ii) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Issuers, shall execute proper instruments
acknowledging the same), and Holders of the Notes and any amounts deposited
under Section 9.03 hereof shall cease to be subject to any obligations to, or
the rights of, any holder of Senior Debt under Article Eight or otherwise,
except for the following provisions, which shall survive until otherwise
terminated or discharged hereunder:
<PAGE> 66
-59-
(i) the rights of Holders of outstanding Notes to receive solely
from the trust fund described in Section 9.04 hereof, and as more fully
set forth in such Section, payments in respect of the principal of and
interest on such Notes when such payments are due;
(ii) the Issuers' obligations with respect to such Notes under
Article Two and Section 4.02 hereof;
(iii) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and the Issuers' obligations in connection therewith;
and
(iv) this Article Nine.
Subject to compliance with this Article Nine, the Issuers may exercise their
option under this paragraph (b) notwithstanding the prior exercise of its option
under paragraph (c) hereof.
(c) Upon the Issuers' exercise under paragraph (a) hereof of the
option applicable to this paragraph (c), each Issuer shall, subject to the
satisfaction of the conditions set forth in Section 9.03 hereof, be released
from its obligations under the covenants contained in Sections 4.10 through 4.20
and Article Five hereof with respect to the outstanding Notes on and after the
date the conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the
purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes) and Holders of the Notes and any amounts deposited under Section 8.03
hereof shall cease to be subject to any obligations to, or the rights of, any
holder of Senior Debt under Article Eight or otherwise. For this purpose, such
Covenant Defeasance means that, with respect to the outstanding Notes, the
Issuers may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such covenant, whether directly
or indirectly, by reason of any reference elsewhere herein to any such covenant
or by reason of any reference in any such covenant to any other provision herein
or in any other document and such omission to comply shall not constitute a
Default or an Event or Default under Section 6.01(iii) hereof, but, except as
specified above, the remainder of this Indenture and such Notes shall be
unaffected thereby. In addition, upon the Issuers' exercise under paragraph (a)
hereof of the option applicable to this paragraph (c), subject to the
satisfaction of the conditions set forth in Section 9.03 hereof, Sections
6.01(iii), 6.01(iv) and 6.01(v) shall not constitute Events of Default.
SECTION 9.03. Conditions to Legal Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 9.02(b) or 9.02(c) hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Issuers must irrevocably deposit or cause to be deposited
with the Trustee, in trust, for the benefit of the Holders cash in United
States Legal Tender, non-callable United States Government Obligations, or
a combination thereof, in such amounts as will be sufficient, in the
opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on the Notes on the
stated date for payment thereof or on the applicable redemption date, as
the case may be;
(b) in the case of Legal Defeasance, the Issuers shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Issuers
<PAGE> 67
-60-
have received from, or here has been published by, the Internal Revenue
Service a ruling or (B) since the date of this Indenture, there has been a
change in the applicable federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm that,
the Holders will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not
occurred;
(c) in the case of Covenant Defeasance, the Issuers shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders will not
recognize income, gain or loss for federal income tax purposes as a result
of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Sections 6.01(vi) and
(vii) are concerned, at any time in the period ending on the 91st day
after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under this Indenture or
any other material agreement or instrument to which the Issuers or any of
their Restricted Subsidiaries is a party or by which the Issuers or any of
their Restricted Subsidiaries is bound;
(f) each of the Issuers shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the Issuers
with the intent of preferring the Holders over any other creditors of the
Issuers or with the intent of defeating, hindering, delaying or defrauding
any other creditors of the Issuers or others;
(g) each of the Issuers shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance or
the Covenant Defeasance have been complied with; and
(h) each of the Issuers shall have delivered to the Trustee an
Opinion of Counsel to the effect that (A) the trust funds will not be
subject to any rights of holders of Senior Debt, including, without
limitation, those arising under this Indenture and (B) after the 91st day
following the deposit, the trust funds will not be subject to the effect
of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally.
Notwithstanding the foregoing, the Opinion of Counsel required by clause (b)
above with respect to a Legal Defeasance need not be delivered if all Notes not
theretofore delivered to the Trustee for cancellation (x) have become due and
payable or (y) will become due and payable on the maturity date within one year
under arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense of, the Issuers.
SECTION 9.04. Application of Trust Money.
The Trustee or Paying Agent shall hold in trust United States Legal
Tender or United States Government Obligations deposited with it pursuant to
Article Eight, and shall apply the deposited United States Legal Tender and the
money from United States Government Obligations in accordance with this
Indenture to
<PAGE> 68
-61-
the payment of principal of and interest on the Notes. The Trustee shall be
under no obligation to invest said United States Legal Tender or United States
Government Obligations except as it may agree with the Company.
The Issuers shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the United States Legal Tender or
United States Government Obligations deposited pursuant to Section 9.03 hereof
or the principal and interest received in respect thereof other than any such
tax, fee or other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article Nine to the contrary notwithstanding, the
Trustee shall deliver or pay to the Issuers from time to time upon the Issuers'
request any United States Legal Tender or United States Government Obligations
held by it as provided in Section 9.03 hereof which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 9.03(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
SECTION 9.05. Repayment to Issuers.
Subject to this Article Nine, the Trustee and the Paying Agent shall
promptly pay to the Issuers upon request any excess United States Legal Tender
or United States Government Obligations held by them at any time and thereupon
shall be relieved from all liability with respect to such money. The Trustee and
the Paying Agent shall pay to the Issuers upon request any money held by them
for the payment of principal or interest that remains unclaimed for two years.
After payment to the Issuers, Holders entitled to such money must look to the
Issuers for payment as general creditors unless an applicable law designates
another Person.
SECTION 9.06. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
Legal Tender or United States Government Obligations in accordance with this
Article Nine 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 Issuers' obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to this Article Nine until such time as the Trustee or Paying
Agent is permitted to apply all such United States Legal Tender or United States
Government Obligations in accordance with Article Nine; provided that if the
Issuers have made any payment of interest on or principal of any Notes because
of the reinstatement of their obligations, the Issuers shall be subrogated to
the rights of the Holders of such Notes to receive such payment from the United
States Legal Tender or United States Government Obligations held by the Trustee
or Paying Agent.
ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders.
The Issuers and each Guarantor, if any, when authorized by a
resolution of their respective Boards of Directors, and the Trustee may amend or
supplement this Indenture or the Notes without notice to or consent of any
Holder:
<PAGE> 69
-62-
(a) to cure any ambiguity, defect or inconsistency;
(b) to effect the assumption by a successor Person of all
obligations of the Company under the Notes and this Indenture in
connection with any transaction complying with Article Five of this
Indenture;
(c) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
(d) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(e) to make any change that would provide any additional benefit or
rights to the Holders;
(f) to make any other change that does not adversely affect the
rights of any Holder under this Indenture;
(g) to add to the covenants of the Company or any Guarantor, for the
benefit of the Holders, or to surrender any right or power herein
conferred upon the Company or any Guarantor;
(h) to secure the Notes pursuant to the requirements of Section 4.18
or otherwise; or
(i) to add a Guarantor pursuant to the requirements of Section 4.19;
provided, however, that the Issuers deliver to the Trustee an Opinion of Counsel
stating that such amendment or supplement does not adversely affect the rights
of any Holder and otherwise complies with the provisions of this Section 10.01.
SECTION 10.02. With Consent of Holders.
Subject to Section 6.07, the Issuers and each Guarantor, if any,
when authorized by a resolution of their respective Boards of Directors, and the
Trustee may amend or supplement this Indenture or the Notes, or waive compliance
with any provision hereof or thereof, with the written consent of the Holders of
at least a majority in principal amount of the outstanding Notes (including
consents obtained in connection with a tender offer or exchange offer for the
Notes). However, without the consent of each Holder affected, an amendment,
supplement or waiver, including a waiver pursuant to Section 6.04, may not:
(a) reduce the amount of Notes whose Holders must consent to an
amendment;
(b) reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any Notes;
(c) reduce the principal of or change or have the effect of changing
the fixed maturity of any Notes, or change the date on which any Notes may
be subject to redemption or reduce the redemption price therefor;
(d) make any Notes payable in money other than that stated in the
Notes;
<PAGE> 70
-63-
(e) make any change in provisions of this Indenture protecting the
right of each Holder to receive payment of principal of and interest on
such Note on or after the due date thereof or to bring suit to enforce
such payment, or permitting Holders of a majority in principal amount of
Notes to waive Defaults or Events of Default;
(f) after the Company's obligation to purchase Notes arises
hereunder, amend, change or modify in any material respect the obligation
of the Company to make and consummate a Change of Control Offer in the
event of a Change of Control or make and consummate a Net Proceeds Offer
with respect to any Asset Sale that has been consummated or, after such
Change of Control has occurred or such Asset Sale has been consummated,
modify any of the provisions or definitions with respect thereto; or
(g) modify or change any provision of this Indenture or the related
definitions affecting the subordination or ranking of the Notes in a
manner which adversely affects the Holders.
It shall not be necessary for the consent of the Holders under this
Section 10.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 10.02
becomes effective, the Issuers shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Issuers to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amendment, supplement or
waiver.
SECTION 10.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Notes
shall comply with the TIA as then in effect.
SECTION 10.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of that Note or portion of that Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. Subject to the following paragraph, any such Holder or
subsequent Holder may revoke the consent as to such Holder's Note or portion of
such Note by notice to the Trustee or the Issuers received before the date on
which the Trustee receives an Officers' Certificate certifying that the Holders
of the requisite principal amount of Notes have consented (and not theretofore
revoked such consent) to the amendment, supplement or waiver.
The Issuers may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then, notwithstanding the last
sentence of the immediately preceding paragraph, those persons who were Holders
at such record date (or their duly designated proxies), and only those persons,
shall be entitled to consent to such amendment, supplement or waiver or to
revoke any consent previously given, whether or not such persons continue to be
Holders after such record date. No such consent shall be valid or effective for
more than 90 days after such record date.
<PAGE> 71
-64-
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder, unless it makes a change described in any of clauses (a)
through (g) of Section 10.02. In that case the amendment, supplement or waiver
shall bind each Holder of a Note who has consented to it and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note.
SECTION 10.05. Notation on or Exchange of Notes.
If an amendment, supplement or waiver changes the terms of a Note,
the Trustee may require the Holder of the Note to deliver it to the Trustee. The
Trustee may place an appropriate notation on the Note about the changed terms
and return it to the Holder. Alternatively, if the Issuers or the Trustee so
determine, the Issuers in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms. Failure to make
the appropriate notation or issue a new Note shall not affect the validity and
effect of such amendment, supplement or waiver.
SECTION 10.06. Trustee To Sign Amendments, etc.
The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
any amendment, supplement or waiver authorized pursuant to this Article Ten is
authorized or permitted by this Indenture and that such amendment, supplement or
waiver constitutes the legal, valid and binding obligation of the Issuers and
each Guarantor, if any, enforceable in accordance with its terms (subject to
customary exceptions). The Trustee may, but shall not be obligated to, execute
any such amendment, supplement or waiver which affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise. In signing any
amendment, supplement or waiver, the Trustee shall be entitled to receive an
indemnity reasonably satisfactory to it and to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Ten is authorized or permitted by this
Indenture and that such amendment or supplement is the legal, valid and binding
obligation of the Issuer enforceable against it in accordance with its terms,
subject to customary exceptions, and complies with the provision hereof
(including Section 10.04). Such Opinion of Counsel shall not be an expense of
the Trustee.
ARTICLE ELEVEN
GUARANTEE
SECTION 11.01. Unconditional Guarantee.
Each Guarantor, if any, hereby unconditionally guarantees to each
Holder of a Note authenticated by the Trustee and to the Trustee and its
successors and assigns that: the principal of and interest on the Notes will be
promptly paid in full when due, subject to any applicable grace period, whether
at maturity, by acceleration or otherwise, and interest on the overdue principal
and interest on any overdue interest on the Notes and all other obligations of
the Issuers to the Holders or the Trustee hereunder or under the Notes will be
promptly paid in full or performed, all in accordance with the terms hereof and
thereof; subject, however, to the limitations set forth in Section 11.03. Any
Guarantee set forth in this Section 11.01 is a guarantee of payment and not of
collection. Each Guarantor hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or
<PAGE> 72
-65-
thereof, the recovery of any judgment against the Issuers, any action to enforce
the same or any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of such Guarantor. Each Guarantor hereby waives
diligence, presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Issuers, any right to require a
proceeding first against an Issuer, protest, notice and all demands whatsoever.
Each Guarantor covenants that the applicable Guarantee will not be discharged
except by complete performance of the obligations contained in the Notes and
this Indenture. Notwithstanding the foregoing sentence, any Guarantor shall be
released from all the obligations under its Guarantee under this Article Eleven
concurrently with the defeasance of the Notes under Section 9.02(b) or the
Covenant Defeasance of the Notes under Section 9.02(c). If any Holder or the
Trustee is required by any court or otherwise to return to the Issuers or any
Guarantor or any custodian, trustee, liquidator or other similar official acting
in relation to the Issuers or a Guarantor, any amount paid by the Issuers or a
Guarantor to the Trustee or such Holder, the applicable Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect. Each
Guarantor further agrees that, as between such Guarantor, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article Six for
the purpose of the applicable Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in Article Six, such obligations (whether or not due and payable)
shall become due and payable by such Guarantor for the purpose of the applicable
Guarantee.
SECTION 11.02. Severability.
In case any provision of this Article Eleven shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.03. Limitation of Guarantor's Liability.
Each Guarantor, if any, and by its acceptance hereof each Holder and
the Trustee, hereby confirm that it is the intention of all such parties that
the applicable Guarantee does not constitute a fraudulent transfer or conveyance
for purposes of title 11 of the United States Code, as amended, the Uniform
Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar
U.S. Federal or state or other applicable law. To effectuate the foregoing
intention, each Holder and each Guarantor hereby irrevocably agree that the
obligations of a Guarantor under its Guarantee shall be limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Guarantor, and after giving effect to any collections from
or payments made by or on behalf of such Guarantor in respect of the obligations
of such Guarantor pursuant to Section 11.04, result in the obligations of such
Guarantor not constituting such a fraudulent transfer or conveyance.
SECTION 11.04. Execution of Guarantee.
To further evidence a Guarantee to the Holders, each Guarantor, if
any, hereby agrees to execute a guarantee to be endorsed on and made a part of
each Note ordered to be authenticated and delivered by the Trustee. Each
Guarantor hereby agrees that its guarantee set forth in Section 11.01 shall
remain in full force and effect notwithstanding any failure to endorse on each
Note a guarantee. Each such guarantee shall be signed on behalf of each
Guarantor by its Chairman of the Board, its President or one of its Vice
Presidents prior to the authentication of the Note on which it is endorsed, and
the delivery of such Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of such guarantee on behalf of such
Guarantor. Such signature upon the guarantee may be a manual or facsimile
signature of such officer and may be imprinted
<PAGE> 73
-66-
or otherwise reproduced on the guarantee, and in case such officer who shall
have signed the guarantee shall cease to be such officer before the Note on
which such guarantee is endorsed shall have been authenticated and delivered by
the Trustee or disposed of by the Issuers, such Note nevertheless may be
authenticated and delivered or disposed of as though the Person who signed the
guarantee had not ceased to be such officer of such Guarantor.
SECTION 11.05. Subordination of Subrogation and Other Rights.
Each Guarantor, if any, hereby agrees that any claim against the
Issuers that arises from the payment, performance or enforcement of such
Guarantor's obligations under the applicable Guarantee or this Indenture,
including, without limitation, any right of subrogation, shall be subject and
subordinate to, and no payment with respect to any such claim of such Guarantor
shall be made before, the payment in full in cash of all outstanding Notes in
accordance with the provisions provided therefor in this Indenture.
ARTICLE TWELVE
SUBORDINATION OF GUARANTEE
SECTION 12.01. Guarantee Obligations Subordinated to Senior Debt.
Each Guarantor, if any, covenants and agrees, and the Trustee and
each Holder of the Notes by its acceptance thereof likewise covenant and agrees,
that the Guarantee shall be issued subject to the provisions of this Article
Twelve; and each person holding any Note, whether upon original issue or upon
transfer, assignment or exchange thereof, accepts and agrees that all payments
of the principal of and interest on the Notes pursuant to the Guarantee made by
or on behalf of the Guarantor shall, to the extent and in the manner set forth
in this Article Twelve, be subordinated and junior in right of payment to the
prior payment in full in cash or Cash Equivalents of all amounts payable under
Senior Debt of such Guarantor.
SECTION 12.02. No Payment in Certain Circumstances; Payment Over of
Proceeds upon Dissolution, etc.
(a) Upon any payment or distribution of assets of any Guarantor of
any kind or character, whether in cash, property or securities, to creditors
upon any liquidation, dissolution, winding up, reorganization, assignment for
the benefit of creditors or marshaling of assets of such Guarantor or in a
bankruptcy, reorganization, insolvency, receivership or other similar proceeding
relating to such Guarantor or its property, whether voluntary or involuntary,
all Obligations due or to become due upon all Senior Debt shall first be paid in
full in cash or Cash Equivalents, or such payment duly provided for to the
satisfaction of the holders of Senior Debt, before any payment or distribution
of any kind or character is made by or on behalf of such Guarantor on account of
any Obligations on the Guarantee or for the acquisition of any of the Notes for
cash or property or otherwise (except that holders of the Notes may receive
Defeasance Trust Payments). Before any payment may be made by, or on behalf of,
any Guarantor of the principal of, premium, if any, or interest on the Notes
upon any such dissolution or winding-up or total liquidation or reorganization,
any payment or distribution of assets or securities of such Guarantor of any
kind or character, whether in cash, property or securities, to which the Holders
of the Notes or the Trustee on their behalf would be entitled, but for the
subordination provisions of this Indenture, shall be made by the Guarantor or by
any receiver, trustee in bankruptcy, liquidation trustee, agent or other Person
making such payment or distribution, directly to the holders of the Senior Debt
of such Guarantor
<PAGE> 74
-67-
(pro rata to such holders on the basis of the respective amounts of such Senior
Debt held by such holders) or their representatives or to the trustee or
trustees or agent or agents under any agreement or indenture pursuant to which
any of such Senior Debt may have been issued, as their respective interests may
appear, to the extent necessary to pay all such Senior Debt in full in cash
after giving effect to any prior or concurrent payment, distribution or
provision therefor to or for the holders of such Senior Debt.
(b) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
or securities of any Guarantor of any kind or character, whether in cash,
property or securities, shall be received by the Trustee or any Holder of Notes
at a time when such payment or distribution is prohibited by Section 12.02(a)
and before all obligations in respect of the Senior Debt of such Guarantor are
paid in full in cash or Cash Equivalents, such payment or distribution shall be
received and held for the benefit of, and shall be paid over or delivered to,
the holders of such Senior Debt (pro rata to such holders on the basis of the
respective amounts of such Senior Debt held by such holders) or their respective
representatives, or to the trustee or trustees or agent or agents under any
indenture pursuant to which any of such Senior Debt may have been issued, as
their respective interests may appear, for application to the payment of such
Senior Debt remaining unpaid until all such Senior Debt has been paid in full in
cash or Cash Equivalents after giving effect to any prior or concurrent payment,
distribution or provision therefor to or for the holders of such Senior Debt.
The consolidation of any Guarantor with, or the merger of any
Guarantor with or into, another corporation or the liquidation or dissolution of
any Guarantor following the conveyance or transfer of its property as an
entirety, or substantially as an entirety, to another corporation upon the terms
and conditions provided in Article Five shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section 12.02
if such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions stated in Article Five.
If any default occurs and is continuing in the payment when due,
whether at maturity, upon any redemption, by acceleration or otherwise, of any
principal of, interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees with respect to, any Senior Debt, no
payment of any kind or character shall be made by or on behalf of any Guarantor
or any other Person on its behalf with respect to any Obligations on the
applicable Guarantee or to acquire any of the Notes for cash or property or
otherwise (except that holders of the Notes may receive Defeasance Trust
Payments).
In addition, if any other event of default occurs and is continuing
with respect to any Designated Senior Debt, as such event of default is defined
in the instrument creating or evidencing such Designated Senior Debt, permitting
the holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of
Designated Senior Debt gives a Payment Blockage Notice to the Trustee, then,
unless and until all events of default have been cured or waived or have ceased
to exist or the Trustee receives notice from the Representative for the
respective issue of Designated Senior Debt terminating the Payment Blockage
Period, during the Payment Blockage Period, no Guarantor or any other Person on
such Guarantor's behalf, shall (x) make any payment of any kind or character
with respect to any Obligations on the applicable Guarantee or (y) acquire any
of the Notes for cash or property or otherwise (except that holders of the Notes
may receive Defeasance Trust Payments).
Notwithstanding anything herein to the contrary, in no event will a
Payment Blockage Period extend beyond 180 days from the date the Payment
Blockage Notice is delivered and only one such Payment Blockage Period may be
commenced within any 360 consecutive days. No event of default which existed or
was continuing on the date of the commencement of any Payment Blockage Period
with respect to the Desig-
<PAGE> 75
-68-
nated Senior Debt shall be, or be made, the basis for commencement of a second
Payment Blockage Period by the Representative of such Designated Senior Debt
whether or not within a period of 360 consecutive days, unless such event of
default shall have been cured or waived for a period of not less than 90
consecutive days (it being acknowledged that any subsequent action, or any
breach of any financial covenants for a period commencing after the date of
commencement of such Payment Blockage Period that, in either case, would give
rise to an event of default pursuant to any provisions under which an event of
default previously existed or was continuing shall constitute a new event of
default for this purpose).
SECTION 12.03. Subrogation.
Upon the payment in full in cash or Cash Equivalents of all Senior
Debt of a Guarantor, or provision for payment, the Holders of the Notes shall be
subrogated to the rights of the holders of such Senior Debt to receive payments
or distributions of cash, property or securities of such Guarantor made on such
Senior Debt until the principal of and interest on the Notes shall be paid in
full in cash or Cash Equivalents; and, for the purposes of such subrogation, no
payments or distributions to the holders of such Senior Debt of any cash,
property or securities to which the Holders of the Notes or the Trustee on their
behalf would be entitled except for the provisions of this Article Twelve, and
no payment over pursuant to the provisions of this Article Twelve to the holders
of such Senior Debt by Holders of the Notes or the Trustee on their behalf
shall, as between such Guarantor, its creditors other than holders of such
Senior Debt, and the Holders of the Notes, be deemed to be a payment by such
Guarantor to or on account of such Senior Debt. It is understood that the
provisions of this Article Twelve are and are intended solely for the purpose of
defining the relative rights of the Holders of the Notes, on the one hand, and
the holders of Senior Debt of any such Guarantor on the other hand.
If any payment or distribution to which the Holders of the Notes
would otherwise have been entitled but for the provisions of this Article Twelve
shall have been applied, pursuant to the provisions of this Article Twelve, to
the payment of all amounts payable under Senior Debt of the Guarantors, then and
in such case, the Holders of the Notes shall be entitled to receive from the
holders of such Senior Debt any payments or distributions received by such
holders of Senior Debt in excess of the amount required to make payment in full
in cash of such Senior Debt.
SECTION 12.04. Obligations of Guarantors Unconditional.
Subject to Sections 11.03 and 8.02, nothing contained in this
Article Twelve or elsewhere in this Indenture or in the Notes is intended to or
shall impair, as among any Guarantor and the Holders of the Notes, the
obligation of such Guarantor, which is absolute and unconditional, to pay to the
Holders of the Notes the principal of and interest on the Notes as and when the
same shall become due and payable in accordance with the terms of the Guarantee,
or is intended to or shall affect the relative rights of the such Guarantor of
the Notes and creditors of any Guarantor other than the holders of Senior Debt
of such Guarantor, as the case may be, nor shall anything herein or therein
prevent the Holder of any Note or the Trustee on their behalf from exercising
all remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article Twelve of the
holders of Senior Debt in respect of cash, property or securities of such
Guarantor received upon the exercise of any such remedy.
Without limiting the generality of the foregoing, nothing contained
in this Article Twelve shall restrict the right of the Trustee or the Holders of
Notes to take any action to declare the Notes to be due and payable prior to
their stated maturity pursuant to Section 6.02 or to pursue any rights or
remedies hereunder; provided, however, that all Senior Debt of each Guarantor
then due and payable shall first be paid in full in cash or
<PAGE> 76
-69-
Cash Equivalents before the Holders of the Notes or the Trustee are entitled to
receive any direct or indirect payment from such Guarantor of principal of or
interest on the Notes pursuant to the Guarantee.
SECTION 12.05. Notice to Trustee and Paying Agent.
The Issuers shall give prompt written notice to the Trustee and the
Paying Agent of any fact known to them which would prohibit the making of any
payment to or by the Trustee or the Paying Agent in respect of the Notes
pursuant to the provisions of this Article Twelve. Neither the Trustee nor the
Paying Agent shall be charged with knowledge of the existence of any event of
default with respect to any Senior Debt of a Guarantor or of any other facts
which would prohibit the making of any payment to or by the Trustee or the
Paying Agent unless and until the Trustee shall have received notice in writing
at its Corporate Trust Office to that effect signed by an Officer of either of
the Issuers, or by a holder of Senior Debt of a Guarantor or trustee or agent
therefor; and prior to the receipt of any such written notice, the Trustee
shall, subject to Article Seven, be entitled to assume that no such facts exist.
Nothing contained in this Section 12.05 shall limit the right of the holders of
Senior Debt of a Guarantor to recover payments as contemplated by Section 12.03.
The Trustee and the Paying Agent shall be entitled to rely on the delivery to it
of a written notice by a Person representing himself or itself to be a holder of
any Senior Debt of a Guarantor (or a trustee on behalf of, or other
representative of, such holder) to establish that such notice has been given by
a holder of such Senior Debt or a trustee or representative on behalf of any
such holder.
In the event that either the Trustee or the Paying Agent determines
in good faith that any evidence is required with respect to the right of any
Person as a holder of Senior Debt of a Guarantor to participate in any payment
or distribution pursuant to this Article Twelve, the Trustee or the Paying Agent
may request such Person to furnish evidence to the reasonable satisfaction of
the Trustee or the Paying Agent, as the case may be, as to the amount of Senior
Debt held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such Person under this Article Twelve, and if such evidence is not
furnished, the Trustee and the Paying Agent may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 12.06. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets or securities of a
Guarantor referred to in this Article Twelve, the Trustee and the Holders of the
Notes shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which bankruptcy, dissolution, winding-up, liquidation
or reorganization proceedings are pending, or upon a certificate of the
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, delivered to the Trustee or to the Holders
of the Notes for the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of Senior Debt of such Guarantor and other
indebtedness of such Guarantor, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article Twelve.
SECTION 12.07. Trustee's Relation to Senior Debt of a Guarantor.
The Trustee, the Agents and any other Agent of the Issuers shall be
entitled to all the rights set forth in this Article Twelve with respect to any
Senior Debt of a Guarantor which may at any time be held by them in their
individual or any other capacity to the same extent as any other holder of
Senior Debt of such Guarantor, and nothing in this Indenture shall deprive the
Trustee, the Agents or any other Agent of the Issuers of any of its rights as
such holder.
<PAGE> 77
-70-
With respect to the holders of Senior Debt of any Guarantor, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Twelve, and no implied
covenants or obligations with respect to the holders of such Senior Debt shall
be read into this Indenture against the Trustee. The Trustee shall not be deemed
to owe any fiduciary duty to the holders of Senior Debt of any Guarantor. The
Trustee shall not be liable to any such holders if the Trustee shall in good
faith mistakenly pay over or distribute to Holders of Notes or to the Issuers or
to any other person cash, property or securities to which any holders of Senior
Debt of a Guarantor shall be entitled by virtue of this Article Twelve or
otherwise.
SECTION 12.08. Subordination Rights Not Impaired by Acts or Omissions of Holders
of Senior Debt.
No right of any present or future holders of any Senior Debt of a
Guarantor to enforce subordination as provided herein shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of such
Guarantor or by any act or failure to act, in good faith, by any such holder, or
by any noncompliance by such Guarantor with the terms of this Indenture,
regardless of any knowledge thereof which any such holder may have or otherwise
be charged with. The provisions of this Article Twelve are intended to be for
the benefit of, and shall be enforceable directly by, the holders of Senior Debt
of any Guarantor.
SECTION 12.09. Holders Authorize Trustee To Effectuate Subordination of
Guarantee.
Each Holder of Notes by his acceptance of such Notes authorizes and
expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article Twelve, and appoints the Trustee his attorney-in-fact for such purposes,
including, in the event of any dissolution, winding-up, total liquidation or
reorganization of any Guarantor (whether in bankruptcy, insolvency,
receivership, reorganization or similar proceedings or upon an assignment for
the benefit of creditors or otherwise) tending towards liquidation of the
business and assets of any Guarantor, the filing of a claim for the unpaid
balance of its or his Notes in the form required in those proceedings.
SECTION 12.10. This Article Not To Prevent Events of Default.
The failure to make a payment on account of principal of or interest
on the Notes by reason of any provision of this Article Twelve shall not be
construed as preventing the occurrence of an Event of Default.
SECTION 12.11. Trustee's Compensation Not Prejudiced.
Nothing in this Article Twelve shall apply to amounts due to the
Trustee or the Agents pursuant to other sections in this Indenture.
SECTION 12.12. No Waiver of Guarantee Subordination Provisions.
Without in any way limiting the generality of Section 12.08, the
holders of Senior Debt of any Guarantor, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the Notes,
without incurring responsibility to the Holders of the Notes and without
impairing or releasing the subordination provided in this Article Twelve or the
obligations hereunder of the Holders of the Notes to the holders of such Senior
Debt, do any one or more of the following: (a) change the manner, place or terms
of payment or extend the time of payment of, or renew or alter, such Senior Debt
or any instrument evidencing the same or any agreement under which such Senior
Debt is outstanding or secured; (b) sell, exchange, release or
<PAGE> 78
-71-
otherwise deal with any property pledged, mortgaged or otherwise securing such
Senior Debt; (c) release any Person liable in any manner for the collection of
such Senior Debt; and (d) exercise or refrain from exercising any rights against
the Guarantor and any other Person.
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls.
This Indenture is subject to the provisions of the TIA that are
required to be a part of any indenture subject to the TIA. If any provision of
this Indenture modifies any TIA provision that may be so modified, such TIA
provision shall be deemed to apply to this Indenture as so modified. If any
provision of this Indenture excludes any TIA provision that may be so excluded,
such TIA provision shall be excluded from this Indenture.
The provisions of TIA Sections 310 through 317 that impose
duties on any Person (including the provisions automatically deemed included
unless expressly excluded by this Indenture) are a part of and govern this
Indenture, whether or not physically contained herein.
SECTION 13.02. Notices.
Any notice or communication shall be sufficiently given if in
writing and delivered in person, by facsimile and confirmed by overnight
courier, or mailed by first-class mail addressed as follows:
if to the Issuers:
1 Generac Way
P.O. Box 239
Jefferson, WI 53549
Attention: Chief Financial Officer
Facsimile: (920) 674-5663
Telephone: (920) 674-1760
with copies to:
The Beacon Group LLC
399 Park Avenue
New York, New York 10022
Attention: Richard A. Aube
Facsimile: (212) 339-9109
Telephone: (212) 339-9100
<PAGE> 79
-72-
King & Spalding
1185 Avenue of the Americas
New York, New York 10036-4003
Attention: Mark Zvonkovic, Esq.
Facsimile: (212) 556-2222
Telephone: (212) 556-2100 or (212) 556-2250
if to the Trustee:
Marine Midland Bank
140 Broadway
New York, New York 10005
Attention: Corporate Trust Services/Generac
Facsimile: (212) 658-6433
Telephone: (212) 658-6425
if to the Registrar:
Bankers Trust Company
4 Albany Street
7th floor
New York, New York 10006
Attention: Corporate Trust and Agency Services
Each party by notice to the others may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication mailed, first-class, postage prepaid, to
a Holder, including any notice delivered in connection with TIA Section 310(b),
TIA Section 313(c), TIA Section 314(a) and TIA Section 315(b), shall be mailed
to such Holder at the address as set forth on the list maintained pursuant to
Section 2.05 and shall be sufficiently given to him if so mailed 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 mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. Except for
a notice to the Trustee, which is deemed given only when received, if a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
SECTION 13.03. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Issuers, the Trustee, the Registrar and any other person shall have the
protection of TIA Section 312(c).
<PAGE> 80
-73-
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Issuers to the Trustee to
take or refrain from taking any action under this Indenture after the date
hereof, the Issuers shall furnish to the Trustee at the request of the Trustee:
(1) an Officers' Certificate in form and substance satisfactory to
the Trustee (which shall include the statements set forth in Section 13.05
hereof) stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with; and
(2) an Opinion of Counsel in form and substance satisfactory to the
Trustee stating that, in the opinion of such counsel, all such conditions
precedent have been complied with; except that in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion
need be furnished.
SECTION 13.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall include:
(1) a statement that the person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with; provided, however, that
with respect to matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION 13.07. Governing Law.
This Indenture and the Notes will 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 law of another jurisdiction would be required thereby.
<PAGE> 81
-74-
SECTION 13.08. No Recourse Against Others.
No director, officer, employee, stockholder or member as such of the
Issuers, or any Guarantor, shall have any liability for any obligations of the
Issuers or any Guarantor under the Notes or this Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
SECTION 13.09. Successors.
All agreements of a party to this Indenture contained in this
Indenture shall bind such party's successors.
SECTION 13.10. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 13.11. Severability.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
and a Holder shall have no claim therefor against any party hereto.
SECTION 13.12. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan
or debt agreement. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 13.13. Legal Holidays.
If a payment date is a not a Business Day at a place of payment,
payment may be made at that place on the next succeeding Business Day, and no
interest shall accrue for the intervening period.
[Signature Pages Follow]
<PAGE> 82
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
ISSUERS:
GENERAC PORTABLE PRODUCTS, LLC
By: /s/ [Illegible]
---------------------------------------
Name:
Title:
GPPW, INC.
By: /s/ Faith Rosenfeld
---------------------------------------
Name:
Title:
TRUSTEE:
MARINE MIDLAND BANK
By: /s/ Frank J. Godino
---------------------------------------
Name: Frank J. Godino
Title: Vice President
<PAGE> 83
EXHIBIT A
[FORM OF SERIES A NOTE]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH NOTE, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE ISSUERS OR ANY AFFILIATE OF THE ISSUERS
WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF SUCH NOTE), ONLY (A) TO AN
ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE
FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E)
TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE NOTE FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN
EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE NOTES OF $250,000 FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE ISSUERS' AND THE REGISTRAR'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER PURSUANT TO CLAUSE (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM.
THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
A-1
<PAGE> 84
GENERAC PORTABLE PRODUCTS, LLC
GPPW, INC.
11 1/4% Senior Subordinated Note
due 2006, Series A
CUSIP No.:[ ]
No. [ ] $[ ]
GENERAC PORTABLE PRODUCTS, LLC, a limited liability company (the
"Company", which term includes any successor), and GPPW, INC., a Wisconsin
corporation ("GPPW", which term includes any successor, and, together with the
Company, the "Issuers"), for value received jointly and severally promise to pay
to [ ] or registered assigns, the principal sum of [ ] Dollars, on July 1, 2006.
Interest Payment Dates: January 1 and July 1, commencing on
January 1, 1999.
Interest Record Dates: December 15 and June 15.
Reference is made to the further provisions of this Note contained
herein and the Indenture (as defined), which will for all purposes have the same
effect as if set forth at this place.
A-2
<PAGE> 85
IN WITNESS WHEREOF, each of the Issuers has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
GENERAC PORTABLE PRODUCTS, LLC
By: ____________________________________
Name:
Title:
By: ____________________________________
Name:
Title:
GPPW, INC.
By: ____________________________________
Name:
Title:
By: ____________________________________
Name:
Title:
Dated: [ ]
A-3
<PAGE> 86
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 11 1/4% Senior Subordinated Notes due 2006,
Series A, described in the within-mentioned Indenture.
Dated: [ ]
MARINE MIDLAND BANK,
as Trustee
By:______________________________________
Authorized Signatory
or
MARINE MIDLAND BANK,
as Trustee
By Bankers Trust Company,
as Authenticating Agent
By:______________________________________
Authorized Signatory
A-4
<PAGE> 87
(REVERSE OF NOTE)
GENERAC PORTABLE PRODUCTS, LLC
GPPW, INC.
11 1/4% Senior Subordinated Note
due 2006, Series A
1. Interest.
The Issuers jointly and severally promise to pay interest on the
principal amount of this Note at the rate per annum shown above. Cash interest
on the Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from July 9, 1998. The Issuers will pay
interest semi-annually in arrears on each Interest Payment Date, commencing
January 1, 1999. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
In addition, the Issuers shall pay interest on overdue principal
and on overdue installments of interest (without regard to any applicable grace
periods) to the extent lawful from time to time on demand, in each case at the
rate borne by this Note.
The Notes are not entitled to the benefit of any mandatory sinking
fund.
2. Method of Payment.
The Issuers shall pay interest on the Notes (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Interest Record Date immediately preceding the Interest Payment Date even
if the Notes are cancelled on registration of transfer or registration of
exchange after such Interest Record Date. Holders must surrender Notes to a
Paying Agent to collect principal payments. The Issuers shall pay principal and
interest in United States Legal Tender (as defined in the Indenture referred to
below). However, the Issuers may pay principal and interest by wire transfer of
Federal funds (provided that the Paying Agent shall have received wire
instructions on or prior to the relevant Interest Record Date), or interest by
check payable in such United States Legal Tender. The Issuers may deliver any
such interest payment to the Paying Agent or to a Holder at the Holder's
registered address.
3. Paying Agent and Registrar.
Initially, Bankers Trust Company will act as Paying Agent and
Registrar. The Issuers may change any Paying Agent or Registrar without notice
to the Holders. The Issuers may, subject to certain exceptions, act as
Registrar.
A-5
<PAGE> 88
4. Indenture.
The Issuers issued the Notes under an Indenture, dated as of July
1, 1998 (the "Indenture"), by and among the Issuers and Marine Midland Bank, as
Trustee (the "Trustee"). Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. This Note is one of a duly authorized
issue of Notes of the Issuers designated as their 11-1/4% Senior Subordinated
Notes due 2006 issued under the Indenture. The aggregate principal amount of
Notes which may be issued under the Indenture is limited (except as otherwise
provided in the Indenture) to $160,000,000. The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended (the "TIA"), as in effect on the date of
the Indenture (except as otherwise indicated in the Indenture) until such time
as the Indenture is qualified under the TIA, and thereafter as in effect on the
date on which the Indenture is qualified under the TIA. Notwithstanding anything
to the contrary herein, the Notes are subject to all such terms, and holders of
Notes are referred to the Indenture and the TIA for a statement of them.
5. Subordination.
The Notes are unsecured obligations of the Issuers and are
subordinated in right of payment to all Senior Debt of the Issuers to the extent
and in the manner provided in the Indenture. Each Holder of a Note, by accepting
a Note, agrees to such subordination, authorizes the Trustee to give effect to
such subordination and appoints the Trustee as attorney-in-fact for such
purpose. The Notes will rank pari passu in right of payment with any future
senior subordinated indebtedness of the Issuers and will rank senior in right of
payment to any other subordinated obligations of the Issuers.
6. Optional Redemption.
The Notes will be redeemable, at the Issuers' option, in whole at
any time or in part from time to time, on and after July 1, 2002, upon not less
than 30 nor more than 60 days' notice, at the following redemption prices
(expressed as percentages of the principal amount thereof) if redeemed during
the twelve-month period commencing on July 1 of the year set forth below, plus,
in each case, accrued and unpaid interest thereon, if any, to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2002......................................................... 107.625%
2003......................................................... 104.750%
2004......................................................... 102.875%
2005 and thereafter.......................................... 100.000%
</TABLE>
7. Optional Redemption upon Equity Offerings.
At any time, or from time to time, on or prior to July 1, 2001,
the Issuers may, at their option, use the net cash proceeds of one or more
Public Equity Offerings (as defined below) to redeem the Notes at a redemption
price equal to 111.25% of the principal amount thereof plus accrued and unpaid
interest thereon, if any, to the date of redemption; provided that at least 65%
of the principal amount of Notes originally issued remains outstanding
immediately after any such redemption. In order to effect the foregoing
redemption with the proceeds of any Public Equity Offering, the Issuers shall
make such redemption not more than 120 days after the consummation of any such
Public Equity Offering.
A-6
<PAGE> 89
As used in the preceding paragraph, "Public Equity Offering" means
an underwritten public offering of Qualified Capital Stock of Holdings or the
Company pursuant to a registration statement filed with the Commission in
accordance with the Securities Act, other than an offering pursuant to Form S-8
(or any successor thereto); provided that, in the event of a Public Equity
Offering by Holdings, Holdings contributes to the capital of the Company the
portion of the net cash proceeds of such Public Equity Offering necessary to pay
the aggregate redemption price (plus accrued interest to the redemption date) of
the Notes to be redeemed pursuant to the preceding paragraph.
8. Selection and Notice of Redemption.
In the event that less than all of the Notes are to be redeemed at
any time, selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such Notes are listed or, if such Notes are not then listed on
a national securities exchange, on a pro rata basis, by lot or by such method as
the Trustee shall deem fair and appropriate; provided, however, that no Notes of
a principal amount of $1,000 or less shall be redeemed in part; provided,
further, that if a partial redemption is made with the proceeds of a Public
Equity Offering, selection of the Notes or portions thereof for redemption shall
be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis
as is practicable (subject to DTC procedures), unless such method is otherwise
prohibited. Notice of redemption shall be mailed by first-class mail at least 30
but not more than 60 days before the redemption date to each Holder of Notes to
be redeemed at its registered address. If any Note is to be redeemed in part
only, the notice of redemption that relates to such Note shall state the portion
of the principal amount thereof to be redeemed. A new Note in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note. On and after the redemption
date, interest will cease to accrue on Notes or portions thereof called for
redemption as long as the Company has deposited with the Paying Agent funds in
satisfaction of the applicable redemption price pursuant to the Indenture.
9. Change of Control Offer.
Following the occurrence of a Change of Control, the Issuers
shall, within 30 days, make a Change of Control Offer for all Notes then
outstanding at a purchase price in cash equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the Change
of Control Payment Date (subject to the right of Holders of record on the
relevant Interest Record Date to receive interest due on the relevant Interest
Payment Date).
10. Limitation on Disposition of Assets.
The Issuers are, subject to certain conditions, obligated to make
a Net Proceeds Offer for Notes at a purchase price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the Net Proceeds Offer Payment Date (subject to the right of Holders of record
on the Interest Relevant Record Date to receive interest due on the relevant
Interest Payment Date) with the excess proceeds of certain asset dispositions.
11. Denominations; Transfer; Exchange.
The Notes are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange of Notes in accordance with the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or similar
governmental charges payable in connection therewith as
A-7
<PAGE> 90
permitted by the Indenture. The Registrar need not register the transfer of or
exchange of any Notes or portions thereof selected for redemption, except the
unredeemed portion of any Note being redeemed in part.
12. Persons Deemed Owners.
The registered Holder of a Note shall be treated as the owner of
it for all purposes.
13. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed
for two years, the Trustee and the Paying Agent will repay the funds to the
Issuers at their written request. After that, all liability of the Trustee and
such Paying Agent with respect to such funds shall cease.
14. Legal Defeasance and Covenant Defeasance.
The Issuers may be discharged from their obligations under the
Indenture and the Notes, except for certain provisions thereof, and may be
discharged from obligations to comply with certain covenants contained in the
Indenture and the Notes, in each case upon satisfaction of certain conditions
specified in the Indenture.
15. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture and the Notes may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Notes then outstanding, and any
existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Notes then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture and the Notes
to, among other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated Notes or comply
with any requirements of the SEC in connection with the qualification of the
Indenture under the TIA, or make any other change that does not materially
adversely affect the rights of any Holder of a Note.
16. Restrictive Covenants.
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and the Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
to the Company, to consolidate, merge or sell all or substantially all of its
assets or to engage in transactions with affiliates or certain other related
persons. The limitations are subject to a number of important qualifications and
exceptions. The Issuers must report quarterly to the Trustee on compliance with
such limitations.
17. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in aggregate principal amount of Notes then
outstanding may declare all the Notes to be due and payable immediately in the
manner and with the effect provided in the Indenture. Holders of Notes may not
enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee is not obligated to enforce the Indenture or the Notes unless it has
received indemnity satisfactory to it. The Indenture permits, subject to certain
limitations
A-8
<PAGE> 91
therein provided, Holders of a majority in aggregate principal amount of the
Notes then outstanding to direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of Notes notice of certain
continuing Defaults or Events of Default if it determines that withholding
notice is in their interest.
18. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Notes and may otherwise deal with
the Issuers or their respective Affiliates as if it were not the Trustee.
19. No Recourse Against Others.
No director, officer, employee, stockholder or member of the
Issuers, as such, shall have any liability for any obligation of the Issuers
under the Notes or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Note by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
20. Authentication.
This Note shall not be valid until the Trustee or Authenticating
Agent signs the certificate of authentication on this Note.
21. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants
by the entireties), JT TEN (= joint tenants with right of survivorship and not
as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
22. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Issuers have caused CUSIP
numbers to be printed on the Notes as a convenience to the Holders of the Notes.
No representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
23. Registration Rights.
Pursuant to the Registration Rights Agreement, the Issuers will be
obligated upon the occurrence of certain events to consummate an exchange offer
pursuant to which the Holder of this Note shall have the right to exchange this
Note for an 11 1/4% Senior Subordinated Note due 2006, Series B, of the Issuers
which has been registered under the Securities Act, in like principal amount and
having terms identical in all material respects to the Initial Notes. The
Holders shall be entitled to receive certain additional interest payments in the
event such exchange offer is not consummated and upon certain other conditions,
all pursuant to and in accordance with the terms of the Registration Rights
Agreement.
A-9
<PAGE> 92
24. Governing Law.
The Indenture and the Notes will 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 law of another jurisdiction would be required thereby.
A-10
<PAGE> 93
[FORM OF GUARANTEE]
SENIOR SUBORDINATED GUARANTEE
The Guarantor (capitalized terms used herein have the meanings
given such terms in the Indenture referred to in the Note upon which this
notation is endorsed) hereby unconditionally guarantees on a senior subordinated
basis (such guaranty being referred to herein as the "Guarantee") the due and
punctual payment of the principal of, and interest on the Notes, whether at
maturity, by acceleration or otherwise, the due and punctual payment of interest
on the overdue principal, premium and interest on the Notes, and the due and
punctual performance of all other obligations of the Issuers to the Holders or
the Trustee, all in accordance with the terms set forth in Article Eleven of the
Indenture.
The obligations of the Guarantor to the Holders of Notes and to
the Trustee pursuant to the Guarantee and the Indenture are expressly set forth,
and are expressly subordinated and subject in right of payment to the prior
payment in full of all Senior Debt of the Guarantor, to the extent and in the
manner provided in Article Eleven and Article Twelve of the Indenture.
This Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Notes upon which this Guarantee
is noted shall have been executed by the Trustee under the Indenture or the
Authenticating Agent by the manual signature of one of its authorized officers.
This Guarantee shall be governed by and construed in accordance
with the laws of the State of New York without regard to principles of conflicts
of law.
This Guarantee is subject to release upon the terms set forth in
the Indenture.
[ ]
By:______________________________________
Name:
Title:
<PAGE> 94
ASSIGNMENT FORM
I or we assign and transfer this Note to
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint_________________________________________________________
agent to transfer this Note on the books of the Issuers. The agent may
substitute another to act for him.
Dated:___________________ Signed: ______________________________
(Signed exactly as name appears
on the other side of this Note)
Signature Guarantee:______________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Registrar)
<PAGE> 95
EXHIBIT B
[FORM OF SERIES B NOTE]
GENERAC PORTABLE PRODUCTS, LLC
GPPW, INC.
11 1/4% Senior Subordinated Note
due 2006, Series B
CUSIP No.:[ ]
No. [ ] $[ ]
GENERAC PORTABLE PRODUCTS, LLC, a limited liability company (the
"Company", which term includes any successor), and GPPW, INC., a Wisconsin
corporation ("GPPW", which term includes any successor and, together with the
Company, the "Issuers"), for value received jointly and severally promise to pay
to [ ] or registered assigns, the principal sum of [ ] Dollars, on July 1, 2006.
Interest Payment Dates: January 1 and July 1, commencing on
January 1, 1999.
Interest Record Dates: December 15 and June 15.
Reference is made to the further provisions of this Note contained
herein and the Indenture (as defined), which will for all purposes have the same
effect as if set forth at this place.
B-1
<PAGE> 96
IN WITNESS WHEREOF, each of the Issuers has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
GENERAC PORTABLE PRODUCTS, LLC
By:______________________________________
Name:
Title:
By:______________________________________
Name:
Title:
GPPW, INC.
By:______________________________________
Name:
Title:
By:______________________________________
Name:
Title:
Dated: [ ]
B-2
<PAGE> 97
FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 11 1/4% Senior Subordinated Notes due 2006,
Series B, described in the within-mentioned Indenture.
Dated: [ ]
MARINE MIDLAND BANK,
as Trustee
By:______________________________________
Authorized Signatory
or
MARINE MIDLAND BANK,
as Trustee
By Bankers Trust Company,
as Authenticating Agent
By:______________________________________
Authorized Signatory
B-3
<PAGE> 98
(REVERSE OF NOTE)
GENERAC PORTABLE PRODUCTS, LLC
GPPW, INC.
11 1/4% Senior Subordinated Note
due 2006, Series B
1. Interest.
The Issuers jointly and severally promise to pay interest on the
principal amount of this Note at the rate per annum shown above. Cash interest
on the Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from July 9, 1998. The Issuers will pay
interest semi-annually in arrears on each Interest Payment Date, commencing
January 1, 1999. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
In addition, the Issuers shall pay interest on overdue principal
and on overdue installments of interest (without regard to any applicable grace
periods) to the extent lawful from time to time on demand, in each case at the
rate borne by this Note.
The Notes are not entitled to the benefit of any mandatory sinking
fund.
2. Method of Payment.
The Issuers shall pay interest on the Notes (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Interest Record Date immediately preceding the Interest Payment Date even
if the Notes are cancelled on registration of transfer or registration of
exchange after such Interest Record Date. Holders must surrender Notes to a
Paying Agent to collect principal payments. The Issuers shall pay principal and
interest in United States Legal Tender (as defined in the Indenture referred to
below). However, the Issuers may pay principal and interest by wire transfer of
Federal funds (provided that the Paying Agent shall have received wire
instructions on or prior to the relevant Interest Record Date), or interest by
check payable in such United States Legal Tender. The Issuers may deliver any
such interest payment to the Paying Agent or to a Holder at the Holder's
registered address.
3. Paying Agent and Registrar.
Initially, Bankers Trust Company will act as Paying Agent and
Registrar. The Issuers may change any Paying Agent or Registrar without notice
to the Holders. The Issuers may, subject to certain exceptions, act as
Registrar.
4. Indenture.
The Issuers issued the Notes under an Indenture, dated as of July
1, 1998 (the "Indenture"), by and among the Issuers and Marine Midland Bank, as
Trustee (the "Trustee"). Capitalized terms herein are used
B-4
<PAGE> 99
as defined in the Indenture unless otherwise defined herein. This Note is one of
a duly authorized issue of Notes of the Issuers designated as their 11 1/4%
Senior Subordinated Notes due 2006, Series B, under the Indenture. The aggregate
principal amount of Notes which may be issued under the Indenture is limited
(except as provided in the Indenture) to $160,000,000. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "TIA"), as in
effect on the date of the Indenture (except as otherwise indicated in the
Indenture) until such time as the Indenture is qualified under the TIA, and
thereafter as in effect on the date on which the Indenture is qualified under
the TIA. Notwithstanding anything to the contrary herein, the Notes are subject
to all such terms, and holders of Notes are referred to the Indenture and the
TIA for a statement of them.
5. Subordination.
The Notes are unsecured obligations of the Issuers and are
subordinated in right of payment to all Senior Debt of the Issuers to the extent
and in the manner provided in the Indenture. Each Holder of a Note, by accepting
a Note, agrees to such subordination, authorizes the Trustee to give effect to
such subordination and appoints the Trustee as attorney-in-fact for such
purpose. The Notes will rank pari passu in right of payment with any future
senior subordinated indebtedness of the Issuers and will rank senior in right of
payment to any other subordinated obligations of the Issuers.
6. Optional Redemption.
The Notes will be redeemable, at the Issuers' option, in whole at
any time or in part from time to time, on and after July 1, 2002, upon not less
than 30 nor more than 60 days' notice, at the following redemption prices
(expressed as percentages of the principal amount thereof) if redeemed during
the twelve-month period commencing on July 1 of the year set forth below, plus,
in each case, accrued and unpaid interest thereon, if any, to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2002.................................................. 107.625%
2003.................................................. 104.750%
2004.................................................. 102.875%
2005 and thereafter................................... 100.000%
</TABLE>
7. Optional Redemption upon Public Equity Offerings.
At any time, or from time to time, on or prior to July 1, 2001,
the Issuers may, at their option, use the net cash proceeds of one or more
Public Equity Offerings (as defined below) to redeem the Notes at a redemption
price equal to 111.25% of the principal amount thereof plus accrued and unpaid
interest thereon, if any, to the date of redemption; provided that at least 65%
of the principal amount of Notes originally issued remains outstanding
immediately after any such redemption. In order to effect the foregoing
redemption with the proceeds of any Public Equity Offering, the Issuers shall
make such redemption not more than 120 days after the consummation of any such
Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means
an underwritten public offering of Qualified Capital Stock of Holdings or the
Company pursuant to a registration statement filed with the Commission in
accordance with the Securities Act, other than an offering pursuant to Form S-8
(or any successor thereto); provided that, in the event of a Public Equity
Offering by Holdings, Holdings contributes to the
B-5
<PAGE> 100
capital of the Company the portion of the net cash proceeds of such Public
Equity Offering necessary to pay the aggregate redemption price (plus accrued
interest to the redemption date) of the Notes to be redeemed pursuant to the
preceding paragraph.
8. Selection and Notice of Redemption.
In the event that less than all of the Notes are to be redeemed at
any time, selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such Notes are listed or, if such Notes are not then listed on
a national securities exchange, on a pro rata basis, by lot or by such method as
the Trustee shall deem fair and appropriate; provided, however, that no Notes of
a principal amount of $1,000 or less shall be redeemed in part; provided,
further, that if a partial redemption is made with the proceeds of a Public
Equity Offering, selection of the Notes or portions thereof for redemption shall
be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis
as is practicable (subject to DTC procedures), unless such method is otherwise
prohibited. Notice of redemption shall be mailed by first-class mail at least 30
but not more than 60 days before the redemption date to each Holder of Notes to
be redeemed at its registered address. If any Note is to be redeemed in part
only, the notice of redemption that relates to such Note shall state the portion
of the principal amount thereof to be redeemed. A new Note in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note. On and after the redemption
date, interest will cease to accrue on Notes or portions thereof called for
redemption as long as the Company has deposited with the Paying Agent funds in
satisfaction of the applicable redemption price pursuant to the Indenture.
9. Change of Control Offer.
Following the occurrence of a Change of Control, the Issuers
shall, within 30 days, make a Change of Control Offer for all Notes then
outstanding at a purchase price in cash equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the Change
of Control Payment Date (subject to the right of Holders of record on the
relevant Interest Record Date to receive interest due on the relevant Interest
Payment Date).
10. Limitation on Disposition of Assets.
The Issuers are, subject to certain conditions, obligated to make
a Net Proceeds Offer for Notes at a purchase price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the Net Proceeds Offer Payment Date (subject to the right of Holders of record
on the Interest Relevant Record Date to receive interest due on the relevant
Interest Payment Date) with the excess proceeds of certain Asset Sales.
11. Denominations; Transfer; Exchange.
The Notes are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange of Notes in accordance with the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or similar
governmental charges payable in connection therewith as permitted by the
Indenture. The Registrar need not register the transfer of or exchange of any
Notes or portions thereof selected for redemption, except the unredeemed portion
of any Note being redeemed in part.
B-6
<PAGE> 101
12. Persons Deemed Owners.
The registered Holder of a Note shall be treated as the owner of
it for all purposes.
13. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed
for two years, the Trustee and the Paying Agent will repay the funds to the
Issuers at their written request. After that, all liability of the Trustee and
such Paying Agent with respect to such funds shall cease.
14. Legal Defeasance and Covenant Defeasance.
The Issuers may be discharged from their obligations under the
Indenture and the Notes, except for certain provisions thereof, and may be
discharged from obligations to comply with certain covenants contained in the
Indenture and the Notes, in each case upon satisfaction of certain conditions
specified in the Indenture.
15. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture and the Notes may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Notes then outstanding, and any
existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Notes then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture and the Notes
to, among other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated Notes or comply
with any requirements of the SEC in connection with the qualification of the
Indenture under the TIA, or make any other change that does not materially
adversely affect the rights of any Holder of a Note.
16. Restrictive Covenants.
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and the Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
to the Company, to consolidate, merge or sell all or substantially all of its
assets or to engage in transactions with affiliates or certain other related
persons. The limitations are subject to a number of important qualifications and
exceptions. The Issuers must report quarterly to the Trustee on compliance with
such limitations.
17. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in aggregate principal amount of Notes then
outstanding may declare all the Notes to be due and payable immediately in the
manner and with the effect provided in the Indenture. Holders of Notes may not
enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee is not obligated to enforce the Indenture or the Notes unless it has
received indemnity satisfactory to it. The Indenture permits, subject to certain
limitations therein provided, Holders of a majority in aggregate principal
amount of the Notes then outstanding to direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of Notes notice of
certain continuing Defaults or Events of Default if it determines that
withholding notice is in their interest.
B-7
<PAGE> 102
18. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Notes and may otherwise deal with
the Issuers or their respective Affiliates as if it were not the Trustee.
19. No Recourse Against Others.
No director, officer, employee, stockholder or member of the
Issuers, as such, shall have any liability for any obligation of the Issuers
under the Notes or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Note by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
20. Authentication.
This Note shall not be valid until the Trustee or Authenticating
Agent signs the certificate of authentication on this Note.
21. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants
by the entireties), JT TEN (= joint tenants with right of survivorship and not
as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
22. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Issuers have caused CUSIP
numbers to be printed on the Notes as a convenience to the Holders of the Notes.
No representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
23. Governing Law.
The Indenture and the Notes will be governed by, and construed in
accordance with, the laws of the State of New York but without giving effect of
applicable principles of conflicts of law to the extent that the application of
the law of another jurisdiction would be required thereby.
B-8
<PAGE> 103
[FORM OF GUARANTEE]
SENIOR SUBORDINATED GUARANTEE
The Guarantor (capitalized terms used herein have the meanings
given such terms in the Indenture referred to in the Note upon which this
notation is endorsed) hereby unconditionally guarantees on a senior subordinated
basis (such guaranty being referred to herein as the "Guarantee") the due and
punctual payment of the principal of, and interest on the Notes, whether at
maturity, by acceleration or otherwise, the due and punctual payment of interest
on the overdue principal, premium and interest on the Notes, and the due and
punctual performance of all other obligations of the Issuers to the Holders or
the Trustee, all in accordance with the terms set forth in Article Eleven of the
Indenture.
The obligations of the Guarantor to the Holders of Notes and to
the Trustee pursuant to the Guarantee and the Indenture are expressly set forth,
and are expressly subordinated and subject in right of payment to the prior
payment in full of all Senior Debt of the Guarantor, to the extent and in the
manner provided in Article Eleven and Article Twelve of the Indenture.
This Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Notes upon which this Guarantee
is noted shall have been executed by the Trustee under the Indenture or the
Authenticating Agent by the manual signature of one of its authorized officers.
This Guarantee shall be governed by and construed in accordance
with the laws of the State of New York without regard to principles of conflicts
of law.
This Guarantee is subject to release upon the terms set forth in
the Indenture.
[ ]
By:______________________________________
Name:
Title:
<PAGE> 104
ASSIGNMENT FORM
I or we assign and transfer this Note to
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint_________________________________________________________
agent to transfer this Note on the books of the Issuers. The agent may
substitute another to act for him.
Dated:___________________ Signed: ________________________________
(Signed exactly as name appears
on the other side of this Note)
Signature Guarantee:
__________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Registrar)
<PAGE> 105
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuers
pursuant to Section 4.05 or Section 4.14 of the Indenture, check the appropriate
box:
Section 4.05 [ ]
Section 4.14 [ ]
If you want to elect to have only part of this Note purchased by
the Issuers pursuant to Section 4.05 or Section 4.14 of the Indenture, state the
amount: $_____________
Dated:___________________ Your Signature:_____________________
(Signed exactly as name appears
on the other side of this Note)
Signature Guarantee:
_________________________
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
<PAGE> 106
EXHIBIT C
FORM OF LEGEND FOR GLOBAL NOTES
Any Global Note authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Note) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY
OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS NOTE IS
NOT EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER
THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER THAN A
TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, AND TRANSFERS OF INTERESTS IN THIS GLOBAL NOTE
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 2.16 OF THE INDENTURE.
C-1
<PAGE> 107
EXHIBIT D
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF NOTES
Re: 11-1/4% Senior Subordinated Notes due 2006
(the "Notes")
Generac Portable Products, LLC and GPPW, Inc.
This Certificate relates to $_______ principal amount of Notes
held in the form of* ___ a beneficial interest in a Global Note or* _______
Physical Notes by ______ (the "Transferor").
The Transferor:*
/ / has requested by written order that the Registrar deliver in
exchange for its beneficial interest in the Global Note held by the Depositary a
Physical Note or Physical Notes in definitive, registered form of authorized
denominations and an aggregate number equal to its beneficial interest in such
Global Note (or the portion thereof indicated above); or
/ / has requested by written order that the Registrar exchange or
register the transfer of a Physical Note or Physical Notes.
In connection with such request and in respect of each such Note,
the Transferor does hereby certify that the Transferor is familiar with the
Indenture relating to the above captioned Notes and the restrictions on
transfers thereof as provided in Section 2.16 of such Indenture, and that the
transfer of the Notes does not require Registration under the Securities Act of
1933, as amended (the "Act"), because*:
/ / Such Note is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.16 of the Indenture).
/ / Such Note is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Act), in reliance on Rule 144A.
/ / Such Note is being transferred to an institutional "accredited
investor" (within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule
501 under the Act) which delivers a certificate to the Trustee in the form of
Exhibit E to the Indenture.
/ / Such Note is being transferred in reliance on Rule 144 under
the Act.
/ / Such Note is being transferred in reliance on and in
compliance with an exemption from the Registration requirements of the Act other
than Rule 144A or Rule 144 under the Act to a person other than an institutional
"accredited investor." [An Opinion of Counsel to the effect that such transfer
does not require Registration under the Securities Act accompanies this
certification.]
________________________________
[INSERT NAME OF TRANSFEROR]
By: ____________________________
[Authorized Signatory]
Date:________________________
*Check applicable box.
D-1
<PAGE> 108
EXHIBIT E
Form of Transferee Letter of Representation
Bankers Trust Company
4 Albany Street
New York, NY 10006
Attention: Corporate Trust and Agency Services
Dear Sirs:
This certificate is delivered to request a transfer of $________
principal amount of the 11 1/4% Senior Subordinated Notes due 2006 of Generac
Portable Products, LLC and GPPW, Inc. (the "Issuers") and any guarantee thereof
(the "Notes"). Upon transfer, the Notes would be registered in the name of the
new beneficial owner as follows:
Name:______________________________
Address:___________________________
Taxpayer ID Number:________________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933 (the
"Securities Act")) purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount of the
Notes, and we are acquiring the Notes not with a view to, or for offer or sale
in connection with, any distribution in violation of the Securities Act. We have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risk of our investment in the Notes and we invest
in or purchase securities similar to the Notes in the normal course of our
business. We and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
2. We understand that the Notes have not been registered under
the Securities Act and, unless so registered, may not be sold except as
permitted in the following sentence. We agree on our own behalf and on behalf of
any investor account for which we are purchasing Notes to offer, sell or
otherwise transfer such Notes prior to the date which is two years after the
later of the date of original issue and the last date on which the Issuers or
any affiliate of the Issuers was the owner of such Notes (or any predecessor
thereto) (the "Resale Restriction Termination Date") only (a) to an Issuer, (b)
pursuant to a registration statement which has been declared effective under the
Securities Act, (c) in a transaction complying with the requirements of Rule
144A under the Securities Act, to a person we reasonably believe is a qualified
institutional buyer under Rule 144A (a "QIB") that purchases for its own account
or for the account of a QIB and to whom notice is given that the transfer is
being made in reliance on Rule 144A, (d) to an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, that is purchasing for its own account or for the account of
such an institutional "accredited investor," in each case in a minimum principal
amount of Notes of $250,000 or (e) pursuant to any other available exemption
from the registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirement of law that the disposition of our property
or the property of such investor account or accounts be at all times within our
or their control and in compliance with any applicable state securities laws. If
any resale or other transfer of the Notes is proposed to be made pursuant to
clause (d) above prior to the Resale Restriction Termination Date, the
transferor shall deliver a letter from the transferee substantially in the form
of this letter to the Issuers and the Registrar, which shall provide, among
other things,
E-1
<PAGE> 109
that the transferee is an institutional "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it is
acquiring such Notes for investment purposes and not for distribution in
violation of the Securities Act. The Issuers and the Registrar reserve the right
prior to any offer, sale or other transfer prior to the Resale Restriction
Termination Date of the Notes pursuant to clause (d) or (e) above to require the
delivery of an opinion of counsel, certificates and/or other information
satisfactory to the Issuers and the Registrar.
Dated: ______________________ TRANSFEREE:
By: ________________________________
E-2
<PAGE> 1
Exhibit 4.2
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of July 2, 1998
Among
GENERAC PORTABLE PRODUCTS, LLC
GPPW, INC.
as Issuers,
and
BT ALEX. BROWN INCORPORATED,
as Initial Purchaser
11 1/4% Senior Subordinated Notes due 2006
- --------------------------------------------------------------------------------
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is dated
as of July 2, 1998, among GENERAC PORTABLE PRODUCTS, LLC, a Delaware limited
liability company (the "Operating Company"), and GPPW, INC., a Wisconsin
corporation (the "Co-Issuer," and together with the Operating Company, the
"Issuers"), as issuers, and BT ALEX. BROWN INCORPORATED, as initial purchaser
(the "Initial Purchaser").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of July 2, 1998, among the Issuers and the Initial Purchaser
(the "Purchase Agreement"), which provides for, among other things, the sale by
the Issuers to the Initial Purchaser of $110,000,000 aggregate principal amount
of the Issuers' 11 1/4% Senior Subordinated Notes due 2006 (the "Notes"). In
order to induce the Initial Purchaser to enter into the Purchase Agreement, the
Issuers have agreed to provide the registration rights set forth in this
Agreement for the benefit of the Initial Purchaser and any subsequent holder or
holders of the Notes. The execution and delivery of this Agreement is a
condition to the Initial Purchaser's obligation to purchase the Notes under the
Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4 hereof.
Advice: See the last paragraph of Section 5 hereof.
Agreement: See the introductory paragraphs hereto.
Applicable Period: See Section 2 hereof.
Effectiveness Date: The 270th day after the Issue Date;
provided, however, that with respect to any Shelf Registration, the
Effectiveness Date shall be the 210th day after the Filing Date with respect
thereto.
Effectiveness Period: See Section 3 hereof.
Event Date: See Section 4 hereof.
<PAGE> 3
-2-
Exchange Act: The Notes Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2 hereof.
Exchange Offer: See Section 2 hereof.
Exchange Offer Registration Statement: See Section 2 hereof.
Filing Date: (A) If no Exchange Offer Registration Statement
has been filed by the Issuers pursuant to this Agreement, the 210th day after
the Issue Date; and (B) with respect to a Shelf Registration Statement, the 60th
day after the delivery of a Shelf Notice as required pursuant to Section 2(c)
hereof.
Holder: Any holder of a Registrable Note or Registrable Notes.
Indemnified Person: See Section 7(c) hereof.
Indemnifying Person: See Section 7(c) hereof.
Indenture: The Indenture, dated as of July 1, 1998, by and
among the Issuers and Marine Midland Bank, as trustee, pursuant to which the
Notes are being issued, as the same may be amended or supplemented from time to
time in accordance with the terms thereof.
Initial Purchaser: See the introductory paragraphs hereto.
Initial Shelf Registration: See Section 3(a) hereof.
Inspectors: See Section 5(m) hereof.
Issue Date: July 9, 1998, the date of original issuance of the
Notes.
Issuers: See the introductory paragraphs hereto.
NASD: See Section 5(r) hereof.
Notes: See the introductory paragraphs hereto.
Offering Memorandum: The final offering memorandum of the
Company dated July 2, 1998, in respect of the offering of the Notes.
Participant: See Section 7(a) hereof.
<PAGE> 4
-3-
Participating Broker-Dealer: See Section 2 hereof.
Person: An individual, trustee, corporation, partnership,
limited liability company, joint stock company, trust, unincorporated
association, union, business association, firm or other legal entity.
Private Exchange: See Section 2 hereof.
Private Exchange Notes: See Section 2 hereof.
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act and any term sheet filed pursuant
to Rule 434 under the Securities Act), as amended or supplemented by any
prospectus supplement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
Purchase Agreement: See the introductory paragraphs hereof.
Records: See Section 5(m) hereof.
Registrable Notes: Each Security upon its original issuance
and at all times subsequent thereto, each Exchange Note as to which Section
2(c)(iv) hereof is applicable upon original issuance and at all times subsequent
thereto and each Private Exchange Note upon original issuance thereof and at all
times subsequent thereto, until (i) a Registration Statement (other than, with
respect only to any Exchange Note as to which Section 2(c)(iv) hereof is
applicable, the Exchange Offer Registration Statement) covering such Note,
Exchange Note or Private Exchange Note has been declared effective by the SEC
and such Note, Exchange Note or such Private Exchange Note, as the case may be,
has been disposed of in accordance with such effective Registration Statement,
(ii) such Note has been exchanged pursuant to the Exchange Offer for an Exchange
Note or Exchange Notes that may be resold without restriction under state and
federal securities laws, (iii) such Note, Exchange Note or Private Exchange
Note, as the case may be, ceases to be outstanding for purposes of the Indenture
or (iv) such Note, Exchange Note or Private Exchange Note, as the case may be,
may be resold without restriction pursuant to Rule 144 (or any similar provision
then in force) under the Securities Act.
Registration Statement: Any registration statement of the
Issuers that covers any of the Notes, the Exchange Notes or the Private Exchange
Notes filed with the SEC under
<PAGE> 5
-4-
the Securities Act, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of the issuer of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Notes and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2 hereof.
Shelf Registration: See Section 3(b) hereof.
Subsequent Shelf Registration: See Section 3(b) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and the trustee (if
any) under any indenture governing the Exchange Notes and Private Exchange
Notes.
Underwritten registration or underwritten offering: A
registration in which securities of one or more of the Issuers are sold to an
underwriter for reoffering to the public.
2. Exchange Offer
(a) To the extent not prohibited by any applicable law or
applicable interpretation of the staff of the SEC, the Issuers shall file with
the SEC, no later than the Filing Date, a Registration Statement (the "Exchange
Offer Registration Statement") on an appropri-
<PAGE> 6
-5-
ate registration form with respect to a registered offer (the "Exchange Offer")
to exchange any and all of the Registrable Notes for a like aggregate principal
amount of notes of the Company, that are identical in all material respects to
the Notes (the "Exchange Notes"), except that (i) the Exchange Notes shall
contain no restrictive legend thereon and (ii) interest thereon shall accrue
from the last date on which interest was paid on the Notes or, if no such
interest has been paid, from the Issue Date, and which are entitled to the
benefits of the Indenture or a trust indenture which is identical in all
material respects to the Indenture (other than such changes to the Indenture or
any such identical trust indenture as are necessary to comply with the TIA) and
which, in either case, has been qualified under the TIA. The Exchange Offer
shall comply with all applicable tender offer rules and regulations under the
Exchange Act and other applicable law. The Issuers shall use their reasonable
best efforts to (x) cause the Exchange Offer Registration Statement to be
declared effective under the Securities Act on or before the Effectiveness Date;
(y) keep the Exchange Offer open for at least 20 days (or longer if required by
applicable law) after the date that notice of the Exchange Offer is mailed to
Holders; and (z) consummate the Exchange Offer on or prior to the later of (i)
the 45th day following the date on which the Exchange Offer Registration
Statement is declared effective by the SEC or (ii) the 300th day after the Issue
Date. If, after the Exchange Offer Registration Statement is initially declared
effective by the SEC, the Exchange Offer or the issuance of the Exchange Notes
thereunder is interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court, the Exchange
Offer Registration Statement shall be deemed not to have become effective for
purposes of this Agreement during the period of such interference, until the
Exchange Offer may legally resume.
Each Holder that participates in the Exchange Offer will be
required, as a condition to its participation in the Exchange Offer, to
represent to the Issuers in writing (which may be contained in the applicable
letter of transmittal) that any Exchange Notes to be received by it will be
acquired in the ordinary course of its business, that at the time of the
consummation of the Exchange Offer such Holder will have no arrangement or
understanding with any Person to participate in the distribution of the Exchange
Notes in violation of the provisions of the Securities Act, and that such Holder
is not an affiliate of the Company within the meaning of the Securities Act.
Upon consummation of the Exchange Offer in accordance with
this Section 2, the provisions of this Agreement shall continue to apply,
mutatis mutandis, solely with respect to Registrable Notes that are Private
Exchange Notes, Exchange Notes as to which Section 2(c)(iv) is applicable and
Exchange Notes held by Participating Broker-Dealers (as defined), and the
Issuers shall have no further obligation to register Registrable Notes (other
than Private Exchange Notes and other than in respect of any Exchange Notes as
to which clause 2(c)(iv) hereof applies) pursuant to Section 3 hereof.
<PAGE> 7
-6-
No securities other than the Exchange Notes shall be included
in the Exchange Offer Registration Statement.
(b) The Issuers shall include within the Prospectus contained
in the Exchange Offer Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to the Initial Purchaser, which shall
contain a summary statement of the positions taken or policies made by the staff
of the SEC with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange
Offer (a "Participating Broker-Dealer"), whether such positions or policies have
been publicly disseminated by the staff of the SEC or such positions or policies
represent the prevailing views of the staff of the SEC. Such "Plan of
Distribution" section shall also expressly permit, to the extent permitted by
applicable policies and regulations of the SEC, the use of the Prospectus by all
Persons subject to the prospectus delivery requirements of the Securities Act,
including, to the extent permitted by applicable policies and regulations of the
SEC, all Participating Broker-Dealers, and include a statement describing the
means by which Participating Broker-Dealers may resell the Exchange Notes in
compliance with the Securities Act.
The Issuers shall use their best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
Prospectus contained therein in order to permit such Prospectus to be lawfully
delivered by all Persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as is necessary to comply with applicable
law in connection with any resale of the Exchange Notes covered thereby,
provided, however, that such period shall not be required to exceed 180 days, or
such longer period if extended pursuant to the last sentence of Section 5 (the
"Applicable Period").
If, prior to consummation of the Exchange Offer, the Initial
Purchaser holds any Notes acquired by it that have the status of an unsold
allotment in the initial distribution, the Issuers upon the request of the
Initial Purchaser shall simultaneously with the delivery of the Exchange Notes
in the Exchange Offer, issue and deliver to the Initial Purchaser, in exchange
(the "Private Exchange") for such Notes held by the Initial Purchaser, a like
principal amount of notes (the "Private Exchange Notes") of the Issuers, that
are identical in all material respects to the Exchange Notes except for the
placement of a restrictive legend on such Private Exchange Notes. The Private
Exchange Notes shall be issued pursuant to the same indenture as the Exchange
Notes and bear the same CUSIP number as the Exchange Notes.
In connection with the Exchange Offer, the Issuers shall:
(1) mail, or cause to be mailed, to each Holder of record
entitled to participate in the Exchange Offer a copy of the Prospectus forming
part of the Exchange Of-
<PAGE> 8
-7-
fer Registration Statement, together with an appropriate letter of transmittal
and related documents;
(2) use their best efforts to keep the Exchange Offer open for
not less than 20 days after the date that notice of the Exchange Offer
is mailed to Holders (or longer if required by applicable law);
(3) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, The City of New
York;
(4) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York time, on the last business day
on which the Exchange Offer shall remain open; and
(5) otherwise comply in all material respects with all
applicable laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer
and the Private Exchange, if any, the Issuers shall:
(1) accept for exchange all Registrable Notes validly tendered
and not validly withdrawn pursuant to the Exchange Offer and the
Private Exchange, if any;
(2) deliver to the Trustee for cancellation all Registrable
Notes so accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly to
each Holder of Notes, Exchange Notes or Private Exchange Notes, as the
case may be, equal in principal amount to the Notes of such Holder so
accepted for exchange.
The Exchange Offer and the Private Exchange shall not be
subject to any conditions, other than that (i) the Exchange Offer or the Private
Exchange, as the case may be, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii) no action or proceeding shall have
been instituted or threatened in any court or by any governmental agency which
might materially impair the ability of the Issuers to proceed with the Exchange
Offer or the Private Exchange, (iii) all governmental approvals shall have been
obtained, which approvals the Issuers deem necessary for the consummation of the
Exchange Offer or the Private Exchange, (iv) there has not been any material
change, or development involving a prospective material change, in the business
or financial affairs of the Issuers which, in the reasonable judgment of the
Issuers, would materially impair the Issuers' ability to consummate the Exchange
Offer or the Private Exchange Offer, and (v) there has not been proposed,
adopted or enacted any law, statute, rule or regulation which, in the reasonable
<PAGE> 9
-8-
judgment of the Issuers, would materially impair the Issuers' ability to
consummate the Exchange Offer or the Private Exchange Offer or have a material
adverse effect on the Issuers if the Exchange Offer or the Private Exchange
Offer was consummated. In the event that the Issuers are unable to consummate
the Exchange Offer or the Private Exchange Offer due to any event listed in
clauses (i) through (v) above, the Issuers shall not be deemed to have breached
any covenant under this Section 2.
Each Holder of Registrable Notes who wishes to exchange such
Registrable Notes for Exchange Notes in the Exchange Offer will be required to
make certain customary representations in connection therewith, including
representations that such Holder is not an affiliate of the Issuers within the
meaning of Rule 405 under the Securities Act, that any Exchange Notes to be
received by it will be acquired in the ordinary course of business and that at
the time of commencement of the Exchange Offer it had no arrangement with any
Person to participate in the distribution (within the meaning of the Securities
Act) of the Exchange Notes and will be required to make such other
representations as may be necessary under applicable SEC rules, regulations or
interpretations to render available the use of Form S-4 or any other appropriate
form under the Securities Act.
The Exchange Notes and the Private Exchange Notes shall be
issued under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture and which, in either case, has been qualified under
the TIA or is exempt from such qualification and shall provide that the Exchange
Notes shall not be subject to the transfer restrictions set forth in the
Indenture. The Indenture or such indenture shall provide that the Exchange
Notes, the Private Exchange Notes and the Notes shall vote and consent together
on all matters as one class and that none of the Exchange Notes, the Private
Exchange Notes or the Notes will have the right to vote or consent as a separate
class on any matter.
(c) If (i) because of any change in law or in currently
prevailing interpretations of the staff of the SEC, the Issuers are not
permitted to effect the Exchange Offer, (ii) the Exchange Offer is not
consummated within 300 days of the Issue Date, (iii) the holder of Private
Exchange Notes so requests in writing to the Issuers within 60 days after the
consummation of the Exchange Offer, or (iv) in the case of any Holder that
participates in the Exchange Offer, such Holder does not receive Exchange Notes
on the date of the exchange that may be sold without restriction under state and
federal securities laws (other than due solely to the status of such Holder as
an affiliate of one of the Issuers within the meaning of the Securities Act),
then in the case of each of clauses (i) to and including (iv) of this sentence,
the Issuers shall promptly deliver to the Holders and the Trustee written notice
thereof (the "Shelf Notice") and shall file a Shelf Registration pursuant to
Section 3 hereof.
<PAGE> 10
-9-
3. Shelf Registration
If at any time a Shelf Notice is delivered as contemplated by
Section 2(c) hereof, then:
(a) Shelf Registration. The Issuers shall file with the SEC a
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415 covering all of the Registrable Notes not exchanged in the Exchange
Offer, Private Exchange Notes and Exchange Notes as to which Section 2(c)(iv) is
applicable (the "Initial Shelf Registration"). The Issuers shall use their
reasonable best efforts to file with the SEC the Initial Shelf Registration on
or before the applicable Filing Date. The Initial Shelf Registration shall be on
Form S-1 or another appropriate form permitting registration of such Registrable
Notes for resale by Holders in the manner or manners designated by them
(including, without limitation, one or more underwritten offerings). The Issuers
shall not permit any securities other than the Registrable Notes to be included
in the Initial Shelf Registration or any Subsequent Shelf Registration (as
defined below).
No Holder of Registrable Notes may include any of its
Registrable Notes in any Shelf Registration Statement pursuant to this Agreement
unless and until such Holder furnishes to the Issuers in writing, within 5 days
after receipt of a request therefor, such information the Issuers may reasonably
request for inclusion in any Shelf Registration Statement or prospectus or
preliminary prospectus included therein. No Holder of Registrable Notes shall be
entitled to Additional Interest pursuant to Section 4 hereof unless and until
such Holder shall have provided all such information. Each Holder as to which
any Shelf Registration Statement is being effected agrees to furnish promptly to
the Issuers additional information required to be disclosed in the applicable
Shelf Registration Statement by the rules and regulations of the SEC in order to
make the information previously furnished to the Issuers by such Holder not
materially misleading.
The Issuers shall, subject to applicable law or applicable
interpretation of the staff of the SEC, use their reasonable best efforts to
cause the Initial Shelf Registration to be declared effective under the
Securities Act on or prior to the Effectiveness Date and to keep the Initial
Shelf Registration continuously effective under the Securities Act until the
date which is two years from the Issue Date or such shorter period ending when
(i) all Registrable Notes covered by the Initial Shelf Registration have been
sold in the manner set forth and as contemplated in the Initial Shelf
Registration or cease to be outstanding or (ii) a Subsequent Shelf Registration
covering all of the Registrable Notes covered by and not sold under the Initial
Shelf Registration or an earlier Subsequent Shelf Registration has been declared
effective under the Securities Act (the "Effectiveness Period"), provided,
however, that the Effectiveness Period in respect of the Initial Shelf
Registration shall be extended to the extent re-
<PAGE> 11
-10-
quired to permit dealers to comply with the applicable prospectus delivery
requirements of Rule 174 under the Securities Act and as otherwise provided
herein.
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Effectiveness Period (other than because of the
sale of all of the securities registered thereunder), the Issuers shall use
their reasonable best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within 60 days of
such cessation of effectiveness amend the Initial Shelf Registration in a manner
to obtain the withdrawal of the order suspending the effectiveness thereof, or
file an additional "shelf" Registration Statement pursuant to Rule 415 covering
all of the Registrable Notes covered by and not sold under the Initial Shelf
Registration or an earlier Subsequent Shelf Registration (each, a "Subsequent
Shelf Registration"). If a Subsequent Shelf Registration is filed, the Issuers
shall use their reasonable best efforts to cause the Subsequent Shelf
Registration to be declared effective under the Securities Act as soon as
practicable after such filing and to keep such subsequent Shelf Registration
continuously effective for a period equal to the number of days in the
Effectiveness Period less the aggregate number of days during which the Initial
Shelf Registration or any Subsequent Shelf Registration was previously
continuously effective. As used herein the term "Shelf Registration" means the
Initial Shelf Registration and any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Issuers shall use their
reasonable best efforts to promptly supplement and amend any Shelf Registration
if required by the rules, regulations or instructions applicable to the
registration form used for such Shelf Registration, if required by the
Securities Act, or if reasonably requested by the Holders of a majority in
aggregate principal amount of the Registrable Notes covered by such Registration
Statement or by any underwriter of such Registrable Notes.
4. Additional Interest
(a) The Issuers and the Initial Purchaser agree that the
Holders will suffer damages if the Issuers fail to fulfill their obligations
under Section 2 or Section 3 hereof and that it would not be feasible to
ascertain the extent of such damages with precision. Accordingly, the Issuers
agree to pay, as liquidated damages, additional interest on the Notes
("Additional Interest") under the circumstances and to the extent set forth
below (each of which shall be given independent effect):
(i) if (A) neither the Exchange Offer Registration
Statement nor the Initial Shelf Registration has been filed on or prior
to the applicable Filing Date or (B) notwithstanding that the Issuers
have consummated or will consummate the Exchange Offer, the Issuers are
required to file a Shelf Registration and such Shelf Reg-
<PAGE> 12
-11-
istration is not filed on or prior to the Filing Date applicable
thereto, then, commencing on the day after any such Filing Date,
Additional Interest shall accrue on the principal amount of the Notes
at a rate of 0.50% per annum for the first 90 days immediately
following each such Filing Date, and such Additional Interest rate
shall increase by an additional 0.50% per annum at the beginning of
each subsequent 90-day period; or
(ii) if (A) neither the Exchange Offer Registration
Statement nor the Initial Shelf Registration is declared effective by
the SEC on or prior to the relevant Effectiveness Date or (B)
notwithstanding that the Issuers have consummated or will consummate
the Exchange Offer, the Issuers are required to file a Shelf
Registration and such Shelf Registration is not declared effective by
the SEC on or prior to the Effectiveness Date in respect of such Shelf
Registration, then, commencing on the day after such Effectiveness
Date, Additional Interest shall accrue on the principal amount of the
Notes at a rate of 0.50% per annum for the first 90 days immediately
following the day after such Effectiveness Date, and such Additional
Interest rate shall increase by an additional 0.50% per annum at the
beginning of each subsequent 90-day period; or
(iii) if (A) the Issuers have not exchanged Exchange
Notes for all Notes validly tendered in accordance with the terms of
the Exchange Offer on or prior to the later of the 45th day after the
date on which the Exchange Offer Registration Statement relating
thereto was declared effective or the 300th day after the Issue Date or
(B) if applicable, a Shelf Registration has been declared effective and
such Shelf Registration ceases to be effective at any time during the
Effectiveness Period, then Additional Interest shall accrue on the
principal amount of the Notes at a rate of 0.50% per annum for the
first 90 days commencing on the (x) 46th or 301st day, as the case may
be, after such effective date, in the case of (A) above, or (y) the day
such Shelf Registration ceases to be effective in the case of (B)
above, and such Additional Interest rate shall increase by an
additional 0.50% per annum at the beginning of each such subsequent
90-day period;
provided, however, that the Additional Interest rate on the Notes may not exceed
at any one time in the aggregate 1.00% per annum; provided, further, however,
that (1) upon the filing of the applicable Exchange Offer Registration Statement
or the applicable Shelf Registration as required hereunder (in the case of
clause (i) above of this Section 4), (2) upon the effectiveness of the Exchange
Offer Registration Statement or the applicable Shelf Registration Statement as
required hereunder (in the case of clause (ii) of this Section 4), or (3) upon
the exchange of the applicable Exchange Notes for all Notes tendered (in the
case of clause (iii)(A) of this Section 4), or upon the effectiveness of the
applicable Shelf Registration Statement which had ceased to remain effective (in
the case of (iii)(B) of this Section 4), Additional In-
<PAGE> 13
-12-
terest on the Notes in respect of which such events relate as a result of such
clause (or the relevant subclause thereof), as the case may be, shall cease to
accrue.
(b) The Issuers shall notify the Trustee within three business
days after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). Any amounts of
Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section
4 will be payable in cash semiannually on each January 1 and July 1 (to the
holders of record on the December 15 and June 15 immediately preceding such
dates), commencing with the first such date occurring after any such Additional
Interest commences to accrue. The amount of Additional Interest will be
determined by multiplying the applicable Additional Interest rate by the
principal amount of the Registrable Notes, multiplied by a fraction, the
numerator of which is the number of days such Additional Interest rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months and, in the case of a partial month, the
actual number of days elapsed), and the denominator of which is 360.
5. Registration Procedures
In connection with the filing of any Registration Statement
pursuant to Sections 2 or 3 hereof, the Issuers shall effect such registrations
to permit the sale of the securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto and in
connection with any Registration Statement filed by the Issuers hereunder each
of the Issuers shall:
(a) Prepare and file with the SEC prior to the applicable
Filing Date, a Registration Statement or Registration Statements as prescribed
by Sections 2 or 3 hereof, and use their reasonable best efforts to cause each
such Registration Statement to become effective and remain effective as provided
herein; provided, however, that, if (1) such filing is pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period relating thereto, before filing any
Registration Statement or Prospectus or any amendments or supplements thereto,
the Issuers, if requested, shall furnish to and afford the Holders of the
Registrable Notes included in such Registration Statement or each such
Participating Broker-Dealer, as the case may be, their counsel and the managing
underwriters, if any, a reasonable opportunity to review copies of all such
documents (including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed (in each case at least
five days prior to such filing, or such later date as is reasonable under the
circumstances). The Issuers shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto if the Holders of a majority
in aggregate principal amount of the Registrable Notes included in such
Registration Statement, or any such Participating
<PAGE> 14
-13-
Broker-Dealer, as the case may be, their counsel, or the managing underwriters,
if any, shall reasonably object on a timely basis.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration Statement or Exchange Offer
Registration Statement, as the case may be, as may be necessary to keep such
Registration Statement continuously effective for the Effectiveness Period or
the Applicable Period, as the case may be; cause the related Prospectus to be
supplemented by any Prospectus supplement required by applicable law, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provisions then in
force) promulgated under the Securities Act; and comply with the provisions of
the Securities Act and the Exchange Act applicable to each of them with respect
to the disposition of all securities covered by such Registration Statement as
so amended or in such Prospectus as so supplemented and with respect to the
subsequent resale of any securities being sold by a Participating Broker-Dealer
covered by any such Prospectus. The Issuers shall be deemed not to have used
their reasonable best efforts to keep a Registration Statement effective during
the Effectiveness Period or the Applicable Period, as the case may be, relating
thereto if any Issuer voluntarily takes any action that would result in selling
Holders of the Registrable Notes covered thereby or Participating Broker-Dealers
seeking to sell Exchange Notes not being able to sell such Registrable Notes or
such Exchange Notes during that period unless such action is required by
applicable law or permitted by this Agreement.
(c) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period relating thereto from whom the Company
Issuers have received written notice that it will be a Participating
Broker-Dealer in the Exchange Offer, notify the selling Holders of Registrable
Notes, or each such Participating Broker-Dealer, as the case may be, their
counsel and the managing underwriters, if any, promptly (but in any event within
one day), and confirm such notice in writing, (i) when a Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to any applicable Registration Statement or any post-effective
amendment, when the same has become effective under the Securities Act
(including in such notice a written statement that any Holder may, upon request,
obtain, at the sole expense of the Issuers, one conformed copy of such
Registration Statement or post-effective amendment including financial
statements and schedules, documents incorporated or deemed to be incorporated by
reference and exhibits), (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus or the initiation
of any proceedings for that purpose, (iii) if at any time when a prospectus is
required by the Securities Act to be delivered in connection with sales of the
Registrable Notes or resales of Exchange Notes by Participating Broker-Dealers
the repre-
<PAGE> 15
-14-
sentations and warranties of the Issuers contained in any agreement (including
any underwriting agreement) contemplated by Section 5(l) hereof cease to be true
and correct in all material respects, (iv) of the receipt by any Issuer of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Notes or the Exchange Notes to be
sold by any Participating Broker-Dealer for offer or sale in any jurisdiction,
or the initiation or threatening of any proceeding for such purpose, (v) of the
happening of any event, the existence of any condition or any information
becoming known that makes any statement made in such Registration Statement or
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the making
of any changes in or amendments or supplements to such Registration Statement,
Prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
(vi) of the Issuers' determination that a post-effective amendment to a
Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, use its best efforts to prevent the issuance
of any order suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable Notes
or the Exchange Notes to be sold by any Participating Broker-Dealer, for sale in
any jurisdiction, and, if any such order is issued, to use its best efforts to
obtain the withdrawal of any such order at the earliest possible time.
(e) If a Shelf Registration is filed pursuant to Section 3 and
if requested by the managing underwriter or underwriters (if any), the Holders
of a majority in aggregate principal amount of the Registrable Notes being sold
in connection with an underwritten offering or any Participating Broker-Dealer,
(i) as promptly as practicable incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriter or
underwriters (if any), such Holders, any Participating Broker-Dealer or counsel
for any of them reasonably request to be included therein, (ii) make all
required filings of such prospectus supplement or such post-effective amendment
as soon as practicable after an Issuer has received notification of the matters
to be incorporated in such prospectus supplement or
<PAGE> 16
-15-
post-effective amendment, and (iii) supplement or make amendments to such
Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, furnish to each selling Holder of
Registrable Notes who so requests and to counsel and each managing underwriter,
if any, at the sole expense of the Issuers, one conformed copy of the
Registration Statement or Registration Statements and each post-effective
amendment thereto, including financial statements and schedules, and, if
requested, all documents incorporated or deemed to be incorporated therein by
reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, deliver to each selling Holder of
Registrable Notes, or each such Participating Broker-Dealer, as the case may be,
their respective counsel, and the underwriters, if any, at the sole expense of
the Issuers, as many copies of the Prospectus or Prospectuses (including each
form of preliminary prospectus) and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, the Issuers
hereby consent to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, and the underwriters or agents,
if any, and dealers (if any), in connection with the offering and sale of the
Registrable Notes covered by, or the sale by Participating Broker-Dealers of the
Exchange Notes pursuant to, such Prospectus and any amendment or supplement
thereto, provided that such use complies with all applicable laws and
regulations.
(h) Prior to any public offering of Registrable Notes or any
delivery of a Prospectus contained in the Exchange Offer Registration Statement
by any Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, use its best efforts to register or qualify, and to cooperate
with the selling Holders of Registrable Notes or each such Participating
Broker-Dealer, as the case may be, the managing underwriter or underwriters, if
any, and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Notes for offer and sale under the securities or Blue Sky laws of
such jurisdictions within the United States as any selling Holder, Participating
Broker-Dealer, or the managing underwriter or underwriters reasonably request in
writing; provided, however, that no Issuer shall be required to (A) qualify
generally to do business in any jurisdiction where it is not then so qualified,
(B) take any ac-
<PAGE> 17
-16-
tion that would subject it to general service of process in any such
jurisdiction where it is not then so subject or (C) subject itself to taxation
in excess of a nominal dollar amount in any such jurisdiction where it is not
then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3
hereof, cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and cause such
Registrable Notes to be in such denominations (consistent with the provisions of
the Indenture) and registered in such names as the managing underwriter or
underwriters, if any, or Selling Holders may request.
(j) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, upon the occurrence of any event
contemplated by paragraph 5(c)(iv) or 5(c)(v) hereof, as promptly as practicable
prepare and (subject to Section 5(a) hereof) file with the SEC, at the sole
expense of the Issuers, a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, or file any
other required document so that, as thereafter delivered to the purchasers of
the Registrable Notes being sold thereunder or to the purchasers of the Exchange
Notes to whom such Prospectus will be delivered by a Participating
Broker-Dealer, any such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Notwithstanding the foregoing, the Issuers
shall not be required to amend or supplement a Registration Statement, any
related Prospectus or any document incorporated therein by reference, in the
event that, and for a period not to exceed an aggregate of 60 days in any
calendar year if, (i) an event occurs and is continuing as a result of which the
Shelf Registration would, in the Issuers' good faith judgment, contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, and (ii) (a) the Issuers determine in their good
faith judgment that the disclosure of such event at such time would have a
material adverse effect on the business, operations or prospects of the Issuers
or (b) the disclosure otherwise relates to a pending material business
transaction that has not yet been publicly disclosed.
(k) Prior to the effective date of the first Registration
Statement relating to the Registrable Notes, (i) provide the Trustee with
certificates for the Registrable Notes in a
<PAGE> 18
-17-
form eligible for deposit with The Depository Trust Company and (ii) provide a
CUSIP number for the Registrable Notes.
(l) In connection with any underwritten offering of
Registrable Notes pursuant to a Shelf Registration, enter into an underwriting
agreement as is customary in underwritten offerings of debt securities similar
to the Notes in form and substance reasonably satisfactory to the Issuers and
take all such other actions as are reasonably requested by the managing
underwriter or underwriters in order to expedite or facilitate the registration
or the disposition of such Registrable Notes and, in such connection, (i) make
such representations and warranties to, and covenants with, the underwriters
with respect to the business of the Issuers and the subsidiaries of the Issuers
(including any acquired business, properties or entity, if applicable) and the
Registration Statement, Prospectus and documents, if any, incorporated or deemed
to be incorporated by reference therein, in each case, as are customarily made
by issuers to underwriters in underwritten offerings of debt securities similar
to the Notes, and confirm the same in writing if and when requested in form and
substance reasonably satisfactory to the Issuers; (ii) obtain the written
opinions of counsel to the Issuers and written updates thereof in form, scope
and substance reasonably satisfactory to the managing underwriter or
underwriters, addressed to the underwriters covering the matters customarily
covered in opinions reasonably requested in underwritten offerings and such
other matters as may be reasonably requested by the managing underwriter or
underwriters; (iii) use its best efforts to obtain "cold comfort" letters and
updates thereof in form, scope and substance reasonably satisfactory to the
managing underwriter or underwriters from the independent public accountants of
the Issuers (and, if necessary, any other independent public accountants of the
Issuers, 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 or incorporated by reference in the Registration Statement),
addressed to each of the underwriters, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings of debt securities similar to the Notes
and such other matters as reasonably requested by the managing underwriter or
underwriters as permitted by the Statement on Auditing Standards No. 72; and
(iv) if an underwriting agreement is entered into, cause the same to contain
indemnification provisions and procedures no less favorable to the sellers and
underwriters, if any, than those set forth in Section 7 hereof (or such other
provisions and procedures acceptable to Holders of a majority in aggregate
principal amount of Registrable Notes covered by such Registration Statement and
the managing underwriter or underwriters or agents, if any). The above shall be
done at each closing under such underwriting agreement, or as and to the extent
required thereunder.
(m) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer
<PAGE> 19
-18-
who seeks to sell Exchange Notes during the Applicable Period, make available
for inspection by any selling Holder of such Registrable Notes being sold, or
each such Participating Broker-Dealer, as the case may be, any underwriter
participating in any such disposition of Registrable Notes, if any, and any
attorney, accountant or other agent retained by any such selling Holder or each
such Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "Inspectors"), at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and instruments of the Issuers and subsidiaries of the Issuers
(collectively, the "Records") as shall be reasonably necessary to enable them to
exercise any applicable due diligence responsibilities, and cause the officers,
directors and employees of the Issuers and any of their subsidiaries to supply
all information reasonably requested by any such Inspector in connection with
such Registration Statement and Prospectus. Each Inspector shall agree in
writing that it will keep the Records confidential and that it will not disclose
any of the Records that the Issuers determine, in good faith, to be confidential
and notify the Inspectors in writing are confidential unless (i) the disclosure
of such Records is necessary to avoid or correct a material misstatement or
material omission in such Registration Statement or Prospectus, (ii) the release
of such Records is ordered pursuant to an effective subpoena or other order from
a court of competent jurisdiction, or (iii) the information in such Records has
been made generally available to the public other than as a result of a breach
of confidentiality or secrecy to the Issuers; provided, however, that prior
notice shall be provided as soon as practicable to the Issuers of the potential
disclosure of any information by such Inspector pursuant to clauses (i) or (ii)
of this sentence to permit the Issuers to obtain a protective order (or waive
the provisions of this paragraph (m)) and that such Inspector shall take such
actions as are reasonably necessary to protect the confidentiality of such
information (if practicable) to the extent such action is otherwise not
inconsistent with, an impairment of or in derogation of the rights and interests
of the Holder or any Inspector.
(n) Provide an indenture trustee for the Registrable Notes or
the Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the first
Registration Statement relating to the Registrable Notes; and in connection
therewith, cooperate with the trustee under any such indenture and the Holders
of the Registrable Notes to effect such changes to such indenture as may be
required for such indenture to be so qualified in accordance with the terms of
the TIA; and execute, and use its best efforts to cause such trustee to execute,
all documents as may be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable such indenture to be so
qualified in a timely manner.
(o) Comply with all applicable rules and regulations of the
SEC and make generally available to its securityholders with regard to any
applicable Registration Statement, a consolidated earnings statement satisfying
the provisions of Section 11(a) of the Securities
<PAGE> 20
-19-
Act and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 60 days after the end of any fiscal quarter (or
120 days after the end of any 12-month period if such period is a fiscal year)
(i) commencing at the end of any fiscal quarter in which Registrable Notes are
sold to underwriters in a firm commitment or best efforts underwritten offering
and (ii) if not sold to underwriters in such an offering, commencing on the
first day of the first fiscal quarter of the Issuers after the effective date of
a Registration Statement, which statements shall cover said 12-month periods.
(p) Upon consummation of the Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Issuers, in a form customary for
underwritten transactions, addressed to the Trustee for the benefit of all
Holders of Registrable Notes participating in the Exchange Offer or the Private
Exchange, as the case may be, that the Exchange Notes or Private Exchange Notes,
as the case may be, and the related indenture constitute legal, valid and
binding obligations of the Issuers, enforceable against them in accordance with
their respective terms, subject to customary exceptions and qualifications.
(q) If the Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to the Issuers
(or to such other Person as directed by the Issuers) in exchange for the
Exchange Notes or the Private Exchange Notes, as the case may be, the Issuers
shall mark, or cause to be marked, on such Registrable Notes that such
Registrable Notes are being canceled in exchange for the Exchange Notes or the
Private Exchange Notes, as the case may be; in no event shall such Registrable
Notes be marked as paid or otherwise satisfied.
(r) Cooperate with each seller of Registrable Notes covered by
any Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in connection
with any filings required to be made with the National Association of Securities
Dealers, Inc. (the "NASD").
(s) Use their reasonable best efforts to take all other steps
reasonably necessary to effect the registration of the Registrable Notes covered
by a Registration Statement contemplated hereby.
The Issuers may require each seller of Registrable Notes as to
which any registration is being effected to furnish to the Issuers such
information regarding such seller and the proposed distribution of such
Registrable Notes as the Issuers may, from time to time, reasonably request. The
Issuers may exclude from such registration the Registrable Notes of any seller
so long as such seller fails to furnish such information within a reasonable
time after receiving such request. Each seller as to which any Shelf
Registration 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 seller not materially misleading.
<PAGE> 21
-20-
If any such Registration Statement refers to any Holder by
name or otherwise as the holder of any securities of the Issuers, then such
Holder shall have the right to require (i) the insertion therein of language, in
form and substance reasonably satisfactory to such Holder, to the effect that
the holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the securities
covered thereby and that such holding does not imply that such Holder will
assist in meeting any future financial requirements of the Issuers, or (ii) in
the event that such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force, the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by its acquisition of such Registrable Notes or Exchange
Notes to be sold by such Participating Broker-Dealer, as the case may be, that,
upon actual receipt of any notice from the Issuers of the happening of any event
of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi)
hereof, such Holder will forthwith discontinue disposition of such Registrable
Notes covered by such Registration Statement or Prospectus or Exchange Notes to
be sold by such Holder or Participating Broker-Dealer, as the case may be, until
such Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(j) hereof, or until
it is advised in writing (the "Advice") by the Issuers that the use of the
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto. In the event that the Issuers shall give any such
notice, the Applicable Period shall be extended by the number of days during
such periods from and including the date of the giving of such notice to and
including the date when each seller of Registrable Notes covered by such
Registration Statement or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(j) hereof or (y)
the Advice.
6. Registration Expenses
All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers (other than any underwriting
discounts or commissions) shall be borne by the Issuers whether or not the
Exchange Offer Registration Statement or any Shelf Registration is filed or
becomes effective or the Exchange Offer is consummated, including, without
limitation, (i) all registration and filing fees (including, without limitation,
(A) fees with respect to filings required to be made with the NASD in connection
with an underwritten offering and (B) reasonable fees and expenses of compliance
with state securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Notes or Exchange Notes and determination of the eligibility of the
Registrable Notes or Exchange Notes for investment under the laws of such
<PAGE> 22
-21-
jurisdictions (x) where the holders of Registrable Notes are located, in the
case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the
case of Registrable Notes or Exchange Notes to be sold by a Participating
Broker-Dealer during the Applicable Period)), (ii) printing expenses, including,
without limitation, expenses of printing certificates for Registrable Notes or
Exchange Notes in a form eligible for deposit with The Depository Trust Company
and of printing prospectuses if the printing of prospectuses is requested by the
managing underwriter or underwriters, if any, by the Holders of a majority in
aggregate principal amount of the Registrable Notes included in any Registration
Statement or in respect of Registrable Notes or Exchange Notes to be sold by any
Participating Broker-Dealer during the Applicable Period, as the case may be,
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Issuers and, in connection with any Shelf Registration
Statement, the reasonable fees and disbursements of one special counsel for all
of the sellers of Registrable Notes who shall be King & Spalding, unless another
firm shall be chosen by the Holders of a majority in principal amount of the
Registrable Notes for whose benefit such Shelf Registration Statement is being
prepared (exclusive of any counsel retained pursuant to Section 7 hereof), (v)
fees and disbursements of all independent certified public accountants referred
to in Section 5(l)(iii) hereof (including, without limitation, the expenses of
any special audit and "cold comfort" letters required by or incident to such
performance), (vi) Securities Act liability insurance, if the Issuers desire
such insurance, (vii) fees and expenses of all other Persons retained by the
Issuers, (viii) internal expenses of the Issuers (including, without limitation,
all salaries and expenses of officers and employees of the Issuers performing
legal or accounting duties), (ix) the expense of any annual audit, (x) any fees
and expenses incurred in connection with the listing of the securities to be
registered on any securities exchange, and the obtaining of a rating of the
securities, in each case, if applicable, and (xi) the expenses relating to
printing, word processing and distributing all Registration Statements,
underwriting agreements, indentures and any other documents necessary in order
to comply with this Agreement.
7. Indemnification
(a) Each of the Issuers, jointly and severally, agrees to
indemnify and hold harmless each Holder of Registrable Notes and each
Participating Broker-Dealer selling Exchange Notes during the Applicable Period,
the affiliates, officers, directors, representatives, employees and agents of
each such Person, and each Person, if any, who controls any such Person within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act (each, a "Participant"), from and against any and all losses,
claims, damages, judgments, liabilities and expenses (including, without
limitation, the reasonable legal fees and other expenses actually incurred in
connection with any suit, action or proceeding or any claim asserted) caused by,
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any Registration Statement (or any amendment
<PAGE> 23
-22-
thereto) or Prospectus (as amended or supplemented if the Issuers shall have
furnished any amendments or supplements thereto) or any preliminary prospectus,
or caused by, arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the case of the Prospectus in light of the
circumstances under which they were made, not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Participant furnished to the Issuers
in writing by such Participant expressly for use therein and with respect to any
preliminary Prospectus, to the extent that any such loss, claim, damage or
liability arises solely from the fact that any Participant sold Notes to a
person to whom there was not sent or given a copy of the Prospectus (as amended
or supplemented) at or prior to the written confirmation of such sale if the
Issuers shall have previously furnished copies thereof to the Participant in
accordance herewith and the Prospectus (as amended or supplemented) would have
corrected any such untrue statement or omission.
(b) Each Participant agrees, severally and not jointly, to
indemnify and hold harmless the Issuers, their respective affiliates, officers,
directors, representatives, employees and agents of each Issuer and each Person
who controls each Issuer within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act to the same extent (but on a several, and not
joint, basis) as the foregoing indemnity from the Issuers to each Participant,
but only with reference to information relating to such Participant furnished to
the Issuers in writing by such Participant expressly for use in any Registration
Statement or Prospectus, any amendment or supplement thereto, or any preliminary
prospectus. The liability of any Participant under this paragraph shall in no
event exceed the proceeds received by such Participant from sales of Registrable
Notes or Exchange Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be brought or
asserted against any Person in respect of which indemnity may be sought pursuant
to either of the two preceding paragraphs, such Person (the "Indemnified
Person") shall promptly notify the Persons against whom such indemnity may be
sought (the "Indemnifying Persons") in writing, and the Indemnifying Persons,
upon request of the Indemnified Person, shall retain counsel reasonably
satisfactory to the Indemnified Person to represent the Indemnified Person in
such proceeding and shall pay the reasonable fees and expenses actually incurred
by such counsel related to such proceeding; provided, however, that the failure
to so notify the Indemnifying Persons (i) will not relieve it from any liability
under paragraph (a) or (b) above unless and to the extent such failure results
in the forfeiture by the Indemnifying Person of substantial rights and defenses
and (ii) will not, in any event, relieve the Indemnifying Person from any
obligations to any Indemnified Person which it may have other than on account of
this indemnity agreement. In any such proceeding, any Indemnified Person shall
have the right to retain its own counsel and partici-
<PAGE> 24
-23-
pate in the defense thereof, but the fees and expenses of such counsel shall be
at the expense of such Indemnified Person unless (i) the Indemnifying Persons
and the Indemnified Person shall have mutually agreed to the contrary, (ii) the
Indemnifying Persons shall have failed to assume the defense thereof or within a
reasonable period of time to retain counsel reasonably satisfactory to the
Indemnified Person or (iii) the named parties in any such proceeding (including
any impleaded parties) include both any Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It is
understood that the Indemnifying Persons shall not, in connection with such
proceeding or separate but substantially similar related proceeding in the same
jurisdiction arising out of the same general allegations, be liable for the fees
and expenses of more than one separate firm (in addition to any local counsel)
for all Indemnified Persons, and that all such fees and expenses shall be
reimbursed promptly as they are incurred. Any such separate firm for the
Participants and such control Persons of Participants shall be designated in
writing by Participants who sold a majority in interest of Registrable Notes and
Exchange Notes sold by all such Participants and shall be reasonably acceptable
to the Issuers, and any such separate firm for the Issuers, their affiliates,
officers, directors, representatives, employees and agents and such control
Persons of such Issuer shall be designated in writing by such Issuer and shall
be reasonably acceptable to the Holders.
The Indemnifying Person shall not be liable for any settlement
of any proceeding effected without its prior written consent (which consent
shall not be unreasonably withheld or delayed), but if settled with such consent
or if there be a final non-appealable judgment for the plaintiff for which the
Indemnified Person is entitled to indemnification pursuant to this Agreement,
each Indemnifying Person agrees to indemnify and hold harmless each Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment. No Indemnifying Person shall, without the prior written consent of the
Indemnified Person (which consent shall not be unreasonably withheld or
delayed), effect any settlement or compromise of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party, or indemnity could have been sought hereunder by such Indemnified Person,
unless such settlement (A) includes an unconditional written release of such
Indemnified Person, in form and substance reasonably satisfactory to such
Indemnified Person, from all liability on claims that are the subject matter of
such proceeding and (B) does not include any statement as to an admission of
fault, culpability or failure to act by or on behalf of such Indemnified Person.
(d) If the indemnification provided for in the first and
second paragraphs of this Section 7 is for any reason unavailable to, or
insufficient to hold harmless, an Indemnified Person in respect of any losses,
claims, damages or liabilities referred to therein, then each Indemnifying
Person under such paragraphs, in lieu of indemnifying such Indemnified Person
thereunder and in order to provide for just and equitable contribution, shall
contribute to the
<PAGE> 25
-24-
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof) as well as any
other relevant equitable considerations. The relative fault of the parties shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Issuers on the one hand
or such Participant or such other Indemnified Person, as the case may be, on the
other, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances.
(e) The parties agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages, judgments, liabilities and expenses referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any reasonable legal or other expenses actually
incurred by such Indemnified Person in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 7, in no event shall a Participant be required to contribute any amount
in excess of the amount by which proceeds received by such Participant from
sales of Registrable Notes or Exchange Notes, as the case may be, pursuant to a
Registration Statement exceeds the amount of any damages that such Participant
has otherwise been required to pay or has paid by reason of such untrue or
alleged untrue statement or omission or alleged omission. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section 7 shall be paid by the Indemnifying Person to the Indemnified
Person as such losses, claims, damages, liabilities or expenses are incurred.
The indemnity and contribution agreements contained in this Section 7 shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Holder or any person who controls a
Holder, the Issuers, their directors, officers, employees or agents or any
person controlling an Issuer, and (ii) any termination of this Agreement.
<PAGE> 26
-25-
(g) The indemnity and contribution agreements contained in
this Section 7 will be in addition to any liability which the Indemnifying
Persons may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
Each of the Issuers covenants and agrees that it will file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the SEC thereunder in a timely manner
in accordance with the requirements of the Securities Act and the Exchange Act
and, for so long as any Registrable Notes remain outstanding, if such Issuer is
not required to file such reports, such Issuer will, upon the request of any
Holder or beneficial owner of Registrable Notes, make available such information
necessary to permit sales pursuant to Rule 144A under the Securities Act. Each
of the Issuers further covenants and agrees, for so long as any Registrable
Notes remain outstanding, that it will take such further action as any Holder of
Registrable Notes may reasonably request, all to the extent required from time
to time to enable such holder to sell Registrable Notes without registration
under the Securities Act within the limitation of the exemptions provided by (a)
Rule 144(k) and Rule 144A under the Securities Act, as such Rules may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the SEC.
9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering will
be selected by the Holders of a majority in aggregate principal amount of such
Registrable Notes included in such offering and shall be reasonably acceptable
to the Issuers.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
10. Miscellaneous
(a) No Inconsistent Agreements. The Issuers have not, as of
the date hereof, and the Issuers shall not, after the date of this Agreement,
enter into any agreement with respect to any of their securities that is
inconsistent with the rights granted to the Holders of Registrable Notes in this
Agreement or otherwise conflicts with the provisions hereof. The
<PAGE> 27
-26-
rights granted to the Holders hereunder do not in any way conflict with and are
not inconsistent with the rights granted to the holders of the Issuers' other
issued and outstanding securities under any such agreements. The Issuers will
not enter into any agreement with respect to any of their securities which will
grant to any Person piggy-back registration rights with respect to any
Registration Statement.
(b) Adjustments Affecting Registrable Notes. The Issuers shall
not, directly or indirectly, take any action with respect to the Registrable
Notes as a class that would adversely affect the ability of the Holders of
Registrable Notes to include such Registrable Notes in a registration undertaken
pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, otherwise than with the
prior written consent of (I) the Issuers and (II)(A) the Holders of not less
than a majority in aggregate principal amount of the then outstanding
Registrable Notes and (B) in circumstances that would adversely affect the
Participating Broker-Dealers, the Participating Broker-Dealers holding not less
than a majority in aggregate principal amount of the Exchange Notes held by all
Participating Broker-Dealers; provided, however, that Section 7 and this Section
10(c) may not be amended, modified or supplemented without the prior written
consent of each Holder and each Participating Broker-Dealer (including any
person who was a Holder or Participating Broker-Dealer of Registrable Notes or
Exchange Notes, as the case may be, disposed of pursuant to any Registration
Statement) affected by any such amendment, modification or supplement.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders of Registrable Notes whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect, impair,
limit or compromise the rights of other Holders of Registrable Notes may be
given by Holders of at least a majority in aggregate principal amount of the
Registrable Notes being sold pursuant to such Registration Statement.
(d) Notices. All notices and other communications (including,
without limitation, any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or facsimile:
(i) if to a Holder of the Registrable Notes or any
Participating Broker-Dealer, at the most current address of such Holder
or Participating Broker-Dealer, as the case may be, set forth on the
records of the registrar under the Indenture.
<PAGE> 28
-27-
(ii) if to the Issuers, at the address as follows:
c/o Generac Portable Products, Inc.
1 Generac Way
P.O. Box 239
Jefferson, WI 53549
Facsimile No.: (920) 674-5663
Attention: Chief Financial Officer
with copies to:
King & Spalding
1185 Avenue of the Americas
New York, NY 10036
Facsimile No.: (212) 556-2222
Attention: Mark Zvonkovic
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; one business
day after being timely delivered to a next-day air courier; and when
transmission is confirmed, if sent by facsimile.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address and in the manner specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto, the Holders and the Participating Broker-Dealers; provided, however,
that nothing herein shall be deemed to permit any assignment, transfer or other
disposition of Registrable Notes in violation of the terms of the Purchase
Agreement or the Indenture.
(f) 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.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
<PAGE> 29
-28-
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO
SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(j) Notes Held by the Issuers or Their Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Notes is required hereunder, Registrable Notes held by the Issuers or their
affiliates (as such term is defined in Rule 405 under the Securities Act) shall
not be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
(k) Third-Party Beneficiaries. Holders of Registrable Notes
and Participating Broker-Dealers are intended third-party beneficiaries of this
Agreement, and this Agreement may be enforced by such Persons.
(l) Entire Agreement. This Agreement, together with the
Purchase Agreement and the Indenture, is intended by the parties as a final and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein and any and all prior
oral or written agreements, representations, or warranties, contracts,
understandings, correspondence, conversations and memoranda between the Holders
on the one hand and the Issuers on the other, or between or among any agents,
representatives, parents, subsidiaries, affiliates, predecessors in interest or
successors in interest with respect to the subject matter hereof and thereof are
merged herein and replaced hereby.
<PAGE> 30
S-1
WITNESS the due execution hereof by the respective duly
authorized officers of the undersigned as of the date first written above.
THE ISSUERS:
GENERAC PORTABLE PRODUCTS, LLC
By: /s/ [illegible]
----------------------------------------
Name:
Title:
GPPW, INC.
By: /s/ Faith Rosenfeld
----------------------------------------
Name:
Title:
The foregoing Agreement is hereby con-
firmed and accepted as of the date first
above written.
BT ALEX. BROWN INCORPORATED
as Initial Purchaser
By: /s/ Alok Singh
---------------------------
Name: Alok Singh
Title: Managing Director
<PAGE> 1
EXHIBIT 4.3
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, AND TRANSFERS OF INTERESTS IN THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.16 OF THE INDENTURE.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH NOTE, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUERS OR ANY
AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF SUCH
NOTE), ONLY (A) TO AN ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES
ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E)
TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE NOTE FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN
EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE NOTES OF $250,000 FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE ISSUERS' AND THE REGISTRAR'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER PURSUANT TO CLAUSE (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM.
THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
<PAGE> 2
GENERAC PORTABLE PRODUCTS, LLC
GPPW, INC.
11 1/4% Senior Subordinated Note
due 2006, Series A
CUSIP No.:36873PAA0
No. 1 $110,000,000
GENERAC PORTABLE PRODUCTS, LLC, a limited liability company
(the "Company", which term includes any successor), and GPPW, INC., a Wisconsin
corporation ("GPPW", which term includes any successor, and, together with the
Company, the "Issuers"), for value received jointly and severally promise to pay
to CEDE &CO. or registered assigns, the principal sum of ONE HUNDRED TEN MILLION
Dollars, on July 1, 2006.
Interest Payment Dates: January 1 and July 1, commencing on
January 1, 1999.
Interest Record Dates: December 15 and June 15.
Reference is made to the further provisions of this Note
contained herein and the Indenture (as defined), which will for all purposes
have the same effect as if set forth at this place.
<PAGE> 3
IN WITNESS WHEREOF, each of the Issuers has caused this Note
to be signed manually or by facsimile by its duly authorized officers.
GENERAC PORTABLE PRODUCTS, LLC
By: /s/ Dorrance J. Noonan, Jr.
-----------------------------------------------
Name: Dorrance J. Noonan, Jr.
Title: President and Chief Executive Officer
By: /s/ Gary J. Lato
-----------------------------------------------
Name: Gary J. Lato
Title: CFO
GPPW, INC.
By: /s/ Faith Rosenfeld
-----------------------------------------------
Name: Faith Rosenfeld
Title: President
By: /s/ Richard A. Aube
-----------------------------------------------
Name: Richard A. Aube
Title: Secretary and Treasurer
Dated: July 9, 1998
<PAGE> 4
This is one of the 11 1/4% Senior Subordinated Notes due 2006, Series A,
described in the within-mentioned Indenture.
Dated: July 9, 1998
MARINE MIDLAND BANK,
as Trustee
By:
-----------------------------------
Authorized Signatory
or
MARINE MIDLAND BANK,
as Trustee
By Bankers Trust Company,
as Authenticating Agent
By: /s/ [Illegible]
----------------------------------
Authorized Signatory
<PAGE> 5
(REVERSE OF NOTE)
GENERAC PORTABLE PRODUCTS, LLC
GPPW, INC.
11 1/4% Senior Subordinated Note
due 2006, Series A
1. Interest.
The Issuers jointly and severally promise to pay interest on
the principal amount of this Note at the rate per annum shown above. Cash
interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from July 9, 1998. The Issuers
will pay interest semi-annually in arrears on each Interest Payment Date,
commencing January 1, 1999. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
In addition, the Issuers shall pay interest on overdue
principal and on overdue installments of interest (without regard to any
applicable grace periods) to the extent lawful from time to time on demand, in
each case at the rate borne by this Note.
The Notes are not entitled to the benefit of any mandatory
sinking fund.
2. Method of Payment.
The Issuers shall pay interest on the Notes (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Interest Record Date immediately preceding the Interest Payment Date even
if the Notes are cancelled on registration of transfer or registration of
exchange after such Interest Record Date. Holders must surrender Notes to a
Paying Agent to collect principal payments. The Issuers shall pay principal and
interest in United States Legal Tender (as defined in the Indenture referred to
below). However, the Issuers may pay principal and interest by wire transfer of
Federal funds (provided that the Paying Agent shall have received wire
instructions on or prior to the relevant Interest Record Date), or interest by
check payable in such United States Legal Tender. The Issuers may deliver any
such interest payment to the Paying Agent or to a Holder at the Holder's
registered address.
3. Paying Agent and Registrar.
Initially, Bankers Trust Company will act as Paying Agent and
Registrar. The Issuers may change any Paying Agent or Registrar without notice
to the Holders. The Issuers may, subject to certain exceptions, act as
Registrar.
4. Indenture.
The Issuers issued the Notes under an Indenture, dated as of
July 1, 1998 (the "Indenture"), by and among the Issuers and Marine Midland
Bank, as Trustee (the "Trustee"). Capitalized terms herein are used
<PAGE> 6
as defined in the Indenture unless otherwise defined herein. This Note is one of
a duly authorized issue of Notes of the Issuers designated as their 11-1/4%
Senior Subordinated Notes due 2006 issued under the Indenture. The aggregate
principal amount of Notes which may be issued under the Indenture is limited
(except as otherwise provided in the Indenture) to $160,000,000. The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"TIA"), as in effect on the date of the Indenture (except as otherwise indicated
in the Indenture) until such time as the Indenture is qualified under the TIA,
and thereafter as in effect on the date on which the Indenture is qualified
under the TIA. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and holders of Notes are referred to the Indenture
and the TIA for a statement of them.
5. Subordination.
The Notes are unsecured obligations of the Issuers and are
subordinated in right of payment to all Senior Debt of the Issuers to the extent
and in the manner provided in the Indenture. Each Holder of a Note, by accepting
a Note, agrees to such subordination, authorizes the Trustee to give effect to
such subordination and appoints the Trustee as attorney-in-fact for such
purpose. The Notes will rank pari passu in right of payment with any future
senior subordinated indebtedness of the Issuers and will rank senior in right of
payment to any other subordinated obligations of the Issuers.
6. Optional Redemption.
The Notes will be redeemable, at the Issuers' option, in whole
at any time or in part from time to time, on and after July 1, 2002, upon not
less than 30 nor more than 60 days' notice, at the following redemption prices
(expressed as percentages of the principal amount thereof) if redeemed during
the twelve-month period commencing on July 1 of the year set forth below, plus,
in each case, accrued and unpaid interest thereon, if any, to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2002........................................................................... 107.625%
2003........................................................................... 104.750%
2004........................................................................... 102.875%
2005 and thereafter............................................................ 100.000%
</TABLE>
7. Optional Redemption upon Equity Offerings.
At any time, or from time to time, on or prior to July 1,
2001, the Issuers may, at their option, use the net cash proceeds of one or more
Public Equity Offerings (as defined below) to redeem the Notes at a redemption
price equal to 111.25% of the principal amount thereof plus accrued and unpaid
interest thereon, if any, to the date of redemption; provided that at least 65%
of the principal amount of Notes originally issued remains outstanding
immediately after any such redemption. In order to effect the foregoing
redemption with the proceeds of any Public Equity Offering, the Issuers shall
make such redemption not more than 120 days after the consummation of any such
Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering"
means an underwritten public offering of Qualified Capital Stock of Holdings or
the Company pursuant to a registration statement filed with the Commission in
accordance with the Securities Act, other than an offering pursuant to Form S-8
(or any successor thereto); provided that, in the event of a Public Equity
Offering by Holdings, Holdings contributes to the capital of the Company the
portion of the net cash proceeds of such Public Equity Offering necessary to pay
<PAGE> 7
the aggregate redemption price (plus accrued interest to the redemption date) of
the Notes to be redeemed pursuant to the preceding paragraph.
8. Selection and Notice of Redemption.
In the event that less than all of the Notes are to be
redeemed at any time, selection of such Notes for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which such Notes are listed or, if such Notes are not then
listed on a national securities exchange, on a pro rata basis, by lot or by such
method as the Trustee shall deem fair and appropriate; provided, however, that
no Notes of a principal amount of $1,000 or less shall be redeemed in part;
provided, further, that if a partial redemption is made with the proceeds of a
Public Equity Offering, selection of the Notes or portions thereof for
redemption shall be made by the Trustee only on a pro rata basis or on as nearly
a pro rata basis as is practicable (subject to DTC procedures), unless such
method is otherwise prohibited. Notice of redemption shall be mailed by
first-class mail at least 30 but not more than 60 days before the redemption
date to each Holder of Notes to be redeemed at its registered address. If any
Note is to be redeemed in part only, the notice of redemption that relates to
such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in a principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. On and after the redemption date, interest will cease to
accrue on Notes or portions thereof called for redemption as long as the Company
has deposited with the Paying Agent funds in satisfaction of the applicable
redemption price pursuant to the Indenture.
9. Change of Control Offer.
Following the occurrence of a Change of Control, the Issuers
shall, within 30 days, make a Change of Control Offer for all Notes then
outstanding at a purchase price in cash equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the Change
of Control Payment Date (subject to the right of Holders of record on the
relevant Interest Record Date to receive interest due on the relevant Interest
Payment Date).
10. Limitation on Disposition of Assets.
The Issuers are, subject to certain conditions, obligated to
make a Net Proceeds Offer for Notes at a purchase price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the Net Proceeds Offer Payment Date (subject to the right of Holders of record
on the Interest Relevant Record Date to receive interest due on the relevant
Interest Payment Date) with the excess proceeds of certain asset dispositions.
11. Denominations; Transfer; Exchange.
The Notes are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange of Notes in accordance with the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or similar
governmental charges payable in connection therewith as permitted by the
Indenture. The Registrar need not register the transfer of or exchange of any
Notes or portions thereof selected for redemption, except the unredeemed portion
of any Note being redeemed in part.
12. Persons Deemed Owners.
The registered Holder of a Note shall be treated as the owner
of it for all purposes.
<PAGE> 8
13. Unclaimed Funds.
If funds for the payment of principal or interest remain
unclaimed for two years, the Trustee and the Paying Agent will repay the funds
to the Issuers at their written request. After that, all liability of the
Trustee and such Paying Agent with respect to such funds shall cease.
14. Legal Defeasance and Covenant Defeasance.
The Issuers may be discharged from their obligations under the
Indenture and the Notes, except for certain provisions thereof, and may be
discharged from obligations to comply with certain covenants contained in the
Indenture and the Notes, in each case upon satisfaction of certain conditions
specified in the Indenture.
15. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture and the Notes may
be amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Notes then outstanding, and any
existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Notes then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture and the Notes
to, among other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated Notes or comply
with any requirements of the SEC in connection with the qualification of the
Indenture under the TIA, or make any other change that does not materially
adversely affect the rights of any Holder of a Note.
16. Restrictive Covenants.
The Indenture contains certain covenants that, among other
things, limit the ability of the Company and the Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
to the Company, to consolidate, merge or sell all or substantially all of its
assets or to engage in transactions with affiliates or certain other related
persons. The limitations are subject to a number of important qualifications and
exceptions. The Issuers must report quarterly to the Trustee on compliance with
such limitations.
17. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Notes then
outstanding may declare all the Notes to be due and payable immediately in the
manner and with the effect provided in the Indenture. Holders of Notes may not
enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee is not obligated to enforce the Indenture or the Notes unless it has
received indemnity satisfactory to it. The Indenture permits, subject to certain
limitations therein provided, Holders of a majority in aggregate principal
amount of the Notes then outstanding to direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of Notes notice of
certain continuing Defaults or Events of Default if it determines that
withholding notice is in their interest.
<PAGE> 9
18. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Notes and may otherwise deal
with the Issuers or their respective Affiliates as if it were not the Trustee.
19. No Recourse Against Others.
No director, officer, employee, stockholder or member of the
Issuers, as such, shall have any liability for any obligation of the Issuers
under the Notes or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Note by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
20. Authentication.
This Note shall not be valid until the Trustee or
Authenticating Agent signs the certificate of authentication on this Note.
21. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of
a Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
22. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Issuers have caused CUSIP
numbers to be printed on the Notes as a convenience to the Holders of the Notes.
No representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
23. Registration Rights.
Pursuant to the Registration Rights Agreement, the Issuers
will be obligated upon the occurrence of certain events to consummate an
exchange offer pursuant to which the Holder of this Note shall have the right to
exchange this Note for an 11 1/4% Senior Subordinated Note due 2006, Series B,
of the Issuers which has been registered under the Securities Act, in like
principal amount and having terms identical in all material respects to the
Initial Notes. The Holders shall be entitled to receive certain additional
interest payments in the event such exchange offer is not consummated and upon
certain other conditions, all pursuant to and in accordance with the terms of
the Registration Rights Agreement.
24. Governing Law.
The Indenture and the Notes will 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 law of another jurisdiction would be required thereby
<PAGE> 10
ASSIGNMENT FORM
I or we assign and transfer this Note to
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
_______________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint _______________________________________________________
agent to transfer this Note on the books of the Issuers. The agent may
substitute another to act for him.
Dated:___________________ Signed: ______________________________
(Signed exactly as name appears
on the other side of this Note)
Signature Guarantee: ___________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Registrar)
<PAGE> 11
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Issuers pursuant to Section 4.05 or Section 4.14 of the Indenture, check the
appropriate box:
Section 4.05 [ ]
Section 4.14 [ ]
If you want to elect to have only part of this Note purchased
by the Issuers pursuant to Section 4.05 or Section 4.14 of the Indenture, state
the amount: $_____________
Dated:___________________ Your Signature:
Signed exactly as name appears
on the other side of this Note)
Signature Guarantee:
__________________________
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
<PAGE> 1
EXHIBIT 4.4
GENERAC PORTABLE PRODUCTS, LLC
GPPW, INC.
11 1/4% Senior Subordinated Note
due 2006, Series B
CUSIP No.:36873PAC6
No. [ ] $[ ]
GENERAC PORTABLE PRODUCTS, LLC, a limited liability company
(the "Company", which term includes any successor), and GPPW, INC., a Wisconsin
corporation ("GPPW", which term includes any successor and, together with the
Company, the "Issuers"), for value received jointly and severally promise to pay
to [ ] or registered assigns, the principal sum of [ ] Dollars, on July 1, 2006.
Interest Payment Dates: January 1 and July 1, commencing on
January 1, 1999.
Interest Record Dates: December 15 and June 15.
Reference is made to the further provisions of this Note
contained herein and the Indenture (as defined), which will for all purposes
have the same effect as if set forth at this place.
<PAGE> 2
IN WITNESS WHEREOF, each of the Issuers has caused this Note
to be signed manually or by facsimile by its duly authorized officers.
GENERAC PORTABLE PRODUCTS, LLC
By: ________________________________
Name:
Title:
By: ________________________________
Name:
Title:
GPPW, INC.
By: ________________________________
Name:
Title:
By: ________________________________
Name:
Title:
Dated: [ ]
<PAGE> 3
This is one of the 11 1/4% Senior Subordinated Notes due 2006, Series B,
described in the within-mentioned Indenture.
Dated: [ ]
MARINE MIDLAND BANK,
as Trustee
By: ________________________________
Authorized Signatory
or
MARINE MIDLAND BANK,
as Trustee
By Bankers Trust Company,
as Authenticating Agent
By: _______________________________
Authorized Signatory
<PAGE> 4
(REVERSE OF NOTE)
GENERAC PORTABLE PRODUCTS, LLC
GPPW, INC.
11 1/4% Senior Subordinated Note
due 2006, Series B
1. Interest.
The Issuers jointly and severally promise to pay interest on
the principal amount of this Note at the rate per annum shown above. Cash
interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from July 9, 1998. The Issuers
will pay interest semi-annually in arrears on each Interest Payment Date,
commencing January 1, 1999. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
In addition, the Issuers shall pay interest on overdue
principal and on overdue installments of interest (without regard to any
applicable grace periods) to the extent lawful from time to time on demand, in
each case at the rate borne by this Note.
The Notes are not entitled to the benefit of any mandatory
sinking fund.
2. Method of Payment.
The Issuers shall pay interest on the Notes (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Interest Record Date immediately preceding the Interest Payment Date even
if the Notes are cancelled on registration of transfer or registration of
exchange after such Interest Record Date. Holders must surrender Notes to a
Paying Agent to collect principal payments. The Issuers shall pay principal and
interest in United States Legal Tender (as defined in the Indenture referred to
below). However, the Issuers may pay principal and interest by wire transfer of
Federal funds (provided that the Paying Agent shall have received wire
instructions on or prior to the relevant Interest Record Date), or interest by
check payable in such United States Legal Tender. The Issuers may deliver any
such interest payment to the Paying Agent or to a Holder at the Holder's
registered address.
3. Paying Agent and Registrar.
Initially, Bankers Trust Company will act as Paying Agent and
Registrar. The Issuers may change any Paying Agent or Registrar without notice
to the Holders. The Issuers may, subject to certain exceptions, act as
Registrar.
4. Indenture.
The Issuers issued the Notes under an Indenture, dated as of
July 1, 1998 (the "Indenture"), by and among the Issuers and Marine Midland
Bank, as Trustee (the "Trustee"). Capitalized terms herein are used as defined
in the Indenture unless otherwise defined herein. This Note is one of a duly
authorized issue of Notes of the Issuers designated as their 11 1/4% Senior
Subordinated Notes due 2006, Series B, under the Indenture.
<PAGE> 5
The aggregate principal amount of Notes which may be issued under the Indenture
is limited (except as provided in the Indenture) to $160,000,000. The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"TIA"), as in effect on the date of the Indenture (except as otherwise indicated
in the Indenture) until such time as the Indenture is qualified under the TIA,
and thereafter as in effect on the date on which the Indenture is qualified
under the TIA. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and holders of Notes are referred to the Indenture
and the TIA for a statement of them.
5. Subordination.
The Notes are unsecured obligations of the Issuers and are
subordinated in right of payment to all Senior Debt of the Issuers to the extent
and in the manner provided in the Indenture. Each Holder of a Note, by accepting
a Note, agrees to such subordination, authorizes the Trustee to give effect to
such subordination and appoints the Trustee as attorney-in-fact for such
purpose. The Notes will rank pari passu in right of payment with any future
senior subordinated indebtedness of the Issuers and will rank senior in right of
payment to any other subordinated obligations of the Issuers.
6. Optional Redemption.
The Notes will be redeemable, at the Issuers' option, in whole
at any time or in part from time to time, on and after July 1, 2002, upon not
less than 30 nor more than 60 days' notice, at the following redemption prices
(expressed as percentages of the principal amount thereof) if redeemed during
the twelve-month period commencing on July 1 of the year set forth below, plus,
in each case, accrued and unpaid interest thereon, if any, to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2002....................................................................... 107.625%
2003....................................................................... 104.750%
2004....................................................................... 102.875%
2005 and thereafter........................................................ 100.000%
</TABLE>
7. Optional Redemption upon Public Equity Offerings.
At any time, or from time to time, on or prior to July 1,
2001, the Issuers may, at their option, use the net cash proceeds of one or more
Public Equity Offerings (as defined below) to redeem the Notes at a redemption
price equal to 111.25% of the principal amount thereof plus accrued and unpaid
interest thereon, if any, to the date of redemption; provided that at least 65%
of the principal amount of Notes originally issued remains outstanding
immediately after any such redemption. In order to effect the foregoing
redemption with the proceeds of any Public Equity Offering, the Issuers shall
make such redemption not more than 120 days after the consummation of any such
Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering"
means an underwritten public offering of Qualified Capital Stock of Holdings or
the Company pursuant to a registration statement filed with the Commission in
accordance with the Securities Act, other than an offering pursuant to Form S-8
(or any successor thereto); provided that, in the event of a Public Equity
Offering by Holdings, Holdings contributes to the capital of the Company the
portion of the net cash proceeds of such Public Equity Offering necessary to pay
the aggregate redemption price (plus accrued interest to the redemption date) of
the Notes to be redeemed pursuant to the preceding paragraph.
<PAGE> 6
8. Selection and Notice of Redemption.
In the event that less than all of the Notes are to be
redeemed at any time, selection of such Notes for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which such Notes are listed or, if such Notes are not then
listed on a national securities exchange, on a pro rata basis, by lot or by such
method as the Trustee shall deem fair and appropriate; provided, however, that
no Notes of a principal amount of $1,000 or less shall be redeemed in part;
provided, further, that if a partial redemption is made with the proceeds of a
Public Equity Offering, selection of the Notes or portions thereof for
redemption shall be made by the Trustee only on a pro rata basis or on as nearly
a pro rata basis as is practicable (subject to DTC procedures), unless such
method is otherwise prohibited. Notice of redemption shall be mailed by
first-class mail at least 30 but not more than 60 days before the redemption
date to each Holder of Notes to be redeemed at its registered address. If any
Note is to be redeemed in part only, the notice of redemption that relates to
such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in a principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. On and after the redemption date, interest will cease to
accrue on Notes or portions thereof called for redemption as long as the Company
has deposited with the Paying Agent funds in satisfaction of the applicable
redemption price pursuant to the Indenture.
9. Change of Control Offer.
Following the occurrence of a Change of Control, the Issuers
shall, within 30 days, make a Change of Control Offer for all Notes then
outstanding at a purchase price in cash equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the Change
of Control Payment Date (subject to the right of Holders of record on the
relevant Interest Record Date to receive interest due on the relevant Interest
Payment Date).
10. Limitation on Disposition of Assets.
The Issuers are, subject to certain conditions, obligated to
make a Net Proceeds Offer for Notes at a purchase price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the Net Proceeds Offer Payment Date (subject to the right of Holders of record
on the Interest Relevant Record Date to receive interest due on the relevant
Interest Payment Date) with the excess proceeds of certain Asset Sales.
11. Denominations; Transfer; Exchange.
The Notes are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange of Notes in accordance with the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or similar
governmental charges payable in connection therewith as permitted by the
Indenture. The Registrar need not register the transfer of or exchange of any
Notes or portions thereof selected for redemption, except the unredeemed portion
of any Note being redeemed in part.
12. Persons Deemed Owners.
The registered Holder of a Note shall be treated as the owner
of it for all purposes.
<PAGE> 7
13. Unclaimed Funds.
If funds for the payment of principal or interest remain
unclaimed for two years, the Trustee and the Paying Agent will repay the funds
to the Issuers at their written request. After that, all liability of the
Trustee and such Paying Agent with respect to such funds shall cease.
14. Legal Defeasance and Covenant Defeasance.
The Issuers may be discharged from their obligations under the
Indenture and the Notes, except for certain provisions thereof, and may be
discharged from obligations to comply with certain covenants contained in the
Indenture and the Notes, in each case upon satisfaction of certain conditions
specified in the Indenture.
15. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture and the Notes may
be amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Notes then outstanding, and any
existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Notes then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture and the Notes
to, among other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated Notes or comply
with any requirements of the SEC in connection with the qualification of the
Indenture under the TIA, or make any other change that does not materially
adversely affect the rights of any Holder of a Note.
16. Restrictive Covenants.
The Indenture contains certain covenants that, among other
things, limit the ability of the Company and the Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
to the Company, to consolidate, merge or sell all or substantially all of its
assets or to engage in transactions with affiliates or certain other related
persons. The limitations are subject to a number of important qualifications and
exceptions. The Issuers must report quarterly to the Trustee on compliance with
such limitations.
17. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Notes then
outstanding may declare all the Notes to be due and payable immediately in the
manner and with the effect provided in the Indenture. Holders of Notes may not
enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee is not obligated to enforce the Indenture or the Notes unless it has
received indemnity satisfactory to it. The Indenture permits, subject to certain
limitations therein provided, Holders of a majority in aggregate principal
amount of the Notes then outstanding to direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of Notes notice of
certain continuing Defaults or Events of Default if it determines that
withholding notice is in their interest.
<PAGE> 8
18. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Notes and may otherwise deal
with the Issuers or their respective Affiliates as if it were not the Trustee.
19. No Recourse Against Others.
No director, officer, employee, stockholder or member of the
Issuers, as such, shall have any liability for any obligation of the Issuers
under the Notes or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Note by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
20. Authentication.
This Note shall not be valid until the Trustee or
Authenticating Agent signs the certificate of authentication on this Note.
21. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of
a Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
22. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Issuers have caused CUSIP
numbers to be printed on the Notes as a convenience to the Holders of the Notes.
No representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
23. Governing Law.
The Indenture and the Notes will be governed by, and construed
in accordance with, the laws of the State of New York but without giving effect
of applicable principles of conflicts of law to the extent that the application
of the law of another jurisdiction would be required thereby.
<PAGE> 9
ASSIGNMENT FORM
I or we assign and transfer this Note to
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
_______________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint _______________________________________________________
agent to transfer this Note on the books of the Issuers. The agent may
substitute another to act for him.
Dated:___________________ Signed: ______________________________
(Signed exactly as name appears
on the other side of this Note)
Signature Guarantee:
_______________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Registrar)
<PAGE> 10
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Issuers pursuant to Section 4.05 or Section 4.14 of the Indenture, check the
appropriate box:
Section 4.05 [ ]
Section 4.14 [ ]
If you want to elect to have only part of this Note purchased
by the Issuers pursuant to Section 4.05 or Section 4.14 of the Indenture, state
the amount: $_____________
Dated:___________________ Your Signature: _______________________
(Signed exactly as name appears
on the other side of this Note)
Signature Guarantee:
_____________________________
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
<PAGE> 11
[FORM OF GUARANTEE]
SENIOR SUBORDINATED GUARANTEE
The Guarantor (capitalized terms used herein have the meanings given such
terms in the Indenture referred to in the Note upon which this notation is
endorsed) hereby unconditionally guarantees on a senior subordinated basis (such
guaranty being referred to herein as the "Guarantee") the due and punctual
payment of the principal of, and interest on the Notes, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal, premium and interest on the Notes, and the due and punctual
performance of all other obligations of the Issuers to the Holders or the
Trustee, all in accordance with the terms set forth in Article Eleven of the
Indenture.
The obligations of the Guarantor to the Holders of Notes and to the Trustee
pursuant to the Guarantee and the Indenture are expressly set forth, and are
expressly subordinated and subject in right of payment to the prior payment in
full of all Senior Debt of the Guarantor, to the extent and in the manner
provided in Article Eleven and Article Twelve of the Indenture.
This Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication of the Notes upon which this Guarantee is noted
shall have been executed by the Trustee under the Indenture or the
Authenticating Agent by the manual signature of one of its authorized officers.
This Guarantee shall be governed by and construed in accordance with the
laws of the State of New York without regard to principles of conflicts of law.
This Guarantee is subject to release upon the terms set forth in the
Indenture.
[ ]
-----------------------------
By:
---------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 5.1
[Letterhead of King & Spalding]
March 1, 1999
Generac Portable Products, Inc.
Generac Portable Products, LLC
GPPW, Inc.
1 Generac Way
Jefferson, Wisconsin 53549
Ladies and Gentlemen:
We have acted as counsel to Generac Portable Products, Inc., a Delaware
corporation ("Holdings"), Generac Portable Products, LLC, a Delaware limited
liability company (the "Company"), and GPPW, Inc., a Wisconsin corporation
("GPPW" and, together with Holdings and the Company, the "Registrants"), in
connection with the registration, pursuant to a Registration Statement on Form
S-4 (the "Registration Statement") filed today by the Registrants under the
Securities Act of 1933, as amended (the "Securities Act"), of (i) the offer to
exchange the 11 1/4% Senior Subordinated Notes due 2006 (the "New Notes" ) of
the Company and GPPW for all outstanding 11 1/4% Senior Subordinated Notes due
2006 (the "Old Notes" and, together with the New Notes, the "Notes") of the
Company and GPPW that were issued on July 2, 1998 in a transaction exempt from
the registration requirements of the Securities Act, and (ii) issuance of the
irrevocable and unconditional guarantee on a senior subordinated basis by
Holdings of the obligations of the Company and GPPW under the New Notes (the
"Guarantee").
In our capacity as such counsel, we have reviewed (i) the Registration
Statement, (ii) the Indenture (the "Indenture") dated as of July 1, 1998 between
the Company, GPPW and Marine Midland Bank, as trustee, relating to the Notes and
filed as an exhibit to the Registration Statement and (iii) the Guarantee, filed
as an exhibit to the Registration Statement. We have also reviewed such matters
of law and examined original, certified, conformed or photographic copies of
such other documents, records, agreements and certificates as we have deemed
necessary as a basis for the opinions hereinafter expressed. In such review, we
have assumed the genuineness of signatures on all documents submitted to us as
originals, the conformity to original documents of all copies submitted to us as
certified, conformed or photographic copies.
We have assumed that the execution and delivery of, and the performance
of all obligations under, the Indenture and the Guarantee have been duly
authorized by all requisite action by each party thereto, and that such
documents have been duly executed and delivered by the parties thereto, and are
valid and binding agreements of the parties thereto (other than the Registrants)
enforceable against the parties thereto (other than the Registrants) in
accordance with their respective terms.
<PAGE> 2
Generac Portable Products, Inc.
March 1, 1999
Page 2
This opinion is limited in all respects to the laws of the State of New
York, and no opinion is expressed with respect to the laws of any other
jurisdiction or any effect that such laws may have on the opinions expressed
herein. This opinion is limited to the matters stated herein, and no opinion is
implied or may be inferred beyond the matters expressly stated herein.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Notes issued under the Indenture constitute valid and
binding obligations of the Company and GPPW, enforceable against each
of the Company and GPPW in accordance with their terms, subject, as to
the enforcement of remedies, to bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights generally,
general equitable principles and the discretion of courts in granting
equitable remedies.
2. The Guarantee constitutes a valid and binding obligation of
Holdings, enforceable against Holdings in accordance with its terms,
subject to the enforcement of remedies, to bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
generally, general equitable principles and the discretion of courts in
granting equitable remedies.
.
This opinion is given as of the date hereof, and we assume no
obligation to update this opinion to reflect any fact or circumstance that may
hereafter come to our attention or any change in any law or regulation that may
hereafter occur.
We hereby consent to the filing of this opinion letter as an exhibit to
the Registration Statement and to the reference to us under the caption
"Validity of Notes" in the prospectus included in the Registration Statement. In
giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act.
Very truly yours,
/s/ King & Spalding
<PAGE> 1
EXHIBIT 12.1
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
PREDECESSOR COMPANY PRO FORMA
---------------------------------- ------------- ------------
YEAR ENDED JULY 10, 1998
DECEMBER 31, JANUARY 1, 1998 THROUGH YEAR ENDED
---------------- THROUGH DECEMBER 31, DECEMBER 31,
1996 1997 JULY 9, 1998 1998 1998
------ ------- --------------- ------------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Earnings:
Income before income
taxes............... $6,757 $18,743 $14,493 $ 6,382 $ 8,895
Add fixed charges:
Interest expense.... 2,237 2,100 1,409 9,674 19,988
Deferred financing
cost
amortization...... -- -- -- 401 825
Portion of rents
representative of
the interest
factor............ 33 154 159 47 94
------ ------- ------- ------- -------
Earnings as adjusted..... $9,027 $20,997 $16,061 $16,504 $29,802
====== ======= ======= ======= =======
Fixed charges:
Interest expense....... $2,237 $ 2,100 $ 1,409 $ 9,674 $19,988
Deferred financing cost
amortization........ -- -- -- 401 825
Portion of rents
representative of
the interest factor
(approximately
one-third of rent
expense)............ 33 154 159 47 94
------ ------- ------- ------- -------
Total fixed charges...... $2,270 $ 2,254 $ 1,568 $10,122 $20,907
====== ======= ======= ======= =======
Ratio of earnings to
fixed charges.......... 4.0 9.3 10.2 1.6 1.4
====== ======= ======= ======= =======
</TABLE>
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT AND REPORT ON FINANCIAL STATEMENT SCHEDULE
We consent to the use in this Registration Statement of Generac Portable
Products, Inc. on Form S-4 of our report dated January 29, 1999 (relating to the
financial statements of the Portable Products Division, a Business Unit of
Generac Corporation) appearing in the Prospectus, which is part of this
Registration Statement, and to the reference to us under the heading "Experts"
in such Prospectus.
Our audits also included the financial statement schedule of the Portable
Products Division, a Business Unit of Generac Corporation listed in Item 21.
This financial statement schedule is the responsibility of the Corporation's
management. Our responsibility is to express an opinion based on our audits. In
our opinion such financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects, the information set forth therein.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
March 2, 1999
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Generac Portable Products, Inc., Generac
Portable Products, LLC and GPPW, Inc. of our report dated February 22, 1999
relating to the financial statements of Generac Portable Products, Inc., which
appears in such Prospectus. We also consent to the use of our report on the
Financial Statement Schedule included in such Registration Statement. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
February 26, 1999
<PAGE> 1
Exhibit 25
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
-----------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
-----------
MARINE MIDLAND BANK
(Exact name of trustee as specified in its charter)
New York 16-1057879
(Jurisdiction of incorporation (I.R.S. Employer
or organization if not a U.S. Identification No.)
national bank)
140 Broadway, New York, NY 10005-1180
(212) 658-1000 (Zip Code)
(Address of principal executive offices)
Warren L. Tischler
Senior Vice President
Marine Midland Bank
140 Broadway
New York, New York 10005-1180
Tel: (212) 658-5167
(Name, address and telephone number of agent for service)
GENERAC PORTABLE PRODUCTS, INC.
GENERAC PORTABLE PRODUCTS, LLC
GPPW, INC.
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 13-4006887
Delaware 39-1932782
Wisconsin 3621 13-4012695
(State or other jurisdiction (Primary Standard Industrial Classification (I.R.S. Employer
of incorporation or organization) Code Number) Identification Number)
</TABLE>
<PAGE> 2
1 Generac Way
Jefferson, Wisconsin, 53549
(920) 674-3750
(Address,including zip code, and telephone
number, including area code, of
registrant's of principal executive
offices)
Dorrance J. Noonan, Jr.
President and Chief Executive Officer
Generac Portable Products, LLC
1 Generac Way
Jefferson, Wisconsin 53549
(920) 674-3750
(Name, address, including zip code, and telephone number,
Including area code, of agent for service)
11 1/4% SENIOR SUBORDINATED NOTES DUE 2006
(Title of Indenture Securities)
<PAGE> 3
General
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory authority to
which it is subject.
State of New York Banking Department.
Federal Deposit Insurance Corporation, Washington, D.C.
Board of Governors of the Federal Reserve System,
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each
such affiliation.
None
<PAGE> 4
Item 16. List of Exhibits.
Exhibit
T1A(i) * - Copy of the Organization Certificate of
Marine Midland Bank.
T1A(ii) * - Certificate of the State of New York
Banking Department dated December 31,
1993 as to the authority of Marine Midland
Bank to commence business.
T1A(iii) - Not applicable.
T1A(iv) * - Copy of the existing By-Laws of Marine
Midland Bank as adopted on January 20,
1994.
T1A(v) - Not applicable.
T1A(vi) * - Consent of Marine Midland Bank required
by Section 321(b) of the Trust Indenture
Act of 1939.
T1A(vii) - Copy of the latest report of condition of
the trustee (September 30, 1998),
published pursuant to law or the
requirement of its supervisory or
examining authority.
T1A(viii) - Not applicable.
T1A(ix) - Not applicable.
* Exhibits previously filed with the Securities and Exchange Commission
with Registration No. 33-53693 and incorporated herein by reference
thereto.
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
Marine Midland Bank, a banking corporation and trust company organized under the
laws of the State of New York, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York on the 17th day of February, 1999.
MARINE MIDLAND BANK
By: /s/ Anthony R. Bufinsky
-----------------------
Anthony R. Bufinsky
Corporate Trust Officer
<PAGE> 6
<TABLE>
<S> <C>
EXHIBIT T1A (vii)
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL Expires March 31, 2000
- -----------------------------------------------------------------------------------------------------
1
Please refer to page i, Table
of Contents, for the required
disclosure of estimated burden.
- -----------------------------------------------------------------------------------------------------
</TABLE>
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR A BANK WITH DOMESTIC AND
FOREIGN OFFICES--FFIEC 031
REPORT AT THE CLOSE OF BUSINESS SEPTEMBER 30, 1998
(19980930)
(RCRI 9999)
This report is required by law; 12 U.S.C. Section 324 (State member banks); 12
U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161 (National
banks).
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National Banks.
I, Gerald A. Ronning, Executive VP & Controller
- -----------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and Income
(including the supporting schedules) have been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and are true
to the best of my knowledge and believe.
/s/ Gerald A. Ronning
- ----------------------------------------------
Signature of Officer Authorized to Sign Report
10/26/98
- ----------------------------------------------
Date of Signature
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
/s/ Bernard J. Kennedy
- ----------------------------------------------
Director (Trustee)
/s/ Sal H. Alfiero
- ----------------------------------------------
Director (Trustee)
/s/ Malcolm Burnett
- ----------------------------------------------
Director (Trustee)
SUBMISSION OF REPORTS
Each Bank must prepare its Reports of Condition and Income either:
(a) in automated formand then file the computer data file directly with the
banking agencies' collection agent, Electronic Data
System Corporation (EDS), by modem or computer diskette; or
(b) in hard-copy (paper) form and arrange for another party to convert the
paper report to automated for. That party (if other than EDS) must transmit
the bank's computer data file to EDS
To fulfill the signature and attestation requirement for the Reports of
Condition and Income for this report date, attach this signature page to the
hard-copy f the completed report that the bank places in its files.
FDIC Certificate Number 0 0 5 8 9
--- --- --- --- ---
(RCRI 9030)
<PAGE> 7
<TABLE>
<CAPTION>
REPORT OF CONDITION
Consolidating domestic and foreign subsidiaries of the
Marine Midland Bank of Buffalo
Name of Bank City
in the state of New York, at the close of business
September 30, 1998
ASSETS
Thousands
of dollars
<S> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances
currency and coin.................................... $937,647
Interest-bearing balances ........................... 3,764,738
Held-to-maturity securities.......................... 0
Available-for-sale securities........................ 3,998,450
Federal funds sold and securities purchased
under agreements to resell........................... 1,634,540
Loans and lease financing receivables:
Loans and leases net of unearned
income............................... 21,024,990
LESS: Allowance for loan and lease
losses............................... 400,676
LESS: Allocated transfer risk reserve 0
Loans and lease, net of unearned
income, allowance, and reserve........................ 20,624,314
Trading assets........................................ 894,111
Premises and fixed assets (including
capitalized leases)................................... 207,944
Other real estate owned.................................. 13,083
Investments in unconsolidated
subsidiaries and associated companies.................... 0
Customers' liability to this bank on
acceptances outstanding.................................. 57,309
Intangible assets........................................ 469,741
Other assets............................................. 572,948
Total assets............................................. 33,174,825
</TABLE>
<PAGE> 8
<TABLE>
<S> <C> <C>
LIABILITIES
Deposits:
In domestic offices................................... 20,579,926
Noninterest-bearing................................... 3,726,544
Interest-bearing...................................... 16,853,382
In foreign offices, Edge, and Agreement
subsidiaries, and IBFs................................... 5,954,449
Noninterest-bearing................................... 0
Interest-bearing...................................... 5,954,449
Federal funds purchased and securities sold
under agreements to repurchase........................ 1,025,621
Demand notes issued to the U.S. Treasury 86,890
Trading Liabilities...................................... 172,910
Other borrowed money:
With a remaining maturity of one year
or less............................................... 1,340,056
With a remaining maturity of more than
one year through three years.......................... 84,661
With a remaining maturity of more than
three years........................................... 38,489
Bank's liability on acceptances
executed and outstanding................................. 57,309
Subordinated notes and debentures........................ 697,963
Other liabilities........................................ 805,684
Total liabilities........................................ 30,843,958
EQUITY CAPITAL
Perpetual preferred stock and related
surplus.................................................. 0
Common Stock............................................. 205,000
Surplus.................................................. 1,985,665
Undivided profits and capital reserves................... 78,723
Net unrealized holding gains (losses)
on available-for-sale securities......................... 61,479
Cumulative foreign currency translation
adjustments.............................................. 0
Total equity capital..................................... 2,330,867
Total liabilities, limited-life
preferred stock, and equity capital...................... 33,174,825
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information (in $000's) extracted from
the Generac Portable Products, Inc. and the Generac Portable Products Division
(A Business Unit of Generac Corporation) financial statements and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001080892
<NAME> GENERAC PORTABLE PRODUCTS, INC.
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS YEAR YEAR
<FISCAL-YEAR-END> JUL-10-1998 JAN-01-1998 DEC-31-1997 DEC-31-1996
<PERIOD-END> DEC-31-1998 JUL-09-1998 DEC-31-1997 DEC-31-1996
<CASH> 1,528 599 1,065 1,122
<SECURITIES> 0 0 0 0
<RECEIVABLES> 44,937 48,753 18,938 14,414
<ALLOWANCES> 242 225 172 151
<INVENTORY> 46,651 42,839 33,023 24,707
<CURRENT-ASSETS> 93,911 92,395 53,060 40,722
<PP&E> 20,460 18,946 16,831 15,502
<DEPRECIATION> 1,023 5,577 4,591 3,145
<TOTAL-ASSETS> 332,002 105,764 65,300 53,079
<CURRENT-LIABILITIES> 36,370 23,854 12,537 11,443
<BONDS> 110,000 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 1 0 0 0
<OTHER-SE> 103,266 81,910 52,763 41,636
<TOTAL-LIABILITY-AND-EQUITY> 332,002 105,764 65,300 53,079
<SALES> 136,862 139,551 178,014 122,550
<TOTAL-REVENUES> 136,862 139,551 178,014 122,550
<CGS> 98,245 104,537 131,095 95,246
<TOTAL-COSTS> 120,559 123,474 156,964 113,696
<OTHER-EXPENSES> 230 108 186 15
<LOSS-PROVISION> 17 67 21 (155)
<INTEREST-EXPENSE> 9,674 1,409 2,100 2,237
<INCOME-PRETAX> 6,382 14,493 18,743 6,757
<INCOME-TAX> 2,180 0 0 0
<INCOME-CONTINUING> 4,202 14,493 18,743 6,757
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 4,202 14,493 18,743 6,757
<EPS-PRIMARY> 0 0 0 0
<EPS-DILUTED> 0 0 0 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
GENERAC PORTABLE PRODUCTS, LLC
GPPW, INC.
OFFER TO EXCHANGE
$110,000,000 PRINCIPAL AMOUNT OF
11 1/4% SENIOR SUBORDINATED NOTES DUE
2006 THAT HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933
FOR ANY AND ALL
$110,000,000 PRINCIPAL AMOUNT OF
11 1/4% SENIOR SUBORDINATED NOTES DUE 2006
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON _______, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE").
If you desire to accept the Exchange Offer, this Letter of Transmittal
should be completed, signed, and submitted to Bankers Trust Company, as the
Exchange Agent:
<TABLE>
<CAPTION>
<S> <C> <C>
By Facsimile: By Overnight Mail or Courier: By Hand Delivery:
BT Services Tennessee, Inc. BT Services Tennessee, Inc. Bankers Trust Company
Reorganization Unit Corporate Trust & Agency Group Corporate Trust & Agency Group
P.O. Box 292737 Reorganization Unit Attn: Reorganization Department
Nashville, Tennessee 648 Grassmere Park Road Receipt & Delivery Window
37229-2737 Nashville, Tennessee 37211 123 Washington Street, 1st Floor
New York, New York 10006
Facsimile Transmission Number: Confirm By Telephone: Information:
(615) 835-3701 (615) 835-3572 (800) 735-7777
</TABLE>
Delivery of this Letter of Transmittal to an address other than as set
forth above or transmission of this Letter of Transmittal via facsimile to a
number other than as set forth above does not constitute a valid delivery.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE> 2
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of Old Notes (as
defined below) either if Old Notes are to be forwarded herewith or if tenders of
Old Notes are to be made by book-entry transfer to an account maintained by
Bankers Trust Company (the "Exchange Agent") at The Depository Trust Company
("DTC") pursuant to the procedures set forth in "The Exchange Offer--Procedures
for Tendering Old Notes" in the Prospectus unless an Agent's Message is
transmitted in lieu hereof.
Holders of Old Notes whose certificates (the "Certificates") for such Old
Notes are not immediately available or who cannot deliver their Certificates and
all other required documents to the Exchange Agent on or prior to the Expiration
Date (as defined in the Prospectus) or who cannot complete the procedures for
book-entry transfer on a timely basis, must tender their Old Notes according to
the guaranteed delivery procedures set forth in "The Exchange Offer--Procedures
for Tendering Old Notes" in the Prospectus unless an Agent's Message is
transmitted in lieu thereof.
DELIVERY OF DOCUMENTS TO DTC DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
ALL TENDERING HOLDERS COMPLETE THIS BOX:
BOX 1
DESCRIPTION OF OLD NOTES TENDERED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
OLD NOTES TENDERED
(ATTACH ADDITIONAL LIST IF NECESSARY) AGGREGATE PRINCIPAL PRINCIPAL AMOUNT OF OLD
IF BLANK, PLEASE PRINT NAME AND ADDRESS OF CERTIFICATE AMOUNT OF NOTES TENDERED
REGISTERED HOLDER. NUMBER(S)* OLD NOTES (IF LESS THAN ALL)**
------------------ ---------- --------- --------------------
<S> <C> <C> <C>
TOTAL
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders.
** Old Notes may be tendered in whole or in part in any integral multiple of
$1,000. All Old Notes held shall be deemed tendered unless a lesser number
is specified in this column.
2
<PAGE> 3
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution________________________________________
DTC Account Number___________________________________________________
Transaction Code Number______________________________________________
/ / CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)_________________________________________
Window Ticket Number (if any)________________________________________
Date of Execution of Notice of Guaranteed Delivery___________________
Name of Institution which Guaranteed Delivery________________________
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution________________________________________
DTC Account Number___________________________________________________
Transaction Code Number______________________________________________
/ / CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES
ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
/ / CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name_________________________________________________________________
Address______________________________________________________________
3
<PAGE> 4
Ladies and Gentlemen:
The undersigned hereby tenders to Generac Portable Products, LLC, a
Delaware limited liability company (the "Company"), and GPPW, Inc., a Wisconsin
corporation ("GPPW" and, together with the Company, the "Issuers"), the above
described aggregate principal amount of the Issuers' 11 1/4% Senior Subordinated
Notes due 2006 (the "Old Notes") in exchange for a like aggregate principal
amount of the Issuers' 11 1/4% Senior Subordinated Notes due 2006 (the "New
Notes") which have been registered under the Securities Act of 1933 (the
"Securities Act"), upon the terms and subject to the conditions set forth in the
Prospectus dated______ __, 1999 (as the same may be amended or supplemented from
time to time, the "Prospectus"), receipt of which is acknowledged, and in this
Letter of Transmittal (which, together with the Prospectus, constitutes the
"Exchange Offer").
Subject to and effective upon the acceptance for exchange of all or any
portion of the Old Notes tendered herewith in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to or upon the order of the
Issuers all right, title and interest in and to such Old Notes as are being
tendered herewith. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as its agent and attorney-in-fact (with full knowledge that
the Exchange Agent is also acting as agent of the Issuers in connection with the
Exchange Offer) with respect to the tendered Old Notes, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), subject only to the right of withdrawal described in
the Prospectus, to (i) deliver Certificates for Old Notes to the Issuers
together with all accompanying evidences of transfer and authenticity to, or
upon the order of, the Issuers, upon receipt by the Exchange Agent, as the
undersigned's agent, of the New Notes to be issued in exchange for such Old
Notes, (ii) present Certificates for such Old Notes for transfer, and to
transfer the Old Notes on the books of the Issuers, and (iii) receive for the
account of the Issuers all benefits and otherwise exercise all rights of
beneficial ownership of such Old Notes, all in accordance with the terms and
conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE OLD
NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, THE
ISSUERS WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND
CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE OLD
NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES. THE
UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS
DEEMED BY THE ISSUERS OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO
COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE OLD NOTES TENDERED HEREBY,
AND THE UNDERSIGNED WILL COMPLY WITH ITS OBLIGATIONS UNDER THE REGISTRATION
RIGHTS AGREEMENT. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE
EXCHANGE OFFER.
The name(s) and address(es) of the registered holder(s) of the Old Notes
tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Certificates representing such Old Notes. The
Certificate number(s) and the Old Notes that the undersigned wishes to tender
should be indicated in the appropriate boxes above.
If any tendered Old Notes are not exchanged pursuant to the Exchange Offer
for any reason, or if Certificates are submitted for more Old Notes than are
tendered or accepted for exchange, Certificates for such nonexchanged
4
<PAGE> 5
or nontendered Old Notes will be returned (or, in the case of Old Notes tendered
by book-entry transfer, such Old Notes will be credited to an account maintained
at DTC), without expense to the tendering holder, promptly following the
expiration or termination of the Exchange Offer.
The undersigned understands that tenders of Old Notes pursuant to any one
of the procedures described in "The Exchange Offer--Procedures for Tendering Old
Notes" in the Prospectus and in the instruction will, upon the Issuers'
acceptance for exchange of such tendered Old Notes, constitute a binding
agreement between the undersigned and the Issuers upon the terms and subject to
the conditions of the Exchange Offer. The undersigned recognizes that, under
certain circumstances set forth in the Prospectus, the Issuers may not be
required to accept for exchange any of the Old Notes tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the New Notes be issued
in the name(s) of the undersigned or, in the case of a book-entry transfer of
Old Notes, that such New Notes be credited to the account indicated above
maintained at DTC. If applicable, substitute Certificates representing Old Notes
not exchanged or not accepted for exchange will be issued to the undersigned or,
in the case of a book-entry transfer of Old Notes, will be credited to the
account indicated above maintained at DTC. Similarly, unless otherwise indicated
under "Special Delivery Instructions," please deliver New Notes to the
undersigned at the address shown below the undersigned's signature.
BY TENDERING OLD NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, THE
UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) THE UNDERSIGNED IS NOT AN
"AFFILIATE" OF THE ISSUERS OR GENERAC PORTABLE PRODUCTS, INC., (II) ANY NEW
NOTES TO BE RECEIVED BY THE UNDERSIGNED ARE BEING ACQUIRED IN THE ORDINARY
COURSE OF ITS BUSINESS, (III) THE UNDERSIGNED HAS NO ARRANGEMENT OR
UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN THE DISTRIBUTION (WITHIN THE
MEANING OF THE SECURITIES ACT) OF NEW NOTES TO BE RECEIVED IN THE EXCHANGE
OFFER, AND (IV) IF THE UNDERSIGNED IS NOT A BROKER-DEALER, THE UNDERSIGNED IS
NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION (WITHIN THE
MEANING OF THE SECURITIES ACT) OF SUCH NEW NOTES. BY TENDERING OLD NOTES
PURSUANT TO THE EXCHANGE OFFER AND EXECUTING THIS LETTER OF TRANSMITTAL, A
HOLDER OF OLD NOTES WHICH IS A BROKER-DEALER REPRESENTS AND AGREES, CONSISTENT
WITH CERTAIN INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE DIVISION OF
CORPORATION FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION TO THIRD PARTIES,
THAT (A) SUCH OLD NOTES HELD BY THE BROKER-DEALER ARE HELD ONLY AS A NOMINEE, OR
(B) SUCH OLD NOTES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS A
RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND IT WILL
DELIVER THE PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME) MEETING
THE REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF SUCH NEW
NOTES (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH
BROKER- DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN
THE MEANING OF THE SECURITIES ACT).
THE ISSUERS HAVE AGREED THAT, SUBJECT TO THE PROVISIONS OF THE
REGISTRATION RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY A PARTICIPATING BROKER-DEALER (AS
DEFINED BELOW) IN CONNECTION WITH RESALES OF NEW NOTES RECEIVED IN EXCHANGE FOR
OLD NOTES, WHERE SUCH OLD NOTES WERE ACQUIRED BY SUCH PARTICIPATING
BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR
OTHER TRADING ACTIVITIES, FOR
5
<PAGE> 6
A PERIOD ENDING 90 DAYS AFTER THE EXPIRATION DATE (SUBJECT TO EXTENSION UNDER
CERTAIN LIMITED CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS) OR, IF EARLIER, WHEN
ALL SUCH NEW NOTES HAVE BEEN DISPOSED OF BY SUCH PARTICIPATING BROKER-DEALER. IN
THAT REGARD, EACH BROKER-DEALER WHO ACQUIRED OLD NOTES FOR ITS OWN ACCOUNT AND
AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES (A "PARTICIPATING
BROKER-DEALER"), BY TENDERING SUCH OLD NOTES AND EXECUTING THIS LETTER OF
TRANSMITTAL, AGREES THAT, UPON RECEIPT OF NOTICE FROM THE ISSUERS OF THE
OCCURRENCE OF ANY EVENT OR THE DISCOVERY OF ANY FACT WHICH MAKES ANY STATEMENT
CONTAINED OR INCORPORATED BY REFERENCE THEREIN, IN LIGHT OF THE CIRCUMSTANCES
UNDER WHICH THEY WERE MADE, NOT MISLEADING OR OF THE OCCURRENCE OF CERTAIN OTHER
EVENTS SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT, SUCH PARTICIPATING
BROKER-DEALER WILL SUSPEND THE SALE OF NEW NOTES PURSUANT TO THE PROSPECTUS
UNTIL THE ISSUERS HAVE AMENDED OR SUPPLEMENTED THE PROSPECTUS TO CORRECT SUCH
MISSTATEMENT OR OMISSION AND HAS FURNISHED COPIES OF THE AMENDED OR SUPPLEMENTED
PROSPECTUS TO THE PARTICIPATING BROKER-DEALER OR THE ISSUERS HAVE GIVEN NOTICE
THAT THE SALE OF THE NEW NOTES MAY BE RESUMED, AS THE CASE MAY BE. IF THE
ISSUERS GIVE SUCH NOTICE TO SUSPEND THE SALE OF THE NEW NOTES, IT SHALL EXTEND
THE 90-DAY PERIOD REFERRED TO ABOVE DURING WHICH PARTICIPATING BROKER-DEALERS
ARE ENTITLED TO USE THE PROSPECTUS IN CONNECTION WITH THE RESALE OF NEW 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 PARTICIPATING BROKER-DEALERS SHALL
HAVE RECEIVED COPIES OF THE SUPPLEMENTED OR AMENDED PROSPECTUS NECESSARY TO
PERMIT RESALES OF THE NEW NOTES OR TO AND INCLUDING THE DATE ON WHICH THE
ISSUERS HAVE GIVEN NOTICE THAT THE SALE OF NEW NOTES MAY BE RESUMED, AS THE CASE
MAY BE.
As a result, a Participating Broker-Dealer who intends to use the
Prospectus in connection with resales of New Notes received in exchange for Old
Notes pursuant to the Exchange Offer must notify the Issuers, or cause the
Issuers to be notified, on or prior to the Expiration Date, that it is a
Participating Broker-Dealer. Such notice may be given in the space provided
above or may be delivered to the Exchange Agent at the address set forth in the
Prospectus under "The Exchange Offer--Exchange Agent."
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive interest on such Old Notes and the undersigned waives the right to
receive any interest on such Old Notes accumulated from and after July 9, 1998.
Accordingly, holders of New Notes as of the record date for the payment of
interest on January 1, 1999 will be entitled to interest accumulated from and
after July 9, 1998.
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except as
stated in the Prospectus, this tender is irrevocable.
6
<PAGE> 7
HOLDER(S) SIGN HERE
(See Instructions 2, 5 and 6)
(Please Complete Substitute Form W-9 Below)
(Note: Signature(s) must be guaranteed if required by Instruction 2)
This Letter of Transmittal must be signed by registered holder(s) exactly
as name(s) appear(s) on Certificates(s) for the Old Notes hereby tendered or on
a security position listing, or by any person(s) authorized to become the
registered holder(s) by endorsements and documents transmitted herewith
(including such opinions of counsel, certificates and other information as may
be required by the Issuers or the Trustee for the Old Notes to comply with the
restrictions on transfer applicable to the Old Notes). If signature is by an
attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary capacity or representative
capacity, please set forth the signer's full title. See Instruction 5.
(SIGNATURE(S) OF HOLDER(S))
X___________________________________________ Date:_________________________
X___________________________________________ Date:_________________________
Name(s)________________________________________________________________________
(PLEASE PRINT)
Address(es)____________________________________________________________________
(INCLUDING ZIP CODE)
Area Code(s) and Telephone Number(s)___________________________________________
_______________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
GUARANTEE OF SIGNATURE(S)
(See Instructions 2 and 5)
Authorized Signature___________________________________________________________
Name___________________________________________________________________________
(PLEASE PRINT)
Capacity or Title______________________________________________________________
Name of Firm___________________________________________________________________
Address________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number_________________________________________________
Date___________________________________________________________________________
7
<PAGE> 8
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 1, 5 and 6)
To be completed ONLY if New Notes are to be issued in the name of someone other
than the registered holder of the Old Notes whose name(s) appear(s) above.
Issue:
/ / New Notes to:
/ / Old Notes not tendered to:
Name___________________________________________________________________________
(PLEASE PRINT)
Address________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(INCLUDE ZIP CODE)
_______________________________________________________________________________
(Taxpayer Identification or Social Security No.)
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 5 and 6)
To be completed ONLY if New Notes are to be sent to someone other than the
registered holder of the Old Notes whose name(s) appear(s) above, or to the
registered holder(s) at an address other than that shown above.
Mail:
/ / New Notes to:
/ / Old Notes not tendered to:
Name___________________________________________________________________________
(PLEASE PRINT)
Address________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(INCLUDE ZIP CODE)
_______________________________________________________________________________
(Taxpayer Identification or Social Security No.)
8
<PAGE> 9
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES.
This Letter of Transmittal is to be completed either if (a) tenders are to
be made pursuant to the procedures for tender by book-entry transfer set forth
in "The Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus
unless an Agent's Message is transmitted in lieu hereof or (b) Certificates are
to be forwarded herewith. Timely confirmation of a book-entry transfer of such
Old Notes into the Exchange Agent's account at DTC, or Certificates as well as
this Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees or an Agent's Message in lieu
hereof, and any other documents required by this Letter of Transmittal, must be
received by the Exchange Agent at its addresses set forth herein on or prior to
the Expiration Date. Old Notes may be tendered in whole or in part in any
integral multiple of $1,000.
Holders who wish to tender their Old Notes and (i) who cannot complete the
procedures for delivery by book-entry transfer on a timely basis, may tender
their Old Notes by properly completing and duly executing a Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedures set forth in "The
Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus or (ii who
cannot deliver their Old Notes, this Letter of Transmittal and all other
required documents to the Exchange Agent on or prior to the Expiration Date or
(ii whose Old Notes are not immediately available must use a Notice of
Guaranteed Delivery and follow the related procedures. Pursuant to such
procedures: (a) such tender must be made by or through an Eligible Institution
(as defined below); (b) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form made available by the Issuers,
must be received by the Exchange Agent on or prior to the Expiration Date; and
(c) the Certificates (or a book-entry confirmation (as defined in the
Prospectus)) representing tendered Old Notes, in proper form for transfer,
together with a Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees or an Agent's Message
in lieu hereof and any other documents required by this Letter of Transmittal,
must be received by the Exchange Agent within three New York Stock Exchange,
Inc. trading days after the date of execution of such Notice of Guaranteed
Delivery, all as provided in "The Exchange Offer--Procedures for Tendering Old
Notes" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile or mail to the Exchange Agent, and must include a guarantee by an
Eligible Institution in the form set forth in such Notice. For Old Notes to be
properly tendered pursuant to the guaranteed delivery procedure, the Exchange
Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration
Date. As used herein and in the Prospectus, "Eligible Institution" means a firm
or other entity identified in Rule 17Ad-15 under the Exchange Act as "an
eligible guarantor institution," including (as such terms are defined therein)
(i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or
government securities broker or dealer; (iii) a credit union; (iv) a national
securities exchange, registered securities association or clearing agency; or
(v) a savings association that is a participant in a Securities Transfer
Association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER
AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
9
<PAGE> 10
The Issuers will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance of
such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder (which
term, for purposes of this document, shall include any participant in DTC whose
name appears on a security position listing as the owner of the Old Notes) of
Old Notes tendered herewith, unless such holder(s) has completed either the box
entitled "Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" above, or
(ii) such Old Notes are tendered for the account of a firm that is an
Eligible Institution.
In all other cases, an Eligible Institution must guarantee the
signature(s) on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Old Notes" is inadequate, the Certificate number(s) and/or the
principal amount of Old Notes and any other required information should be
listed on a separate signed schedule which is attached to this Letter of
Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Old Notes will be
accepted in any integral multiple of $1,000. If less than all the Old Notes
evidenced by any Certificate submitted are to be tendered, fill in the principal
amount of Old Notes which are to be tendered in the box entitled "Principal
Amount of Old Notes Tendered." In such case, new Certificate(s) for the
remainder of the Old Notes that were evidenced by your Old Certificate(s) will
only be sent to the holder of the Old Note, promptly after the Expiration Date.
All Old Notes represented by Certificates delivered to the Exchange Agent will
be deemed to have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time on or prior to the Expiration Date. In order for a withdrawal to be
effective on or prior to that time, a written, telegraphic, telex or facsimile
transmission of such notice of withdrawal must be timely received by the
Exchange Agent at one of its addresses set forth above or in the Prospectus on
or prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Old Notes to be withdrawn, the aggregate
principal amount of Old Notes to be withdrawn, and (if Certificates for Old
Notes have been tendered) the name of the registered holder of the Old Notes as
set forth on the Certificate for the Old Notes, if different from that of the
person who tendered such Old Notes. If Certificates for the Old Notes have been
delivered or otherwise identified to the Exchange Agent, then prior to the
physical release of such Certificates for the Old Notes, the tendering holder
must submit the serial numbers shown on the particular Certificates for the Old
Notes to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution, except in the case of Old Notes tendered
for the account of an Eligible Institution. If Old Notes have been tendered
pursuant to the procedures for book-entry transfer set forth in "The Exchange
Offer--Procedures for Tendering Old Notes," the notice of withdrawal must
specify the name and number of the account at DTC to be credited with the
withdrawal of Old Notes, in which case a notice of withdrawal will be effective
if delivered to the Exchange Agent by written, telegraphic, telex or facsimile
transmission. Withdrawals of tenders of Old Notes may not be rescinded. Old
Notes properly withdrawn will not be deemed validly tendered for purposes of the
Exchange Offer, but may be retendered at any subsequent time on or prior to the
Expiration Date by following any of the procedures described in the Prospectus
under "The Exchange Offer--Procedures for Tendering Old Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Issuers, in their
sole discretion, whose determination shall be final and binding on all parties.
10
<PAGE> 11
None of the Issuers, any affiliates or assigns of the Issuers, the Exchange
Agent or any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. Any Old Notes which have been tendered
but which are withdrawn will be returned to the holder thereof without cost to
such holder promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Old
Notes tendered hereby, the signature(s) must correspond exactly with the name(s)
as written on the face of the Certificate(s) without alteration, enlargement or
any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different name(s) on several
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal (or facsimiles thereof) as there are different
registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and must submit proper
evidence satisfactory to the Issuers, in their sole discretion, of such persons'
authority to so act.
When this Letter of Transmittal is signed by the registered owner(s) of
the Old Notes listed and transmitted hereby, no endorsement(s) of Certificate(s)
or separate bond power(s) are required unless New Notes are to be issued in the
name of a person other than the registered holder(s). Signature(s) on such
Certificate(s) or bond power(s) must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Old Notes listed, the Certificates must be endorsed
or accompanied by appropriate bond powers, signed exactly as the name or names
of the registered owner(s) appear(s) on the Certificates, and also must be
accompanied by such opinions of counsel, certifications and other information as
the Issuers or the Trustee for the Old Notes may require in accordance with the
restrictions on transfer applicable to the Old Notes. Signatures on such
Certificates or bond powers must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Notes are to be
issued in the name of a person other than the signer of this Letter of
Transmittal, or if New Notes are to be sent to someone other than the signer of
this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
Certificates for Old Notes not exchanged will be returned by mail or, if
tendered by book-entry transfer, by crediting the account indicated above
maintained at DTC. See Instruction 4.
7. IRREGULARITIES. The Issuers will determine, in their sole discretion,
all questions as to the form of documents, validity, eligibility (including time
of receipt) and acceptance for exchange of any tender of Old Notes which
determination shall be final and binding on all parties. The Issuers reserve the
absolute right, in their sole and absolute discretion, to reject any and all
tenders determined by either of them not to be in proper form or the acceptance
of which, or exchange for, may, in the view of counsel to the Issuers, be
unlawful. The Issuers also reserve the absolute right, subject to applicable
law, to waive any of the conditions of the Exchange Offer set forth in the
Prospectus under "The Exchange Offer--Conditions to the Exchange Offer" or any
conditions or irregularity in any tender of Old Notes of any particular holder
whether or not similar conditions or irregularities are waived in the case of
other holders. The Issuers' interpretation of the terms and conditions of the
Exchange Offer (including this Letter of Transmittal and the instructions
hereto) will be final and binding. No tender of Old Notes will be deemed to have
been validly made until all irregularities with respect to such tender have been
cured or
11
<PAGE> 12
waived. None of the Issuers, any affiliates or assigns of the Issuers, the
Exchange Agent, or any other person shall be under any duty to give notification
of any irregularities in tenders or incur any liability for failure to give such
notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the Exchange Agent at its address and
telephone number set forth on the front of this Letter of Transmittal.
Additional copies of the Prospectus, this Letter of Transmittal and the Notice
of Guaranteed Delivery may be obtained from the Exchange Agent or from your
broker, dealer, commercial bank, trust company or other nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a holder whose tendered Old Notes are accepted for exchange is required
to provide the Exchange Agent with such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 below. If the Exchange Agent is not
provided with the correct TIN, the Internal Revenue Service (the "IRS") may
subject the holder or other payee to a $50 penalty. In addition, payments to
such holders or other payees with respect to Old Notes exchanged pursuant to the
Exchange Offer may be subject to 31% backup withholding.
The box in Part 2 of the Substitute Form W-9 may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 2 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60 day period following the date of the Substitute Form W-9.
If the holder furnishes the Exchange Agent with its TIN within 60 days after the
date of the Substitute Form W-9, the amounts retained during the 60 day period
will be remitted to the holder and no further amounts shall be retained or
withheld from payments made to the holder thereafter. If, however, the holder
has not provided the Exchange Agent with its TIN within such 60 day period,
amounts withheld will be remitted to the IRS as backup withholding. In addition,
31% of all payments made thereafter will be withheld and remitted to the IRS
until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Old Notes or of the last transferee appearing on the transfers attached to,
or endorsed on, the Old Notes. If the Old Notes are registered in more than one
name or are not in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the face
thereof, to avoid possible erroneous backup withholding. A foreign person may
qualify as an exempt recipient by submitting a properly completed IRS Form W- 8,
signed under penalties of perjury, attesting to that holder's exempt status.
Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather,
the U.S. Federal income tax liability of a person subject to backup withholding
will be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s)
representing Old Notes have been lost, destroyed or stolen, the holder should
promptly notify the Exchange Agent. The holder will then be instructed as
12
<PAGE> 13
to the steps that must be taken in order to replace the Certificate(s). This
Letter of Transmittal and related documents cannot be processed until the
procedures for replacing lost, destroyed or stolen Certificate(s) have been
followed.
11. SECURITY TRANSFER TAXES. Holders who tender their Old Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, New Notes are to be delivered to, or are to be issued in
the name of, any person other than the registered holder of the Old Notes
tendered, or if a transfer tax is imposed for any reason other than the exchange
of Old Notes in connection with the Exchange Offer, then the amount of any such
transfer tax (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE
EXPIRATION DATE.
13
<PAGE> 14
TO BE COMPLETED BY ALL TENDERING NOTE HOLDERS
(SEE INSTRUCTION 9)
- -------------------------------------------------------------------------------
PAYERS' NAME: GENERAC PORTABLE PRODUCTS, LLC AND GPPW, INC.
- -------------------------------------------------------------------------------
SUBSTITUTE
Form W-9
DEPARTMENT OF TREASURY
INTERNAL REVENUE SERVICE
PAYER'S REQUEST FOR
TAXPAYER IDENTIFICATION
NUMBER ("TIN") AND
CERTIFICATION
Part 1 -- PLEASE PROVIDE YOUR TIN IN THE
BOX AT RIGHT AND CERTIFY BY SIGNING
AND DATING BELOW.
- -------------------------------------------------------------------------------
- ------------------------------
Social Security Number
or
- ------------------------------
Employer Identification Number
- -------------------------------------------------------------------------------
CERTIFICATION -- UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT
(1) the number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me),
(2) I am not subject to backup withholding either because (i) I am exempt from
backup withholding, (ii) I have not been notified by the Internal Revenue
Service ("IRS") that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (iii) the IRS has notified
me that I am no longer subject to backup withholding, and
(3) any other information provided on this form is true and correct.
Certification Instructions -- You must cross out item (iii) in Part (2)
above if you have been notified by the IRS that you are subject to backup
withholding because of under reporting interest or dividends on your tax
return and you have not been notified by the IRS that you are no longer
subject to backup withholding.
- -------------------------------------------------------------------------------
Signature
--------------------
Date
------------------------
- -------------------------------------------------------------------------------
Part 2 --
Awaiting TIN [ ]
- --------------------------------------------------------------------------------
NOTE: IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBERS
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all payments made to me on account of the New Notes shall be retained until I
provide a taxpayer identification number to the Exchange Agent and that, if I do
not provide my taxpayer identification number within 60 days, such retained
amounts shall be remitted to the Internal Revenue Service as backup withholding
and 31% of all reportable payments made to me thereafter will be withheld and
remitted to the Internal Revenue Service until I provide a taxpayer
identification number.
Signature Date
-------------------------- -------------------
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
11 1/4% SENIOR SUBORDINATED NOTES DUE 2006
OF
GENERAC PORTABLE PRODUCTS, LLC
GPPW,INC.
As set forth in the Prospectus dated , 1999 (the "Prospectus") of
Generac Portable Products, LLC, a Delaware limited liability company (the
"Company"), and GPPW, Inc., a Wisconsin corporation ("GPPW" and, together with
the Company, the "Issuers"), and in the accompanying Letter of Transmittal and
instructions thereto (the "Letter of Transmittal"), this form or one
substantially equivalent hereto must be used to accept the Issuers' offer to
exchange (the "Exchange Offer") new 11 1/4% Senior Subordinated Notes due 2006
(the "New Notes") that have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), for all of their outstanding 11 1/4% Senior
Subordinated Notes due 2006 (the "Old Notes") if the Letter of Transmittal or
any other documents required thereby cannot be delivered to the Exchange Agent,
or certificates for Old Notes cannot be delivered or the procedure for
book-entry transfer cannot be completed, prior to 5:00 p.m., New York City time,
on the Expiration Date (as defined in the Prospectus). This form may be
delivered by an Eligible Institution by hand or transmitted by facsimile
transmission, overnight courier or mail to the Exchange Agent as set forth
below. Capitalized terms not defined herein have the meanings ascribed to them
in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1999, UNLESS EXTENDED (THE "EXPIRATION DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
TO: BANKERS TRUST COMPANY, AS EXCHANGE AGENT
<TABLE>
<S> <C> <C>
By Facsimile: By Overnight Mail or Courier: By Hand Delivery:
BT Services Tennessee, Inc. BT Services Tennessee, Inc. Bankers Trust Company
Reorganization Unit Corporate Trust & Agency Group Corporate Trust & Agency Group
P.O. Box 292737 Reorganization Unit Attn: Reorganization Department
Nashville, Tennessee 648 Grassmere Park Road Receipt & Delivery Window
37229-2737 Nashville, Tennessee 37211 123 Washington Street, 1st Floor
New York, New York 10006
Facsimile Transmission Number: Confirm by Telephone: Information:
(615) 835-3701 (615) 835-3572 (800) 735-7777
</TABLE>
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of instructions via a facsimile number other
than that set forth above will not constitute a valid delivery.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal to be used to tender Old Notes is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the Letter
of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuers, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal (which together constitute the "Exchange Offer"), receipt of which
is hereby acknowledged, the principal amount of Old Notes specified below
pursuant to the guaranteed delivery procedures set forth in the Prospectus and
in Instruction 1 of the Letter of Transmittal.
The undersigned understands that tenders of Old Notes pursuant to the
Exchange Offer may not be withdrawn after 5:00 p.m., New York City time, on the
Expiration Date. Tenders of Old Notes may also be withdrawn if the Exchange
Offer is terminated without any such Old Notes being purchased thereunder or as
otherwise provided in the Prospectus.
All authority thereto conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned.
The undersigned hereby tenders the Old Notes listed below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
AGGREGATE PRINCIPAL AMOUNT OF OLD NOTES PRINCIPAL AMOUNT OF OLD NOTES TENDERED
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW
SIGN HERE
Name(s) of Holder(s):
- --------------------------------------------------------------------------------
Address(es):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Telephone Number:
- --------------------------------------------------------------------------------
Signature(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Date:
- --------------------------------------------------------------------------------
DTC Account Number (if applicable):
- -----------------------------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by (i) the Holder(s) of
Old Notes exactly as its/their name(s) appear on certificate for Old Notes, (ii)
the Holder(s) of Old Notes exactly as its/their name(s) appear on a security
position listing maintained by DTC as the owner of Old Notes or (iii) by
person(s) authorized to become Holder(s) by documents transmitted with this
Notice of Guaranteed Delivery. If signature is by a trustee, executor,
administrator,
2
<PAGE> 3
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information:
PLEASE PRINT NAME(S) AND ADDRESS(ES) OF PERSON SIGNING ABOVE
Name(s):
- --------------------------------------------------------------------------------
------------------------------------------------------------------------
Capacity:
- --------------------------------------------------------------------------------
Address(es):
- --------------------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), hereby (a) represents that the above named
person(s) "own(s)" the Old Notes tendered hereby within the meaning of Rule
14e-4 under the Exchange Act, (b) represents that such tender of Old Notes
complies with Rule 14e-4 under the Exchange Act and (c) guarantees that delivery
to the Exchange Agent of the Letter of Transmittal (or facsimile thereof),
either certificates for Old Notes in proper form for transfer or a confirmation
of the book-entry transfer of such Old Notes into the Exchange Agent's account
at DTC, pursuant to the procedures for book-entry transfer set forth in the
Prospectus, and delivery of either a properly completed and duly executed Letter
of Transmittal (or manually signed facsimile thereof) with any required
signatures and any other documents required by the Letter of Transmittal or an
Agent's Message, will be received by the Exchange Agent by 5:00 p.m., New York
City time, within three New York Stock Exchange, Inc. trading days after the
date of execution of this Notice of Guaranteed Delivery.
THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF TRANSMITTAL
OR AGENT'S MESSAGE AND OLD NOTES TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN
THE TIME PERIOD SET FORTH ABOVE AND THAT FAILURE TO DO SO COULD RESULT IN
FINANCIAL LOSS TO THE UNDERSIGNED.
SIGN HERE
Name of firm:
- --------------------------------------------------------------------------------
Authorized Signature:
- --------------------------------------------------------------------------------
Name (please print):
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Telephone Number:
- --------------------------------------------------------------------------------
Date:
- --------------------------------------------------------------------------------
DO NOT SEND ANY CERTIFICATES FOR OLD NOTES WITH THIS FORM. ACTUAL SURRENDER
OF CERTIFICATES FOR OLD NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY,
AN EXECUTED LETTER OF TRANSMITTAL.
3
<PAGE> 4
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at its address set forth herein on or prior to the Expiration
Date. The method of delivery of this Notice of Guaranteed Delivery and any other
required documents to the Exchange Agent is at the election and risk of the
holder, and the delivery will be deemed made only when actually received by the
Exchange Agent. If delivery is by mail, registered mail with return receipt
requested, properly insured, is recommended. Instead of delivery by mail, it is
recommended that the holder use an overnight or hand delivery service. In all
cases sufficient time should be allowed to assure timely delivery. For a
description of the guaranteed delivery procedure, see Instruction 1 of the
Letter of Transmittal.
2. SIGNATURES ON THIS NOTICE OF GUARANTEED DELIVERY. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Old Notes to be
tendered (in the case of Certificates representing Old Notes), the signature
must correspond with the name(s) as written on the face of such Old Notes
without alteration, enlargement, or any change whatsoever. If this Notice of
Guaranteed Delivery is signed by the DTC participant whose name appears on a
security position maintained by DTC (in the case of book-entry confirmation),
the signature must correspond exactly with such participant's name as it appears
on a security position maintained by DTC listing such participant as the owner
of the Old Notes, without any change whatsoever.
If any of the Old Notes to be tendered are owned of record by two or more
joint owners, all such owners must sign this Notice of Guaranteed Delivery. If
any Old Notes to be tendered are held in different names on several Old Notes,
it will be necessary to complete, sign, and submit as many separate copies of
the Notice of Guaranteed Delivery documents as there are names in which Old
Notes to be tendered are held.
If this Notice of Guaranteed Delivery or any Old Notes are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and, unless waived by the Issuers,
evidence satisfactory to the Issuers of their authority to so act must be
submitted with this Notice of Guaranteed Delivery.
3. REQUESTS FOR ASSISTANCE OF ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders also may contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
4
<PAGE> 1
Exhibit 99.3
BANKERS TRUST COMPANY
EXCHANGE AGENT AGREEMENT
_________ __, 1999
Bankers Trust Company
Corporate Trust and
Agency Group
Four Albany Street, 4th Floor
New York, NY 10006
Attention: Corporate Market Services
Ladies and Gentlemen:
Generac Portable Products, LLC, a Delaware limited liability company
(the "COMPANY"), and GPPW, Inc., a Wisconsin corporation ("GPPW" and, together
with the Company, the "ISSUERS"), are offering to exchange (the "EXCHANGE
OFFER") their 11 1/4% Senior Subordinated Notes due 2006 (the "New Notes") for
an equal principal amount of their 11 1/4% Senior Subordinated Notes
due 2006 (the "OLD NOTES" and, together with the New Notes, the "NOTES"),
pursuant to a prospectus (the "PROSPECTUS") included in the Issuers'
Registration Statement on Form S-4 (File No. __________) as amended (the
"REGISTRATION STATEMENT"), filed with the Securities and Exchange Commission
(the "SEC") and attached hereto as Exhibit A. The Term "EXPIRATION DATE" shall
mean 5:00 p.m., New York City time, on _________ __, 1999, unless the Exchange
Offer is extended as provided in the Prospectus, in which case the term
"EXPIRATION DATE" shall mean the latest date and time to which the Exchange
Offer is extended. Upon execution of this Agreement, Bankers Trust Company will
act as the Exchange Agent for the Exchange Offer (the "EXCHANGE AGENT").
Capitalized terms used and not otherwise defined herein shall have the
respective meanings ascribed thereto in the Prospectus.
A copy of each of the form of letter of transmittal (the "LETTER OF
TRANSMITTAL"), the form of the notice of guaranteed delivery (the "NOTICE OF
GUARANTEED DELIVERY"), the form of letter to brokers and the form of letter to
clients (collectively, the "TENDER DOCUMENTS") to be used by Holders of Old
Notes in order to receive New Notes pursuant to the Exchange Offer are attached
hereto as Exhibit B.
The Issuers hereby appoint you to act as Exchange Agent in connection
with the Exchange Offer. In carrying out your duties as Exchange Agent, you are
to act in accordance with the following provisions of this Agreement:
1. You are to mail the Prospectus and the Tender Documents to all of
the Holders and participants on the day that you are notified by the Company
that the Registration Statement has become effective under the Securities Act of
1933, as amended, or as soon as practicable thereafter, and to make subsequent
mailings thereof the date thereof and to any persons who become Holders prior to
the Expiration Date and to any persons as may from time to time be
<PAGE> 2
2
requested by the Company. All mailings pursuant to this Section 1 shall be by
first class mail, postage prepaid, unless otherwise specified by the Company.
You shall also accept and comply with telephone requests for information
relating to the Exchange Offer provided that such information shall relate only
to the procedures for tendering Old Notes in (or withdrawing tenders of Old
Notes from) the Exchange Offer. All other requests for information relating to
the Exchange Offer shall be directed to the Company, Attention: Dorrance J.
Noonan, Jr., President and Chief Executive Officer.
2. You are to examine Letters of Transmittal and the Old Notes and
other documents delivered or mailed to you, by or for the Holders, prior to the
Expiration Date, to ascertain whether (i) the Letters of Transmittal are
properly executed and completed in accordance with the instructions set forth
therein, (ii) the Old Notes are in proper form for transfer and (iii) all other
documents submitted to you are in proper form. In each case where a Letter of
Transmittal or other document has been improperly executed or completed or, for
any other reason, is not in proper form, or some other irregularity exists, you
are authorized to endeavor to take such action as you consider appropriate to
notify the tendering Holder of such irregularity and as to the appropriate means
of resolving the same. Determination of questions as to the proper completion or
execution of the Letters of Transmittal, or as to the proper form for transfer
of the Old Notes or as to any other irregularity in connection with the
submission of Letters of Transmittal and/or Old Notes and other documents in
connection with the Exchange Offer, shall be made by the officers of, or counsel
for, the Company at their written instructions or oral direction confirmed by
facsimile. Any determination made by the Company on such questions shall be
final and binding.
3. At the written request of the Company or its counsel, King &
Spalding, you shall notify tendering Holders of Old Notes in the event of any
termination, recision or modification of the Exchange Offer. In the event of any
such termination, recision or modification, you will return all tendered Old
Notes to the persons entitled thereto, at the request of the Company or its
counsel, King & Spalding, and at the expense of the Issuers.
4. Tender of the Old Notes may be made only as set forth in the Letter
of Transmittal. Notwithstanding the foregoing, tenders which the Company shall
approve in writing as having been properly delivered shall be considered to be
properly tendered. Letters of Transmittal and Notices of Guaranteed Delivery
shall be recorded by you as to the date and time of receipt and shall be
preserved and retained by you at the Issuers' expense for one year. New Notes
are to be issued in exchange for Old Notes pursuant to the Exchange Offer only
(i) against deposit with you prior to the Expiration Date or, in the case of a
tender in accordance with the guaranteed delivery procedures outlined in
Instruction __ of the Letter of Transmittal, within three New York Stock
Exchange trading days after the Expiration Date of the Exchange Offer, together
with executed Letters of Transmittal and other documents required by the
Exchange Offer or (ii) in the event that the Holder is a participant in The
Depository Trust Company ("DTC") system, by the utilization of DTC's Automated
Tender Offer Program ("ATOP") and any evidence required by the Exchange Offer.
<PAGE> 3
3
You are hereby directed to establish an account with respect to the
Notes at The Depositary Trust Company (the "BOOK ENTRY TRANSFER FACILITY")
within two days after the date hereof in accordance with SEC Regulation 240.17
Ad-14. Any financial institution that is a participant in the Book Entry
Transfer Facility system may, until the Expiration Date, make book-entry
delivery of the Notes by causing the Book Entry Facility to transfer such Notes
into your account in accordance with the procedure for such transfer established
by the Book Entry Transfer Facility. In every case, however, a Letter of
Transmittal (or a manually executed facsimile thereof), or an Agent's Message,
properly completed and duly executed, with any required signature guarantees and
any other required documents must be transmitted to and received by you prior to
the Expiration Date or the guaranteed delivery procedures described in the
Letter of Transmittal must be complied with.
5. Upon oral or written request of the Company (with written
confirmation of any such oral request thereafter), you will transmit by
telephone, and promptly thereafter confirm in writing to Dorrance J. Noonan,
Jr., President and Chief Executive Officer (telecopier number (920) 674-5663),
with a copy to King & Spalding, Attention: Kathleen Minniti (telecopier number
(212) 556-2222), or such other persons as the Company may reasonably request,
the aggregate number and principal amount of Old Notes tendered to you and the
number and principal amount of Old Notes properly tendered that day. In
addition, you will also inform the aforementioned persons, upon oral request
made from time to time (with written confirmation of such request thereafter)
prior to the Expiration Date, of such information as they or any of them may
reasonable request.
6. Upon the terms and subject to the conditions of the Exchange Offer,
delivery of New Notes will be made by you promptly after acceptance of the
tendered Old Notes. You will be hold all items which are deposited for tender
with you after 5:00 p.m. New York City time, on the Expiration Date pending
further instructions from an officer of the Company.
7. If any Holder shall report to you that his or her failure to
surrender Old Notes registered in his or her name is due to the loss or
destruction of a certificate or certificates, you shall request such Holder (i)
to furnish to you an affidavit of loss and, if required by the Company, a bond
of indemnity in an amount and evidenced by such certificate or certificates of a
surety, as may be satisfactory to you and the Company, and (ii) to execute and
deliver an agreement to indemnify the Company, the Trustee and you in such
form as is acceptable to you and the Company. The obligees to be named in each
such indemnity bond shall include the Company, the Trustee and you. You shall
report to the Company the names of all Holders who claim that their Old Notes
have been lost or destroyed and the principal amount of such Old Notes.
8. As soon as practicable after the Expiration Date, you shall mail or
deliver via the Book Entry Transfer Facility's applicable procedures, the New
Notes that such Holders may be entitled to receive and you shall arrange for
cancellation of the Old Notes submitted to you or returned by DTC in connection
with ATOP. Such Old Notes shall be forwarded to Dorrance J. Noonan, Jr. for
cancellation and retirement as you are instructed by the Company (or a
representative designated by the Company) in writing.
<PAGE> 4
4
9. For your services as the Exchange Agent hereunder, the Company
shall pay you in accordance with the schedule of fees attached hereto as Exhibit
C. The Company also will reimburse you for your reasonable out-of-pocket
expenses (including, but not limited to, reasonable attorneys' fees not
previously paid to you as set forth in Exhibit C) in connection with your
services promptly after submission to the Company of itemized statements.
10. You are not authorized to pay any concessions, commissions or
solicitation fees to any broker, dealer, bank or other person or to engage or
utilize any person to solicit tenders.
11. As the Exchange Agent hereunder you:
(a) shall have no duties or obligations other than those
specifically set forth herein or in the Exhibits attached hereto or as
may be subsequently requested in writing of you by the Company and
agreed to by you in writing with respect to the Exchange Offer;
(b) will be regarded as making no representations and having
no responsibilities as to the validity, accuracy, sufficiency, value or
genuineness of any Old Notes deposited with you hereunder, any New
Notes, and Tender Documents or other documents prepared by the Issuers
in connection with the Exchange Offer;
(c) shall not be obligated to take any legal action hereunder
which might in your judgment involve any expense or liability unless
you shall have been furnished with an indemnity reasonably satisfactory
to you;
(d) may rely on, and shall be fully protected and indemnified
as provided in Section 12 hereof in acting upon, the written or oral
instructions with respect to any matter relating to your acting as
Exchange Agent specifically covered by this Agreement or supplementing
or qualifying any such action of any officer or agent of such other
person or persons as may be designated or whom you reasonably believe
have been designated by the Company;
(e) may consult with counsel satisfactory to you, including
counsel for the Company, and the advice of such counsel shall be full
and complete authorization and protection in respect of any action
taken, suffered or omitted by you in good faith and in accordance with
such advice of such counsel;
(f) shall not at any time advise any person as to the wisdom
of the Exchange Offer or as to the market value or decline or
appreciation in market value of any Old Notes or New Notes; and
(g) shall not be liable for any action which you may do or
refrain from doing in connection with this Agreement except for your
gross negligence, willful misconduct or bad faith.
<PAGE> 5
5
12. The Issuers covenant and agree to indemnify and hold harmless
Bankers Trust Company and its officers, directors, employees, agents and
affiliates (collectively, the "INDEMNIFIED PARTIES" and each an "INDEMNIFIED
PARTY") against any loss, liability or reasonable expense of any nature
(including reasonable attorneys' and other fees and expenses) incurred in
connection with the administration of the duties of the Indemnified Parties
hereunder in accordance with this Agreement; provided, however, that no such
Indemnified Party shall be indemnified against any such loss, liability or
expense arising out of such Indemnified Party's gross negligence, willful
misconduct or bad faith. In no case shall the Issuers be liable under this
indemnity with respect to any claim against any Indemnified Party unless the
Issuers shall be notified by such Indemnified Party by letter, or by cable,
telex or telecopier confirmed by letter, of the written assertion of a claim
against such Indemnified Party, or of any action commenced against such
Indemnified Party, promptly after but in any event within 10 days of the date
such Indemnified Party shall have received any such written assertion of a claim
or shall have been served with a summons, or other legal process, giving
information as to the nature and basis of the claim; provided, however, that
failure to so notify the Issuers shall not relieve the Issuers of any liability
which they may otherwise have hereunder except such liability that is a direct
result of such Indemnified Party's failure to so notify the Issuers. The Issuers
shall be entitled to participate at their own expense in the defense of any such
claim or legal action and if the Issuers so elect or if the Indemnified Party in
such notice to the Issuers so directs, the Issuers shall assume the defense of
any suit brought to enforce any such claim. In the event the Issuers assume the
defense, the Indemnified Party shall be entitled to retain separate counsel,
provided that the Issuers shall be liable for the necessary and appropriate fees
and expenses thereafter incurred by such counsel only in the event of the need
to have separate representation because of a conflict of interest between such
Indemnified Party and the Issuers. You shall not enter into a settlement or
other compromise with respect to any indemnified loss, liability or expense
without the prior written consent of the Company, which shall not be
unreasonably withheld or delayed if not adverse to the Issuers' interests.
13. This Agreement and your appointment as the Exchange Agent shall be
construed and enforced in accordance with the laws of the State of New York and
shall inure to the benefit of, and the obligations created hereby shall be
binding upon, the successors and assigns of the parties hereto. No other person
shall acquire or have any rights under or by virtue of this Agreement.
14. The parties hereto hereby irrevocably submit to the venue and
jurisdiction of any New York State or federal court sitting in the Borough of
Manhattan in New York City in any action or proceeding arising out of or
relating to this Agreement, and the parties hereby irrevocably agree that all
claims in respect of such action or proceeding arising out of or relating to
this Agreement, shall be heard and determined in such a New York State or
federal court. The parties hereby consent to and grant to any such court
jurisdiction over the persons of such parties and over the subject matter of any
such dispute and agree that delivery or mailing of any process or other papers
in the manner provided herein, or in such other manner as may be permitted by
law, shall be valid and sufficient service thereof.
<PAGE> 6
6
15. This Agreement may not be modified, amended or supplemented without
an express written agreement executed by the parties hereto. Any inconsistency
between this Agreement and the Tender Documents, as they may from time to time
be supplemented or amended, shall be resolved in favor of the latter, except
with respect to the duties, liabilities and indemnification of you as Exchange
Agent.
16. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
17. In case any provision of this Agreement 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.
18. Unless terminated earlier by the parties hereto, this Agreement
shall terminate 90 days following the Expiration Date. Notwithstanding the
foregoing, Sections 9 and 12 shall survive the termination of this Agreement.
Upon any termination of this Agreement, you shall promptly deliver to the
Trustee any certificates for Old Notes or New Notes, funds or property then held
by you as Exchange Agent under this Agreement.
19. All notices and communications hereunder shall be in writing and
shall be deemed to be duly given if delivered or mailed first class certified or
registered mail, postage prepaid, or telecopied as follows:
If to the Issuers: Generac Portable Products, LLC
P.O. Box 239
1 Generac Way
Jefferson, Wisconsin 53549
Telecopier No: (920) 674-5663
Attn: Dorrance J. Noonan, Jr.,
President and Chief Executive Officer
and a copy to: King & Spalding
1185 Avenue of the Americas
New York, New York 10036
Telecopier No: (212) 556-2222
Attn: Kathleen Minniti
If to you: Bankers Trust Company
Corporate Trust and Agency Group
Four Albany Street - 4th Floor
New York, NY 10006
Attn.:
<PAGE> 7
7
Telephone: (212) 250-
Telecopier: (212) 250-6392/6961
and a copy to:
or such other address or telecopy number as any of the above may have furnished
to the other parties in writing for such purposes.
20. This Agreement and all of the obligations hereunder shall be
assumed by any and all successors and assigns of the Issuers.
If the foregoing is in accordance with your understanding, would you
please indicate your agreement by signing and returning the enclosed copy of
this Agreement to the Issuers.
Very truly yours,
GENERAC PORTABLE PRODUCTS, LLC
By: _______________________________
Name: Dorrance J. Noonan, Jr.
Title: President and Chief Executive
Officer
GPPW, INC.
By: _______________________________
Name: Faith Rosenfeld
Title: President
Agreed to this _____ day of ______, 1999
BANKERS TRUST COMPANY,
as Exchange Agent
By: _______________________________
Name:
Title:
<PAGE> 8
EXHIBIT C
BANKERS TRUST COMPANY
CORPORATE TRUST AND AGENCY GROUP
SCHEDULE OF FEES
I. Exchange Agent $5,000.00
Covers review of the Exchange Agent Agreement, the Letter of Transmittal
and other related documentation; establishment of accounts and systems link with
depositories; operational and administrative charges and time spent in
connection with the review, receipt and processing of Letters of Transmittal,
and Agent's Messages.
Note: The fees set forth in this schedule are subject to review of
documentation. The fees are also subject to change should circumstances warrant.
Out-of-pocket expenses and disbursements, including counsel fees, incurred in
the performance of our duties will be added to the billed fees. Fees for any
services not covered in this or related schedules will be based upon our
appraisal of the services rendered.
We may place orders to buy/sell financial instruments with outside
broker-dealers that we select, as well as with BT or its affiliates. These
transactions(for which normal and customary spreads or other compensation may be
earned by such broker-dealers, including BT or its affiliates, in addition to
the charges quoted above) will be executed on a riskless principal basis solely
for your account(s) and without recourse to us or our affiliates. If you choose
to invest in any mutual fund, BT and/or our affiliates may earn investment
management fees and other service fees/expenses associated with these funds as
disclosed in the mutual fund prospectus provided to you, in addition to the
charges quoted above. Likewise, BT has entered into agreements with certain
mutual funds or their agents to provide shareholder services to those funds. For
providing these shareholder services, BT is paid a fee by these mutual funds
that calculated on an annual basis does not exceed 25 basis points of the amount
of your investment in these mutual funds. In addition, if you choose to use
other services provided by BT or its affiliates, Corporate Trust or other BT
affiliates may be allocated a portion of the fees earned. We will provide
periodic account statements describing transactions executed for your
account(s). Trade confirms will be available upon your request at no additional
charge. If a transaction should fail to close for reasons beyond our control, we
reserve the right to charge our acceptance fee plus reimbursement for legal fees
incurred.
C-1
<PAGE> 9
Shares of mutual funds are not deposits or obligations of, or
guaranteed by, Bankers Trust Company or any of its affiliates and are not
insured by the Federal Deposit Insurance Corporation or any other agency of the
U.S. Government. Investments in the mutual funds involve the possible loss of
principal. Please read the prospectus carefully before investing.
C-2
